As filed with the Securities and Exchange Commission on May 31, 2000
Registration Statement No. 333-_____________
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------------------------------
ANDRX CORPORATION
(Exact name of registrant as specified in its charter)
-------------------------------------------------------
FLORIDA 65-0366879
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
DR. ELLIOT F. HAHN, PRESIDENT
ANDRX CORPORATION
4001 SOUTHWEST 47TH AVENUE
FORT LAUDERDALE, FLORIDA 33314
(954) 584-0300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices
and agent for service of process)
--------------------------------------------------------
COPIES OF COMMUNICATIONS TO:
DALE S. BERGMAN, P.A. CHARLES RENNERT, ESQ.
MICHAEL D. KARSCH, P.A. BERMAN WOLFE RENNERT VOGEL & MANDLER, P.A.
BROAD AND CASSEL 100 SOUTHEAST SECOND STREET
201 SOUTH BISCAYNE BOULEVARD MIAMI, FLORIDA 33131
MIAMI, FLORIDA 33131 TELEPHONE: (305) 577-4177
TELEPHONE: (305) 373-9400 TELECOPIER: (305) 373-6036
TELECOPIER: (305) 373-9443
--------------------------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective and the
satisfaction or waiver of all other conditions to the reorganization agreement
described in the Joint Proxy Statement/Prospectus forming part of this
Registration Statement.
If any of the securities being registered on this Form are to be
offered in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT TO OFFERING AGGREGATE AMOUNT OF
OF SECURITIES TO BE PRICE OFFERING REGISTRATION
BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE FEE(3)
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------
Andrx Group Common Stock, $.001
par value per share 68,924,410 $46.78 $3,224,307,055 $851,234
--------------------------------------------------------------------------------------------------------------------------
Cybear Group Common Stock,
$.001 par value per share 15,715,111 $3.84 $60,404,956 $15,947
--------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Represents the maximum number of shares of Andrx Group Common Stock and Cybear Group Common Stock to be
issued in connection with the transaction.
(2) Estimated pursuant to paragraph (c) of Rule 457 under the Securities Act of 1933, as amended, solely for
the purpose of calculating the registration fee on the basis of the high and low sales prices for a
share of common stock on the Nasdaq National Market on May 24, 2000.
(3) Calculated by multiplying .000264 by the proposed maximum offering price.
</FN>
</TABLE>
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A), OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
<PAGE>
[LOGO OF ANDRX]
ANNUAL MEETING OF STOCKHOLDERS
Dear Andrx Stockholder,
As you may know, Andrx and Cybear, Inc. entered into an agreement for a
corporate reorganization plan which will give you the ability to distinguish
between your investment in Andrx and Cybear, Inc. As part of the reorganization,
a new holding company named Andrx Corporation will be created under Delaware
law. All of the publicly traded shares of Cybear common stock will be acquired
by the holding company and two new classes of common stock of the holding
company will be created, "Andrx Group Common Stock," to reflect the performance
of Andrx and the "Cybear Group Common Stock," to reflect the performance of
Cybear. We expect that the reorganization should be tax-free to you and Andrx
except with respect to cash received on the sale of any fractional shares.
The boards of directors of Andrx and Cybear believe that the
reorganization should provide benefits to both Andrx and Cybear. The
reorganization cannot be completed, however, unless a majority of the Cybear
stockholders entitled to vote approve the reorganization, and a majority of the
Cybear stockholders entitled to vote, other than Andrx, do not vote against the
reorganization and a majority of the stockholders of Andrx entitled to vote
approve the reorganization.
If the reorganization is completed, Cybear's stockholders, other than
Andrx, who currently own 30.5% (assuming the exercise by Edward E. Goldman,
M.D., Cybear's CEO, of an outstanding warrant to acquire 525,000 shares of
Cybear's common stock currently owned by Andrx) of the common shares of Cybear,
will receive one share of Cybear Group Common Stock for each share of Cybear
common stock that they own. Current Andrx stockholders will receive one share of
Andrx Group Common Stock and .1493 shares of Cybear Group Common Stock for each
share of Andrx common stock they own. This results in Cybear stockholders, other
than Andrx, owning, in the aggregate, approximately 34.5% of the equity of
Cybear at the closing, excluding stock options.
The Andrx common stock is, and the Andrx Group Common Stock will be
upon completion of the reorganization, quoted on the Nasdaq National Market
under the symbol "ADRX". The Cybear common stock is, and the Cybear Group Common
Stock will be upon completion of the reorganization, quoted on the Nasdaq
National Market under the symbol "CYBA."
In addition, Andrx stockholders will vote on the following matters:
o Election of three directors to serve until 2003;
<PAGE>
o Adoption of the 2000 Stock Option Plan; and
o Ratification of the appointment of Arthur Andersen LLP as
Andrx's independent certified public accountants for the
fiscal year ending December 31, 2000.
The boards of directors of Andrx and Cybear have unanimously approved
the reorganization and the other actions being taken and are seeking your
approval of the reorganization and the other actions being taken.
PLEASE SEE PAGES ____ THROUGH ____ FOR A DESCRIPTION OF RISK FACTORS
THAT MAY AFFECT THE VALUE OF THE ANDRX GROUP COMMON STOCK AND CYBEAR GROUP
COMMON STOCK TO BE ISSUED IN THE REORGANIZATION, ALONG WITH SEVERAL OTHER RISK
FACTORS PERTAINING TO THE REORGANIZATION THAT YOU SHOULD CONSIDER.
This document provides you with detailed information about the
reorganization and other actions being taken. We encourage you to read this
document carefully in its entirety.
We urge you to vote FOR the reorganization and all of these other
actions.
Sincerely yours,
Alan P. Cohen
Co-Chairman and Chief Executive Officer
Andrx Corporation
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE ANDRX GROUP COMMON STOCK OR THE CYBEAR GROUP COMMON
STOCK TO BE ISSUED UNDER THIS DOCUMENT OR DETERMINED IF THIS DOCUMENT IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED JUNE ___, 2000,
AND WAS FIRST MAILED TO STOCKHOLDERS ON JUNE ___, 2000.
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
[LOGO OF CYBEAR]
Dear Cybear Stockholder,
As you may know, Cybear and Andrx Corporation entered into an agreement
for a corporate reorganization plan pursuant to which Cybear will become a
wholly owned subsidiary of a new holding company named Andrx Corporation. Two
new classes of common stock of the holding company will be created, "Andrx Group
Common Stock," to reflect the performance of Andrx and the "Cybear Group Common
Stock" to reflect the performance of Cybear. You will receive shares of Cybear
Group Common Stock in exchange for your shares of Cybear common stock. We expect
that the reorganization should be tax-free to you and Cybear.
The boards of directors of Cybear and Andrx believe that the
reorganization should provide benefits to both Cybear and Andrx. The
reorganization cannot be completed, however, unless a majority of the Cybear
stockholders entitled to vote approve the reorganization, and a majority of the
Cybear stockholders entitled to vote, other than Andrx, do not vote against the
reorganization and a majority of the stockholders of Andrx entitled to vote
approve the reorganization.
If the reorganization is completed, Cybear's stockholders, other than
Andrx, who currently own 30.5% (assuming the exercise by Edward E. Goldman,
M.D., Cybear's CEO, of an outstanding warrant to acquire 525,000 shares of
Cybear's common stock currently owned by Andrx) of the common shares of Cybear,
will receive one share of Cybear Group Common Stock for each share of Cybear
common stock that they own. Current Andrx stockholders will receive one share of
Andrx Group Common Stock and .1493 shares of Cybear Group Common Stock for each
share of Andrx common stock they own. This results in Cybear stockholders, other
than Andrx, owning, in the aggregate, approximately 34.5% of the equity of
Cybear at the closing, excluding stock options.
The Cybear common stock is, and the Cybear Group Common Stock will be
upon completion of the reorganization, quoted on the Nasdaq National Market
under the symbol "CYBA."
The boards of directors of Cybear and Andrx have unanimously approved
the reorganization and are seeking your approval of the reorganization. The
approval of the Cybear board of directors is based, in part, on the
recommendation of the special committee of the board of directors formed to
consider the advisability of and to negotiate the terms of the reorganization.
PLEASE SEE PAGES _____ THROUGH ______ FOR A DESCRIPTION OF RISK FACTORS
THAT MAY AFFECT THE VALUE OF THE CYBEAR GROUP COMMON STOCK TO BE ISSUED IN THE
REORGANIZATION, ALONG WITH SEVERAL OTHER RISK FACTORS PERTAINING TO THE
REORGANIZATION THAT YOU SHOULD CONSIDER.
<PAGE>
This document provides you with detailed information about the
reorganization. We encourage you to read this document carefully in its
entirety.
We urge you to vote FOR the reorganization.
Sincerely yours,
Edward E. Goldman, M.D.
Chief Executive Officer
Cybear, Inc.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED THE ANDRX GROUP COMMON STOCK OR THE CYBEAR GROUP COMMON
STOCK TO BE ISSUED UNDER THIS DOCUMENT OR DETERMINED IF THIS DOCUMENT IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED JUNE ___, 2000,
AND WAS FIRST MAILED TO STOCKHOLDERS ON JUNE ___, 2000.
<PAGE>
ANDRX CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY ____, 2000
To the Stockholders of Andrx Corporation:
NOTICE IS HEREBY GIVEN that an annual meeting of stockholders of Andrx
Corporation, a Florida corporation, will be held at the Fort Lauderdale Airport
Hilton, 1870 Griffin Road, Dania, Florida 33004, at 9:00 A.M., on July ____,
2000 for the following purposes:
1. To consider and vote upon the reorganization proposal by
approving and adopting an agreement and plan of merger and
reorganization under which:
o Andrx and Cybear, Inc. will each merge with a
separate subsidiary of Andrx Corporation, a Delaware
corporation newly formed by us for this purpose,
o Each outstanding share of our existing common stock
will be converted into one share of Andrx
Corporation's Andrx Group Common Stock and .1493 of a
share of Andrx Corporation's Cybear Group Common
Stock, and
o Each outstanding share of Cybear's common stock will
be converted into one share of Andrx Corporation's
Cybear Group Common Stock.
2. To elect three directors to serve until 2003,
3. To consider and vote upon a proposal to adopt the 2000 Stock
Option Plan,
4. To consider and vote upon a proposal to ratify the appointment
of Arthur Andersen LLP as the Company's independent certified
public accountants for the fiscal year ending December 31,
2000, and
5. To transact such other business as may properly come before
the annual meeting and any adjournment or postponements
thereof.
Only stockholders of record at the close of business on June ___, 2000
will be entitled to vote at the meeting and any adjournments or postponements
thereof. YOUR VOTE IS VERY IMPORTANT. Approval of the reorganization proposal,
described in the attached joint proxy statement/prospectus, at the Andrx meeting
requires the favorable vote of the holders of a majority of the outstanding
shares of Andrx common stock.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the pre-addressed envelope provided for that purpose
as promptly as possible or vote via the Internet or by telephone.
By Order of the Board of Directors,
SCOTT LODIN, Secretary
Fort Lauderdale, Florida
June ____, 2000
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE ANDRX ANNUAL MEETING IN PERSON. THOSE
STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY URGED TO EXECUTE AND
RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE OR VOTE VIA THE INTERNET
OR BY TELEPHONE. STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND
THE ANNUAL MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
THE BOARD OF DIRECTORS OF ANDRX HAS UNANIMOUSLY APPROVED THE REORGANIZATION AND
DETERMINED THAT THE REORGANIZATION IS ADVISABLE AND IN THE BEST INTERESTS OF
ANDRX AND ITS STOCKHOLDERS. AFTER CAREFUL CONSIDERATION, THE ANDRX BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT ANDRX STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE REORGANIZATION AND THE OTHER PROPOSALS.
<PAGE>
CYBEAR, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY ____, 2000
To the Stockholders of Cybear, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Cybear, Inc., a Delaware corporation, will be held at the Fort Lauderdale
Airport Hilton, 1870 Griffin Road, Dania, Florida 33004, at 10:00 A.M., on July
____, 2000 for the following purposes:
To consider and vote upon the reorganization proposal by approving and
adopting an agreement and plan of merger and reorganization under which:
o Cybear and Andrx Corporation, a Florida corporation,
will each merge with a separate subsidiary of Andrx
Corporation, a Delaware corporation newly formed by
Andrx for this purpose,
o Each outstanding share of our existing common stock
not owned by Andrx will be converted into one share
of Andrx Corporation's Cybear Group Common Stock, and
o Each outstanding share of Andrx's common stock will
be converted into one share of Andrx Corporation's
Andrx Group Common Stock and .1493 of a share of
Andrx Corporation's Cybear Group Common Stock.
Only stockholders of record at the close of business on June ___, 2000
will be entitled to vote at the special meeting and any adjournments or
postponements thereof. YOUR VOTE IS VERY IMPORTANT. Approval of the
reorganization proposal described in the attached joint proxy
statement/prospectus, at the Cybear special meeting requires the favorable vote
of the holders of a majority of the outstanding shares of Cybear common stock,
provided that a majority of the outstanding shares of Cybear common stock held
by stockholders other than Andrx do not vote against the reorganization.
Whether or not you expect to be present, please sign, date and return
the enclosed proxy card in the pre-addressed envelope provided for that purpose
as promptly as possible or vote via the Internet or by telephone. No postage is
required if mailed in the United States.
By Order of the Board of Directors,
SCOTT LODIN, Secretary
Boca Raton, Florida
June ____, 2000
ALL STOCKHOLDERS ARE INVITED TO ATTEND THE CYBEAR SPECIAL MEETING IN PERSON.
THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY URGED TO EXECUTE
AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE OR VOTE VIA THE
INTERNET OR BY TELEPHONE. STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS
ATTEND THE SPECIAL MEETING, REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
THE BOARD OF DIRECTORS OF CYBEAR HAS UNANIMOUSLY APPROVED THE REORGANIZATION AND
DETERMINED THAT THE REORGANIZATION IS ADVISABLE AND IN THE BEST INTERESTS OF
CYBEAR AND ITS STOCKHOLDERS. AFTER CAREFUL CONSIDERATION, THE CYBEAR BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT CYBEAR STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE REORGANIZATION PROPOSAL.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Questions And Answers About The Meetings..............................................................................1
Who Can Help Answer Your Questions....................................................................................4
Summary...............................................................................................................5
Summary Consolidated Financial Data..................................................................................12
Risk Factors.........................................................................................................20
Risks Associated With Having Two Classes Of Andrx Common Stock..............................................20
Risks Related To Cybear Group Common Stock..................................................................25
Risks Related To Andrx Group Common Stock...................................................................32
Note Regarding Forward-Looking Statements............................................................................38
Where You Can Find More Information..................................................................................38
The Stockholders' Meetings...........................................................................................39
The Andrx Annual Meeting....................................................................................39
The Cybear Special Meeting..................................................................................39
Voting Of Proxies...........................................................................................40
The Reorganization..........................................................................................43
Description Of The Reorganization...........................................................................43
Background Of The Reorganization............................................................................44
Andrx's Reasons For The Reorganization......................................................................45
Recommendation Of Andrx's Board Of Directors................................................................47
Cybear's Reasons For The Reorganization.....................................................................47
Opinion Of Cybear's Financial Advisor.......................................................................49
Recommendation Of Cybear's Board Of Directors...............................................................54
Interests Of Certain Directors, Officers And Affiliates In The Reorganization...............................54
Management And Allocation Policies..........................................................................54
Tax Sharing Agreement.......................................................................................59
Description Of Andrx Group Common Stock And Cybear Group Common Stock.......................................59
Reincorporation In The State Of Delaware....................................................................68
Comparison Of Stockholder Rights............................................................................68
Certain Anti-Takeover Provisions............................................................................73
United States Federal Income Tax Considerations.............................................................74
Principal Provisions Of The Reorganization Agreement........................................................77
No Appraisal Rights.........................................................................................80
Accounting Treatment........................................................................................80
Stock Exchange Listings.....................................................................................80
Exchange Procedures.........................................................................................80
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Stock Transfer Agent And Registrar..........................................................................80
Financial Advisors..........................................................................................80
Management's Discussion And Analysis Of Condition....................................................................81
Business Of Cybear...................................................................................................85
Beneficial Security Ownership........................................................................................96
Andrx ...................................................................................................96
Cybear ...................................................................................................97
Election Of Directors................................................................................................98
Executive Compensation..............................................................................................100
Certain Transactions................................................................................................106
Proposal To Approve 2000 Stock Option Plan..........................................................................107
Ratification Of Selection Of Independent Certified Public Accountants...............................................110
Other Business......................................................................................................111
Price Range Of Existing Common Stocks And Dividend Information......................................................111
Information About Stockholder Proposals.............................................................................111
Expenses Of Solicitation............................................................................................112
Legal And Tax Opinions..............................................................................................112
Experts ...........................................................................................................112
Index To Financial Statements.......................................................................................F-1
Cybear, Inc. - Independent Certified Public Accountants' Report And Financial Statements............................F-2
LIST OF ANNEXES
Annex A Agreement and Plan of Merger and Reorganization
Annex B Amended and Restated Certificate of Incorporation
Annex C Opinion of SG Cowen Securities Corporation
Annex D Common Stock Policies
Annex E 2000 Stock Option Plan
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MEETINGS
QUESTIONS ABOUT THE REORGANIZATION
Q: WHY AM I RECEIVING THIS PROXY STATEMENT?
A: We are distributing this joint proxy statement/prospectus to
you in connection with a reorganization proposal whereby Andrx Corporation, a
new Delaware holding company formed by Andrx to effect the reorganization, would
acquire Andrx and the shares of Cybear not owned by Andrx, and create two new
classes of common stock. Andrx stockholders are also receiving this joint proxy
statement/prospectus so that they can act upon the matters outlined in the
Notice of the Annual Meeting on the cover page of this joint proxy
statement/prospectus, including the election of directors, adoption of Andrx's
2000 Stock Option Plan and the ratification of Andrx's independent certified
public accountants.
Q: WHY ARE THE COMPANIES PROPOSING THE REORGANIZATION?
A: We believe the reorganization should provide certain benefits
to Andrx and Cybear including, separating Cybear's operating losses from Andrx's
operating results for financial reporting purposes, improving the liquidity of
Cybear's publicly traded equity, providing Cybear with a more viable currency
for potential future strategic acquisitions, preserving financial flexibility
for Andrx's management to maximize stockholder value, providing a premium for
the Cybear common stock, increasing Cybear's flexibility for operational
spending, allowing Cybear to leverage Andrx's business and relationships and
providing potential tax consolidation advantages to Andrx.
Q: WHAT WILL BE THE TWO CLASSES OF COMMON STOCK OF ANDRX
CORPORATION?
A: The two classes of common stock of Andrx will be the Cybear
Group Common Stock and the Andrx Group Common Stock.
o The Cybear Group Common Stock is intended to reflect the
performance of Cybear's existing Internet business, which
includes the assets, liabilities and businesses of Cybear
being acquired in the reorganization, and future Internet
businesses, including related liabilities, as may be
designated by Andrx's board of directors. These assets,
liabilities and businesses, together with the assets,
liabilities and businesses of Cybear, are referred to as the
"Cybear Group." Investors commonly refer to this type of stock
as tracking stock or targeted stock, because the stock is
intended to track or target the performance of a group of
assets, division or business of a company.
o The Andrx Group Common Stock is intended to reflect the
performance of Andrx Corporation's interest in all of its
other assets, liabilities and businesses. These assets,
liabilities and businesses are referred to as the "Andrx
Group."
Q: WHAT WILL HAPPEN TO OUTSTANDING SHARES OF COMMON STOCK OF
CYBEAR AND ANDRX IN THE REORGANIZATION?
A: Andrx stockholders will receive one share of Andrx Group
Common Stock and .1493 of Cybear Group Common Stock for each share of Andrx
common stock owned. Andrx stockholders will receive cash from the sale of any
resulting fraction of a share in an amount reflecting the market value of the
fraction of a share. The Andrx Group Common Stock will be quoted on the Nasdaq
National Market under the symbol "ADRX."
A Cybear stockholder, other than Andrx, will receive one share of
Cybear Group Common Stock in exchange for each share of Cybear common stock
owned. The shares of Cybear Group Common Stock will be quoted on the Nasdaq
National Market under the symbol "CYBA." Former Cybear stockholders, who
currently own 30.5% (assuming the exercise by Edward E. Goldman, M.D., Cybear's
CEO, of an outstanding warrant to acquire 525,000 shares of Cybear's common
stock currently owned by Andrx) of the equity of
1
<PAGE>
Cybear, other than Andrx, will then own immediately after the reorganization
approximately 34.5% of the equity of Cybear, excluding stock options. The
exchange ratios were determined in negotiations with the special committee of
Cybear's board of directors formed for this purpose.
Q: WHY ARE WE BECOMING A DELAWARE CORPORATION?
A: A number of other large corporations with similar capital
structures, such as General Motors Corporation, The Walt Disney Company and USX
Corporation, are also incorporated in Delaware. By becoming a Delaware
corporation, we will be able to benefit from Delaware's comprehensive and
well-developed corporate laws. We believe that Delaware law will offer clearer
guidance with respect to legal issues that may arise as a result of the
existence of separate classes of common stock.
Q: HOW DO CYBEAR AND ANDRX STOCKHOLDERS VOTE ON THE REORGANIZATION?
A: Just indicate on the proxy card that is enclosed with this
document in the space designated for the reorganization how you want to vote on
the reorganization, sign the proxy card and mail it in the enclosed
postage-prepaid return envelope as soon as possible, so that your shares may be
represented at the Cybear special meeting and the Andrx annual meeting. Cybear
and Andrx stockholders also have the option of submitting their vote by
telephone or via the Internet, as described in this document. If you, as a
Cybear or Andrx stockholder, sign and send in a proxy card and do not indicate
how you want to vote, Cybear and Andrx will count the proxy card as a vote in
favor of the reorganization. You may attend the meeting and vote your shares in
person or call in a vote or vote via the Internet rather than signing and
mailing the proxy card.
Q: CAN I CHANGE MY VOTE ON THE REORGANIZATION?
A: Yes. Any person who gives a proxy in connection with this
solicitation, including one given by telephone or via the Internet, may revoke
the proxy at any time before it is voted. The proxy may be revoked in writing,
by telephone or via the Internet, or by your appearing at the meeting and voting
in person. You can find further details on how to revoke your proxy on page 40
of this document.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY
BROKER VOTE MY SHARES ON THE REORGANIZATION PROPOSAL FOR ME?
A: Your broker will not be able to vote your shares of Cybear
common stock or Andrx common stock for or against the reorganization without
instructions from you. Following the directions provided by your broker, you
should instruct your broker on how to vote your shares.
Q: WHAT ARE THE MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF THE REORGANIZATION TO ME?
A: We believe that for U.S. federal income tax purposes, the Andrx
and Cybear stockholders generally should not recognize any gain or loss as a
result of the reorganization, except with respect to cash received by the Andrx
stockholders on the sale of any resulting Cybear Group Common Stock fractional
shares. There are, however, no court decisions or other authorities directly
bearing on transactions similar to the reorganization. In addition, the Internal
Revenue Service has announced that it will not issue advance rulings on the
classification of an instrument with characteristics similar to those of the
Andrx Group Common Stock and Cybear Group Common Stock. Accordingly, we cannot
assure you that the views expressed in this paragraph, if contested, would be
sustained by a court.
Tax matters are very complicated and the tax consequences of the
reorganization to you will depend on the facts of your own situation. We urge
you to consult your tax advisors for a full description of the tax consequences
of the reorganization to you.
Q: WHAT KIND OF FINANCIAL INFORMATION WILL I RECEIVE IN THE
FUTURE?
2
<PAGE>
A: Following the reorganization, holders of Andrx Group Common
Stock and Cybear Group Common Stock will receive consolidated financial
information for Andrx as a whole accompanied by separate financial information
for the Andrx Group and the Cybear Group.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. Andrx will send written instructions to Andrx and Cybear
stockholders on how to exchange their stock certificates for certificates of
Andrx Group Common Stock and Cybear Group Common Stock, as applicable, after the
reorganization is completed.
Q: WHEN DO YOU EXPECT TO COMPLETE THE REORGANIZATION?
A: We are working to complete the reorganization as soon as
possible. We hope to complete the reorganization shortly after the meetings, if
we obtain the required stockholder approvals.
3
<PAGE>
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have additional questions about the
reorganization or would like additional
copies of this document
you should contact:
If you are an
Andrx Stockholder:
Andrx Corporation
4001 Southwest 47th Avenue
Ft. Lauderdale, Florida 33314
Attention: General Counsel
Phone Number: (954) 584-0300
If you are a
Cybear Stockholder:
Cybear, Inc.
5000 Blue Lake Drive Suite 200
Boca Raton, Florida 33431
Attention: Stockholder Services
Phone Number (561) 999-3500
4
<PAGE>
SUMMARY
This summary contains selected information from this document and may
not contain all of the information that is important to you. To understand the
reorganization fully, we strongly encourage you to read this entire document
carefully, including the annexes, and the documents to which we refer. A list of
documents that Andrx incorporates by reference appears under the heading "Where
You Can Find More Information."
THE COMPANIES
ANDRX CORPORATION
4001 SOUTHWEST 47TH AVENUE
FT. LAUDERDALE, FLORIDA 33314
TELEPHONE: (954) 584-0300
Andrx formulates and commercializes controlled-release oral
pharmaceuticals using its proprietary drug delivery technologies. Andrx
currently markets and sells its generic or bioequivalent versions of Cardizem(R)
CD and Dilacor XR(R). Through its distribution operations, Andrx also sells
generic drugs manufactured by third parties primarily to independent pharmacies,
pharmacy chains which do not maintain their own central warehousing facilities
and pharmacy buying groups.
Following the reorganization, Andrx will consist of two groups for
financial accounting purposes:
o The "Cybear Group" will consist of the assets, liabilities and
businesses of Cybear, and certain future Internet businesses
of Andrx; and
o The "Andrx Group" will consist of Andrx's interest in all
other assets, liabilities and businesses of Andrx.
CYBEAR, INC.
5000 BLUE LAKE DRIVE SUITE 200
BOCA RATON, FLORIDA 33431
TELEPHONE: (561) 999-3500
Cybear is an information technology company that is using the Internet
to attempt to improve the efficiency of administrative and communication tasks
of managing patient care with secure and reliable transmission of information.
Cybear is an Internet service provider, or ISP, and an application services
provider, or ASP, for the healthcare industry. Cybear uses or intends to use its
own secure private network to provide access to the Internet, e-mail and
productivity applications to physicians, physician organizations, pharmacies and
hospitals.
5
<PAGE>
THE REORGANIZATION (SEE PAGES ____ AND ____)
Andrx and Cybear entered into an agreement and plan of merger and
reorganization, or the reorganization agreement, in March 2000. As part of the
reorganization, a new holding company named Andrx Corporation, will be created
under Delaware law. All of the publicly traded shares of Cybear and Andrx common
stock will be acquired by the holding company and two new classes of common
stock of the holding company will be created, "Andrx Group Common Stock," to
reflect the performance of the Andrx Group and the "Cybear Group Common Stock,"
to reflect the performance of the Cybear Group.
If the reorganization is completed, Cybear's stockholders, other than
Andrx, who currently own 30.5% (assuming the exercise by Edward E. Goldman,
M.D., Cybear's CEO, of an outstanding warrant to acquire 525,000 shares of
Cybear's common stock currently owned by Andrx) of the common shares of Cybear,
will receive one share of Cybear Group Common Stock for each share of Cybear
common stock that they own. Current Andrx stockholders will receive one share of
Andrx Group Common Stock and .1493 shares of Cybear Group Common Stock for each
share of Andrx common stock they own. This results in current Cybear
stockholders, other than Andrx, owning, in the aggregate, approximately 34.5% of
the Cybear Group Common Stock at the closing, excluding stock options.
We encourage you to read the reorganization agreement attached as Annex
A to this document carefully because it is the legal document that governs the
reorganization.
THE REASONS FOR THE REORGANIZATION
Andrx and Cybear are seeking the approval of their stockholders to
approve the reorganization.
ANDRX'S REASONS FOR THE REORGANIZATION (see pages ____ through ___)
Andrx believes that the reorganization will, among other things:
o Separate Cybear's operating losses from Andrx's operating
results for financial reporting purposes;
o Improve liquidity for Cybear's publicity traded equity;
o A more viable currency for potential future strategic
acquisitions; and
o Preserve financial flexibility for the management of Andrx to
maximize stockholder value.
In addition, the reorganization should provide Andrx with certain
potential tax consolidation advantages.
CYBEAR'S REASONS FOR THE REORGANIZATION (see pages ___ through ___)
Cybear believes that the reorganization offers advantages to Cybear and
its stockholders, among other things:
o A premium for its common stock for stockholders other than
Andrx;
o Increased flexibility for its operational spending;
6
<PAGE>
o Improved liquidity of Cybear's publicly traded equity;
o A more viable currency for potential future strategic
acquisitions; and
o Ability to leverage Andrx's business and relationships.
RECOMMENDATIONS TO STOCKHOLDERS
TO ANDRX'S STOCKHOLDERS (see page ____):
Andrx's board of directors believes that the reorganization is
advisable and in the best interests of Andrx and its stockholders and
unanimously recommends that Andrx stockholders vote FOR the reorganization.
TO CYBEAR'S STOCKHOLDERS (see page ___):
Cybear's board of directors believes that the reorganization is
advisable and in the best interests of Cybear and for its stockholders and
unanimously recommends that Cybear stockholders vote FOR the reorganization. The
approval of Cybear's board of directors is based, in part, on the recommendation
of the special committee of the board of directors formed to consider the
advisability of and to negotiate the terms of the reorganization.
VOTING MATTERS
REQUIRED VOTE OF ANDRX COMMON STOCKHOLDERS (see page ___):
The approval of a majority of all of the outstanding shares of Andrx
common stock entitled to vote at the Andrx annual meeting is required to approve
and adopt the reorganization.
REQUIRED VOTE OF CYBEAR COMMON STOCKHOLDERS (see page ___)
The reorganization requires the approval by a majority of all of the
outstanding shares of Cybear common stock entitled to vote at the Cybear special
meeting including shares held by Andrx, and it also requires that a majority of
the Cybear stockholders, other than Andrx, do not vote against the
reorganization.
RECORD DATE; VOTING POWER (see pages ___ through ___)
If you are an Andrx stockholder, you are entitled to vote at the Andrx
annual meeting if you owned shares of Andrx Group Common Stock as of the record
date for that annual meeting, which was the close of business on June ___, 2000.
If you are a Cybear stockholder, you are entitled to vote at the Cybear
special meeting if you owned shares of Cybear common stock as of the record date
for that special meeting, which was the close of business on June ___, 2000.
On June ___, 2000, there were _______________ shares of Andrx common
stock outstanding. For each share of Andrx Group Common Stock owned on that
date, Andrx stockholders will have one vote at the Andrx annual meeting.
On June __, 2000, there were __________ shares of Cybear common stock
outstanding, including __________ shares held by Andrx. For each share of Cybear
common stock owned on that date, Cybear stockholders, including Andrx, will have
one vote at the Cybear special meeting.
SHARE OWNERSHIP OF MANAGEMENT AND DIRECTORS
7
<PAGE>
On June ____, 2000, the record date for the Andrx annual meeting,
directors and executive officers of Andrx and their affiliates owned and were
entitled to vote ___________ shares of Andrx common stock, or approximately
_____% of the Andrx common stock outstanding on that date.
On June ____, 2000, the record date for the Cybear special meeting,
directors and executive officers of Cybear, other than directors and executive
officers affiliated or associated with Andrx, owned and were entitled to vote
________________ shares of Cybear common stock, or approximately ___% of the
Cybear common stock outstanding on that date.
OPINION OF CYBEAR'S FINANCIAL ADVISOR
An opinion was rendered to the special committee of independent
directors of Cybear's board of directors (which consisted of one member) by its
financial advisor as to the fairness, from a financial point of view, of the
consideration to be received by Cybear's stockholders, other than Andrx, in the
reorganization.
The Cybear special committee received an oral opinion on March 22,
2000, subsequently confirmed in writing as of the same date, from its financial
advisor, SG Cowen Securities Corporation, or SG Cowen, to the effect that, as of
the date of the opinion and based upon and subject to the matters described in
the opinion, the consideration to be received by Cybear's stockholders, other
than Andrx, in the reorganization was fair, from a financial point of view. We
have included this opinion as Annex C to this document.
The opinion is directed to the Cybear special committee and is not a
recommendation to stockholders with respect to any matter relating to the
reorganization. We urge you to read carefully the opinion in its entirety.
MANAGEMENT AND ALLOCATION POLICIES
Cybear's and Andrx's board of directors have established policies to
accomplish the fundamental objectives of the reorganization since Andrx and
Cybear will each be part of a single company. We have included these policies
as Annex D to this document.
TAX SHARING AGREEMENT
Andrx and Cybear have entered into the tax sharing agreement, which
sets forth the agreement of the parties with respect to tax matters upon
completion of the reorganization.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
We believe that for U.S. federal income tax purposes, the Andrx and
Cybear stockholders should not recognize any gain or loss as a result of the
reorganization, except with respect to cash received by the Andrx stockholders
on the sale of any resulting Cybear Group Common Stock fractional shares. There
are, however, no court decisions or other authorities directly bearing on
transactions similar to the reorganization. In addition, the IRS has announced
that it will not issue advance rulings on the classification of an instrument
with characteristics similar to those of the Andrx Group Common Stock and Cybear
Group Common Stock. Accordingly, no assurance can be given that the views
expressed in this paragraph, if contested, would be sustained by a court.
Tax matters are very complicated and the tax consequences of the
reorganization to you will depend on the facts of your own situation. We urge
you to consult your tax advisors for a full description of the tax consequences
of the reorganization to you.
NO APPRAISAL RIGHTS
Cybear is a Delaware corporation. Under Delaware law, Cybear
stockholders have no right to an appraisal of the value of their Cybear common
stock in connection with the reorganization. Andrx is a Florida corporation.
Under Florida law, Andrx stockholders have no right to an appraisal of the value
of their Andrx common stock in connection with the reorganization.
8
<PAGE>
ACCOUNTING TREATMENT
The acquisition of the shares from the Cybear stockholders other than
Andrx will be accounted for by Andrx as a purchase of a business. Under this
method of accounting, the portion of the assets and liabilities of Cybear
acquired from the Cybear stockholders other than Andrx will be recorded at their
fair value, and any excess of Andrx's purchase price over the fair value will be
accounted for as goodwill.
PRINCIPAL PROVISIONS OF THE REORGANIZATION AGREEMENT
The reorganization agreement contemplates the merger of a wholly owned
subsidiary of Andrx Corporation with and into Andrx, with Andrx surviving the
merger and the merger of another wholly owned subsidiary of Andrx Corporation
with and into Cybear with Cybear surviving the merger. Andrx and Cybear will
both be wholly owned subsidiaries of Andrx Corporation. The reorganization will
become effective on the date and time that the certificate of merger is filed
with the Delaware and Florida Secretaries of State or such other date and time
specified in the certificate of merger.
The reorganization agreement contains representations and warranties by
Andrx and Cybear customary for agreements of this nature. The reorganization
agreement also contains customary covenants. Some of the covenants include:
o Cybear agreed to use its best efforts to obtain an agreement
from Dr. Edward E. Goldman, its Chief Executive Officer and
from John Klein, its Chairman of the board of directors, to
vote in favor of the reorganization.
o Andrx agreed to use its best efforts to obtain an agreement
from Alan P. Cohen, its Co-Chairman of the board of directors
and chief executive officer, Chih-Ming J. Chen, its
Co-Chairman of the board of director and Chief Scientific
Officer, and Elliot F. Hahn, its president and a director, to
vote in favor of the reorganization.
o Cybear has agreed that it will not solicit, initiate or
encourage or take any action which would facilitate a takeover
proposal or engage in negotiations or disclose any nonpublic
information or give access to any person who told Cybear they
are considering or has made a takeover proposal. Cybear may
engage in negotiations, however, under certain conditions.
We will complete the reorganization only if specific conditions are
satisfied or, in some cases, waived, including the following:
o the reorganization has been approved by both the stockholders
of Andrx and Cybear;
o the holders of a majority of the Cybear common stock not owned
by Andrx have not voted against the reorganization;
o there is no law or court order that prohibits the
reorganization;
o the Cybear Group Common Stock has been approved for quotation
on the Nasdaq National Market;
o receipt by Andrx of an opinion of Arthur Andersen LLP to the
effect that the reorganization should be a "tax-free
reorganization" for federal income tax purposes and that
Andrx, its subsidiaries, and its stockholders should not
recognize gain or loss by reason of the reorganization except
with respect to cash received by the Andrx stockholders on the
sale of any resulting Cybear Group Common Stock fractional
shares, in each case under the law in effect as of the closing
date of the reorganization; and
o receipt by Cybear of an opinion of Arthur Andersen LLP to the
effect that the reorganization should be a "tax-free exchange"
for federal income tax purposes and that neither Cybear nor
any of its stockholders should recognize a gain or loss by
reason of the reorganization, in each case under the law in
effect as of the closing date of the reorganization.
9
<PAGE>
The company entitled to assert a condition may waive some of the
conditions to the reorganization, but not the first three conditions listed
above.
The Andrx and Cybear boards of directors can jointly agree to terminate
the reorganization agreement at any time before the reorganization is completed.
In addition, either company can terminate the reorganization agreement if:
o the reorganization is not completed by December 31, 2000;
o a law or final and nonappealable court order prohibits the
reorganization;
o either Andrx's or Cybear's stockholders fail to approve the
reorganization; or
o the other party breaches any of material representations or
warranties or fails to comply with any of its obligations
under the reorganization agreement; provided that the breach
is not cured within 30 days after notice to the other party.
In addition, Cybear can terminate the reorganization agreement if:
o Cybear's board of directors receives a takeover proposal and
determines in good faith that the takeover proposal is
superior to that of Andrx and that it is required by its
fiduciary duty to accept such takeover proposal.
THE ANDRX CERTIFICATE OF INCORPORATION
The amended and restated certificate of incorporation of Andrx
Corporation, or the certificate of incorporation, is attached as Annex B to this
document. We encourage you to read the certificate of incorporation carefully in
its entirety.
Andrx Corporation's capital stock will consist of two classes of common
stock, the Andrx Group Common Stock and Cybear Group Common Stock, and preferred
stock if the reorganization is consummated. The certificate of incorporation
provides for the following rights and preferences with respect to the two
classes of Andrx common stock following the reorganization:
VOTING RIGHTS
o On all matters as to which both classes of Andrx common stock
would vote together as a single class, each outstanding share
of Andrx Group Common Stock will have one vote, and each
outstanding share of Cybear Group Common Stock will have a
number of votes equal to the quotient of the average market
value of a share of Cybear Group Common Stock divided by the
average market value of a share of Andrx Group Common Stock
during the 20 consecutive trading days ending on the tenth
trading day prior to the record date for determination of the
stockholders entitled to vote, subject to some exceptions and
qualifications. Cybear Group Common Stock will in no event
represent in excess of 25% of the total voting power of all
outstanding shares of the Andrx common stock.
SALE OF CYBEAR GROUP
o Upon a sale or other disposition by Andrx Corporation of all
or substantially all of the properties and assets attributed
to the Cybear Group, Andrx Corporation is required to pay a
dividend on the outstanding shares of Cybear Group Common
Stock, redeem some or all of the outstanding shares of Cybear
Group Common Stock or convert outstanding shares of Cybear
Group Common Stock into shares of Andrx Group Common Stock,
subject to some exceptions more fully described in the
description of the common stock.
OPTIONAL CONVERSION
10
<PAGE>
o At any time after either the first anniversary of the
effective date of the reorganization or the occurrence of
tax-related events, the board of directors may convert shares
of Cybear Group Common Stock into Andrx Group Common Stock at
a specified ratio of market prices.
DIVIDENDS
o Funds available for dividends on Andrx Group Common Stock and
Cybear Group Common Stock will be limited to the lesser of the
amount that would be legally available for the payment of
dividends on the stock of such group if the group were a
separate company and an amount equal to the funds legally
available for the payment of dividends for Andrx Corporation
as a whole.
o Subject to the prior payment of dividends on outstanding
shares of preferred stock and the limitations described above,
the Andrx board of directors may choose to declare and pay
dividends on either class, or both classes, of common stock,
in equal or unequal amounts.
LIQUIDATION
o In the event of a dissolution or liquidation and winding-up of
Andrx Corporation after payment or provision for payment of
the debts and other liabilities of Andrx Corporation and full
preferential amounts to which holders of preferred stock are
entitled, the holders of Andrx Group Common Stock and Cybear
Group Common Stock will be entitled to receive the net assets,
if any, of Andrx Corporation remaining for distribution on a
per share basis in proportion to the specified liquidation
units per share of each class, as more fully described herein.
The liquidation rights of holders of the respective classes
may not bear any relationship to the relative market values or
relative voting rights of the two classes.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
Andrx common stock is quoted on the Nasdaq National Market under the
symbol "ADRX." Cybear common stock is quoted on the Nasdaq National Market under
the symbol "CYBA." On December 20, 1999, the last full trading day prior to
public announcement of the proposed reorganization, the closing price per share
of Andrx common stock was $20.75 and the closing price per share of Cybear
common stock was $7.69. On May 30, 2000, the most recent practicable date prior
to the filing of this document, the closing price per share of Andrx common
stock was $55.50 and the closing price per share of Cybear common stock was
$3.13.
ANDRX ANNUAL MEETING MATTERS
Andrx is also seeking the vote of its stockholders for the election of
three directors, the adoption of the 2000 Stock Option Plan and the ratification
of Arthur Andersen LLP, its independent certified public accountants. Andrx's
board of directors believes that these proposals are advisable and in the best
interests of Andrx and its stockholders and unanimously recommends that Andrx
stockholders vote FOR these proposals.
11
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
Andrx and Cybear stockholders should read the Summary Consolidated Financial
Data presented below in conjunction with the Consolidated Financial Statements
and the notes to the financial statements for Andrx and Cybear incorporated by
reference or included herein. These amounts have been extracted from the
companies' consolidated financial statements. All amounts are in thousands,
except for share and per share amounts.
<TABLE>
<CAPTION>
ANDRX
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------- -----------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
----------------------- -----------------------------------------------------------------
(Unaudited) (Unaudited)
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA(1):
Revenues
Distributed products............... $ 67,826 $ 63,025 $ 262,402 $ 215,903 $ 146,237 $ 86,721 $ 50,468
Manufactured products.............. 44,114 4,373 134,796 11,472 3,324 - -
Stipulation fees................... - 10,000 70,733 19,130 - - -
Licensing and other................ 3,538 526 8,059 552 137 50 165
----------- ------------ --------------- ------------ ----------- ------------ -----------
Total revenues................... 115,478 77,924 475,990 247,057 149,698 86,771 50,633
----------- ------------ --------------- ------------ ----------- ------------ -----------
Operating expenses
Cost of goods sold................. 63,204 52,826 235,346 188,226 126,802 72,400 41,781
Selling, general and
administrative..................... 11,542 9,591 55,266 30,646 18,934 13,778 9,847
Research and development........... 8,211 4,315 25,697 16,837 11,251 5,066 3,895
Cybear, Inc. Internet operating
expenses........................... 6,339 2,795 14,744 4,090 1,473 - -
Cybear, Inc. merger costs.......... 832 - - - - - -
----------- ------------ ----------- ------------ ----------- ----------- -----------
Total operating expenses......... 90,128 69,527 331,053 239,799 158,460 91,244 55,523
----------- ------------ ----------- ------------ ----------- ----------- -----------
Income (loss) from operations .......... 25,350 8,397 144,937 7,258 (8,762) (4,473) (4,890)
Other income (expense)
Minority interest.................. 1,820 51 1,937 85 31 - -
Gain on sale of Cybear, Inc.
shares............................. - 300 643 700 - - -
Interest income.................... 1,531 366 3,603 1,064 1,585 1,210 339
Interest expense................... (474) (154) (1,661) (380) (490) (765) (636)
----------- ------------ ----------- ------------ ----------- ----------- -----------
Income (loss) before income taxes....... 28,227 8,960 149,459 8,727 (7,636) (4,028) (5,187)
Income taxes............................ 11,856 2,016 55,405 333 - - -
----------- ------------ ----------- ------------ ----------- ----------- -----------
Net income (loss)....................... $ 16,371 $ 6,944 $ 94,054 $ 8,394 $ (7,636) $ (4,028) $ (5,187)
=========== ============ =========== ============ =========== =========== ===========
Basic net income (loss) per share....... $ 0.26 $ 0.11 $ 1.52 $ 0.14 $ (0.13) $ (0.08) $ (0.14)
=========== ============ =========== ============ =========== =========== ===========
Diluted net income (loss) per share..... $ 0.25 $ 0.11 $ 1.45 $ 0.13 $ (0.13) $ (0.08) $ (0.14)
=========== ============ =========== ============ =========== =========== ===========
Basic weighted average shares of
Common stock outstanding.............. 63,212,600 60,871,900 61,979,800 60,090,800 56,852,400 48,592,000 37,787,200
=========== ============ =========== ============ =========== =========== ===========
Diluted weighted average shares of
Common stock outstanding.............. 65,832,200 64,625,300 64,953,200 63,706,800 56,852,400 48,592,000 37,787,200
=========== ============ =========== ============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, -------------------------------------------------------------
2000 1999 1998 1997 1996 1995
---------- -------------------------------------------------------------
(Unaudited)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA(1):
Cash, cash equivalents and
investments available-for-sale(2) $ 114,771 $ 123,418 $ 23,092 $ 25,543 $ 30,320 $ 13,841
Working capital 185,842 180,863 51,345 45,144 32,963 14,402
Total assets 363,126 357,954 121,198 90,845 66,538 36,010
Short-term borrowings 20,370 20,226 4,107 546 6,563 6,101
Total stockholders' equity 246,638 220,972 72,583 60,861 42,762 18,325
</TABLE>
(1) Certain prior years' amounts have been reclassified to conform with the
current year presentation.
(2) Includes $26.7 million and $38.0 million of cash, cash equivalents and
investments available-for-sale held by Cybear as of March 31, 2000 and
December 31, 1999, respectively.
12
<PAGE>
CYBEAR
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE THREE MONTHS ENDED FOR THE YEARS ENDED FROM
STATEMENT OF OPERATIONS DATA:* MARCH 31, DECEMBER 31, FEBRUARY 5, 1997
----------------------------- ----------------------------- (INCEPTION) TO
2000 1999 1999 1998 DECEMBER 31, 1997
------------ ------------ ------------ ------------ -----------------
(UNAUDITED) (UNAUDITED)
(in thousands, except for share and per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues ................................ $ 231 $ -- $ 270 $ -- $ 96
------------ ------------ ------------ ------------ ------------
Operating expenses:
Cost of Revenues .................... 209 -- 77 -- --
Network operations and operations
support ........................... 933 728 2,790 643 --
Product development ................. 948 526 3,058 1,557 894
Sales and marketing ................. 1,896 725 4,909 483 --
General and administrative .......... 880 655 2,544 1,064 667
Depreciation and amortization ....... 549 191 1,556 139 65
Merger costs ........................ 832 -- -- -- --
Other non-recurring charges ......... 1,152 -- -- 285 --
------------ ------------ ------------ ------------ ------------
Total operating expenses ................ 7,399 2,825 14,934 4,171 1,626
------------ ------------ ------------ ------------ ------------
Loss from operations .................... (7,168) (2,825) (14,664) (4,171) (1,530)
Other income (expense):
Interest income ..................... 559 1 1,282 -- --
Interest expense on due to Andrx
Corporation ........................ -- (91) (216) (210) (28)
------------ ------------ ------------ ------------ ------------
Loss before income taxes ................ (6,609) (2,915) (13,598) (4,381) (1,558)
Income tax benefit ...................... -- 1,400 2,824 1,900 --
------------ ------------ ------------ ------------ ------------
Net loss ................................ $ (6,609) $ (1,515) $ (10,774) $ (2,481) $ (1,558)
============ ============ ============ ============ ============
Basic and diluted net loss per share .... $ (0.37) $ (0.11) $ (0.70) $ (0.19) $ (0.12)
============ ============ ============ ============ ============
Basic and diluted weighted average shares
of common stock outstanding ......... 17,703,669 13,269,400 15,470,009 13,030,999 12,768,303
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------------------------
BALANCE SHEET DATA: 2000 1999 1998 1997
--------- --------- ---------- ----------
(UNAUDITED)
(in thousands)
<S> <C> <C> <C> <C>
Cash, cash equivalents and investments
available-for-sale ................ $26,743 $37,994 $ 4 $ 1
Working capital (deficit) .............. 31,631 39,390 (3,235) (1,378)
Total assets ........................... 46,798 53,068 3,332 396
Total liabilities ...................... 3,127 3,090 3,799 1,410
Total shareholders' equity (deficit).... 43,671 49,978 (467) (1,014)
</TABLE>
* Certain prior years' amounts have been reclassified to conform to the current
year presentation.
13
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The unaudited pro forma condensed consolidated balance sheets as of March
31, 2000 and the unaudited pro forma condensed consolidated statements of
operations for the three months ended March 31, 2000 and for the year ended
December 31, 1999 give pro forma effect to the corporate reorganization plan
(the "Reorganization") which will create two classes of Andrx common stock,
Cybear Group Common Stock, to separately track the performance of Cybear, and
Andrx Group Common Stock to represent the equity interests of Andrx other than
its ownership of Cybear.
In connection with the Reorganization, Andrx will acquire all of the
publicly traded shares of common stock of Cybear in what should be a tax-free
reorganization. Cybear's public shareholders currently own approximately 4.9
million shares or 27.5% of the common shares of Cybear as of March 31, 2000 and
those shareholders will receive one share of Cybear Group Common Stock for
every share of Cybear common stock they currently own. In the Reorganization,
the number of Cybear shares held by Andrx will be reduced from 12.9 million
shares to 10.8 million shares so as to provide the equivalent of a 20% increase
in shares held by the non-Andrx shareholders of Cybear. Upon completion of the
Reorganization, the non-Andrx shareholders of Cybear will own approximately
31.2% of the Cybear Group Common Stock following the closing of the transaction.
Pursuant to the Reorganization, each Andrx common share will be converted into
(i) one share of Andrx Group Common Stock and (ii) approximately .1493 shares
of Cybear Group Common Stock. Upon completion of the Reorganization, (i) Cybear
will be a wholly owned subsidiary of Andrx with 100% of its value publicly
traded in the form of Cybear Group Common Stock, (ii) current Cybear public
shareholders will own approximately 31.2% of the Cybear Group Common Stock; and
(iii) current Andrx shareholders will own 100% of the Andrx Group Common Stock
and approximately 68.8% of the Cybear Group Common Stock. The preceding share
ownership and percentages exclude the potential exercise by Edward E. Goldman,
M.D., Cybear's Chief Executive Officer, of an outstanding warrant to acquire
525,000 shares of Cybear common stock currently owned by Andrx.
The unaudited pro forma condensed consolidated balance sheets give effect
to the Reorganization as if it occurred as of March 31, 2000. The unaudited pro
forma condensed consolidated statements of operations give effect to the
Reorganization as if it occurred at the beginning of the periods presented.
Prior to the Reorganization, Andrx Corporation and subsidiaries had a
single class of common stock outstanding and, accordingly, presented
consolidated financial statements relating to that one class. As a result of
the Reorganization, Andrx Corporation will have two classes of common stock as
follows:
1. Cybear Group Common Stock representing the equity interest and
businesses of the Cybear Group comprised of Andrx' Cybear subsidiary, and
2. Andrx Group Common Stock representing the equity interests and
businesses of the Andrx Group comprised of Andrx Corporation and its
subsidiaries other than the Cybear Group.
Accordingly, under the Reorganization, Andrx will present consolidated
financial statements and also separate financial statements relating to each
class of common stock.
Cybear Group and Andrx Group financial statements will include basic and
diluted earnings (loss) per share based on each group's respective operating
results and basic and diluted shares outstanding. The Andrx Corporation and
subsidiaries consolidated financial statements will not reflect consolidated
basic and diluted earnings (loss) per share since there will be no underlying
equity security related to the consolidated financial results. In connection
with the Reorganization, Cybear and members of the Andrx consolidated group
will enter into, among other things, a Federal and state tax sharing agreement.
The financial statements of Andrx Group and Cybear Group will utilize the
separate company method of accounting for purposes of allocating Federal and
state consolidated tax liabilities among group members. Under the terms of the
tax sharing
14
<PAGE>
agreement, a member of the group will be entitled to its income tax benefits in
the year generated to the extent that the member can utilize such tax benefits
in the year generated. To the extent that a member cannot utilize its income
tax benefits in the year generated, the member will not be compensated in that
year by other members of the Andrx consolidated group for any utilization of
those benefits. Instead, if and when a member leaves the group, Andrx may elect
to reimburse that member for any unreimbursed income tax benefits utilized.
That reimbursement will take the form of a capital investment by Andrx, for
which it will receive stock. In the case of any "tracking stock" members, such
as the Cybear Group, the stock received by Andrx shall be in the form of
tracking shares. In addition, if any member of the group causes another member
to become subject to state tax in a state where it would otherwise not be taxed
on a separate company basis, the member causing the tax liability shall be
fully responsible for the state tax of the other member.
For financial statement purposes, at such time as the Cybear Group
achieves profitability, if ever, or is otherwise able to recognize its tax
benefits under accounting principles generally accepted in the United States,
the Cybear Group will recognize the benefit of its accumulated income tax
benefits (which had previously been utilized by the Andrx Group) in its
statement of operations with a corresponding decrease to the Cybear Group's
shareholders' equity (i.e., effectively accounted for as a non-cash dividend).
To the extent the Andrx Group is profitable and is able to utilize such tax
benefit and the Cybear Group is generating losses, it is expected that the
Andrx Group effective tax rate will be less than the statutory Federal and
state rate. If the Cybear Group is ever able to attain profitability or is
otherwise able to recognize its tax benefits, the Andrx Group effective tax
rate may be greater than the statutory Federal and state income tax rate to the
extent of the Cybear Group's then unreimbursed accumulated tax benefits that
can be realized (the Andrx Group will then reverse the tax benefits previously
recorded, i.e., effectively transferring such tax benefits to the Cybear Group
in the form of a non-cash equity transaction).
The unaudited pro forma condensed consolidated financial data are provided
for informational purposes only and are not necessarily indicative of the
results of operations or financial position had the transactions assumed
therein occurred, nor are they necessarily indicative of the results of
operations that may be expected to occur in the future. Consummation of the
transaction is subject to various conditions, including approval by
shareholders of Andrx and Cybear. 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. Andrx and Cybear will file a joint proxy statement and registration
statement with respect to the proposed transaction. Furthermore, the unaudited
pro forma condensed consolidated financial data are based upon assumptions that
Andrx and Cybear believe are reasonable and should be read in conjunction with
the consolidated financial statements and the accompanying notes thereto
included elsewhere in this prospectus and the consolidated financial statements
and accompanying notes thereto for the year ended December 31, 1999, included in
Andrx' Annual Report on Form 10-K for the year ended December 31, 1999.
15
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 2000
------------------------------------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA PRO FORMA
CYBEAR ANDRX PRO FORMA ANDRX CYBEAR ANDRX
CONSOLIDATED CONSOLIDATED ADJUSTMENTS CONSOLIDATED GROUP GROUP
------------ ------------ --------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ........................ $ 1,040 $ 26,904 $ -- $ 26,904 $ 1,040 $ 25,864
Investments available-for-sale ................... 25,703 87,867 -- 87,867 25,703 62,164
Accounts receivable, net ......................... 162 64,280 -- 64,280 162 64,118
Inventories ...................................... -- 78,263 -- 78,263 -- 78,263
Deferred income tax assets, net .................. -- 18,435 -- 18,435 -- 18,435
Prepaid and other current assets, net ............ 7,853 14,552 -- 14,552 7,853 6,699
--------- --------- ----------- --------- -------- ---------
Total current assets ........................... 34,758 290,301 -- 290,301 34,758 255,543
Property, plant and equipment, net ............... 3,608 48,157 -- 48,157 3,608 44,549
Other assets, net ................................ 8,432 24,668 2,700 (A) 43,050 26,814 16,236
15,682 (C)
--------- --------- ----------- --------- -------- ---------
Total assets ................................... $ 46,798 $ 363,126 $ 18,382 $ 381,508 $ 65,180 $ 316,328
========= ========= =========== ========= ======== =========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable ................................. $ 2,348 $ 46,325 $ 4,000 (A) $ 50,993 $ 3,016 $ 47,977
668 (B)
Accrued liabilities .............................. 779 28,377 28,377 779 27,598
Bank loan ........................................ -- 20,370 -- 20,370 -- 20,370
Income taxes payable ............................. -- 9,387 -- 9,387 -- 9,387
--------- --------- ----------- --------- -------- ---------
Total current liabilities ...................... 3,127 104,459 4,668 109,127 3,795 105,332
Commitments and contingencies
Minority interest ................................. -- 12,029 (12,029)(C) -- -- --
Shareholders' equity .............................. 43,671 246,638 (1,300)(A) 272,381 61,385 210,996
(668)(B)
27,711 (C)
--------- --------- ----------- --------- -------- ---------
Total liabilities and shareholders' equity ..... $ 46,798 $ 363,126 $ 18,382 $ 381,508 $ 65,180 $ 316,328
========= ========= =========== ========= ======== =========
</TABLE>
The accompanying notes to the unaudited pro forma condensed consolidated
balance sheets are an integral part of these statements.
16
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
(A) Reflects the estimated fees and expenses of $2,700 incurred by Andrx Group
with respect to the acquisition of the historical minority interest which
was allocated to Cybear Group goodwill and $1,300 with respect to the
Reorganization which was charged to shareholders' equity. As the effect of
the costs of $1,300 is non-recurring it has not been included in the
unaudited pro forma condensed consolidated statements of operations.
(B) Reflects the estimated remaining fees and expenses of $668 to be incurred
by Cybear Group in connection with the Reorganization which will be
charged to shareholders' equity. As the effect of the costs is
non-recurring, they have not been included in the unaudited pro forma
condensed consolidated statements of operations.
(C) Reflects the effects of the Reorganization, as follows:
<TABLE>
<CAPTION>
ADJUSTED
SHARES SHARES
OUTSTANDING AT REORGANIZATION OUTSTANDING AT
MARCH 31, 2000 ELIMINATION MARCH 31, 2000
---------------- ---------------- ---------------
<S> <C> <C> <C>
Andrx ownership of Cybear ........................................ 12,877,000 (2,058,700) 10,818,300
Minority ownership of Cybear ..................................... 4,896,000 -- 4,896,000
---------- ---------- ----------
Total Cybear shares outstanding .................................. 17,773,000 (2,058,700) 15,714,300
==========
Times assumed per share price .................................... $ 5.00 $ 5.66
------------ ------------
Total Cybear market capitalization ............................... $ 88,865 $ 88,865
============ ============
Minority ownership of Cybear ..................................... 4,896,000
Times adjusted market price ...................................... $ 5.66
------------
Purchase price of minority interest acquired ..................... 27,711
Less: minority interest historical basis ......................... (12,029)
------------
Goodwill--Purchase price of minority interest in excess of its
historical basis ............................................... 15,682
Goodwill--Andrx group estimated fees and expenses (See Note
A) ............................................................. 2,700
------------
Total goodwill allocated to Cybear Group ......................... $ 18,382
============
</TABLE>
For purposes of the unaudited pro forma condensed consolidated financial
statements, the market price of Cybear, Inc. common stock was assumed to be
$5.00 per share, which was adjusted to $5.66 per share resulting from the
elimination of 2,058,700 Cybear shares due to the exchange rate included in the
Reorganization. As provided under the Reorganization terms, the shares
eliminated in the Reorganization are calculated excluding the potential
exercise by Edward E. Goldman, M.D., Cybear's Chief Executive Officer, of an
outstanding warrant to acquire 525,000 shares of Cybear common stock currently
owned by Andrx. In connection with the Reorganization, the resulting total
goodwill of $18,382 was allocated to Cybear Group Common shareholders. The
actual amount of goodwill will be determined based upon Cybear's common stock
price as of the closing of the transaction. An increase or decrease of $1.00 in
Cybear's common stock price will result in an increase or decrease of
approximately $5,500 to the goodwill and therefore in an increase or decrease
of approximately $550 to the annual goodwill amortization.
17
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000
-----------------------------------------------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA PRO FORMA
CYBEAR ANDRX PRO FORMA ANDRX CYBEAR ANDRX
CONSOLIDATED CONSOLIDATED ADJUSTMENTS(J) CONSOLIDATED GROUP GROUP
------------- ------------- ---------------- ------------ ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues ................................ $ 231 $ 115,478 $ -- $ 115,478 $ 231 $ 115,247
Operating expenses ...................... 7,399 90,128 460 (E) 89,756 7,027 82,729
(832) (F)
----------- ----------- ---------- --------- ------------- -----------
Income (loss) from operations ........... (7,168) 25,350 372 25,722 (6,796) 32,518
Other income (expense), net ............. 559 2,877 (1,820) (D) 1,057 559 498
----------- ----------- ---------- --------- ------------- -----------
Income (loss) before income taxes ....... (6,609) 28,227 (1,448) 26,779 (6,237) 33,016
Income tax benefit (provision) .......... -- (11,856) 2,101 (H) (9,755) -- (9,755)
----------- ----------- ---------- --------- ------------- -----------
Net income (loss) ....................... $ (6,609) $ 16,371 $ 653 $ 17,024 $ (6,237) $ 23,261
=========== =========== ========== ========= ============= ===========
Basic net income (loss) per share ....... $ (0.37) $ 0.26 $ (0.40) $ 0.37
=========== =========== ============= ===========
Diluted net income (loss) per share ..... $ (0.37) $ 0.25 $ (0.40) $ 0.35
=========== =========== ============= ===========
Basic weighted average shares of
common stock outstanding ............... 17,703,669 63,212,600 15,645,000 (I) 63,212,600
=========== =========== ============= ===========
Diluted weighted average shares of
common stock outstanding ............... 17,703,669 65,832,200 15,645,000 (I) 65,832,200
=========== =========== ============= ===========
</TABLE>
The accompanying notes to the unaudited pro forma condensed consolidated
statements of operations are an integral part of these statements.
18
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------------------------------------------------
HISTORICAL HISTORICAL PRO FORMA PRO FORMA PRO FORMA
CYBEAR ANDRX PRO FORMA ANDRX CYBEAR ANDRX
CONSOLIDATED CONSOLIDATED ADJUSTMENTS(J) CONSOLIDATED GROUP GROUP
------------ ------------ --------------- ------------ ----------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues ................................ $ 270 $ 475,990 $ -- $ 475,990 $ 270 $ 475,720
Operating expenses ...................... 14,934 331,053 1,838 (E) 332,891 16,772 316,119
----------- ----------- --------- ---------- ------------- -----------
Income (loss) from operations ........... (14,664) 144,937 (1,838) 143,099 (16,502) 159,601
Other income (expense), net ............. 1,066 4,522 (1,937)(D) 2,585 1,066 1,519
----------- ----------- --------- ---------- ------------- -----------
Income (loss) before income taxes ....... (13,598) 149,459 (3,775) 145,684 (15,436) 161,120
Income tax benefit (provision) .......... 2,824 (55,405) (2,824)(G) (53,240) -- (53,240)
4,989 (H)
----------- ----------- --------- ---------- ------------- -----------
Net income (loss) ....................... $ (10,774) $ 94,054 $ (1,610) $ 92,444 $ (15,436) $ 107,880
=========== =========== ========= ========== ============= ===========
Basic net income (loss) per share ....... $ (0.70) $ 1.52 $ (1.15) $ 1.74
=========== =========== ============= ===========
Diluted net income (loss) per share ..... $ (0.70) $ 1.45 $ (1.15) $ 1.66
=========== =========== ============= ===========
Basic weighted average shares of
common stock outstanding ............... 15,470,009 61,979,800 13,411,300 (I) 61,979,800
=========== =========== ============= ===========
Diluted weighted average shares of
common stock outstanding ............... 15,470,009 64,953,200 13,411,300 (I) 64,953,200
=========== =========== ============= ===========
</TABLE>
The accompanying notes to the unaudited pro forma condensed consolidated
statements of operations are an integral part of these statements.
19
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
(D) Reflects the elimination of the historical minority interest resulting from
the minority ownership of Cybear which is eliminated as a result of the
Reorganization.
(E) Reflects the amortization of $460 for the three months ended March 31, 2000
and $1,838 for the year ended December 31, 1999 of goodwill totaling
$18,382, consisting of $15,682 representing the excess of the purchase
price of $27,711 offset by historical minority interest of $12,029 and
Andrx Group's estimated Reorganization transaction costs and expenses of
$2,700 (see unaudited pro forma condensed consolidated balance sheets
Notes A and C). Such goodwill is amortized on a straight line basis over
an estimated life of ten years.
(F) For the three months ended March 31, 2000, reflects the elimination of fees
and expenses of $832 incurred by Cybear in connection with the
Reorganization. As the effect of the costs are non-recurring, they have
been eliminated in the unaudited pro forma condensed consolidated
statements of operations for the three months ended March 31, 2000.
(G) For the year ended December 31, 1999, reflects the elimination of Cybear's
historical $2,824 income tax benefit which would not have been used by
Cybear Group on a separate income tax return basis and would have been
included in the tax allocation to Andrx Group (Note H) pursuant to the
Reorganization.
(H) Represents the Cybear Group income tax benefit allocated to Andrx Group
pursuant to the Reorganization as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
-------------------- ------------------
<S> <C> <C>
Cybear Group loss before income taxes ...... $ 6,237 $ 15,436
Nondeductible goodwill amortization
(including historical amortization) ...... 558 1,953
-------- ---------
Loss before income taxes ................... 5,679 13,483
Federal and state statutory tax rate ....... 37% 37%
-------- ---------
Income tax benefit ......................... $ 2,101 $ 4,989
======== =========
</TABLE>
(I) Pro Forma Cybear Group weighted average shares outstanding consists of the
following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 2000 DECEMBER 31, 1999
-------------------- ------------------
<S> <C> <C>
Historical Cybear weighted average shares outstanding ... 17,703,700 15,470,000
Less: shares eliminated as a result of the Reorganization
(see unaudited pro forma condensed consolidated balance
sheets Note C) ........................................ (2,058,700) (2,058,700)
---------- ----------
Pro Forma Cybear Group Common Stock weighted average
shares outstanding .................................... 15,645,000 13,411,300
========== ==========
</TABLE>
(J) Certain results of the Reorganization referred to in the notes to the
unaudited pro forma condensed consolidated balance sheets have been
excluded from the unaudited pro forma condensed consolidated statements of
operations due to their non-recurring nature.
20
<PAGE>
RISK FACTORS
Stockholders of Andrx and Cybear should consider the risk factors
described below, as well as the other information included in or incorporated by
reference into this document before deciding how to vote on the proposals. After
discussing risk factors related to the reorganization, we discuss risks relating
to Cybear's and Andrx's businesses.
RISKS ASSOCIATED WITH HAVING TWO CLASSES OF ANDRX COMMON STOCK
FINANCIAL EFFECTS ON ONE GROUP COULD ADVERSELY AFFECT THE OTHER GROUP
Holders of Andrx Group Common Stock and Cybear Group Common Stock will
all be common stockholders of Andrx Corporation, and will continue to be subject
to all of the risks of an investment in Andrx Corporation and all of its
businesses, assets and liabilities. The issuance of the Andrx Group Common Stock
and the Cybear Group Common Stock and the allocation of assets and liabilities
and stockholders' equity between the Andrx Group and the Cybear Group will not
result in a distribution or spin-off to stockholders of any of its assets or
liabilities and will not affect Andrx Corporation's ownership of its assets or
responsibility for its liabilities or those of its subsidiaries. The assets
attributed to one group may be subject to the liabilities of the other group,
even if these liabilities arise from lawsuits, contracts or indebtedness
attributed to the other group. If Andrx Corporation is unable to satisfy one
group's liabilities with the assets attributed to it, it may satisfy those
liabilities with assets it has attributed to the other group.
Financial effects on one group that affect the consolidated results of
operations or financial condition of Andrx Corporation could, if significant,
affect the results of operations or financial condition of the other group and
the market price of the common stock relating to the other group. In addition,
net losses of either group and dividends and distributions on, or repurchases
of, either class of common stock or repurchases of preferred stock at a price
per share greater than par value will reduce the funds that can be paid as
dividends on each class of common stock under Delaware law. For these reasons,
you should read the consolidated financial information of Andrx incorporated by
reference in this joint prospectus/proxy statement, the consolidated financial
information of Cybear herein and the financial information provided for each of
the Andrx Group and the Cybear Group.
DECISIONS OF THE BOARD OF DIRECTORS AFFECTING THE MARKET VALUE OF EACH
CLASS OF COMMON STOCK COULD AFFECT VOTING AND CONVERSION RIGHTS
The relative voting power per share of the Andrx Group Common Stock and
the Cybear Group Common Stock and the number of shares of Andrx Group Common
Stock issuable upon the conversion of the Cybear Group Common Stock will vary
depending upon the relative market value of the Andrx Group Common Stock and the
Cybear Group Common Stock. The market value of either or both classes of common
stock could be affected by market reaction to decisions by the board of
directors that investors perceive to affect differently one class of common
stock compared to the other and will correspondingly have an effect on the
voting power of one group relative to the other. These decisions could involve
changes to the management and allocation policies, transfers of assets between
groups, allocations of corporate opportunities and financing resources between
groups and changes in dividend policies.
HOLDERS OF EACH CLASS OF COMMON STOCK WILL HAVE ONLY LIMITED CLASS
STOCKHOLDER RIGHTS
Holders of Andrx Group Common Stock and Cybear Group Common Stock
generally will not have stockholder rights specific to their corresponding
groups. Rather, stockholders will have customary stockholder rights relating to
Andrx Corporation as a whole. For example, holders of Andrx Group Common Stock
and Cybear Group Common Stock will vote as a single class to approve a
disposition of all or substantially all of Andrx Corporation assets and holders
of both classes are entitled to receive a percentage of all of Andrx
Corporation's assets in the case of a liquidation. Holders of either Andrx Group
Common Stock or Cybear Group Common Stock will have only the following rights
with respect to their class of common stock:
21
<PAGE>
o an opportunity to receive dividends, if any, when, as and if
declared by the board of directors;
o an opportunity to have the Cybear Group Common Stock be
redeemed or converted into Andrx Group Common Stock upon the
disposition of all or substantially all of the assets of the
Cybear Group; and
o a right to vote separately as a class only on matters as set
forth in the certificate of incorporation, as may be required
under Delaware law or the Nasdaq National Market rules.
Andrx Corporation will not hold separate meetings for holders of Andrx
Group Common Stock or Cybear Group Common Stock.
THE AGGREGATE VOTING POWER OF ALL OF THE OUTSTANDING SHARES OF CYBEAR
GROUP COMMON STOCK IS LIMITED TO 25% OF THE TOTAL VOTING POWER OF ALL OF THE
OUTSTANDING SHARES OF BOTH CLASSES OF ANDRX COMMON STOCK
Except for limited matters on which a separate class vote may be
required, the Andrx Group Common Stock and the Cybear Group Common Stock will
vote together as a single class on all matters requiring a stockholder vote.
Matters on which the Andrx Group Common Stock and the Cybear Group Common Stock
will vote together may involve an apparent or real divergence of interests
between the holders of each class of common stock in the aggregate. The
aggregate voting power of all of the outstanding shares of Cybear Group Common
Stock is limited to 25% of the total voting power of all of the outstanding
shares of both classes of Andrx common stock. Consequently, the aggregate voting
power of all of the outstanding shares of Andrx Group Common Stock will
represent a majority of the outstanding voting power of all of the outstanding
shares of both classes of common stock. To the extent that matters come before
the stockholders on which the holders of Andrx Group Common Stock and the
holders of Cybear Group Common Stock have a divergence of interests, the holders
of Andrx Group Common Stock, to the extent they vote in a similar manner, will
be able to control the vote. These matters may include mergers or other
extraordinary transactions. In addition, the issuance or repurchase of shares of
either class of common stock could cause changes in the relative voting power of
the groups, subject to the 25% limitation on the voting power of the Cybear
Group Common Stock described above.
IN LIMITED CIRCUMSTANCES WHERE A SEPARATE CLASS VOTE IS REQUIRED, THE
CLASS OF COMMON STOCK WITH LESS THAN MAJORITY VOTING POWER CAN BLOCK ACTION
If the certificate of incorporation, Delaware law or the Nasdaq
National Market rules require a separate vote on any matter by the holders of
either the Andrx Group Common Stock or the Cybear Group Common Stock, those
holders could prevent approval of the matter, even if the holders of a majority
of the total number of votes cast or entitled to be cast, voting together as a
class, were to vote in favor of it.
HOLDERS OF EITHER CLASS OF COMMON STOCK COULD BE ADVERSELY AFFECTED BY
A CONVERSION OF THE CYBEAR GROUP COMMON STOCK
At any time after either the first anniversary of the effective date of
the reorganization or the occurrence of tax-related events, the board of
directors, in its sole discretion and without stockholder approval, could
determine to convert shares of Cybear Group Common Stock into shares of Andrx
Group Common Stock, including a conversion at a time when either or both classes
of Andrx Corporation common stock may be considered to be overvalued or
undervalued. Any conversion at a premium would dilute the interests of the
holders of the Andrx Group Common Stock in Andrx Corporation. Any conversion
would also preclude holders of both classes of common stock from retaining their
investment in a security that is intended to reflect separately the performance
of the groups. It may also give holders of shares of converted Cybear Group
Common Stock a greater or lesser consideration than any consideration a
third-party buyer would pay for all or substantially all of the assets of the
Cybear Group.
22
<PAGE>
STOCKHOLDERS MAY NOT HAVE ANY REMEDIES FOR BREACH OF FIDUCIARY DUTIES
IF ANY ACTION BY DIRECTORS AND OFFICERS HAS A DISADVANTAGEOUS EFFECT ON EITHER
CLASS OF COMMON STOCK
Stockholders may not have any remedies if an action or decision of the
board of directors or officers of Andrx Corporation has a disadvantageous effect
on the Andrx Group Common Stock or the Cybear Group Common Stock compared to the
other class of common stock. Recent cases in Delaware Court involving tracking
stocks have indicated that decisions by directors or officers involving
differing treatment of tracking stocks should be judged under the business
judgment rule, unless self-interest is established. The business judgment rule
provides that an informed director or officer will be deemed to have satisfied
his or her fiduciary duties if that person acts in a manner he or she believes
in good faith to be in the best interests of Andrx Corporation. Because of the
application of the business judgment rule, holders of one group's stock who are
disadvantaged by an action of the board of directors or officers may not be able
to successfully make claims that a decision involving different treatment of the
Andrx Group Common Stock or Cybear Group Common Stock was wrongful, absent a
showing of self-interest by directors or officers.
STOCK OWNERSHIP COULD CAUSE DIRECTORS AND OFFICERS TO FAVOR ONE GROUP
OVER THE OTHER
Andrx Corporation's directors and officers will initially own more
shares, including shares subject to stock options, of Andrx Group Common Stock
than the Cybear Group Common Stock. As a policy, the board of directors will
periodically monitor the ownership of shares of the Andrx Group Common Stock and
shares of Cybear Group Common Stock by its directors and senior officers and its
option grants to them so that their interests are generally aligned with the two
classes of common stock and with their duty to act in the best interests of the
Andrx Corporation and its stockholders as a whole. However, because the actual
value of their interests in the Andrx Group Common Stock and Cybear Group Common
Stock is anticipated to vary significantly, it is possible that they could favor
one group over the other due to their stock and option holdings.
NUMEROUS POTENTIAL CONFLICTS OF INTERESTS EXIST BETWEEN CLASSES OF COMMON STOCK
WHICH MAY BE DIFFICULT TO RESOLVE BY THE BOARD OF DIRECTORS OR WHICH MAY BE
RESOLVED ADVERSELY TO ONE OF THE CLASSES
The existence of different classes of common stock could give rise to
occasions when the interests of holders of the Andrx Group Common Stock and
Cybear Group Common Stock diverge, conflict or appear to diverge or conflict.
THE BOARD OF DIRECTORS MAY PAY MORE OR LESS DIVIDENDS ON ONE GROUP'S
COMMON STOCK THAN IF THAT GROUP WAS A SEPARATE COMPANY
The board of directors has the authority to declare and pay dividends
on each class of common stock in any amount and could, in its sole discretion,
declare and pay dividends exclusively on the Andrx Group Common Stock,
exclusively on the Cybear Group Common Stock, or on both, in equal or unequal
amounts. The board of directors will not be required to consider the amount of
dividends previously declared on each class, the respective voting or
liquidation rights of each class or any other factor. The performance of one
group may cause the board of directors to pay more or less dividends on the
common stock relating to the other group than if that other group was a
stand-alone corporation. In addition, Delaware law and the certificate of
incorporation may impose limitations on the amount of dividends which may be
paid on each class of common stock.
Because the Cybear Group is expected to require significant capital
commitments to finance its operations and fund its future groups, Andrx
Corporation does not expect to pay any dividends on shares of Cybear Group
Common Stock for the foreseeable future.
23
<PAGE>
PROCEEDS OF MERGERS OR CONSOLIDATIONS MAY BE ALLOCATED UNFAVORABLY
The reorganization does not contain any provisions governing how
consideration to be received by holders of common stock in connection with a
merger or consolidation involving Andrx Corporation is to be allocated among
holders of each class of common stock. The board of directors will make that
determination. That determination could favor the holders of one group of common
stock at the expense of the holders of the other group's stock.
ALLOCATION OF CORPORATE OPPORTUNITIES COULD FAVOR ONE GROUP OVER THE
OTHER
The board of directors may be required to allocate corporate
opportunities between the groups. In some cases, the directors could determine
that a corporate opportunity, such as a business that the Andrx Group may be
acquiring, should be shared by the groups. Any such decisions could favor one
group at the expense of the other.
GROUPS MAY COMPETE WITH EACH OTHER TO THE DETRIMENT OF THEIR BUSINESSES
The creation of two separate classes of common stock will not prevent
the groups from competing with each other. Any competition between the groups
could be detrimental to the businesses of either or both of the groups. Under a
board of directors' policy, groups will generally not engage in the principal
businesses of the other. However, the board of directors will permit indirect
competition between the groups based on his or its good faith business judgment
that such competition is in the best interests of Andrx and all of its
stockholders as a whole. In addition, the groups may compete in a business that
is not a principal business of the other group.
EITHER GROUP MAY FINANCE THE OTHER GROUP ON TERMS UNFAVORABLE TO ONE OF
THE GROUPS
It is possible that Andrx Corporation will transfer cash and other
property between groups to finance their business activities. The group
providing the financing will be subject to the risks relating to the group
receiving the financing. Andrx Corporation will account for those transfers in
one of the following ways:
o as a short-term or long-term loan between groups or as a
repayment of a previous borrowing;
o as an increase or decrease in the Andrx Group's equity
interest in the Cybear Group; or
o as a sale of assets between the two groups.
The board of directors has not adopted specific criteria for
determining when it will transfer cash or other property as a loan or repayment,
an increase or decrease in equity interest or a sale of assets. These
determinations, including the terms of any transactions accounted for as debt,
could be unfavorable to either the group transferring or receiving the cash or
other property. The board of directors expects to make these determinations,
either in specific instances or by setting generally applicable policies, after
considering the financing requirements and objectives of the receiving group,
the investment objectives of the transferring group and the availability, cost
and time associated with alternative financing sources, prevailing interest
rates and general economic conditions.
Andrx and Cybear cannot assure you that any terms that are fixed for
debt will approximate those that could have been obtained by the borrowing group
if it were a stand-alone corporation.
CYBEAR GROUP MAY NOT BE FULLY REIMBURSED FOR ANDRX GROUP'S USE OF ITS
TAX BENEFITS AND COULD PAY HIGHER FUTURE TAXES THAN IF IT WERE A STAND-ALONE
TAXPAYER
The tax sharing agreement entered into as part of the reorganization
agreement provides that tax benefits generated but not used by the Cybear Group
in the year generated may be used by other members of Andrx Corporation's
consolidated group. Accordingly, on a cash basis any tax benefits generated by
the Cybear Group and utilized by other members of the consolidated group will
not be available as a carry-forward to reduce the Cybear Group's future tax
liabilities. This could result in the Cybear Group
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reporting higher corporate tax liability in the future than would have been the
case if the Cybear Group had retained its tax benefits.
HOLDERS OF CYBEAR GROUP COMMON STOCK MAY RECEIVE LESS CONSIDERATION
UPON A SALE OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS THAN IF THE GROUP WAS A
SEPARATE COMPANY
The certificate of incorporation provides that if a disposition of all
or substantially all of the assets of the Cybear Group occurs, Andrx Corporation
must, subject to certain exceptions:
o distribute to holders of the Cybear Group Common Stock an
amount equal to the net proceeds of such disposition, or
o convert at a 110% exchange ratio the Cybear Group Common Stock
into shares of the Andrx Group Common Stock.
If the Cybear Group Common Stock were a separate, independent company and its
shares were acquired by another person, certain costs of that disposition,
including corporate level taxes, might or might not be payable in connection
with that acquisition. As a result, stockholders of a separate, independent
company might receive a greater amount than the net proceeds that would be
received by holders of the Cybear Group Common Stock if the assets of the Cybear
Group were sold. In addition, Andrx Corporation cannot assure you that the net
proceeds per share of the Cybear Group Common Stock will be equal to or more
than the market value per share of the Cybear Group Common Stock prior to or
after announcement of a disposition.
PROVISIONS GOVERNING THE TWO CLASSES OF COMMON STOCK COULD DISCOURAGE A
CHANGE OF CONTROL AND THE PAYMENT OF A PREMIUM FOR SHARES
The existence of two classes of common stock could present complexities
and could pose obstacles, financial or otherwise, to a person seeking to acquire
control of Andrx Corporation. In addition, provisions of Delaware law and the
certificate of incorporation and bylaws may also deter hostile takeover
attempts. If the Andrx Group and the Cybear Group were separate, independent
companies, any person interested in acquiring either group without negotiating
with the other group's management could seek control of that entity by obtaining
control of its outstanding voting stock by means of a tender offer or proxy
contest. A person interested in acquiring only one group would still be required
to seek control of the majority of the voting power represented by all the
outstanding stock of Andrx Corporation.
INVESTORS MAY NOT VALUE THE COMMON STOCK BASED ON GROUP FINANCIAL
INFORMATION AND POLICIES
We cannot assure you that investors will value the Andrx Group Common
Stock and the Cybear Group Common Stock based on the reported financial results
and prospects of the Andrx Group and the Cybear Group or the dividend policies
established by the board of directors with respect to the groups.
THE BOARD OF DIRECTORS MAY CHANGE OR MAKE EXCEPTIONS TO THE MANAGEMENT
AND ALLOCATION POLICIES TO THE DETRIMENT OF ONE GROUP WITHOUT STOCKHOLDER
APPROVAL
The board of directors intends to adopt the management and allocation
policies which are described in this proxy statement under "Management and
Allocation Policies," to govern the relationship between the Andrx Group Common
Stock and the Cybear Group Common Stock. The board of directors may modify or
rescind, or make exceptions to, the policies with respect to the allocation of
corporate opportunities, financing arrangements, shared corporate services,
competition between the groups, taxes, debt, interest and other matters, or may
adopt additional policies, in its sole discretion without stockholder approval.
A decision to modify, rescind or make exceptions to these policies or adopt
additional policies, could have different effects on the holders of the Andrx
Group Common Stock and the holders of the Cybear Group Common Stock or could
adversely affect the holders of one class of common stock compared to the
holders of the other class of common stock.
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IRS COULD ASSERT THAT THE DISTRIBUTION OR RECEIPT OF GROUP COMMON
STOCK IS TAXABLE
Andrx and Cybear have been advised by their tax advisors that no
income, gain or loss should be recognized by the companies or their stockholders
for federal income tax purposes as a result of the reorganization, except with
respect to the sale of fractional shares received by Andrx's stockholders.
However, there are no court decisions or other authorities bearing directly on
the treatment of stock with characteristics similar to the Andrx Group Common
Stock and the Cybear Group Common Stock. In addition, the IRS has announced that
it will not issue rulings on the characterization of stock with characteristics
similar to the Andrx Group Common Stock and the Cybear Group Common Stock. It is
possible, therefore, that the Internal Revenue Service could assert that the
distribution, receipt or subsequent exchange of the Andrx Group Common Stock or
the Cybear Group Common Stock could be taxable.
RECENT CLINTON ADMINISTRATION PROPOSAL COULD RESULT IN TAXATION OF
ISSUANCES OF COMMON STOCK
A proposal last year by the Clinton administration would impose a
corporate-level tax on the issuance of stock similar to the Andrx Group Common
Stock or the Cybear Group Common Stock. In contrast, a proposal this year by the
Clinton Administration would, among other things, tax stockholders who receive
tracking stock as a dividend or in a recapitalization. Both proposals would
affect stock issued on or after the date the proposals were enacted by Congress.
To date, Congress has not enacted either last year's or this year's proposal.
However, if either proposal or a similar one were enacted with an effective date
prior to the date of the reorganization, Andrx Corporation or its stockholders
could be subject to tax with respect to the Andrx Group Common Stock or Cybear
Group Common Stock. We cannot predict whether either proposal or a similar one
will be enacted, and, if so, when it would be effective.
Under the certificate of incorporation, Andrx may convert the Cybear
Group Common Stock into shares of the Andrx Group Common Stock without any
premium if there are adverse U.S. federal income tax law developments. The
proposal of the Clinton Administration would be such an adverse development if
it is enacted or receives certain legislative action.
RISKS RELATED TO CYBEAR GROUP COMMON STOCK
A MARKET FOR THE CYBEAR GROUP COMMON STOCK MAY NOT DEVELOP AND THE
MARKET VALUE OF THE CYBEAR GROUP COMMON STOCK IS NOT PREDICTABLE
Although there is a public trading market for the Cybear common stock,
we cannot assure you that a public trading market for Cybear Group Common Stock
will develop or be sustained after the reorganization. In addition, the market
prices of Andrx Group Common Stock and Cybear Group Common Stock will be
determined in the trading markets and will be influenced by many factors,
including, among other things:
o the respective financial results of Andrx Group and the Cybear
Group;
o the consolidated financial results of Andrx Corporation;
o investors' expectations for the Andrx Group, the Cybear Group
and Andrx Corporation as a whole;
o the right of the board of directors to exchange shares of one
class of common stock for shares of the other class;
o the discretion of the board of directors in making
determinations relating to a variety of cash management and
allocation matters;
o the variable voting power of the Cybear Group Common Stock
relative to the Andrx Group Common Stock;
o trading volume of each class of common stock;
o share issuances and repurchases; and
o general economic conditions.
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We cannot assure you that the market value of the Cybear Group Common
Stock will equal or exceed the market value of the existing Cybear common stock.
In addition, Andrx cannot predict the impact that the terms of the
reorganization will have on the market prices of the Andrx Group Common Stock.
Furthermore, we cannot assure you that the market values of the Andrx Group
Common Stock and the Cybear Group Common Stock will in fact reflect the
performance of the Andrx Group and the Cybear Group, as intended.
THE CYBEAR GROUP COMMON STOCK PRICES MAY FLUCTUATE
The market price of Cybear Group Common Stock may fluctuate widely in
response to a number of events and factors such as:
o quarterly changes in results of operations of the Cybear
Group;
o announcements of new technological innovations and new
products and properties by the Cybear Group or its
competitors;
o changes in financial estimates and recommendations by
securities analysts;
o the operating and stock price performance of companies that
investors may deem comparable to the Cybear Group; and
o news relating to trends in the Cybear Group's markets or
general economic conditions.
The stock market and specifically the stock of Internet companies have
been very volatile. This volatility is often not related to the operating
performance of the companies. This broad market volatility and industry
volatility may reduce the price of Cybear Group Common Stock, without regard to
the Cybear Group's performance. In addition, Cybear's operating results may be
below the expectations of public market analysts and investors. In such event,
there would be a high possibility that the market price of Cybear Group Common
Stock would decrease.
THE CYBEAR GROUP HAS A LIMITED OPERATING HISTORY AND A HISTORY OF NET
LOSSES AND THERE IS NO ASSURANCE THAT THE CYBEAR GROUP WILL REPORT NET INCOME IN
THE FUTURE
A potential investor in Cybear Group Common Stock should consider the
risks, expenses and difficulties frequently encountered by businesses such as
the Cybear Group particularly in the new and rapidly evolving market for
Internet products, content and services. There can be no assurance that the
Andrx Group and/or the Cybear Group will be successful in addressing these
risks. Since its inception, Cybear has been primarily engaged in product
development activities. Cybear has not yet generated any significant revenues
from product sales or any other services. In addition, Cybear has incurred
significant net losses and negative cash flow from operations since inception
and as of December 31, 1999 had an accumulated deficit of approximately $14.8
million. We cannot assure you that the Cybear Group will report net income in
the future.
THE CYBEAR GROUP IS STILL IN AN EARLY STAGE AND MAY EXPERIENCE
DIFFICULTIES IN DEVELOPING AND COMMERCIALIZING ITS PRODUCTS
The Cybear Group faces all of the risks, uncertainties, expenses,
delays, problems and difficulties typically encountered in establishing a new
business and developing and commercializing new products. The Cybear Group has
limited experience in developing and commercializing software and Internet-based
products. It does not know the potential performance or market acceptance of its
products that it may introduce. It is possible that the Cyber Group will have
unanticipated expenses, problems or technical difficulties that could cause
material delays in product commercialization.
The Cybear Group's operating losses have increased in recent quarters
as it built its infrastructure. The Cybear Group intends to continue to invest
heavily in the areas of product development, network operations, sales and
marketing, customer support and administration. As a result, it expects to
continue to incur substantial operating losses for the foreseeable future, and
it may not achieve or sustain profitability.
For the foreseeable future, the Cybear Group expects to incur
significant expenses for:
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o product development;
o licensing and content development;
o marketing to potential users;
o developing additional infrastructure; and
o funding operating expenses.
THE CYBEAR GROUP WILL NEED TO GENERATE REVENUES TO BECOME PROFITABLE
We cannot be certain that the Cybear Group can achieve sufficient
revenues in relation to its expenses to ever become profitable. The Cybear Group
will not generate any meaningful revenues until and unless its products gain
market acceptance by physicians and other participants in the healthcare
industry. The Cybear Group anticipates its revenues to be generated primarily
from:
o e-commerce sales of products through an arrangement with the
Andrx Group;
o transaction fees derived from the use of productivity
applications by healthcare providers; and
o subscriber fees from the user of its products.
Currently, Cybear's revenues have been primarily generated from the sale of
products pursuant to an arrangement with Andrx. However, the Cybear Group's
business model is still evolving and it is unable to predict the amount and
timing of revenues. If the Cybear Group does achieve profitability, it cannot be
certain that it can sustain or increase profitability on a quarterly or annual
basis in the future.
THE CYBEAR GROUP MAY NEED ADDITIONAL CAPITAL TO CONTINUE ITS BUSINESS
IF IT DOES NOT GENERATE SUFFICIENT REVENUES OVER THE NEXT 12 MONTHS
If the Cybear Group's revenues fall short of its projections or its
expenses exceed its expectations, the Cybear Group may need to raise additional
capital through public or private debt or equity financings to fund the
deployment of its products or continue its business plan. The Cybear Group may
not be able to raise additional capital when needed on terms favorable to it or
at all.
THE CYBEAR GROUP HAS RECEIVED ONLY LIMITED REVENUES FROM ITS PRODUCTS
AND IT DOES NOT KNOW IF POTENTIAL CUSTOMERS WILL ACCEPT ITS PRODUCTS
The Cybear Group cannot guarantee that physicians and other
participants in the healthcare industry will accept its products, or even the
Internet, as a replacement for traditional methods of communication and sources
of information and administrative services. Market acceptance of its products
will depend upon continued growth in the use of the Internet generally and, in
particular, as a source of communications, information and administrative
services for the healthcare industry.
The Cybear Group's ability to become profitable will depend on whether
healthcare providers accept these new methods of conducting business and
exchanging information. If healthcare providers do not make this transition, it
will not be able to build its user base resulting in insufficient revenues to
achieve profitability.
THE CYBEAR GROUP WILL NOT BE ABLE TO ATTRACT USERS IF IT FAILS TO
ESTABLISH AND MAINTAIN AWARENESS OF ITS PRODUCTS
In order to increase its user base, the Cybear Group must establish,
maintain and strengthen the awareness of its products. For it to be successful
in establishing this awareness, healthcare providers must perceive the Cybear
Group products as offering quality, cost-effective information and services, and
medical suppliers, pharmaceutical companies and other vendors to the healthcare
industry must perceive its products as being an effective marketing and sales
channel for their products and services. The Cybear Group's business could be
materially adversely affected if its marketing efforts are not productive.
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THE CYBEAR GROUP NEEDS TO CONTINUE PRODUCT DEVELOPMENT IN ORDER TO
ATTRACT AND RETAIN USERS
If the Cybear Group is unable to develop its products as planned, it
will not be able to attract and retain users, which will impact its ability to
generate revenue.
The Cybear Group's first product dr.cybear was introduced in March 1999
but still needs further development. Other Cybear products have not yet been
introduced and are still under development. The Cybear Group will have to commit
considerable time, effort and resources to finalize development and adapt its
software to satisfy specific requirements of potential customers. The Cybear
Group product development efforts may not be successfully completed on a timely
basis or at all. The Cybear Group may not be able to successfully adapt its
software to satisfy specific requirements of potential customers, and we cannot
guarantee that unanticipated events will not occur which would result in
increased costs or material delays in product development or commercialization.
Technologies as complex as those incorporated into its products may
contain errors that become apparent during commercial use. Remedying product
errors could delay its plans and cause it to incur substantial additional costs.
COMPETITION COULD HAMPER THE CYBEAR GROUP'S ABILITY TO BUILD ITS USER
BASE RESULTING IN INSUFFICIENT REVENUES, WHICH WOULD ADVERSELY AFFECT ITS
BUSINESS
Both the ISP market and the ASP market are extremely competitive. The
Cybear Group's competitors include online services or web sites targeted to the
healthcare community, general purpose ISPs, publishers and distributors of
offline media targeted to the healthcare community, healthcare information
companies and large data processing and information companies. Any pricing
pressures, reduced margins or loss of market share resulting from its failure to
compete effectively would materially adversely affect its business, financial
condition and operating results. The Cybear Group may not have the financial
resources, technical expertise or marketing and support capabilities to compete
successfully.
The Cybear Group expects competition in its market to increase
significantly as new companies enter the market and current competitors expand
their product lines and services. Many of these potential competitors are likely
to enjoy substantial competitive advantages, including:
o greater financial, technical and marketing resources that can
be devoted to the development, promotion and sale of their
services;
o stronger strategic relationships;
o longer operating histories;
o greater name recognition; and
o larger user bases.
THE CYBEAR GROUP WILL NOT BE SUCCESSFUL IF INTERNET USAGE FOR BUSINESS
AND E-COMMERCE DOES NOT INCREASE
The Cybear Group's success depends on the increased acceptance and use
of the Internet, which is uncertain. Internet usage in the Cybear Group's
business area is at an early stage of development and is rapidly evolving. The
adoption of the Internet for commerce, particularly by those individuals and
companies in the healthcare industry that historically have relied upon
traditional means of commerce, will require a broad acceptance of new methods of
conducting business and exchanging information. A market for its products and
services may not develop and demand for its services may not emerge or be
sustainable. If the market fails to develop, develops more slowly than expected
or becomes saturated with competitors, or if its services do not achieve or
sustain market acceptance, its business, results of operations and financial
condition would be materially adversely affected.
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Internet usage may be inhibited for a number of reasons, such as:
o lack of appropriate infrastructure;
o limitations on access by potential users;
o security concerns;
o privacy concerns;
o inconsistent quality of service; and
o lack of availability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth, and performance and reliability
may decline. In addition, web sites may from time to time experience
interruptions in their service as a result of outages and other delays occurring
throughout the Internet network infrastructure. If these outages or delays
frequently occur in the future, Internet usage could be adversely affected and
users may not use the Cybear Group's products and services.
BREACHES OF INTERNET SECURITY COULD HARM THE CYBEAR GROUP'S BUSINESS
AND RESULT IN LIABILITY
To the extent that the Cybear Group's activities involve the storage
and transmission of proprietary information such as patient information and
credit card numbers, security breaches could expose it to a risk of loss,
litigation and possible liability to users. The Cybear Group's security measures
may not prevent security breaches which in turn may have a material adverse
effect on its business, results of operations and financial condition.
A party who is able to circumvent the Cybear Group's security measures
could misappropriate proprietary and confidential information or cause
interruptions in its operations. The Cybear Group may be required to expend
significant capital and other resources to protect against the threat of
security breaches or to alleviate problems caused by breaches. Concerns over the
security of Internet transactions and the privacy of users may also inhibit the
growth of the Internet generally, especially as a means of conducting commercial
transactions.
CLAIMS THAT MAY BE MADE AGAINST THE CYBEAR GROUP FOR INFORMATION
RETRIEVED FROM THE INTERNET COULD HAVE MATERIAL ADVERSE FINANCIAL EFFECTS ON ITS
BUSINESS
Due to the fact that materials may be downloaded from the Cybear
Group's products and may be subsequently distributed to others, there is the
potential that claims will be made against us for defamation, negligence,
copyright or trademark infringement or other theories based on the nature and
content of such materials. Similar claims have been brought, sometimes
successfully, against Internet service providers in the past. In addition, the
Cybear Group could be subject to liability with respect to content that may be
accessible through its products or third party web sites linked from its
products.
Although the Cybear Group carries general liability insurance, its
insurance may not cover potential claims of this type or may not be adequate to
cover all costs incurred in defense of potential claims or to indemnify it for
all liability that may be imposed. Any costs or imposition of liability that is
not covered by insurance or in excess of insurance coverage could have a
material adverse effect on the Cybear Group's business, results of operations
and financial condition.
THE CYBEAR GROUP'S SUCCESS DEPENDS ON ITS ABILITY TO DEVELOP DESIRABLE
INTERNET BASED APPLICATIONS AND GENERATE E-COMMERCE REVENUES
To date, Cybear has:
o developed its core product, dr.cybear, which offers a broad
range of physician practice management tools;
o developed certain internet based applications, none of which
has resulted in Cybear deriving material revenue; and
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o commenced generating e-commerce revenue through an arrangement
with Andrx.
The failure of the Cybear Group to develop additional desirable
Internet based applications or significantly increase the volume of e-commerce
sales could inhibit the Cybear Group's ability to attract users and accordingly
could have a material adverse effect on its business, financial condition and
operating results.
THE CYBEAR GROUP AND ITS SERVICE AND CONTENT PROVIDERS MAY EXPERIENCE
SYSTEM FAILURES THAT COULD INTERRUPT ITS SERVICES
The success of the Cybear Group's business will depend on the capacity,
reliability and security of its network infrastructure. The Cybear Group relies
on major telecommunications providers to provide the external telecommunications
infrastructure necessary for Internet communications. The Cybear Group also
depends on its content and service providers for some of the content and service
applications that it makes available through dr.cybear. Any significant
interruptions in the Cybear Group's services or an increase in response time
could result in a loss of potential or existing users and sponsors and, if
sustained or repeated, could reduce the attractiveness of dr.cybear to them.
Although the Cybear Group maintains insurance for its business, it cannot
guarantee that its insurance will be adequate to compensate it for all losses
that may occur or to provide for costs associated with business interruptions.
To succeed, the Cybear Group must be able to operate dr.cybear 24 hours
a day, seven days a week, without interruption. To operate without interruption,
the Cybear Group's service and content providers must guard against:
o damage from fire, power loss and other natural disasters;
o communications failures;
o software and hardware errors, failures or crashes;
o security breaches, computer viruses and similar disruptive
problems; and
o other potential interruptions.
dr.cybear may be required to accommodate a high volume of traffic and
deliver frequently updated information. The Cybear Group's users may experience
slower response times or system failures due to increased traffic on its site or
for a variety of other reasons. The Cybear Group also depends on service
application providers to provide information and data feeds on a timely basis.
dr.cybear could experience disruptions or interruptions in service due to the
failure or delay in the transmission or receipt of this information. Any
significant interruption in the Cybear Group's operations could have a material
adverse effect on its business, financial condition and operating results.
IF THE CYBEAR GROUP IS UNABLE TO MANAGE GROWTH, ITS BUSINESS MAY SUFFER
The Cybear Group's inability to manage growth effectively would have a
material adverse effect on its business, financial condition and operating
results. The Cybear Group must continue to implement and improve its
operational, financial and information systems, and expand, train and manage its
employee base. The Cybear Group may not be able to effectively manage expansion
of its operations, and its facilities, systems, procedures or controls may not
be adequate to support its operations.
THE LOSS OF THE SERVICES OF ONE OR MORE OF THE CYBEAR GROUP'S KEY
PERSONNEL COULD DISRUPT ITS OPERATIONS AND DAMAGE ITS ABILITY TO GROW ITS
BUSINESS
The Cybear Group's performance is substantially dependent on the
continued services and on the performance of its executive officers and key
employees, many of whom have worked together for only a short period of time.
Particularly in light of the Cybear Group's relatively early stage of
development, it is dependent on retaining and motivating highly qualified
personnel, especially its senior management. The loss of the services of Edward
E. Goldman, M.D., its chief executive officer, Timothy Nolan, its president and
chief operating officer, or other executive officers and key employees could
have a material adverse effect on
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its business, results of operations or financial condition. The Cybear Group
does not have "key person" life insurance policies on any of its executive
officers or key employees.
THE CYBEAR GROUP'S ABILITY TO IMPLEMENT ITS BUSINESS PLAN DEPENDS ON
ITS ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL TO IMPLEMENT ITS BUSINESS PLAN
The Cybear Group needs to attract and retain highly qualified
technical, sales, customer service and managerial personnel in order to
implement its business plan. The Cybear Group particularly needs these personnel
to continue product development and marketing. Competition for personnel in
these areas is intense, and the Cybear Group cannot guarantee that it will be
able to attract or retain a sufficient number of highly qualified employees in
the future. If the Cybear Group is unable to hire and retain personnel in key
positions, its business, financial condition and operating results could be
materially adversely affected.
THE CYBEAR GROUP'S INABILITY TO PROTECT ITS INTELLECTUAL PROPERTY COULD
ADVERSELY IMPACT THE ACCEPTANCE OF THE DR.CYBEAR PRODUCT AND ITS FINANCIAL
CONDITION
The Cybear Group regards its copyrights, trademarks, trade secrets
including methodologies, practices and tools and other intellectual property
rights as critical to its success. To protect the Cybear Group's rights in these
various forms of intellectual property, it relies on a combination of patent,
trademark and copyright law, trade secret protection and confidentiality
agreements and other contractual arrangements with its employees, affiliates,
clients, strategic partners, acquisition targets and others. The Cybear Group's
inability to protect its intellectual property adequately could have a material
adverse effect on the acceptance of the dr.cybear brand and on its business,
financial condition and operating results.
The Cybear Group cannot guarantee that its actions to protect its
proprietary rights will be adequate, that third parties will not infringe or
misappropriate intellectual property, or that it will be able to detect
unauthorized use of its intellectual property and take appropriate steps to
enforce its rights. It is possible that the Cybear Group's competitors or others
will adopt product or service names similar to its, thereby impeding its ability
to build brand identity and possibly leading to customer confusion. Moreover,
because domain names derive value from the individual's ability to remember
these names, the Cybear Group cannot guarantee that its domain name will not
lose its value if, for example, users begin to rely on mechanisms other than
domain names to access online resources. In addition, the Cybear Group cannot
guarantee that other parties will not assert infringement claims against it.
Litigation, whether to enforce or defend the Cybear Group's
intellectual property rights, would divert management resources, be expensive
and may not effectively enable it to protect its intellectual property.
THE CYBEAR GROUP'S GROWTH MIGHT BE LIMITED IF ITS INTERNET ACTIVITIES
BECOME SUBJECT TO SALES OR OTHER TAXES
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 enacted law
places a temporary moratorium on creating new types of state and local taxation
on Internet commerce. The Cybear Group 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 the Cybear Group's business, financial condition and operating
results.
GOVERNMENT REGULATION OF INTERNET COMMUNICATIONS MAY ADVERSELY IMPACT
THE CYBEAR GROUP'S BUSINESS
The Cybear Group could become subject to regulation by the Federal
Communications Commission or another regulatory agency as a provider of basic
telecommunications services. Changes in the regulatory environment relating to
the application of access charges and other support payments to Internet and
Internet telephony providers, regulation of Internet services, including
Internet telephony, and other regulatory changes
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that directly or indirectly affect costs imposed on Internet or Internet
telephony providers, telecommunications costs or increase in the likelihood or
scope of competition, could make its communications infrastructure more
expensive to operate and have a material adverse impact on its business and
financial condition.
GOVERNMENT REGULATION OF HEALTHCARE MAY ADVERSELY IMPACT THE CYBEAR
GROUP'S BUSINESS
The impact of regulatory developments in the healthcare industry is
complex and difficult to predict, and the Cybear Group cannot guarantee that it
will not be materially adversely affected by existing or new regulatory
requirements or interpretations. Participants in the healthcare industry are
subject to extensive and frequently changing regulation under numerous laws
administered by governmental entities at the federal, state and local levels.
Many current laws and regulations, when enacted, did not anticipate the methods
of healthcare communication that the Cybear Group is developing. The Cybear
Group believes, however, that these laws and regulations may nonetheless be
applied to its healthcare communications business. Accordingly, the Cybear
Group's healthcare communications business may be affected by current
regulations as well as future regulations specifically targeted to this new
segment of the healthcare industry.
Current laws and regulations that may affect the healthcare
communications business include:
o the regulation of confidential patient medical record
information;
o laws relating to the electronic transmission of prescriptions
from physicians' offices to pharmacies;
o regulations governing the use of software applications in the
diagnosis, cure, treatment, mitigation or prevention of
disease; and
o laws or regulations relating to the relationships between or
among healthcare providers.
There may also be future legislation and regulation in these areas,
both at the state and federal level.
RISKS RELATED TO ANDRX GROUP COMMON STOCK
ANDRX'S BUSINESS IS SUBJECT TO SUBSTANTIAL LITIGATION WHICH COULD
EXPOSE ANDRX TO UNFAVORABLE CLAIMS
Andrx has and continues to face substantial patent infringement
litigation with respect to the manufacture, use and sale of Andrx's products. To
date, actions have been filed against Andrx in connection with substantially all
of the ANDAs Andrx has filed containing certifications relating to infringement,
validity or enforceability of patents. In these applications, Andrx has
certified that it believes an unexpired patent which is listed with the FDA and
covers the brand name product will not be infringed by Andrx's product and/or is
invalid or unenforceable. Andrx anticipates that additional actions may be filed
as Andrx or its collaborative partners file additional ANDAs. Patent litigation
may also be brought against Andrx in connection with certain NDA products that
Andrx may pursue. The outcome of this type of litigation is difficult to predict
because of the uncertainties inherent in patent litigation. Prior to filing an
ANDA or NDA, Andrx evaluates the probability of patent infringement litigation
on a case-by-case basis and has reserved for the estimated patent infringement
litigation costs relating to litigation. Andrx's business and financial results
could be materially harmed by the delays in marketing its products as a result
of litigation, an unfavorable outcome in any litigation or the expense of
litigation whether or not it is successful.
ANDRX IS SUBJECT TO ANTITRUST LITIGATION AND AN FTC ADMINISTRATIVE
PROCEEDING RELATING TO A STIPULATION ANDRX ENTERED INTO WITH AVENTIS AND ITS
AFFILIATES WHICH, IF ADVERSELY DETERMINED, WOULD HARM ANDRX'S BUSINESS AND
FINANCIAL RESULTS
Putative class actions and individual actions have been filed against
Andrx in a number of state and federal courts. In each of these suits, Aventis
S.A., formerly Hoechst Marion Roussel, Inc., and some of its affiliates, have
been named as co-defendants. Andrx entered into a stipulation and agreement with
Aventis pursuant to which the parties agreed to maintain the status quo during
the patent infringement litigation that Aventis brought against Andrx. In the
stipulation, Andrx agreed not to commence marketing its bioequivalent
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version of Cardizem CD until the earlier of final resolution of the Aventis
litigation or certain dates specified in the stipulation in exchange for the
right to obtain a license to the relevant Aventis' patents in the event Andrx
lost the patent infringement litigation or if other events occurred as well as
payments made by Aventis to Andrx, among other things. The complaint in each of
the class actions alleges that Aventis alone and Aventis along with Andrx, by
way of the stipulation, engaged in antitrust and other statutory and common law
violations which allegedly have, and other things, given Aventis and Andrx a
monopoly in the U.S. market for Cardizem CD and a bioequivalent version of that
pharmaceutical product or otherwise restrained trade. The complaints in each of
the class actions seek compensatory damages on behalf of each class member in an
unspecified amount and, in some cases, treble damages, as well as costs and
counsel fees, disgorgement, injunctive relief and other remedies.
On May 11, 2000, the United States District Court for the Eastern
District of Michigan denied Andrx's and Aventis' motions to dismiss the
consolidated class action and other complaints pending before this court, which
is handling the multi-district litigation challenging the stipulation. The
motions to dismiss were premised upon legal arguments as to why the causes of
action asserted by the various claimants are legally inadequate. In denying the
motions, the court was required to assume the truth of the claimant's factual
allegations and rejected Andrx's view of certain aspects of state and federal
law upon which Andrx's defenses are premised. Andrx and Aventis will now be
required to continue to submit to discovery and make a substantive response to
the factual allegations of each of the consolidated complaints. The court's
interpretation of the applicable law, with which Andrx disagrees, may make
Andrx's defense of the allegations more difficult.
In addition, on March 16, 2000, Andrx was named as a respondent by the
FTC in an administrative action seeking a cease and desist order against future
agreements similar to the stipulation and other remedies. The complaint in the
administrative proceeding does not seek any monetary remedies from Andrx of any
kind.
An adverse outcome in the class actions, individual actions and FTC
administrative action or the expense to Andrx of defending such actions, whether
or not there is an adverse outcome, could materially harm Andrx's business and
financial results.
ANDRX ONLY HAS A LIMITED NUMBER OF COMMERCIALIZED PRODUCTS AND THESE
AND OTHER PRODUCTS TYPICALLY HAVE DECLINING REVENUES OVER THEIR PRODUCT LIFE
To date, the FDA has approved or tentatively approved the ANDAs for six
of Andrx's products and Andrx has commenced marketing only four of these
(including the two ANCIRC products). Andrx cannot assure you that its products
under development or products submitted to the FDA will be approved by the FDA
or other regulatory authorities or that Andrx's development efforts will be
successfully completed. Andrx's future results of operations will depend
significantly upon Andrx's ability to develop and market new pharmaceutical
products and our existing ones. Andrx's operating results may vary significantly
on an annual or quarterly basis depending on the timing of, and Andrx's ability
to obtain, FDA approvals for such new products. Newly introduced bioequivalent
pharmaceuticals with limited or no competition are typically sold at higher
selling prices, often resulting in higher gross profit margins. As competition
from other manufacturers intensifies, selling prices and gross profit margins
typically decline, which has been our experience with our existing products. The
timing of Andrx's future operating results may also be affected by a variety of
additional factors, including the results of future patent challenges and the
market acceptance of Andrx's new products.
THE STRINGENT GOVERNMENTAL REGULATION IN ANDRX'S BUSINESS SUBJECTS
ANDRX TO A COSTLY AND TIME CONSUMING APPROVAL PROCESS FOR ANDRX'S PRODUCTS
Drug manufacturers are required to obtain FDA approval before marketing
their new drug product candidates. The FDA approval requirements are costly and
time consuming. Andrx cannot assure you that its bioequivalence or clinical
studies and other data will result in FDA approval to market Andrx's new drug
products. Andrx believes that the FDA's abbreviated new drug application
procedures will apply to its bioequivalent versions of controlled-release drugs.
Andrx cannot assure you that any of its bioequivalent versions of
controlled-release drugs will be suitable for, or approved as part of,
abbreviated applications. Moreover, once a drug is approved (under either
procedure) Andrx cannot assure you that it will not have to withdraw such
product from the market if it is not manufactured in accordance with FDA
standards or Andrx's own internal standards.
Some abbreviated application procedures for bioequivalent
controlled-release drugs and other products are presently the subject of
petitions filed by brand name drug manufacturers, which seek changes from the
FDA in the approval requirements for particular bioequivalent drugs. Andrx
cannot predict at this time whether the FDA will make any changes to its
abbreviated application requirements as a result of these petitions or the
effect that any changes may have on Andrx. Any changes in FDA regulations or
policies may make abbreviated application approvals more difficult and thus may
materially harm its business and financial results.
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In order to market a new drug that does not qualify for the FDA's
abbreviated application procedures, Andrx must conduct extensive clinical trials
to demonstrate product safety and efficacy and submit an NDA. The process of
completing clinical trials and preparing an NDA may take several years and
requires substantial resources. Andrx has never submitted an NDA. Andrx cannot
assure you that its studies and filings will result in FDA approval to market
its new drug products or the timing of any approval.
Patent certification requirements for bioequivalent controlled-release
drugs and for some new drugs could also result in significant delays in
obtaining FDA approval if patent infringement litigation is initiated by the
holder or holders of the brand name patents. Delays in obtaining FDA approval of
abbreviated applications and some new drug applications can also result from a
marketing exclusivity period and/or an extension of patent terms.
PROPOSED FDA REGULATIONS AND RECENT FDA GUIDELINES MAY RESULT IN
ANDRX'S BIOEQUIVALENT PRODUCTS NOT BEING ABLE TO FULLY UTILIZE THE 180-DAY
MARKETING EXCLUSIVITY PERIOD
In August 1999, the FDA proposed to amend its regulations relating to
180-day marketing exclusivity for which certain bioequivalent drugs may qualify.
Andrx cannot predict whether or what changes the FDA may make to its
regulations. In March 2000, the FDA issued new guidelines regarding the timing
of approval of ANDAs following a court decision in patent infringement actions
and the start of the 180-day marketing exclusivity period provided for in the
Waxman-Hatch amendments applicable to generic pharmaceuticals. These guidelines
could result in Andrx not being able to utilize all or any portion of the
180-day marketing exclusivity period on ANDA products Andrx was first to file
on, depending on the timing of court decisions in patent litigation. Andrx is
unable to predict what impact, if any, the FDA's new guidelines may have on
Andrx's business or financial condition.
ANDRX FACES UNCERTAINTIES RELATED TO CLINICAL TRIALS WHICH COULD RESULT
IN DELAYS IN PRODUCT DEVELOPMENT AND COMMERCIALIZATION
Prior to seeking FDA approval for the commercial sale of brand name
controlled-release formulations under development, Andrx must demonstrate
through clinical trials that these products are safe and effective for use.
Andrx has limited experience in conducting and supervising clinical trials.
There are a number of difficulties associated with clinical trials. The results
of these clinical trials may not be indicative of results that would be obtained
from large-scale testing. Clinical trials are often conducted with patients
having advanced stages of disease and, as a result, during the course of
treatment these patients can die or suffer adverse medical effects for reasons
that may not be related to the pharmaceutical agents being tested, but which
nevertheless, affect the clinical trial results. Moreover, Andrx cannot assure
you that its clinical trials will demonstrate sufficient safety and efficacy to
obtain FDA approval. A number of companies in the pharmaceutical industry have
suffered significant setbacks in advanced clinical trials even after promising
results in pre-clinical studies. These failures have often resulted in decreases
in stock prices. If any of Andrx's products under development are not shown to
be safe and effective in clinical trials, Andrx's business and financial results
could be materially harmed by any resulting delays in developing other compounds
and conducting related clinical trials.
RESTRICTIVE FDA REGULATIONS GOVERN THE MANUFACTURING AND DISTRIBUTION
OF ANDRX'S PRODUCTS
The FDA also regulates the development, manufacture, distribution,
labeling and promotion of prescription drugs, requires that certain records be
kept and reports be made, mandates registration of drug manufacturers and
listing of their products and has the authority to inspect manufacturing
facilities for compliance with Current Good Manufacturing Practices, or cGMP,
standards. As a wholesale distributor of bioequivalent pharmaceuticals
manufactured by third parties, Andrx is subject to state licensure and other
requirements pertaining to the wholesale distribution of prescription drugs.
Andrx's business and financial results could be materially harmed by any failure
to comply with licensing and other requirements.
Other requirements exist for controlled drugs, such as narcotics, which
are regulated by the U.S. Drug Enforcement Administration, or DEA, and
comparable state-level agencies. Further, the FDA has the authority to withdraw
approvals of previously approved drugs for cause, to request recalls of
products, to bar
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companies and individuals from future drug application submissions and, through
action in court, to seize products, institute criminal prosecution or close
manufacturing plants in response to violations. The DEA has similar authority
and may also pursue monetary penalties. Andrx's business and financial results
could be materially harmed by these requirements or FDA or DEA actions.
ANDRX HAS LIMITED MANUFACTURING CAPACITY AND NEEDS TO ACQUIRE OR BUILD
ADDITIONAL CAPACITY FOR PRODUCTS IN ITS PIPELINE. ANDRX'S MANUFACTURING
FACILITIES MUST COMPLY WITH STRINGENT FDA AND OTHER REGULATORY REQUIREMENTS
Andrx has an approximately 35,000 square foot commercial manufacturing
facility. This facility is currently being used to manufacture the bioequivalent
versions of Dilacor XR and Cardizem CD. Although this facility is expected to be
sufficient for these products and for Andrx's bioequivalent versions of
Tiazac(R), Oruvail(R), Naprelan(R) and K-Dur(R), it will not be suitable for the
manufacture of all of the products Andrx intends to develop and manufacture.
Andrx will need to scale up its current manufacturing operations significantly.
Andrx is in the process of expanding its facilities for manufacturing
operations.
In addition to obtaining the appropriate licenses and permits to build
the new facilities, the new manufacturing facilities, once completed, will need
to be in compliance with cGMP and inspected. Andrx cannot assure you that such
permits, licenses and approvals will be obtained or, if obtained, obtained in
time to manufacture additional products as they are approved. Andrx's facilities
will be subject to periodic inspections by the FDA and Andrx cannot assure you
that the facilities will continue to be in compliance with cGMP or other
regulatory requirements. Failure to comply with such requirements could result
in significant delays in the development, approval and distribution of Andrx's
planned products, and may require Andrx to incur significant additional expense
to comply with cGMP or other regulatory requirements. Andrx's business and
financial results could be materially harmed by an adverse determination by the
FDA as a result of any such inspection. Further, Andrx will depend on other
companies to manufacture certain of the product candidates under development.
The DEA also periodically inspects facilities for compliance with
security, record keeping, and other requirements that govern controlled
substances. Andrx's business and financial results could be materially harmed
by an adverse determination by the DEA as a result of such inspection.
IF ANDRX IS UNABLE TO MANAGE IS RAPID GROWTH, ITS BUSINESS WILL SUFFER
Andrx has experienced rapid growth of its operations. This growth has
required it to expand, upgrade and improve its administrative, operational and
management systems, controls and resources. Andrx anticipates additional growth
in connection with the expansion of its manufacturing operations, development of
its brand products, its marketing and sales efforts for the products it
develops, the development and manufacturing efforts for its products and
Internet operations. If Andrx fails to manage growth effectively or to develop a
successful marketing approach, its business and financial results will be
materially harmed.
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ANDRX FACES INTENSE COMPETITION IN THE PHARMACEUTICAL INDUSTRY FROM
BOTH BRAND-NAME AND BIOEQUIVALENT MANUFACTURERS, WHOLESALERS AND DISTRIBUTORS
THAT COULD SEVERELY LIMIT ITS GROWTH
The pharmaceutical industry is highly competitive and many of its
competitors have longer operating histories and greater financial, research and
development, marketing and other resources than Andrx. Andrx is subject to
competition from numerous other entities that currently operate or intend to
operate in the pharmaceutical industry, including companies that are engaged in
the development of controlled-release drug delivery technologies and products
and other manufacturers that may decide to undertake in-house development of
these products. Andrx's bioequivalent products may be subject to competition
from competing bioequivalent products marketed by the patent holder. In Andrx's
pharmaceutical distribution business, Andrx competes with a number of large
wholesalers and other distributors of pharmaceuticals. Andrx cannot assure you
that it will be able to continue to compete successfully with these companies.
ANDRX DEPENDS ON ITS PATENTS AND TRADE SECRETS AND ITS FUTURE SUCCESS
IS DEPENDENT ON ITS ABILITY TO PROTECT THESE SECRETS AND NOT INFRINGE ON THE
RIGHTS OF OTHERS
Andrx believes that patent and trade secret protection is important to
its business and that its future success will depend in part on its ability to
obtain patents, maintain trade secret protection and operate without infringing
on the rights of others. Andrx has been issued a number of U.S. patents and has
filed additional U.S. and various foreign patent applications relating to its
drug delivery technologies. Andrx expects to apply for additional U.S. and
foreign patents in the future. The issuance of a patent is not conclusive as to
its validity or as to the enforceable scope of the claims of the patent. Andrx
cannot assure you that:
o its patents or any future patents will prevent other companies
from developing similar or functionally equivalent products or
from successfully challenging the validity of its patents;
o any of its future processes or products will be patentable;
o any pending or additional patents will be issued in any or all
appropriate jurisdictions;
o its processes or products will not infringe upon the patents
of third parties; or
o it will have the resources to defend against charges of patent
infringement by third parties or to protect its own patent
rights against infringement by third parties.
Andrx's business and financial results could be materially harmed if
Andrx fails to avoid infringement of the patent or proprietary rights of others
or to protect its patent rights.
Andrx also relies on trade secrets and proprietary knowledge, which
Andrx generally seeks to protect by confidentiality and non-disclosure
agreements with employees, consultants, licensees and pharmaceutical companies.
Andrx cannot assure that these agreements will not be breached, that Andrx will
have adequate remedies for any breach or that its trade secrets will not
otherwise become known by competitors.
ANDRX DEPENDS UPON MANAGEMENT AND KEY PERSONNEL AND DOES NOT HAVE
EMPLOYMENT AGREEMENTS WITH THEM
Andrx's success for the foreseeable future depends upon the services of
Dr. Chih-Ming J. Chen, Co-Chairman and Chief Scientific Officer; Alan P. Cohen,
Co-Chairman and Chief Executive Officer; and Dr. Elliot F. Hahn, President.
Andrx does not have employment agreements with these individuals. Dr. Chen
receives a 3.33% royalty on all sales of the bioequivalent version of Cardizem
CD, regardless of his employment status. In addition, Andrx's success will
depend in large part on its ability to attract and retain highly qualified
scientific, technical and business personnel experienced in the development,
manufacture and marketing of pharmaceuticals. Andrx's business and financial
results would be materially harmed by the loss of the services of any of these
three officers, or the inability to attract or retain qualified personnel.
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ANDRX WILL NEED AN EFFECTIVE SALES ORGANIZATION TO MARKET AND SELL ITS
FUTURE BRAND PRODUCTS AND ANDRX'S FAILURE TO HAVE AN EFFECTIVE SALES
ORGANIZATION MAY HARM ITS BUSINESS
Andrx does not have a sales organization to market and sell its brand
products that Andrx may develop or acquire. Andrx cannot assure you that prior
to the time these products are available for commercial launch Andrx will be
able to license its products to pharmaceutical companies with sales
organizations, enter into a favorable co-promotion or contract sales
arrangement, or recruit or acquire an effective sales organization. Andrx's
inability to enter into satisfactory sales and marketing arrangements in the
future may materially harm its business and financial results. Andrx may have to
rely on collaborative partners to market its products. These partners may not
have the same interests as Andrx in marketing the products and Andrx may lose
control over the sales of these products.
DECREASES IN HEALTHCARE REIMBURSEMENTS COULD LIMIT ANDRX'S ABILITY TO
SELL ITS PRODUCTS OR DECREASE ITS REVENUES
Andrx's ability to maintain profitability in its distribution business
or to commercialize its product candidates depends in part on the extent to
which reimbursement for the cost of pharmaceuticals will be available from
government health administration agencies, private health insurers and other
organizations. In addition, third party payors are attempting to control costs
by limiting the level of reimbursement for medical products, including
pharmaceuticals, which may adversely affect the pricing of Andrx's product
candidates. Moreover, healthcare reform has been, and may continue to be, an
area of national and state focus, which could result in the adoption of measures
which could adversely affect the pricing of pharmaceuticals or the amount of
reimbursement available from third party payors. Andrx cannot assure you that
healthcare providers, patients or third party payors will accept and pay for
Andrx's pharmaceuticals. In addition, there is no guarantee that healthcare
reimbursement laws or policies will not materially harm Andrx's ability to sell
its products profitably or prevent Andrx from realizing an appropriate return on
Andrx's investment in product development.
ANDRX MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS AND IT MAY NOT HAVE
ADEQUATE INSURANCE
The design, development and manufacture of Andrx's products or the
products it distributes involve a risk of product liability claims. Andrx has
obtained product liability insurance and believes that it is adequate for its
current operations, but may seek to increase its coverage prior to the
commercial introduction of its new product candidates. Andrx cannot assure you
that the coverage limits of its insurance will be sufficient to cover potential
claims. Product liability insurance is expensive and difficult to obtain and may
not be available in the future on acceptable terms or in sufficient amounts, if
available at all. Andrx's business and financial results could be materially
harmed by a successful claim against it in excess of its insurance coverage.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
We caution readers that certain important factors may affect our actual
results and could cause such results to differ materially from any
forward-looking statements which may be deemed to have been made in this Joint
Proxy Statement/Prospectus or which are otherwise made by us or on our behalf.
For this purpose, any statements contained in this prospectus that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the generality of the foregoing, words such as "may", "will",
"expect", "believe", "anticipate", "intend", "could", "would", "estimate", or
"continue" or the negative other variations thereof or comparable terminology
are intended to identify forward-looking statements. Factors which may affect
our results include, but are not limited to, the risks and uncertainties of
being a company which has only commercialized a few products, relies on new
technologies, has limited manufacturing experience, faces current and potential
competitors with significant technical and marketing resources, needs future
capital and depends on collaborative partners and on key personnel. Andrx is
also subject to the risks and uncertainties of being a drug delivery company,
including changes in regulatory scheme, compliance with government regulations
and patient infringement and other litigation. Additionally, Andrx is subject to
risks and uncertainties of being a drug distribution company including, but not
limited to, decreasing gross profits. In addition, Cybear is subject to the
risks and uncertainties of an early development stage Internet company
including, but not limited to, limited operating history, uncertainty or market
acceptance, changes in technology, operating losses, and dependence on the
adoption of the Internet by the healthcare industry. Andrx and Cybear are also
subject to other risks detailed herein or detailed from time to time in our
filings with the SEC.
WHERE YOU CAN FIND MORE INFORMATION
Andrx files annual, quarterly and special reports, proxy statements and
other information with the SEC. Our SEC filings are available to the public over
the Internet at the SEC's web site at http://www.sec.gov. You may also read and
copy any document we file at the SEC's public reference room at 450 Fifth
Street, N.W. Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information about the public reference room.
The SEC allows us to "incorporate by reference" the information we file
with it, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this proxy statement, and information that we file later
with the SEC will automatically update and supersede this information.
We incorporate by reference our documents listed below and any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until the annual meeting:
o Annual Report on Form 10-K for the fiscal year ended December
31, 1999 of Andrx Corporation, and
o Quarterly Report on Form 10-Q for the quarter ended March 31,
2000 of Andrx Corporation.
You should rely only on the information incorporated by reference or
provided in this proxy statement. We have not authorized anyone else to provide
you with different information. You should not assume that the information in
this proxy statement is accurate as of any date other than the date on the front
of this document.
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THE STOCKHOLDERS' MEETINGS
We are furnishing this document to the stockholders of Andrx and Cybear
in connection with the solicitation of proxies by Andrx's board of directors at
an annual meeting of its stockholders and by Cybear's board of directors at a
special meeting of its stockholders, and at any adjournments or postponements of
either meeting.
THE ANDRX ANNUAL MEETING
WHERE AND WHEN THE ANDRX ANNUAL MEETING WILL BE HELD
The Andrx annual meeting will be held at the Fort Lauderdale Airport
Hilton, 1870 Griffin Road, Dania, Florida 33004 on July ____, 2000 starting at
9:00 a.m., local time.
WHAT WILL BE VOTED UPON
At the Andrx annual meeting, Andrx stockholders will consider and vote
upon the proposal to approve the reorganization, elect directors, approve the
2000 Stock Option Plan and ratify the appointment of accountants.
ONLY ANDRX STOCKHOLDERS OF RECORD ON JUNE ____, 2000 ARE ENTITLED TO VOTE
The only outstanding voting securities of Andrx are shares of Andrx
common stock. Only holders of record of Andrx common stock on the record date
are entitled to notice of and to vote at the Andrx annual meeting. Each holder
of record, as of the record date, of Andrx common stock is entitled to cast one
vote per share on each matter.
On the Andrx record date, there were _____________ shares of Andrx
common stock outstanding and entitled to vote at the Andrx annual meeting, held
by approximately _________ Andrx stockholders of record.
VOTE REQUIRED FOR APPROVAL
The favorable vote of a majority of all outstanding shares on the
record date entitled to vote at the Andrx annual meeting is required to approve
the reorganization. The favorable vote of a majority of the outstanding shares
voting at the Andrx annual meeting is required to approve the other matters.
On the record date, the directors and executive officers of Andrx and
their affiliates beneficially owned and were entitled to vote approximately
___________ shares of Andrx common stock, or approximately ____ percent of the
Andrx common stock outstanding on the record date. Alan P. Cohen, Andrx's
Co-Chairman of the board of directors and Chief Executive Officer, Dr. Chih-Ming
J. Chen, Co-Chairman of the board of directors and Chief Scientific Officer, and
Dr. Elliot F. Hahn, President and a director, have all entered into an agreement
to vote in favor of the reorganization. Together they beneficially own ______
shares of Andrx common stock or ____% of the outstanding common stock.
THE CYBEAR SPECIAL MEETING
WHERE AND WHEN THE CYBEAR SPECIAL MEETING WILL BE HELD
The Cybear special meeting will be held at the Fort Lauderdale Airport
Hilton, 1870 Griffin Road, Dania, Florida 33004 on July ____, 2000 starting at
10:00 a.m., local time.
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WHAT WILL BE VOTED UPON
At the Cybear special meeting, Cybear stockholders will consider and
vote upon a proposal to approve the reorganization.
ONLY CYBEAR STOCKHOLDERS OF RECORD ON JUNE ____, 2000 ARE ENTITLED TO VOTE
Currently, the only outstanding voting securities of Cybear are shares
of Cybear common stock. Only holders of record of Cybear common stock on the
Cybear record date are entitled to notice of and vote at the Cybear special
meeting. Each holder of record, as of the record date, of Cybear common stock,
including Andrx, is entitled to cast one vote per share on the reorganization
proposal.
On the record date, there were ___________ shares of Cybear common
stock outstanding and entitled to vote at the Cybear special meeting. These
outstanding shares are held by approximately _____ Cybear stockholders of
record. Andrx holds an aggregate of _________ shares of Cybear common stock and
intends to vote for the reorganization.
VOTE REQUIRED FOR APPROVAL
The favorable vote of a majority of the shares of Cybear common stock
outstanding on the Cybear record date is required for approval, provided a
majority of the shares of Cybear common stock not held by Andrx do not vote
against the reorganization. Because Andrx intends to vote for the
reorganization, this proposal will be approved by the Cybear stockholders unless
a majority of the shares not held by Andrx are voted against the reorganization.
On the Cybear record date, the directors and executive officers of
Cybear and their affiliates beneficially owned and were entitled to vote
___________ shares of Cybear common stock, or approximately _____ percent of the
shares of Cybear common stock outstanding on the Cybear record date, and Andrx
and the directors of Cybear designated by Andrx beneficially owned and were
entitled to vote ____________ shares of Cybear common stock, or approximately
____ percent of the shares of Cybear common stock outstanding on the record
date. Dr. Edward E. Goldman, Cybear's CEO and John Klein, Cybear's Chairman of
the Board, have entered into an agreement to vote in favor of the
reorganization. Together they beneficially own _____ shares of Cybear common
stock or ____% of the outstanding common stock.
VOTING OF PROXIES
All shares of Andrx common stock and shares of Cybear common stock
represented by proxies properly received prior to or at the Andrx annual meeting
or the Cybear special meeting, as the case may be, and not revoked, will be
voted in accordance with the instructions indicated in such proxies. If
stockholders do not indicate any instructions on a properly executed and
returned proxy, that proxy will be voted FOR the approval of the reorganization.
If any other matters are properly presented at the Andrx annual
meeting, in the case of the Andrx stockholders, or the Cybear special meeting,
in the case of the Cybear stockholders, for consideration, the persons named in
the enclosed form of proxy, and acting under that proxy, will have discretion to
vote on such matters in accordance with their best judgment, unless
authorization to use that discretion is withheld. If a proposal to adjourn the
Andrx annual meeting or the Cybear special meeting is properly presented, the
persons named in the enclosed form of proxy will not have discretion to vote
shares voted against any of the proposals related to the approval of the
reorganization in favor of the adjournment proposal. Neither Andrx nor Cybear is
aware of any matters expected to be presented at its meeting other than as
described in its notice of its meeting.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by:
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o filing, including by telegram or telecopy, with the Secretary
of Andrx or the Secretary of Cybear, as the case may be,
before taking the vote at the meeting, a written notice of
revocation bearing a later date than the date of the proxy or
a later-dated proxy relating to the same shares;
o voting by telephone before taking the vote at the meeting
which will serve to revoke any prior telephone vote;
o by the Internet; or
o attending the meeting and voting in person.
In order to vote in person at either the Andrx annual meeting or the
Cybear special meeting, the Andrx stockholders and Cybear stockholders must
attend the meeting and cast their votes in accordance with the voting procedures
established for the meeting. Attendance at a meeting will not in and of itself
constitute a revocation of a proxy. Any written notice of revocation or
subsequent proxy must be sent so as to be delivered at or before the taking of
the vote at the applicable meeting as follows:
o in the case of the Andrx stockholders, to Andrx Corporation,
4001 Southwest 47th Avenue, Fort Lauderdale, Florida 33314,
Telecopy: (954) 792-1034, Attention: Secretary; and
o in the case of Cybear stockholders, to Cybear Inc., 5000 Blue
Lake Drive Suite 200, Boca Raton, Florida 33431, Telecopy:
(954) 792-1034, Attention: Secretary.
Andrx and Cybear stockholders may use a toll-free telephone number to
vote their shares. The enclosed proxy card contains the specific instructions to
be followed by Andrx and Cybear stockholders for telephone voting. Andrx and
Cybear stockholders whose shares are held in the name of a bank or broker should
follow the voting instructions provided by the bank or broker. The availability
of telephone voting will depend on the voting processes of the bank or broker.
Andrx and Cybear stockholders may submit a proxy by Internet in lieu of
returning an executed proxy card. In order to use this voting service, Andrx and
Cybear stockholders should log into their company's voting web site and follow
the instructions. Andrx's voting web site can be found at www.__________.com,
while Cybear's voting web site can be found at www._________.com. The enclosed
proxy card also contains instructions for Internet voting. The availability of
Internet voting to Andrx and Cybear stockholders whose shares are held in the
name of a bank or broker will depend on the voting processes of the bank or
broker.
Andrx and Cybear stockholders who require assistance in changing or
revoking a proxy should contact the person at the address or phone number
provided in this document under the caption "Who Can Help Answer Your
Questions."
Approval of the reorganization requires (1) a favorable vote of the
majority of all outstanding shares of Cybear common stock and (2) a majority of
the publicly held shares of Cybear common stock shall not have affirmatively
voted against the reorganization. An abstention will have the effect of a vote
against the reorganization for purposes of the requirements specified in item
(1) above. However, it will not be counted as a vote against the reorganization
for purposes of requirement (2) above.
Since the favorable vote of holders of a majority of the outstanding
shares of Andrx common stock entitled to vote at the Andrx annual meeting is
required for Andrx's stockholders to approve the reorganization, an Andrx proxy
marked "ABSTAIN" with respect to the reorganization or a failure of an Andrx
stockholder to return a proxy will have the effect of a vote against the
reorganization. Since the favorable vote of holders of a majority of the
outstanding shares of Andrx's common stock voting at the Andrx annual meeting is
required to approve the other proposals, a proxy marked "ABSTAIN" with respect
to the other proposals or a failure to return a proxy will have no effect on the
voting.
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The failure of an Andrx or Cybear stockholder to return a proxy will
have the effect of not being counted for purposes of determining the presence of
a quorum.
Under applicable rules, brokers who hold shares in street name for
customers have the authority to vote on some routine proposals when they have
not received instructions from beneficial owners. Under applicable rules, these
brokers are precluded from exercising their voting discretion with respect to
the approval and adoption of non-routine matters like the reorganization and
adoption of the 2000 Stock Option Plan, and, thus, absent specific instructions
from the beneficial owner of shares held in street name, brokers are not
empowered to vote these shares with respect to the approval and adoption of the
reorganization, i.e., broker non-votes. Therefore, a broker non vote will not be
counted for purposes of determining the presence of a quorum, but it will
otherwise have the same effect as an abstention.
It is the policy of both Andrx and Cybear to keep confidential proxy
cards, ballots and voting tabulations that identify individual stockholders,
except where disclosure is mandated by law and in other limited circumstances.
The cost of solicitation of proxies will be paid by Andrx for the Andrx
proxies and by Cybear for Cybear proxies. In addition to solicitation by mail,
arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries to send the proxy materials to beneficial owners, and Andrx or
Cybear, as the case may be, will, upon request, reimburse those brokerage houses
and custodians for their reasonable expenses in so doing. Andrx and Cybear may
retain a proxy solicitor to aid in the solicitation of proxies and to verify
records related to the solicitations. Each proxy solicitor will receive
customary fees and expense reimbursement for their services. To the extent
necessary in order to ensure sufficient representation at its meeting, Andrx or
Cybear may request by telephone or telegram the return of proxy cards. The
extent to which this will be necessary depends entirely upon how promptly
proxies are received. We urge stockholders to vote proxies without delay.
Andrx and Cybear stockholders should not send in any stock certificates
with their proxy cards. A transmittal form with instructions for the surrender
of certificates representing shares of Andrx or Cybear common stock will be
mailed to the Andrx and Cybear stockholders as soon as practicable after the
consummation of the reorganization.
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THE REORGANIZATION
DESCRIPTION OF THE REORGANIZATION
Andrx and Cybear entered into an agreement and plan of merger and
reorganization, or the reorganization agreement, in March 2000. As part of the
reorganization, a new holding company, Andrx Corporation, will be created under
Delaware law. All of the outstanding shares of Cybear and Andrx common stock
will be acquired by the holding company and two new classes of common stock of
the holding company will be created, "Andrx Group Common Stock," to reflect the
performance of the Andrx Group and the "Cybear Group Common Stock," to reflect
the performance of the Cybear Group. The boards of directors of Andrx and Cybear
believe that the reorganization should provide benefits to both Andrx and
Cybear. The reorganization should be tax-free to Andrx, Cybear and their
stockholders, except with respect to the sale of fractional shares received by
Andrx stockholders.
Andrx and Cybear stockholders need to consider and vote on the
reorganization under which:
o Andrx and Cybear will each merge with a separate subsidiary of
Andrx Corporation;
o each outstanding share of Andrx common stock will be
automatically converted in the merger into one share of Andrx
Group Common Stock and .1493 of a share of Cybear Group Common
Stock; and
o each outstanding share of Cybear common stock will be
automatically converted in the merger into one share of Cybear
Group Common Stock.
A vote approving the reorganization will also constitute adoption of
the reorganization agreement governing the reorganization. Accordingly, Andrx
and Cybear stockholders should carefully read the reorganization agreement,
which is attached to this joint proxy statement/prospectus as Annex A.
If the reorganization is implemented, Andrx and Cybear will become
wholly owned subsidiaries of Andrx Corporation, which will initially own no
assets other than the stock of Andrx and Cybear. In addition, the rights of
Andrx stockholders will cease to be governed by Florida law and the existing
articles of incorporation and by-laws. Instead, the rights of Andrx stockholders
will be governed by Delaware law and a new certificate of incorporation and
bylaws of Andrx Corporation which are part of the reorganization agreement. The
certificate of incorporation also contains the terms of the Andrx Group Common
Stock and the Cybear Group Common Stock and is attached to this joint proxy
statement/prospectus. Accordingly, Andrx stockholders should also carefully read
the certificate of incorporation.
IF THE REORGANIZATION IS NOT APPROVED, THE REORGANIZATION WILL NOT BE
CONSUMMATED AND THE EXISTING ANDRX COMMON STOCK WILL NOT BE CONVERTED INTO ANDRX
GROUP COMMON STOCK AND CYBEAR GROUP COMMON STOCK AND THE CYBEAR COMMON STOCK
WILL NOT BE CONVERTED INTO CYBEAR GROUP COMMON STOCK.
If the reorganization is approved, Andrx and Cybear plan to implement
the reorganization by filing a certificate of merger with the Secretary of State
of Delaware and the State of Florida. Andrx and Cybear presently anticipate that
these filings will be made as soon as possible after their meetings. All state
and federal regulatory approvals required for the consummation of the
reorganization have been obtained.
The board of directors of Andrx and Cybear may terminate the
reorganization agreement and not implement the reorganization for certain
reasons at any time prior to the effective time of the reorganization, either
before or after stockholder approval. In addition, the reorganization agreement
may be amended prior to the effective time of the reorganization. However, the
reorganization agreement may not be amended after the reorganization has been
approved if, in the judgment of the board of directors of Andrx or Cybear, as
the case may be, the amendment would have a material adverse effect on the
rights of its stockholders.
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BACKGROUND OF THE REORGANIZATION
In pursuing their strategies for enhancing stockholder value, each of
Andrx and Cybear regularly consider strategic opportunities, joint ventures,
acquisitions and other strategic alliances.
During discussions throughout the second half of 1999, Andrx and Cybear
determined that stockholder value of both Andrx and Cybear could be further
enhanced by Andrx acquiring all of the outstanding shares of Cybear not already
owned by Andrx. On October 14, 1999, Andrx retained Credit Suisse First Boston
Corporation, or CSFB, to act as its financial advisor for a proposed
reorganization. In December 1999, the Andrx board of directors authorized
management to make a proposal to Cybear. On December 20, 1999, Andrx's
management delivered a proposal to Cybear. On December 21, 1999, Andrx announced
that Andrx had sent Cybear a proposal for a potential transaction that would
result in Andrx acquiring all of the outstanding shares of Cybear not already
owned by Andrx and issuing a new class of Andrx common stock designed to track
the performance of Cybear.
On December 22, 1999, the Cybear board of directors met to consider the
proposed transaction with Andrx. At this meeting, Cybear formed a special
committee of independent directors consisting of Philip Gerbino, Ph.D. and Eric
Moskow, M.D., both non-full-time-employee directors of Cybear and both not
employed by or otherwise affiliated with Andrx. On January 5, 2000, the special
committee retained Berman Wolfe Rennert Vogel & Mandler, P.A., or BWRV&M, as
legal counsel and SG Cowen as financial advisor.
On February 1, 2000 representatives of SG Cowen reviewed with the
special committee an overview of various aspects of the proposed transaction
structure, including a review of businesses and assets that were proposed to be
attributed to the new class of Andrx common stock, and a preliminary analysis of
a number of valuation metrics applicable to the potential transaction based upon
materials previously distributed to the board. Representatives of BWRV&M also
reviewed with the special committee the proposed terms of the new class of Andrx
common stock and a number of the other terms and conditions of the proposed
transaction. The special committee discussed the proposal with a specific focus
on the adequacy of the proposed exchange ratios in light of the fact that some
stockholder rights may be reduced as a result of the establishment of a tracking
stock, and the differences in valuation between e-commerce companies and
pharmaceutical companies. Further, at this February 1, 2000 meeting, the special
committee discussed with its advisors issues related to tracking stocks. The
special committee recommended that Cybear's management, in consultation with its
financial, accounting and legal advisors, continue to negotiate the terms and
conditions of a proposed transaction with Andrx in an effort to both increase
the premium on the exchange ratios and improve the rights being offered to the
holders of the Cybear Group Common Stock.
On February 3, 2000, Andrx management, CSFB and Broad and Cassel,
Andrx's legal advisor, met to discuss the status of the progress of the
discussions with Cybear.
On February 4, 2000, Andrx, together with CSFB and Broad and Cassel,
and Cybear, together with SG Cowen and BWRV&M, met to discuss the proposed
transaction. At this meeting, the parties discussed the material terms of the
reorganization, including the exchange ratios and the rights of holders of the
Cybear Group Common Stock with respect to voting, conversion and liquidation and
their rights upon a sale of the Cybear Group. Furthermore, Cybear requested that
it be permitted to designate one member to the Andrx board of directors and that
the reorganization approval mechanism for Cybear stockholders be a majority of
the outstanding shares of Cybear common stock provided, that a majority of the
outstanding shares of Cybear common stock held by stockholders other than Andrx
do not vote against the reorganization.
Between February 4, 2000 and March 22, 2000, Andrx and the special
committee, together with their legal and financial advisors, continued their
legal and financial due diligence and negotiation of the terms and conditions of
the proposed transaction, the reorganization agreement and the related
documents. At this stage, the negotiations, in general, focused on the exchange
ratios, the terms of the Cybear Group Common Stock, the governance of Cybear
following the reorganization and the inter-group arrangements between Andrx and
Cybear.
On February 6, 2000, Eric Moskow, M.D. became employed on a full-time
basis as the Executive Vice President of Market Development of Cybear and
resigned as a member of the special committee.
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On February 10, 2000, the special committee retained Sam Barker, Ph.D.
as a consultant to assist the special committee in its review of the
reorganization. Prior to his retirement, Dr. Barker was Executive Vice President
- Marketing and Strategy and President of the U.S. pharmaceutical business of
Bristol-Myers Squibb.
On March 22, 2000, Cybear's special committee met to consider the
proposed transaction. At this meeting, Cybear management, along with its
financial, accounting and legal advisors, updated the special committee on their
due diligence investigations and reviewed the terms of the proposed transaction,
based upon the proposed definitive reorganization agreement, the certificate of
incorporation, the common stock policies and other materials previously
circulated to the special committee. This meeting included a discussion of the
material terms of the proposed transaction, the terms of the new class of Andrx
common stock to be received by Cybear stockholders in the transaction, and the
corporate governance, tax and accounting treatment of the contemplated
transactions. In addition, representatives of SG Cowen made a presentation to
the special committee regarding the valuation aspects of the proposed
transaction. This presentation included the several analyses described under
"Opinion of Cybear's Financial Advisor" below. Representatives of SG Cowen also
delivered SG Cowen's opinion that the consideration to be received in the
reorganization by the holders of Cybear common stock, other than Andrx, is fair
to the holders from a financial point of view. This meeting concluded with the
special committee voting to recommend that Cybear's board of directors approve
the reorganization and the reorganization agreement and related documents and
recommend that Cybear's board of directors approve the transaction and recommend
that Cybear's stockholders adopt the reorganization agreement and approve the
reorganization.
On March 22, 2000, subsequent to the meeting of the special committee,
Cybear's board of directors met with BWRV&M and SG Cowen by conference call to
consider the proposed transaction and the related documents. At this March 22,
2000 Cybear board of directors meeting, Dr. Gerbino, on behalf of the special
committee, delivered the report of the special committee and conveyed to the
board that the special committee recommended that the board of directors approve
the reorganization and recommend it for approval to the Cybear stockholders.
After considering the report of the special committee and presentations from
Cybear's management, financial and legal advisors, Cybear's board of directors
unanimously approved the reorganization and the agreements and documents related
thereto and unanimously voted to recommend to the Cybear stockholders to approve
the reorganization.
On March 23, 2000, Andrx's board of directors met with Broad and Cassel
and CSFB by conference call to consider the proposed transaction and the related
documents. After considering presentations from management and management's
analysis of the proposed reorganization and the presentations of Andrx's legal
and financial advisors, the board of directors unanimously approved the
reorganization agreement and the related documents and voted to recommend that
Andrx's stockholders approve the reorganization.
Following the approvals by each of Andrx's board of directors and the
Cybear board of directors, Cybear and Andrx entered into the reorganization
agreement on March 23, 2000.
ANDRX'S REASONS FOR THE REORGANIZATION
In reaching its decision to approve the reorganization and recommending
that the Andrx stockholders approve the reorganization, the Andrx board of
directors consulted with:
o Its management regarding the business and financial condition
of Cybear, trends and competitors in the Internet industry,
its investigation of Cybear and the terms and other
considerations in the proposed reorganization;
o Its legal counsel regarding the proposed terms of the
transaction and the obligations of the board of directors in
its consideration of the proposed reorganization;
o CSFB regarding the terms and structure of the proposed
transaction; and
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o Its independent certified public accountants regarding the
accounting and tax aspects of the proposed transaction.
In reaching its conclusion that the reorganization was in the best
interests of Andrx and its stockholders and in deciding to recommend that its
stockholders approve the Andrx proposals, Andrx's board of directors considered
the following information and factors:
o The benefits of separating Cybear Group's operating results
from those of the Andrx Group for financial reporting
purposes;
o Improvement in the liquidity for Cybear's publicly traded
equity; and
o Providing Cybear with a more viable currency for potential
strategic acquisitions.
In addition, the acquistion of Cybear should provide Andrx with certain
potential tax consolidation advantages.
In addition, the Andrx board of directors considered Andrx's strategic
flexibility after implementation of the reorganization, including the ability to
engage in mergers, acquisitions, divestitures, spin-offs, split-offs and other
recombinations. The Andrx board of directors also considered other factors
relating to the reorganization, including, among other things:
o It is not expected that implementation of the reorganization
should be taxable for United States federal income tax
purposes to Andrx or its stockholders, except with respect to
the sale of fractional shares received by Andrx's
stockholders.
o The consideration to be paid in the reorganization, the
valuation of Cybear and its approximate 69.5% interest in
Cybear following the reorganization and prior to the
distribution to Andrx's stockholders.
o Several other large, well-known companies have created equity
securities that are intended to reflect separately the
performance of specific businesses, performance of those
securities and the performance of other equity securities
comparable to the newly created Cybear Group Common Stock.
o The corporate governance advantages that would accrue by
incorporating in Delaware. The Andrx board of directors
considered that there were several large corporations with
similar structures, such as General Motors Corporation, The
Walt Disney Company and USX Corporation. By becoming a
Delaware corporation, Andrx will now be able to benefit from
Delaware's comprehensive and well-developed corporate laws.
The Andrx board of directors also considered that Delaware law
would offer guidance with respect to legal issues that may
arise as a result of the existence of separate classes of
stock.
The Andrx board of directors also considered the following potential
adverse consequences of the reorganization:
o The degree to which the market price of Cybear Group Common
Stock and the Andrx Group Common Stock will reflect the
performance of the Cybear Group and the Andrx Group or the
impact of the Andrx reorganization on the market price of
Andrx's common stock prior to the reorganization and
implementation of the reorganization.
o The new certificate of incorporation may alter certain
corporate governance issues not present under Andrx's current
structure. In particular, in the future the interests of the
two groups could diverge, or appear to diverge, and complex
issues could arise in resolving such conflicts that
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effectively require the Andrx board of directors to benefit,
or appear to benefit, one group at the expense of another.
o In general, the implementation of the reorganization will make
the capital structure of Andrx more complex and could cause
confusion among investors analyzing Andrx's capital structure.
o Holders of Andrx Stock and Cybear Stock will continue to bear
the risks associated with an investment in a single
corporation and all of Andrx's businesses, assets and
liabilities.
o There is no direct legal authority regarding the tax treatment
of tracking stocks. Recent proposals by the Clinton
Administration to tax tracking stocks, if enacted, could cause
Andrx Corporation to revise its capital structure. This could
adversely affect the Cybear Group Common Stock and the Andrx
Group Common Stock.
o The substantial costs that will be incurred in connection with
the reorganization, including the amortization of large
amounts of goodwill and transaction expenses.
Andrx's board of directors determined that, on balance, the positive
attributes of the reorganization outweigh any potentially adverse consequences.
Andrx's board of directors ultimately concluded that the reorganization is
advisable and in the best interests of Andrx and its stockholders and is the
best means to achieve Andrx's strategic goals.
In view of the number and wide variety of factors considered in
connection with its evaluation of the reorganization and the complexity of these
matters, Andrx's board of directors did not find it practicable to, nor did it
attempt to, quantify, rank or otherwise assign relative weights to the specific
factors it considered. In addition, Andrx's board of directors did not undertake
to make any specific determination as to whether any particular factor was
favorable or unfavorable to the Andrx board of directors' ultimate determination
or assign any particular weight to any factor, but rather conducted an overall
analysis of the factors described above, including through discussions with and
questioning of Andrx's management and its analysis of the reorganization based
on information received from Andrx's legal, financial and accounting advisors.
In considering the factors described above, individual members of Andrx's board
of directors may have given different weight to different factors. Andrx's board
of directors considered all these factors as a whole, and considered the factors
overall to be favorable to and to support its determination.
RECOMMENDATION OF ANDRX'S BOARD OF DIRECTORS
The Andrx board of directors has unanimously approved the
reorganization and believes that the reorganization is in the best interests of
Andrx and its stockholders. Accordingly, the Andrx board of directors
unanimously recommends that stockholders vote "FOR" the reorganization.
CYBEAR'S REASONS FOR THE REORGANIZATION
In reaching its decision, the Cybear board consulted with:
o Cybear management regarding the business and financial
condition of Cybear, trends and competitors in the Internet
industry, Cybear management's investigation of Andrx and its
assets and the terms and other considerations in the proposed
reorganization;
o SG Cowen regarding the financial aspects of the proposed
transaction and the fairness, from a financial point of view,
of the consideration to be received by holders of Cybear
common stock, other than Andrx, in the reorganization;
o BWRVM regarding the proposed terms of the transaction, the
obligations of the members of the Cybear board in its
consideration of the proposed transaction and the legal
investigation of Andrx and its assets conducted by legal
counsel;
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o Its independent certified public accountants regarding the tax
and accounting aspects of the proposed transaction; and
o The special committee regarding the special committee's
recommendation to Cybear's board of directors to approve the
reorganization and to recommend it to the Cybear stockholders.
In reaching its conclusion that the reorganization was in the best
interests of Cybear and its stockholders, the Cybear board of directors
considered the following information and factors:
o The opportunity for Cybear's stockholders, other than Andrx,
to receive a premium for their Cybear common stock;
o Increased flexibility for operational spending;
o The opportunity to address Cybear's desire to improve the
liquidity of its publicly traded equity;
o The availability of a more viable currency for potential
future strategic acquisitions;
o The opportunity to leverage Andrx's business and
relationships;
o The presentation and opinion of SG Cowen that, as of the date
of the opinion, the consideration to be received by holders of
Cybear Group Common Stock, other than Andrx, in the
reorganization is fair, from a financial point of view, to
these stockholders. The full text of SG Cowen's opinion, which
sets forth the assumptions made, matters considered and
limitations on the review undertaken in connection with the
opinion of SG Cowen, is attached as Annex C. We urge Cybear
stockholders to read the opinion carefully in its entirety;
o The belief that the terms of the reorganization agreement,
including the parties' representations, warranties and
covenants and the conditions to each party's obligations, as
well as the common stock policies which govern the Cybear
Group Common Stock, are reasonable;
o Reports from Cybear's management and legal and accounting
advisors as to the results of their due diligence;
o The fact that the parties intend to treat the reorganization
as a tax-free transaction under the Internal Revenue Code and
that Cybear will obtain an opinion of Arthur Andersen LLP that
the merger should be a tax-free exchange; and
o The special committee's recommendation to approve the
reorganization and to recommend it to Cybear's stockholders.
Cybear's board of directors also considered potentially negative factors
relating to the reorganization, including:
o The risk that the potential benefits anticipated to result
from the reorganization set forth above might not be realized;
o The uncertainty as to how the Cybear Group Common Stock will
trade, after the reorganization, including uncertainty as to
whether the Cybear Group Common Stock will be valued by the
trading market in similar fashion to independent Internet
companies;
o The fact that the Cybear Group will not be a separate
independent company from the Andrx Group as Cybear presently
is;
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o The relative complexity of the terms of the Cybear Group
Common Stock and the issuance of tracking stock in the context
of an acquisition;
o The fact that the common stock policies affecting the Cybear
Group Common Stock are subject to change by resolution of the
board of directors;
o The possibility of a decline in the value of the Cybear Group
Common Stock following the reorganization;
o The possibility that the reorganization might not be
completed, even if approved by Cybear and Andrx stockholders,
and the effect of public announcement of the reorganization or
any failure to complete the reorganization on Cybear's
business and stock price, its ability to attract and retain
key management, sales and marketing and technical personnel
and the fees payable by Cybear if the reorganization is
terminated under certain circumstances; and
o Other potential risks described in this joint proxy
statement/prospectus under "Risk Factors."
In view of the number and wide variety of factors considered in
connection with its evaluation of the reorganization, and the complexity of
these matters, the Cybear board of directors did not find it practicable to, nor
did it attempt to, quantify, rank or otherwise assign relative weights to the
specific factors it considered. In addition, the board did not undertake to make
any specific determination as to whether any particular factor was favorable or
unfavorable to its ultimate determination or assign any particular weight to any
factor, but rather conducted an overall analysis of the factors described above,
including through discussions with and questioning of Cybear's management and
management's analysis of the proposed reorganization based on information
received from Cybear's legal, financial and accounting advisors. In considering
the factors described above, individual members of the Cybear board of directors
may have given different weight to different factors. The Cybear board of
directors considered all these factors as a whole, and overall considered the
factors to be favorable to and to support his determination.
OPINION OF CYBEAR'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated January 7, 2000, Cybear retained
SG Cowen to render an opinion to the special committee as to the fairness, from
a financial point of view, to the holders of Cybear common stock, other than
Andrx, of the Transaction Consideration, as defined below.
As more specifically set forth in the reorganization agreement, and
subject to the terms, conditions and adjustments set forth in the reorganization
agreement, Andrx has offered to acquire all of the publicly traded Cybear common
stock (approximately 31% of the total shares outstanding, assuming the exercise
by Edward E. Goldman, M.D., Cybear's CEO, of an outstanding warrant to acquire
525,000 shares of Cybear's common stock currently owned by Andrx) not currently
owned by Andrx, or the Cybear Minority Shares, in exchange for the Cybear Group
Common Stock intended to separately reflect the performance of Cybear. Each
Cybear Minority Share will be exchanged for one share of Cybear Group Common
Stock, or the Cybear Minority Exchange Ratio. In connection with the
reorganization, holders of Andrx common stock will be issued 10.293 million
shares of Cybear Group Common Stock, or 83.33% of the 12.352 million shares of
Cybear common stock currently owned by Andrx. This reduction in the number of
shares, combined with the Cybear Minority Exchange Ratio, is hereinafter
referred to as the Transaction Consideration.
On March 22, 2000, SG Cowen delivered certain of its written analyses
and its oral opinion to the special committee, subsequently confirmed in writing
as of the same date, to the effect that, and subject to the various assumptions
set forth therein, as of March 22, 2000, the Transaction Consideration was fair,
from a financial point of view, to the holders of Cybear common stock, other
than Andrx. The full text of the written opinion of SG Cowen, dated March 22,
2000, is attached as Annex C hereto and is incorporated by reference. Holders of
Cybear common stock are urged to read the opinion in its entirety for the
assumptions made, procedures followed, other matters considered and limits of
the review by SG Cowen. The summary of the written opinion of SG Cowen set forth
herein is qualified in its entirety by reference to the full text of such
opinion. SG Cowen's analyses and opinion were prepared for and addressed to the
special committee and are
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directed only to the fairness, from a financial point of view, of the
Transaction Consideration, and do not constitute an opinion as to the merits of
the transaction or a recommendation to any stockholder as to how to vote on the
proposed transaction. The Transaction Consideration was determined through
negotiations between Cybear and Andrx and not purusant to recommendations of SG
Cowen.
In arriving at its opinion, SG Cowen reviewed and considered such
financial and other matters as it deemed relevant, including, among other
things:
o a draft of the reorganization agreement dated March 20, 2000;
o certain publicly available information for Cybear including
its annual report filed on Form 10-K for the year ended
December 31, 1998, and its quarterly reports filed on Form
10-Q for each of the quarters ended March 31, June 30, and
September 30, 1999, and certain other relevant financial and
operating data furnished to SG Cowen by the management of
Cybear;
o certain publicly available information for Andrx, including
its annual report filed on Form 10-K for the year ended
December 31, 1998, and its quarterly reports filed on Form
10-Q for each of the quarters ended March 31, June 30, and
September 30, 1999, and certain other relevant financial and
operating data furnished to SG Cowen by the management of
Andrx;
o certain internal financial analyses, financial forecasts,
reports and other information concerning Cybear, or the
Forecasts, prepared by Cybear's management;
o First Call consensus estimates, or the First Call Estimates,
and financial projections published in Wall Street analyst
reports, or the Wall Street Projections, for each of Cybear
and Andrx;
o discussions SG Cowen had with certain members of Cybear's
management concerning the historical and current business
operations, financial condition and prospects of Cybear and
such other matters SG Cowen deemed relevant;
o the reported prices, trading histories and historical and
projected operating performance of certain tracking stocks as
compared to the reported prices, trading histories and
historical and projected operating performance of certain
publicly traded companies SG Cowen deemed relevant;
o the rights of certain tracking stocks as compared to the
rights of the Cybear Group Common Stock;
o the reported prices of certain securities with dual classes of
stock;
o premiums paid in selected minority squeeze-out transactions
since January 1, 1990 which SG Cowen deemed relevant; and
o such other information, financial studies, analyses and
investigations and such other factors that SG Cowen deemed
relevant for the purposes of the opinion.
In conducting its review and arriving at its opinion, SG Cowen, with
Cybear's consent, assumed and relied, without independent investigation, upon
the accuracy and completeness of all financial and other information provided to
it by Cybear and Andrx or which was publicly available. SG Cowen did not
undertake any responsibility for the accuracy, completeness or reasonableness
of, or independently to verify, this information. In addition, SG Cowen did not
conduct any physical inspection of the properties or facilities of Cybear or
Andrx. SG Cowen further relied upon the assurance of management of Cybear that
they were unaware of any facts that would make the information provided to SG
Cowen incomplete or misleading in any respect. SG Cowen, with Cybear's consent,
assumed that the Forecasts provided to SG Cowen were reasonably prepared by the
management of Cybear, and reflected the best available estimates and good faith
judgments of such management as to the future performance of Cybear. Cybear's
management confirmed to SG Cowen, and SG Cowen assumed, with Cybear's consent,
that each of the Forecasts, the First Call Estimates and the Wall Street
Projections with respect to Cybear provided a reasonable basis for its opinion.
SG Cowen did not make, or obtain, any independent evaluations,
valuations or appraisals of the assets or liabilities of Cybear or Andrx, nor
was SG Cowen furnished with these materials. With respect to all legal matters
relating to Cybear and Andrx, SG Cowen relied on the advice of legal counsel to
Cybear. SG Cowen expressed no opinion with respect to any legal matter. SG
Cowen's services to Cybear in connection with the reorganization were comprised
solely of rendering an opinion as to the fairness, from a financial point of
view, of the consideration to be paid by Andrx to the holders of Cybear common
stock, other than Andrx. SG Cowen's opinion was necessarily based upon economic
and market conditions and other circumstances as they existed and could be
evaluated by SG Cowen on the date of its opinion. It should be understood that
although
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subsequent developments may affect its opinion, SG Cowen does not have any
obligation to update, revise or reaffirm its opinion and SG Cowen expressly
disclaims any responsibility to do so. Additionally, SG Cowen was not authorized
or requested to, and did not, solicit alternative offers for Cybear or its
assets, nor did SG Cowen investigate any other alternative transactions that may
be available to Cybear.
In rendering its opinion, SG Cowen assumed that the representations and
warranties of each party contained in the reorganization agreement are true and
correct, that each party will perform all of the covenants and agreements
required to be performed by it under the reorganization agreement and that all
conditions to the consummation of the reorganization will be satisfied without
waiver thereof. SG Cowen assumed that the final form of the reorganization
agreement would be substantially similar to the last draft received by SG Cowen
prior to rendering its opinion. SG Cowen also assumed that all governmental,
regulatory and other consents and approvals contemplated by the reorganization
agreement would be obtained and that, in the course of obtaining any of those
consents, no restrictions will be imposed or waivers made that would have an
adverse effect on the contemplated benefits of the reorganization.
SG Cowen's opinion does not constitute a recommendation to any
stockholder as to how the stockholder should vote on the proposed
reorganization. SG Cowen's opinion does not imply any conclusion as to the
likely trading range for the Cybear Group Common Stock following consummation of
the reorganization or otherwise. SG Cowen's opinion is limited to the fairness,
from a financial point of view, of the consideration to be paid by Andrx to the
holders of Cybear common stock other than Andrx. SG Cowen expresses no opinion
as to the underlying business reasons that may support the decision of the
special committee to approve, or Cybear's decision to consummate, the
reorganization.
The following is a summary of the principal financial analyses
performed by SG Cowen to arrive at its opinion. Some of the summaries of
financial analyses include information presented in tabular format. In order to
fully understand the financial analyses, the tables must be read together with
the text of each summary. The tables alone do not constitute a complete
description of the financial analyses. Considering the data set forth in the
tables without considering the full narrative description of the financial
analyses, including the methodologies and assumptions underlying the analyses,
could create a misleading or incomplete view of the financial analyses.
PREMIUM
A factor influencing the SG Cowen opinion was the premium to be
received by the holders of the Cybear Minority Shares. Each Cybear Minority
Share will be exchanged for one share of Cybear Group Common Stock, or the
Cybear Minority Exchange Ratio. Each Share of Cybear common stock owned by Andrx
will be exchanged for 0.8333 of a share of Cybear Group Common Stock, or the
Andrx Exchange Ratio. The combination of the Cybear Minority Exchange Ratio and
the Andrx Exchange Ratio results in holders of the Cybear Minority Shares
receiving a 13.1% increase in their aggregate ownership of Cybear, or the Cybear
Premium.
ANALYSIS OF TRACKING STOCK PERFORMANCE
SG Cowen analyzed the stock price performance of 21 publicly traded
tracking stocks as compared to selected publicly traded peer groups that SG
Cowen deemed relevant. Two performance measures were used. The first measure was
a comparison of the annualized performance of each tracking stock to the
annualized performance of a composite comprised of companies that were deemed
comparable to each tracking stock. For each of the 21 publicly traded tracking
stocks analyzed, SG Cowen annualized the tracking stock's return and the
composite's return from the date of that tracking stock's initial public
offering or distribution until March 17, 2000, then calculated the absolute
difference between those returns. If the tracking stock's returns were greater
than the composite, it was deemed to have outperformed. If the tracking stock's
returns were less than the composite, it was deemed to have underperformed. The
second measure was a comparison of the latest six-month performance of each
tracking stock to the latest six-month performance of a composite comprised of
companies that were deemed comparable to each tracking stock. For each of the 21
publicly traded tracking stocks analyzed, SG Cowen measured the tracking stock's
return and the composite's return for the six-month period ended March 17, 2000,
then calculated the absolute difference between those returns. The
52
<PAGE>
tracking stocks included in these analyses were: Quantum Corporation's Hard Disk
Drive Group, Quantum Corporation's DLT & Storage Systems Group, DLJdirect,
ZDNet, Circuit City Stores' Carmax Group, Circuit City Stores' Circuit City
Group, USX - U.S. Steel Group, USX - Marathon Group, go.com, Georgia-Pacific
Corporation - Georgia-Pacific Group, Georgia-Pacific Corporation - Timber Group,
Celera Genomics, PE Biosystems, Genzyme General, Genzyme Tissue Repair, Genzyme
Surgical Products, Genzyme Molecular Oncology, AT&T Liberty Media, Sprint PCS
Group, Sprint FON Group and Hughes Electronics.
The following table presents the annualized and latest six-month
performance of each tracking stock versus their respective composites. Summary
statistics were reviewed for the entire group of 21 tracking stocks as well as
for the 13 seasoned tracking stocks (which are defined as those that have been
in existence for more than one year). The results are shown with and without
Celera Genomics because its stock price performance was significantly greater
than the performance of the appropriate comparable company composite.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Difference in Performance Between Tracking Stock and Low Median Mean High
Composite:
-----------------------------------------------------------------------------------------------------------
Annualized performance since IPO or distribution:
-----------------------------------------------------------------------------------------------------------
All tracking stocks (339.7)% (2.6)% 46.1% 600.9%
-----------------------------------------------------------------------------------------------------------
All tracking stocks excluding Celera Genomics (339.7)% (4.3)% 16.9% 460.5%
-----------------------------------------------------------------------------------------------------------
All seasoned tracking stocks (60.8)% (1.0)% 20.6% 231.8%
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
Latest six-month performance since IPO or distribution:
-----------------------------------------------------------------------------------------------------------
All tracking stocks (139.7)% 2.0% 18.5% 266.5%
-----------------------------------------------------------------------------------------------------------
All tracking stocks excluding Celera Genomics (139.7)% 1.0% 6.9% 266.5%
-----------------------------------------------------------------------------------------------------------
All seasoned tracking stocks (73.8)% 2.0% 23.0% 266.5%
-----------------------------------------------------------------------------------------------------------
</TABLE>
On an annualized basis, 11 tracking stocks were noted to be
underperformers, and nine tracking stocks were noted to be outperformers as
compared to their peer groups. On a six-month basis, ten tracking stocks were
noted to be underperformers, and 11 tracking stocks were noted to be
outperformers as compared to their peer groups.
For each of the tracking stocks included in this analysis, SG Cowen
also reviewed the operating performance, as measured by revenue and earnings
growth, for each tracking stock as compared to its selected peer group.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Annualized Returns
-----------------------------------------------------------------------------------------------------------
11 Underperformers 9 Outperformers
-----------------------------------------------------------------------------------------------------------
REVENUE GROWTH EARNINGS GROWTH REVENUE GROWTH EARNINGS GROWTH
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
8 Underperform 3 Underperform 3 Underperform 2 Underperform
-----------------------------------------------------------------------------------------------------------
2 Outperform 2 Outperform 4 Outperform 0 Outperform
-----------------------------------------------------------------------------------------------------------
1 Not Available 6 Not Available 2 Not Available 7 Not Available
-----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Latest Six-month Returns
-----------------------------------------------------------------------------------------------------------
10 Underperformers 11 Outperformers
-----------------------------------------------------------------------------------------------------------
REVENUE GROWTH EARNINGS GROWTH REVENUE GROWTH EARNINGS GROWTH
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
5 Underperform 4 Underperform 5 Underperform 2 Underperform
-----------------------------------------------------------------------------------------------------------
4 Outperform 2 Outperform 5 Outperform 1 Outperform
-----------------------------------------------------------------------------------------------------------
1 Not Available 4 Not Available 1 Not Available 8 Not Available
-----------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
ANALYSIS OF SELECTED DUAL CLASS STOCKS
SG Cowen analyzed the stock prices and trading discounts of 74
companies which have dual classes of common stock that have identical rights
except in terms of voting. SG Cowen calculated the trading discount of the stock
class with lesser voting rights to the stock class with greater voting rights.
The following table outlines the summary trading discounts of each set
of dual class common stock.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Low Median Mean High Cybear Premium
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------
Premium/(Discount) of (41.5)% (0.5)% (3.6)% 29.3% 13.1%
stock class with lesser
voting rights to stock
class with greater
voting rights:
------------------------------------------------------------------------------------------------------------
</TABLE>
ANALYSIS OF SELECTED MINORITY SQUEEZE-OUT TRANSACTIONS
The proposed certificate of incorporation includes an optional
conversion provision under which, beginning at the one-year anniversary of the
closing date, Andrx has the option to convert the Cybear Group Common Stock into
shares of Andrx Group Common Stock at a premium based upon the date of
conversion. The conversion premium and the Cybear Premium are shown in the
following table:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Anniversary of the Closing Date: Conversion Premium Cybear Premium Total
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
After the first anniversary 25.0% 13.1% 38.1%
-----------------------------------------------------------------------------------------------------------
After the second anniversary 20.0% 13.1% 33.1%
-----------------------------------------------------------------------------------------------------------
After the third anniversary 15.0% 13.1% 28.1%
-----------------------------------------------------------------------------------------------------------
After the fourth anniversary 10.0% 13.1% 23.1%
-----------------------------------------------------------------------------------------------------------
</TABLE>
SG Cowen reviewed 35 minority squeeze-out transactions announced since
January 1, 1990. In conducting this analysis, SG Cowen analyzed the premiums
paid over the target's market price one day prior to the announcement of a
transaction and four weeks prior to the announcement of a transaction. The
following table represents the results of this analysis:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Since January 1, 1990
-----------------------------------------------------------------------------------------------------------
Premiums Paid to Stock Price: Low Median Mean High
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
One day prior to announcement 2.2% 25.6% 34.5% 100.2%
-----------------------------------------------------------------------------------------------------------
Four weeks prior to announcement 2.2% 22.0% 22.8% 77.8%
-----------------------------------------------------------------------------------------------------------
</TABLE>
The following table represents the results of this analysis for those
transactions announced since January 1, 1995:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Since January 1, 1995
-----------------------------------------------------------------------------------------------------------
Premiums Paid to Stock Price: Low Median Mean High
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------
One day prior to announcement 11.2% 27.0% 38.1% 100.2%
-----------------------------------------------------------------------------------------------------------
Four weeks prior to announcement 8.3% 25.3% 26.8% 77.8%
-----------------------------------------------------------------------------------------------------------
<FN>
The summaries set forth above do not purport to be a complete description of all the analyses
performed by SG Cowen. The preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analyses and the application of these methods to the
particular circumstances
</FN>
</TABLE>
54
<PAGE>
and, therefore, such an opinion is not readily susceptible to partial analysis
or summary description. SG Cowen did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly,
notwithstanding the separate factors summarized above, SG Cowen believes, and
has advised the special committee, that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all analyses and factors, could create an incomplete
view of the process underlying its opinion. The analyses supplied by SG Cowen
and its opinion were among several factors taken into consideration by the
Cybear Special Committee in making its decision to enter into the reorganization
agreement and should not be considered as determinative of such decision.
SG Cowen was selected by the special committee to render an opinion to
the special committee because SG Cowen is a nationally recognized investment
banking firm and because, as part of its investment banking business, SG Cowen
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the ordinary course of its
business, SG Cowen and its affiliates may actively trade the securities of
Cybear and Andrx for their own account and for the accounts of their customers,
and, accordingly, may at any time hold a long or short position in such
securities.
Pursuant to the SG Cowen engagement letter, Cybear has agreed to pay a
fee of $500,000 to SG Cowen for rendering its opinion. As a result of the
execution of the reorganization agreement, SG Cowen is entitled to receive a
transaction fee of $250,000. Additionally, Cybear agreed to reimburse SG Cowen
for its out-of-pocket expenses, including attorneys' fees, and has agreed to
indemnify SG Cowen against certain liabilities, including liabilities under the
federal securities laws. The terms of the fee arrangement with SG Cowen, which
are customary in transactions of this nature, were negotiated at arm's length
between Cybear and SG Cowen, and the special committee was aware of the
arrangement.
RECOMMENDATION OF CYBEAR'S BOARD OF DIRECTORS
Cybear's board of directors believes that the reorganization is fair to
and in the best interests of Cybear and its stockholders and unanimously
recommends to its stockholders that they vote "FOR" the proposal to approve the
reorganization.
INTERESTS OF CERTAIN DIRECTORS, OFFICERS AND AFFILIATES IN THE REORGANIZATION
In considering the recommendations of the boards of directors of Andrx
and Cybear, you should be aware that certain directors and officers of Andrx and
Cybear have interests in the reorganization that are in addition to those held
by their stockholders generally.
The reorganization agreement provides that Andrx Corporation will for a
period of six years from the effective date of the reorganization indemnify,
defend and hold harmless the directors, officers and employees of Andrx and
Cybear for acts or omissions occurring at or prior to the effective date.
Andrx and Edward E. Goldman, M.D., Cybear's Chief executive officer,
are party to a warrant giving Dr. Goldman the right to purchase up to 525,000
shares of Cybear common stock currently owned by Andrx at a price of $3.00 per
share through April 2007. Upon completion of the reorganization, the warrant
will be amended to give Dr. Goldman the right to purchase up to 525,000 shares
of Cybear Group Common Stock instead of the shares of Cybear common stock
MANAGEMENT AND ALLOCATION POLICIES
Because the Andrx Group and Cybear Group will each be a part of a
single company, Andrx and Cybear have carefully considered a number of issues
with respect to the financing of the Andrx Group Common Stock and Cybear Group
Common Stock, competition between groups, inter-group business transactions,
corporate opportunities and the allocation of debt, corporate overhead,
interest, taxes and other charges between the two groups. The board of directors
and management have established policies to accomplish the fundamental objective
of the reorganization. These policies establish charges between the two groups
on an objective basis and, except as described below, to ensure that
transactions between the Andrx
55
<PAGE>
Group and the Cybear Group are made on terms that approximate the terms that
could be obtained from unaffiliated third parties. We have included these
policies as Annex D.
POLICIES SUBJECT TO CHANGE WITHOUT STOCKHOLDER APPROVAL
A summary of the management and allocation policies that are expected
to be effective upon the reorganization are set forth below. Andrx and Cybear
are not requesting stockholder approval of these policies.
The board of directors may modify, rescind or make exceptions to these
policies, or may adopt additional policies, in its sole discretion without
stockholder approval. However, the board of directors has no present plans to do
so. A board of directors' decision to modify or rescind such policies, or adopt
additional policies could have different effects upon holders of Andrx Group
Common Stock and holders of Cybear Group Common Stock or could result in a
benefit or detriment to one class of stockholders compared to the other class.
The board of directors would make any such decision in accordance with its good
faith business judgment that such decision is in the best interests of Andrx and
all of its stockholders as a whole.
INTERESTS TO BE ATTRIBUTED TO THE ANDRX GROUP AND THE CYBEAR GROUP
It is Andrx Corporation's intent to attribute to the Cybear Group all
of its interests worldwide in Internet business related to the healthcare
industry other than any Internet business related to the marketing, manufacture,
purchase, warehousing, developing, sale and distribution of pharmaceuticals. All
other of Andrx Corporation's interests not allocated to the Cybear Group will be
allocated to the Andrx Group.
FIDUCIARY AND MANAGEMENT RESPONSIBILITIES
Because Andrx Group Common Stock and Cybear Group Common Stock will
continue to be a part of a single company, the directors and officers of Andrx
Corporation will have the same fiduciary duties to holders of Andrx Group Common
Stock and Cybear Group Common Stock that they currently have to the holders of
the existing common stock. Under Delaware law, absent an abuse of discretion, a
director or officer will be deemed to have satisfied his or her fiduciary duties
to Andrx Corporation and its stockholders if that person is disinterested and
acts in accordance with his or her good faith business judgment in the interests
of Andrx and all of the stockholders as a whole. The board of directors in
establishing policies with regard to intracompany matters such as business
transactions between groups and allocations of assets, liabilities, debt,
corporate overhead, taxes, interest, corporate opportunities and other matters,
will consider various factors and information which could benefit or cause
detriment to the stockholders of the respective groups and will make
determinations in the best interests of Andrx Corporation and all of the
stockholders as a whole.
Because the reorganization will result in no change in operating
structure, Andrx's and Cybear's officers will have the same duties and
responsibilities for the management of the assets and businesses which comprise
the Andrx Group and Cybear Group following the reorganization as they have now.
COMMON STOCK OWNERSHIP OF DIRECTORS AND SENIOR OFFICERS
As a policy, the board of directors will periodically monitor the
ownership of shares of Andrx Group Common Stock and shares of Cybear Group
Common Stock by the directors and senior officers and the option grants to them
so that their interests are generally aligned with the two classes of common
stock and with their duty to act in the best interests of Andrx Corporation and
the stockholders as a whole. However, because of the anticipated differences in
trading values between Andrx Group Common Stock and Cybear Group Common Stock,
the actual value of their interests in Andrx Group Common Stock and Cybear Group
Common Stock will vary significantly. Accordingly, it is possible that directors
or senior officers could favor one group over the other due to their stock and
option holdings.
56
<PAGE>
FINANCING ACTIVITIES
Most financial and treasury activities will be managed on a centralized
basis. These activities include but are not limited to the issuance and
repayment of short-term and long-term debt and the issuance and repurchase of
any preferred stock. If a transfer of cash or other property allocated to one
group to the other group occurs, Andrx Corporation will account for such
transfer in one of the following ways, as determined by its board of directors
except as set forth in a Tax Sharing Agreement entered into by Andrx and Cybear:
o As a short-term or long-term loan from one group to the other, or as a
repayment of a previous borrowing, as described under "INTER-GROUP
LOANS" below;
o As an increase or decrease in the Number of Cybear Group Designated
Shares, as described under "FUTURE EQUITY CONTRIBUTIONS TO BE REFLECTED
AS CYBEAR GROUP COMMON STOCK SHARES" below; or
o As a sale of assets between the two groups.
The board of directors has not adopted specific criteria to determine
which of the foregoing will be applied to a particular transfer of cash or
property from one group to the other. The board of directors will make these
determinations, either in specific instances or by setting applicable policies
generally, in the exercise of its business judgment based on all relevant
circumstances. All transfers of material assets from one group to the other will
be made on a fair value basis for the foregoing purposes, as determined by the
board of directors. See "-Transfers of Assets Between Groups."
Although debt and preferred stock may be allocated between groups, the
debt and preferred stock will remain obligations of Andrx Corporation and all of
its stockholders will be subject to the risks associated with those obligations.
DEBT. Debt will be allocated between the groups or, in its entirety to
a particular group. If debt for a particular financing is allocated in its
entirety to one group, the interest rate, amortization, maturity, redemption and
other terms shall be on then prevailing terms on which the Andrx Group could
borrow such funds. Any expense related to debt that is allocated in its entirety
to a group will be allocated in whole to that group.
PREFERRED STOCK. Preferred stock, if issued, will be allocated between
the groups or, if it so determines, in its entirety to a particular group. If
Andrx allocates preferred stock for a particular financing in its entirety to
one group, that group will be charged the dividend cost. If the dividend cost is
higher than Andrx's actual cost, the other group will receive a credit for an
amount equal to the difference as compensation for the use of its credit
capacity. Any expense related to preferred stock that is allocated in its
entirety to a group will be allocated in whole to that group.
INTER-GROUP LOANS. Cash or other property that is allocated to one
group that is transferred to the other group, could, if so determined by the
board of directors, be accounted for either as a short-term loan or as a
long-term loan. The board of directors will establish the terms on which
short-term and long-term loans between the groups will be made, including
interest rate, amortization schedule, maturity and redemption terms. The terms,
however, shall reflect the then prevailing terms on which the Andrx Group could
borrow the funds.
FUTURE EQUITY CONTRIBUTIONS TO BE REFLECTED AS CYBEAR GROUP COMMON
STOCK DESIGNATED SHARES. Cash or other property allocated to the Andrx Group
that is contributed as additional equity to the Cybear Group will increase the
number of Cybear Group Designated Shares. Cash or other property allocated to
the Cybear Group that is transferred to the Andrx Group will, if so determined
by the board of directors, decrease the number of Cybear Group Designated
Shares.
EQUITY ISSUANCES AND REPURCHASES AND DIVIDENDS. All financial effects
of issuances and repurchases of shares of Andrx Group Common Stock or shares of
Cybear Group Common Stock will be reflected entirely
57
<PAGE>
in the financial statements of that group except as described in the next
sentence. All financial effects of issuances of additional shares of Cybear
Group Common Stock, which have been reflected as a reduction in the number of
Cybear Group Designated Shares, will be reflected entirely in the financial
statements of the Andrx Group. Financial effects of dividends or other
distributions on, and purchases of, shares of Andrx Group Common Stock or Cybear
Group Common Stock will be reflected entirely in the respective financial
statements of the Andrx Group and the Cybear Group.
COMPETITION BETWEEN GROUPS
Neither Andrx Group Common Stock nor the Cybear Group Common Stock will
engage in each other's principal businesses, except for joint transactions with
each other. Joint transactions may include joint ventures or other collaborative
arrangements to develop, market, sell and support new products and services.
Third parties may also participate in such joint transactions. See "-TRANSFERS
OF ASSETS BETWEEN GROUPS-JOINT TRANSACTIONS." The terms of any joint
transactions will be determined by our chief executive officer or, in
appropriate circumstances, our board of directors.
Our board of directors will make decisions whether to permit indirect
competition between the groups. Indirect competition could occur if and when:
o one group uses products of third parties in that group's products
rather than using the other group's products;
o a third party uses a product of one group in the third party's products
which compete with the other group's products; or
o a group licenses technology allocated to that group to a third party
that is a competitor of the other group.
The groups may compete in a business which is not a principal business of
the other group.
TRANSFERS OF ASSETS BETWEEN GROUPS
The certificate of incorporation permits the transfer of assets between
groups without stockholder approval. Our board of directors has determined that
all such transfers will be made at fair value, as determined by our board of
directors, except as described below. The consideration for such transfers may
be paid by one group to the other in cash or other consideration, as determined
by our board of directors. All cash and cash equivalents on Cybear's balance
sheet on the effective date of the reorganization, however, will be used solely
by the Cybear Group to fund its operations.
Our board of directors has adopted specific policies for the sale of
products and services between groups and joint transactions with each other and
third parties as set forth below.
SALES OF PRODUCTS AND SERVICES BETWEEN GROUPS. A group will sell products or
services to the other group on terms that would be available from third parties
in commercial transactions. If terms for such transactions are not available
from a third party, the purchasing group will (1) pay for such products at fair
value as determined by our board of directors and (2) pay for such services at
fair value, as determined by our board of directors, or at the cost, including
overhead, of the selling group.
JOINT TRANSACTIONS. The groups may from time to time engage in transactions
jointly, including with third parties, as described under " - COMPETITION
BETWEEN GROUPS." Research and development and other services performed by one
group for a joint venture or other collaborative arrangement will be charged at
fair value, as determined by our board of directors. Andrx will cause the Andrx
Group to provide the Cybear Group, at no cost and expense to the Cybear Group,
telemarketing and distribution services in connection with the "Cybear
Marketplace Operations."
58
<PAGE>
REVIEW OF CORPORATE OPPORTUNITIES
Our board of directors will review any matter which involves the
allocation of a corporate opportunity to either the Andrx Group Common Stock or
the Cybear Group Common Stock or in part to the Andrx Group Common Stock and in
part to the Cybear Group Common Stock. In accordance with Delaware law, our
board of directors will make its determination with regard to the allocation of
any such opportunity and the benefit of such opportunity in accordance with
their good faith business judgment of the best interests of Andrx and all of our
stockholders as a whole. Among the factors that our board of directors may
consider in making this allocation is whether a particular corporate opportunity
is principally related to the business of the Andrx Group or the Cybear Group;
whether one group, because of its managerial or operational expertise, will be
better positioned to undertake the corporate opportunity; and existing
contractual agreements and restrictions.
FINANCIAL STATEMENTS
We will prepare financial statements in accordance with accounting
principles generally accepted in the United States, consistently applied, for
the Andrx Group and the Cybear Group, and these financial statements, taken
together, will comprise all of the accounts included in our corresponding
consolidated financial statements. The financial statements of each of the Andrx
Group and the Cybear Group will reflect the financial condition, results of
operations and cash flows of the businesses included therein.
ALLOCATION MATTERS
Group financial statements will also include allocated portions of our
debt, interest corporate overhead and costs of administrative shared services
and taxes. We will make these allocations for the purpose of preparing each
group's financial statements; however, holders of Andrx Group Common Stock and
Cybear Group Common Stock will continue to be subject to all of the risks
associated with an investment in Andrx Corporation and all of its businesses,
assets and liabilities. See "Risk Factors - You will remain stockholders of one
company and, therefore, financial effects on one group could adversely affect
the other" and the historical financial statements for the Andrx Group and the
Cybear Group included in this proxy statement.
In addition to allocating debt and interest as described above under "-
FINANCING ACTIVITIES" and assets as described above under "TRANSFERS OF ASSETS
BETWEEN GROUPS," our board of directors has adopted the following allocation
policies, each of which is reflected in the combined financial statements of the
respective groups included in this proxy statement:
o DIRECT CHARGES. We will allocate direct expenses incurred on
behalf of a group to that group.
o CORPORATE OVERHEAD AND ADMINISTRATIVE SHARED SERVICES. We will
allocate a portion of our corporate overhead to the Andrx
Group and the Cybear Group based upon the use of services by
that group. Corporate overhead includes costs of our executive
management, payroll, human resources, legal, auditing, tax,
mergers and acquisitions, treasury, and strategic planning
functions. We will allocate in a similar manner a portion of
our costs of administrative shared services, such as
information technology services. Where determinations based on
use alone are not practical, we will use other methods and
criteria that we believe are equitable and provide a
reasonable estimate of the cost attributable to the groups.
o TAXES. We will allocate the federal income tax provisions and
related tax payments and refunds between the groups based on
the tax sharing agreement.
CAPITAL STOCK COMMITTEE
At the effective time of the reorganization, Andrx Corporation will
establish a capital stock committee of the board of directors. To the extent the
Cybear nominee to the board of directors is a member of the board of directors,
Cybear's nominee will be a member of the capital stock committee, however, in
the event that
59
<PAGE>
Cybear's nominee is a member of the capital stock committee, the
capital stock committee will have at least one other member. The capital stock
committee will have authority to:
o Interpret, make determinations under, and oversee the
implementation of these policies in order to resolve potential
and actual conflicts between the groups.
o Adopt additional general policies governing the relationship
between the Andrx Group and the Cybear Group with respect to
these policies; and
o Engage the services of accountants, investment bankers,
appraisers, attorneys and other service providers to assist in
discharging its duties.
The decisions of the capital stock committee will be subject to
ultimate approval of the board of directors.
TAX SHARING AGREEMENT
As part of the reorganization, members of the Andrx Corporation group
will enter into a federal and state tax sharing agreement. Under the terms of
the tax sharing agreement, the group's consolidated federal and state income tax
liabilities will be apportioned among the members of the group based on each
member's share of consolidated taxable income. Any nonconsolidated state tax
liabilities will be the responsibility of the respective separate group members.
However, if, for state tax purposes, any member causes other members of the
group to become subject to state tax in a state in which the member would not
generally be subject to such tax, then the member causing such state tax
liability will be liable to the other members for their state income tax
incurred and other additional costs.
Under the tax sharing agreement, if any deductions, net operating
losses, credits and other tax attributes of a member cannot be fully utilized by
that member in the year the attribute is generated, then that member will not be
compensated in that year by other members for utilization of those attributes.
Instead, if and when the member leaves the group, Andrx Corporation may elect to
reimburse the member in the form of a capital investment for which Andrx
Corporation will receive stock equal to the amount of its excess loss account,
if any, for that member. If the respective member is the Cybear Group, then the
stock received would be in the form of designated shares.
DESCRIPTION OF ANDRX GROUP COMMON STOCK AND CYBEAR GROUP COMMON STOCK
A summary of the material terms of the Andrx Group Common Stock and the
Cybear Group Common Stock is set forth below. The summary is not complete. We
encourage you to read the new certificate of incorporation which is attached as
Annex B.
AUTHORIZED AND OUTSTANDING SHARES
Andrx's articles of incorporation authorizes it to issue 100,000,000
shares of common stock, par value $.01 per share, and 1,000,000 shares of
preferred stock, par value $.01 per share. The board of directors may issue
shares of preferred stock in series, without stockholder approval. As of June
___, 2000, ____________ shares of existing common stock and no shares of
preferred stock were issued and outstanding.
The certificate of incorporation will authorize Andrx Corporation to
issue 126,000,000 shares of capital stock as follows: 100,000,000 shares of a
class of common stock, designated as Andrx Corporation-Andrx Group Common Stock,
or the Andrx Group Common Stock, 25,000,000 shares of a class of common stock,
designated as Andrx Corporation-Cybear Group Common Stock, or the Cybear Group
Common Stock, and 1,000,000 shares of preferred stock. Shares of each class of
stock will have a par value of $.001 per share. The board of directors will be
able to issue shares of preferred stock in series, without stockholder approval.
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As a result of the reorganization, assuming the number of shares of
existing common stock then outstanding is the same as the number outstanding on
June ____, 2000, ____________ shares of Andrx Group Common Stock and 15,715,111
shares of the Cybear Group Common Stock will be issued and outstanding.
DIVIDENDS
Dividends on the Andrx Group Common Stock and the Cybear Group Common
Stock will be subject to similar limitations as dividends on the existing common
stock. Dividends on the existing common stock are limited to our legally
available assets under Florida law and subject to the prior payment of dividends
on any outstanding shares of preferred stock.
Dividends on the Andrx Group Common Stock and dividends on the Cybear
Group Common Stock will be limited to an amount not greater than the Available
Dividend Amount as defined in the Certificate of Incorporation for the relevant
group.
Delaware law limits the amount of distributions on capital stock to the
legally available funds, which are determined on the basis of the entire
company, and not only the respective groups. As a result, the amount of legally
available funds will reflect the amount of any net losses of each group, any
distributions on Andrx Group Common Stock, Cybear Group Common Stock or any
preferred stock and any repurchases of Andrx Group Common Stock, Cybear Group
Common Stock or certain preferred stock. Dividend payments on the Andrx Group
Common Stock and on the Cybear Group Common Stock could be precluded because
legally available funds are not available under Delaware law, even though the
Available Dividend Amount test for the particular relevant group was met. Andrx
cannot assure stockholders that there will be an Available Dividend Amount for
either group.
Subject to the prior payment of dividends on any outstanding shares of
preferred stock and the limitations described above, the board of directors will
be able, in its sole discretion, to declare and pay dividends exclusively on the
Andrx Group Common Stock, exclusively on the Cybear Group Common Stock or on
both, in equal or unequal amounts. In making its dividend decisions, the board
of directors will not be required to take into account the relative Available
Dividend Amounts for the two groups, the amount of prior dividends declared on
either class, the respective voting or liquidation rights of either class or any
other factor.
CONVERSION AND REDEMPTION
The existing articles of incorporation currently do not provide for
either mandatory or optional conversion or redemption of the existing common
stock. The reorganization will permit the conversion or redemption of the Andrx
Group Common Stock and the Cybear Group Common Stock.
MANDATORY DIVIDEND, REDEMPTION OR CONVERSION OF COMMON STOCK IF
DISPOSITION OF CYBEAR GROUP ASSETS OCCURS. If Andrx Corporation sells,
transfers, assigns or otherwise disposes of, in one transaction or a series of
related transactions, all or substantially all of the properties and assets
attributed to the Cybear Group, Andrx Corporation is required, except as
described below, to:
o pay a dividend in cash and/or securities or other property to
the holders of the Cybear Group Common Stock having a fair
value equal to the net proceeds of the disposition;
o if the disposition involves all, but not merely substantially
all, of such properties and assets, redeem all outstanding
shares of the Cybear Group Common Stock for cash and/or
securities or other property having a fair value equal to the
net proceeds of the disposition;
o if the disposition involves substantially all, but not all, of
such properties and assets, redeem or exchange that number of
whole shares of the class of Cybear Group Common Stock as have
in the aggregate an average market value, during the period of
ten consecutive trading days beginning on the 26th trading day
immediately succeeding the consummation date, closest to
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the net proceeds of the disposition; and the redemption price
will be cash and/or securities or other property having a fair
value equal to such net proceeds; or
o convert each outstanding share of Cybear Group Common Stock to
a number of shares of Andrx Group Common Stock equal to 110%
of the ratio of the average market value of one share of
Cybear Group Common Stock to the average market value of one
share of during the 10-trading day period beginning on the
26th trading day following the disposition date.
Andrx Corporation may only pay a dividend or redeem shares of common
stock as set forth above if it has legally available funds under Delaware law
and the amount to be paid to holders is less than or equal to the Available
Dividend Amount for the Cybear Group. Andrx Corporation is required to pay this
dividend or complete a redemption or conversion on or prior to the 95th trading
day following the disposition.
For purposes of determining whether a disposition has occurred,
"substantially all of the properties and assets" attributed to the Cybear Group
means a portion of such properties and assets:
o that represents at least 80% of the then fair value of the
properties and assets attributed to the Cybear Group; or
o from which were derived at least 80% of the aggregate revenues
of the Cybear Group for the immediately preceding 12 fiscal
quarterly periods.
The "net proceeds" of a disposition means an amount equal to what
remains of the gross proceeds of the disposition after any payment of, or
reasonable provision is made as determined by the board of directors for:
o any taxes payable by Andrx Corporation or which would have
been payable but for the utilization of tax benefits
attributable to the Andrx Group, in respect of the disposition
or in respect of any resulting dividend or redemption;
o any transaction costs, including, without limitation, any
legal, investment banking and accounting fees and expenses;
and
o any liabilities of or attributed to the Cybear Group,
including, without limitation, any liabilities for deferred
taxes, any indemnity or guarantee obligations incurred in
connection with the disposition or otherwise, any liabilities
for future purchase price adjustments and any preferential
amounts plus any accumulated and unpaid dividends in respect
of the preferred stock attributed to the Cybear Group.
Andrx Corporation may elect to pay the dividend or redemption price in
connection with a disposition either in the same form as the proceeds of the
disposition were received or in any other combination of cash, securities or
other property that the board of directors determines will have an aggregate
market value of not less than the fair value of the net proceeds.
The following illustration demonstrates the provisions requiring a
mandatory dividend, redemption or conversion if a disposition occurs. If:
o 60 million shares of Andrx Group Common Stock and 15 million
shares of Cybear Group Common Stock were outstanding,
o the net proceeds of the disposition of substantially all, but
not all, of the assets of the Cybear Group equals $250
million,
o the average market value of the Cybear Group Common Stock
during the 10-trading day valuation period was $15 per share
and
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o the average market value of the Andrx Group Common Stock
during the same valuation period was $100 per share,
then Andrx Corporation could do any of the following:
<TABLE>
<CAPTION>
<S> <C>
(1) pay a dividend to the holders of shares of Cybear Group Common Stock equal to:
net proceeds = $250 million = $16.67 per share
------------------------ ------------------------
number of outstanding shares 15 million
of Cybear Group Common Stock
(2) redeem for $15 per share a number of shares of Cybear Group Common Stock equal to:
net proceeds = $250 million = 16,666,667 shares
------------------------ ------------------------
average market value of $ 15
Cybear Group Common Stock
(3) convert each outstanding share of Cybear Group Common Stock into a number of shares of
Andrx Group Common Stock equal to:
average market value of
1.1 x Cybear Group Common Stock = 1.1 x $ 15 per share = .1650 shares
---------------------------- --------------------
average market value of $100 per share
Andrx Group Common Stock
</TABLE>
EXCEPTIONS TO THE DIVIDEND, REDEMPTION OR CONVERSION REQUIREMENT IF A
DISPOSITION OCCURS. Andrx Corporation is not required to take any of the above
actions for any disposition of all or substantially all of the properties and
assets of the Cybear Group in a transaction or series of related transactions
that results in Andrx Corporation receiving for such properties and assets
primarily equity securities of any entity which:
o acquires such properties or assets or succeeds to the business
conducted with such properties or assets or controls such
acquiror or successor; and
o is primarily engaged or proposes to engage primarily in one or
more businesses similar or complementary to the businesses
conducted by the Cybear Group prior to the disposition, as
determined by the board of directors.
The purpose of this exception is to enable Andrx Corporation technically to
"dispose" of properties or assets of the Cybear Group to other entities engaged
or proposing to engage in businesses similar or complementary to those of the
Cybear Group without requiring a dividend on, or a conversion or redemption of,
the Cybear Group Common Stock, so long as Andrx Corporation holds an equity
interest in that entity. A joint venture in which Andrx Corporation owns a
direct or indirect equity interest is an example of such an acquiror. Andrx
Corporation is not required to control that entity, whether by ownership or
contract provisions.
Andrx Corporation is also not required to effect a dividend, redemption or
conversion if the disposition is:
o of all or substantially all of our properties and assets in
one transaction or a series of related transactions in
connection with our dissolution, liquidation or winding up and
the distribution of our assets to stockholders;
o on a pro rata basis, such as in a spin-off, to the holders of
all outstanding shares of Cybear Group Common Stock; or
o made to any person or entity controlled by us, as determined
by the board of directors.
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NOTICES IF DISPOSITION OF GROUP ASSETS OCCURS. Not later than the 20th
trading day after the consummation of a disposition, Andrx Corporation will
announce publicly by press release:
o the estimated net proceeds of the disposition;
o the number of outstanding shares of the Cybear Group Common
Stock; and
o the number of shares of Cybear Group Common Stock into or for
which convertible securities are then convertible,
exchangeable or exercisable and the conversion, exchange or
exercise price thereof.
Not earlier than the 36th trading day and not later than the 40th
trading day after the consummation of the disposition, Andrx Corporation will
announce publicly by press release whether it will pay a dividend or redeem
shares of common stock with the net proceeds of the disposition or convert the
Cybear Group Common Stock into the Andrx Group Common Stock.
Andrx Corporation is required to cause to be mailed to each holder of
shares of the Cybear Group Common Stock the additional notices and other
information required by the certificate of incorporation.
CONVERSION OF CYBEAR GROUP COMMON STOCK AT OUR OPTION AT ANY TIME. The
board of directors may at any time after the first anniversary of the
consummation of the reorganization, or at any time after a Tax Event occurs,
convert each share of Cybear Group Common Stock into a number of shares of Andrx
Group Common Stock equal to a percentage as set forth below of the ratio of the
average market values of the Cybear Group Common Stock to the Andrx Group Common
Stock over a 20-trading day period.
<TABLE>
<CAPTION>
<S> <C>
Any conversion date occurring after the following Percentage of market value ratio of Cybear Group
anniversary of the reorganization and on or prior to the Common Stock to the Andrx Group Common
next such anniversary Stock
------------------------------------------------------------ ----------------------------------------------------
First................................................. 125%
Second................................................ 120%
Third................................................. 115%
Fourth and Thereafter................................. 110%
</TABLE>
Andrx Corporation will calculate the ratio as of the fifth trading day prior to
the date it mails the conversion notice to holders.
However, if a Tax Event occurs at any time subsequent to the effective date, a
factor of 100% rather than the above percentages will be applied to the ratio of
the average market values. This means that the holders of the Cybear Group
Common Stock will not receive any premium in such conversion.
"Tax Event" means the receipt by Andrx of an opinion of its tax advisors that,
as a result of:
o any amendment to, or change in, the laws or regulations
interpreting such laws of the United States or any political
subdivision or taxing authority, including any announced
proposed change by an applicable legislative committee or its
chair in such laws or by an administrative agency in such
regulations, or
o any official or administrative pronouncement, action or
judicial decision interpreting or applying such laws or
regulations,
it is more likely than not that for United States federal income tax purposes:
o Andrx or its stockholders are, or, at any time in the future,
will be subject to tax upon the issuance of shares of either
Andrx Group Common Stock or Cybear Group Common Stock, or
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o Andrx Group Common Stock or Cybear Group Common Stock is not
or, at any time in the future, will not be treated solely as
stock of Andrx Corporation.
These provisions allow Andrx the flexibility to recapitalize the two
classes of common stock into one class of common stock that would, after such
reorganization, represent an equity interest in all of its businesses. The
optional conversion or redemption could be exercised at any future time if the
board of directors determines that, under the facts and circumstances then
existing, an equity structure consisting of two classes of common stock was no
longer in the best interests of all of its stockholders. Such exchange could be
exercised, however, at a time that is disadvantageous to the holders of one of
the classes of common stock.
Many factors could affect the market values of the Andrx Group Common
Stock or the Cybear Group Common Stock, including our results of operations and
those of each of the groups, trading volume and general economic and market
conditions. Market values could also be affected by decisions by the board of
directors or management that investors perceive to affect differently one class
of common stock compared to the other. These decisions could include changes to
the management and allocation policies, transfers of assets between groups,
allocations of corporate opportunities and financing resources between the
groups and changes in dividend policies.
The following illustration demonstrates the calculation of the number
of shares issuable upon conversion of Cybear Group Common Stock into shares of
Andrx Group Common Stock at our option between the second and third
anniversaries of the reorganization. If:
o a Tax Event has not occurred,
o 15 million shares of Cybear Group Common Stock and 60 million
shares of Andrx Group Common Stock were outstanding
immediately prior to a conversion,
o the average market value of one share of the Cybear Group
Common Stock over the 10-trading day valuation period was $15,
and
o the average market value of one share of Andrx Group Common
Stock over the same valuation period was $100,
then each share of Cybear Group Common Stock could be converted into .18 shares
of Andrx Group Common Stock based on the following calculation:
1.2 x $ 15 = .18 shares
-----
$100
REDEMPTION IN EXCHANGE FOR STOCK OF SUBSIDIARY. The board of directors
may redeem on a pro rata basis all of the outstanding shares of Andrx Group
Common Stock or Cybear Group Common Stock for shares of the common stock of one
or more of its wholly owned subsidiaries which own all of the assets and
liabilities attributed to the relevant group. If at the time of any such
redemption of Andrx Group Common Stock, the Andrx Group is entitled to Number of
Cybear Group Designated Shares, it will also issue an equal number of shares of
Cybear Group Common Stock either to (1) the holders of the Andrx Group Common
Stock or (2) one or more of those Andrx Group subsidiaries. Andrx may redeem
shares of common stock for subsidiary stock only if we have legally available
funds under Delaware law.
These provisions are intended to give Andrx increased flexibility with
respect to spinning-off the assets of one of the groups by transferring the
assets of that group to one or more wholly-owned subsidiaries and redeeming the
shares of common stock related to that group in exchange for stock of such
subsidiary or subsidiaries. As a result of any such redemption, holders of each
class of common stock would hold securities of separate legal entities operating
in distinct lines of business. Such a redemption could be authorized by the
board of directors at any time in the future if it determines that, under the
facts and circumstances then
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<PAGE>
existing, an equity structure comprised of the Andrx Group Common Stock and the
Cybear Group Common Stock is no longer in the best interests of all of the
stockholders as a whole.
SELECTION OF SHARES FOR REDEMPTION. If less than all of the outstanding
shares of a class of common stock are to be redeemed, Andrx will redeem such
shares proportionately from among the holders of outstanding shares of such
common stock or by such method as may be determined by the board of directors to
be equitable.
FRACTIONAL INTERESTS; TRANSFER TAXES. Andrx will not be required to
issue fractional shares of any capital stock or any fractional securities to any
holder of either class of common stock upon any conversion, redemption, dividend
or other distribution described above. If a fraction is not issued to a holder,
Andrx will pay cash instead of such fraction.
Andrx will pay all documentary, stamp or similar issue or transfer
taxes that may be payable in respect of the issue or delivery of any shares of
capital stock and/or other securities on conversion or redemption of shares.
VOTING RIGHTS
Currently, holders of existing common stock of both Andrx and Cybear
have one vote per share on all matters submitted to shareholders.
Under the new certificate of incorporation the entire voting power of
the stockholders will be vested in the holders of common stock, who will be
entitled to vote on any matter on which stockholders are entitled to vote,
except as otherwise required by the board of directors or provided by law or
stock exchange rules, by the terms of any outstanding preferred stock or by any
provision of the certificate of incorporation restricting the power to vote on a
specified matter to other stockholders.
Holders of common stock will vote as a single class on each matter on
which holders of common stock are generally entitled to vote.
On all matters as to which both classes of common stock will vote
together as a single class:
o each share of Andrx Group Common Stock will have one vote; and
o each share of Cybear Group Common Stock will have a number of
votes equal to the quotient of the average market value of a
share of Cybear Group Common Stock over the 20-trading day
period ending on the 10th trading day prior to the record date
for determining the holders of common stock entitled to vote,
divided by the average market value of a share of Andrx Group
Common Stock over the same period; provided, however, in the
event the holders of the Cybear Group Common Stock shall hold
in excess of 25% of the total voting power, the vote of Cybear
Group Common Stock shall be reduced to represent 25% of the
total voting power.
Accordingly, the relative per share voting rights of the Andrx Group
Common Stock and the Cybear Group Common Stock will fluctuate depending on
changes in the relative market values of shares of such classes of common stock.
Andrx expects that, upon completion of the reorganization, the Andrx
Group Common Stock will have a substantial majority of the voting power because
it expects that the aggregate market value of the outstanding shares of Andrx
Group Common Stock will be substantially greater than the aggregate market value
of the outstanding shares of Cybear Group Common Stock.
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Andrx Corporation will set forth the number of outstanding shares of
Andrx Group Common Stock and Cybear Group Common Stock in its Annual Report on
Form 10-K and its Quarterly Reports on Form 10-Q filed under the Securities
Exchange Act of 1934. Andrx Corporation will disclose in any proxy statement for
a stockholders' meeting the number of outstanding shares and per share voting
rights of the Andrx Group Common Stock and the Cybear Group Common Stock.
If shares of only one class of common stock are outstanding, each share
of that class will have one vote. If either class of common stock is entitled to
vote as a separate class with respect to any matter, each share of that class
will, for purpose of such vote, have one vote on such matter.
Fluctuations in the relative voting rights of the Andrx Group Common
Stock and the Cybear Group Common Stock could influence an investor interested
in acquiring and maintaining a fixed percentage of the voting power of the stock
to acquire such percentage of both classes of common stock, and would limit the
ability of investors in one class to acquire for the same consideration
relatively more or less votes per share than investors in the other class.
The holders of Andrx Group Common Stock and Cybear Group Common Stock
will not have any rights to vote separately as a class on any matter coming
before our stockholders, except for certain limited class voting rights provided
under Delaware law. In addition to the approval of the holders of a majority of
the voting power of all shares of common stock voting together as a single
class, the approval of a majority of the outstanding shares of the Andrx Group
Common Stock or the Cybear Group Common Stock, voting as a separate class, would
be required under Delaware law to approve any amendment to the certificate of
incorporation that would change the par value of the shares of the class or
alter or change the powers, preferences or special rights of the shares of such
class so as to affect them adversely. As permitted by Delaware law, the new
certificate of incorporation will provide that an amendment to the certificate
of incorporation that increases or decreases the number of authorized shares of
Andrx Group Common Stock or Cybear Group Common Stock will only require the
approval of the holders of a majority of the voting power of all shares of
common stock, voting together as a single class, and will not require the
approval of the holders of the class of common stock affected by such amendment,
voting as a separate class.
The following illustration demonstrates the calculation of the number
of votes each share of Cybear Group Common Stock would be entitled on all
matters on which holders of Andrx Group Common Stock and Cybear Group Common
Stock vote as a single class.
If the average market value for the 20-trading day valuation period was
$15 for the Cybear Group Common Stock and $100 for the Andrx Group Common Stock,
each share of Andrx Group Common Stock would have one vote and each share of
Cybear Group Common Stock would have 0.15 votes based on the following
calculation:
$15 = 0.15 votes
----
$100
Assuming 60 million shares of Andrx Group Common Stock and 15 million shares of
Cybear Group Common Stock were outstanding, the shares of Andrx Group Common
Stock would represent approximately 97.0% of our total voting power and the
shares of Cybear Group Common Stock would represent approximately 3.0% of our
total voting power.
LIQUIDATION
Currently, in the event of a liquidation, dissolution or termination,
after payment, or provision for payment, of its debts and other liabilities and
the payment of full preferential amounts to which the holders of any preferred
stock are entitled, holders of existing common stock of Andrx and Cybear are
entitled to share equally in their remaining net assets.
Under the new certificate of incorporation, in the event of a
dissolution, liquidation or winding up, after payment or provision for payment
of the debts and other liabilities and full preferential amounts to which
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holders of any preferred stock are entitled, regardless of the group to which
such shares of preferred stock were attributed, the holders of Andrx Group
Common Stock and Cybear Group Common Stock will be entitled to receive the
assets remaining for distribution to holders of common stock on a per share
basis in proportion to the liquidation units per share of such class. Each share
of Andrx Group Common Stock will have one liquidation unit. Each share of Cybear
Group Common Stock will have a number of liquidation units equal to the quotient
of the average market value of a share of Cybear Group Common Stock over the
20-trading day period ending on the 40th trading day after the effective date of
the reorganization, divided by the average market value of a share of Andrx
Group Common Stock over the same period.
After the number of liquidation units to which each share of Cybear
Group Common Stock is entitled has been calculated in accordance with this
formula, that number will not be changed without the approval of holders of the
class of common stock adversely affected. As a result, after the date of the
calculation of the number of liquidation units to which the Cybear Group Common
Stock is entitled, the liquidation rights of the holders of the respective
classes of common stock may not bear any relationship to the relative market
values or the relative voting rights of the two classes. Our financial advisors
believe that, in general, these liquidation provisions are immaterial to trading
in the Andrx Group Common Stock and the Cybear Group Common Stock.
No holder of Andrx Group Common Stock will have any special right to
receive specific assets of the Andrx Group and no holder of Cybear Group Common
Stock will have any special right to receive specific assets of the Cybear Group
in the case of the dissolution, liquidation or winding up of Andrx.
If Andrx Corporation subdivides or combines the outstanding shares of
either class of common stock or declare a dividend or other distribution of
shares of either class of common stock to holders of such class of common stock,
the number of liquidation units of either class of common stock will be
appropriately adjusted, as determined by the board of directors, to avoid any
dilution in the aggregate, relative liquidation rights of any class of common
stock.
Neither a merger nor consolidation of Andrx Corporation into or with
any other corporation, nor any sale, transfer or lease of all or any part of our
assets, will, alone, be deemed a liquidation or winding up of Andrx Corporation,
or cause its dissolution for purposes of these liquidation provisions.
DETERMINATIONS BY THE BOARD OF DIRECTORS
Any determinations made in good faith by the board of directors under
any provision described under "Description of Andrx Group Common Stock and
Cybear Group Common Stock," and any determinations with respect to any group or
the rights of holders of shares of either class of common stock, will be final
and binding on all of our stockholders, subject to the rights of stockholders
under applicable Delaware law and under the federal securities laws.
PREEMPTIVE RIGHTS
Neither the holders of the Andrx Group Common Stock nor the holders of
the Cybear Group Common Stock will have any preemptive rights or any rights to
convert their shares into any other securities of Andrx.
CYBEAR GROUP DESIGNATED SHARES
The Andrx Group, in the future, may hold an equity interest in the
Cybear Group in the form of "Number of Cybear Designated Shares" as a result of
future contributions of cash or property to the Cybear Group described below.
The board of directors could create Number of Cybear Designated Shares if it
determines that (1) the Cybear Group requires additional equity capital to
finance its business and (2) the Andrx Group should supply that capital.
Number of Cybear Designated Shares are authorized shares of Cybear
Group Common Stock that are not issued and outstanding, but which the board of
directors, pursuant to the management and allocation
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policies, may from time to time issue without allocating the proceeds or other
benefits of such issuance to the Cybear Group. The Number of Cybear Designated
Shares are not eligible to receive dividends and can not be voted.
The Number of Cybear Designated Shares will initially be zero but from
time to time will be:
o adjusted as appropriate to reflect subdivisions and
combinations of the Cybear Group Common Stock and dividends or
distributions of shares of Cybear Group Common Stock to
holders of Cybear Group Common Stock and other
reclassifications of Cybear Group Common Stock;
o increased by a number equal to the quotient obtained by
dividing (1) the fair value of all cash or other property
attributed to the Andrx Group that is contributed to the
Cybear Group to increase the Number of Cybear Designated
Shares by (2) the average market value of Cybear Group Common
Stock over the 20-trading day period immediately prior to the
date of transfer;
o decreased by a number equal to the quotient obtained by
dividing (1) the fair value of all cash or other property
attributed to the Cybear Group that is contributed to the
Andrx Group to reduce the Number of Cybear Designated Shares
by (2) the average market value of Cybear Group Common Stock
over the 20-trading day period immediately prior to the date
of contribution; and
o decreased by the number of newly issued shares of Cybear Group
Common Stock, the proceeds of which have been allocated to the
Andrx Group, or issued as a dividend or distribution or by
reclassification, exchange or otherwise to holders of Andrx
Group Common Stock.
REINCORPORATION IN THE STATE OF DELAWARE
Andrx determined to reincorporate in Delaware for several reasons. For
many years, Delaware has followed a policy of encouraging incorporation in that
state and, in furtherance of that policy, has adopted comprehensive, modern and
flexible corporate laws which are periodically updated and revised to meet
changing business needs. As a result, many major corporations have initially
chosen Delaware for their domicile or have subsequently reincorporated in
Delaware. The Delaware courts have developed considerable expertise in dealing
with corporate issues, and a substantial body of case law has developed
construing Delaware law and establishing public policies with respect to
Delaware corporations, thereby providing greater predictability with respect to
legal affairs.
A number of other large corporations with similar capital structures,
such as General Motors Corporation, The Walt Disney Company and USX Corporation,
are also incorporated in Delaware. By becoming a Delaware corporation, we will
be able to benefit from Delaware's comprehensive and well-developed corporate
laws. We believe that Delaware law will offer clearer guidance with respect to
legal issues that may arise as a result of the existence of separate classes of
common stock.
COMPARISON OF STOCKHOLDER RIGHTS
Following the reorganization, the rights of the Andrx stockholders will
cease to be governed by Florida law, the existing articles of incorporation and
the existing bylaws. Instead, the rights of the Andrx stockholders will be
governed by Delaware law and the new certificate of incorporation and the new
bylaws of Andrx Corporation. Following the reorganization, the rights of
Cybear's stockholders will cease to be governed by Cybear's certificate of
incorporation and bylaws and will be governed by the new certificate of
incorporation and bylaws of Andrx Corporation.
The following is a brief summary of the material ways in which the
rights of Andrx and Cybear stockholders will change because of the
reorganization.
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AMENDMENTS TO CERTIFICATE OF INCORPORATION.
Under Florida law, the board of directors must propose an amendment to
the articles of incorporation and then the affirmative vote of the holders of
shares having a majority of the votes cast affirmatively or negatively and
present in person or by proxy at the meeting. Under Delaware law, the board of
directors must propose an amendment to the certificate of incorporation and then
a majority of all outstanding shares entitled to vote must approve it. Under
Florida law, a separate vote of a class or series of capital stock is required
for amendments which exclude or limit the voting rights of such stock, provide
for a conversion of such stock into another class or series, change the
conversion rights of such stock, or authorize shares which have preferences in
any respect superior to that stock. Under Delaware law, amendments which make
changes regarding the capital stock by increasing or decreasing the par value or
otherwise adversely affecting the rights of such class must be approved by a
majority vote of each class or series of stock affected, even if such stock
would not otherwise have voting rights.
Andrx's existing articles of incorporation and the new certificate of
incorporation both require a two-thirds vote of all outstanding shares entitled
to vote in order to amend the provisions relating to directors, special meetings
of stockholders and stockholder action without a meeting. Cybear's existing
certificate of incorporation requires an affirmative vote of the holders of at
least 75% of all outstanding shares entitled to vote at a meeting to amend the
provisions relating to the directors and special meetings of stockholders.
AMENDMENTS TO BYLAWS.
Under Florida and Delaware law, either the affirmative vote of the
holders of shares having a majority of the votes cast affirmatively or
negatively and present in person or by proxy at the meeting or the affirmative
vote of a majority of the members of our board of directors can amend or repeal
our bylaws.
Andrx's existing articles and new bylaws both require a two-thirds vote
of all outstanding shares entitled to vote in order to amend the provisions
relating to directors, special meetings of stockholders, notice of stockholder
proposals and stockholder action without a meeting. Cybear's existing bylaws
require the affirmative vote of the majority of all outstanding shares entitled
to vote at the meeting in order to amend the bylaws.
NUMBER OF DIRECTORS.
Under Andrx's existing articles of incorporation, the number of
directors will not be less than three and not more than 12. Andrx's existing
bylaws and new bylaws provide that the board of directors or by bylaw amendment
may fix the number of directors.
Under the new certificate of incorporation and new bylaws of Andrx, the
number of directors will not be less than three and not more than 12. The new
certificate of incorporation provides that the number of directors will be fixed
by resolution of the board of directors. Under Cybear's existing bylaws, the
number of directors will not be less than one and not more than 10 and provides
that the number of directors will be fixed by resolution of the board of
directors.
REMOVAL OF DIRECTORS.
Under Florida law, the stockholders may remove one or more directors
with or without cause unless the articles of incorporation provide that
directors may be removed only for cause. Under Delaware law, stockholders may
remove any director with or without cause by the vote of the holders of shares
entitled to cast a majority of the votes entitled to be cast by all outstanding
shares entitled to vote at an election of directors. Under Andrx's existing and
the new bylaws a director may be removed only for cause and by a two-thirds vote
of all outstanding shares entitled to vote. Under Cybear's existing bylaws, a
director may be removed only for cause and by a majority vote of all outstanding
shares entitled to vote.
FILING NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
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Under Florida and Delaware law, Andrx's existing bylaws, Cybear's
existing bylaws and the new bylaws, whenever a vacancy occurs on the board of
directors, including a vacancy resulting from an increase in the number of
directors, it may be filled by the affirmative vote of a majority of the
remaining directors, though less than a quorum of directors, or by the
stockholders, unless the articles of incorporation provide otherwise.
BUSINESS COMBINATIONS WITH SUBSTANTIAL STOCKHOLDERS.
Delaware law contains a statutory provision which is intended to curb
abusive takeovers of Delaware corporations. Section 203 of the DGCL addresses
the problem by preventing certain business combinations of the corporation with
interested stockholders within three years after such stockholders become
interested. Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person or an affiliate, or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless:
o the transaction resulting in a person becoming an interested
stockholder, or the business combination, is approved by the
board of directors of the corporation before the person
becomes an interested stockholder;
o the interested stockholder acquired 85% or more of the
outstanding voting stock of the corporation in the same
transaction that makes such person an interested stockholder
(excluding shares owned by persons who are both officers and
directors of the corporation, and shares held by certain
employee stock ownership plans); or
o on or after the date the person becomes an interested
stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at
least 66-2/3% of the corporation's outstanding voting stock at
an annual or special meeting, excluding shares owned by the
interested stockholder.
Under Section 203, an "interested stockholder" is defined as any person who is:
o the owner of 15% or more of the outstanding voting stock of
the corporation; or
o an affiliate or associate of the corporation and who was the
owner of 15% or more of the outstanding voting stock of the
corporation at any time within the three year period
immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
Florida law provides for certain "anti-takeover" protections against
persons who acquire or intend to acquire 20% or more of the voting power of
certain Florida corporations, including Andrx.
A corporation may, at its option, exclude itself from the coverage of
Section 203 of the DGCL by amending its certificate of incorporation or bylaws
by action of its stockholders to exempt itself from coverage, provided that such
bylaw or certificate of incorporation amendment shall not become effective until
12 months after the date it is adopted. Andrx Corporation has not adopted such a
provision to the certificate of incorporation. It is not anticipated that the
board of directors will seek stockholder approval to "opt out" of the operation
of this provision.
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MERGER WITH SUBSIDIARY.
Under Delaware law, a parent corporation may merge into a subsidiary
and a subsidiary may merge into its parent, without stockholder approval, where
such parent corporation owns at least 90% of the outstanding shares of each
class of capital stock of its subsidiary. Florida law permits such a merger of a
subsidiary without stockholder approval if 80% of each class of capital stock of
the subsidiary is owned by the parent corporation.
DIVIDENDS.
Delaware law provides that the corporation may pay dividends out of
surplus, from the corporation's net profits for the preceding fiscal year, or
both, provided that there remains in the stated capital account an amount equal
to the par value represented by all shares of the corporation's stock having a
distribution preference. Florida law provides that dividends may be paid, unless
after giving effect to such distribution, the corporation would not be able to
pay its debts as they come due in the usual course of business, or the
corporation's total assets would be less than the sum of its total liabilities,
plus (unless the corporation's articles of incorporation permit otherwise) the
amount needed to satisfy preferential distributions.
LIABILITY OF DIRECTORS.
Delaware law permits a Delaware corporation to include in its
certificate of incorporation a provision which eliminates or limits the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duties as a director. However, no such provision
may eliminate or limit the liability of a director:
o for any breach of the director's duty of loyalty to the
corporation or its stockholders;
o for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
o for declaration of unlawful dividends or illegal redemptions
or stock repurchases; or
o for any transaction from which the director derived an
improper personal benefit.
The certificate of incorporation includes such a provision. Under Florida law, a
director is not personally liable for monetary damages to any person for his
actions as a director unless the director breached his duties by way of:
o a criminal violation, unless the director has reasonable cause
to believe his conduct was lawful or had no reasonable cause
to believe his conduct was unlawful;
o a transaction from which the director derived an improper
personal benefit;
o declaration of unlawful distributions;
o in a derivative action, conscious disregard by the director
for the best interests of the corporation or willful
misconduct by the director; or
o in a third party action, recklessness or actions or omissions
committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human
rights, safety or property.
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INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Andrx's existing bylaws and the new bylaws provide that directors,
officers or employees be indemnified against any liability (including any
judgment, settlement, penalty or fine) incurred in connection with any legal
proceeding provided the director, officer or employee acted in good faith and in
a manner they reasonably believed to be in or not opposed to the best interests
of Andrx.
Andrx's existing and the new bylaws generally provide that all
reasonable expenses of the indemnified director, officer or employee be paid in
advance of the final proceeding to the fullest extent permitted by law.
SPECIAL MEETINGS OF STOCKHOLDERS.
Under Delaware law, a special meeting of stockholders may be called by
the corporation's board of directors or by such persons as may be authorized by
the corporation's certificate of incorporation or bylaws.
Florida law provides that a special meeting of stockholders may be
called by:
o a corporation's board of directors;
o the persons authorized by the articles of incorporation or
bylaws; or
o the holders of not less than 10% of all votes entitled to be
cast on any issue to be considered at the proposed special
meeting.
A corporation's articles of incorporation may require a higher percentage of
votes, up to a maximum of 50% to call a special meeting of stockholders. Andrx's
existing articles of incorporation do not include any such provision.
Andrx's existing and the new bylaws provide that a special meeting may be called
by the chief executive officer, a majority of the board of directors or 33.3% of
the stockholders entitled to vote. Cybear's existing bylaws provide that a
special meeting may be called by its board of directors, its Chairman of the
board of directors or its chief executive officer. Cybear's existing certificate
of incorporation requires a 75% affirmative vote of all outstanding shares
entitled to vote at a meeting to call a special meeting of stockholders.
VOTE REQUIRED FOR MERGERS AND CERTAIN OTHER TRANSACTIONS. Florida law
provides that the sale, lease, exchange or disposal of all, or substantially
all, of the assets of a Florida corporation, not in the ordinary course of
business, as well as any merger, consolidation or share exchange generally must
be recommended by the board of directors and approved by a vote of a majority of
the shares of each class of the stock of the corporation entitled to vote on
such matters. Under Florida law, the vote of the stockholders of a corporation
surviving a merger is not required if:
o the articles of incorporation of the surviving corporation
will not substantially differ from its articles of
incorporation before the merger; and
o each stockholder of the surviving corporation before the
effective date will hold the same number of shares, with
identical designations, preferences, limitations and relative
rights immediately after the merger.
Delaware law has a similar provision requiring stockholder approval in
the case of the disposition of assets or a merger or a share exchange. However,
Delaware law requires that any merger, consolidation or share exchange be
approved by a vote of a majority of the shares of all classes voting together
and not each class separately. In addition, with respect to mergers which do not
require the vote of the corporation's stockholders, Delaware law, unlike Florida
law, also requires that either:
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o no shares of common stock of the surviving corporation and no
shares, securities or obligations convertible into such stock
are to be issued or delivered under the plan of merger; or
o the authorized unissued shares or the treasury shares of
common stock of the surviving corporation to be issued or
delivered under the plan of merger, plus those initially
issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan, do not
exceed 20% of the shares of common stock of such constituent
corporation outstanding immediately prior to the effective
date of the merger.
DISSENTER'S RIGHTS.
Delaware law provides that dissenting stockholders who follow
prescribed statutory procedures are entitled to appraisal rights in the case of
a merger of a corporation, except that such rights are not provided when:
o no vote of the stockholders is required for the merger; or
o shares of the corporation are listed on a national securities
exchange or held by more than 2,000 stockholders and are to be
exchanged solely for shares of stock of another corporation
which are listed on a national securities exchange or held by
more than 2,000 stockholders.
Florida law provides appraisal rights in connection with:
o a merger, except that such rights are not provided when (a) no
vote of the stockholders is required for the merger or (b)
shares of the corporation are listed on a national securities
exchange, traded on the Nasdaq National Market System, or held
of record by fewer than 2,000 stockholders;
o a sale of substantially all the assets of a corporation (with
similar restrictions as provided under the Delaware Law for
mergers); and
o amendments to the articles of incorporation that may adversely
affect the rights or preferences of stockholders.
CORPORATE ACTION WITHOUT A STOCKHOLDER MEETING.
Delaware and Florida law both permit corporate action without a meeting
of stockholders upon the written consent of the holders of that number of shares
necessary to authorize the proposed corporate action being taken, unless the
certificate of incorporation or articles of incorporation, respectively,
expressly provide otherwise. In the event such proposed corporate action is
taken without a meeting by less than the unanimous written consent of
stockholders, Delaware law requires that prompt notice of the taking of such
action be sent to those stockholders who have not consented in writing. Florida
law provides that such notice must be given within ten days of the date such
stockholder authorization is granted. Andrx's existing articles of
incorporation, the new certificate of incorporation, and Andrx's existing and
the new bylaws do not allow stockholder action without a meeting. Cybear's
existing bylaws permit corporate action without a meeting of stockholders upon
the written consent of the holders of that number of shares necessary to
authorize the proposed corporate action being taken.
CERTAIN ANTI-TAKEOVER PROVISIONS
The certificate of incorporation and bylaws adopt certain anti-takeover
measures which are intended to protect the stockholders by rendering it more
difficult for a person or persons to obtain control of Andrx Corporation without
cooperation of the management. The anti-takeover provisions include an advance
notice
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requirement for any stockholder proposals or nominations for the election of a
director and a provision for a staggered board of directors.
Andrx's existing and the new bylaws provide that any stockholder
proposals and nominations for the election of directors be delivered to Andrx
Corporation no less than 60 days nor more than 90 days in advance of a meeting.
However, in the event that less than 70 days notice of the meeting is provided
to the stockholders, the stockholders must provide Andrx Corporation with its
notice no later than 10 days following the date Andrx Corporation's notice was
made. Such stockholder notice must contain (1) a brief description of the
business desired to be brought before the meeting and the reasons for conducting
such business at the annual meeting, (2) the name and record address of the
stockholder, (3) the class and number of shares of capital stock which are
beneficially owned by the stockholder and (4) any material interest of the
stockholder in such business. Cybear's bylaws did not contain such a provision.
The inclusion of such "anti-takeover" provisions in the certificate of
incorporation may delay, deter or prevent a takeovers which the stockholders may
consider to be in their best interests, thereby possibly depriving holders of
Andrx Corporation's securities of certain opportunities to sell or otherwise
dispose of their securities at above-market prices, or limit the ability of
stockholders to remove incumbent directors as readily as the stockholders may
consider to be in their best interests.
UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the principal United States
federal income tax consequences of the reorganization. The discussion is based
on the Internal Revenue Code of 1986, as amended, or the Code, Treasury
Department regulations, published positions of the Internal Revenue Service, and
court decisions now in effect, all of which are subject to change, potentially
with retroactive effect. In particular, Congress could enact legislation
affecting the treatment of stock with characteristics similar to the Andrx Group
Common Stock and the Cybear Group Common Stock, or the Treasury Department could
issue regulations that change current law. Any future legislation or other
guidance could apply retroactively to affect the tax consequences provided in
this discussion. See "Clinton Administration Proposal" below for a discussion of
potential proposed legislation that could affect the treatment of capital stock
with characteristics similar to the Andrx Group Common Stock and Cybear Group
Common Stock.
This discussion addresses only those stockholders who hold Andrx and
Cybear existing common stock as a capital asset and will, after the
reorganization, hold Andrx Group Common Stock and Cybear Group Common Stock as a
capital asset. This discussion does not discuss all aspects of United States
federal income taxation that may be relevant to stockholders in light of their
particular tax circumstances. This discussion does not address the U.S. federal
income taxation of stockholders subject to special treatment under the Code,
such as the following:
o Tax-exempt entities;
o Partnerships, S corporations, or other pass-through entities;
o Mutual funds and regulated investment companies;
o Small business investment companies;
o Insurance companies and other financial institutions;
o Dealers in securities;
o Traders that mark their positions to market;
o Stockholders who hold their shares as part of a hedge,
appreciated financial position, straddle, or conversion
transaction;
o Stockholders who acquired their shares through the exercise of
options or otherwise as compensation or through a
tax-qualified retirement plan;
o Individuals who are not citizens or residents of the United
States; and
o Foreign corporations and other foreign entities.
Finally, this discussion does not address any consequences under state,
local or foreign tax laws.
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YOU SHOULD CONSULT WITH YOUR OWN TAX ADVISORS WITH REGARD TO THE APPLICATION OF
THE FEDERAL INCOME TAX LAWS, AS WELL AS TO THE APPLICABILITY AND EFFECT OF ANY
STATE, LOCAL OR FOREIGN TAX LAWS TO WHICH YOU MAY BE SUBJECT.
Andrx and Cybear have obtained an opinion from Arthur Andersen LLP
regarding the material federal income tax consequences of the reorganization,
which is based on the law in effect on the date this registration statement is
filed with the SEC. The opinion from Arthur Andersen LLP is being filed with the
SEC as an exhibit to this registration statement. The opinion relies on factual
assumptions, including an assumption that there have been no changes in existing
facts, that the Andrx Group Common Stock and Cybear Group Common Stock will be
issued in accordance with the certificate of incorporation, and that the
reorganization will be completed in accordance with the reorganization
agreement. The opinion also relies on representations contained in certificates
furnished to Arthur Andersen LLP by officers of Andrx and Cybear in connection
with Arthur Andersen LLP rendering its opinion. If any of these assumptions or
representations are inaccurate, the conclusions contained in the opinion could
be affected.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION
The material federal income tax consequences to Andrx's stockholders
are as follows:
o The Andrx Group Common Stock and Cybear Group Common Stock
should be treated as stock of Andrx Corporation for U.S.
federal income tax purposes.
o The exchange of Andrx common stock for Andrx Group Common
Stock and Cybear Group Common Stock should be treated as a
reorganization under Section 368(a) of the Code.
o Each Andrx stockholder should recognize no gain or loss upon
the exchange of Andrx common stock solely for shares of Andrx
Group Common Stock and Cybear Group Common Stock, except with
respect to any cash received by an Andrx stockholder from the
sale of fractional shares.
o Each Andrx stockholder should have an aggregate tax basis in
the shares of Andrx Group Common Stock and Cybear Group Common
Stock received in the reorganization (including any fractional
shares sold for cash) equal to the aggregate tax basis of the
stockholder's Andrx common stock immediately prior to the
reorganization. Such aggregate basis should be allocated
between the Andrx Group Common Stock and Cybear Group Common
Stock (including any fractional shares) based on their
relative fair market values.
o Each Andrx stockholder's holding period for shares of Andrx
Group Common Stock and Cybear Group Common Stock received in
the reorganization (including any fractional shares) should
include the stockholder's holding period for the Andrx common
stock exchanged therefor.
o If any Andrx stockholder receives cash instead of fractional
shares of Cybear Group Common Stock, the stockholder should
recognize capital gain or loss equal to the amount of cash
received less the amount of basis allocated to the fractional
share interest.
o Each Andrx optionholder should recognize no gain or loss upon
the exchange of Andrx options for Andrx Group Common Stock
options and Cybear Group Common Stock options.
o The shares of Andrx Group Common Stock and Cybear Group Common
Stock received by Andrx stockholders in the reorganization
should not be classified as Section 306 stock.
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The material federal income tax consequences to Cybear's stockholders
are as follows:
o The Cybear Group Common Stock should be treated as stock of
Andrx Corporation for U.S. federal income tax purposes.
o The exchange of Cybear common stock for Cybear Group Common
Stock should be treated as a tax-free exchange under Section
351 of the Code.
o Each Cybear stockholder should recognize no gain or loss on
the exchange of Cybear common stock solely for Cybear Group
Common Stock in the reorganization under Section 351 of the
Code.
o Each Cybear stockholder should have an aggregate tax basis in
the shares of Cybear Group Common Stock received in the
reorganization equal to the stockholder's aggregate tax basis
of the Cybear common stock exchanged therefor.
o Each Cybear stockholder's holding period for the shares of
Cybear Group Common Stock received in the reorganization
should include the holding period for the Cybear common stock
exchanged therefor.
o Each Cybear optionholder should recognize no gain or loss upon
the exchange of Cybear common stock options for Cybear Group
Common Stock options.
o The shares of Cybear Group Common Stock received in the
reorganization should not be classified as Section 306 stock.
The material federal income tax consequences to Andrx Corporation,
Andrx and Cybear are as follows:
o The Andrx Group Common Stock and Cybear Group Common Stock
should be treated as stock of Andrx Corporation for U.S.
federal income tax purposes.
o Andrx Corporation, Andrx and Cybear should recognize no gain
or loss as a result of the reorganization.
o Following the reorganization, Cybear should be included in any
U.S. federal consolidated income tax return filed by the
affiliated group of which Andrx Corporation is the common
parent, provided that the group maintains the required level
of ownership in Cybear for purposes of filing a consolidated
tax return.
NO IRS RULING
No ruling has been sought from the IRS. The IRS has announced that it
will not issue any advance rulings on the classification of an instrument that
has certain voting and liquidation rights in an issuing corporation but whose
dividend rights are determined by reference to the earnings of a segregated
portion of the issuing corporation's assets, including assets held by a
subsidiary. Arthur Andersen LLP's opinion is not binding on the IRS. In
addition, there are no court decisions or other authorities that bear directly
on the treatment of stock with characteristics similar to the Andrx Group Common
Stock and Cybear Group Common Stock. It is possible, therefore, that the IRS
could successfully take the position that:
o The Andrx Group Common Stock is stock of a separate
corporation and not stock of Andrx Corporation.
o The Cybear Group Common Stock is stock of a separate
corporation and not stock of Andrx Corporation.
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o The receipt of Andrx Group Common Stock and Cybear Group
Common Stock is a taxable event to Andrx stockholders.
o The receipt of Cybear Group Common Stock is a taxable event to
Cybear stockholders.
o Andrx Corporation recognizes a significant taxable gain on the
issuance of Andrx Group Common Stock and Cybear Group Common
Stock.
o Cybear is not includable in Andrx Corporation's U.S. federal
consolidated income tax return, and, among other things, any
dividends paid or deemed paid to Andrx Corporation by Cybear
could be taxable to Andrx Corporation, subject to any
applicable dividends received deduction.
Arthur Andersen LLP, however, is of the opinion that the IRS should not prevail
in any of the above assertions.
CLINTON ADMINISTRATION PROPOSAL
A proposal last year by the Clinton administration would impose a
corporate-level tax on the issuance of stock similar to the Andrx Group Common
Stock or the Cybear Group Common Stock. In contrast, a proposal this year by the
Clinton Administration would, among other things, tax stockholders who receive
tracking stock as a dividend or in a recapitalization. Both proposals would
affect stock issued on or after the date the proposals were enacted by Congress.
To date, Congress has not enacted either last year's or this year's proposal.
However, if either proposal or a similar one were enacted with an effective date
prior to the date of the reorganization, Andrx Corporation or its stockholders
could be subject to tax with respect to the Andrx Group Common Stock or Cybear
Group Common Stock. We cannot predict whether either proposal or a similar one
will be enacted, and, if so, when it would be effective.
Under the certificate of incorporation, Andrx Corporation may convert
the Cybear Group Common Stock into shares of Andrx Group Common Stock without
any premium if there are adverse federal income tax law developments. The
proposal of the Clinton Administration would be such an adverse development if
it is implemented or receives certain legislative action.
PRINCIPAL PROVISIONS OF THE REORGANIZATION AGREEMENT
Set forth below is a description of the material terms of the
reorganization agreement. We urge stockholders to carefully read, in its
entirety, the reorganization agreement, which we have attached as Annex A to
this joint proxy statement/prospectus and incorporated into this document by
reference.
GENERAL
The reorganization agreement contemplates the creation of Andrx
Corporation, a new holding company under Delaware law. A wholly-owned subsidiary
of Andrx Corporation would merge with and into Andrx, with Andrx surviving the
merger and another wholly owned subsidiary of the Andrx Corporation would merge
with and into Cybear with Cybear surviving the merger. The reorganization will
become effective on the date and time that the certificate of merger is filed
with the Delaware and Florida Secretaries of State or such other date and time
specified in the certificate of merger.
CONVERSION OF SHARES AND CONSIDERATION TO BE RECEIVED IN THE REORGANIZATION
At the effective time of the reorganization:
o each issued and outstanding share of Cybear common stock,
other than shares owned by Andrx, will be converted into the
right to receive one share of Cybear Group Common Stock;
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o each issued and outstanding share of Andrx common stock will
be converted into the right to receive one share of Andrx
Group Common Stock and .1493 shares of Cybear Group Common
Stock;
o each outstanding stock option under the Andrx stock option
plans will be converted into separately exercisable options to
acquire one share of Andrx Group Common Stock and a fraction
of shares of Cybear Group Common Stock;
o each outstanding stock option of Cybear will be converted into
options to acquire .8842 shares of Cybear Group Common Stock;
o the exercise price for the resulting Andrx Group Common Stock
options will be equal to the existing exercise price of the
Andrx option less the product of a ratio and the closing price
of the Cybear common stock on the effective date;
o the exercise price for the resulting Cyber Group Common Stock
options will be equal to the existing exercise price of the
Cybear option; and
o the exercise price of the options to purchase Cybear Group
Common Stock issued to holders of Andrx options and Cybear
options shall equal the closing price of the Cybear common
stock on the effective date.
REPRESENTATIONS AND WARRANTIES
The reorganization agreement contains representations and warranties by
Andrx and Cybear customary for agreements of this nature.
PRINCIPAL COVENANTS
VOTING AGREEMENTS. Pursuant to the reorganization agreement, Cybear
agreed to use its best efforts to obtain an agreement from Dr. Edward E.
Goldman, its Chief Executive Officer and a member of the board of directors, and
John Klein, its Chairman of the Board, to vote in favor of the reorganization.
Andrx agreed to use its best efforts to obtain an agreement from Alan P. Cohen,
its Co-Chairman of the board of directors and chief executive officer, Chih-Ming
T. Chen, its Co-Chairman of the board of directors and Chief Scientific Officer,
and Elliot F. Hahn, its president and a director, to vote in favor of the
reorganization.
CONDUCT OF BUSINESS PENDING THE REORGANIZATION. Pursuant to the
reorganization agreement, Cybear has agreed that, until the effective time of
the reorganization, subject to certain exceptions, Cybear will carry on business
in the same manner as conducted prior to the date of the reorganization
agreement.
NO SOLICITATION OF TRANSACTIONS. Pursuant to the reorganization
agreement, Cybear has agreed that it will not solicit, initiate or encourage or
take any action which would facilitate a takeover proposal or engage in
negotiations or disclose any nonpublic information or give access to any person
who is considering or has made a takeover proposal. Cybear may engage in
negotiations, however, under certain conditions.
OTHER COVENANTS. The reorganization agreement contains additional
covenants, including covenants relating to:
o notices and consents;
o preparation, filing and distribution of this joint proxy
statement/prospectus;
o cooperation regarding filings with governmental and other
agencies and organizations;
o coordination of special meetings;
o access to information;
o tax filings and tax opinions;
o mutual notification of particular events;
o allocation of expenses; and
o public announcements.
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In addition, the reorganization agreement contains a general covenant
requiring each party to use its reasonable best efforts to effect the
consummation of the reorganization.
ASSUMPTION OF STOCK OPTIONS. At the effective time of the
reorganization, the new Andrx will assume all outstanding options to purchase
Cybear common stock and Andrx common stock. Andrx also agrees to promptly file a
registration statement on Form S-8 covering the shares of Andrx Group Common
Stock and Cybear Group Common Stock issuable under the options. Following the
effective time of the reorganization, each Andrx Corporation common stock option
or warrant will be exercisable on the same terms and conditions as the
applicable current Andrx option or warrant and Cybear option or warrant.
CONDITIONS. The reorganization will be completed only if certain
conditions are satisfied or, in some cases, waived, including the following:
o the reorganization has been approved by the required vote of
both the stockholders of Andrx and Cybear;
o there being no law or court order that prohibits the
reorganization;
o the Cybear Group Common Stock has been approved for quotation
on the Nasdaq National Market;
o receipt by Andrx of an opinion of Arthur Andersen LLP to the
effect that the reorganization should be a "tax-free
reorganization" for federal income tax purposes and that
Andrx, its subsidiaries, and its stockholders should not
recognize gain or loss by reason of the reorganization (except
with respect to the sale of fractional shares received by
Andrx stockholders), in each case under the law in effect as
of the closing date of the reorganization;
o receipt by Cybear of an opinion of Arthur Andersen LLP that
the reorganization should be a "tax-free exchange" for federal
income tax purposes under the law in effect as of the closing
date of the reorganization;
o Andrx and Cybear have entered into the tax sharing agreement;
o Andrx Corporation's board of directors will consist of a
Cybear nominee; and
o Andrx Corporation's board of directors shall have agreed to
appoint Cybear's designee to the board of directors.
The company entitled to assert a condition may waive any of the
conditions to the reorganization.
TERMINATION OF THE REORGANIZATION AGREEMENT. The Andrx and Cybear
boards of directors can jointly agree to terminate the reorganization agreement
at any time before the reorganization is completed. In addition, either company
can terminate the reorganization agreement if:
o the other party breaches any of material representations or
warranties or fails to comply with any of its obligations
under the reorganization agreement; provided that the breach
is not cured within 30 days after notice to the other party;
o the reorganization is not completed by December 31, 2000;
o a law or final and nonappealable court order prohibits the
reorganization; or
o either Andrx's or Cybear's stockholders fail to approve the
reorganization.
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In addition, Cybear can terminate the reorganization agreement if:
o Cybear's board of directors receives a takeover proposal and
it determines it good faith that the takeover proposal is
superior to that of Andrx and that it is required by its
fiduciary duty to accept such takeover proposal.
NO APPRAISAL RIGHTS
Cybear is a Delaware corporation. Under Delaware law, Cybear
stockholders have no right to an appraisal of the value of their Cybear common
stock in connection with the reorganization. Andrx is a Florida corporation.
Under Florida law, Andrx's stockholder have no right to an appraisal of the
value of their Andrx common stock in connection with the reorganization.
ACCOUNTING TREATMENT
The acquisition of the shares from the Cybear stockholders other than
Andrx will be accounted for by Andrx as a purchase of a business. Under this
method of accounting, the portion of the assets and liabilities of Cybear
acquired from the Cybear stockholders other than Andrx will be recorded at their
fair value, and any excess of Andrx's purchase price over the fair value will be
accounted for as goodwill.
STOCK EXCHANGE LISTINGS
The Andrx Group Common Stock will be, upon completion of the
reorganization, quoted on the Nasdaq National Market under the symbol "ADRX,"
and the Cybear Group Common Stock will be quoted on the Nasdaq National Market
under the symbol "CYBA".
EXCHANGE PROCEDURES
Upon consummation of the reorganization, stock certificates for the
Andrx common stock will be exchanged for shares of Andrx Group Common Stock and
Cybear Group Common Stock, and stock certificates for the Cybear common stock
will be exchanged for shares of Cybear Group Common Stock. Shortly after the
reorganization, stockholders will be mailed stock certificates representing
their new shares.
STOCK TRANSFER AGENT AND REGISTRAR
Our existing transfer agent, American Stock Transfer & Trust Company,
will act as the registrar and transfer agent for both the Andrx Group Common
Stock and the Cybear Group Common Stock.
FINANCIAL ADVISORS
CSFB is acting as Andrx's sole advisor with respect to the
reorganization. Andrx has agreed to pay CSFB a fee of $1,750,000.
SG Cowen is acting as Cybear's sole advisor with respect to the
reorganization. Cybear agreed to pay SG Cowen a fee of $750,000.
Andrx and Cybear have also agreed to reimburse these advisors for their
reasonable out-of-pocket expenses, including the fees and expenses of their
lawyers, and to indemnify them against liabilities under the Securities Act and
certain other liabilities.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDITION
AND RESULTS OF OPERATIONS OF CYBEAR
INTRODUCTION
Cybear 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 with secure and
reliable transmission of information. Cybear is an ISP and ASP for the
healthcare industry. Cybear uses or intends to use its own secure private
network to provide access to the Internet, e-mail and productivity applications
to physicians, physician organizations, pharmacies and hospitals.
In March 1999, Cybear introduced its first product, dr. cybear, its
Physician Practice Portal, which addresses the communications and operational
needs of physicians. Cybear's future products may include 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, Cybear completed a public offering of 3,450,000 shares of
its common stock, raising approximately $50.8 million in net proceeds. In
September 1999, Cybear acquired Telegraph Consulting Corporation, the
programing, 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 of the assumption of approximately
$136,000 of Telegraph Consulting Corporation's debt. The acquisition was
recorded using the purchase method of accounting.
Cybear has incurred net operating losses and negative cash flows from
operating activities since its inception. As of March 31, 2000, Cybear had an
accumulated deficit of approximately $21.4 million. In addition, Cybear intends
to continue to incur significant expenses in product development, network
operations, operations 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, Andrx and Cybear announced that they executed a
definitive Agreement and Plan of Merger and Reorganization (the
"Reorganization") with respect to the previously announced tracking stock
reorganization plan. This plan, which was recommended to Cybear's 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 Stock"). The Reorganization will be
submitted to Andrx and Cybear shareholders for approval during 2000.
In connection with the Reorganization, Cybear estimates it will incur
reorganization costs of up to approximately $1.5 million if the Reorganization
is consummated. These costs will be charged to expense as incurred. No assurance
can be given that this transaction will be consumated.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000, AS COMPARED TO THREE MONTHS ENDED MARCH 31,
1999.
Cybear generated $231,000 in revenues for the three months ended March
31, 2000 and had no revenues for the three months ended March 31, 1999. Revenues
for the three months ended March 31, 2000 include $215,000 from e-commerce
transactions, $12,000 from web site development and maintenance, and $4,000 from
subscriptions to Cybear's Physician Practice Portal product.
Cybear incurred $209,000 in cost of revenues for the three months ended
March 31, 2000. Cost of revenues for the three months ended March 31, 2000
represent the cost for the products sold through Cybear's Physician Practice
Portal product. Such products are purchased from Andrx at cost.
Network operations and operations support costs were $933,000 during
the three months ended March 31, 2000 compared to $728,000 during the three
months ended March 31, 1999. The increase in network operations and operations
support costs for the three months ended March 31, 2000 related primarily to an
increase in telecommunications costs and headcount in the operations support
area.
Product development costs were $948,000 for the three months ended
March 31, 2000 compared to $526,000 for the three months ended March 31, 1999.
The increase in the product development costs for the three months ended March
31, 2000 reflects the progress and expansion of Cybear's development activities.
Sales and marketing expenses were $1.9 million for the three months
ended March 31, 2000 compared to $725,000 for the three months ended March 31,
1999. The increase in sales and marketing expenses for the three months ended
March 31, 2000 related primarily to the expansion of the selling and marketing
infrastructure and an increase in consulting and advertising costs.
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General and administrative expenses were $880,000 for the three months
ended March 31, 2000 compared to $655,000 for the three months ended March 31,
1999. The increase in general and administrative expenses for the three months
ended March 31, 2000 related to the expansion of the administrative
infrastructure.
Depreciation and amortization expense was $549,000 for the three months
ended March 31, 2000 compared to $191,000 for the three months ended March 31,
1999. The increase in depreciation and amortization for the three months ended
March 31, 2000 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, the depreciation and
amortization expense includes amortization of the goodwill related to the
acquisition of Telegraph Consulting Corporation on September 17, 1999.
Costs associated with the proposed Reorganization were $832,000 for the
three months ended March 31, 2000 and were primarily investment banking and
legal fees. Cybear expects to incur merger costs of up to approximately $1.5
million in connection with the pending Reorganization.
Other non-recurring charges were $1.2 million for the three months
ended March 31, 2000. These charges consist of severance costs, impairment
charges to certain assets and costs incurred to terminate an agreement. Certain
of these other non-recurring charges pertain to an agreement whereby Cybear has
future monthly contractual obligations through June 2001, totaling approximately
$2.3 million. In March 2000, Cybear disputed the third party's performance under
the agreement and the companies are attempting to resolve this dispute. While no
amounts have been recorded relating to any required performance under this
agreement subsequent to February 29, 2000, no assurance can be given that Cybear
will not be required to record any additional charges upon the resolution of
this dispute.
Cybear had interest income of $559,000 for the three months ended March
31, 2000 and $1,000 for the three months ended March 31, 1999. The interest
income for the three months ended March 31, 2000 resulted primarily from the
investments of the net proceeds generated from the public offering in money
market funds and interest bearing investment grade securities.
Interest expense of $91,000 for the three months ended March 31, 1999
represented interest on the 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's results of operations for tax purposes 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, thereafter Cybear files its income tax returns separately.
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For the three months ended March 31, 2000, Cybear did not record any
income tax benefit as Andrx's ownership in Cybear was below 80% and Cybear
generated net operating loss carryforwards. 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 three months ended March 31, 1999, Cybear recorded $1.4 million
in income tax benefit. The income tax benefit reflects the reimbursement from
Andrx for the utilization of Cybear's income tax attributes pursuant to the tax
allocation agreement.
YEAR ENDED DECEMBER 31, 1999 ("1999") AS COMPARED TO YEAR ENDED DECEMBER 31,
1998 ("1998").
Cybear had $270,000 in revenues for 1999 and had no revenues for 1998
as Cybear was in the development stage. Revenues for 1999 include $87,000 from
subscriptions to Cybear's Physician Practice Portal product, as well as $102,000
from web site development and maintenance and $81,000 from e-commerce
transactions. Cybear does not expect that revenues derived from web site
development and maintenance to be material in the year ending December 31, 2000.
Cybear had $77,000 in cost of revenues for 1999. Cost of revenues
represent the cost for the products sold through Cybear's Physician Practice
Portal product. Such products are purchased from Andrx at cost.
Network operations and operations support costs were $2.8 million in
1999 compared to $643,000 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 $1.6
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
$483,000 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 and an increase in consulting and advertising costs.
General and administrative expenses were $2.5 million in 1999 compared
to $1.1 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 $139,000 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 Consulting Corporation.
Other non-recurring charges were $285,000 in 1998. The charges for 1998
consisted of a write off of a software license and costs incurred to settle
certain litigation.
Interest expense was $216,000 in 1999 compared to $210,000 in 1998.
Interest expense represented interest 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.
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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 had a
tax sharing 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 has thereafter
filed 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 carry
forward 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
carry forward 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 sharing 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 $96,000 in 1997 and consisted of software development services
rendered to Andrx.
Network operations and operations support costs were $643,000 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 $1.6 million in 1998 compared to
$894,000 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 $483,000 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 $1.1 million in 1998 compared
to $667,000 in 1997. The increase in general and administrative expenses for
1998 related to the expansion of the administrative infrastructure.
Depreciation and amortization expense was $139,000 in 1998 compared to
$65,000 in 1997. The increase in depreciation and amortization for 1998 resulted
primarily from Cybear's purchases of computer hardware and software used in the
establishment of its network operations center and the development of its
products.
Other non-recurring charges were $285,000 in 1998. These charges
consisted of a write off of a software license and costs incurred to settle
certain litigation.
Interest expense was $210,000 in 1998 compared to $28,000 in 1997.
Interest expense represented interest on advances from Andrx under a 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, Cybear did not
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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 carry
forward 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 March 31, 2000, Cybear had $26.7 million in cash, cash
equivalents and investments available-for-sale and $31.6 million of working
capital.
Net cash used in operating activities was $4.4 million for the three
months ended March 31, 2000 compared to $1.6 million for the three months ended
March 31, 1999. The increase in net cash used in operating activities for the
three months ended March 31, 2000, as compared to the three months ended March
31, 1999 is primarily due to Cybear incurring a net loss of $6.6 million for the
three months ended March 31, 2000 as compared to a net loss of $1.5 million for
the three months ended March 31, 1999, an increase in accounts payable and
accrued liabilities for the three months ended March 31, 2000 as compared to a
decrease for the three months ended March 31, 1999, an increase in depreciation
and amortization expense for the three months ended March 31, 2000, as compared
to the three months ended March 31, 1999 and other non-cash charges for the
three months ended March 31, 2000. The other non-cash charges result primarily
from impairment charges to certain assets.
For the three months ended March 31, 2000, net cash used in operating
activities was primarily attributable to Cybear's loss from operations, offset
by the depreciation and amortization expense and other non-cash charges, and an
increase in accounts payable and accrued liabilities. For the three months ended
March 31, 1999, the net cash used in operating activities was primarily
attributed to Cybear's loss from operations.
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 prepaid expenses and other assets in 1999 as
compared to a decrease in 1998 offset by depreciation and amortization expense
of $1.6 million in 1999, as compared to $139,000 in 1998. The increase in
prepaid expenses and other assets in 1999 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 11 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
Cybear'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 $6.8 million for the three
months ended March 31, 2000 and $1.1 million for the three months ended March
31, 1999. For the three months ended March 31, 2000, Cybear received proceeds of
$390,000 from sales of investments available-for-sale and funded a $4.0 million
one-year convertible promissory note from AHT Corporation. Cybear also purchased
$558,000 in property and equipment consisting mainly of computer hardware and
software used in its network operations center and the development of its
products. Cybear also purchased $2.5 million in software licenses. For the three
months ended March 31, 1999, Cybear purchased $1.1 million of property and
equipment consisting mainly of computer hardware and software used in its
network operations center and in its product development activities, leasehold
improvements to the rented space housing its corporate headquarters and network
operations center and furniture for its corporate headquarters.
Net cash used in investing activities was $34.2 million in 1999, $2.7
million in 1998 and $401,000 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 $140,000 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 $241,000 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.
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Net cash provided by financing activities was $281,000 for the three
months ended March 31, 2000 compared to $3.1 million for the three months ended
March 31, 1999. For the three months ended March 31, 2000, net cash provided by
financing activities consisted of proceeds generated from the exercises of stock
options. For the three months ended March 31, 1999, 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
income tax attributes pursuant to the tax allocation agreement.
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 Cybear 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
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 except
as otherwise disclosed herein, 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 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.
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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 Cybear's election, before January 1,
1998). Cybear 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 Cybear's consolidated results of operations and
financial condition.
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BUSINESS OF CYBEAR
OVERVIEW
Cybear is an information technology company using the Internet to
attempt to improve the efficiency of administrative and communications tasks of
managing patient care while addressing the healthcare industry's need for the
secure and reliable transmission of information. Cybear is an Internet service
provider, or ISP, and an application services provider, or 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.
These are available on a transaction or subscription basis to physicians,
physician organizations, pharmacies and hospitals. Some of its online
applications include or may 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, dr.cybear, a
physician practice portal, which is designed to address 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, Cybear completed a public offering of 3,450,000 shares of
its common stock, raising approximately $50.8 million in net proceeds. In
September 1999, Cybear acquired Telegraph Consulting Corporation, or Telegraph
Consulting, 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 common
stock valued at approximately $2.8 million and the assumption of approximately
$136,000 of Telegraph Consulting debt. The acquisition was recorded using the
purchase method of accounting.
In September 1999, Cybear entered into an arrangement with Andrx
pursuant to which prescription vaccines, injectables and other items distributed
by Andrx can be ordered through dr.cybear.
Cybear has incurred net operating losses and negative cash flows from
operating activities since its inception. As of March 31, 2000, Cybear had an
accumulated deficit of approximately $21.4 million. In addition, Cybear intends
to continue to invest heavily in its product development, network operations,
operations 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 pursuant to which Cybear will provide secure on-line
connectivity and a communications solution through dr.cybear to an initial group
of 5,000 Novartis-selected physicians for monthly subscription fees commencing
one month after these physicians are registered. Novartis has committed to
register 5,000 physicians by the end of the year 2000.
In March 2000, Andrx and Cybear announced that they executed a
definitive Agreement and Plan of Merger and Reorganization (the
"Reorganization") with respect to the previously announced tracking stock
reorganization plan. This plan, which was recommended to the Cybear's 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 Stock"). The Reorganization will be
submitted to Andrx and Cybear shareholders for approval during 2000.
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Over the next year, Cybear intends to supplement its core dr.cybear
product by continuing to improve its functionality and by introducing rx.cybear,
its Pharmacist Portal Product. rx.cybear 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, Cybear expects its 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.
Cybear also intends to implement additional functionality to its
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. Cybear also intends to provide through its
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.
Cybear also intends to offer healthcare providers the ability to verify patient
eligibility and coverage and process medical claims through its dr.cybear
product.
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 the healthcare
industry 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.
Cybear believes 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.
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THE CYBEAR SOLUTION
Cybear 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, Cybear believes 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. Cybear also believes
that there will be a strong demand for real-time clinical and practice
management solutions that are easy to use, secure and cost effective.
Cybear's 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 Cybear to meet their
particular needs, and, through its 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 Cybear's 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 and tiered-restricted access to member specific network
communications. Cybear's Internet-based technology platform allows for efficient
installation, maintenance and customization using the user's existing computer
system. Like other ISP's, Cybear uses existing phone lines and the
telecommunications infrastructure. Registered users may also access dr.cybear
through other ISPs, even though Internet access through its ISP is already
included in their service.
CYBEAR'S COMPETITIVE ADVANTAGES
Cybear believes its healthcare experience, its sales force, its
Internet-based technology platform, its in-house software development
capabilities and its business relationship with Andrx provide Cybear with
significant competitive advantages that should permit Cybear to become an
Internet communications and applications provider for the healthcare community.
Cybear's main strengths are:
o Healthcare Experience - Cybear's chief executive officer is a
physician with experience practicing medicine, managing
provider networks and providing practice management services.
Other members of Cybear's senior management and board of
directors have experience in healthcare practice management
and pharmaceutical industries. Cybear's development, marketing
and support staff have in-depth knowledge of the operations
and specific needs of physicians and other key participants in
the healthcare industry. As a result, Cybear believes it is
able to develop and deliver products that are useful and
acceptable to its users allowing it to build meaningful and
lasting user relationships.
o Its Own Sales Force - Cybear has 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. Cybear
believes that these relationships will allow it to rapidly
expand its user base.
o An Internet-Based Technology Platform - Cybear provides direct
Internet access to its registered users through its own ISP,
unlike its competitors who depend on others for Internet
access. Being an ISP allows Cybear to provide a secure medium
for transmission of sensitive patient and transactional
information in an easy to use, low cost, fast and reliable
manner. Cybear's ISP platform also allows it to provide more
value to its users by providing general purpose Internet
access at no additional cost, web-hosting and the ability to
develop private intranets, which Cybear believes will result
in users being less likely to switch to a competitor's product
or service.
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o Extensive In-House Software Development Capabilities - Cybear
has an in-house software development team made up of over 30
programmers, allowing it to provide easy to use, low cost
tools for the day-to-day operational and management needs of
medical practices and networks. This allows Cybear to create
flexible Java and Cold Fusion language-based applications to
address the particular needs of different segments of the
healthcare industry. Cybear's in-house development capability,
together with its server-based applications technology that
allows it to send updates to subscribers online, will allow it
to make continuous improvements to its products.
o A Business Relationship with Andrx - Andrx provides Cybear
with telemarketing and product distribution expertise. Cybear
has an arrangement with Andrx pursuant to which prescription
vaccines and injectables distributed by Andrx can be ordered
through dr.cybear.
CYBEAR'S STRATEGY
Cybear's 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:
o Building a Physician User Base - Cybear is 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 or encourage their members
to use dr.cybear. Cybear expects administrative staff,
particularly office managers, schedulers and billers will be
regular users of many of the administrative tools of
dr.cybear.
o Using Physician User Base to Obtain Additional Industry Users
- By developing a physician-centered user base, Cybear
believes that it will attract non-physician users such as
pharmacies, hospitals and independent practice associations,
or IPA's, who will use its future products to communicate and
transact business with its dr.cybear physician users. To this
end, Cybear is actively pursuing strategic relationships with
key healthcare, technology and content partners to enable it
to offer higher quality products and solutions to other
segments of the healthcare industry.
o Using Connectivity to Retain Users - Cybear believes that its
ISP-related ability to link physician organizations through
custom, secure private networks will improve communications
and administrative efficiency. Cybear believes that once
individual users are connected to and use a private network,
particularly members of large provider networks, they will
continue subscribing to its products and services instead of
switching to one of its competitor's services because if they
switched, they would not be able to communicate with members
who are dr.cybear users.
o Capitalizing on Multiple Revenue Sources - Cybear intends to
generate revenues from multiple sources, including e-commerce,
transaction fees and subscription fees.
PRODUCTS
CYBEAR'S TECHNOLOGY PLATFORM
Cybear's Internet-based technology platform for its products includes
an ISP that serves only its 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 its user applications, and a network
operations center with full system backups to provide reliability to its user
base, all with the capacity to meet its users' growing needs.
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COMMON FEATURES OF CYBEAR'S PRODUCTS
Each of Cybear's products will share the following common features
tailored to meet the needs of the targeted user:
<TABLE>
<CAPTION>
------------------------------ -----------------------------------------------------------------------------------
Component o Features
------------------------------ -----------------------------------------------------------------------------------
<S> <C> <C>
Internet Service Provider o Automatic configuration of the user's computer
o Dial-in from any location in the U.S. through a network of local numbers
o Customizable front-end image that may include the name and service mark
of the user or the user's network
o On-demand customer support
o Access to Cybear's products as well as full general purpose Internet
access for use by its users
------------------------------ -----------------------------------------------------------------------------------
Communications Services o E-mail, private network capabilities and web hosting services
o 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
o User group menus comprising larger groups or organizations defined by a
common interest or situation
------------------------------ -----------------------------------------------------------------------------------
Content and Applications o A portal entry point notifying users of new information and product
updates relevant to the particular user group
o 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
o Software application tools to streamline day-to-day healthcare
administrative and operational tasks
o 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> <C>
Managed Care Applications o Contract Manager Helps manage differing insurance
o Eligibility and contracts, checks a patient's insurance
Authorization status, obtains referral authorization
o Capitation Evaluation and evaluates managed care payments.
---------------------------------- -------------------------------------- -----------------------------------------
Care Management o Patient Satisfaction Survey Patient services including satisfaction
o Patient Education evaluation, educational handouts,
o Patient Support online patient support links and
o Practice Benchmarks evaluation of practice by comparing to
norms.
---------------------------------- -------------------------------------- -----------------------------------------
Coding Management o Coding Newsletter Updates and trains staff on coding
o Medicare Training changes, simplifies billing with online
o ICD-9 Online procedure and disease listings.
---------------------------------- -------------------------------------- -----------------------------------------
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
---------------------------------- -------------------------------------- -------------------------------------------
Practice Compliance o Compliance Newsletter Keeps practice abreast of compliance
o Legislative Update issues and legislative initiatives,
o Legal Resources alerts regarding fraud and abuse issues
o Fraud and Abuse Alerts and assists in evaluating health care
attorney qualifications.
---------------------------------- -------------------------------------- -----------------------------------------
Office Tools
Application Content Benefit
---------------------------------- -------------------------------------- -----------------------------------------
Supply Replacement o Injectables and Vaccines Online ordering of injectables,
o Medical Supplies and Office vaccines, medical, and office supplies
Supplies frees staff time and ensures
availability.
---------------------------------- -------------------------------------- -----------------------------------------
Staff Services o Human Resources Helps track required human resource
o Policy and Procedures documentation, contains staff policies
o Office Training and procedures, online training
o Occupational Safety and courses, and Occupational Safety and
Health Administration Health Administration compliance
Regulatory Compliance evaluation and protocols.
o Disaster Protocols
---------------------------------- -------------------------------------- -----------------------------------------
Infrastructure Support o Office Forms Database Extensive repository of office forms
for all needs, both business and
clinical.
---------------------------------- -------------------------------------- -----------------------------------------
Physician Tools
Application Content Benefit
---------------------------------- -------------------------------------- -----------------------------------------
Continuing Education o Continuing Medical Education Keeps physicians updated on their
o Medical Library continuing medical education, and
o Conference Calendar allows patient, disease and clinical
o Clinical Studies research.
---------------------------------- -------------------------------------- -----------------------------------------
Prescription Management o Managed Care Tracks the medications covered by
o Food and Drug different insurance carriers, and
Administration Approvals minimizes changes and substitutions of
o Drug Formulary Prescription patient medications.
Profiling
---------------------------------- -------------------------------------- -----------------------------------------
Certification Assistance o Credentialing Database Updates physician's profile regarding
o Utilization Benchmarking 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 Cybear's 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.
o Additional functionality to Cybear's dr.cybear product will include:
o 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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o 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.
o Enhanced patient eligibility and coverage verification.
o Medical claims processing.
o rx.cybear will be targeted at community pharmacies, a segment of the
healthcare delivery sector that is experiencing increased pressures to reduce
and control operational costs. rx.cybear will also 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:
o Calculators that assist with managing the profitability of the store, labor
budgets, delivery costs, contract profitability, profit and loss, and
price increases.
o Electronic integration of the Patient / Physician / Pharmacy for Rx refills
and renewals.
o Ability to modify and change drug therapies during the refill process.
o E-commerce through the pharmacist's web page.
o Access to numerous journals, regulatory information, formulary listings and
clinical study summaries.
MARKETING AND SALES
Cybear sells its product primarily through two mechanisms: its in-house
sales force and its distribution partnerships. Cybear has 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. Cybear believes both through direct sales and through distribution
partnerships, it will have more rapid product penetration and revenue
generation. Cybear plans to continue recruiting additional sales and marketing
staff.
To complement its sales strategy, Cybear has a multifaceted marketing
approach that includes advertising, direct mailing, telemarketing, trade show
visibility and direct selling activity. Cybear's marketing efforts take a
business partnership approach, with a focus on developing three main revenue
bases: e-commerce, transaction revenues and subscription revenues. Cybear
believes that providing useful, easy to use and well supported products and
services will allow it to build its user base, and that building its user base
will allow Cybear 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
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support available via pager. Personnel are trained to both resolve technical
problems and 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 was designed to fully integrate
redundancy and scalability. Cybear has installed redundant power supplies, each
with its own power cable, into every major switch or router in its system so as
to ensure that a disruption in the power supply or a disconnected power cable
does not incapacitate the network. Cybear can increase its capacity, speed and
fault tolerance without affecting or stopping existing services simply by
connecting additional equipment into its network. Cybear uses 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. Cybear has connectivity, split across several routes and high-speed
segments known as T3 lines, to several major telecommunication infrastructure
providers, including BellSouth, 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. Cybear's 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 network operations center 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. We cannot assure you 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. We cannot assure you 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 operations
of healthcare organizations. Cybear's products are designed to
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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
organizations may react to these proposals and the uncertainty surrounding those
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. We 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.
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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
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
Electronic Data Interface 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.
Cybear has a federal service mark registration for "Cybear". Cybear has
also registered the domain names "dr.cybear.com," "rx.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, we cannot assure you 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 April 21, 2000, Cybear had 115 full-time employees. None of
Cybear's employees is a member of a labor union and Cybear considers its
relationship with its employees to be good.
PROPERTIES
Cybear currently leases 38,068 square feet of space in Boca Raton,
Florida housing its corporate headquarters and network systems. The lease
provides for annual rent of $490,316, excluding taxes, insurance, utilities and
common area maintenance charges and terminates on March 31, 2007. Cybear has
adequate insurance for the premises. Management believes that this office space
will be adequate for Cybear's needs for the foreseeable future.
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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 except as otherwise disclosed
herein, 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.
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BENEFICIAL SECURITY OWNERSHIP
ANDRX
The following table sets forth, as of the record date, information with
respect to the beneficial ownership of Andrx's common stock by (1) each person
who is known by Andrx to beneficially own 5% or more of Andrx's outstanding
common stock, (2) Andrx's chief executive officer and each of the other "Named
Executive Officers" (as defined below in "Executive Compensation--Summary
Compensation Table"), (3) each director of Andrx, and (4) all directors and
executive officers of Andrx as a group. Andrx is not aware of any beneficial
owner of more than 5% of the outstanding common stock other than as set forth in
the following table.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER(1) BENEFICIALLY OWNED(2) OUTSTANDING
---------------------------------------------------- --------------------------- --------------------
<S> <C> <C>
Alan P. Cohen(3)......................................... 5,582,888 8.1%
Chih-Ming J. Chen, Ph.D.(4).............................. 6,092,804 8.7
Elliot F. Hahn, Ph.D.(5)................................. 1,578,780 2.3
Scott Lodin(6)........................................... 145,000 *
Angelo C. Malahias(7).................................... 105,700 *
Lawrence J. DuBow........................................ 40,000 *
Irwin C. Gerson(8)....................................... 50,000 *
Michael A. Schwartz, Ph.D.(9)............................ 67,500 *
Melvin Sharoky, M.D.(10)................................. 133,300 *
All directors and executive officers
as a group (9 persons)(11) ............................ 13,795,972 19.6
5% OR GREATER HOLDERS:
Janus Capital Corporation (12)
100 Fillmore Street
Denver, Colorado 80206-4923............................ 6,414,775 9.3
Watson Pharmaceuticals, Inc.
311 Bonnie Circle
Corona, CA 91720....................................... 4,598,604 6.7
<FN>
----------------
* Less than 1%.
(1) Except as otherwise indicated, the address of each beneficial owner is c/o the Company, 4001 S.W.
47th Avenue, Fort Lauderdale, Florida 33314.
(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 in within 60 days.
(3) Represents 17,500 shares of common stock held jointly by Mr. Cohen and his spouse and 5,515,388
shares held in family limited partnerships and 50,000 shares of common stock issuable upon the
exercise of stock options.
(4) Represents 48,242 shares of common stock owned by Dr. Chen, 5,172,772 shares of common stock held
by limited partnerships for which Dr. Chen is an officer of the corporate general partner 4,790
shares held by a charitable family foundation, 850,000 shares of common stock issuable upon the
exercise of stock options and 17,000 shares of common stock issuable upon the exercise of stock
options held by Dr. Chen's spouse.
(5) Represents 1,528,780 shares of common stock held in family trusts and a family limited partnership
and 50,000 shares issuable upon the exercise of stock options.
(6) Represents 145,000 shares of common stock issuable upon the exercise of stock options.
(7) Represents 3,200 shares held as custodian for his minor children and 102,500 shares of common stock
issuable upon the exercise of stock options.
(8) Represents 50,000 shares of common stock issuable upon exercise of stock options.
(9) Represents 67,500 shares of common stock issuable upon exercise of stock options.
(10) Includes 129,000 shares of common stock issuable upon exercise of stock options and 3,320 shares
of common stock held by Dr. Sharoky as custodian for his minor children.
(11) Includes 1,518,500 shares of common stock issuable upon the exercise of stock options.
(12) Based solely on information contained in Schedule 13G dated May 10, 2000 filed with the Securities
and Exchange Commission.
</FN>
</TABLE>
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<PAGE>
CYBEAR
The following table sets forth, as of the record date, information with
respect to the beneficial ownership of Cybear's common stock by (1) each person
who is known by Cybear to beneficially own 5% or more of Cybear's outstanding
common stock, (2) Cybear's chief executive officer and each of the other "Named
Executive Officers" (as defined below in "Executive Compensation--Summary
Compensation Table"), (3) each director of Cybear, and (4) all directors and
executive officers of Cybear as a group. Cybear is not aware of any beneficial
owner of more than 5% of the outstanding common stock other than as set forth in
the following table.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER (1)(2) BENEFICIALLY OWNED OUTSTANDING
----------------------------------------------- -------------------- ------------------
<S> <C> <C>
Andrx Corporation(5)........................... 12,877,054 72.5%
Alan P. Cohen(3)(4)............................ 12,905,554 72.5%
John H. Klein(6)............................... 555,555 3.1%
Edward E. Goldman, M.D.(7)..................... 650,500 3.7%
Timothy E. Nolan(4)............................ 35,000 *
Eric D. Moskow, M.D.(8)........................ 75,000 *
Scott Lodin(4)(9).............................. 12,909,554 72.5%
Angelo C. Malahias(3)(4)....................... 12,902,554 72.5%
Melvin Sharoky, M.D.(3)(4)..................... 12,921,054 72.6%
Philip P. Gerbino, Ph.D.(4).................... 25,000 *
Martin Reid Stoller, Ph.D.(4).................. 26,300 *
All Directors and Officers
as a Group (10 persons)(10)................. 13,849,909 76.2%
<FN>
------------
* 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.
(3) Includes shares owned indirectly by Andrx 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 222,222 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 75,000 shares of common stock issuable upon the exercise of stock options.
(9) Includes 1,000 shares of common stock held by Mr. Lodin as custodian for his minor
children.
(10) Includes the shares of common stock described in notes (4) through (7), and (9) and
472,222 shares of common stock issuable upon the exercise of the stock options
described in notes (4), (6) and (8).
</FN>
</TABLE>
98
<PAGE>
ELECTION OF DIRECTORS
Andrx's articles of incorporation provide that the board of directors
be divided into three classes. Each class of directors serves a staggered
three-year term. Dr. Chih-Ming J. Chen, Irwin C. Gerson and Dr. Michael A.
Schwartz hold office until the 2000 Annual Meeting. Dr. Elliot F. Hahn and
Lawrence J. DuBow hold office until the 2001 Annual Meeting. Alan P. Cohen and
Dr. Melvin Sharoky hold office until the 2002 Annual Meeting.
At the Annual Meeting, three directors will be elected by the
shareholders to serve until the Annual Meeting to be held in 2003 or until their
successors are duly elected and qualified. The accompanying form of proxy when
properly executed and returned to Andrx, will be voted FOR the election as
directors of the three persons named below, unless the proxy contains contrary
instructions. Proxies cannot be voted for a greater number of persons than the
number of nominees named in the Proxy Statement. Management has no reason to
believe that any of the nominees are unable or unwilling to serve if elected.
However, in the event that any of the nominees should become unable or unwilling
to serve as a director, the proxy will be voted for the election of such person
or persons as shall be designated by the board of directors.
NOMINEES
The persons nominated as directors are as follows:
<TABLE>
<CAPTION>
YEAR FIRST
NAME AGE POSITION WITH THE COMPANY ELECTED DIRECTOR
---------------------------------------- -------- ----------------------------------- -----------------------
<S> <C> <C> <C>
Chih-Ming J. Chen, Ph.D. (1)................ 48 Co-Chairman, Chief Scientific 1992
Officer and Director
Irwin C. Gerson (2)(3)...................... 70 Director 1993
Michael A. Schwartz, Ph.D. (3).............. 69 Director 1993
</TABLE>
----------------------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
DR. CHIH-MING J. CHEN has been Co-Chairman since November 1998 and the
Chief Scientific Officer and a director since November 1992. In January 1992,
Dr. Chen formed his own company, ASAN Labs, Inc., which was acquired by Andrx in
November 1992. Dr. Chen served as the Director of Product Development at IVAX
Corporation, or IVAX, from 1988 to 1992, where he was the leader of a research
team which specialized in the development of drug formulations, including
several controlled-release products. After graduating with a Ph.D. degree in
pharmaceutics from Ohio State University in 1981, Dr. Chen worked at
Bristol-Myers and Berlex Labs.
IRWIN C. GERSON, a director of Andrx since November 1993, was the
Chairman of the Lowe McAdams Healthcare division of the Interpublic Group
(formerly William Douglas McAdams, Inc.), a healthcare marketing, communications
and public relations company, from 1987 through December 1998. Mr. Gerson is a
member of the board of trustees of academic institutions, including Long Island
University, Albany College of Pharmacy and is Chairman of the Council of
Overseers of the Arnold and Marie Schwartz College of Pharmacy. Mr. Gerson is
also a director of Cytoclonal Pharmaceutics, Inc., a biotechnology company.
DR. MICHAEL A. SCHWARTZ, a director of Andrx since November 1993, is
currently Dean Emeritus and a Professor at the College of Pharmacy at the
University of Florida having served as Dean of that college from April 1978
through May 1996.
99
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF ALL THREE NOMINEES FOR
ELECTION AS DIRECTORS.
Set forth below is certain information concerning the directors who are
not currently standing for election:
<TABLE>
<CAPTION>
YEAR FIRST YEAR CURRENT
NAME AGE POSITION WITH THE COMPANY ELECTED DIRECTOR TERM EXPIRES
--------------------------------------- ---------- ------------------------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Alan P. Cohen(1)....................... 45 Co-Chairman, Chief Executive 1992 2002
Officer and Director
Elliot F. Hahn, Ph.D.(1)............... 55 President and Director 1993 2001
Lawrence J. DuBow(2)................... 68 Director 2000 2001
Melvin Sharoky, M.D.................... 49 Executive Director and 1995 2002
Director
</TABLE>
-------------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
ALAN P. COHEN is Co-Chairman of the Board, Chief Executive Officer and
a director of Andrx, which he founded in August 1992. Mr. Cohen was the Chairman
and a director of Cybear from February 1997 through August 1998, when he
resigned as Chairman. He remains a director of Cybear. He is a graduate of the
University of Florida and is a registered pharmacist. In 1984, Mr. Cohen founded
Best Generics, Inc., or Best, a bioequivalent drug distribution firm, which was
sold to IVAX Corporation in 1988. Mr. Cohen served as President of Best from
April 1989 until June 1990.
DR. ELLIOT F. HAHN has been President and a director of Andrx since
February 1993. From June 1990 to February 1993, Dr. Hahn was employed as a Vice
President, Scientific Affairs of IVAX, where he was involved in the evaluation
and international licensing of product opportunities and was responsible for
maintaining the intellectual property of IVAX. From 1988 to 1993, Dr. Hahn also
served as the Vice President of Research of Baker Norton Pharmaceuticals, a
subsidiary of IVAX. Prior to that, he was an Associate Professor at The
Rockefeller University from 1977 to 1988. From 1972 until 1977, Dr. Hahn was an
Assistant Professor of Albert Einstein College of Medicine and a member of the
Institute for Steroid Research at Montefiore Hospital in New York City. Since
1988, he has been an adjunct Associate Professor at the University of Miami
School of Medicine. Dr. Hahn holds a B.S. degree from City College of New York
and a Ph.D. degree in chemistry from Cornell University. Dr. Hahn also serves as
a director of Chesapeake Biological Laboratories, Inc. and Delta Pharmaceutical,
Inc.
LAWRENCE J. DUBOW, appointed a director effective April 2000, has been
Chairman and Chief Executive Officer of HMS Sales and Marketing, Inc. which is
presently engaged in marketing pharmaceutical products, since he founded it in
1991. Since 1957, he was engaged in various capacities within the pharmaceutical
industry. Mr. DuBow was the former President of the Drug Wholesales' Association
and a former Chairman of the National Wholesale Druggists' Association.
DR. MELVIN SHAROKY, a director of Andrx since November 1995, joined
Andrx as Executive Director on March 1, 1999. Dr. Sharoky has also been a
director of Cybear since April 1999. Dr. Sharoky is also president of Somerset
Pharmaceuticals Inc., 50% owned by Watson. 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. From November 1995 to May
1998, Dr. Sharoky served on Andrx's Board of Directors as the designee of
Watson.
100
<PAGE>
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 Andrx's executive officers, directors and holders of more than 10% of
Andrx's common stock, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission, or the Commission, and The Nasdaq
National Market. Such persons are required to furnish Andrx 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, Andrx believes that, with respect to the
fiscal year ended December 31, 1999, all filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners were
complied with.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During 1999, the board of directors held formal meetings and took
actions by written consent on six occasions. During 1999, no director attended
fewer than 75% of the number of meetings of the board of directors and each
committee of the board of directors held during the period such director served
on the board.
The only standing committees of the board of directors are the Audit
Committee, the Compensation Committee and the Executive Committee. The board
does not have a nominating or similar committee.
The Audit Committee is presently comprised of Lawrence J. DuBow, Melvin
Sharoky, M.D., and Irwin C. Gerson. The duties and responsibilities of the Audit
Committee include (a) recommending to the board of directors the appointment of
Andrx's independent certified public accountants and any termination of
engagement, (b) reviewing the plan and scope of independent audits, (c)
reviewing significant accounting and reporting policies and operating controls
of Andrx, (d) having general responsibility for all related auditing matters,
and (e) reporting its recommendations and findings to the full board of
directors. The Audit Committee met on three occasions during 1999.
The Compensation Committee is presently comprised of Irwin C. Gerson
and Dr. Michael A. Schwartz. The Compensation Committee reviews and approves the
compensation of the Company's executive officers and administers the Company's
1993 Stock Incentive Plan, or the Plan. The Compensation Committee met on three
occasions during 1999 and took action by written consent on three occasions.
The Executive Committee is presently comprised of Alan P. Cohen, Dr.
Elliot F. Hahn and Dr. Chih-Ming J. Chen. The Executive Committee informally
consults from time to time concerning industry trends, the direction of Andrx,
potential collaborations, and other potential opportunities. The Executive
Committee did not meet in 1999.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for the fiscal year ended
December 31, 1997 and 1998 and 1999, the cash and certain other compensation
paid by Andrx to its CEO and the four most highly compensated other executive
officers whose annual salary and bonus exceeded $100,000 during 1999
(collectively with the CEO, the "Named Executive Officers"):
101
<PAGE>
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------------------------------------- -------------------
SECURITIES
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#)(1)
----------------------------------- --------- ------------ ------------- --------------------- -------------------
<S> <C> <C> <C> <C> <C>
Alan P. Cohen, Co-Chairman 1999 264,500 150,000 18,300(2)
and CEO 1998 241,200 50,000 17,300(3) 100,000
1997 188,400 55,000 13,300(3) --
Chih-Ming J. Chen, Ph.D. 1999 264,500 150,000 18,300(2)
Co-Chairman and Chief Scientific 1998 241,200 50,000 31,900(3)(4) 100,000
Officer 1997 188,400 50,000 15,900(3) --
Elliot F. Hahn, Ph.D., President 1999 264,500 100,000 17,000(2)
1998 241,200 50,000 18,800(3) 100,000
1997 188,400 50,000 14,700(3) --
Scott Lodin, Vice President, 1999 199,600 50,000 563,200(5)(6) 108,000
General Counsel and Secretary 1998 178,000 40,000 12,200(6) 24,000
1997 148,200 30,000 4,000(6) 30,000
Angelo C. Malahias, Vice 1999 169,700 50,000 207,900(7) 48,000
President and Chief Financial 1998 154,900 32,500 276,700(7) 24,000
Officer 1997 129,700 25,000 38,600(8) 30,000
</TABLE>
------------------
(1) Represents options to purchase shares of common stock granted to the Named
Executive Offer under the Plan.
(2) Represents an automobile allowance, premiums for a $1 million life insurance
policy (the beneficiary of which is designated by the Named Executive
Officer) other than Dr. Hahn, certain medical expense, reimbursements and
health insurance premium reimbursements.
(3) Represents an automobile allowance, premiums for a $1 million life insurance
policy (the beneficiary of which is designated by the Named Executive
Officer) other than Dr. Hahn, certain medical expense reimbursements and
health insurance premium reimbursements and the premiums for a disability
policy (other than for Mr. Cohen), the beneficiary of which is designated
by the Named Executive Officer.
(4) Includes compensation of $11,700 for taxes resulting from the forgiveness of
an interest bearing loan made by Andrx to Dr. Chen.
(5) Represents exercise of options to purchase 16,000 shares of common stock
with an exercise price of $2.00 per share.
(6) Represents reimbursement of premiums on health insurance policies and group
term life insurance benefits. For 1999 and 1998 amount also includes an
automobile allowance.
(7) Represents reimbursement of premiums on health insurance policies and group
term life insurance benefits. For 1999 and 1998 includes exercise of
options to purchase 6,000 and 40,000 shares of common stock, respectively,
with an exercise price of $2.75 per share.
(8) Represents relocation expenses and reimbursement of premiums on health
insurance policies.
102
<PAGE>
COMPENSATION OF DIRECTORS
Effective June 1, 1999, non-employee directors of Andrx received $5,000
for each of the regularly scheduled quarterly meetings they attended and a
lesser amount for other participation (including attendance at committee
meetings or other special meetings of the board of directors). Prior to that, on
June 1 of each year, non-employee directors of Andrx were granted stock options
under the Plan to purchase 28,000 shares of common stock, all of which are
currently exercisable. All options granted to non-employee directors are granted
at fair market value on the date of the grant and expire ten years from the date
of the grant. The following sets forth information with respect to options
previously granted to non-employee directors under the Plan.
<TABLE>
<CAPTION>
NAME OF OPTIONEE NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
-------------------------------- ----------------------- --------------------- -----------------------------
<S> <C> <C> <C>
Irwin C. Gerson.............. 10,000 $ 1.75 May 12, 2003
36,000 1.625 August 7, 2004
23,500 3.00 June 1, 2006
28,000 5.75 June 1, 2007
28,000 8.47 June 1, 2008
Michael A. Schwartz, Ph.D.... 10,000 $ 0.75 May 12, 2003
36,000 1.625 August 7, 2004
23,500 3.00 June 1, 2006
28,000 5.75 June 1, 2007
28,000 8.47 June 1, 2008
Melvin Sharoky, M.D.(1)...... 10,000 $ 2.75 November 11, 2005
23,000 3.00 June 1, 2006
28,000 5.75 June 1, 2007
28,000 8.47 June 1, 2008
--------------------------------
</TABLE>
(1) Dr. Sharoky joined the Company as Executive Director on March 1, 1999.
INDEMNIFICATION AGREEMENTS
Andrx has entered into an indemnification agreement with each of its
directors and executive officers. Each indemnification agreement provides that
Andrx will indemnify such person against certain liabilities (including
settlements) and expenses actually and reasonably incurred by him or her in
connection with any threatened or pending legal action, proceeding or
investigation (other than actions brought by or in the right of Andrx) to which
he or she is, or is threatened to be, made a party by reason of his or her
status as a director, officer or agent of Andrx, provided that such director or
executive officer acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of Andrx and, with
respect to any criminal proceedings, had no reasonable cause to believe his or
her conduct was unlawful. With respect to any action brought by or in the right
of Andrx, a director or executive officer will also be indemnified, to the
extent not prohibited by applicable law, against expenses and amounts paid in
settlement, and certain liabilities if so determined by a court of competent
jurisdiction, actually and reasonably incurred by him or her in connection with
such action if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of Andrx.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information concerning individual grants
of stock options made during 1999 to any of the Named Executive Officers.
103
<PAGE>
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
NUMBER OF OF ASSUMED ANNUAL RATES
SECURITIES % OF TOTAL OF STOCK PRICE
UNDERLYING OPTIONS GRANTED EXERCISE OR APPRECIATION
OPTIONS TO EMPLOYEES IN BASE PRICE FOR OPTION TERMS (1)
GRANTED(#) FISCAL YEAR ($/SH) EXPIRATION DATE
5% 10%
------------ ---------------- --------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Scott Lodin................ 108,000 7.0 16.69 March 2, 2009 1,133,400 2,872,300
Angelo Malahias............ 48,000 3.1 16.69 March 2, 2009 503,800 1,276,600
</TABLE>
---------------------
(1) Based upon the exercise price, which was equal to the fair market value on
the date of grant, and annual appreciation at the rate stated on such price
through the expiration date of the options. Amounts represent hypothetical
gains that could be achieved for the options if exercised at the end of the
term. The assumed 5% and 10% rates of stock price appreciation are provided
in accordance with the rules of the Commission and do not represent Andrx's
estimate or projection of the future stock price. Actual gains, if any, are
contingent upon the continued employment of the Named Executive Officer
through the expiration date, as well as being dependent upon the general
performance of the common stock. The potential realizable values have not
taken into account amounts required to be paid for federal income taxes.
STOCK OPTIONS HELD AT END OF 1999
The following table indicates 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
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
------------ -- -------------- --------------------------------
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(1)
------------------------- ----------------- ----------- ------------ -------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Alan P. Cohen................... -- -- 50,000 50,000 $ 715,600 $ 715,600
Chih-Ming J. Chen, Ph.D......... -- -- 850,000 50,000 15,625,200 715,600
Elliot F. Hahn, Ph.D............ -- -- 50,000 50,000 715,600 715,600
Scott Lodin..................... 16,000 551,300 206,000 130,000 3,793,500 797,000
Angelo C. Malahias.............. 6,000 202,200 82,000 134,000 1,395,700 1,706,800
</TABLE>
-----------------
(1) Based on a fair market value of $21.16 per share at December 31, 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Under rules established by the Commission, Andrx is required to provide
a report explaining the rationale and considerations that led to fundamental
compensation decisions affecting Andrx's executive officers (including the Named
Executive Officers) during the past fiscal year. The report of Andrx's
Compensation Committee is set forth below.
COMPENSATION PHILOSOPHY
The three principal components of Andrx's executive compensation are
salary, bonus and stock options. These components are designed to facilitate
fulfillment of the compensation objectives of Andrx's Board of Directors and the
Compensation Committee, which objectives include (i) attracting and retaining
competent management, (ii) recognizing individual initiative and achievement,
(iii) rewarding management for short and long term accomplishments, and (iv)
aligning management compensation with the achievement of Andrx's goals and
performance.
104
<PAGE>
The Compensation Committee endorses the position that equity ownership
by management is beneficial in aligning management's and shareholders' interests
in the enhancement of shareholder value. This alignment is amplified by the
extensive holdings by management of Andrx's Common Stock and stock options. Base
salaries for new management employees are determined initially by evaluating the
responsibilities of the position held and the experience of the individual, and
by reference to the competitive marketplace for managerial talent, including a
comparison of base salaries for comparable positions at similar companies of
comparable sales and capitalization. Annual salary adjustments are determined by
evaluating the competitive marketplace, the performance of Andrx, the
performance of the executive, and the responsibilities assumed by the executive.
The Compensation Committee intends to annually review Andrx's existing
management compensation programs and plans (i) to meet with the chief executive
officer to attempt to establish performance objectives for members of senior
management and/or Andrx, and later to compare such objectives with the results
obtained, and (ii) to consider and, as appropriate, approve modifications to
such programs to ensure a proper fit with the philosophy of the Compensation
Committee and the agreed-upon standards and goals.
EXECUTIVE OFFICER COMPENSATION
Base salary, bonus and stock options for Andrx's executive officers for
1999 were determined by the Compensation Committee. This determination was made
after a review and consideration of a number of factors, including each
executive's level of responsibility and commitment, level of performance (with
respect to specific areas of responsibility and on an overall basis), past and
present contribution to and achievement of Andrx's goals and individual
performance during 1999, compensation levels at competitive similarly situated
publicly held companies and Andrx's historical compensation levels. Although
Andrx's performance was one of the factors considered, the approval of the
Compensation Committee was based upon an overall review of the relevant factors,
and there was no specific relationship or formula by which compensation was tied
to Andrx's performance.
STOCK OPTIONS
Andrx maintains the Plan which is designed to attract and retain
executive officers, directors and other employees of Andrx and to reward them
for delivering long-term value to the Andrx.
/s/ Michael A. Schwartz, Ph.D.
/s/ Irwin C. Gerson
105
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on
Andrx's Common Stock with the cumulative total shareholder return on the Nasdaq
Stock Market-US Index and The S&P Pharmaceutical Preparations Industry Index
commencing on June 14, 1996 (the first day the Common Stock began trading on The
Nasdaq National Market) and ending December 31, 1999.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG ANDRX CORPORATION, THE S&P PHARMACEUTICAL PREPARATIONS
INDUSTRY INDEX AND THE NASDAQ STOCK MARKET--U.S. INDEX
Plot points appear below:
<TABLE>
<CAPTION>
JUNE 14, DECEMBER 31,
1996 1996 1997 1998 1999
----------------- ----------------- ------------------ ---------------- -----------
<S> <C> <C> <C> <C> <C>
Andrx.......................... $100 $ 134.42 $ 285.42 $ 427.08 $ 705.33
SIC Code Index.................. 100 113.21 164.49 233.31 209.90
Nasdaq Market Index............. 100 102.89 125.86 177.52 313.09
</TABLE>
------------
* Assumes that $100 was invested on June 14, 1996 in Andrx's common
stock, in The S&P Pharmaceutical Preparations Industry Index, or The
Nasdaq Stock Market Index, and that all dividends are reinvested.
106
<PAGE>
CERTAIN TRANSACTIONS
TRANSACTIONS WITH DR. CHEN
Andrx is party to a royalty agreement with Dr. Chen, which provides for
royalties to Dr. Chen upon the sale of Andrx's bioequivalent version of
Cardizem(R) CD, for which Andrx received final approval in July 1998 from the
FDA. In August 1998, Andrx amended that royalty agreement to account for the
various contingencies presented by the Cardizem CD stipulation. Royalties paid
to Dr. Chen of $7 million for the year ended December 31, 1999 were based on
3.33% of the net sales of Cartia XT(TM) and Cardizem CD stipulation fees. Such
royalties are included in selling, general, and administrative expenses in the
Consolidated Statement of Income. Andrx is no longer attempting to develop any
other products included in that agreement, as the reference brand product is no
longer being marketed.
TRANSACTIONS WITH WATSON
In July 1994, Andrx and Circa Pharmaceuticals, which was subsequently
acquired by Watson, established the ANCIRC joint venture. In connection with the
establishment of ANCIRC, Andrx sold to Watson, for aggregate consideration of
$6.0 million, (i) 67,416 shares of Preferred Stock, which in accordance with its
terms, converted into 2,696,628 shares of common stock on April 30,1995 and (ii)
warrants, or the Watson Warrants, to purchase 1,348,316 shares of common stock
exercisable through July 1999 at a price equal to the lesser of $2.225 or the
offering price per share of shares sold in an initial public offering. The
Watson Warrants were exercised in July 1999.
In August 1995, Watson purchased an additional 363,636 shares of common
stock from Andrx at a price of $2.75 per share and Watson was granted a
two-month option to purchase no less than 3,272,728 nor more than 5,818,180
shares of common stock from Andrx, Mr. Cohen, trusts for the benefit of Dr.
Hahn's children (the "Trusts") and Dr. Chen at a price of $2.75 per share (with
no more than 727,272 shares being sold by selling shareholders). Watson
exercised such option in October 1995 and in December 1995 purchased 4,579,612
shares from Andrx, 254,544 shares from Dr. Chen, for a total of 5,306,884 shares
of common stock. In connection with the exercise of the option by Watson, the
ANCIRC joint venture agreement was amended to provide that Andrx and Watson
would agree on two additional product candidates to be developed by ANCIRC, and
to restructure the respective interests of Andrx and Watson in ANCIRC so that
ANCIRC became a 50/50 joint venture.
In June 1997, Watson purchased an additional 600,000 shares of common
stock from Andrx and 1,800,000 shares from Andrx's founders at a price of $6.375
per share, the closing price of the common stock on the business date prior to
the sale. Watson also entered into a standstill agreement with Andrx pursuant to
which it agreed, among other matters, not to acquire more than a 25% equity
interest in Andrx or engage in certain transactions with Andrx (including a
merger), prior to June 13, 2000, without the prior approval of the board of
directors.
Andrx has also granted Watson certain demand and piggyback registration
rights, under the Securities Act of 1933, as amended, with respect to the shares
of common stock held by Watson and the shares underlying the Watson Warrants,
which rights became exercisable commencing June 1997 and expire in June 2000.
In June 1999, Watson exercised a warrant to acquire 1,348,406 shares of
Andrx Common Stock at an exercise price of $2.225. Such warrant was issued to
Watson in connection with the original investment in Andrx in July 1994.
107
<PAGE>
PROPOSAL TO APPROVE 2000 STOCK OPTION PLAN
In February 1993, Andrx adopted its 1993 Stock Option Plan, or the
1993 plan. In 1997, Andrx's board of directors and shareholders approved an
increase in the number of shares available for grant under the 1993 plan to
8,000,000. At present, Andrx has granted options to purchase all 8,000,000
shares of common stock reserved for issuance under the 1993 plan. In order to
continue to effectively attract and retain employees and directors, the board of
directors believes that Andrx needs to continue to grant options to purchase
shares of Andrx Group Common Stock and Cybear Group Common Stock. As a result,
on February 29, 2000, the board of directors adopted the 2000 Stock Option Plan,
or the 2000 plan. Pursuant to the 2000 Plan, Andrx may grant options to purchase
up to an aggregate of 12,000,000 shares which may either be shares of Andrx
Group Common Stock or Cybear Group Common Stock to eligible persons. Andrx's
ability to grant "incentive stock options" under the 2000 Plan is subject to the
approval of the stockholders at the Annual Meeting. Andrx's board of directors
recommends that the 2000 Plan be adopted by the stockholders.
SUMMARY OF THE PLAN
The following is a general description of the terms and provisions of
the 2000 Plan and does not purport to be complete. All such statements are
qualified in their entirety by reference to the full text of the 2000 Plan,
which is filed herewith, as Annex E.
The purpose of the 2000 Plan is to provide the employees, directors,
independent contractors and consultants of Andrx and its subsidiaries with an
added incentive to provide their services to Andrx and its subsidiaries and to
induce them to exert their maximum efforts toward Andrx's success.
The 2000 Plan provides for the issuance of incentive stock options and
nonqualified stock options. An incentive stock option is an option to purchase
common stock that meets the definition of "incentive stock option" set forth in
Section 422 of the Internal Revenue Code of 1986, as amended, or the Code. A
nonqualified stock option is an option to purchase common stock that meets
certain requirements in the 2000 Plan but does not meet the definition of an
"incentive stock option" set forth in Section 422 of the Code. Nonqualified
stock options and incentive stock options are sometimes referred to herein as
"options."
The number of shares that may be issued pursuant to options granted
under the 2000 Plan is up to an aggregate of 12,000,000 shares which may either
be Andrx Group Common Stock or Cybear Group Common Stock. If any option granted
pursuant to the 2000 Plan terminates or expires for any reason without having
been exercised in full or shall cease for any reason to be exercisable in whole
or in part, the shares subject to the unexercised portion of such option shall
again be available to underlie the grant of options. The shares acquired upon
exercise of options granted under the 2000 Plan will be authorized and unissued
shares of common stock. The stockholders will not have any preemptive rights to
purchase or subscribe for the shares reserved for issuance under the 2000 Plan.
The 2000 Plan is administered by the compensation committee of the
board of directors, or the committee, comprised of at least two outside
directors or the board of directors. The committee has the right to determine,
among other things, the persons to whom options are granted, the number of
shares of common stock subject to options, the exercise price of options and the
term thereof.
All employees of Andrx Corporation and its subsidiaries, including
officers, directors, consultants and independent contractors to Andrx
Corporation, are eligible to receive grants of options under the 2000 Plan;
however, no incentive stock option may be granted to non-employee directors,
consultants, independent contractors or individuals who are not also employees
of Andrx or any of its subsidiaries. Upon receiving a grant of options, each
holder of the options shall enter into an option agreement with Andrx
Corporation, which contains the terms and conditions of the options established
by the committee.
TERMS AND CONDITIONS OF OPTIONS
OPTION PRICE. For any option granted under the 2000 Plan, the option
price per share of common stock may be any price not less than par value per
share as determined by the committee; however, the option price
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<PAGE>
per share of any incentive stock option may not be less than the fair market
value (defined below) of the common stock on the date such incentive stock
option is granted. On the record date, the closing price of Andrx's common stock
as reported by the Nasdaq National Market was $_____ per share.
Under the 2000 Plan, the "Fair Market Value" is the closing price of
shares on the business day on or immediately preceding the date of grant;
however, if the shares are not publicly traded, then the fair market value will
be as the committee shall in its sole and absolute discretion determine in a
fair and uniform manner.
EXERCISE OF OPTIONS. Each option is exercisable in such amounts, at
such intervals and upon such terms as the committee may determine. In no event
may an option be exercisable after ten years from the date of grant. Unless
otherwise provided in an option, each outstanding option may, in the sole
discretion of the committee, become immediately fully exercisable (1) if there
occurs any transaction (which shall include a series of transactions occurring
within 60 days or occurring pursuant to a plan), that has the result that
stockholders of Andrx immediately before such transaction cease to own at least
40 percent of the voting stock of Andrx or of any entity that results from the
participation of Andrx in a reorganization, consolidation, merger, liquidation
or any other form of corporate transaction; (2) if the stockholders of Andrx
shall approve a plan of merger, consolidation, reorganization, liquidation or
dissolution in which Andrx does not survive (unless such plan is subsequently
abandoned); or (3) if the stockholders of Andrx shall approve a plan for the
sale, lease, exchange or other disposition of all or substantially all the
property and assets of Andrx (unless such plan is subsequently abandoned). The
committee may in its sole discretion accelerate the date on which any option may
be exercised and may accelerate the vesting of any shares subject to any option.
Options granted to the officers and directors under the 2000 Plan may not be
exercised unless otherwise expressly provided in any option, until six months
following the date of grant and if and only if the optionee is in the employ of
Andrx on such date.
Unless further limited by the committee in any option, shares of common
stock purchased upon the exercise of options must be paid for in cash, by
certified or official bank check, by money order, with already owned shares of
common stock, or a combination of the above. The committee, in its sole
discretion, may accept a personal check in full or partial payment. If paid in
whole or in part with shares of already owned common stock, the value of the
shares surrendered is deemed to be their fair market value on the date the
option is exercised. Proceeds from the sale of common stock pursuant to the
exercise of options will be added to the general funds of Andrx to be used for
general corporate purposes. Under the 2000 Plan, Andrx may also lend money to an
optionee to exercise all or a portion of an option granted under the 2000 Plan.
If the exercise price is paid in whole or in part with optionee's promissory
note, such note shall (1) provide for full recourse to the maker, (2) be
collateralized by the pledge of shares purchased by optionee upon exercise of
such option, (3) bears interest at a rate of interest no less than the rate of
interest payable by Andrx to its principal lender, and (4) contain such other
terms as the committee in its sole discretion shall require.
NONTRANSFERABILITY. Options granted under the 2000 Plan are not
transferable by an optionee other than (a) by will or the laws of descent and
distribution, (b) by gift to a family member, as that term is defined in the
2000 Plan, and (c) through a domestic relations order in settlement of marital
property rights. No option shall be exercisable during the optionee's lifetime
by any person other than the optionee or certain transferees permitted under the
2000 Plan.
TERMINATION OF OPTIONS. The expiration date of an option is determined
by the committee at the time of the grant and is set forth in the applicable
stock option agreement. In no event may an option be exercisable after ten years
from the date it is granted.
The 2000 Plan provides that if an optionee's employment is terminated
for any reason other than for cause, retirement, an improper termination, mental
or physical disability or death, then the unexercised portion of the optionee's
options shall terminate three months after the such termination. If an
optionee's employment is terminated by reason of the optionee's retirement from
Andrx Corporation, the unexercised portion of the optionee's options shall
continue until the original expiration date. If an optionee's employment is
terminated for cause or if there is an improper termination of optionee's
employment, the unexercised portion of the optionee's options shall terminate
immediately upon such termination. If an optionee's employment is terminated by
reason
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<PAGE>
of the optionee's mental or physical disability, the unexercised portion of the
optionee's options shall continue until the original expiration date. If an
optionee's employment is terminated by reason of the optionee's death, the
unexercised portion of the optionee's options shall terminate 12 months after
the optionee's death.
The committee in its sole discretion may by giving written notice
cancel, effective upon the date of the consummation of certain corporate
transactions that would result in an option becoming fully exercisable, cancel
any option that remains unexercised on such date. Such notice shall be given a
reasonable period of time prior to the proposed date of such cancellation and
may be given either before or after shareholder approval of such corporate
transaction.
CANCELLATION AND RESCISSION OF AWARDS. Unless the option says otherwise, the
committee may cancel, rescind, suspend, withhold or otherwise limit or restrict
any unexpired, unpaid, or deferred options for certain detrimental activity,
including (1) the rendering of services to a competitor of Andrx Corporation,
(2) the disclosure of any of Andrx Corporation's confidential information, (3)
the failure or refusal to disclose promptly and to assign to Andrx Corporation
all right, title and interest in any invention or idea conceived by the optionee
during employment by Andrx Corporation, (4) activity that results in termination
of the optionee's employment for cause, (5) a material violation of any written
rules, policies, procedures or guidelines of Andrx Corporation, (6) any attempt
to induce another Andrx Corporation employee to be employed or perform services
elsewhere or any attempt to solicit the trade or business of any current or
prospective customer, supplier or partner of Andrx Corporation, (7) being
convicted of, or entering a guilty plea with respect to a crime, or (8) any
other conduct or act determined by Andrx Corporation to be injurious,
detrimental or prejudicial to any interest of Andrx Corporation.
Upon exercise, payment or delivery pursuant to an option, the optionee
is required to certify that he or she is in compliance with the terms of the
2000 Plan. If the optionee fails to comply with the detrimental activity
provision described above prior to, during the six months after, any exercise
pursuant to an option, such exercise may be rescinded by Andrx Corporation
within two years. In the event of rescission, the optionee shall pay Andrx
Corporation any gain or payment received as a result.
AMENDMENT OF 2000 PLAN
Either the board of directors or the committee may from time to time
amend this 2000 Plan or any option without the consent or approval of the
stockholders of Andrx. However, that, except to the extent provided in the
Termination of Options section above, no amendment or suspension of this 2000
Plan or any option issued thereunder shall substantially impair any option
previously granted to any optionee without the consent of such optionee.
FEDERAL INCOME TAX EFFECTS
The 2000 Plan is not qualified under the provisions of Section 401(a)
of the Code, nor is it subject to any of the provisions of the Employee
Retirement Income Security Act of 1974, as amended.
INCENTIVE STOCK OPTIONS. Incentive stock options are "incentive stock
options" as defined in Section 422 of the Code. Under the Code, an optionee
generally is not subject to ordinary income tax upon the grant or exercise of an
incentive stock option. However, an employee who exercises an incentive stock
option by delivering shares of common stock previously acquired pursuant to the
exercise of an incentive stock option is treated as making a disqualifying
disposition (defined below) of such shares if the employee delivers such shares
before the expiration of the holding period applicable to such shares. The
applicable holding period is the longer of two years from the date of grant or
one year from the date of exercise. The effect of this provision is to prevent
"pyramiding" the exercise of an incentive stock option (i.e., the exercise of
the incentive stock option for one share and the use of that share to make
successive exercise of the incentive stock option until it is completely
exercised) without the imposition of current income tax.
The amount by which the fair market value of the shares acquired at the
time of exercise of an incentive stock option exceeds the purchase price of the
shares under such option will be treated as an item of adjustment included in
the optionee's alternative minimum taxable income for purposes of the
alternative minimum tax. If, however, there is a disqualifying disposition in
the year in which the option is exercised, the maximum amount of the item of
adjustment for such year is the gain on the disposition of the shares. If there
is disqualifying disposition in a year other than the year of exercise, the
dispositions will not result in an item of adjustment for such other year.
If, subsequent to the exercise of an incentive stock option (whether
paid for in cash or in shares), the optionee holds the shares received upon
exercise for a period that exceeds (a) two years from the date such incentive
stock option was granted or, if later, (b) one year from the date of exercise,
or the required holding period, the difference (if any) between the amount
realized from the sale of such shares and their tax basis to the holder will be
taxed as long-term capital gain or loss. If the holder is subject to the
alternative minimum tax in the year of disposition, such holder's tax basis in
his or her shares will be increased for purposes of determining his alternative
minimum tax for such year, by the amount of the item of adjustment recognized
with respect to such shares in the year the option was exercised.
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In general, if, after exercising an incentive stock option, an employee
disposes of the shares so acquired before the end of the required holding period
a disqualifying disposition, such optionee would be deemed in receipt of
ordinary income in the year of the disqualifying disposition, in an amount equal
to the excess of the fair market value of the shares at the date the incentive
stock option was exercised over the exercise price. If the disqualifying
disposition is a sale or exchange which would permit a loss to be recognized
under the Code (were a loss in fact to be sustained), and the sales proceeds are
less than the fair market value of the shares on the date of exercise, the
optionee's ordinary income would be limited to the gain (if any) from the sale.
If the amount realized upon disposition exceeds the fair market value of the
shares on the date of exercise, the excess would be treated as short-term or
long-term capital gain, depending on whether the holding period for such shares
exceeded one year.
An income tax deduction is not allowed to Andrx with respect to the
grant or exercise of an incentive stock option or the disposition, after the
required holding period, of shares acquired upon exercise. In the event of a
disqualifying disposition, a federal income tax deduction should be allowed to
Andrx in an amount equal to the ordinary income to be recognized by the
optionee, provided that such amount constitutes an ordinary and necessary
business expense to Andrx and is reasonable, and Andrx satisfies its withholding
obligation with respect to such income.
NONQUALIFIED STOCK OPTIONS. An optionee granted a nonqualified stock
option under the 2000 Plan will generally recognize, at the date of exercise of
such nonqualified stock option, ordinary income equal to the difference between
the exercise price and the fair market value of the shares of common stock
subject to the nonqualified stock option. This taxable ordinary income will be
subject to federal income tax withholding. A federal income tax deduction should
be allowed to Andrx in an amount equal to the ordinary income to be recognized
by the optionee, provided that such amount constitutes an ordinary and necessary
business expense to Andrx and is reasonable, and Andrx satisfies its withholding
obligation with respect to such income.
If an optionee exercises a nonqualified stock option by delivering
other shares, the optionee should not recognize gain or loss with respect to the
exchange of such shares, even if their then fair market value is different from
the optionee's tax basis. The optionee, however, should be taxed as described
above with respect to the exercise of the nonqualified stock option as if he had
paid the exercise price in cash, and Andrx likewise generally should be entitled
to an equivalent tax deduction. Provided a separate identifiable stock
certificate is issued therefor, the optionee's tax basis in that number of
shares received on such exercise which is equal to the number of shares
surrendered on such exercise should be equal to his tax basis in the shares
surrendered and his holding period for such number of shares received should
include his holding period for the shares surrendered. The optionee's tax basis
and holding period for the additional shares received on exercise of a
nonqualified stock option paid for, in whole or in part, with shares should be
the same as if the optionee had exercised the nonqualified stock option solely
for cash.
The discussion set forth above does not purport to be a complete
analysis of the potential tax consequences relevant to the optionees or to
Andrx, or to describe tax consequences based on particular circumstances. It is
based on federal income tax law and interpretational authorities as of the date
of this proxy statement/prospectus, which are subject to change at any time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
RATIFICATION OF SELECTION OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP independent certified public
accountants, served as Andrx's independent certified public accountants for
1999. The board of directors has selected Arthur Andersen LLP as Andrx's
independent certified public accountants for the current fiscal year ending
December 31, 2000. One or more representatives of Arthur Andersen LLP are
expected to be present at the Annual Meeting, will have the opportunity to make
a statement if they desire to do so and are expected to be available to respond
to appropriate questions from shareholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.
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OTHER BUSINESS
The board of directors knows of no other business to be brought before
the Annual Meeting. If, however, any other business should properly come before
the Annual Meeting, the persons named in the accompanying proxy will vote
proxies as in their discretion they may deem appropriate, unless they are
directed by a proxy to do otherwise.
PRICE RANGE OF EXISTING COMMON STOCKS AND DIVIDEND INFORMATION
For the calendar quarters indicated, the table below sets forth the
high and low closing prices per share of Andrx common stock, as reported on the
Nasdaq National Market, based on published financial sources. The table also
includes the high and low closing prices per share of Cybear common stock.
Cybear's 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, Cybear's 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 shares of Cybear's 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 21, 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 Cybear common stock and the prices
might not have reflected the true value of our common stock. Neither Andrx nor
Cybear has ever paid any dividends.
<TABLE>
<CAPTION>
ANDRX COMMON STOCK CYBEAR COMMON STOCK
MARKET PRICE MARKET PRICE
----------------------------------- -------------------------------
HIGH LOW HIGH LOW
---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
1998
First Quarter.................. $ 9.57 $ 6.13
Second Quarter................. 10.66 7.03
Third Quarter.................. 10.75 6.47
Fourth Quarter................. 12.93 6.16
1999
First Quarter.................. $23.13 $11.13 $ 53.00(1) $ 3.25(1)
Second Quarter................. 39.00 15.41 41.00 13.88
Third Quarter.................. 39.00 28.57 23.25 5.88
Fourth Quarter................. 29.00 19.25 10.00 5.47
2000
First Quarter.................. $64.41 $20.13 $ 12.25 $ 4.38
Second Quarter (through
May 30, 2000).............. 68.31 43.63 5.88 2.78
</TABLE>
---------------------
(1) Commencing January 28, 1999.
The sales prices per share of Andrx common stock reflect a 2-for-1
stock split effective April 3, 2000.
On May 30, 2000 the last sale price of the Andrx common stock as
reported by the Nasdaq National Market was $55.50 per share and the last sale
price of the Cybear common stock as reported by the Nasdaq National Market was
$3.13 per share. We urge stockholders to obtain current quotations.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 promulgated by the Securities and Exchange
Commission, a stockholder intending to present a proposal to be included in
Andrx's proxy statement for Andrx's 2001 Annual Meeting of Stockholders
must deliver a proposal in writing to Andrx's principal executive office
no later than __________, 2001.
Stockholder proposals intended to be presented at, but not included in
Andrx's proxy materials for, that meeting must be received by Andrx no later
than ________, 2001, at its principal executive offices; otherwise, such
proposals will be subject to the grant of discretionary authority contained in
Andrx's form of proxy to vote on them.
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The new bylaws also provide that any stockholder who intends to present
a nomination for a directorship or a proposal for action at any annual meeting
of stockholders must give advance notice of such proposal together with certain
specified information. These requirements are separate and apart from and in
addition to the SEC requirements noted above that a stockholder must meet in
order to have a proposal included in our proxy materials. In general, the
advance notice must be given to Andrx's secretary not less than 45 days or more
than 75 days prior to the first anniversary of the date on which we first mailed
proxy materials for the preceding year's annual meeting. In the case of our 2001
annual meeting, such advance notice must be received no earlier than _________,
2000 or later than ___________, 2000. Further information regarding the
submission of stockholder proposals may be obtained by writing to the secretary
of Andrx.
EXPENSES OF SOLICITATION
Andrx and Cybear will pay the cost of soliciting proxies for their
meetings. In addition to soliciting by mail, Andrx and Cybear directors,
officers and other employees may solicit proxies in person, or by telephone,
facsimile transmission or other means of electronic communication. Andrx and
Cybear will also pay brokers, nominees, fiduciaries and other custodians their
reasonable fees and expenses for sending proxy materials to beneficial owners
and obtaining their instructions. Andrx and Cybear may retain a proxy solicitor
to perform solicitation services.
LEGAL AND TAX OPINIONS
Broad and Cassel, a partnership including professional associations,
Miami, Florida has rendered an opinion concerning the validity of the common
stock. Arthur Andersen LLP has rendered an opinion concerning certain tax
matters described under "The Reorganization - United States Federal Income Tax
Considerations."
EXPERTS
Andrx's financial statements as of December 31, 1999 and 1998 and for
each of the three fiscal years in the period ended December 31, 1999
incorporated by reference in this joint prospectus/proxy statement and Cybear's
financial statements as of December 31, 1999 and 1998 and for each of the two
fiscal years in the period ended December 31, 1999 and the period from February
5, 1997 (inception) through December 31, 1997 have been so included in reliance
on the reports of Arthur Andersen LLP, independent certified public accountants,
given on their authority as experts in auditing and accounting.
Representatives of Arthur Andersen LLP are expected to attend the
meetings and will have an opportunity to make a statement and to respond to
appropriate questions that you pose.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CYBEAR, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS OF
CYBEAR, INC. AND SUBSIDIARIES:
<TABLE>
<CAPTION>
<S> <C>
PAGE
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of March 31, 2000 (unaudited) and December 31, 1999 and 1998 F-3
Consolidated Statements of Operations for the three months ended March 31, 2000 (unaudited) and
1999 (unaudited), 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 three months ended
March 31, 2000 (unaudited), 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 three months ended March 31, 2000 (unaudited) and
1999 (unaudited),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 reorganization
plan discussed in Note 1, as to
which the date is March 24, 2000).
F-2
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31 -----------------------
2000 1999 1998
----------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,040 $ 11,922 $ 4
Investments available-for-sale 25,703 26,072 --
Investment interest receivable 433 740 --
Accounts receivable, net of allowance of $8 and $3 as of
March 31, 2000 and December 31, 1999, respectively 162 104 --
Convertible notes receivable 7,000 3,000 --
Receivable from Blue Lake Ltd. -- -- 366
Prepaid expenses and other current assets 420 642 194
-------- -------- --------
Total current assets 34,758 42,480 564
Property and equipment, net 3,608 3,523 2,407
Product development costs, net 362 333 358
Software licenses 4,127 1,603 --
Goodwill, net 3,721 3,819 --
Other assets 222 1,310 3
-------- -------- --------
Total assets $ 46,798 $ 53,068 $ 3,332
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 2,348 $ 2,758 $ 1,153
Accrued liabilities 779 332 301
Due to Andrx Corporation -- -- 2,345
-------- -------- --------
Total current liabilities 3,127 3,090 3,799
-------- -------- --------
Commitments and contingencies (Notes 1, 9, 11 and 15)
Shareholders' equity (deficit):
Preferred stock, $.01 par value; 2,000,000 shares authorized, none issued -- -- --
and outstanding
Common stock, $.001 par value; 25,000,000 shares authorized, 17,772,537,
17,653,662 and 13,269,400 shares issued and outstanding as of March 31,
2000, December 31, 1999 and 1998, respectively 18 18 13
Additional paid-in capital 65,154 64,873 3,559
Accumulated deficit (21,422) (14,813) (4,039)
Accumulated other comprehensive loss (79) (100) --
-------- -------- --------
Total shareholders' equity (deficit) 43,671 49,978 (467)
-------- -------- --------
Total liabilities and shareholders' equity (deficit) $ 46,798 $ 53,068 $ 3,332
======== ======== ========
</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
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED FOR THE PERIOD FROM
MARCH 31, DECEMBER 31, FEBRUARY 5, 1997
----------------------------- ----------------------------- (INCEPTION) TO
2000 1999 1999 1998 DECEMBER 31, 1997
------------ ------------ ------------ ------------ -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues $ 231 $ -- $ 270 $ -- $ 96
------------ ------------ ------------ ------------ ------------
Operating expenses:
Cost of revenues 209 -- 77 -- --
Network operations and operations support 933 728 2,790 643 --
Product development 948 526 3,058 1,557 894
Sales and marketing 1,896 725 4,909 483 --
General and administrative 880 655 2,544 1,064 667
Depreciation and amortization 549 191 1,556 139 65
Merger costs 832 -- -- -- --
Other non-recurring charges 1,152 -- -- 285 --
------------ ------------ ------------ ------------ ------------
Total operating expenses 7,399 2,825 14,934 4,171 1,626
------------ ------------ ------------ ------------ ------------
Loss from operations (7,168) (2,825) (14,664) (4,171) (1,530)
Other income (expenses):
Interest income 559 1 1,282 -- --
Interest expense on due to Andrx Corporation -- (91) (216) (210) (28)
------------ ------------ ------------ ------------ ------------
Loss before income taxes (6,609) (2,915) (13,598) (4,381) (1,558)
Income tax benefit -- 1,400 2,824 1,900 --
------------ ------------ ------------ ------------ ------------
Net loss $ (6,609) $ (1,515) $ (10,774) $ (2,481) $ (1,558)
============ ============ ============ ============ ============
Basic and diluted net loss per share $ (0.37) $ (0.11) $ (0.70) $ (0.19) $ (0.12)
============ ============ ============ ============ ============
Basic and diluted weighted average shares of
common stock outstanding 17,703,669 13,269,400 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)
(IN THOUSANDS, EXCEPT FOR SHARE AMOUNTS)
<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 13 487 - -
Issuance of shares of convertible
preferred stock 130,000 - - - 30 - -
Shares of common stock issued in
connection with conversion of
shares of convertible
preferred stock (130,000) - 130,000 - - - -
Options granted to non-employees - - - - 14 - -
Net loss and comprehensive loss - - - - - (1,558) - $ (1,558)
-----------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997 - - 13,000,000 13 531 (1,558) -
Shares of common stock issued in
connection with merger with
1997 Corp. - - 269,400 - - - -
Conversion of due to Andrx
Corporation upon consummation
of merger with 1997 Corp. - - - - 3,012 - -
Options granted to non-employees - - - - 16 - -
Net loss and comprehensive loss - - - - - (2,481) - $ (2,481)
-----------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1998 - - 13,269,400 13 3,559 (4,039) -
Shares of common stock issued in
connection with public offering - - 3,450,000 4 50,774 - -
Conversion of due to Andrx
Corporation upon completion of
public offering - - 465,387 1 7,445 - -
Shares of common stock issued in
connection with the acquisition
of Telegraph Consulting Corporation - - 320,000 - 2,771 - -
Shares of common stock issued in
connection with exercise of
stock options - - 148,875 - 169 - -
Options granted to non-employees - - - - 155 - -
Unrealized loss on investments
available-for-sale - - - - - - (100) $ (100)
Net loss - - - - - (10,774) - (10,774)
------------
Comprehensive loss $ (10,874)
---------------------------------------------------------------------------------- ============
BALANCE, DECEMBER 31, 1999 - - 17,653,662 18 64,873 (14,813) (100)
Shares of common stock issued in
connection with exercise of stock
options (unaudited) - - 118,875 - 281 -
Unrealized gain on investments
available-for-sale (unaudited) - - - - - - 21 $ 21
Net loss (unaudited) - - - - - (6,609) - (6,609)
------------
Comprehensive loss (unaudited) $ $(6,588)
---------------------------------------------------------------------------------- ============
BALANCE, MARCH 31, 2000 (unaudited) - $ - 17,772,537 $ 18 $ 65,154 $ (21,422) $ (79)
========== ======= ========== ======== ======== ========== ===========
</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
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE PERIOD
THREE MONTHS ENDED YEARS ENDED FROM FEBRUARY 5,
MARCH 31, DECEMBER 31, 1997 (INCEPTION)
----------------------- ----------------------- TO DECEMBER 31,
2000 1999 1999 1998 1997
-------- -------- -------- -------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (6,609) $ (1,515) $(10,774) $ (2,481) $ (1,558)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation and amortization 549 191 1,556 139 66
Other non-cash charges 856 -- 36 160 --
Changes in operating assets and liabilities:
Investment interest receivable 307 -- (740) -- --
Accounts receivable (58) -- (46) -- --
Receivable from Blue Lake Ltd. -- 366 366 (366) --
Prepaid expenses and other assets 6 (175) (1,755) (151) (46)
Accounts payable and accrued liabilities 537 (512) 1,608 1,313 141
-------- -------- -------- -------- --------
Net cash used in operating activities (4,412) (1,645) (9,749) (1,386) (1,397)
-------- -------- -------- -------- --------
Cash flows from investing activities:
Proceeds from sales (purchases of) investments
available-for-sale, net 390 -- (26,172) -- --
Funding of convertible notes receivable (4,000) -- (3,000) -- --
Purchases of property and equipment (558) (1,054) (2,154) (2,341) (241)
Proceeds from sale of property and equipment 21 -- 5 -- --
Product development costs (80) (55) (140) (358) --
Purchases of software licenses (2,524) -- (1,603) -- (160)
Acquisition of Telegraph Consulting Corporation -- -- (1,181) -- --
-------- -------- -------- -------- --------
Net cash used in investing activities (6,751) (1,109) (34,245) (2,699) (401)
-------- -------- -------- -------- --------
Cash flows from financing activities:
Advances from Andrx Corporation, net of Andrx's
utilization of Cybear's income tax attributes -- 3,075 5,101 4,088 1,269
Repayment of bank loan -- -- (136) -- --
Net proceeds from public share offering -- -- 50,778 -- --
Proceeds from exercises of stock options 281 -- 169 -- --
Proceeds from promissory note issued for purchase of
convertible preferred stock -- -- -- -- 30
Net proceeds from issuance of shares of common stock -- -- -- -- 500
-------- -------- -------- -------- --------
Net cash provided by financing activities 281 3,075 55,912 4,088 1,799
-------- -------- -------- -------- --------
Net (decrease) increase in cash and cash equivalents (10,882) 321 11,918 3 1
Cash and cash equivalents, beginning of period 11,922 4 4 1 --
-------- -------- -------- -------- --------
Cash and cash equivalents, end of period $ 1,040 $ 325 $ 11,922 $ 4 $ 1
======== ======== ======== ======== ========
Supplemental disclosure of non-cash activities:
Conversion of due to Andrx Corporation into shares of
common stock $ -- $ -- $ 7,446 $ -- $ --
======== ======== ======== ======== ========
Conversion of due to Andrx Corporation into additional
paid-in capital $ -- $ -- $ -- $ 3,012 $ --
======== ======== ======== ======== ========
</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
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
(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% (72%
at March 31,2000) 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 $50,778 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
$4,088 included $1,181 in cash, the issuance of 320,000 shares of Cybear
unregistered common stock valued at approximately $2,771 and the assumption of
approximately $136 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 $3,934.
The goodwill is being amortized on a straight-line basis over its estimated
useful life of 10 years. The amortization of the goodwill totaled $115 in 1999.
The following summarizes the acquisition:
Cash used for acquisition $1,181
Common stock issued 2,771
Debt assumed 136
--------
Purchase price 4,088
Working capital acquired (30)
Property and equipment acquired (124)
--------
Goodwill $3,934
========
F-7
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
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 $ 1,112 $ 1,146
========= =========
Net loss $(11,216) $ (2,876)
========= =========
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.
TRACKING STOCK REORGANIZATION PLAN
In March 2000, Andrx and Cybear entered into a definitive Agreement and
Plan of Merger and Reorganization (the "Reorganization") with respect to the
previously announced tracking stock reorganization 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 Reorganization will be submitted to Andrx and Cybear shareholders
for approval during 2000.
Pursuant to the Agreement, Andrx will acquire all of the publicly
traded shares of common stock of Cybear in what should be a tax-free "roll-up"
reorganization. Public shareholders currently own approximately 4.9 million
shares or 27.6%, of the common shares of Cybear, and those shareholders will
receive one share of Cybear Group Common Stock for every Cybear share they
currently own. In the Reorganization, the number of Cybear shares held by Andrx
will be reduced from 12.9 million shares to 10.8 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
31.2% of the Cybear Group Common Stock following the closing of the transaction.
Pursuant to the Reorganization, each Andrx common share will be converted into
(i) one share of Andrx Group Common Stock and (ii) approximately .1493 shares of
Cybear Group Common Stock. Upon completion of the Reorganization, (i) Cybear
will be a wholly owned subsidiary of Andrx with 100% of its value publicly
traded in the form of Cybear Group Common Stock; (ii) current Cybear
shareholders will own approximately 31.2% of the Cybear Group Common Stock; and
(iii) current Andrx shareholders will own 100% of the Andrx Group Common Stock
and approximately 68.8% of the Cybear Group Common Stock. The preceding share
ownership and percentages exclude the potential exercise by Edward E. Goldman,
M.D., Cybear's Chief Executive Officer, of an outstanding warrant to acquire
525,000 shares of Cybear common stock currently owned by Andrx.
Andrx and Cybear will be filing a preliminary joint proxy statement and
a registration statement with the SEC with respect to the proposed transaction,
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 proposed tracking stock reorganization plan, the
Company incurred merger costs of $832 in the three months ended March 31, 2000.
The Company expects to incur merger costs of up to approximately $1,500 in
connection with the proposed tracking stock reorganization plan. These costs are
charged to expense as incurred.
UNAUDITED FINANCIAL STATEMENTS
The interim consolidated financial statements as of March 31, 2000 and
for the three months ended March 31, 2000 and 1999 are unaudited. In the opinion
of management, such unaudited consolidated financial statements have been
prepared by Cybear pursuant to the rules and regulations of the United States
Securities and Exchange Commission ("SEC"). The unaudited consolidated financial
statements reflect, in the opinion of management, all material adjustments
(which include only normal recurring adjustments) necessary to present fairly
the Company's unaudited financial position and results operations and cash
flows. The unaudited consolidated results of operations and cash flows for the
three months ended March 31, 2000, are not necessarily indicative of the results
of operations or cash flows which may be expected for the remainder of 2000.
(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
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
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
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
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 $1,603
for such software application licenses. As of December 31, 1999, Cybear had paid
$600 of such amount and the remaining $1,003 was included in accounts payable on
the accompanying consolidated balance sheet. Such amount payable was paid during
the three months ended March 31, 2000.
In January 2000, Cybear entered into a perpetual non-transferable and
non-exclusive license agreement with a third party to use its software as a
means to gain access to electronic patient records. Cybear paid $2,500 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 $7,500 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.
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 recorded in the three months ended March 31, 2000, 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:
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
FEBRUARY 5,
1997
(UNAUDITED) (INCEPTION) TO
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
MARCH 31, DECEMBER 31, 1997
-------------------------- -------------------------- ----------
2000 1999 1999 1998
------------ ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
E-commerce $ 215 $ - $ 81 $ - $ -
Web site development and maintenance 12 - 102 - -
Subscription 4 - 87 - -
Software development services to Andrx - - - - 96
------------ ----------- ------------ ----------- ----------
$ 231 $ - $ 270 $ - $ 96
============ =========== ============ =========== ==========
</TABLE>
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 11) 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.
Subscription revenues for the year ended December 31, 1999 include $57
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
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
Subscription revenues for the year ended December 31, 1999 include $19
from Andrx (see Note 12). 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 three months ended March 31, 2000 and 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 12).
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 14).
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 1,574,334, 1,647,408, and
985,083 options and warrants outstanding at March 31, 2000 and at December 31,
1999 and 1998, respectively, that could potentially dilute earnings per share in
the future.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of March 31, 2000 and December 31, 1999 and 1998, the carrying
amounts of cash and cash equivalents, investments available-for-sale, investment
interest receivable, accounts receivable, the convertible notes receivable, 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
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
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 notes receivable.
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 notes receivable (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 three months
ended March 31, 2000, 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
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
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 $ 16,009 $ (92) $ 15,917
Corporate bonds 10,163 (8) 10,155
------------ ------------ ------------
$ 26,172 $ (100) $ 26,072
============ ============ ============
(4) CONVERTIBLE NOTES RECEIVABLE
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 from
Cybear, HIE issued to Cybear a one-year convertible promissory note (the "HIE
Note") in the amount of $3,000 bearing interest at the rate of 7.8%. At its
option, on the maturity date, Cybear may convert the HIE Note into shares of
common stock of HIE at a conversion price of $3.19 per share. The Company has
recorded the HIE Note at cost. As of March 31, 2000, the closing sale price of
HIE's common stock was $6.00. In addition, HIE granted Cybear a warrant (the
"HIE Warrant") to purchase 47,022 shares of its common stock. The HIE Warrant
has an exercise price of $3.19 per share and expires five years from the grant
date.
In March 2000, Cybear entered into a software license agreement with
AHT Corporation ("AHT"). In connection with the agreement, upon receipt of
$4,000 from Cybear, AHT issued to Cybear a one-year convertible promissory note
(the "AHT Note") in the amount of $4,000 bearing interest at the rate of 10.0%.
At its option, Cybear may convert the AHT Note into AHT common stock at a
conversion price of the lower of $4.34 per share or 80% of the average market
price for the 30 trading days immediately preceding the conversion date provided
that Cybear cannot acquire upon conversion more than 1,913,550 shares of AHT
common stock. In addition, in the event of default by AHT, Cybear shall be
granted a perpetual license to the software, including the source code to the
software. The Company has recorded the AHT Note at cost. As of March 31, 2000,
the closing sale price of AHT's common stock was $3.38. In addition, AHT granted
Cybear a warrant (the "AHT Warrant") to purchase 300,000 shares of its common
stock. The AHT Warrant has an exercise price of $4.34 per share and expires five
years from the grant date.
(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 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
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
(6) PROPERTY AND EQUIPMENT, NET
Property and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1999 1998
----------- ------------
<S> <C> <C>
Computer hardware and software $ 3,244 $ 1,807
Furniture and fixtures 704 242
Leasehold improvements 831 533
------- -------
4,779 2,582
Less: accumulated depreciation and amortization (1,256) (175)
------- -------
Property and equipment, net $ 3,523 $ 2,407
======= =======
</TABLE>
(7) PRODUCT DEVELOPMENT COSTS, NET
Capitalized product development costs consist of the following:
1999 1998
----------- -----------
Balance, beginning of year $ 358 $ --
Costs capitalized 140 358
Costs amortized (165) --
----- -----
Balance, end of year $ 333 $ 358
===== =====
The accumulated amortization of capitalized product development costs
totaled $98 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 $ 116
Litigation settlement charge - 125
Other 99 60
------------- ---------
$ 332 $ 301
============= =========
(9) OTHER NON-RECURRING CHARGES
Other non-recurring charges for the three months ended March 31, 2000
consist of severance costs, impairment charges to certain assets and costs
incurred to terminate an agreement. Certain of these other non-recurring charges
pertain to an agreement whereby the Company has future monthly contractual
obligations through June 2001, totaling approximately $2,300. In March 2000, the
Company disputed the third party's performance under the agreement and the
companies are attempting to resolve this dispute. While no amounts have been
recorded relating to any required performance under this agreement subsequent to
February 29, 2000, no assurance can be given that the Company will not be
required to record any additional charges upon the resolution of this dispute.
Other non-recurring charges for the year ended December 31, 1998
consisted of the write-off of a software license and costs incurred to settle
certain litigation.
(10) 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
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
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 $10,000 which is available to offset future
earnings. As of December 31, 1999, Cybear has net deferred tax assets of
approximately $4,000 attributable primarily to this net operating loss
carryforward. 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 and $1,900, 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:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
DECEMBER 31, FEBRUARY 5, 1997
--------------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
---------------- ------------- -------------------
<S> <C> <C> <C>
Current $ 2,824 $ 1,900 $ -
Deferred - - -
---------------- ------------- ------------------
Total $ 2,824 $ 1,900 $ -
================ ============= ==================
</TABLE>
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 $ 3,929 $ 325
Book over (under) tax depreciation 44 (8)
Software development costs (128) -
Other, net 112 25
----------- ---------
3,957 342
Valuation allowance (3,957) (342)
----------- ---------
Net $ - $ -
=========== =========
The following table indicates the activity in the valuation allowance:
1999 1998
----------- ---------
Beginning balance January 1 $ (342) $ (524)
Generated (6,439) (1,718)
Utilized by Andrx 2,824 1,900
----------- ---------
Ending balance December 31 $ (3,957) $ (342)
=========== =========
F-15
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
As of December 31, 1999, the Company has a net operating loss
carryforward of approximately $10,000 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 $1,000 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%.
(11) 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
2001 612
2002 612
2003 390
-------------
$ 2,324
=============
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.
F-16
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
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
2001 1,185
2002 748
2003 750
2004 767
Thereafter 1,792
--------
$ 6,398
========
Rent expense for the years ended December 31, 1999 and 1998 amounted to
$1,137 and $145, respectively, and $130 for the period from February 5, 1997
(inception) to December 31, 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 had a remaining obligation to pay
$800 in 2000 for consulting services under these agreements and had recorded
$600 to other assets representing subscription services to be paid by one
medical organization in 2001. As of March 31, 2000, Cybear has a remaining
obligation to pay $300 in 2000 for consulting services under these agreements.
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 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 $165 beginning in September
1999 over the remaining term of this agreement. For the three months ended March
31, 2000 and the year ended December 31, 1999, Cybear made payments of $290 and
$1,015, respectively, under this agreement and has expensed $646 and $659,
respectively. As of March 31, 2000, the Company has a future remaining
obligation of approximately $2,300 related to this agreement. In March 2000,
Cybear disputed the third party's performance under the agreement and the
companies are attempting to resolve this dispute. While no amounts have been
recorded relating to any required performance under this agreement subsequent to
February 29, 2000, no assurance can be given that Cybear will not be required to
record any additional changes upon resolution of this dispute.
F-17
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
(12) 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 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 three months ended March 31, 2000 and for
the year ended December 31, 1999, Andrx charged Cybear $22 and $8, respectively,
for the services it provided.
The Company and Andrx have a corporate services agreement whereby Andrx
provides the Company with various services of its management. For the three
months ended March 31, 2000, 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 $30 for the three
months ended March 31, 2000, $120 for each of the years ended December 31, 1999
and 1998, respectively, and $110 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 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 and $210,
respectively, in interest expense on the Due to Andrx. For the period from
February 5, 1997 (inception) to December 31, 1997, Cybear recorded $28 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
and $5 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. In addition, for the
years ended December 31, 1999 and 1998, the Company recorded $111 and $21,
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 $96 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.
F-18
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
(13) SHAREHOLDERS' EQUITY
In February 1997, the Company issued 130,000 shares of convertible
preferred stock for a promissory note of $30. 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 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 $50,778 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.
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 $2,771.
(14) 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 of 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.
F-19
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
A summary of the Plan's activity is as follows:
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------------------------------- -------------------------------
NUMBER OF
SHARES EXERCISE PRICE PER SHARE WEIGHTED AVG.
----------------------------------- EXERCISE
UNDER 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>
<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:
<TABLE>
<CAPTION>
FOR THE PERIOD FRO
YEARS ENDED DECEMBER 31, FEBRUARY 5, 1997
------------------------------- (INCEPTION) TO
1999 1998 DECEMBER 31, 1997
--------------- -------------- ------------------
<S> <C> <C> <C>
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 - - -
</TABLE>
F-20
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
UNAUDITED WITH RESPECT TO THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT FOR SHARES AND PER SHARE AMOUNTS)
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 $ (10,774) $ (2,481) $ (1,558)
Pro forma $ (15,228) $ (2,570) $ (1,591)
Basic and diluted net loss per share As reported $ (0.70) $ (0.19) $ (0.12)
Pro forma $ (0.98) $ (0.20) $ (0.12)
</TABLE>
(15) SUBSEQUENT EVENT
In April 2000, Cybear entered into a three-year agreement with a
medical organization to provide the Company's subcription services to the
organization's members in exchange for various consulting and marketing
services. Under the terms of this agreement, Cybear paid $1,200 at inception for
various consulting and marketing services and will receive monthly subscription
fees of $25. Consequently, this agreement will result in a net cash outflow to
Cybear of $300 over its term. Therefore, subscription services earned under this
agreement will be recorded as a reduction of the amounts expensed for the
consulting and marketing services received.
F-21
<PAGE>
ANNEX A
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 23, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <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>
(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>
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(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
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(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>
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<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 23, 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.
<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.
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<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.
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<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.
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<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.
7
<PAGE>
(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."
8
<PAGE>
(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.
9
<PAGE>
(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
10
<PAGE>
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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<PAGE>
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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<PAGE>
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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(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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(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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(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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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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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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(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
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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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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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(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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(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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(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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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) 999-3500
Facsimile: (561) 994-2828
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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) 584-0300
Facsimile: (954) 792-1034
COPY TO:
Dale S. Bergman, Esq.
Broad and Cassel
Suite 3000
201 South Biscayne Blvd.
Miami, FL 33131
Telephone: (305) 373-9400
Facsimile: (305) 373-9493
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
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<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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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
ANDRX CORPORATION, a Florida corporation
By: //S// ALAN P. COHEN
--------------------
Alan P. Cohen, Co-Chairman and CEO
NEW ANDRX CORPORATION, a Delaware
corporation
By: //S// ALAN P. COHEN
--------------------
Alan P. Cohen, Co-Chairman and CEO
ANDRX ACQUISITION CORP., a Florida
corporation
By: //S// ALAN P. COHEN
--------------------
Alan P. Cohen, President
CYBEAR ACQUISITION CORP., a Florida
corporation
By: //S// ALAN P. COHEN
--------------------
Alan P. Cohen, President
CYBEAR, INC., a Delaware corporation
By: //S// DR. EDWARD E. GOLDMAN
----------------------------
Dr. Edward E. Goldman, CEO
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ANNEX B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ANDRX CORPORATION
Pursuant to the requirements of Section 245 of the Delaware Business
Corporation Act, the undersigned, Elliot F. Hahn, hereby certifies that he is
the duly and acting President of New Andrx Corporation, a Delaware corporation,
and does hereby make, swear to, adopt and file these Amended and Restated
Articles of Incorporation of New Andrx Corporation.
1. The name under which the corporation was originally incorporated is
New Andrx Corporation, and the date of filing the original certificate of
incorporation of the corporation with the Secretary of State of the State of
Delaware is March 23, 2000.
2. The Certificate of Incorporation shall be amended and restated to
read in full as follows:
ARTICLE I.
NAME
The name of the corporation is Andrx Corporation (the "Corporation").
ARTICLE II.
MAILING ADDRESS
The current mailing address of the principal place of business of the
Corporation is 4001 Southwest 47th Avenue, Suite 201, Ft. Lauderdale, Florida
33314.
ARTICLE III.
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "DGCL").
ARTICLE IV.
CAPITAL STOCK
SECTION 1. AUTHORIZATION. The aggregate number of shares of stock which the
Corporation shall have authority to issue is 125,000,000 shares, of which
100,000,000 shares shall be shares of a class of common stock designated as
"Andrx Corporation - Andrx Group Common Stock," having a par value of $0.001 per
share (the "Andrx Stock"), 25,000,000 shares shall be shares of a class of
common stock designated as "Andrx Corporation - Cybear Group Common Stock,"
having a par value of $0.001 per share (the "Cybear Stock"), and 1,000,000
shares shall be shares of a class of preferred stock having a par value of $.00l
per share (the "Preferred Stock") and issuable in one or more series as
hereinafter provided. The Andrx Stock and the Cybear Stock shall hereinafter
collectively be called "Common Stock" and either shall sometimes be called a
class of Common Stock. For purposes of this Article IV, references to the "Board
of Directors" shall refer to the Board of Directors of the Corporation, as
established in accordance with Article V of the Certificate of Incorporation of
the Corporation, and references to "the Certificate of Incorporation" shall
refer to this Amended and Restated Certificate of Incorporation as the same may
be amended from time to time. Certain capitalized terms used in this Article IV,
shall have the meanings set forth in Section 2.6 of this Article. For purposes
of this Article IV, the Andrx Stock, when issued, shall be considered issued in
respect of the Andrx Group and the Cybear Stock, when issued, shall be
considered issued in respect of the Cybear Group. The number of authorized
shares of any class or classes of capital stock of the Corporation may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the voting
power of the stock of the Corporation entitled to vote generally in the election
of directors.
<PAGE>
SECTION 2. COMMON STOCK. The voting powers, preferences and relative,
participating, optional or other special rights of the Common Stock, and the
qualifications and restrictions thereon, shall be as follows in this Section 2.
SECTION 2.1 DIVIDENDS. Subject to any preferences and
relative, participating, optional or other special rights of any outstanding
class or series of preferred stock of the Corporation and any qualifications or
restrictions on either class of Common Stock created thereby, dividends may be
declared and paid upon either class of Common Stock, upon the terms with respect
to each such class, and subject to the limitations provided for below in this
Section 2.1, as the Board of Directors may determine.
(a) DIVIDENDS ON ANDRX STOCK. Dividends on Andrx Stock may be declared
and paid only out of the lesser of (i) the funds of the Corporation legally
available therefor and (ii) the Andrx Group Available Dividend Amount.
(b) DIVIDENDS ON CYBEAR STOCK. Dividends on Cybear Stock may be
declared and paid only out of the lesser of (i) the funds of the Corporation
legally available therefor and (ii) the Cybear Group Available Dividend Amount.
(c) DISCRIMINATION IN DIVIDENDS BETWEEN CLASSES OF COMMON STOCK. The
Board of Directors, subject to the provisions of Sections 2.1(a) and 2.1(b), may
at any time declare and pay dividends exclusively on Andrx Stock, exclusively on
Cybear Stock, or on both such classes, in equal or unequal amounts,
notwithstanding the relative amounts of the Available Dividend Amount with
respect to either Group, the amount of dividends previously declared on either
class, the respective voting or liquidation rights of either class or any other
factor.
(d) SHARE DISTRIBUTIONS. Except as permitted by Sections 2.4(a), the
Board of Directors may declare and pay dividends or distributions of shares of
Andrx Stock or Cybear Stock (or Convertible Securities convertible into or
exchangeable or exercisable for shares of Andrx Stock or Cybear Stock) on shares
of a class of Common Stock or shares of a class or series of preferred stock of
the Corporation only as follows:
(i) dividends or distributions of shares of Andrx Stock (or
Convertible Securities convertible into or exchangeable
or exercisable for shares of Andrx Stock) on shares of
Andrx Stock or shares of preferred stock attributed to
the Andrx Group;
(ii) dividends or distributions of shares of Cybear Stock (or
Convertible Securities convertible into or exchangeable
or exercisable for shares of Cybear Stock) on shares of
Cybear Stock or shares of preferred stock attributed to
the Cybear Group; and
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(iii) dividends or distributions of shares of Cybear Stock (or
Convertible Securities convertible into or exchangeable
or exercisable for shares of Cybear Stock) on shares of
Andrx Stock or shares of preferred stock attributed to
the Andrx Group, but only if the sum of (1) the number
of shares of Cybear Stock to be so issued (or the number
of such shares which would be issuable upon conversion,
exchange or exercise of any Convertible Securities to be
so issued) and (2) the number of shares of Cybear Stock
which are issuable upon conversion, exchange or exercise
of any Convertible Securities then outstanding that are
attributed to the Andrx Group is less than or equal to
the Number of Cybear Group Designated Shares.
SECTION 2.2 VOTING RIGHTS. (A) GENERAL. Except as otherwise provided by
law, by the terms of any outstanding class or series of preferred stock of the
Corporation or by any provision of the Certificate of Incorporation restricting
the power to vote on a specified matter to other stockholders, the entire voting
power of the stockholders of the Corporation shall be vested in the holders of
the Common Stock, who shall be entitled to vote on any matter on which the
holders of stock of the Corporation shall by law or by the provisions of the
Certificate of Incorporation or Bylaws of the Corporation (the "Bylaws"), be
entitled to vote, and both classes of Common Stock shall vote thereon together
as a single class.
(b) NUMBER OF VOTES FOR EACH CLASS OF COMMON STOCK. On each matter to
be voted on by the holders of both classes of Common Stock voting
together as a single class, the number of votes per share of each
class shall be as follows:
(i) each outstanding share of Andrx Stock shall have one vote;
and
(ii) each outstanding share of Cybear Stock shall have a number of
votes (including a fraction of one vote) equal to the
quotient (rounded to the nearest three decimal places) of the
average Market Value of one share of Cybear Stock during the
20-Trading-Day Period ending on the tenth Trading Day prior
to the record date for determining the stockholders entitled
to vote, divided by the average Market Value of a share of
Andrx Stock during such 20-Trading Day period; provided,
however, that in the event the foregoing calculation results
in the holders of Cybear Stock holding in excess of 30% of
the total voting power of all outstanding shares of Common
Stock, the vote of each share of Cybear Stock shall be
reduced such that all of the outstanding shares of Cybear
Stock in the aggregate represent 25% of the total voting
power of all outstanding shares of Common Stock.
Notwithstanding the foregoing, if shares of only one class of Common
Stock are outstanding on the record date for determining the holders of Common
Stock entitled to vote on any matter, then each share of that class shall be
entitled to one vote and, if either class of Common Stock is entitled to vote as
a separate class with respect to any matter, each share of that class shall, for
purpose of such vote, be entitled to one vote on such matter.
(c) CLASS VOTE OF CYBEAR STOCK. The holders of Cybear Stock, voting as
a separate class, shall be entitled to approve by the affirmative
vote of the holders of a majority of the outstanding shares any
amendment, alteration or repeal of any provision of the
Certificate of Incorporation which adversely affects the rights,
powers, or privileges of the Cybear Stock.
(d) CLASS VOTE OF ANDRX STOCK. The holders of Andrx Stock, voting as a
separate class, shall be entitled to approve by the affirmative
vote of the holders of a majority of the
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outstanding shares any amendment, alteration or repeal of any
provision of the Certificate of Incorporation which adversely
affects the rights, powers, or privileges of the Andrx Stock.
SECTION 2.3 LIQUIDATION RIGHTS. In the event of any voluntary or
involuntary dissolution, liquidation or winding up of the Corporation, after
payment or provision for payment of the debts and other liabilities of the
Corporation and the full preferential amounts (including any accumulated and
unpaid dividends) to which the holders of any outstanding shares of preferred
stock of the Corporation are entitled (regardless of the Group to which such
shares of preferred stock were attributed), the holders of the Andrx Stock and
Cybear Stock shall be entitled to receive the assets, if any, of the Corporation
remaining for distribution to holders of Common Stock on a per share basis
(regardless of the Group to which such assets are attributable) in proportion to
the respective liquidation units per share of such class. Each share of Andrx
Stock shall have one liquidation unit and each share of Cybear Stock shall have
a number of liquidation units (including a fraction of one liquidation unit)
equal to the quotient (rounded to the nearest five decimal places) of the
average Market Value of one share of Cybear Stock during the 20-Trading Day
period ending on the 40th Trading Day after the effective date of this
Certificate of Incorporation, divided by the average Market Value of one share
of Andrx Stock during such 20-Trading Day period. Neither the merger nor
consolidation of the Corporation into or with any other corporation, nor a sale,
transfer or lease of all or any part of the assets of the Corporation, shall,
alone, be deemed a liquidation or winding up of the Corporation or cause the
dissolution of the Corporation, for purposes of this Section 2.3.
If the Corporation shall in any manner subdivide (by stock split,
reclassification or otherwise) or combine (by reverse stock split,
reclassification or otherwise) the outstanding shares of Andrx Stock or Cybear
Stock, or declare a dividend in shares of either class to holders of such class,
the per share liquidation units of either class of Common Stock specified in the
preceding paragraph of this Section 2.3, as adjusted from time to time, shall be
appropriately adjusted as determined by the Board of Directors, so as to avoid
dilution in the aggregate, relative liquidation rights of the shares of any
class of Common Stock.
SECTION 2.4 CONVERSION OR REDEMPTION OF THE CYBEAR STOCK. Cybear Stock
is subject to conversion or redemption, in each case, upon the terms provided
below in this Section 2.4.
(a) MANDATORY AND OPTIONAL CONVERSION AND REDEMPTION OF CYBEAR STOCK
OTHER THAN FOR CYBEAR SUBSIDIARY Stock. (I) In the event of the
Disposition, in one transaction or a series of related
transactions, by the Corporation and/or its subsidiaries of all or
substantially all of the properties and assets attributed to the
Cybear Group to one or more persons or entities (other than the
Disposition (w) by the Corporation of all or substantially all of
its properties and assets in one transaction or a series of
related transactions in connection with the dissolution,
liquidation or winding up of the Corporation and the distribution
of assets to stockholders as referred to in Section 2.3, (x) of
the properties and assets attributed to the Cybear Group as
contemplated by Section 2.4(b) or otherwise to all holders of
shares of Cybear Stock divided among such holders on a pro rata
basis in accordance with the number of shares of Cybear Stock
outstanding, (y) to any person or entity controlled (as determined
by the Board of Directors) by the Corporation or (z) in connection
with a Related Business Transaction in respect of the Cybear
Group), the Corporation shall, on or prior to the 95th Trading Day
after the date of consummation of such Disposition (the
"Disposition Date"), pay a dividend on Cybear Stock or redeem some
or all of Cybear
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Stock or convert Cybear Stock into Andrx Stock (or another class
or series of common stock of the Corporation), all as provided by
the following Sections 2.4(a)(i)(1) and 2.4(a)(i)(2) and, to the
extent applicable, by Section 2.4(d), as the Board of Directors
shall have selected among such alternatives:
(1) provided that there are funds of the Corporation legally
available therefor:
(A) pay to the holders of the shares of Cybear Stock
a dividend pro rata in accordance with the number of shares of
Cybear Stock held by each such holder, as the Board of
Directors shall have declared subject to compliance with
Section 2.1, in cash and/or in securities (other than a
dividend of shares of a class of Common Stock) or other
property having a Fair Value as of the Disposition Date in the
aggregate equal to the Fair Value as of the Disposition Date
of the Net Proceeds of such Disposition; or
(B)(I) subject to the last sentence of this Section
2.4(a)(i), if such Disposition involves all (not merely
substantially all) of the properties and assets attributed to
the Cybear Group, redeem or exchange as of the Redemption Date
determined as provided by Section 2.4(d)(iii), all outstanding
shares of Cybear Stock in exchange for, on a pro rata basis,
cash and/or for securities (other than shares of a class of
Common Stock) or other property having a Fair Value as of the
Disposition Date in the aggregate equal to the Fair Value as
of the Disposition Date of the Net Proceeds of such
Disposition; or
(II) subject to the last sentence of this Section
2.4(a)(i), if such Disposition involves substantially all (but
not all) of the properties and assets attributed to the Cybear
Group, redeem or exchange as of the Redemption Date determined
as provided by Section 2.4(d)(iv) such number of whole shares
of Cybear Stock (which may be all, but not more than all, of
such shares outstanding) as have in the aggregate an average
Market Value during the period of ten consecutive Trading Days
beginning on the 26th Trading Day immediately succeeding the
Disposition Date closest to the Fair Value as of the
Disposition Date of the Net Proceeds of such Disposition in
consideration for, on a pro rata basis, cash and/or securities
(other than shares of a class of Common Stock) or other
property having a Fair Value as of the Disposition Date in the
aggregate equal to such product; or
(2) declare that each outstanding share of Cybear
Stock shall be converted as of the Conversion Date determined
as provided by Section 2.4(d)(vi) into a number of fully paid
and nonassessable shares of Andrx Stock (or, if Andrx Stock is
not Publicly Traded at such time and shares of another class
or series of common stock of the Corporation (other than
Cybear Stock) are then Publicly Traded, of such other class or
series of the common stock of the Corporation as has the
largest Market Capitalization as of the close of business on
the Trading Day immediately preceding the date of the notice
of such conversion required by Section 2.4(d)(vi)) equal to
110% of the ratio, expressed as a decimal fraction rounded to
the nearest five decimal places, of the average Market Value
of one share of Cybear Stock over the period of ten
consecutive Trading Days beginning on the 26th Trading Day
immediately succeeding the Disposition Date to the average
Market Value of one share of Andrx Stock (or such other class
or series of common stock) over the same ten Trading Day
period.
Notwithstanding the foregoing provisions of this Section 2.4(a)(i), the
Corporation shall redeem shares of a class of Common Stock as provided by
Section 2.4(a)(i)(1)(B)(I) or (II) only if the amount to be paid in redemption
of such stock is less than or equal to the Cybear Group Available Dividend
Amount as of the Redemption Date.
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(ii) For purposes of this Section 2.4(a): (1) as of any date,
"substantially all of the properties and assets"
attributed to the Cybear Group shall mean a portion of
such properties and assets (A) that represents at least
80% of the Fair Value of the properties and assets
attributed to the Cybear Group as of such date or (B)
from which were derived at least 80% of the aggregate
revenues for the immediately preceding twelve fiscal
quarterly periods of the Corporation (calculated on a
pro forma basis to include revenues derived from any of
such properties and assets acquired during such period)
derived from the properties and assets attributed to the
Cybear Group as of such date; (2) in the case of a
Disposition of the properties and assets attributed to
the Cybear Group in a series of related transactions,
such Disposition shall not be deemed to have been
consummated until the consummation of the last of such
transactions; and (3) the Board of Directors may pay any
dividend or redemption price referred to in Section
2.4(a)(i) in cash, securities (other than shares of a
class of Common Stock) or other property, regardless of
the form or nature of the proceeds of the Disposition.
(iii) The Board of Directors may, at any time or from time to
time after either the first anniversary of the Effective
Date or the occurrence of a Tax Event (defined below),
in its sole discretion declare that each outstanding
share of Cybear Stock shall be converted, as of the
Conversion Date provided by Section 2.4(d)(v), into a
number of fully paid and nonassessable shares of Andrx
Stock (or, if Andrx Stock is not Publicly Traded at such
time and shares of any other class or series of common
stock of the Corporation (other than Cybear Stock) are
then Publicly Traded, of such other class or series of
common stock of the Corporation that has the largest
Market Capitalization as of the close of business on the
fifth Trading Day immediately preceding the date of the
notice of conversion required by Section 2.4(d)(v))
equal the applicable percentage, on the Conversion Date
set forth below of the Market Value Ratio of Cybear
Stock to Andrx Stock as of the fifth Trading Day prior
to the date of the notice of such conversion required by
Section 2.4(d)(v):
Any Conversion Date
Occurring After the Following Anniversary Percentage of Market
Of the Effective Date and on or Prior Value Ratio of Cybear Stock
to the Next Such Anniversary to the Andrx Stock
----------------------------------------- ----------------------------
First 125%
Second 120%
Third 115%
Fourth and Thereafter 110%
However, if a Tax Event has occurred, such number of fully paid and
nonassessable shares shall equal 100% of such ratio.
(b) REDEMPTION OF CYBEAR STOCK FOR CYBEAR SUBSIDIARY STOCK AND
REDEMPTION OF ANDRX STOCK FOR ANDRX SUBSIDIARY STOCK. (I)
At any time at which all of the assets and liabilities
attributed to the Cybear Group (and no other assets or
liabilities of the Corporation or any subsidiary thereof)
are held directly or indirectly by one or more wholly-owned
subsidiaries of the Corporation (each, a "Cybear
Subsidiary"), the Board of Directors may, provided that
there are funds of the Corporation legally available
therefor, redeem all of the outstanding shares of Cybear
Stock, on a
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Redemption Date of which notice is delivered in accordance
with Section 2.4(d)(vi), in exchange for all of the shares
of common stock of each Cybear Subsidiary as will be
outstanding immediately following such exchange of shares,
such shares of common stock of each Cybear Subsidiary to be
delivered to the holders of shares of Cybear Stock on the
Redemption Date either directly or indirectly through the
delivery of shares of another Cybear Subsidiary that owns
directly or indirectly all such shares, and to be divided
among the holders of Cybear Stock pro rata in accordance
with the number of shares of Cybear Stock held by each such
holder on such Redemption Date, each of which shares of
common stock of such Cybear Subsidiary shall be, upon such
delivery, fully paid and nonassessable.
(ii) At any time at which all of the assets and liabilities
attributed to the Andrx Group (and no other assets or
liabilities of the Corporation or any subsidiary
thereof) are held directly or indirectly by one or
more wholly-owned subsidiaries of the Corporation
(each, a "Andrx Subsidiary"), the Board of Directors
may, provided that there are funds of the Corporation
legally available therefor, redeem all of the
outstanding shares of Andrx Stock, on a Redemption
Date of which notice is delivered in accordance with
Section 2.4(d)(vi), in exchange for all of the shares
of common stock of each Andrx Subsidiary as will be
outstanding immediately following such exchange of
shares, such shares of common stock of each Andrx
Subsidiary to be delivered to the holders of shares of
Andrx Stock on the Redemption Date either directly or
indirectly through the delivery of shares of another
Andrx Subsidiary that owns directly or indirectly all
such shares, and to be divided among the holders of
Andrx Stock pro rata in accordance with the number of
shares of common stock of such Andrx Subsidiary shall
be, upon such delivery, fully paid and nonassessable.
(c) TREATMENT OF CONVERTIBLE SECURITIES. After any Conversion
Date or Redemption Date on which all outstanding shares of
Cybear Stock are converted or redeemed, any share of such
class of Common Stock that is to be issued on conversion,
exchange or exercise of any Convertible Securities shall,
immediately upon such conversion, exchange or exercise and
without any notice from or to, or any other action on the
part of, the Corporation or its Board of Directors or the
holder of such Convertible Security:
(i) in the event the shares of Cybear Stock outstanding on
such Conversion Date were converted into shares of
Andrx Stock (or another class or series of common
stock of the Corporation) pursuant to Section
2.4(a)(i)(2) or 2.4(a)(iii), be converted into the
amount of cash and/or the number of shares of the kind
of capital stock and/or other securities or property
of the Corporation that number of shares of Andrx
Stock that were to be issued upon such conversion,
exchange or exercise would have received had such
shares been outstanding on such Conversion Date; or
(ii) in the event the shares of Cybear Stock outstanding on
such Redemption Date were redeemed pursuant to Section
2.4(a)(i)(1)(B)(I) or 2.4(b) to the extent of funds of
the Corporation legally available therefor, for $.0l
per share in cash for each share of Cybear Stock that
otherwise would be issued upon such conversion,
exchange or exercise.
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<PAGE>
The provisions of the preceding sentence of this Section 2.4(c) shall not apply
to the extent that other adjustments in respect of such conversion, exchange or
redemption of Cybear Stock are otherwise made pursuant to the provisions of such
Convertible Securities.
(d) NOTICE AND OTHER PROVISIONS.
(i) Not later than the 20th Trading Day following the
consummation of a Disposition referred to in Section
2.4(a)(i), the Corporation shall announce publicly by
press release (1) the estimated Net Proceeds of such
Disposition, (2) the number of shares outstanding of
Cybear Stock and (3) the number of shares of Cybear
Stock into or for which Convertible Securities are then
convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof. Not
earlier than the 36th Trading Day and not later than the
40th Trading Day following the consummation of such
Disposition, the Corporation shall announce publicly by
press release which of the actions specified in Section
2.4(a)(i), as the case may be, it has irrevocably
determined to take in respect of such Disposition.
(ii) If the Corporation determines to pay a dividend pursuant
to Section 2.4(a)(i)(1)(A), the Corporation shall, not
later than the 40th Trading Day following the
consummation of the Disposition referred to in such
Section, cause notice to be given to the holders of
shares of Cybear Stock and to each holder of Convertible
Securities that are convertible into or exchangeable or
exercisable for shares of Cybear Stock (unless alternate
provision for such notice to the holders of such
Convertible Securities is made pursuant to the terms of
such Convertible Securities), setting forth (1) the
record date for determining holders entitled to receive
such dividend, which shall be not earlier than the tenth
Trading Day and not later than the 20th Trading Day
following the date of such notice, (2) the anticipated
payment date of such dividend (which shall not be more
than 95 Trading Days following the consummation of such
Disposition), (3) the type of property to be paid as
such dividend in respect of the outstanding shares of
Cybear Stock, (4) the Net Proceeds of such Disposition,
(5) the number of outstanding shares of Cybear Stock and
the number of shares of such class of Common Stock into
or for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof and (6)
in the case of notice to be given to holders of
Convertible Securities, a statement to the effect that a
holder of such Convertible Securities shall be entitled
to receive such dividend only if such holder properly
converts, exchanges or exercises such Convertible
Securities on or prior to the record date referred to in
clause (1) of this sentence. Such notice shall be sent
by first-class mail, postage prepaid, to each such
holder at such holder's address as the same appears on
the transfer books of the Corporation on the record date
fixed for such notice.
(iii) If the Corporation determines to undertake a redemption
pursuant to Section 2.4(a)(i)(1)(B)(I), the Corporation
shall, not earlier than the 45th Trading Day and not
later than the 35th Trading Day prior to the Redemption
Date, cause notice to be given to the holders of shares
of Cybear Stock and to each holder of Convertible
Securities convertible into or exchangeable or
exercisable for shares of Cybear Stock (unless alternate
provision for such notice to the holders of such
Convertible Securities is made pursuant to the terms of
such Convertible Securities), setting forth (1) a
statement that all shares of Cybear Stock outstanding on
the Redemption Date shall be redeemed, (2) the
Redemption Date (which shall
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<PAGE>
not be more than 95 Trading Days following the
consummation of such Disposition), (3) the type of
property in which the redemption price for the shares of
Cybear Stock to be redeemed is to be paid, (4) the Net
Proceeds of such Disposition, (5) the place or places
where certificates for shares of Cybear Stock, properly
endorsed or assigned for transfer (unless the
Corporation waives such requirement), are to be
surrendered for delivery of cash and/or securities or
other property, (6) the number of outstanding shares of
Cybear Stock and the number of shares of Cybear Stock
into or for which outstanding Convertible Securities are
then convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof, (7) in
the case of notice to be given to holders of Convertible
Securities, a statement to the effect that a holder of
such Convertible Securities shall be entitled to
participate in such redemption only if such holder
properly converts, exchanges or exercises such
Convertible Securities on or prior to the Redemption
Date referred to in clause (2) of this sentence and a
statement as to what, if anything, such holder will be
entitled to receive pursuant to the terms of such
Convertible Securities or, if applicable, this Section
2.4 if such holder thereafter converts, exchanges or
exercises such Convertible Securities and (8) a
statement to the effect that, except as otherwise
provided by Section 2.4(d)(x), dividends on shares of
Cybear Stock shall cease to be paid as of such
Redemption Date. Such notice shall be sent by
first-class mail, postage prepaid, to each such holder
at such holder's address as the same appears on the
transfer books of the Corporation on the record date
fixed for such notice.
(iv) If the Corporation determines to undertake a redemption
pursuant to Section 2.4(a)(i)(1)(B)(II), the Corporation
shall, not later than the 40th Trading Day following the
consummation of the Disposition referred to in such
Section, cause notice to be given to the holders of
shares of Cybear Stock and to each holder of Convertible
Securities that are convertible into or exchangeable or
exercisable for shares of Cybear Stock (unless alternate
provision for such notice to the holders of such
Convertible Securities is made pursuant to the terms of
such Convertible Securities) setting forth (1) a date
not earlier than the tenth Trading Day and not later
than the 20th Trading Day following the date of such
notice on which shares of Cybear Stock shall be selected
for redemption, (2) the anticipated Redemption Date
(which shall not be more than 95 Trading Days following
the consummation of such Disposition), (3) the type of
property in which the redemption price for the shares to
be redeemed is to be paid, (4) the Net Proceeds of such
Disposition, (5) the number of shares of Cybear Stock
outstanding and the number of shares of Cybear Stock
into or for which outstanding Convertible Securities are
then convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof, (6) in
the case of notice to be given to holders of Convertible
Securities, a statement to the effect that a holder of
such Convertible Securities shall be eligible to
participate in such selection for redemption only if
such holder properly converts, exchanges or exercises
such Convertible Securities on or prior to the record
date referred to in clause (1) of this sentence, and a
statement as to what, if anything, such holder will be
entitled to receive pursuant to the terms of such
Convertible Securities or, if applicable, this Section
2.4 if such holder thereafter converts, exchanges or
exercises such Convertible Securities and (7) a
statement that the Corporation will not be required to
register a transfer of any shares of Cybear Stock for a
period of 15 Trading Days next preceding the date
referred to in clause (1) of this sentence. Promptly
following the date referred to
9
<PAGE>
in clause (1) of the preceding sentence, the Corporation
shall cause a notice to be given to each holder of
record of shares of Cybear Stock to be redeemed setting
forth (1) the number of shares of Cybear Stock held by
such holder to be redeemed, (2) a statement that such
shares of Cybear Stock shall be redeemed, (3) the
Redemption Date, (4) the kind and per share amount of
cash and/or securities or other property to be received
by such holder with respect to each share of Cybear
Stock to be redeemed, including details as to the
calculation thereof, (5) the place or places where
certificates for shares of Cybear Stock, properly
endorsed or assigned for transfer (unless the
Corporation shall waive such requirement), are to be
surrendered for delivery of such cash and/or securities
or other property, (6) if applicable, a statement to the
effect that the shares being redeemed may no longer be
transferred on the transfer books of the Corporation
after the Redemption Date and (7) a statement to the
effect that, subject to Section 2.4(d)(x), dividends on
Cybear Stock shall cease to be paid as of the Redemption
Date. Such notices shall be sent by first-class mail,
postage prepaid, to each such holder at such holder's
address as the same appears on the transfer books of the
Corporation on the record date fixed for such notice.
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<PAGE>
(v) If the Corporation determines to convert Cybear Stock
into Andrx Stock (or another class or series of common
stock of the Corporation) pursuant to Section
2.4(a)(i)(2) or 2.4(a)(iii), the Corporation shall not
earlier than the 45th Trading Day and not later than the
35th Trading Day prior to the Conversion Date cause
notice to be given to the holders of shares of Cybear
Stock and to each holder of Convertible Securities that
are convertible into or exchangeable or exercisable for
shares of Cybear Stock (unless alternate provision for
such notice to the holders of such Convertible
Securities is made pursuant to the terms of such
Convertible Securities) setting forth (1) a statement
that all outstanding shares of Cybear Stock shall be
converted, (2) the Conversion Date (which, in the case
of a conversion after a Disposition, shall not be more
than 95 Trading Days following the consummation of such
Disposition), (3) the per share number of shares of
Andrx Stock (or another class or series of common stock
of the Corporation) to be received with respect to each
share of Cybear Stock, including details as to the
calculation thereof, (4) the place or places where
certificates for shares of Cybear Stock, properly
endorsed or assigned for transfer (unless the
Corporation shall waive such requirement), are to be
surrendered for delivery of certificates for shares of
Cybear Stock, (5) the number of outstanding shares of
Cybear Stock and the number of shares of Cybear Stock
into or for which outstanding Convertible Securities are
then convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof, (6) a
statement to the effect that, subject to Section
2.4(d)(x), dividends on shares of Cybear Stock shall
cease to be paid as of such Conversion Date and (7) in
the case of notice to holders of such Convertible
Securities, a statement to the effect that a holder of
such Convertible Securities shall be entitled to receive
shares of Cybear Stock upon such conversion if such
holder properly converts, exchanges or exercises such
Convertible Securities on or prior to such Conversion
Date and a statement as to what, if anything, such
holder will be entitled to receive pursuant to the terms
of such Convertible Securities or, if applicable, this
Section 2.4 if such holder thereafter converts,
exchanges or exercises such Convertible Securities. Such
notice shall be sent by first-class mail, postage
prepaid, to each such holder at such holder's address as
the same appears on the transfer books of the
Corporation on the record date fixed for such notice.
(vi) If the Corporation determines to redeem shares of Cybear
Stock pursuant to Section 2.4(b)(i) or Andrx Stock
pursuant to Section 2.4(b)(ii), the Corporation shall
cause notice to be given to each holder of shares of
such class of Common Stock to be redeemed and to the
holders of Convertible Securities that are convertible
into or exchangeable or exercisable for shares of such
class of Common Stock (unless alternate provision for
such notice to the holders of such Convertible
Securities is made pursuant to the terms of such
Convertible Securities), setting forth (1) a statement
that all shares of Common Stock outstanding on the
Redemption Date shall be redeemed in exchange for shares
of common stock of each Cybear Subsidiary or Andrx
Subsidiary, as applicable, (2) the Redemption Date, (3)
the place or places where certificates for shares of the
class of Common Stock to be redeemed, properly endorsed
or assigned for transfer (unless the Corporation shall
waive such requirement), are to be surrendered for
delivery of certificates for shares of common stock of
each Cybear Subsidiary or Andrx Subsidiary, as
applicable, (4) a statement to the effect that, subject
to Section 2.4(d)(x), dividends on shares of such class
of Common Stock being redeemed shall cease to be paid as
of such Redemption Date, (5) the number of
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<PAGE>
shares of such class of Common Stock outstanding and the
number of shares of such class of Common Stock into or
for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the
conversion, exchange or exercise price thereof and (6)
in the case of notice to holders of Convertible
Securities, a statement to the effect that a holder of
Convertible Securities shall be entitled to receive
shares of common stock of each Cybear Subsidiary, or
Andrx Subsidiary, as applicable upon redemption only if
such holder properly converts, exchanges or exercises
such Convertible Securities on or prior to the
Redemption Date and a statement as to what, if anything,
such holder will be entitled to receive pursuant to the
terms of such Convertible Securities or, if applicable,
this Section 2.4(d), if such holder thereafter converts,
exchanges or exercises such Convertible Securities. Such
notice shall be sent by first-class mail, postage
prepaid, not less than 35 Trading Days nor more than 45
Trading Days prior to the Redemption Date to each such
holder at such holder's address as the same appears on
the transfer books of the Corporation on the record date
fixed for such notice.
(vii) If less than all of the outstanding shares of Cybear
Stock are to be redeemed pursuant to Section
2.4(a)(i)(1), the shares to be redeemed by the
Corporation shall be selected from among the holders of
shares of Cybear Stock outstanding at the close of
business on the record date for such redemption on a pro
rata basis among all such holders or by lot or by such
other method as may be determined by the Board of
Directors to be equitable.
(viii) The Corporation shall not be required to issue or
deliver fractional shares of any capital stock or of
any other securities to any holder of Cybear Stock upon
any conversion, redemption, dividend or other
distribution pursuant to this Section 2.4. If more than
one share of Cybear Stock shall be held at the same
time by the same holder, the Corporation may aggregate
the number of shares of any capital stock that shall be
issuable or any other securities or property that shall
be distributable to such holder upon any conversion,
redemption, dividend or other distribution (including
any fractional shares). If fractional shares of any
capital stock or of any other securities would be
required to be issued or distributed to the holders of
Cybear Stock, the Corporation shall, if such fractional
shares are not issued or distributed. to the holder,
pay cash in respect of such fractional shares in an
amount equal to the Fair Value thereof (without
interest).
(ix) No adjustments in respect of dividends shall be made
upon the conversion or redemption of any shares of
Cybear Stock; provided, however, that if the Conversion
Date or Redemption Date, as the case may be, with
respect to any shares of Cybear Stock shall be
subsequent to the record date for the payment of a
dividend or other distribution thereon or with respect
thereto, the holders of Cybear Stock at the close of
business on such record date shall be entitled to
receive the dividend or other distribution payable on or
with respect to such shares on the date set for payment
of such dividend or other distribution, in each case
without interest, notwithstanding the subsequent
conversion or redemption of such shares.
(x) Before any holder of shares of Cybear Stock shall be
entitled to receive any cash payment and/or certificates
or instruments representing shares of any capital stock
and/or other securities or property to be distributed to
such holder with respect to
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<PAGE>
Cybear Stock pursuant to this Section 2.4, such holder
shall surrender at such place as the Corporation shall
specify certificates for such shares of Cybear Stock,
properly endorsed or assigned for transfer (unless the
Corporation shall waive such requirement). The
Corporation shall as soon as practicable after receipt
of certificates representing such shares of Cybear Stock
deliver to the person for whose account such shares of
Cybear Stock were so surrendered, or to such person's
nominee or nominees, the cash and/ or the certificates
or instruments representing the number of whole shares
of the kind of capital stock and/or other securities or
property to which such person shall be entitled as
aforesaid, together with any payment in respect of
fractional shares contemplated by Section 2.4(d)(ix), in
each case without interest. If less than all of the
shares of Cybear Stock represented by any one
certificate are to be redeemed, the Corporation shall
issue and deliver a new certificate for the shares of
Cybear Stock not redeemed.
(xi) From and after any applicable Conversion Date or
Redemption Date, as the case may be, all rights of a
holder of shares of Cybear Stock that were converted or
redeemed shall cease except for the right, upon
surrender of the certificates representing such shares
of Cybear Stock as required by Section 2.4(d)(xi), to
receive the cash and/or the certificates or instruments
representing shares of the kind and amount of capital
stock and/or other securities or property for which such
shares were converted or redeemed, together with any
payment in respect of fractional shares contemplated by
Section 2.4(d)(viii) (which shall be held by the
Corporation for the holder of such shares of Cybear
Stock that were redeemed until the receipt of
certificates representing such shares of Cybear Stock as
provided in Section 2.4(d)(xi)) and rights to dividends
as provided in Section 2.4(d)(x), in each case without
interest. No holder of a certificate that immediately
prior to the applicable Conversion Date or Redemption
Date represented shares of a class of Cybear Stock shall
be entitled to receive any dividend or other
distribution or interest payment with respect to shares
of any kind of capital stock or other security or
instrument for which Cybear Stock was converted or
redeemed until the surrender as required by this Section
2.4 of such certificate in exchange for a certificate or
certificates or instrument or instruments representing
such capital stock or other security. Subject to
applicable escheat and similar laws, upon such
surrender, there shall be paid to the holder the amount
of any dividends or other distributions (without
interest) which theretofore became payable on any class
or series of capital stock of the Corporation as of a
record date after the Conversion Date or Redemption
Date, but that were not paid by reason of the foregoing,
with respect to the number of whole shares of the kind
of capital stock represented by the certificate or
certificates issued upon such surrender. From and after
a Conversion Date or Redemption Date, the Corporation
shall, however, be entitled to treat the certificates
for Cybear Stock that have not yet been surrendered for
conversion or redemption as evidencing the ownership of
the number of whole shares of the kind or kinds of
capital stock of the Corporation for which the shares of
Cybear Stock represented by such certificates shall have
been converted or redeemed, notwithstanding the failure
to surrender such certificates.
(xii) The Corporation shall pay any and all documentary, stamp
or similar issue or transfer taxes that may be payable
in respect of the issuance or delivery of any shares of
capital stock and/or other securities upon conversion or
redemption of shares of Cybear Stock pursuant to this
Section 2.4. The Corporation shall not,
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<PAGE>
however, be required to pay any tax that may be payable
in respect of any transfer involved in the issuance or
delivery of any shares of capital stock and/or other
securities in a name other than that in which the shares
of Cybear Stock so converted or redeemed were
registered, and no such issuance or delivery shall be
made unless and until the person requesting such
issuance or delivery has paid to the Corporation the
amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been
paid.
(xiii) Neither the failure to mail any notice required by this
Section 2.4 to any particular holder of Cybear Stock or
of Convertible Securities nor any defect therein shall
affect the sufficiency thereof with respect to any
other holder of outstanding shares of Cybear Stock or
of Convertible Securities or the validity of any such
conversion or redemption.
(xiv) The Board of Directors may establish such rules and
requirements to facilitate the effectuation of the
transactions contemplated by this Section 2.4 as the
Board of Directors shall determine to be appropriate.
SECTION 2.5 APPLICATION OF THE PROVISIONS OF ARTICLE IV.
(a) CERTAIN DETERMINATIONS BY THE BOARD OF DIRECTORS. The Board of
Directors shall make such determinations with respect to the
businesses, assets, properties and liabilities to be attributed
to the Groups, the application of the provisions of the
Certificate of Incorporation to transactions to be engaged in by
the Corporation and the voting powers, preferences and relative,
participating, optional and other special rights of the holders
of Cybear Stock, and the qualifications and restrictions thereon,
provided by the Certificate of Incorporation as may be or become
necessary or appropriate to the exercise of such powers,
preferences and relative, participating, optional and other
special rights, including, without limiting the foregoing, the
determinations referred to in this Section 2.5. A record of any
such determination shall be filed with the records of the actions
of the Board of Directors.
(i) Upon any acquisition by the Corporation or its subsidiaries
of any assets or business, or any assumption of
liabilities, outside of the ordinary course of business of
the Andrx Group or the Cybear Group, as the case may be,
the Board of Directors shall determine whether such assets,
business and liabilities (or an interest therein) shall be
for the benefit of the Andrx Group or the Cybear Group or
that an interest therein shall be partly for the benefit of
the Andrx Group and partly for the benefit of the Cybear
Group and, accordingly, shall be attributed to the Andrx
Group or the Cybear Group, or partly to each, in accordance
with Section 2.6(c) or 2.6(f), as the case may be.
(ii) Upon any issuance of any shares of Cybear Stock at a time
when the Number of Cybear Group Designated Shares is
greater than zero, the Board of Directors shall determine,
based on the use of the proceeds of such issuance and any
other relevant factors, whether all or any part of the
shares of Cybear Stock so issued shall reduce the Number of
Cybear Group Designated Shares and the Number of Cybear
Group Designated Shares shall be adjusted accordingly.
(iii) Upon any issuance by the Corporation or any subsidiary
thereof of any Convertible Securities that are convertible
into or exchangeable or exercisable for
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<PAGE>
shares of Cybear Stock, if at the time such Convertible
Securities are issued the Number of Cybear Group Designated
Shares is greater than zero, the Board of Directors shall
determine, based on the use of the proceeds of such
issuance and any other relevant factors, whether, upon
conversion, exchange or exercise thereof, the issuance of
shares of Cybear Stock pursuant thereto shall, in whole or
in part, reduce the Number of Cybear Group Designated
Shares and the Number of Cybear Group Designated Shares
shall be adjusted accordingly.
(iv) Upon any issuance of any shares of any class or series of
preferred stock of the Corporation, the Board of Directors
shall attribute, based on the use of proceeds of such
issuance of shares of preferred stock in the business of
the Andrx Group or the Cybear Group and any other relevant
factors, the shares so issued entirely to the Andrx Group
or entirely to the Cybear Group or partly to the Andrx
Group also partly to the Cybear Group in such proportion as
the Board of Directors shall determine.
(v) Upon any redemption or repurchase by the Corporation or any
subsidiary thereof of shares of preferred stock of any
class or series or of other securities or debt obligations
of the Corporation, the Board of Directors shall determine,
based on the property used to redeem or purchase such
shares, other securities or debt obligations, which, if
any, of such shares, other securities or debt obligations
redeemed or repurchased shall be attributed to the Andrx
Group and which, if any, of such shares, other securities
or debt obligations shall be attributed to the Cybear Group
and, accordingly, how many of the shares of such class or
series of preferred stock or of such other securities, or
how much of such debt obligations, that remain outstanding,
if any, are thereafter attributed to the Andrx Group or the
Cybear Group.
(b) SOURCES OF DIVIDENDS AND DISTRIBUTIONS; USE OF PROCEEDS OF SHARE
ISSUANCES. Notwithstanding the attribution of properties or
assets of the Corporation to the Andrx Group or Cybear Group as
provided by Section 2.6(c) or Section 2.6(f), but subject to the
limitations of Section 2.1(a), 2.1(b), and 2.1(d), the Board of
Directors (i) may cause dividends or distributions or other
payments to the holders of any class of Common Stock or any class
or series of Preferred Stock to be made out of the properties or
assets attributed to any Group, subject, however, to any contrary
term or any series of Preferred Stock fixed in accordance with
Section 3, and (ii) may cause the proceeds of issuance of any
shares of Andrx Stock or Cybear Stock or any class or series of
Preferred Stock, to whichever Group attributable in accordance
with Section 2.5(a)(iv), to be used in the business of, and to be
attributed either to the Andrx Group in accordance with Section
2.6(c) or to the Cybear Group in accordance with Section 2.6(f).
(c) CERTAIN DETERMINATIONS NOT REQUIRED. Notwithstanding the
foregoing provisions of this Section 2.5, the provisions of
Section 2.6(c) or 2.6(f) or any other provision of the
Certificate of Incorporation, at any time when there are not
outstanding both (i) one or more shares of Andrx Stock or
Convertible Securities convertible into or exchangeable or
exercisable for Andrx Stock and (ii) one or more shares of Cybear
Stock or Convertible Securities convertible into or exchangeable
or exercisable for Cybear Stock, the Corporation need not (A)
attribute any of the assets or liabilities of the Corporation or
any of its subsidiaries to the Andrx Group or the Cybear Group or
(B)
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make any determination required in connection therewith, nor
shall the Board of Directors be required to make any of the
determinations otherwise required by this Article, and in such
circumstances the holders of the shares of Andrx Stock and Cybear
Stock outstanding, as the case may be, shall (unless otherwise
specifically provided by the Certificate of Incorporation) be
entitled to all the voting powers, preferences and relative,
participating, optional and other special rights of both classes
of Common Stock without differentiation between the Andrx Stock
and the Cybear Stock.
(d) BOARD DETERMINATIONS BINDING. Subject to applicable law, any
determinations made in good faith by the Board of Directors of
the Corporation under any provision of this Section 2.5 or
otherwise in furtherance of the application of this Section 2
shall be final and binding on all stockholders.
SECTION 2.6 CERTAIN DEFINITIONS. As used in the Certificate of
Incorporation, the following terms shall have the following meanings (with terms
defined in the singular having comparable meaning when used in the plural and
vice versa), unless the context otherwise requires. As used in this Section 2.6,
a "contribution" or "transfer" of assets or properties from one Group to another
shall refer to the reattribution of such assets or properties from the
contributing or transferring Group to the other Group and correlative phrases
shall have correlative meanings.
(a) ANDRX CORPORATION EARNINGS (LOSS) ATTRIBUTABLE TO THE ANDRX GROUP
shall mean, for any period through any date, (i) the net income
or loss of the Andrx Group for such period determined in
accordance with generally accepted accounting principles in
effect at such time, reflecting income and expense of the
Corporation attributed to the Andrx Group on a basis
substantially consistent with attributions of income and expense
made in the calculation of Andrx Corporation Earnings (Loss)
Attributable to the Cybear Group, including, without limitation,
corporate administrative costs, net interest and other financial
costs and income taxes, increased by (ii) the amount reducing
Andrx Corporation Earnings (Loss) Attributable to the Cybear
Group for such period pursuant to clause (ii) of Section 2.6(b).
(b) ANDRX CORPORATION EARNINGS (LOSS) ATTRIBUTABLE TO THE CYBEAR
GROUP shall mean, for any period through any date, (i) the net
income or loss of the Cybear Group for such period determined in
accordance with generally accepted accounting principles in
effect at such time, reflecting income and expense of the
Corporation attributed to the Cybear Group on a basis
substantially consistent with attributions of income and expense
made in the calculation of Andrx Group Earnings (Loss)
Attributable to the Andrx Corporation, including, without
limitation, corporate administrative costs, net interest and
other financial costs and income taxes, reduced by (ii) the
aggregate amount of consolidated allowable tax benefits for
federal income tax purposes generated by the Cybear Group for
such period which cannot be utilized by the Cybear Group but can
be utilized by the Corporation on a consolidated basis for such
period to the extent such amount was included in the calculation
of net income or loss under clause (i) for such period
("Excludable Cybear Group Tax Benefits").
(c) ANDRX GROUP shall mean, as of any date:
(i) the interest of the Corporation or any of its subsidiaries
on such date in all of the businesses, assets, properties
and liabilities of the Corporation or any of its
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subsidiaries (and any successor companies), other than any
businesses, assets, properties and liabilities attributed
in accordance with this Article to the Cybear Group;
(ii) all businesses, assets, properties and liabilities
transferred to the Andrx Group from the Cybear Group (other
than in a transaction pursuant to Section 2.6(c)(iii))
pursuant to transactions in the ordinary course of business
of the Andrx Group and the Cybear Group or otherwise as the
Board of Directors may have directed as permitted by the
Certificate of Incorporation;
(iii) all properties and assets transferred to the Andrx Group
from the Cybear Group in connection with a reduction of the
Number of Cybear Group Designated Shares; and
(iv) the interest of the Corporation or any of its subsidiaries
in any business or asset acquire d and any liabilities
assumed by the Corporation or any of its subsidiaries
outside of the ordinary course of business and attributed
to the Andrx Group, as determined by the Board of Directors
as contemplated by Section 2.5(a)(i);
provided that from and after any transfer of any assets or properties
from the Andrx Group to the Cybear Group, the Andrx Group shall no longer
include such assets or properties so transferred.
(d) ANDRX GROUP AVAILABLE DIVIDEND AMOUNT shall mean, on any date,
either:
(i) the amount equal to the fair market value of the total
assets attributed to the Andrx Group less the total
liabilities attributed to the Andrx Group (provided that
preferred stock shall not be treated as a liability), in
each case, as of such date and determined on a basis
consistent with that applied in determining Andrx Group
Earnings (Loss) Attributable to the Andrx Group, minus (ii)
the aggregate par value of, or any greater amount
determined in accordance with applicable law to be capital
in respect of, all outstanding shares of Andrx Stock and
each class or series of preferred stock attributed in
accordance with the Certificate of Incorporation to the
Andrx Group, or
(ii) in case the total amount calculated pursuant to clause (i)
above is not a positive number, an amount equal to Andrx
Group Earnings (Loss) Attributable to the Andrx Group (if
positive) for the fiscal year in which the dividend is
declared and/or the preceding fiscal year.
Notwithstanding the foregoing provisions of this Section 2.6(d), and consistent
with Section 2.5(c), at any time when there are not outstanding both (i) one or
more shares of Andrx Stock or Convertible Securities convertible into or
exchangeable or exercisable for Andrx Stock and (ii) one or more shares of
Cybear Stock or Convertible Securities convertible into or exchangeable or
exercisable for Cybear Stock, the "Available Dividend Amount," on any
calculation date during such time period, with respect to the Andrx Stock or the
Cybear Stock, as the case may be (depending on which of such classes of Common
Stock or Convertible Securities convertible into or exchangeable or exercisable
for Cybear Stock is outstanding), shall mean the amount available for the
payment of dividends on such Common Stock in accordance with law.
(e) AVAILABLE DIVIDEND AMOUNT shall mean, as the context requires, a
reference to the Andrx Group Available Dividend Amount or the
Cybear Group Available Dividend Amount.
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(f) CYBEAR GROUP shall mean, as of any date:
(i) the interest of the Corporation on such date in Cybear,
Inc., (the "Cybear Company"), any successor companies, and
all of the businesses, assets and liabilities of the Cybear
Company and any subsidiaries thereof;
(ii) all assets and liabilities of the Corporation and its
subsidiaries attributed by the Board of Directors to the
Cybear Group, whether or not such assets or liabilities are
or were also assets and liabilities of the Cybear Company;
(iii) all businesses, assets, properties and liabilities
transferred to the Cybear Group from the Andrx Group (other
than in a transaction pursuant to Section 2.6(f)(iv))
pursuant to transactions in the ordinary course of business
of the Cybear Group and the Andrx Group or otherwise as the
Board of Directors may have directed as permitted by the
Certificate of Incorporation;
(iv) all properties and assets transferred to the Cybear Group
from the Andrx Group in connection with an increase in the
Number of Cybear Group Designated Shares; and
(v) the interest of the Corporation or any of its subsidiaries
in any business or asset acquired and any liabilities
assumed by the Corporation or any of its subsidiaries
outside of the ordinary course of business and attributed
to the Cybear Group, as determined by the Board of
Directors as contemplated by Section 2.5(a)(i);
provided that from and after any transfer of any assets or properties from the
Cybear Group to the Andrx Group, the Cybear Group shall no longer include such
assets or properties so transferred.
(g) CYBEAR GROUP AVAILABLE DIVIDEND AMOUNT shall mean, on any date,
either:
(i) an amount equal to the fair market value of the total
assets attributed to the Cybear Group less the total
liabilities attributed to the Cybear Group (provided that
preferred stock shall not be treated as a liability), in
each case, as of such date and determined on a basis
consistent with that applied in determining Andrx
Corporation Earnings (Loss) Attributable to the Cybear
Group, minus (ii) the aggregate par value of, or any
greater amount determined in accordance with applicable law
to be capital in respect of, all outstanding shares of
Cybear Stock and each class or series of preferred stock
attributed in accordance with the Certificate of
Incorporation to the Cybear Group, or
(ii) in case the total amount calculated pursuant to clause (i)
above is not a positive number, an amount equal to Andrx
Corporation Earnings (Loss) Attributable to the Cybear
Group (if positive) for the fiscal year in which the
dividend is declared and/or the preceding fiscal year.
Notwithstanding the foregoing provisions of this Section 2.6(g), and consistent
with Section 2.5(c), at any time when there are not outstanding both (i) one or
more shares of Andrx Stock or Convertible Securities convertible into or
exchangeable or exercisable for Andrx Stock and (ii) one or more shares of
Cybear Stock or Convertible Securities convertible into or exchangeable or
exercisable for Cybear Stock, the "Available Dividend Amount," on any
calculation date during such time period, with respect to the Andrx Stock or the
Cybear Stock, as the case may be (depending on which of such classes of Common
Stock or Convertible
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<PAGE>
Securities convertible into or exchangeable or exercisable for Cybear Stock is
outstanding), shall mean the amount available for the payment of dividends on
such Common Stock in accordance with law.
(h) CONVERSION DATE shall mean the date fixed by the Board of
Directors as the effective date for the conversion of shares of
Cybear Stock into shares of Andrx Stock (or another class or
series of common stock of the Corporation) as shall be set forth
in the notice to holders of shares of Cybear Stock and to holders
of any Convertible Securities that are convertible into or
exchangeable or exercisable for shares of Cybear Stock required
pursuant to Section 2.4(d)(vi).
(i) CONVERTIBLE SECURITIES shall mean, as of any date, any securities
of the Corporation or of any subsidiary thereof (other than
shares of a class of Common Stock), including warrants and
options, outstanding at such time that by their terms are
convertible into or exchangeable or exercisable for or evidence
the right to acquire any shares of Andrx Stock or Cybear Stock,
whether convertible, exchangeable or exercisable at such time or
a later time or only upon the occurrence of certain events;
provided that securities shall only be Convertible Securities in
respect of the number of shares of Common Stock into or for which
such securities are then convertible, exchangeable or
exercisable.
(j) DISPOSITION shall mean a sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or
contribution of assets or stock or otherwise) of properties or
assets (including stock, other securities and goodwill).
(k) EFFECTIVE DATE shall mean the date on which the Certificate of
Incorporation shall become effective.
(l) FAIR VALUE shall mean, (i) in the case of equity securities or
debt securities of a class or series that has previously been
Publicly Traded, the Market Value thereof (if such Market Value,
as so defined, can be determined); (ii) in the case of an equity
security or debt security for the Market Value of which cannot be
determined, the fair value per share of stock or per other unit
of such security, on a fully distributed basis, as determined by
an independent investment banking firm experienced in the
valuation of securities selected in good faith by the Board of
Directors, or, if no such investment banking firm is, as
determined in the good faith judgment of the Board of Directors,
available to make such determination, in good faith by the Board
of Directors; (iii) in the case of cash denominated in U.S.
dollars, the face amount thereof and in the case of cash
denominated in other than U.S. dollars, the face amount thereof
converted into U.S. dollars at the rate published in The Wall
Street Journal on the date for the determination of Fair Value
or, if not so published, at such rate as shall be determined in
good faith by the Board of Directors based upon such information
as the Board of Directors shall in good faith determine to be
appropriate; and (iv) in the case of property other than
securities or cash, the "Fair Value" thereof shall be determined
in good faith by the Board of Directors based upon such
appraisals or valuation reports of such independent experts as
the Board of Directors shall in good faith determine to be
appropriate. Any such determination of Fair Value shall be
described in a statement filed with the records of the actions of
the Board of Directors.
(m) GROUP shall mean, as of any date, the Andrx Group or the Cybear
Group, as the case may be.
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(n) MARKET CAPITALIZATION of any class or series of capital stock on
any date shall mean the product of (i) the Market Value of one
share of such class or series of capital stock on such date and
(ii) the number of shares of such class or series of capital
stock outstanding on such date.
(o) MARKET VALUE of a share of any class or series of capital stock
of the Corporation on any day shall mean the average of the high
and low reported sales prices regular way of a share of such
class or series on such Trading Day or, in case no such reported
sale takes place on such Trading Day, the average of the reported
closing bid and asked prices regular way of a share of such class
or series on such Trading Day, in either case as reported on the
New York Stock Exchange Composite Tape or, if the shares of such
class or series are not listed or admitted to trading on such
Exchange on such Trading Day, on the principal national
securities exchange in the United States on which the shares of
such class or series are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange
on such Trading Day, on the Nasdaq National Market or, if the
shares of such class or series are not fisted or admitted to
trading on any national securities exchange or quoted on the
Nasdaq National Market on such Trading Day, the average of the
closing bid and asked prices of a share of such class or series
in the over-the-counter market on such Trading Day as furnished
by any New York Stock Exchange member firm selected from time to
time by the Corporation or, if such closing bid and asked prices
are not made available by any such New York Stock Exchange member
firm on such Trading Day, the Fair Value of a share of such class
or series as set forth in clause (ii) of the definition of Fair
Value; provided that, for purposes of determining the "Market
Value" of a share of any class or series of capital stock for any
period, (i) the "Market Value" of a share of capital any day
prior to any "ex-dividend" date or any similar date occurring
during such period for any dividend or distribution (other than
any dividend or distribution contemplated by clause (ii)(B) of
this sentence) paid or to be paid with respect to such capital
stock shall be reduced by the Fair Value of the per share amount
of such dividend or distribution and (ii) the "Market Value" of
any share of capital stock on any day prior to (A) the effective
date of any subdivision (by stock split or otherwise) or
combination (by reverse stock split or otherwise) of outstanding
shares of such class or series of capital stock occurring during
such period or (B) any "ex-dividend" date or any similar date
occurring during such period for any dividend or distribution
with respect to such capital stock to be made in shares of such
class or series of capital stock or Convertible Securities that
are convertible, exchangeable or exercisable for such class or
series of capital stock shall be appropriately adjusted, as
determined by the Board of Directors, to reflect such
subdivision, combination, dividend or distribution.
(p) MARKET VALUE RATIO OF CYBEAR STOCK TO ANDRX STOCK as of any date
shall mean the fraction (which may be greater or less than 1/1),
expressed as a decimal (rounded to the nearest five decimal
places), of a share of Andrx Stock (or another class or series of
common stock of the Corporation, if so provided by Section
2.4(a)(iii) because Andrx Stock is not then Publicly Traded) to
be issued in respect of a share of Cybear Stock upon a conversion
of Cybear Stock into Andrx Stock (or another class or series of
common stock of the Corporation) in accordance with Section
2.4(a)(iii), the numerator of which shall be the average Market
Value of one share of Cybear Stock during the 20-Trading Day
period ending on such date and the denominator of which
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<PAGE>
shall be the average Market Value of one share of Andrx Stock (or
such other common stock) during the 20-Trading Day period ending
on such date.
(q) NET PROCEEDS shall mean, as of any date with respect to any
Disposition of any of the properties and assets distributed to
the Cybear Group, an amount, if any, equal to what remains of the
gross proceeds of such Disposition after payment of, or
reasonable provision is made as determined by the Board of
Directors for, (i) any taxes payable by the Corporation (or which
would have been payable but for the utilization of tax benefits
attributable to the other Group) in respect of such Disposition
or in respect of any resulting dividend or redemption pursuant to
Section 2.4(a)(i)(1)(A) or 2.4(a)(i)(1)(B), (ii) any transaction
costs, including, without limitation, any legal, investment
banking and accounting fees and expenses and (iii) any
liabilities (contingent or otherwise) of or attributed to such
Group, including, without limitation, any liabilities for
deferred taxes or any indemnity or guarantee obligations of the
Corporation incurred in connection with the Disposition or
otherwise, and any liabilities for future purchase price
adjustments and any preferential amounts plus any accumulated and
unpaid dividends in respect of the preferred stock attributed to
such Group. For purposes of this definition, any properties and
assets attributed to the Group, the properties and assets of
which are subject to such Disposition, remaining after such
Disposition shall constitute "reasonable provision" for such
amount of taxes, costs and liabilities (contingent or otherwise)
as the Board of Directors determines can be expected to be
supported by such properties and assets.
(r) NUMBER OF CYBEAR GROUP DESIGNATED SHARES shall be, as of the date
of the Effective Date, zero; provided, however, that the "Number
of Cybear Group Designated Shares" shall from time to time
thereafter be:
(i) adjusted, if before such adjustment such number is greater
than zero, as determined by the Board of Directors to be
appropriate to reflect equitably any subdivision (by stock
split or otherwise) or combination (by reverse stock split
or otherwise) of the Cybear Stock or any dividend or other
distribution of shares of Cybear Stock to holders of shares
of Cybear Stock or any reclassification of Cybear Stock,
(ii) decreased (but to not less than zero), if before such
adjustment such number is greater than zero, by action of
the Board of Directors by (1) the number of shares of
Cybear Stock issued or sold by the Corporation that,
immediately prior to such issuance or sale, were included
in the Number of Cybear Group Designated Shares, (2) the
number of shares of Cybear Stock issued upon conversion,
exchange or exercise of Convertible Securities that,
immediately prior to the issuance or sale of such
Convertible Securities, were included in the Number of
Cybear Group Designated Shares, (3) the number of shares of
Cybear Stock issued by the Corporation as a dividend or
other distribution (including in connection with any
reclassification or exchange of shares) to holders of Andrx
Stock, (4) the number of shares of Cybear Stock issued upon
the conversion, exchange or exercise of any Convertible
Securities issued by the Corporation as a dividend or other
distribution (including in connection with any
reclassification or exchange of shares) to holders of Andrx
Stock, and (5) the number (rounded, if necessary, to the
nearest whole number) equal to the quotient of (A) the
aggregate Fair Value as of the date of contribution of
properties or assets (including cash) transferred from
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<PAGE>
the Cybear Group to the Andrx Group in consideration for a
reduction in the Number of Cybear Group Designated Shares
divided by (B) the average Market Value of one share of
Cybear Stock during the 20-Trading Day period ending on the
date immediately prior to the date of such transfer, and
(iii) increased by the number (rounded, if necessary, to the
nearest whole number) equal to the quotient of (A) the Fair
Value of properties or assets (including cash) theretofore
attributed as provided by Section 2.6(c) to the Andrx Group
that are contributed to the Cybear Group in consideration
of an increase in the Number of Cybear Group Designated
Shares divided by (B) the average Market Value of one share
of Cybear Stock during the 20-Trading Day period ending on
the date immediately prior to the date of such
contribution.
(s) PUBLICLY TRADED with respect to any security shall mean that such
security is (i) registered under Section 12 of the Securities
Exchange Act of 1934, as amended (or any successor provision of
law), and (ii) listed for trading on the New York Stock Exchange
or the American Stock Exchange (or any national securities
exchange registered under Section 7 of the Securities Exchange
Act of 1934, as amended (or any successor provision of law), that
is the successor to either such exchange) or fisted on The Nasdaq
Stock Market (or any successor market system).
(t) REDEMPTION DATE shall mean the date fixed by the Board of
Directors as the effective date for a redemption of shares of
Cybear Stock, as set forth in a notice to holders thereof
required pursuant to Section 2.4(d)(iv), (v), (vi) or (vii).
(u) RELATED BUSINESS TRANSACTION means any Disposition of all or
substantially all the proper-ties and assets attributed to the
Andrx Group or the Cybear Group, as the case may be, in a
transaction or series of related transactions that result in the
Corporation receiving in consideration of such properties and
assets primarily equity securities (including, without
limitation, capital stock, debt securities convertible into or
exchangeable for equity securities or interests in a general or
limited partnership or limited liability company, without regard
to the voting power or other management or governance rights
associated therewith) of any entity which (i) acquires such
properties or assets or succeeds (by merger, formation of a joint
venture or otherwise) to the business conducted with such
properties or assets or controls such acquiror or successor and
(ii) is engaged primarily or proposes to engage primarily in one
or more businesses similar or complementary to the businesses
conducted by such Group prior to such Disposition, as determined
by the Board of Directors.
(v) TAX EVENT shall mean the receipt by the Corporation of an opinion
of tax counsel to the Corporation experienced in such matters,
who shall not be an officer or employee of the Corporation or any
of its affiliates, that, as a result of any amendment to, or
change in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof
or therein (including any announced proposed change by an
applicable legislative committee or the chair thereof in such
laws or by an administrative agency in such regulations), or as a
result of any official or administrative pronouncement or action
or judicial decision interpreting or applying such laws or
regulations, it is more likely than not that for United States
federal income tax purposes (i) the Corporation or its
stockholders is or, at any time in the future, will be subject to
tax upon the issuance of shares of either Andrx Stock or Cybear
Stock or (ii) either Andrx Stock or
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Cybear Stock is not or, at any time in the future, will not be
treated solely as stock of the Corporation.
(w) TRADING DAY shall mean each weekday other than any day on which
the relevant class of common stock of the Corporation is not
traded on any national securities exchange or listed on the
Nasdaq Stock Market or in the over-the-counter market.
SECTION 3. Preferred Stock. The Preferred Stock may be issued from time
to time in one or more series, each with such distinctive designation as may be
stated in the Certificate of Incorporation or in any amendment hereto, or in a
resolution or resolutions providing for the issue of such stock from time to
time adopted by the Board of Directors or a duly authorized committee thereof.
The authority of the Board of Directors with respect to each such series shall
include, but not be limited to, determination of the following:
(a) the number of shares constituting that series and the distinctive
designation of that series;
(b) the dividend rate on the shares of that series, the conditions
and dates upon which such dividends shall be payable, whether
dividends shall be cumulative and, if so, from which date or
dates, and the relative rights of priority, if any, of payment of
dividends on shares of that series;
(c) whether that series shall have voting rights in addition to the
voting rights provided by law and, if so, the terms of such
voting rights;
(d) whether that series shall have conversion privileges and, if so,
the terms and conditions of such conversion, including provisions
for adjustment of the conversion rate in such events as the Board
of Directors shall determine;
(e) whether or not the shares of that series shall be redeemable and,
if so, the terms and conditions of such redemption, including the
date or dates upon or after which they shall be redeemable, and
the amount per share payable in case of redemption, which amount
may vary under different conditions, and at different redemption
dates;
(f) whether that series shall have a sinking fund for the redemption
or purchase of shares of that series and, if so, the terms and
amount of such sinking fund;
(g) the rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights or priority, if any, of
payment of shares of that series; and
(h) any other relative rights, preferences and limitations of that
series, unless otherwise provided by the certificate of
determination.
ARTICLE V.
ADDRESS OF REGISTERED OFFICE;
NAME OF REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The name
of its registered agent is Corporation Service Company.
ARTICLE VI.
BOARD OF DIRECTORS
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SECTION 1. NUMBER AND TERM OF DIRECTORS. The Board of Directors shall
consist of not less than three nor more than twelve members, with the exact
number to be fixed from time to time in the manner provided in the Bylaws. No
decrease in the number of directors shall have the effect of shortening the term
of any incumbent director. The Board of Directors shall be divided into three
classes. The number of directors elected to each class shall be as nearly equal
in number as possible. Each director in the first class shall be elected to an
initial term expiring at the next ensuing annual meeting of stockholders, each
director in the second class shall be elected to an initial term expiring at the
annual meeting of stockholders held one year thereafter and each director in the
third class shall be elected to an initial term expiring at the annual meeting
of stockholders held one year thereafter, in each case until his or her
successor us duly elected and qualified or until his or her earlier resignation,
death, incapacity or removal from office. Upon the expiration of the initial
terms of office for each class of directors, the successor directors of each
class shall be elected for a full term of three years, to serve until their
successors are duly elected and qualified or until their earlier resignation,
death, incapacity or removal from office. The Board of Directors shall apportion
any increase or decrease in the number of directors among the classes as nearly
equal in number as possible.
SECTION 2. VACANCIES. Whenever any vacancy on the Board of Directors
shall occur due to death, resignation, retirement, disqualification, removal,
increase in the number of directors, or otherwise, a majority of the remaining
directors in office, although less than a quorum of the Board of Directors, may
fill the vacancy for the balance of the unexpired term of the vacant
directorship, at which time a successor or successors shall be duly elected by
the stockholders and qualified. Notwithstanding the provisions of any other
Article hereof, only the remaining directors of the Corporation shall have the
authority, in accordance with the procedure stated herein, to fill any vacancy
that arises on the Board of Directors.
SECTION 3. REMOVAL. A director may be removed from office prior to the
expiration of his or her term: (i) only for cause; and (ii) only upon the
affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Corporation entitled to vote for the election of directors.
SECTION 4. AMENDMENTS. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, this Article VI shall not be
altered, amended or repealed except by an affirmative vote of at least two-third
of the outstanding shares of capital stock of the Corporation entitled to vote
for the election of directors.
ARTICLE VII.
LIMITATION ON DIRECTOR LIABILITY
A director shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the DGCL, or (iv) for any transaction from which such director
derives an improper personal benefit. This Article VII shall be read to
authorize the limitation of liability to the fullest extent permitted under
Delaware law. If the DGCL is hereafter amended to authorize the further or
broader elimination or limitation of the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or limited to
the fullest extent permitted by the DGCL, as so amended. No repeal or
modification of this Article VII shall adversely affect any right of or
protection afforded to a director of the Corporation existing immediately prior
to such repeal or modification.
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ARTICLE VIII.
SPECIAL MEETINGS OF STOCKHOLDERS
Except as otherwise require by law and subject to the rights of the
holders of the Preferred Stock, special meetings of the stockholders of the
Corporation may be called only by (i) the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors, (ii) the
Corporation's Chief Executive Officer or (iii) the holders of at least one-third
of the outstanding shares of capital stock of the Corporation. Notwithstanding
anything contained in this Certificate of Incorporation to the contrary, this
Article VIII shall not be altered, amended or repealed except by an affirmative
vote of at least two-thirds of the outstanding shares of capital stock of the
Corporation entitled to vote at a stockholders' meeting duly called for such
purpose.
ARTICLE IX.
NO SHAREHOLDER ACTION WITHOUT A MEETING
Any action required or permitted to be taken by the stockholders of the
Corporation shall be taken at a duly called annual or special meeting of such
holders and may not be taken by any consent in writing by such holders.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, this Article IX shall not be altered, amended or repealed except by an
affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Corporation entitled to vote at a stockholders' meeting duly called
for such purpose.
ARTICLE X.
INDEMNIFICATION
The Corporation shall indemnify and advance expenses to, and may
purchase and maintain insurance on behalf of, its officers and directors to the
fullest extent permitted by law as now or hereafter in effect. Without limiting
the generality of the foregoing, the Bylaws may provide for indemnification and
advancement of expenses to officers, directors, employees and agents on such
terms and conditions as the Board of Directors may from time to time deem
appropriate or advisable.
ARTICLE XI.
BYLAWS
The Board of Directors shall have the power to adopt, amend or repeal
the Bylaws of the Corporation or any part thereof. Certain provisions of the
Bylaws, as stated therein, may not be altered, amended or repealed except by the
affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Corporation entitled to vote at a Stockholders' meeting duly called
for such purpose. Except for such provisions requiring a two-third vote to
alter, amend or repeal, the Bylaws may be altered, amended or repealed, and new
bylaws may be adopted, by the Stockholders upon the affirmative vote of at least
a majority of the outstanding shares of capital stock of the Corporation
entitled to vote at a Stockholders' meeting duly called for such purpose.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, this Article XI shall not be altered, amended or repealed except by an
affirmative vote of at least two-thirds of the outstanding shares of capital
stock of the Corporation entitled to vote at a stockholders' meeting duly called
for such purpose.
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ARTICLE XII.
AMENDMENT
Except as provided herein, this Certificate of Incorporation may be
altered, amended or repealed by the stockholders of the Corporation in
accordance with Delaware law.
IN WITNESS WHEREOF, the undersigned, being the President of the
Corporation, has signed this Certificate of Incorporation this _____ day of
___________, 2000.
ANDRX CORPORATION
By:
-------------------------------
Name:
-----------------------
Title:
----------------------
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ANNEX C
OPINION OF SG COWEN SECURITIES CORPORATION
March 22, 2000
Special Committee of the Board of Directors
Cybear, Inc.
5000 Blue Lake Drive, Suite 200
Boca Raton, FL 33431
Gentlemen:
You have requested our opinion as to the fairness, from a financial
point of view, to the stockholders of Cybear, Inc. ("Cybear" or the "Company"),
other than Andrx Corporation ("Andrx" or "Acquiror"), of the Transaction
Consideration (as defined below) to be received by the stockholders of the
Company pursuant to the terms of a draft Agreement and Plan of Merger and
Reorganization, dated as of March 20, 2000 (the "Agreement"), by and among the
Company, Cybear Acquisition Corp., Andrx, New Andrx Corporation and Andrx
Acquisition Corp.
As more specifically set forth in the Agreement, and subject to the
terms, conditions and adjustments set forth in the Agreement, Andrx has offered
to acquire all of the publicly traded Cybear common stock (approximately 31% of
the total shares outstanding) not currently owned by Andrx (the "Cybear Minority
Shares") in exchange for shares of a new class of Andrx common stock (the
"Cybear Tracking Stock") intended to separately reflect the performance of
Cybear (the "Transaction"). Each Cybear Minority Share will be exchanged for one
share of Cybear Tracking Stock (the "Cybear Minority Exchange Ratio"). Each
share of Cybear common stock owned by Andrx will be cancelled and Andrx will
receive .8333 share of Cybear Group Common Stock for each share of Cybear Common
Stock held by Andrx at the Andrx Exchange Ratio which shares shall be
distributed to the Andrx stockholder Cybear Group Common Stock. The Cybear
Minority Exchange Ratio in combination with the Andrx Exchange Ratio is
hereafter referred to as the "Transaction Consideration."
SG Cowen Securities Corporation ("SG Cowen"), as part of its investment
banking business, is continually engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. In the
ordinary course of our business, we and our affiliates may actively trade the
securities of the Company and Acquiror for our own account and for the accounts
of our customers and, accordingly, may at any time hold a long or short position
in such securities.
SG Cowen is acting as exclusive financial advisor to the Special
Committee of the Board of Directors of the Company in connection with the
Transaction and will receive a fee from the Company for our services pursuant to
the terms of our engagement letter with the Company, dated as of January 7, 2000
(the "Engagement Letter"), a portion of which is contingent upon the
consummation of the Transaction. We will also receive a fee for providing this
Opinion.
In connection with our opinion, we have reviewed and considered such
financial and other matters as have deemed relevant, including, among other
things:
o a draft of the Agreement dated March 20, 2000
o certain publicly available information for the Company, including
its annual report filed on Form 10-K for the year ended December
31, 1998, and its quarterly reports filed on Form 1O-Q for each
of the quarters ended March 31, June 30, and September 30, 1999
and certain other relevant financial and operating data furnished
to SG Cowen by the Company management;
o certain publicly available information for Acquiror, including
its annual report filed on Form 1O-K for the year ended December
31, 1998, and its quarterly reports filed on Form 104 for each of
the quarters ended March 31, June 30, and September 30, 1999 and
certain other relevant financial and operating data furnished to
SG Cowen by Acquiror management;
<PAGE>
o certain internal financial analyses, financial forecasts, reports
and other information concerning the Company (the "Forecasts"),
prepared by the management of the Company;
o First Call estimates ("First Call Estimates") and financial
projections in Wall Street analyst reports ("Wall Street
Projections") for each of the Company and Acquiror;
o discussions we have had with certain members of the management of
the Company concerning the historical and current business
operations, financial condition and prospects of the Company and
such other matters we deemed relevant;
o the reported prices, trading histories and historical and
projected operating performance of certain tracking stocks as
compared to the reported prices, trading histories and historical
and projected operating performance of certain publicly traded
companies we deemed relevant;
o the rights of certain tracking stocks compared to the rights of
the Cybear Tracking Stock
o the reported prices of certain securities with dual classes of
stock;
o premiums paid in selected minority squeeze-out transactions since
January 1, 1990 which we deemed relevant; and
o such other information, financial studies, analyses and
investigations and such other factors that we deemed relevant for
the purposes of this opinion.
In conducting our review and arriving at our opinion, we have, with
your consent, assumed and relied, without independent investigation, upon the
accuracy and completeness of all financial and other information provided to us
by the Company and Acquiror, respectively, or which is publicly available. We
have not undertaken any responsibility for the accuracy, completeness or
reasonableness of, or independently verified, such information. In addition, we
have not conducted nor have we assumed any obligation to conduct any physical
inspection of the properties or facilities of the Company or the Acquiror. We
have further relied upon the assurance of management of the Company that they
are unaware of any facts that would make the information provided to us
incomplete or misleading in any respect. We have, with your consent, assumed
that the financial forecasts which we examined were reasonably prepared by the
management of the Company on bases reflecting the best currently available
estimates and good faith judgments of such management as to the future
performance of the Company, and such projections and the First Call Estimates
and Wall Street Projections, provide a reasonable basis for our opinion.
We have not made or obtained any independent evaluations, valuations or
appraisals of the assets or liabilities of the Company or Acquiror, nor have we
been furnished with such materials. With respect to all legal matters relating
to the Company and Acquiror, we have relied on the advice of legal counsel to
the Special Committee of the Board of Directors of the Company. Our services to
the Company in connection with the Transaction have included rendering an
opinion from a financial point of view with respect to the Transaction
Consideration. Our opinion is necessarily based upon economic and market
conditions and other circumstances as they exist and can be evaluated by us on
the date hereof. It should be understood that although subsequent developments
may affect our opinion, we do not have any obligation to update, revise or
reaffirm our opinion, and we expressly disclaim any responsibility to do so.
Additionally, we have not investigated any other alternative transactions that
may be available to the Company.
For purposes of rendering our opinion we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
contained in the Agreement are true and correct, that each party will perform
all of the covenants and agreements required to be performed by it under the
Agreement and that all conditions to the consummation of the Transaction will be
satisfied without waiver thereof. We have assumed that the final form of the
Agreement will be substantially similar to the last draft reviewed by us. We
have also assumed that all governmental, regulatory and other consents and
approvals contemplated by the Agreement will be obtained and that in the course
of obtaining any of those consents no restrictions will be
2
<PAGE>
imposed or waivers made that would have an adverse effect on the contemplated
benefits of the Transaction. You have informed us, and we have assumed, that the
Transaction will be treated as a tax-free exchange.
It is understood that this letter is intended for the benefit and use
of the Special Committee of the Board of Directors of the Company in its
consideration of the Transaction and may not be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time, in any manner or
for any purpose without our prior written consent. This letter does not
constitute a recommendation to any stockholder as to how such stockholder should
vote with respect to the Transaction or to take any other action in connection
with the Transaction or otherwise. We have not been requested to opine as to,
and our opinion does not in any manner address, the Company's underlying
business decision to effect the Transaction. Furthermore, we express no view as
to the price or trading range for shares of the Cybear Tracking Stock following
the consummation of the Transaction.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion that, as of the
date hereof, the Transaction Consideration to be received in the Transaction is
fair, from a financial point of view, to the stockholders of the Company other
than Andrx.
Very truly yours,
SG Cowen Securities Corporation
3
<PAGE>
ANNEX D
COMMON STOCK POLICIES GOVERNING THE INTERESTS
OF ANDRX CORPORATION TO BE ALLOCATED BETWEEN
THE ANDRX GROUP AND THE CYBEAR GROUP
ANDRX CORPORATION
COMMON STOCK POLICIES GOVERNING THE INTERESTS OF ANDRX CORPORATION TO BE
ALLOCATED BETWEEN THE ANDRX GROUP AND THE CYBEAR GROUP
GENERAL
Because the Andrx Group and the Cybear Group will each be a part of a
single company, Andrx Corporation, a Delaware corporation (the "Company") has
carefully considered a number of issues with respect to the financing of the
Andrx Group and the Cybear Group, competition between the Groups, inter-Group
business transactions, corporate opportunities and the allocation of debt,
corporate overhead, interest, taxes and other charges between the two Groups.
The Company's board of directors (the "Board") and management have established
policies to accomplish the fundamental objectives of the merger and
reorganization (collectively, the "Reorganization"). These policies establish
guidelines to help the Company allocate costs and charges between the two Groups
on an objective basis and, except as described below, to ensure that
transactions between the Andrx Group and the Cybear Group are made on terms that
approximate the terms that could be obtained from unaffiliated third parties.
All capitalized terms used but not defined herein have the respective meaning
assigned thereto in the Company's Restated Certificate of Incorporation (the
"Certificate of Incorporation").
POLICIES SUBJECT TO CHANGE WITHOUT SHAREHOLDER APPROVAL
These policies will be effective upon the Reorganization. The Company
is not requesting shareholder approval of these policies.
The Board may modify or rescind these policies, or may adopt additional
policies, in its sole discretion without shareholder approval, subject to any
limitations imposed by the Board's fiduciary duties and applicable law. However,
the Board has no present plans to modify or rescind these policies or to adopt
additional policies inconsistent with these policies. The Board's decision to
modify or rescind such policies, or adopt additional policies could have
different effects upon holders of Andrx Stock and holders of Cybear Stock or
could result in a benefit or detriment to one class of stockholders compared to
the other class. The Board would make any such decision in accordance with its
good faith business judgment that such decision is in the best interests of the
Company and all of its stockholders as a whole.
INTERESTS TO BE ATTRIBUTED TO THE ANDRX GROUP AND THE CYBEAR GROUP
It is the current intent of the Company to attribute to the Cybear
Group all of the Company's interests worldwide in Internet business related to
the healthcare industry other than any Internet business related to the
marketing, manufacture, purchase, warehousing, developing, sale and distribution
of pharmaceuticals. All other Company interests not allocated to the Cybear
Group will be allocated to the Andrx Group.
FIDUCIARY AND MANAGEMENT RESPONSIBILITIES
Because the Andrx Group and the Cybear Group will be a part of a single
company, the directors and officers will have the same fiduciary duties both to
holders of the Andrx Stock and the holders of the Cybear Stock. Under Delaware
law, absent an abuse of discretion, a director
<PAGE>
or officer will be deemed to have satisfied his or her fiduciary duties to the
Company and its stockholders if that person is disinterested and acts in
accordance with his or her good faith business judgment in the interests of the
Company and all of its stockholders as a whole. The Board, in establishing
policies with regard to intracompany matters such as business transactions
between Groups and allocations of assets, liabilities, debt, corporate overhead,
taxes, interest, corporate opportunities and other matters, will consider
various factors and information which could benefit or cause detriment to the
stockholders of the respective Groups and will make determinations in the best
interests of the Company and all of its stockholders as a whole.
The officers of Andrx Corporation prior to the Reorganization will be
the officers of the Company subsequent to the Reorganization, and they will hold
the positions they held previously and will continue to have the same general
responsibilities that they had prior to the Reorganization. The costs
attributable to their responsibilities will be allocated as discussed below
under "Financial Statements; Allocation Matters - Corporate Overhead and
Administrative Shared Services."
The Company's chief executive officer, with the approval of the Board,
has designated separate management teams for each of the Andrx Group and the
Cybear Group to ensure that the efforts of each team of managers are focused on
the business and operations for which they have responsibility.
COMMON STOCK OWNERSHIP OF DIRECTORS AND SENIOR OFFICERS
As a policy, the Board will periodically monitor the ownership of
shares of Andrx Stock and shares of Cybear Stock by its directors and senior
officers and its option grants to them so that their interests are generally
aligned with the two classes of common stock and with their duty to act in the
best interests of the Company and its stockholders as a whole. However, because
of the anticipated differences in trading values between the Andrx Stock and the
Cybear Stock, the actual value of their interests in the Andrx Stock and Cybear
Stock may vary significantly.
FINANCING ACTIVITIES/TREASURY AND CASH MANAGEMENT POLICIES
The Company will manage most financing and treasury activities on a
centralized basis. These activities include, but are not limited to, the
issuance and repayment of short-term and long-term debt and the issuance and
repurchase of any preferred stock. Each of the Andrx Group and the Cybear Group
will remit its cash receipts to the Company and the Company will fund each
Group's cash disbursements on a daily basis. If the Company transfers cash or
other property allocated to one Group to the other Group, it will account for
such transfer in one of the following ways, as determined by the Board, except
as set forth in the Tax Sharing Agreement entered into between the Company and
its subsidiaries dated the Effective Date (the "Tax Sharing Agreement"):
o As a short-term or long-term loan from one Group to the other,
or as a repayment of a previous borrowing, as described under
"Inter-Group Loans" below;
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<PAGE>
o As an increase or decrease in the Number of Cybear Designated
Shares, as described under "Future Equity Contributions to be
Reflected as the Number Designated Shares" below; or
o As a sale of assets between the two Groups.
The Board has not adopted specific criteria to determine which of the
foregoing will be applied to a particular transfer of cash or property from one
Group to the other. The Board will make these determinations, either in specific
instances or by setting applicable policies generally, in the exercise of its
business judgment based on all relevant circumstances. The Company will make all
transfers of material assets from one Group to the other on a fair value basis
for the foregoing purposes, as determined by the Board. See "Transfers of Assets
Between Groups."
COMPANY DEBT. The Company will allocate its debt between the Groups or,
if it so determines, in its entirety to a particular Group. If the Company
allocates debt for a particular financing in its entirety to one Group, the
interest rate, amortization, maturity, redemption and other terms shall be on
then prevailing terms on which the Andrx Group could borrow such funds. Any
expense related to debt that is allocated in its entirety to a Group will be
allocated in whole to that Group.
PREFERRED STOCK. The Company will allocate preferred stock, if issued,
between the Groups or, if it so determines, in its entirety to a particular
Group. If the Company allocates preferred stock for a particular financing in
its entirety to one Group, that Group will be charged the dividend cost. If the
dividend cost is higher than the Company's actual cost, the other Group will
receive a credit for an amount equal to the difference as compensation for the
use of its credit capacity. Any expense related to preferred stock that is
allocated in its entirety to a Group will be allocated in whole to that Group.
INTER-GROUP LOANS. If the Board decides to account for a transfer of
cash or other property from one Group to the other Group as a short-term or
long-term loan, the Board will establish the terms on which such short-term or
long-term loans between the Groups will be made, including interest rate,
amortization schedule, maturity and redemption terms; provided, however, any
cash transfers from one Group to the other Group will have interest rates,
amortization, maturity, redemption and other terms that reflect the then
prevailing terms on which the Andrx Group could borrow such funds.
FUTURE EQUITY CONTRIBUTIONS TO BE REFLECTED AS THE NUMBER OF CYBEAR
DESIGNATED SHARES. Cash or other property that the Company allocates to the
Andrx Group that is contributed as additional equity to the Cybear Group will
increase the Number of Cybear Designated Shares. Cash or other property that the
Company allocates to the Cybear Group that is transferred to the Andrx Group
will, if so determined by the Board, decrease the Number of Cybear Designated
Shares.
EQUITY ISSUANCES AND REPURCHASES AND DIVIDENDS. The Company will
reflect all financial effects of issuances and repurchases of shares of Andrx
Stock or Cybear Stock entirely in the financial statements of that Group except
as described in the next sentence. The Company will reflect all financial
effects of issuances of additional shares of Cybear Stock, which have been
reflected as a reduction in the Number of Cybear Designated Shares, entirely in
the
3
<PAGE>
financial statements of the Andrx Group. The Company will reflect financial
effects of dividends or other distributions on, and purchases of, shares of
Andrx Stock or Cybear Stock entirely in the respective financial statements of
the Andrx Group and the Cybear Group.
COMPETITION BETWEEN GROUPS
Neither the Andrx Group nor the Cybear Group intend to engage in each
other's principal businesses. To the extent practicable, the Groups shall
establish joint ventures or other collaborative arrangements to develop, market,
sell and support new products and services where both Groups principal
businesses are involved. Third parties may also participate in such joint
transactions. See "Transfers of Assets Between Groups - Joint Transactions." The
terms of any joint transactions will be determined by the Board. Any existing or
subsequently developed Internet and Internet-based applications of the Andrx
Group which is either related to its pharmaceuticals business or is not related
to the healthcare industry shall not be deemed as competing with the Cybear
Group.
The Board will make decisions whether to permit indirect competition
between the Groups. Indirect competition could occur if and when:
o one Group uses products of third parties in that Group's
products rather than using the other Group's products;
o a third party uses a product of one Group in the third party's
products which compete with the other Group's products; or
o a Group licenses technology allocated to that Group to a third
party that is a competitor of the other Group.
The Groups may compete in a business which is not a principal business
of the other Group.
TRANSFERS OF ASSETS BETWEEN GROUPS
The Articles of Incorporation permits the transfer of assets between
Groups without shareholder approval. The Board has determined that all such
transfers will be made at fair value, as determined by the Board, except as
described below. The consideration for such transfers may be paid by one Group
to the other in cash or other consideration, as determined by the Board.
Notwithstanding the foregoing, all cash and cash equivalents on the balance
sheet of the Cybear Group as of the effective date of the Reorganization (the
"Effective Date") shall be used by the Cybear Group only to fund Cybear Group's
operations.
The Board has adopted specific policies for the sale of products and
services between Groups and joint transactions with each other and third parties
as set forth below.
SALES OF PRODUCTS AND SERVICES BETWEEN GROUPS. A Group will sell
products or services to the other Group on terms that would be available from
third parties in commercial transactions. If terms for such transactions are not
available from a third party, the purchasing Group will (1) pay for such
products at fair value as determined by the Board and (2) pay for
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<PAGE>
such services at fair value, as determined by the Board, or at the cost,
including overhead, of the selling Group.
JOINT TRANSACTIONS. The Groups may from time to time engage in
transactions jointly, including with third parties, as described under
"Competition Between Groups." Research and development and other services
performed by one Group for a joint venture or other collaborative arrangement
will be charged at fair value, as determined by the Board. The Company will
continue to cause the Andrx Group to provide to the Cybear Group, at no cost or
expense to the Cybear Group, telemarketing and distribution services in
connection with the "Cybear Marketplace" operations.
REVIEW OF CORPORATE OPPORTUNITIES
The Board will review any matter which involves the allocation of a
corporate opportunity to either the Andrx Group or the Cybear Group or in part
to the Andrx Group and in part to the Cybear Group. In accordance with Delaware
law, the Board will make its determination with regard to the allocation of any
such opportunity and the benefit of such opportunity in accordance with its good
faith business judgment of the best interests of the Company and all of its
stockholders as a whole. Among the factors that the Board may consider in making
this allocation is whether a particular corporate opportunity is principally
related to the business of the Andrx Group or the Cybear Group; whether one
Group, because of its managerial or operational expertise, will be better
positioned to undertake the corporate opportunity; and existing contractual
agreements and restrictions.
FINANCIAL STATEMENTS
The Company will prepare financial statements in accordance with
generally accepted accounting principles, consistently applied, for the Andrx
Group and the Cybear Group, and these financial statements, taken together, will
comprise all of the accounts included in the Company's corresponding
consolidated financial statements. The financial statements of each of the Andrx
Group and the Cybear Group will reflect the financial condition, results of
operations and cash flows of the businesses included therein.
ALLOCATION MATTERS
Group financial statements will also include allocated portions of the
Company's debt, interest, and corporate overhead and costs of administrative
shared services. The Company will make these allocations for the purpose of
preparing each Group's financial statements; however, holders of Andrx Stock and
Cybear Stock will continue to be subject to all of the risks associated with an
investment in the Company and all of its businesses, assets and liabilities.
In addition to allocating debt and interest as described above under
"Financing Activities" and assets as described above under "Transfers of Assets
Between Groups," the Board has adopted the following allocation policies:
o DIRECT CHARGES. The Company will allocate to a Group all
direct expenses incurred on behalf of such Group.
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o CORPORATE OVERHEAD AND ADMINISTRATIVE SHARED SERVICES. The
Company will allocate a portion of its corporate overhead to
the Andrx Group and the Cybear Group based upon the use of
services by that Group. Corporate overhead includes, but is
not limited to, costs of the Company's executive management,
payroll, human resources, legal, auditing, tax, mergers and
acquisitions, treasury, and strategic planning functions. The
Company will allocate in a similar manner a portion of its
costs of administrative shared services, such as information
technology services. Where determinations based on use alone
are not practical, the Company will use other methods and
criteria that it believes are equitable and provide a
reasonable estimate of the cost attributable to the Groups.
The allocated costs of providing such services and facilities
will include, among other things, the following:
All costs and expenses of personnel employed in
connection with the services and facilities,
including all direct costs of those personnel, for
example payroll, payroll taxes and fringe benefit
costs, calculated at the appropriate annual composite
rate therefor.
All overhead costs and expenses directly related to
the personnel, and the services or facilities
provided by them, including departmental, divisional
and administrative overhead and a reasonable
allocation of capital charges for assets used to
provide these services or facilities, including
equipment and training.
All materials used in connection with the services or facilities,
billed at their net cost to the provider of the services or facilities plus all
overhead costs and expenses related to the materials, including departmental,
divisional and administrative overhead and a reasonable allocation of capital
charges for assets used to provide the materials.
The corporate general and administrative services and facilities to be
allocated between the Groups will include general and administrative services
and facilities (for example, legal services, accounting services, tax and
financial services, treasury services, telemarketing services, purchasing and
material procurement, corporate travel, information systems support and
corporate offices, warehouses and other facilities).
The Company will allocate consolidated federal income tax provisions
and related tax payments or refunds between the Groups based on the Tax Sharing
Agreement.
CAPITAL STOCK COMMITTEE
At the Effective Time of the Reorganization, the Company will amend its
bylaws and take whatever other action is required to establish a capital stock
committee of the Company's Board (the "Capital Stock Committee"). To the extent
the Cybear nominee to the Board is a member of the Board, Cybear's nominee shall
be a member of the Capital Stock Committee, however, in the event that Cybear's
nominee is a member of the Capital Stock Committee, the Capital Stock Committee
shall have at least one other member. The Capital Stock Committee will have
authority to:
6
<PAGE>
1. Interpret, make determinations under, and oversee the implementation
of these policies in order to resolve potential and actual conflicts between the
Groups.
2. Adopt additional general policies governing the relationship between
the Andrx Group and the Cybear Group with respect to these policies; and
3. Engage the services of accountants, investment bankers, appraisers,
attorneys and other service providers to assist in discharging its duties.
The Capital Stock Committee's decision-making authority shall not
extend to general supervision and management of the business enterprises of
either Group. Furthermore, the decisions of the Capital Stock Committee shall be
subject to ultimate approval of the Company's Board.
7
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ANNEX E
ANDRX CORPORATION
2000 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Andrx Corporation 2000 Stock Option Plan
(the "Plan") is to advance the interests of Andrx Corporation., a Florida
corporation (the "Company"), by providing an additional incentive to attract,
retain and motivate highly qualified and competent persons who are key to the
Company, and upon whose efforts and judgment the success of the Company and its
Subsidiaries is largely dependent, including key employees, consultants,
independent contractors, Officers and Directors, by authorizing the grant of
options to purchase Common Stock of the Company to persons who are eligible to
participate hereunder, thereby encouraging stock ownership in the Company by
such persons, all upon and subject to the terms and conditions of this Plan.
2. DEFINITIONS. As used herein, the following terms shall have the
meanings indicated:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Cause" shall mean any of the following:
(i) a determination by the Company that there has
been a willful, reckless or grossly negligent failure by the Optionee to perform
his or her duties as an employee of the Company;
(ii) a determination by the Company that there has
been a willful breach by the Optionee of any of the material terms or provisions
of any employment agreement between such Optionee and the Company;
(iii) any conduct by the Optionee that either results
in his or her conviction of a felony under the laws of the United States of
America or any state thereof, or of an equivalent crime under the laws of any
other jurisdiction;
(iv) a determination by the Company that the Optionee
has committed an act or acts involving fraud, embezzlement, misappropriation,
theft, breach of fiduciary duty or material dishonesty against the Company, its
properties or personnel;
(v) any act by the Optionee that the Company
determines to be in willful or wanton disregard of the Company's best interests,
or which results, or is intended to result, directly or indirectly, in improper
gain or personal enrichment of the Optionee at the expense of the Company;
(vi) a determination by the Company that there has
been a willful, reckless or grossly negligent failure by the Optionee to comply
with any rules, regulations, policies or procedures of the Company, or that the
Optionee has engaged in any act, behavior or conduct demonstrating a deliberate
and material violation or disregard of standards of behavior that the Company
has a right to expect of its employees; or
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(vii) if the Optionee, while employed by the Company
and for two years thereafter, violates a confidentiality and/or noncompete
agreement with the Company, or fails to safeguard, divulges, communicates, uses
to the detriment of the Company or for the benefit of any person or persons, or
misuses in any way, any Confidential Information;
PROVIDED, HOWEVER, that, if the Optionee has entered into a written employment
agreement with the Company which remains effective and which expressly provides
for a termination of such Optionee's employment for "cause", the term "Cause" as
used herein shall have the meaning as set forth in the Optionee's employment
agreement in lieu of the definition of "Cause" set forth in this Section 2(b).
(c) "Change of Control" shall mean the acquisition by any
person or group (as that term is defined in the Securities Exchange Act of 1934
(the "Exchange Act")), and the rules promulgated pursuant to that act) in a
single transaction or a series of transactions of [forty percent (40%)] or more
in voting power of the outstanding stock of the Company and a change of the
composition of the Board of Directors so that, within two years after the
acquisition took place, a majority of the members of the Board of Directors of
the Company, or of any corporation with which the Company may be consolidated or
merged, are persons who were not directors or officers of the Company or one of
its Subsidiaries immediately prior to the acquisition, or to the first of a
series of transactions which resulted in the acquisition of [forty percent
(40%)] or more in voting power of the outstanding stock of the Company.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(e) "Committee" shall mean the stock option or compensation
committee appointed by the Board or, if not appointed, the Board.
(f) "Common Stock" shall mean collectively, the Company's
common stock designated as "Andrx Corporation - Andrx Group Common Stock," par
value $.001 per share, and the Company's common stock designated as "Andrx
Corporation - Cybear Group Common Stock," par value $.001 per share.
(g) "Confidential Information" shall mean any and all
information pertaining to the Company's financial condition, clients, customers,
prospects, sources of prospects, customer lists, trademarks, trade names,
service marks, service names, "know-how," trade secrets, products, services,
details of client or consulting contracts, management agreements, pricing
policies, operational methods, site selection, results of operations, costs and
methods of doing business, owners and ownership structure, marketing practices,
marketing plans or strategies, product development techniques or plans,
procurement and sales activities, promotion and pricing techniques, credit and
financial data concerning customers and business acquisition plans, that is not
generally available to the public.
(h) "Director" shall mean a member of the Board.
(i) "Employee" shall mean any person, including officers,
directors, consultants and independent contractors who are either employed or
engaged by the Company or
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any parent or Subsidiary of the Company within the meaning of Code Section
3401(c) or the regulations promulgated thereunder.
(j) "Fair Market Value" of a Share on any date of reference
shall be the Closing Price of a share of Common Stock on the business day on or
immediately preceding such date, unless the Committee in its sole discretion
shall determine otherwise in a fair manner. For this purpose, the "Closing
Price" of the Common Stock on any business day shall be (i) if the Common Stock
is listed or admitted for trading on any United States national securities
exchange (including the National Association of Securities Dealers Automated
Quotation System, NASDAQ), or if actual transactions are otherwise reported on a
consolidated transaction reporting system, the last reported sale price of the
Common Stock on such exchange or reporting system, as reported in any newspaper
of general circulation,or (ii) if clause (i) is not applicable, the mean between
the high bid and low asked quotations for the Common Stock as reported by the
National Quotation Bureau, Incorporated if at least two securities dealers have
inserted both bid and asked quotations for the Common Stock on at least five of
the ten preceding days. If the information set forth in clauses (i) through (ii)
above is unavailable or inapplicable to the Company (e.g., if the Company's
Common Stock is not then publicly traded or quoted), then the "Fair Market
Value" of a Share shall be the fair market value (i.e., the price at which a
willing seller would sell a Share to a willing buyer when neither is acting
under compulsion and when both have reasonable knowledge of all relevant facts)
of a share of the Common Stock on the business day immediately preceding such
date as the Committee in its sole and absolute discretion shall determine in a
fair and uniform manner.
(k) "Family Member" shall mean any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person
sharing the Employee's household (other than a tenant or Employee), a trust in
which these persons have more than fifty percent of the beneficial interest, a
foundation in which these persons (or the Employee) control the management of
assets, and any other entity in which these persons (or the Employee) own more
than fifty percent of the voting interests.
(l) "Incentive Stock Option" shall mean an incentive stock
option as defined in Section 422 of the Code.
(m) "Non-Employee Directors" shall have the meaning set forth
in Rule 16b-3(b)(3)(i) (17 C.F.R.ss.240.16(b)-3(b)(3)(i)) under the Securities
Exchange Act of 1934, as amended.
(n) "Non-Statutory Stock Option" or "Nonqualified Stock
Option" shall mean an Option which is not an Incentive Stock Option.
(o) "Officer" shall mean the Company's chairman, president,
principal financial officer, principal accounting officer (or, if there is no
such accounting officer, the controller), any vice-president of the Company in
charge of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the Company. Officers of Subsidiaries shall be deemed Officers of the Company if
they perform
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such policy-making functions for the Company. As used in this paragraph, the
phrase "policy-making function" does not include policy-making functions that
are not significant. Unless specified otherwise in a resolution by the Board, an
"executive officer" pursuant to Item 401(b) of Regulation S-K (17 C.F.R.
ss.229.401(b)) shall be only such person designated as an "Officer" pursuant to
the foregoing provisions of this paragraph.
(p) "Option" (when capitalized) shall mean any stock option
granted under this Plan.
(q) "Optionee" shall mean a person to whom an Option is
granted under this Plan or any person who succeeds to the rights of such person
under this Plan by reason of the death of such person.
(r) "Plan" shall mean this 2000 Stock Option Plan of the
Company, which Plan shall be effective upon approval by the Board, subject to
approval, within 12 months of the date thereof by holders of a majority of the
Company's issued and outstanding Common Stock of the Company.
(s) "Securities Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(t) "Share" or "Shares" shall mean a share or shares, as the
case may be, of the Common Stock, as adjusted in accordance with Section 10 of
this Plan.
(u) "Subsidiary" shall mean any corporation (other than the
Company) in any unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50 percent or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3. SHARES AND OPTIONS. Subject to adjustment in accordance with Section
10 hereof, the Company may grant to Optionees from time to time Options to
purchase an aggregate of up to twelve million (12,000,000) Shares from Shares
held in the Company's treasury or from authorized and unissued Shares. Options
may be granted to purchase either Andrx Group Common Stock, Cybear Group Common
Stock or both to an Optionee, as set forth in the individual grant. If any
Option granted under this Plan shall terminate, expire, or be canceled,
forfeited or surrendered as to any Shares, the Shares relating to such lapsed
Option shall be available for issuance pursuant to new Options subsequently
granted under this Plan. Upon the grant of any Option hereunder, the authorized
and unissued Shares to which such Option relates shall be reserved for issuance
to permit exercise under this Plan. Subject to the provisions of Section 14
hereof, an Option granted hereunder shall be either an Incentive Stock Option or
a Non-Statutory Stock Option as determined by the Committee at the time of grant
of such Option and shall clearly state whether it is an Incentive Stock Option
or Non-Statutory Stock Option. All Incentive Stock Options shall be granted
within ten years from the effective date of this Plan.
4. LIMITATIONS. Options otherwise qualifying as Incentive Stock Options
hereunder will not be treated as Incentive Stock Options to the extent that the
aggregate Fair Market Value (determined at the time the Option is granted) of
the Shares, with respect to which
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Options meeting the requirements of Code Section 422(b) are exercisable for the
first time by any individual during any calendar year (under all stock option or
similar plans of the Company and any Subsidiary), exceeds $100,000.
5. CONDITIONS FOR GRANT OF OPTIONS.
(a) Each Option shall be evidenced by an option agreement that
may contain any term deemed necessary or desirable by the Committee, provided
such terms are not inconsistent with this Plan or any applicable law. Optionees
shall be those persons selected by the Committee from the class of all regular
Employees of the Company or its Subsidiaries, including Employee Directors and
Officers who are regular or former regular employees of the Company, as well as
consultants to the Company. Any person who files with the Committee, in a form
satisfactory to the Committee, a written waiver of eligibility to receive any
Option under this Plan shall not be eligible to receive any Option under this
Plan for the duration of such waiver.
(b) In granting Options, the Committee shall take into
consideration the contribution the person has made, or is expected to make, to
the success of the Company or its Subsidiaries and such other factors as the
Committee shall determine. The Committee shall also have the authority to
consult with and receive recommendations from Officers and other personnel of
the Company and its Subsidiaries with regard to these matters. The Committee may
from time to time in granting Options under this Plan prescribe such terms and
conditions concerning such Options as it deems appropriate, including, without
limitation, (i) the exercise price or prices of the Option or any installments
thereof, (ii) prescribing the date or dates on which the Option becomes and/or
remains exercisable, (iii) providing that the Option vests or becomes
exercisable in installments over a period of time, and/or upon the attainment of
certain stated standards, specifications or goals, (iv) relating an Option to
the continued employment of the Optionee for a specified period of time, or (v)
conditions or termination events with respect to the exercisability of any
Option, provided that such terms and conditions are not more favorable to an
Optionee than those expressly permitted herein; provided, however, that to the
extent not canceled pursuant to Section 9(b) hereof, upon a Change in Control,
any Options that have not yet vested, shall vest upon such Change in Control.
(c) The Options granted to employees under this Plan shall be
in addition to regular salaries, pension, life insurance or other benefits
related to their employment with the Company or its Subsidiaries. Neither this
Plan nor any Option granted under this Plan shall confer upon any person any
right to employment or continuance of employment (or related salary and
benefits) by the Company or its Subsidiaries.
6. EXERCISE PRICE. The exercise price per Share of any Option shall be
any price determined by the Committee but shall not be less than the par value
per Share; PROVIDED, HOWEVER, that in no event shall the exercise price per
Share of any Incentive Stock Option be less than the Fair Market Value of the
Shares underlying such Option on the date such Option is granted and, in the
case of an Incentive Stock Option granted to a 10% shareholder, the per Share
exercise price will not be less than 110% of the Fair Market Value in accordance
with Section 14 of this Plan. Re-granted Options, or Options which are canceled
and then re-granted covering
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such canceled Options, will, for purposes of this Section 6, be deemed to have
been granted on the date of the re-granting.
7. EXERCISE OF OPTIONS.
(a) An Option shall be deemed exercised when (i) the Company
has received written notice of such exercise in accordance with the terms of the
Option, (ii) full payment of the aggregate option price of the Shares as to
which the Option is exercised has been made, (iii) the Optionee has agreed to be
bound by the terms, provisions and conditions of any applicable shareholders'
agreement, and (iv) arrangements that are satisfactory to the Committee in its
sole discretion have been made for the Optionee's payment to the Company of the
amount that is necessary for the Company or the Subsidiary employing the
Optionee to withhold in accordance with applicable Federal or state tax
withholding requirements. Unless further limited by the Committee in any Option,
the exercise price of any Shares purchased pursuant to the exercise of such
Option shall be paid in cash, by certified or official bank check, by money
order, with Shares or by a combination of the above; PROVIDED, HOWEVER, that the
Committee in its sole discretion may accept a personal check in full or partial
payment of any Shares. If the exercise price is paid in whole or in part with
Shares, the value of the Shares surrendered shall be their Fair Market Value on
the date the Option is exercised. The Company in its sole discretion may, on an
individual basis or pursuant to a general program established by the Committee
in connection with this Plan, lend money to an Optionee to exercise all or a
portion of the Option granted hereunder. If the exercise price is paid in whole
or part with the Optionee's promissory note, such note shall (i) provide for
full recourse to the maker, (ii) be collateralized by the pledge of the Shares
that the Optionee purchases upon exercise of such Option, (iii) bear interest at
a rate no less than the rate of interest payable by the Company to its principal
lender, and (iv) contain such other terms as the Committee in its sole
discretion shall require. No Optionee shall be deemed to be a holder of any
shares subject to an Option unless and until a stock certificate or certificates
for such shares are issued to the person(s) under the terms of this Plan. No
adjustments shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or property) or distributions or other rights for which the
record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 10 hereof.
(b) No Optionee shall be deemed to be a holder of any Shares
subject to an Option unless and until a stock certificate or certificates for
such Shares are issued to such person(s) under the terms of this Plan. No
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or other rights for which
the record date is prior to the date such stock certificate is issued, except as
expressly provided in Section 10 hereof.
8. EXERCISABILITY OF OPTIONS. Any Option shall become exercisable in
such amounts, at such intervals, upon such events or occurrences and upon such
other terms and conditions as shall be provided in this Plan or in an individual
Option agreement evidencing such Option, except as otherwise provided in Section
5(b) or this Section 8.
(a) The expiration date(s) of an Option shall be determined by
the Committee at the time of grant, but in no event shall an Option be
exercisable after the expiration of ten years from the date of grant of the
Option.
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(b) Unless otherwise expressly provided in any Option as
approved by the Committee, notwithstanding the exercise schedule set forth in
any Option, each outstanding Option, may, in the sole discretion of the
Committee, become fully exercisable upon the date of the occurrence of any
Change of Control, but, unless otherwise expressly provided in any Option, no
earlier than six months after the date of grant, and if and only if Optionee is
in the employ of the Company on such date.
(c) The Committee may in its sole discretion at any time
accelerate the date on which any Option may be exercised and may accelerate the
vesting of any Shares subject to any Option or previously acquired by the
exercise of any Option.
9. TERMINATION OF OPTION PERIOD.
(a) Unless otherwise expressly provided in any Option, the
unexercised portion of any Option shall automatically and without notice
immediately terminate and become forfeited, null and void at the time of the
earliest to occur of the following:
(i) three months after the date on which the
Optionee's employment is terminated for any reason other than by reason of (A)
Cause, (B) the termination of the Optionee's employment with the Company by such
Optionee following less than ninety (90) days' prior written notice to the
Company of such termination (an "Improper Termination"), (C) a mental or
physical disability (within the meaning of Section 22(e) of the Code) as
determined by a medical doctor satisfactory to the Committee, or (D) death;
(ii) immediately upon (A) the termination by the
Company of the Optionee's employment for Cause, or (B) an Improper Termination;
or
(iii) the later of (A) twelve months after the date
of termination of the Optionee's employment by reason of death of the employee,
or (B) three months after the date on which the Optionee shall die if such death
shall occur during the one year period specified in Subsection 9(a)(iii) hereof.
(b) Notwithstanding the foregoing, if the Optionee's
employment is terminated by reason of a mental or physical disability (within
the meaning of Section 22(e) of the Code) as determined by a medical doctor
satisfactory to the Committee or the Optionee retires from employment by the
Company or any other entity, then the Option shall continue until the original
expiration date.
(c) The Committee in its sole discretion may, by giving
written notice ("cancellation notice"), cancel effective upon the date of the
consummation of any corporate transaction described in Subsection 10(d) hereof,
any Option that remains unexercised on such date. Such cancellation notice shall
be given a reasonable period of time prior to the proposed date of such
cancellation and may be given either before or after approval of such corporate
transaction.
(d) Upon Optionee's termination of employment as described in
this Section 9, or otherwise, any Option (or portion thereof) not previously
vested or not yet exercisable
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pursuant to Section 8 of this Plan or the vesting schedule set forth in such
Option shall be immediately canceled.
10. ADJUSTMENT OF SHARES.
(a) If at any time while this Plan is in effect or unexercised
Options are outstanding, there shall be any increase or decrease in the number
of issued and outstanding Shares through the declaration of a stock dividend or
through any recapitalization resulting in a stock split, combination or exchange
of Shares (other than any such exchange or issuance of Shares through which
Shares are issued to effect an acquisition of another business or entity or the
Company's purchase of Shares to exercise a "call" purchase option), then and in
such event:
(i) appropriate adjustment shall be made in the
maximum number of Shares available for grant under this Plan, so that the same
percentage of the Company's issued and outstanding Shares shall continue to be
subject to being so optioned;
(ii) appropriate adjustment shall be made in the
number of Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same percentage of the Company's issued and
outstanding Shares shall remain subject to purchase at the same aggregate
exercise price; and
(iii) such adjustments shall be made by the
Committee, whose determination in that respect shall be final, binding and
conclusive.
(b) Subject to the specific terms of any Option, the Committee
may change the terms of Options outstanding under this Plan, with respect to the
option price or the number of Shares subject to the Options, or both, when, in
the Committee's sole discretion, such adjustments become appropriate by reason
of a corporate transaction described in Subsection 10(d) hereof, or otherwise.
(c) Except as otherwise expressly provided herein, the
issuance by the Company of shares of its capital stock of any class, or
securities convertible into or exchangeable for shares of its capital stock of
any class, either in connection with a direct or unwritten sale or upon the
exercise of rights or warrants to subscribe therefor or purchase such Shares, or
upon conversion of shares of obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to the number of or exercise price of Shares
then subject to outstanding Options granted under this Plan.
(d) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under this Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, reclassifications, recapitalizations, reorganizations or
other changes in the Company's capital structure or its business; (ii) any
merger or consolidation of the Company or to which the Company is a party; (iii)
any issuance by the Company of debt securities, or preferred or preference stock
that would rank senior to or above the Shares subject to outstanding Options;
(iv) any purchase or issuance by the Company of Shares or other classes of
common stock or common equity securities; (v) the dissolution or liquidation of
the Company; (vi) any sale, transfer, encumbrance, pledge or
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assignment of all or any part of the assets or business of the Company; or (vii)
any other corporate act or proceeding, whether of a similar character or
otherwise.
(e) The Optionee shall receive written notice within a
reasonable time prior to the consummation of such action advising the Optionee
of any of the foregoing. The Committee may, in the exercise of its sole
discretion, in such instances declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option.
11. TRANSFERABILITY OF OPTIONS. Unless otherwise authorized by the
Board, no Option granted hereunder shall be sold, pledged, assigned,
hypothecated, disposed or otherwise transferred by the Optionee other than (a)
by will or the laws of descent and distribution, (b) by gift to a Family Member,
or (c) through a domestic relations order in settlement of marital property
rights. No Option shall be exercisable during the Optionee's lifetime by any
person other than the Optionee or transferee permitted under this Section 11.
12. ISSUANCE OF SHARES. As a condition of any sale or issuance of
Shares upon exercise of any Option, the Committee may require such agreements or
undertakings, if any, as the Committee may deem necessary or advisable to assure
compliance with any such law or regulation including, but not limited to, the
following:
(i) a representation and warranty by the Optionee to the
Company, at the time any Option is exercised, that he is acquiring the Shares to
be issued to him for investment and not with a view to, or for sale in
connection with, the distribution of any such Shares; and
(ii) an agreement and undertaking to comply with all of the
terms, restrictions and provisions set forth in any then applicable
shareholders' agreement relating to the Shares, including, without limitation,
any restrictions on transferability, any rights of first refusal and any option
of the Company to "call" or purchase such Shares under then applicable
agreements, and
(A) any restrictive legend or legends, to be embossed
or imprinted on Share certificates, that are, in the discretion of the
Committee, necessary or appropriate to comply with the provisions of any
securities law or other restriction applicable to the issuance of the Shares.
13. ADMINISTRATION OF THIS PLAN.
(a) This Plan shall initially be administered by the Board. As
soon as may be practicable, but no later than the date (if ever) the Common
Stock is listed or admitted for trading on any United States national securities
exchange, the Plan shall be administered by the Committee, which shall consist
of not less than two Non-Employee Directors. The Committee shall have all of the
powers of the Board with respect to this Plan. Any member of the Committee may
be removed at any time, with or without cause, by resolution of the Board and
any vacancy occurring in the membership of the Committee may be filled by
appointment by the Board.
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(b) Subject to the provisions of this Plan, the Committee
shall have the authority, in its sole discretion, to: (i) grant Options, (ii)
determine the exercise price per Share at which Options may be exercised, (iii)
determine the Optionees to whom, and time or times at which, Options shall be
granted, (iv) determine the number of Shares to be represented by each Option,
(v) determine the terms, conditions and provisions of each Option granted (which
need not be identical) and, with the consent of the holder thereof, modify or
amend each Option, (vi) defer (with the consent of the Optionee) or accelerate
the exercise date of any Option, and (vii) make all other determinations deemed
necessary or advisable for the administration of this Plan, including repricing,
canceling and regranting Options.
(c) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of this Plan. The Committee's
determinations and its interpretation and construction of any provision of this
Plan shall be final, conclusive and binding upon all Optionees and any holders
of any Options granted under this Plan.
(d) Any and all decisions or determinations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting of the Committee or (ii) without a meeting by the unanimous written
approval of the members of the Committee.
(e) No member of the Committee, or any Officer or Director of
the Company or its Subsidiaries, shall be personally liable for any act or
omission made in good faith in connection with this Plan.
14. INCENTIVE OPTIONS FOR 10% SHAREHOLDERS. Notwithstanding any other
provisions of this Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly or indirectly (through attribution under
Section 424(d) of the Code) at the date of grant, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company (or of
its Subsidiary) at the date of grant unless the exercise price of such Option is
at least 110% of the Fair Market Value of the Shares subject to such Option on
the date the Option is granted, and such Option by its terms is not exercisable
after the expiration of ten years from the date such Option is granted.
15. INTERPRETATION.
(a) This Plan shall be administered and interpreted so that
all Incentive Stock Options granted under this Plan will qualify as Incentive
Stock Options under Section 422 of the Code. If any provision of this Plan
should be held invalid for the granting of Incentive Stock Options or illegal
for any reason, such determination shall not affect the remaining provisions
hereof, and this Plan shall be construed and enforced as if such provision had
never been included in this Plan.
(b) This Plan shall be governed by the laws of the State of
Florida.
(c) Headings contained in this Plan are for convenience only
and shall in no manner be construed as part of this Plan or affect the meaning
or interpretation of any part of this Plan.
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(d) Any reference to the masculine, feminine, or neuter gender
shall be a reference to such other gender as is appropriate.
(e) Time shall be of the essence with respect to all time
periods specified for the giving of notices to the company hereunder, as well as
all time periods for the expiration and termination of Options in accordance
with Section 9 hereof (or as otherwise set forth in an option agreement).
16. CANCELLATION AND RESCISSION OF AWARDS.
(a) Unless the Option specifies otherwise, the Committee may
cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired,
unpaid, or deferred Options at any time if the Optionee is not in compliance
with all applicable provisions of this Plan and the individual Option agreement
evidencing such Option , or if the Optionee engages in any "Detrimental
Activity." For purposes of this Section 16, "Detrimental Activity" shall
include: (i) the rendering of services for any organization or engaging directly
or indirectly in any business which is or becomes competitive with the Company,
or which organization or business, or the rendering of services to such
organization or business, is or becomes otherwise prejudicial to or in conflict
with the interests of the Company; (ii) the disclosure to anyone outside the
Company, or the use in other than the Company's business, without prior written
authorization from the Company, of any confidential information or material, as
defined in any agreement between the Optionee and the Company regarding
confidential information and intellectual property either during or after
employment with the Company; (iii) the failure or refusal to disclose promptly
and to assign to the Company, pursuant to the Company's confidentiality
agreement with the Optionee, all right, title and interest in any invention or
idea, patentable or not, made or conceived by the Optionee during employment by
the Company, relating in any manner to the actual or anticipated business,
research or development work of the Company or the failure or refusal to do
anything reasonably necessary to enable the Company to secure a patent where
appropriate in the United States and in other countries; (iv) activity that
results in termination of the Optionee's employment for cause; (v) a material
violation of any written rules, policies, procedures or guidelines of the
Company; (vi) any attempt directly or indirectly to induce any employee of the
Company to be employed or perform services elsewhere or any attempt directly or
indirectly to solicit the trade or business of any current or prospective
customer, supplier or partner of the Company; (vii) the Optionee being convicted
of, or entering a guilty plea with respect to, a crime, whether or not connected
with the Company; or (viii) any other conduct or act determined to be injurious,
detrimental or prejudicial to any interest of the Company.
(b) Upon exercise, payment or delivery pursuant to an Option,
the Optionee shall certify in a manner acceptable to the Company that he or she
is in compliance with the terms and conditions of the Plan. In the event a
Optionee fails to comply with the provisions of paragraphs (a)(i)-(viii) of this
Section 16 prior to, or during the six months after, any exercise, payment or
delivery pursuant to an Option, such exercise, payment or delivery may be
rescinded by the Company within two years thereafter. In the event of any such
rescission, the Optionee shall pay to the Company the amount of any gain
realized or payment received as a result of the rescinded exercise, payment or
delivery, in such manner and on such terms and conditions as may be required,
and the Company shall be entitled to set-off against the amount of any such gain
any amount owed to the Optionee by the Company.
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17. AMENDMENT AND DISCONTINUATION OF THIS PLAN. Either the Board or the
Committee may from time to time amend this Plan or any Option without the
consent or approval of the shareholders of the Company; PROVIDED, HOWEVER, that,
except to the extent provided in Section 9, no amendment or suspension of this
Plan or any Option issued hereunder shall substantially impair any Option
previously granted to any Optionee without the consent of such Optionee.
18. TERMINATION DATE. This Plan shall terminate ten years after the
date of adoption by the Board of Directors.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Registrant has authority under Section 607.0850 of the Florida
Business Corporation Act to indemnify its directors and officers to the extent
provided for in such statute. The Registrant's Amended and Restated Articles of
Incorporation and Amended and Restated Bylaws provide that the Registrant may
insure, shall indemnify and shall advance expenses on behalf of its officers and
directors to the fullest extent not prohibited by law. The Registrant is also a
party to indemnification agreements with each of its directors and executive
officers.
ITEM 21: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
Exhibit
No. Description of Exhibit
------- --------------------------------------------------------------
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 Form of Registrant's Amended and Restated Certificate of
Incorporation(2)
3.2 Form of Registrant's Amended and Restated Bylaws(2)
5.1 Opinion of Broad and Cassel(3)
8.1 Opinion of Arthur Andersen LLP(3)
10.42 2000 Stock Option Plan (2)
10.43 Form of Letter Agreement regarding voting by and among Alan P.
Cohen, Chi-Ming J. Chen, Elliot F. Hahn and Andrx Corporation
(2)
10.44 Form of Letter Agreement regarding voting by and among Dr.
Edward E. Goldman, John Klein and Cybear, Inc.(2)
10.45 Form of Tax Sharing Agreement(2)
23.1 Consent of Broad and Cassel(3)
23.2 Consent of Arthur Andersen LLP(2)
99.1 Form of Proxy Card of Andrx Corporation (2)
99.2 Form of Proxy Card of Cybear, Inc. (2)
---------------------------
(1) Filed as an exhibit of the same number to Andrx's Registration
Statement on Form S-3 (File No. 333-33822) and incorporated herein by
reference.
(2) Filed herewith.
(3) To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules for which provision is made in the applicable accounting
regulations of the Commission are not required under the related instructions or
are not applicable, and therefore have been omitted.
ITEM 22: UNDERTAKINGS
The Registrant undertakes:
(1) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that, in
the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense or any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with
the securities being
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<PAGE>
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed
in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-4 and has duly caused this
Registrant Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Fort Lauderdale, State of Florida, on May 30,
2000.
ANDRX CORPORATION
By: /s/ Angelo C. Malahias
-------------------------
Angelo C. Malahias
Vice President and Chief
Financial Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Alan
P. Cohen, Elliot F. Hahn and Angelo C. Malahias, or any one of them, as his or
her true and lawful attorneys-in-fact and agents with full power of substitution
and resubstitution for him or her and in his or her name, place and stead in any
and all capacities to execute in the name of each such person who is then an
officer or director of the Registrant any and all amendments (including
post-effective amendments) to this Registration Statement, and any registration
statement relating to the offering hereunder pursuant to Rule 462 under the
Securities Act of 1933, as amended, and to file the same with all exhibits
thereto and other documents in connection therewith with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents and each of
them full power and authority to do and perform each and every act and thing
required or necessary to be done in and about the premises as fully as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents; or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
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<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
registration statement 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/ Alan P. Cohen Co-Chairman, Chief Executive Officer and May 30, 2000
--------------------------- Director (Principal Executive Officer)
Alan P. Cohen
/s/ Chih-Ming J. Chen Co-Chairman, Chief Scientific Officer May 30, 2000
---------------------- and Director
Chih-Ming J. Chen, Ph.D.
/s/ Elliot F. Hahn President and Director May 30, 2000
---------------------------
Elliot F. Hahn, Ph.D.
/s/ Angelo C. Malahias Vice President and Chief Financial May 30, 2000
----------------------- Officer (Principal Financial and
Angelo C. Malahias Accounting Officer)
/s/ Melvin Sharoky Director May 30, 2000
-------------------
Melvin Sharoky, M.D.
/s/ Lawrence J. DuBow Director May 30, 2000
----------------------
Lawrence J. DuBow
/s/ Irwin C. Gerson Director May 30, 2000
--------------------
Irwin C. Gerson
/s/ Michael A. Schwartz Director May 30, 2000
------------------------
Michael A. Schwartz, Ph.D.
</TABLE>
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<PAGE>
EXHIBIT INDEX
Exhibit
No.
-------
3.1 Amended and Restated Certificate of Incorporation
3.2 Amended and Restated Bylaws
10.42 2000 Stock Option Plan
10.43 Form of Letter Agreement regarding voting by and among Alan P. Cohen,
Chi-Ming, J. Chen, Elliot F. Hahn and Andrx Corporation
10.44 Form of Letter Agreement regarding voting by and among Dr. Edward E.
Goldman, John Klein and Cybear, Inc.
10.45 Form of Tax Sharing Agreement
23.2 Consent of Arthur Andersen LLP
99.1 Form of Proxy Card of Andrx Corporation
99.2 Form of Proxy Card of Cybear, Inc.
