As filed with the Securities and Exchange Commission on July 21, 2000
Registration Statement No. 333-38226
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1
TO
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 (I.R.S. Employer
of incorporation or organization) Identification No.)
Dr. Elliot F. Hahn, President
Andrx Corporation
4001 Southwest 47th Avenue
Ft. 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.
Broad and Cassel Berman Wolfe Rennert Vogel & Mandler, P.A.
201 South Biscayne Boulevard 100 Southeast Second Street
Miami, Florida 33131 Miami, Florida 33131
Telephone: (305) 373-9400 Telephone: (305) 577-4177
Telecopier: (305) 373-9443 Telecopier: (305) 373-6036
---------------
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 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, 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 ADDITIONAL REGISTRATION FEE (1)
================================================================================
<TABLE>
<CAPTION>
Proposed Proposed
Additional Maximum Maximum Amount of
Title of Each Class Amount to be Offering Price Aggregate Additional
of Securities to be Registered Registered Per Share(2) Offering Price Registration Fee(3)
<S> <C> <C> <C> <C>
Andrx Group Common Stock,
$.001 par value per share...... 1,575,590 $ 75.00 $118,169,250 $31,197
Cybear Group Common Stock,
$.001 par value per share...... 784,889 $ 3.44 $ 2,700,018 $ 713
</TABLE>
================================================================================
(1) Andrx Corporation previously registered 68,924,410 shares of Andrx Group
Common Stock and 15,715,111 of Cybear Group Common Stock on May 31, 2000.
(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 July 20, 2000.
(3) Calculated by multiplying .000264 by the proposed maximum offering price.
---------------
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>
[GRAPHIC OMITTED]
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 will 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, 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 Chief Executive Officer, of an outstanding warrant to acquire
525,000 shares of Cybear's common stock currently owned by Andrx) of the common
stock 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 approximately .1492 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 Cybear Group Common Stock 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;
o Adoption of Andrx's 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.
<PAGE>
Please see pages 20 through 39 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 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 July 21, 2000,
and was first mailed to stockholders on July 31, 2000.
<PAGE>
SPECIAL MEETING OF STOCKHOLDERS
[GRAPHIC OMITTED]
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 will 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, 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 Chief Executive Officer, of an outstanding warrant to acquire
525,000 shares of Cybear's common stock currently owned by Andrx) of the common
stock 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 approximately .1492 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 Cybear Group Common Stock 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 20 through 39 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 other risk factors pertaining to the reorganization
that you should consider.
This document provides you with detailed information about the
reorganization. We encourage you to read this document carefully in its
entirety.
<PAGE>
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 July 21, 2000,
and was first mailed to stockholders on July 31, 2000.
<PAGE>
ANDRX CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 5, 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 September 5,
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
approximately .1492 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 Andrx's 2000 Stock Option
Plan,
4. To consider and vote upon a proposal to ratify the appointment of
Arthur Andersen LLP as Andrx'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 July 21, 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. No postage is required if mailed in the United States.
By Order of the Board of Directors,
Scott Lodin, Secretary
Fort Lauderdale, Florida
July 31, 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. 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 SEPTEMBER 5, 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 September 5,
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
approximately .1492 of a share of Andrx Corporation's Cybear Group
Common Stock.
Only stockholders of record at the close of business on July 21, 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. No postage is required if mailed in the United States.
By Order of the Board of Directors,
Scott Lodin, Secretary
Boca Raton, Florida
July 31, 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. 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 .................................................. 3
SUMMARY ............................................................................. 4
SUMMARY CONSOLIDATED FINANCIAL DATA ................................................. 11
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 ......................................... 33
NOTE REGARDING FORWARD-LOOKING STATEMENTS ........................................... 40
WHERE YOU CAN FIND MORE INFORMATION ................................................. 40
THE STOCKHOLDER MEETINGS ............................................................ 41
The Andrx Annual Meeting .......................................................... 41
The Cybear Special Meeting ........................................................ 41
Voting of Proxies ................................................................. 42
The Reorganization ................................................................ 45
Description of the Reorganization ................................................. 45
Background of the Reorganization .................................................. 46
Andrx's Reasons for the Reorganization ............................................ 48
Recommendation of Andrx's Board of Directors ...................................... 49
Cybear's Reasons for the Reorganization ........................................... 50
Opinion of Cybear's Financial Advisor ............................................. 51
Recommendation of Cybear's Board of Directors ..................................... 57
Interests of Certain Directors, Officers and Affiliates in the Reorganization ..... 57
Management and Allocation Policies ................................................ 58
Tax Sharing Agreement. ............................................................ 62
Description of Andrx Group Common Stock and Cybear Group Common Stock ............. 62
Reincorporation in the State of Delaware .......................................... 71
Comparison of Stockholder Rights .................................................. 72
Certain Anti-Takeover Provisions .................................................. 77
United States Federal Income Tax Considerations ................................... 77
Principal Provisions of the Reorganization Agreement .............................. 81
No Appraisal Rights ............................................................... 83
Accounting Treatment .............................................................. 84
Stock Exchange Listings ........................................................... 84
Exchange Procedures ............................................................... 84
Stock Transfer Agent and Registrar ................................................ 84
Financial Advisors ................................................................ 84
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDITION ................................... 85
BUSINESS OF CYBEAR .................................................................. 92
BENEFICIAL SECURITY OWNERSHIP ....................................................... 104
Andrx ............................................................................. 104
Cybear ............................................................................ 105
ELECTION OF DIRECTORS ............................................................... 106
EXECUTIVE COMPENSATION .............................................................. 109
CERTAIN TRANSACTIONS ................................................................ 114
PROPOSAL TO APPROVE 2000 STOCK OPTION PLAN .......................................... 115
RATIFICATION OF SELECTION OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS ........................................................................ 119
OTHER BUSINESS ...................................................................... 119
PRICE RANGE OF EXISTING COMMON STOCKS AND DIVIDEND INFORMATION ...................... 119
INFORMATION CONCERNING STOCKHOLDER PROPOSALS ........................................ 120
EXPENSES OF SOLICITATION ............................................................ 121
LEGAL AND TAX OPINIONS .............................................................. 121
EXPERTS ............................................................................. 121
INDEX TO FINANCIAL STATEMENTS ....................................................... F-1
CYBEAR, INC. - INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS' REPORT
AND FINANCIAL STATEMENTS ........................................................... F-2
</TABLE>
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
The information in this prospectus with respect to Andrx gives effect to
two-for-one stock splits in June 1999 and April 2000.
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 all the outstanding shares of Andrx common stock and the shares of
Cybear common stock 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 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
1
<PAGE>
stockholders, who currently own 30.5% (assuming the exercise by Edward E.
Goldman, M.D., Cybear's Chief Executive Officer, of an outstanding warrant to
acquire 525,000 shares of Cybear's common stock currently owned by Andrx) of
the equity of 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. 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
may revoke the proxy at any time before it is voted. The proxy may be revoked
in writing or by your appearing at the meeting and voting in person. You can
find further details on how to revoke your proxy on page 42 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 will 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. This conclusion is not free from doubt. There are 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 the Cybear
Group Common Stock. Accordingly, we cannot assure you that the views expressed
in this paragraph, if contested, would be sustained by a court.
The U.S. federal income tax consequences are described below under the
heading "United States Federal Income Tax Considerations." Tax matters are very
complex and the tax consequences of the
2
<PAGE>
reorganization to you could 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?
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.
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
3
<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.
The Reorganization (see pages 45 through 84)
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 Chief Executive Officer, of an
4
<PAGE>
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 approximately .1492 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 48 through 49)
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 publicly traded equity;
o Create 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 50 through 51)
Cybear believes that the reorganization, among other things, offers the
following advantages to Cybear and its stockholders:
o Provide a premium for its common stock for stockholders other than Andrx;
o Increase flexibility for its operational spending;
o Improve liquidity of Cybear's publicly traded equity;
o Create a more viable currency for potential future strategic
acquisitions; and
o Provide the ability to leverage Andrx's business and relationships.
Recommendations to Stockholders
To Andrx's Stockholders (see page 49):
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.
5
<PAGE>
To Cybear's Stockholders (see page 57):
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 41):
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 42)
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 41 through 42)
If you are an Andrx stockholder, you are entitled to vote at the Andrx
annual meeting if you owned shares of Andrx common stock as of the record date
for that annual meeting, which was the close of business on July 21, 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 July 21,
2000.
On July 21, 2000, there were 69,016,198 shares of Andrx common stock
outstanding. For each share of Andrx common stock owned on that date, Andrx
stockholders will have one vote at the Andrx annual meeting.
On July 21, 2000, there were 17,786,287 shares of Cybear common stock
outstanding, including 12,877,054 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
On July 21, 2000, the record date for the Andrx annual meeting, directors
and executive officers of Andrx and their affiliates owned and were entitled to
vote 12,352,872 shares of Andrx common stock, or approximately 17.9% of the
Andrx common stock outstanding on that date.
On July 21, 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
468,833 shares of Cybear common stock, or approximately 2.6% 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.
6
<PAGE>
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 a 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 generally will 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. This
conclusion is not free from doubt. There are 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 the 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.
The U.S. federal income tax consequences are described below under the
heading "United States Federal Income Tax Considerations." Tax matters are very
complex and the tax consequences of the reorganization to you could 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.
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.
7
<PAGE>
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 directors and
Chief Scientific Officer, and Elliot F. Hahn, its President and a
director, to vote in favor of the reorganization.
o Cybear 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.
The company entitled to assert a condition may waive some of the
conditions to the reorganization, but not the first three conditions listed
above.
8
<PAGE>
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 a 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
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
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.
9
<PAGE>
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 July 20, 2000, the most recent practicable
date prior to the filing of this document, the closing price per share of Andrx
common stock was $72.75 and the closing price per share of Cybear common stock
was $3.69.
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.
10
<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.
ANDRX
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
2000 1999
-------------- --------------
(Unaudited) (Unaudited)
(in thousands, except for
share and per share amounts)
<S> <C> <C>
Statement of Income Data(1):
Revenues
Distributed products ............................. $ 67,826 $ 63,025
Manufactured products ............................ 44,114 4,373
Stipulation fees ................................. -- 10,000
Licensing and other .............................. 3,538 526
------------ ------------
Total revenues ................................. 115,478 77,924
------------ ------------
Operating expenses
Cost of goods sold ............................... 63,204 52,826
Selling, general and administrative .............. 11,542 9,591
Research and development ......................... 8,211 4,315
Cybear, Inc. Internet operating expenses ......... 6,339 2,795
Cybear, Inc. merger costs ........................ 832 --
------------ ------------
Total operating expenses ....................... 90,128 69,527
------------ ------------
Income (loss) from operations ..................... 25,350 8,397
Other income (expense)
Minority interest ................................ 1,820 51
Gain on sale of Cybear, Inc. shares .............. -- 300
Interest income .................................. 1,531 366
Interest expense ................................. (474) (154)
------------ ------------
Income (loss) before income taxes ................. 28,227 8,960
Income taxes ...................................... 11,856 2,016
------------ ------------
Net income (loss) ................................. $ 16,371 $ 6,944
============ ============
Basic net income (loss) per share ................. $ 0.26 $ 0.11
============ ============
Diluted net income (loss) per share ............... $ 0.25 $ 0.11
============ ============
Basic weighted average shares of
common stock outstanding ......................... 63,212,600 60,871,900
============ ============
Diluted weighted average shares of
common stock outstanding ......................... 65,832,200 64,625,300
============ ============
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
(in thousands, except for share and per share amounts)
<S> <C> <C> <C> <C> <C>
Statement of Income Data(1):
Revenues
Distributed products ............................. $ 262,402 $ 215,903 $ 146,237 $ 86,721 $ 50,468
Manufactured products ............................ 134,796 11,472 3,324 -- --
Stipulation fees ................................. 70,733 19,130 -- -- --
Licensing and other .............................. 8,059 552 137 50 165
------------ ------------ ------------ ------------ ------------
Total revenues ................................. 475,990 247,057 149,698 86,771 50,633
------------ ------------ ------------ ------------ ------------
Operating expenses
Cost of goods sold ............................... 235,346 188,226 126,802 72,400 41,781
Selling, general and administrative .............. 55,266 30,646 18,934 13,778 9,847
Research and development ......................... 25,697 16,837 11,251 5,066 3,895
Cybear, Inc. Internet operating expenses ......... 14,744 4,090 1,473 -- --
Cybear, Inc. merger costs ........................ -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total operating expenses ....................... 331,053 239,799 158,460 91,244 55,523
------------ ------------ ------------ ------------ ------------
Income (loss) from operations ..................... 144,937 7,258 (8,762) (4,473) (4,890)
Other income (expense)
Minority interest ................................ 1,937 85 31 -- --
Gain on sale of Cybear, Inc. shares .............. 643 700 -- -- --
Interest income .................................. 3,603 1,064 1,585 1,210 339
Interest expense ................................. (1,661) (380) (490) (765) (636)
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes ................. 149,459 8,727 (7,636) (4,028) (5,187)
Income taxes ...................................... 55,405 333 -- -- --
------------ ------------ ------------ ------------ ------------
Net income (loss) ................................. $ 94,054 $ 8,394 $ (7,636) $ (4,028) $ (5,187)
============ ============ ============ ============ ============
Basic net income (loss) per share ................. $ 1.52 $ 0.14 $ (0.13) $ (0.08) $ (0.14)
============ ============ ============ ============ ============
Diluted net income (loss) per share ............... $ 1.45 $ 0.13 $ (0.13) $ (0.08) $ (0.14)
============ ============ ============ ============ ============
Basic weighted average shares of
common stock outstanding ......................... 61,979,800 60,090,800 56,852,400 48,592,000 37,787,200
============ ============ ============ ============ ============
Diluted weighted average shares of
common stock outstanding ......................... 64,953,200 63,706,800 56,852,400 48,592,000 37,787,200
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
March 31,
2000
--------------
(Unaudited)
<S> <C> <C>
Balance Sheet Data(1):
Cash, cash equivalents and investments
available-for-sale(2) ............... $ 114,771
Working capital ...................... 185,842
Total assets ......................... 363,126
Short-term borrowings ................ 20,370
Total shareholders' equity ........... 246,638
<CAPTION>
December 31,
--------------------------------------------------------------------------
1999 1998 1997 1996 1995
-------------- -------------- -------------- -------------- --------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data(1):
Cash, cash equivalents and investments
available-for-sale(2) ............... $ 123,418 $ 23,092 $ 25,543 $ 30,320 $ 13,841
Working capital ...................... 180,863 51,345 45,144 32,963 14,402
Total assets ......................... 357,954 121,198 90,845 66,538 36,010
Short-term borrowings ................ 20,226 4,107 546 6,563 6,101
Total shareholders' equity ........... 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.
11
<PAGE>
CYBEAR
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------
2000 1999
-------------- --------------
(Unaudited) (Unaudited)
(in thousands, except for
share and per share amounts)
<S> <C> <C>
Statement of Operations Data:*
Revenues .............................................. $ 231 $ --
------------ ------------
Operating expenses:
Cost of Revenues ..................................... 209 --
Network operations and operations support ............ 933 728
Product development .................................. 948 526
Sales and marketing .................................. 1,896 725
General and administrative ........................... 880 655
Depreciation and amortization ........................ 549 191
Merger costs ......................................... 832 --
Other non-recurring charges .......................... 1,152 --
------------ ------------
Total operating expenses .............................. 7,399 2,825
------------ ------------
Loss from operations .................................. (7,168) (2,825)
Other income (expense):
Interest income ...................................... 559 1
Interest expense on due to Andrx Corporation ......... -- (91)
------------ ------------
Loss before income taxes .............................. (6,609) (2,915)
Income tax benefit .................................... -- 1,400
------------ ------------
Net loss .............................................. $ (6,609) $ (1,515)
============ ============
Basic and diluted net loss per share .................. $ (0.37) $ (0.11)
============ ============
Basic and diluted weighted average shares of
common stock outstanding ............................. 17,703,669 13,269,400
============ ============
<CAPTION>
Year Ended Period From
December 31, February 5, 1997
----------------------------- (Inception) to
1999 1998 December 31, 1997
-------------- -------------- ------------------
(in thousands, except for share and per share
amounts)
<S> <C> <C> <C>
Statement of Operations Data:*
Revenues .............................................. $ 270 $ -- $ 96
------------ ------------ ------------
Operating expenses:
Cost of Revenues ..................................... 77 -- --
Network operations and operations support ............ 2,790 643 --
Product development .................................. 3,058 1,557 894
Sales and marketing .................................. 4,909 483 --
General and administrative ........................... 2,544 1,064 667
Depreciation and amortization ........................ 1,556 139 65
Merger costs ......................................... -- -- --
Other non-recurring charges .......................... -- 285 --
------------ ------------ ------------
Total operating expenses .............................. 14,934 4,171 1,626
------------ ------------ ------------
Loss from operations .................................. (14,664) (4,171) (1,530)
Other income (expense):
Interest income ...................................... 1,282 -- --
Interest expense on due to Andrx Corporation ......... (216) (210) (28)
------------ ------------ ------------
Loss before income taxes .............................. (13,598) (4,381) (1,558)
Income tax benefit .................................... 2,824 1,900 --
------------ ------------ ------------
Net loss .............................................. $ (10,774) $ (2,481) $ (1,558)
============ ============ ============
Basic and diluted net loss per share .................. $ (0.70) $ (0.19) $ (0.12)
============ ============ ============
Basic and diluted weighted average shares of
common stock outstanding ............................. 15,470,009 13,030,999 12,768,303
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
March 31,
2000
--------------
(Unaudited)
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and investments available-for-sale ........ $ 26,743
Working capital (deficit) ........................................ 31,631
Total assets ..................................................... 46,798
Total liabilities ................................................ 3,127
Total shareholders' equity (deficit) ............................. 43,671
<CAPTION>
December 31,
--------------------------------------------
1999 1998 1997
-------------- -------------- --------------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and investments available-for-sale ........ $ 37,994 $ 4 $ 1
Working capital (deficit) ........................................ 39,390 (3,235) (1,378)
Total assets ..................................................... 53,068 3,332 396
Total liabilities ................................................ 3,090 3,799 1,410
Total shareholders' equity (deficit) ............................. 49,978 (467) (1,014)
</TABLE>
---------------
* Certain prior years' amounts have been reclassified to conform to the current
year presentation.
12
<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 Corporation will acquire all
of the publicly traded shares of common stock of Cybear in what the parties
anticipate will 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 .1492 shares of Cybear Group Common Stock. Upon
completion of the Reorganization, (i) Cybear will be a wholly owned subsidiary
of Andrx Corporation 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 Corporation's 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 Corporation 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
13
<PAGE>
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 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 Corporation, 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 designated 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
stockholders 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 have filed this joint proxy
statement/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 joint proxy
statement/registration statement 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.
14
<PAGE>
ANDRX CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
March 31, 2000
-----------------------------
Historical Historical
Cybear Andrx
Consolidated Consolidated
-------------- --------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ................. $ 1,040 $ 26,904
Investments available-for-sale ............ 25,703 87,867
Accounts receivable, net .................. 162 64,280
Inventories ............................... -- 78,263
Deferred income tax assets, net ........... -- 18,435
Prepaid and other current assets, net ..... 7,853 14,552
------- --------
Total current assets .................... 34,758 290,301
Property, plant and equipment, net ........ 3,608 48,157
Other assets, net ......................... 8,432 24,668
Total assets ............................ $46,798 $363,126
======= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable .......................... $ 2,348 $ 46,325
Accrued liabilities ....................... 779 28,377
Bank loan ................................. -- 20,370
Income taxes payable ...................... -- 9,387
------- --------
Total current liabilities ............... 3,127 104,459
Commitments and contingencies
Minority interest .......................... -- 12,029
Shareholders' equity ....................... 43,671 246,638
Total liabilities and
shareholders' equity ................... $46,798 $363,126
======= ========
<CAPTION>
March 31, 2000
--------------------------------------------------------
Pro Forma Pro Forma Pro Forma
Pro Forma Andrx Cybear Andrx
Adjustments Consolidated Group Group
------------------ -------------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ................. $ -- $ 26,904 $ 1,040 $ 25,864
Investments available-for-sale ............ -- 87,867 25,703 62,164
Accounts receivable, net .................. -- 64,280 162 64,118
Inventories ............................... -- 78,263 -- 78,263
Deferred income tax assets, net ........... -- 18,435 -- 18,435
Prepaid and other current assets, net ..... -- 14,552 7,853 6,699
----------- -------- ------- --------
Total current assets .................... -- 290,301 34,758 255,543
Property, plant and equipment, net ........ -- 48,157 3,608 44,549
Other assets, net ......................... 2,700 (A) 43,050 26,814 16,236
15,682 (C)
-----------
Total assets ............................ $ 18,382 $381,508 $65,180 $316,328
=========== ======== ======= ========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable .......................... $ 4,000(A) $ 50,993 $ 3,016 $ 47,977
668 (B)
Accrued liabilities ....................... -- 28,377 779 27,598
Bank loan ................................. -- 20,370 -- 20,370
Income taxes payable ...................... -- 9,387 -- 9,387
----------- -------- ------- --------
Total current liabilities ............... 4,668 109,127 3,795 105,332
Commitments and contingencies
Minority interest .......................... (12,029)(C) -- -- --
Shareholders' equity ....................... (1,300)(A) 272,381 61,385 210,996
(668)(B)
27,711 (C)
-----------
Total liabilities and
shareholders' equity ................... $ 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.
15
<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, it has 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.
16
<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
Cybear Andrx Pro Forma
Consolidated Consolidated Adjustments(J)
-------------- -------------- ----------------
<S> <C> <C> <C>
Revenues ................................ $ 231 $ 115,478 $ --
Operating expenses ...................... 7,399 90,128 460 (E)
(832)(F)
----------
Income (loss) from operations ........... (7,168) 25,350 372
Other income (expense), net ............. 559 2,877 (1,820)(D)
------------ ------------ ----------
Income (loss) before income taxes ....... (6,609) 28,227 (1,448)
Income tax benefit (provision) .......... -- (11,856) 2,101 (H)
------------ ------------ ----------
Net income (loss) ....................... $ (6,609) $ 16,371 $ 653
============ ============ ==========
Basic net income (loss) per share ....... $ (0.37) $ 0.26
============ ============
Diluted net income (loss) per share ..... $ (0.37) $ 0.25
============ ============
Basic weighted average shares of
common stock outstanding ............... 17,703,700 63,212,600
============ ============
Diluted weighted average shares of
common stock outstanding ............... 17,703,700 65,832,200
============ ============
<CAPTION>
Three Months Ended March 31, 2000
---------------------------------------------------
Pro Forma Pro Forma Pro Forma
Andrx Cybear Andrx
Consolidated Group Group
-------------- --------------------- --------------
<S> <C> <C> <C>
Revenues ................................ $115,478 $ 231 $ 115,247
Operating expenses ...................... 89,756 7,027 82,729
Income (loss) from operations ........... 25,722 (6,796) 32,518
Other income (expense), net ............. 1,057 559 498
-------- -------------- ------------
Income (loss) before income taxes ....... 26,779 (6,237) 33,016
Income tax benefit (provision) .......... (9,755) -- (9,755)
-------- -------------- ------------
Net income (loss) ....................... $ 17,024 $ (6,237) $ 23,261
======== ============== ============
Basic net income (loss) per share ....... $ (0.40) $ 0.37
============== ============
Diluted net income (loss) per share ..... $ (0.40) $ 0.35
============== ============
Basic weighted average shares of
common stock outstanding ............... 15,645,000 (I) 63,212,600
============== ============
Diluted weighted average shares of
common stock outstanding ............... 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.
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>
Year Ended December 31, 1999
----------------------------------------------
Historical Historical
Cybear Andrx Pro Forma
Consolidated Consolidated Adjustments(J)
-------------- -------------- ----------------
<S> <C> <C> <C>
Revenues ................................ $ 270 $ 475,990 $ --
Operating expenses ...................... 14,934 331,053 1,838 (E)
------------ ------------ ----------
Income (loss) from operations ........... (14,664) 144,937 (1,838)
Other income (expense), net ............. 1,066 4,522 (1,937)(D)
------------ ------------ ----------
Income (loss) before income taxes ....... (13,598) 149,459 (3,775)
Income tax benefit (provision) .......... 2,824 (55,405) (2,824)(G)
4,989 (H)
----------
Net income (loss) ....................... $ (10,774) $ 94,054 $ (1,610)
============ ============ ==========
Basic net income (loss) per share ....... $ (0.70) $ 1.52
============ ============
Diluted net income (loss) per share ..... $ (0.70) $ 1.45
============ ============
Basic weighted average shares of
common stock outstanding ............... 15,470,000 61,979,800
============ ============
Diluted weighted average shares of
common stock outstanding ............... 15,470,000 64,953,200
============ ============
<CAPTION>
Year Ended December 31, 1999
---------------------------------------------------
Pro Forma Pro Forma Pro Forma
Andrx Cybear Andrx
Consolidated Group Group
-------------- --------------------- --------------
<S> <C> <C> <C>
Revenues ................................ $ 475,990 $ 270 $ 475,720
Operating expenses ...................... 332,891 16,772 316,119
--------- -------------- ------------
Income (loss) from operations ........... 143,099 (16,502) 159,601
Other income (expense), net ............. 2,585 1,066 1,519
--------- -------------- ------------
Income (loss) before income taxes ....... 145,684 (15,436) 161,120
Income tax benefit (provision) .......... (53,240) -- (53,240)
Net income (loss) ....................... $ 92,444 $ (15,436) $ 107,880
========= ============== ============
Basic net income (loss) per share ....... $ (1.15) $ 1.74
============== ============
Diluted net income (loss) per share ..... $ (1.15) $ 1.66
============== ============
Basic weighted average shares of
common stock outstanding ............... 13,411,300 (I) 61,979,800
============== ============
Diluted weighted average shares of
common stock outstanding ............... 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.
18
<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.
19
<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.
20
<PAGE>
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:
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 Corporation 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 Corporation 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
21
<PAGE>
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.
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.
22
<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 its good faith business judgment that
such competition is in the best interests of Andrx Corporation 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
23
<PAGE>
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 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 joint proxy statement/prospectus 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,
24
<PAGE>
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.
The 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 generally will be recognized by the companies or their
stockholders for federal income tax purposes as a result of the reorganization,
except with respect to the cash received on the sale of fractional shares
received by Andrx's stockholders. However, this conclusion is not free from
doubt. 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 advance rulings on the characterization of an instrument
with characteristics similar to the Andrx Group Common Stock and the Cybear
Group Common Stock. It is possible, therefore, that the IRS 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 similar 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 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.
The reorganization may not provide Andrx with tax consolidation advantages
The IRS could assert that the Cybear Group Common Stock is not the voting
common stock of Andrx Corporation, but is instead the voting common stock of
Cybear. If so, Andrx Corporation would not own enough stock in Cybear to
include Cybear as a member of its federal consolidated income tax group.
Consequently, Cybear's tax results would not be reflected in Andrx
Corporation's consolidated return.
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
25
<PAGE>
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.
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.
26
<PAGE>
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 March 31, 2000 had an accumulated deficit of approximately $21.4
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 Cybear 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:
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
27
<PAGE>
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
The Cybear Group believes that its existing capital resources will be
sufficient to enable it to meet its anticipated working capital and capital
expenditure requirements for the next 12 months. The Cybear Group expects
negative cash flows and net losses to continue for the foreseeable future and
certain modifications of its business plan being considered may further
increase its working capital and capital expenditure requirements. Whether or
not the business plan is modified, the Cybear Group may need to raise
additional capital through public or private debt or equity financing or
through funding from the Andrx Group, and has no agreements or arrangements
with respect to raising that capital, including the Andrx Group. Additional
funding, whether obtained through public or private debt or equity financing,
may not be available when required or may not be available on terms favorable
to the Cybear Group, if at all. If additional financing is not available, the
Cybear Group may be required to further modify its business plan or to delay,
scale back or eliminate some or all of its product development and deployment
programs.
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.
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
28
<PAGE>
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.
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;
29
<PAGE>
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 ISPs 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
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.
30
<PAGE>
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
31
<PAGE>
employees could have a material adverse effect on 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.
32
<PAGE>
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 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
33
<PAGE>
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
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. On June 8, 2000, the
Eastern District Court of Michigan granted motions for partial summary judgment
with respect to the stipulation, without addressing the issues of whether the
stipulation had any anti-competitive effect or caused any injury or damages,
the court determined that the stipulation constituted a restraint of trade that
was a per se violation of the federal anti-trust laws. The court must still
determine the issues of whether the stipulation caused any injury or damages to
consumers. The court's decision is subject to Andrx's right to appeal at the
conclusion of the litigation, but Andrx has asked the court to permit an
immediate appeal of the ruling.
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
34
<PAGE>
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.
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.
35
<PAGE>
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 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
36
<PAGE>
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.
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
37
<PAGE>
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 of the board of directors and Chief
Scientific Officer; Alan P. Cohen, Co-Chairman of the board of directors and
Chief Executive Officer; and Dr. Elliot F. Hahn, President and a director.
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.
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.
38
<PAGE>
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.
39
<PAGE>
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 Andrx 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 joint proxy statement/prospectus is accurate as of any date other than the
date on the front of this document.
40
<PAGE>
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 September 5, 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 independent certified
accountants.
Only Andrx Stockholders of Record on July 21, 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 69,016,198 shares of Andrx common
stock outstanding and entitled to vote at the Andrx annual meeting, held by
approximately 196 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
12,352,872 shares of Andrx common stock, or approximately 17.9% 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 and were
entitled to vote approximately 12,304,472 shares of Andrx common stock or 17.8%
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 September 5, 2000 starting
at 10:00 a.m., local time.
What Will be Voted Upon
At the Cybear special meeting, Cybear stockholders will consider and vote
upon a proposal to approve the reorganization.
41
<PAGE>
Only Cybear Stockholders of Record on July 21, 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 17,786,287 shares of Cybear common stock
outstanding and entitled to vote at the Cybear special meeting. These
outstanding shares are held by approximately 71 Cybear stockholders of record.
Andrx holds an aggregate of 12,877,054 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, directors and executive officers of Cybear,
other than directors and executive officers affiliated or associated with Andrx,
owned and were entitled to vote 468,833 shares of Cybear common stock, or
approximately 2.6% of the shares of Cybear common stock outstanding on the
Cybear record date, and Andrx and the directors of Cybear designated by Andrx
owned and were entitled to vote 12,913,354 shares of Cybear common stock, or
approximately 72.6% of the shares of Cybear common stock outstanding on the
record date. Dr. Edward E. Goldman, Cybear's Chief Executive Officer and John
Klein, Cybear's Chairman of the board of directors, have entered into an
agreement to vote in favor of the reorganization. Together they own and were
entitled to vote 458,833 shares of Cybear common stock or 2.6% 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:
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; or
42
<PAGE>
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: (561) 994-2828,
Attention: Secretary.
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) the holders
of a majority of the Cybear common stock not owned by Andrx have not 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.
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
43
<PAGE>
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.
44
<PAGE>
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 will be tax-free to Andrx, Cybear and their
stockholders, except with respect to cash received on 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
approximately .1492 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 bylaws. 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 Andrx and Cybear boards of directors can jointly agree to 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
45
<PAGE>
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.
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 it 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
46
<PAGE>
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.
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.
47
<PAGE>
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
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 will be
taxable for United States federal income tax purposes to Andrx or its
stockholders, except with respect to the cash received on 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 65.5% 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; and
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.
48
<PAGE>
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 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 effectively require the 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; and
o The potential risks described in this joint proxy statement/prospectus
under "Risk Factors."
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.
49
<PAGE>
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 BWRV&M regarding the proposed terms of the transaction, the obligations
of the members of the Cybear board of directors in its consideration of
the proposed transaction and the legal investigation of Andrx and its
assets conducted by legal counsel;
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 and in deciding to recommend that its
stockholders approve the reorganization, 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 will be a
tax-free exchange; and
50
<PAGE>
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;
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 a 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 Cybear board of directors 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 its 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,
51
<PAGE>
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
(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). 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 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;
52
<PAGE>
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;
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 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, in all respects material to
its analysis, 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.
53
<PAGE>
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
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.
54
<PAGE>
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>
<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
<S> <C> <C> <C>
Revenue Growth Earnings Growth Revenue Growth Earnings Growth
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
<S> <C> <C> <C>
Revenue Growth Earnings Growth Revenue Growth Earnings Growth
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>
55
<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> <C>
Premium/(Discount)
of stock class with
lesser voting rights to
stock class with
greater voting rights: (41.5)% (0.5)% (3.6)% 29.3% 13.1%
</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>
<S> <C> <C> <C>
Anniversary of the Closing Date: Conversion Premium Cybear Premium Total
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:
Since January 1, 1990
Premiums Paid to Stock Price: Low Median Mean High
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%
The following table represents the results of this analysis for those
transactions announced since January 1, 1995:
Since January 1, 1995
Premiums Paid to Stock Price: Low Median Mean High
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%
56
<PAGE>
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 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.
57
<PAGE>
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 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.
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.
Policies Subject To Change Without Stockholder Approval
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 Corporation 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 Corporation 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.
58
<PAGE>
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.
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
Corporation 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 Corporation'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
59
<PAGE>
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 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
60
<PAGE>
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."
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 Corporation
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--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 joint proxy statement/
prospectus.
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 joint proxy
statement/prospectus:
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
61
<PAGE>
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 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 Cybear Group 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 Andrx Corporation certificate of incorporation which
is attached as Annex B.
62
<PAGE>
Authorized and Outstanding Shares
Andrx's articles of incorporation authorizes it to issue 100,000,000
shares of common stock, par value $.001 per share, and 1,000,000 shares of
preferred stock, par value $.001 per share. The board of directors may issue
shares of preferred stock in series, without stockholder approval. As of July
21, 2000, 69,016,198 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
151,000,000 shares of capital stock as follows: 100,000,000 shares of a class
of common stock, designated as Andrx Corporation-Andrx Group Common Stock,
50,000,000 shares of a class of common stock, designated as Andrx
Corporation-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.
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
July 21, 2000, 69,016,198 shares of Andrx Group Common Stock and 15,727,611
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
Corporation 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.
63
<PAGE>
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 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 Andrx Group Common Stock 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.
64
<PAGE>
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
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:
(1) pay a dividend to the holders of shares of Cybear Group Common Stock
equal to:
<TABLE>
<S> <C> <C> <C> <C>
net proceeds = $250 million = $16.66 per share
---------------------------------------- ---------------
number of outstanding shares 15 million
of Cybear Group Common Stock
</TABLE>
(2) redeem for $15 per share a number of shares of Cybear Group Common
Stock equal to:
<TABLE>
<S> <C> <C> <C> <C>
net proceeds = $250 million = 16,666,666 shares
----------------------------------- -------------
average market value of $ 15
Cybear Group Common Stock
</TABLE>
(3) convert each outstanding share of Cybear Group Common Stock into a
number of shares of Andrx Group Common Stock equal to:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
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
65
<PAGE>
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.
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>
<S> <C>
Any conversion date occurring after the following Percentage of market value ratio of
anniversary of the reorganization and on or prior to the Cybear Group Common Stock to the
next such anniversary Andrx Group Common 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.
66
<PAGE>
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
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,
67
<PAGE>
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 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.
68
<PAGE>
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.
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.
69
<PAGE>
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 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.
70
<PAGE>
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 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
71
<PAGE>
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.
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
72
<PAGE>
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.
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 Delaware General
Corporate Law, or 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 662/3% of the corporation's outstanding
voting stock at an annual or special meeting, excluding shares owned by
the interested stockholder.
73
<PAGE>
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.
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.
74
<PAGE>
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.
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
75
<PAGE>
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:
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
76
<PAGE>
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 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 material 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
77
<PAGE>
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 Broker-dealers and 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;
o Estates and trusts not subject to U.S. federal income tax; and
o Foreign corporations and other foreign entities.
Finally, this discussion does not address any consequences under state,
local or foreign tax laws.
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. Moreover, the opinion of Arthur Andersen LLP is not binding on the
IRS, and there can be no assurance that views expressed in the opinion, if
challenged, would be sustained in court.
Material United States Federal Income Tax Consequences of the Reorganization
Arthur Andersen LLP is of the opinion that, while the issue is not free
from doubt, the Andrx Group Common Stock and Cybear Group Common Stock will be
treated as voting common stock of Andrx Corporation for United States federal
income tax purposes.
78
<PAGE>
No advance ruling has been sought from the IRS on the U.S. federal income
tax consequences of the reorganization, including the classification of the
Andrx Group Common Stock and the Cybear Group Common Stock. 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
capital stock of Andrx Corporation.
o The Cybear Group Common Stock is stock of a separate corporation and not
capital stock of Andrx Corporation.
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 any member of Andrx Corporation's consolidated group by Cybear
could be taxable to Andrx Corporation, subject to any applicable
dividends received deduction.
o Stockholders will recognize ordinary income, rather than capital gain
upon the taxable disposition of their Andrx Group Common Stock or Cybear
Group Common Stock to parties other than Andrx Corporation or a related
corporation.
Arthur Andersen LLP, however, is of the opinion that, while the issue is not
free from doubt, the IRS would not prevail in any of the above assertions.
Accordingly, the discussion below of the material United States federal income
tax consequences of the reorganization to Andrx stockholders, Cybear
stockholders, Andrx Corporation, Andrx and Cyber assumes that the Andrx Group
Common Stock and the Cybear Group Common Stock will be treated as voting common
stock of Andrx Corporation for United States federal income tax purposes.
Material United States Federal Tax Consequences to Andrx Stockholders, Cybear
Stockholders, Andrx Corporation, Andrx, and Cybear
The material federal income tax consequences to Andrx's stockholders are
as follows:
o The exchange of Andrx common stock for Andrx Group Common Stock and
Cybear Group Common Stock will be treated as an exchange made pursuant to
a reorganization under Section 368(a) of the Code.
o Each Andrx stockholder will 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 will have an aggregate tax basis in the shares of
Andrx Group Common Stock and Cybear Group Common Stock received in the
reorganization (including
79
<PAGE>
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 will 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) will 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 will recognize capital gain or
loss equal to the amount of cash received less the amount of basis
allocated to the fractional share interest.
o Any gain or loss recognized upon a subsequent sale or exchange of the
Andrx Group Common Stock or the Cybear Group Common Stock to parties
other than Andrx Corporation or a related corporation will be capital
gain or loss.
o Each Andrx optionholder will recognize no gain or loss upon the exchange
of Andrx options for Andrx Group Common Stock options and Cybear Group
Common Stock options.
The material federal income tax consequences to Cybear's stockholders are
as follows:
o The exchange of Cybear common stock for Cybear Group Common Stock will be
treated as a tax-free exchange under Section 351 of the Code.
o Each Cybear stockholder will 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 will 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 will include the holding
period for the Cybear common stock exchanged therefor.
o Any gain or loss recognized upon a subsequent sale or exchange of the
Cybear Group Common Stock to parties other than Andrx Corporation or a
related corporation will be capital gain or loss.
o Each Cybear optionholder will recognize no gain or loss upon the exchange
of Cybear common stock options for Cybear Group Common Stock options.
The material federal income tax consequences to Andrx Corporation, Andrx
and Cybear are as follows:
o Andrx Corporation, Andrx and Cybear will recognize no gain or loss as a
result of the reorganization.
o Following the reorganization, Cybear will 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.
o Andrx Corporation's basis in the Cybear common stock acquired in the
reorganization will be the same as the basis of the common stock in the
hands of the Cybear stockholders. Andrx
80
<PAGE>
Corporation's holding period in the Cybear common stock acquired in the
reorganization will include the period during which the common stock was
held by the Cybear stockholders.
o Andrx Corporation's basis in Andrx's common stock will be Andrx's net
asset basis. Andrx Corporation's holding period in the Andrx common stock
acquired in the reorganization will include the period during which the
common stock was held by the Andrx stockholders.
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 similar 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;
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;
81
<PAGE>
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 of directors, 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 J. 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.
82
<PAGE>
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,
Andrx Corporation 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 reorganization is not completed by December 31, 2000;
o a law or a 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.
83
<PAGE>
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.
84
<PAGE>
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.
85
<PAGE>
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.
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 pertained to an agreement whereby Cybear had 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 did not record any amounts relating to any required performance
under this agreement subsequent to February 29, 2000, as the amount, if any,
necessary to resolve this matter was not quantifiable at that time. In June
2000, Cybear and the third party resolved their dispute, agreed to terminate
the agreement, and released each other from any continuing obligations, other
than certain mutual indemnification obligations, upon payment by Cybear of
$870,000 of the remaining $2.3 million due from Cybear under the agreement.
Cybear recorded such amount to expense in June 2000.
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
86
<PAGE>
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.
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
87
<PAGE>
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.
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.
88
<PAGE>
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 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
89
<PAGE>
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.
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
90
<PAGE>
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.
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.
91
<PAGE>
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 ISP and an 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.
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
92
<PAGE>
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.
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
93
<PAGE>
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.
o In-House Software Development Capabilities--Cybear has an in-house
software development team made up of almost 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
94
<PAGE>
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.
95
<PAGE>
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.
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>
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>
96
<PAGE>
dr.cybear
dr.cybear includes a broad range of practice management tools to assist
physicians and their office staff, increase physician productivity and enhance
potential reimbursement. dr.cybear is designed to manage communications between
physicians and the various other segments of the healthcare industry that
interact with them. Cybear launched dr.cybear in March 1999.
The following highlights the dr.cybear practice, office and physician
tools:
Practice Tools
<TABLE>
<CAPTION>
Application Content Benefit
<S> <C> <C>
Managed Care Applications o Contract Manager Helps manage differing
o Eligibility and Authorization insurance contracts, checks
o Capitation Evaluation a patient's insurance status,
obtains referral
authorization and evaluates
managed care payments.
Care Management o Patient Satisfaction Survey Patient services including
o Patient Education satisfaction evaluation,
o Patient Support educational handouts,
o Practice Benchmarks online patient support links
and evaluation of practice
by comparing to norms.
Coding Management o Coding Newsletter Updates and trains staff on
o Medicare Training coding changes, simplifies
o ICD-9 Online billing with online
procedure and disease
listings.
Practice Compliance o Compliance Newsletter Keeps practice abreast of
o Legislative Update compliance issues and
o Legal Resources legislative initiatives, alerts
o Fraud and Abuse Alerts regarding fraud and abuse
issues and assists in
evaluating health care
attorney qualifications.
</TABLE>
97
<PAGE>
Office Tools
<TABLE>
<CAPTION>
Application Content Benefit
<S> <C> <C>
Supply Replacement o Injectables and Vaccines Online ordering of
o Medical Supplies and injectables, vaccines,
Office Supplies medical, and office supplies
frees staff time and ensures
availability.
Staff Services o Human Resources Helps track required human
o Policy and Procedures resource documentation,
o Office Training contains staff policies and
o Occupational Safety and procedures, online training
Health Administration courses, and Occupational
Regulatory Compliance Safety and Health
o Disaster Protocols Administration compliance
evaluation and protocols.
Infrastructure Support o Office Forms Database Extensive repository of
office forms for all needs,
both business and clinical.
</TABLE>
Physician Tools
<TABLE>
<CAPTION>
Application Content Benefit
<S> <C> <C>
Continuing Education o Continuing Medical Education Keeps physicians updated
o Medical Library on their continuing medical
o Conference Calendar education, and allows
o Clinical Studies patient, disease and clinical
research.
Prescription Management o Managed Care Tracks the medications
o Food and Drug covered by different
Administration Approvals insurance carriers, and
o Drug Formulary minimizes changes and
Prescription Profiling substitutions of patient
medications.
Certification Assistance o Credentialing Database Updates physician's profile
o Utilization Benchmarking regarding education,
hospital privileges,
licensure, etc. Allows
comparison of patient
management and treatment
to standard clinical
protocols and treatment
regimes.
</TABLE>
98
<PAGE>
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.
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.
99
<PAGE>
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 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
100
<PAGE>
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 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
101
<PAGE>
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.
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
102
<PAGE>
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 July 17, 2000, Cybear had 102 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.
Legal Proceedings
In June 2000, Cybear received a claim from Nicebid.com for damages
allegedly incurred by Nicebid.com as a result of alleged breaches of an
Internet commerce contract between Nicebid.com and Telegraph Consulting
Corporation. Cybear acquired certain assets of Telegraph Consulting
Corporation. Cybear intends to vigorously defend against the claim.
Except as described above, 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.
103
<PAGE>
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 "Andrx
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) ........... 68,400 *
Melvin Sharoky, M.D.(10) ................ 133,300 *
All directors and executive officers
as a group (9 persons)(11) ............ 13,796,872 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
</TABLE>
----------------
* Less than 1%.
(1) Except as otherwise indicated, the address of each beneficial owner is c/o
Andrx Corporation, 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 Andrx common
stock listed, which include shares of Andrx common stock that such persons
have the right to acquire a beneficial interest in within 60 days.
(3) Represents 17,500 shares of Andrx 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 Andrx common stock issuable upon the exercise of
stock options.
(4) Represents 48,242 shares of Andrx common stock owned by Dr. Chen,
5,172,772 shares of Andrx 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 Andrx
common stock issuable upon the exercise of stock options and 17,000 shares
of Andrx common stock issuable upon the exercise of stock options held by
Dr. Chen's spouse.
(5) Represents 1,528,780 shares of Andrx 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 Andrx common stock issuable upon the exercise
of stock options.
(7) Represents 3,200 shares of Andrx common stock held as custodian for his
minor children and 102,500 shares of Andrx common stock issuable upon the
exercise of stock options.
(8) Represents 50,000 shares of Andrx common stock issuable upon exercise of
stock options.
(9) Includes 67,500 shares of Andrx common stock issuable upon exercise of
stock options.
(10) Includes 129,000 shares of Andrx common stock issuable upon exercise of
stock options and 3,320 shares of Andrx common stock held by Dr. Sharoky
as custodian for his minor children.
(11) Includes 1,518,500 shares of Andrx 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.
104
<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 Cybear's
named executive officers, (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 72.4%
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(3)(4)(9) ........................................... 12,913,554 72.5%
Angelo C. Malahias(3)(4) ....................................... 12,903,554 72.4%
Melvin Sharoky, M.D.(3)(4) ..................................... 12,921,054 72.5%
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) ......... 13,854,609 75.9%
</TABLE>
----------------
* Less than 1%.
(1) Except as indicated, the address of each person named in the table is c/o
Cybear, Inc. 5000 Blue Lake Dr. suite 200, Boca Raton, Florida 33431.
(2) Except as otherwise indicated, the persons named in this table have sole
voting and investment power with respect to all shares of Cybear common
stock listed, which include shares of Cybear common stock that such
persons have the right to acquire a beneficial interest in within 60 days.
(3) Includes shares owned indirectly by Andrx and 525,000 shares of Cybear
common stock deemed to be beneficially owned by Edward E. Goldman, M.D.
(4) Includes 25,000 shares of Cybear common stock issuable upon the exercise
of stock options.
(5) Includes 525,000 shares of Cybear common stock deemed to be beneficially
owned by Edward E. Goldman, M.D.
(6) Includes 222,222 shares of Cybear common stock issuable upon the exercise
of stock options.
(7) Includes 525,000 shares of Cybear 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 Cybear common stock issuable upon the exercise
of stock options.
(9) Includes 1,000 shares of Cybear common stock held by Mr. Lodin as
custodian for his minor children.
(10) Includes the shares of Cybear 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).
105
<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 stockholders
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 joint prospectus/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 of the board of directors 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 university from April 1978
through May 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF ALL THREE NOMINEES FOR
ELECTION AS DIRECTORS.
106
<PAGE>
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 director 1995 2002
</TABLE>
----------------
(1) Member Member of Executive Committee.
(2) Member of Audit Committee.
Alan P. Cohen is Co-Chairman of the board of directors, Chief Executive
Officer and a director of Andrx, which he founded in August 1992. Mr. Cohen was
the Chairman of the board of directors 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 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 its 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.
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
107
<PAGE>
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 1993 Stock
Option Plan, or the 1993 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.
108
<PAGE>
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 Chief Executive Officer and the four most highly
compensated other executive officers whose annual salary and bonus exceeded
$100,000 during 1999 (collectively with the Chief Executive Officer, the "Andrx
Named Executive Officers"):
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
--------------------------------------------------------- --------------
Securities
Other Annual Underlying
Name and Principal Position Year Salary($) Bonus($) Compensation($) Options(#)(1)
------------------------------------------ ------ ----------- ---------- --------------------- --------------
<S> <C> <C> <C> <C> <C>
Alan P. Cohen, Co-Chairman and 1999 264,500 150,000 18,300(2)
Chief Executive Officer 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 Officer 1998 241,200 50,000 31,900(3)(4) 100,000
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 Officer 1998 154,900 32,500 276,700(7) 24,000
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 Officer under the Plan.
(2) Represents an automobile allowance, premiums for a $1 million life
insurance policy (the beneficiary of which is designated by the Andrx
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 Andrx
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 Andrx 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 Andrx 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 Andrx common stock,
respectively, with an exercise price of $2.75 per share.
(8) Represents relocation expenses and reimbursement of premiums on health
insurance policies.
109
<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 1993 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 1993 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.
110
<PAGE>
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 Andrx Named Executive Officers.
<TABLE>
<CAPTION>
Potential Realizable
Value of Assumed
Number of Annual Rates of
Securities % of Total Stock Price Appreciation
Underlying Options Granted Exercise or for Option Terms(1)
Options to Employees in Base Price ---------------------------
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 Andrx 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 Andrx Named Executive
Officers listed as of December 31, 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Fiscal Year-End at FiscalYear-End
Shares Acquired Value ------------------------------ -----------------------------
Name On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------------------- ----------------- ---------- ------------- --------------- ------------- --------------
<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 Securities and Exchange 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 Andrx 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.
111
<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 1993 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 Andrx.
/s/ Michael A. Schwartz, Ph.D.
/s/ Irwin C. Gerson
112
<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>
December 31,
June 14, -------------------------------------------------
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.
113
<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 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
which expired June 13, 2000.
Andrx has also granted Watson certain demand and piggyback registration
rights, under the Securities Act of 1933, 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 expired 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. In May
2000, Watson exercised its registration rights with respect to 1,164,872 of
these shares of Andrx common stock in connection with a secondary offering by
Andrx.
114
<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.
115
<PAGE>
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 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.
As of July 20, 2000, date, the closing price of Andrx's common stock as
reported by the Nasdaq National Market was $72.75 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.
116
<PAGE>
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 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, 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
117
<PAGE>
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.
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.
118
<PAGE>
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.
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
119
<PAGE>
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 ................................ 65.00 49.40 5.88 2.60
Third Quarter (through July 20, 2000) ......... 87.38 63.94 3.75 2.19
</TABLE>
----------------
(1) Commencing January 28, 1999.
On July 20, 2000 the last sale price of the Andrx common stock as reported
by the Nasdaq National Market was $72.75 per share and the last sale price of
the Cybear common stock as reported by the Nasdaq National Market was $3.69 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 April 3, 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 June 15, 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.
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
May 16, 2001 or later than June 15, 2001. 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
120
<PAGE>
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
87,000,000 shares being issued in the reorganization. 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 giving said reports.
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.
121
<PAGE>
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CYBEAR, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS OF CYBEAR, INC. AND SUBSIDIARIES:
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Report of Independent Certified Public Accountants ....................................... F-2
Consolidated Balance Sheets as of 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>
Preferred Stock Common Stock
---------------------- ----------------------
Shares Amount Shares Amount
------------- -------- ------------- --------
<S> <C> <C> <C> <C>
FEBRUARY 5, 1997 (INCEPTION) .............. -- $ -- -- $--
Issuance of shares of common stock to
Andrx Corporation as promoter ............ -- -- 12,870,000 13
Issuance of shares of convertible
preferred stock .......................... 130,000 -- -- --
Shares of common stock issued in
connection with conversion of shares
of convertible preferred stock ........... (130,000) -- 130,000 --
Options granted to non-employees .......... -- -- -- --
Net loss and comprehensive loss ........... -- -- -- --
-------- ---- ---------- ---
BALANCE, DECEMBER 31, 1997 ................ -- -- 13,000,000 13
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. ................... -- -- -- --
Options granted to non-employees .......... -- -- -- --
Net loss and comprehensive loss ........... -- -- -- --
-------- ---- ---------- ---
BALANCE, DECEMBER 31, 1998 ................ -- -- 13,269,400 13
Shares of common stock issued in
connection with public offering .......... -- -- 3,450,000 4
Conversion of due to Andrx
Corporation upon completion of
public offering .......................... -- -- 465,387 1
Shares of common stock issued in
connection with the acquisition of
Telegraph Consulting Corporation ......... -- -- 320,000 --
Shares of common stock issued in
connection with exercise of stock
options .................................. -- -- 148,875 --
Options granted to non-employees .......... -- -- -- --
Unrealized loss on investments
available-for-sale ....................... -- -- -- --
Net loss .................................. -- -- -- --
Comprehensive loss ........................
BALANCE, DECEMBER 31, 1999 ................ -- -- 17,653,662 18
Shares of common stock issued in
connection with exercise of stock
options (unaudited) ...................... -- -- 118,875 --
Unrealized gain on investments
available-for-sale (unaudited) ........... -- -- -- --
Net loss (unaudited) ...................... -- - -- --
Comprehensive loss (unaudited) ............
BALANCE, MARCH 31, 2000
(unaudited) .............................. -- $ -- 17,772,537 $18
======== ==== ========== ===
<CAPTION>
Accumulated
Additional Other
Paid-In Accumulated Comprehensive Comprehensive
Capital Deficit Loss Loss
------------ ------------- --------------- --------------
<S> <C> <C> <C> <C>
FEBRUARY 5, 1997 (INCEPTION) .............. $ -- $ -- $ --
Issuance of shares of common stock to
Andrx Corporation as promoter ............ 487 -- --
Issuance of shares of convertible
preferred stock .......................... 30 -- --
Shares of common stock issued in
connection with conversion of shares
of convertible preferred stock ........... -- -- --
Options granted to non-employees .......... 14 -- --
Net loss and comprehensive loss ........... -- (1,558) -- $ (1,558)
------- -------- ------ --------
BALANCE, DECEMBER 31, 1997 ................ 531 (1,558) --
Shares of common stock issued in
connection with merger with
1997 Corp. ............................... -- -- --
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 ................ 3,559 (4,039) --
Shares of common stock issued in
connection with public offering .......... 50,774 -- --
Conversion of due to Andrx
Corporation upon completion of
public offering .......................... 7,445 -- --
Shares of common stock issued in
connection with the acquisition of
Telegraph Consulting Corporation ......... 2,771 -- --
Shares of common stock issued in
connection with exercise of stock
options .................................. 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 ................ 64,873 (14,813) (100)
Shares of common stock issued in
connection with exercise of stock
options (unaudited) ...................... 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) .............................. $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>
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>
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
F-7
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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--(Continued)
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
======
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
F-8
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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--(Continued)
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 .1492 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.
F-9
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(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.
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:
<TABLE>
<S> <C>
Computer hardware and software ......... 3 years
Furniture and fixtures ................. 5 years
Leasehold improvements ................. Lesser of useful life or term of lease
</TABLE>
Major renewals and betterments are capitalized, while maintenance and
repairs are expensed as incurred.
F-10
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)
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.
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.
In March 2000, Cybear entered into a software license agreement and a
development service agreement with AHT Corporation ("AHT") whereby Cybear
obtained non-exclusive licenses to two AHT softwares for $1,000 and whereby
Cybear agreed to develop a software for AHT and receive $950 for such services.
These agreements are being accounted on a net basis and the resulting net cash
outflow of $50 is included in software licenses and accounts payable on the
accompanying March 31, 2000 balance sheet. Accordingly, no revenue will be
recorded related to the development service agreement.
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.
F-11
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)
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
(Unaudited) Period From
Three Months February 5,
Ended Years Ended 1997
March 31, December 31, (Inception) to
--------------- --------------- December 31,
2000 1999 1999 1998 1997
------ ------ ------ ------ ---------------
<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.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101") which summarizes certain of the staff's
view in applying generally accepted accounting principles to revenue
recognition in financial statements. The effective date of SAB 101 for the
Company is the quarter ended December 31, 2000. The Company continues to
evaluate the impact that SAB 101 will have on the timing of revenue recognition
in future periods. Based on the Company's initial evaluation, Cybear believes
SAB 101 will not have a material impact on its future results of operations.
F-12
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)
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.
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
F-13
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)
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.
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
F-14
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)
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.
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:
<TABLE>
<CAPTION>
Gross
Amortized Unrealized Market
Cost Losses Value
----------- ------------ ----------
<S> <C> <C> <C>
U.S. government agencies ......... $16,009 $ (92) $15,917
Corporate bonds .................. 10,163 (8) 10,155
------- ------- -------
$26,172 $ (100) $26,072
======= ====== =======
</TABLE>
(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
F-15
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(4) CONVERTIBLE NOTES RECEIVABLE--(Continued)
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 and a
development service agreement (see Note 2) with AHT. In connection with these
agreements, 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. In July 2000, AHT
announced it had entered into a merger agreement with BioShield(TM)
Technologies, Inc. ("BioShield") whereby AHT would become a wholly owned
subsidiary of BioShield. If the merger is consummated, Cybear has the right to
redeem the AHT note at a 20% premium of the principal then outstanding. The
merger is subject to various conditions and shareholders approval and,
accordingly, there can be no assurance that the merger agreement will be
consummated and that Cybear will exercise its redemption right.
(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-16
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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
==== ====
F-17
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(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 pertained to an agreement whereby the Company had 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 did not record any amounts relating to any required performance
under this agreement subsequent to February 29, 2000, as the amount, if any,
necessary to resolve this matter was not quantifiable at that time. In June
2000, the Company and the third party resolved their dispute, agreed to
terminate the agreement, and released each other from any continuing
obligations, other than certain mutual indemnification obligations, upon
payment by Cybear of $870 of the remaining $2,300 due from Cybear under the
agreement. The Company recorded such amount to expense in June 2000 (see Note
11).
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.
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.
F-18
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(10) INCOME TAXES--(Continued)
The components of the income tax benefits are summarized as follows:
For the Period From
February 5, 1997
(Inception) to
December 31, December 31, 1997
--------------------- --------------------
1999 1998
--------- ---------
Current .......... $2,824 $1,900 $ --
Deferred ......... -- -- --
------ ------ ----
Total ............ $2,824 $1,900 $ --
====== ====== ====
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)
======== ========
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
F-19
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(10) INCOME TAXES--(Continued)
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-20
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(11) COMMITMENTS--(Continued)
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
F-21
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(11) COMMITMENTS--(Continued)
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 had 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 did not record any amounts relating to any
required performance under this agreement subsequent to February 29, 2000, as
the amount, if any, necessary to resolve this matter was not quantifiable at
that time. In June 2000, the Company and the third party resolved their
dispute, agreed to terminate the agreement, and released each other from any
continuing obligations, other than certain mutual indemnification obligations,
upon payment by Cybear of $870 of the remaining $2,300 due from Cybear under
the agreement. The Company recorded such amount to expense in June 2000 (see
Note 9).
(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
F-22
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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--(Continued)
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.
(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.
F-23
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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--(Continued)
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-24
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(14) STOCK INCENTIVE PLAN--(Continued)
A summary of the Plan's activity is as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------------------- -------------------------
Number of Exercise Price Per Share
Shares ----------------------------- Weighted Avg.
Under Option Low High Wtd. Avg. Shares Exercise 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>
F-25
<PAGE>
CYBEAR, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)
(14) STOCK INCENTIVE PLAN--(Continued)
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 From
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>
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
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 EVENTS
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 and the subscription services
earned under this agreement will be recorded as a reduction of the amounts
expensed for the consulting and marketing services received. In June 2000, the
agreement was extended to a fourth year and the medical organization paid
$1,175 representing its remaining subscription fee obligation. Accordingly,
this agreement will result in no cash inflow or outflow to the Company and
therefore no revenues or expenses will be recorded for the subscription
services provided or the consulting and marketing services received.
In June 2000, Cybear received a claim from Nicebid.com for damages
allegedly incurred by Nicebid.com as a result of alleged breaches of an
Internet commerce contract between Nicebid.com and Telegraph Consulting
Corporation. Cybear acquired certain assets of Telegraph Consulting
Corporation. Cybear intends to vigorously defend against the claim.
F-26
<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> <C>
1. Definitions ................................................................. A-1
2. Basic Transaction ........................................................... A-5
(a) The Mergers ........................................................ A-5
(b) Filing of Plan of Merger, Effective Time ........................... A-5
(c) Effect of Merger ................................................... A-6
(i) General ............................................................ A-6
(ii) Articles of Incorporation .......................................... A-6
(iii) Bylaws ............................................................. A-6
(iv) Directors .......................................................... A-6
(v) Officers ........................................................... A-6
(d) The Closing ........................................................ A-7
(e) Intentionally Omitted .............................................. A-7
(f) Conversion of Andrx and Cybear Capital Stock ....................... A-7
(g) Cancellation of Treasury Stock ..................................... A-8
(h) Unvested Andrx Common Stock and Cybear Common Stock ................ A-8
(i) Capital Stock of Merger Subs ....................................... A-8
(j) Fractional Shares .................................................. A-8
(k) Existing New Andrx Capital Stock ................................... A-9
(l) Exchange Agent ..................................................... A-9
(m) New Andrx to Provide Stock ......................................... A-9
(n) Exchange Procedures ................................................ A-9
(o) Dividends, Etc. .................................................... A-9
(p) Lost, Stolen or Destroyed Certificates ............................. A-10
(q) Tax Consequences ................................................... A-10
3. Representations and Warranties of Cybear .................................. A-11
(a) Organization, Qualification, and Corporate Power ................... A-11
(b) Capitalization ..................................................... A-11
(c) Authorization of Transaction ....................................... A-11
(d) Noncontravention ................................................... A-11
(e) Filings with the SEC ............................................... A-12
(f) Financial Statements ............................................... A-12
(g) Events Subsequent to Most Recent Cybear Fiscal Period End .......... A-12
(h) Undisclosed Liabilities ............................................ A-12
(i) Brokers' Fees ...................................................... A-12
(j) Disclosure ......................................................... A-12
(k) Litigation ......................................................... A-13
(l) Opinion of Financial Advisor ....................................... A-13
(m) Waiver of Change in Control Provisions ............................. A-13
</TABLE>
A-i
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
------
<S> <C> <C>
4. Representations and Warranties of Andrx ........................................... A-13
(a) Organization of Andrx and Subsidiary Corp. ............................... A-13
(b) Capitalization ........................................................... A-13
(c) Authorization of Transaction ............................................. A-13
(d) Noncontravention ......................................................... A-13
(e) Filings with the SEC ..................................................... A-14
(f) Financial Statements ..................................................... A-14
(g) Events Subsequent to Most Recent Andrx Fiscal Period End ................. A-14
(h) Undisclosed Liabilities .................................................. A-14
(i) Brokers' Fees ............................................................ A-14
(j) Disclosure ............................................................... A-14
(k) Litigation ............................................................... A-15
5. Representations and Warranties of New Andrx and Merger Subs ....................... A-15
(a) Organization of New Andrx and Merger Subs ................................ A-15
(b) Capitalization ........................................................... A-15
(c) Authorization of Transaction ............................................. A-15
(d) Noncontravention ......................................................... A-15
(e) Undisclosed Liabilities .................................................. A-16
(f) Brokers' Fees ............................................................ A-16
(g) Disclosure ............................................................... A-16
(h) Litigation ............................................................... A-16
6. Covenants ......................................................................... A-16
(a) General .................................................................. A-16
(b) Notices and Consents ..................................................... A-16
(c) Regulatory Matters and Approvals ......................................... A-16
(i) Securities Act, Securities Exchange Act, and State Securities Law ... A-17
(ii) Approvals .......................................................... A-17
(iii) S-4 Registration Statement and Joint Proxy Statement ............... A-17
(iv) Cybear Stockholder Meeting .......................................... A-18
(v) Andrx Stockholder Meeting ............................................ A-18
(vi) HSR and other Filings; Reasonable Efforts ........................... A-18
(d) Operation of Business .................................................... A-18
(e) Full Access .............................................................. A-19
(f) Notice of Developments ................................................... A-19
(g) Insurance and Indemnification ............................................ A-19
</TABLE>
A-ii
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
-----
<S> <C> <C> <C>
(h) Expenses .............................................................. A-20
(i) Assumption of Andrx Option Plan and Cybear Option Plan; Form S-8; A-20
Employee Plans ......................................................
(j) Certain Tax Matters ................................................... A-20
(i) Return Filing; Information Sharing Until the Closing Date ........ A-20
(ii) Certain Tax Opinions ............................................. A-21
(iii) Tax Covenants ................................................... A-21
(k) No Solicitation ....................................................... A-22
(l) Voting Agreements ..................................................... A-22
7. Conditions to Obligation to Close ............................................ A-23
(a) Conditions to Obligation of New Andrx, Andrx and Merger Subs .......... A-23
(b) Conditions to Obligation of Cybear .................................... A-24
8. Termination .................................................................. A-25
(a) Termination of Agreement .............................................. A-25
(b) Effect of Termination ................................................. A-25
9. Miscellaneous ................................................................ A-26
(a) Survival .............................................................. A-26
(b) Press Releases and Public Announcements ............................... A-26
(c) No Third Party Beneficiaries .......................................... A-26
(d) Entire Agreement ...................................................... A-26
(e) Succession and Assignment ............................................. A-26
(f) Counterparts .......................................................... A-26
(g) Headings .............................................................. A-26
(h) Notices ............................................................... A-26
(i) Governing Law ......................................................... A-27
(j) Amendments and Waivers ................................................ A-27
(k) Severability .......................................................... A-28
(l) Expenses .............................................................. A-28
(m) Construction .......................................................... A-28
(n) Incorporation of Exhibits and Schedules ............................... A-28
EXHIBIT A--PLAN OF MERGER ...........................................................
EXHIBIT B-1--NEW ANDRX AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION .......................................................................
EXHIBIT B-2--NEW ANDRX BYLAWS .......................................................
EXHIBIT C--TAX SHARING AGREEMENT ....................................................
EXHIBIT D--CYBEAR TRACKING COMMON STOCK POLICIES ....................................
</TABLE>
A-iii
<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.
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.
A-1
<PAGE>
"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.
"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.
A-2
<PAGE>
"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.
"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.
A-3
<PAGE>
"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.
"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.
A-4
<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.
(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."
A-5
<PAGE>
(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.
(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
A-6
<PAGE>
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."
(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
A-7
<PAGE>
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.
(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 cash (rounded to the nearest whole cent) equal to the
A-8
<PAGE>
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, 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
A-9
<PAGE>
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
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
A-10
<PAGE>
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.
(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.
A-11
<PAGE>
(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).
(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 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.
A-12
<PAGE>
(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.
(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
A-13
<PAGE>
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.
(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
A-14
<PAGE>
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.
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
A-15
<PAGE>
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 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).
(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:
A-16
<PAGE>
(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.
(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
A-17
<PAGE>
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.
(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;
A-18
<PAGE>
(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;
(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 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,
A-19
<PAGE>
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 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
A-20
<PAGE>
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.
(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.
A-21
<PAGE>
(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 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
A-22
<PAGE>
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.
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;
(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.
A-23
<PAGE>
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;
(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.
A-24
<PAGE>
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);
(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.
A-25
<PAGE>
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
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:
A-26
<PAGE>
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
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
A-27
<PAGE>
of this Agreement shall be valid unless the same shall be in writing 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
A-28
<PAGE>
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
A-29
<PAGE>
ANNEX B
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
ANDRX CORPORATION
Pursuant to the requirements of Sections 242 and 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 151,000,000 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"), 50,000,000 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
B-1
<PAGE>
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.
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
(iii) dividends or distributions of shares of Cybear Stock (or
Convertible Securities convertible into or exchangeable or
exercisable for shares of Cybear Stock) on
B-2
<PAGE>
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 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
B-3
<PAGE>
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 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-4
<PAGE>
(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.
(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.
B-5
<PAGE>
(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):
<TABLE>
<CAPTION>
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
-------------------------------------------- ----------------------------
<S> <C>
First ................................... 125%
Second .................................. 120%
Third ................................... 115%
Fourth and Thereafter ................... 110%
</TABLE>
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 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
B-6
<PAGE>
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.
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
B-7
<PAGE>
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 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
B-8
<PAGE>
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 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.
(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
B-9
<PAGE>
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 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
B-10
<PAGE>
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 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
B-11
<PAGE>
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, 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
B-12
<PAGE>
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 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
B-13
<PAGE>
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) 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
B-14
<PAGE>
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
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 acquired 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
B-15
<PAGE>
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.
(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.
B-16
<PAGE>
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 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.
B-17
<PAGE>
(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
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
B-18
<PAGE>
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 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.
B-19
<PAGE>
(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 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;
B-20
<PAGE>
(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
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
B-21
<PAGE>
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.
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
B-22
<PAGE>
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.
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:
------------------------------
B-23
<PAGE>
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 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
Company management;
C-1
<PAGE>
o certain publicly available information for Acquiror, including its
annual report filed on Form 10-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;
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
C-2
<PAGE>
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 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
C-3
<PAGE>
ANNEX D
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 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
D-1
<PAGE>
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;
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.
D-2
<PAGE>
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
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
D-3
<PAGE>
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 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.
D-4
<PAGE>
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.
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:
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
D-5
<PAGE>
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.
D-6
<PAGE>
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
(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
E-1
<PAGE>
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 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
E-2
<PAGE>
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 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
E-3
<PAGE>
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 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
E-4
<PAGE>
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 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.
E-5
<PAGE>
(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.
(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 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
E-6
<PAGE>
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 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.
E-7
<PAGE>
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.
(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
E-8
<PAGE>
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.
(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
E-9
<PAGE>
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.
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.
E-10
<PAGE>
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.
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibit
-------- ----------------------------------------------------------------------------------------
<S> <C>
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(3)
3.2 Form of Registrant's Amended and Restated Bylaws(3)
5.1 Opinion of Broad and Cassel(2)
8.1 Opinion of Arthur Andersen LLP(2)
10.42 2000 Stock Option Plan (3)
10.43 Form of Letter Agreement regarding voting by and among Alan P. Cohen, Chi-Ming J. Chen,
Elliot F. Hahn and Andrx Corporation (3)
10.44 Form of Letter Agreement regarding voting by and among Dr. Edward E. Goldman, John
Klein and Cybear, Inc.(3)
10.45 Form of Tax Sharing Agreement(3)
23.1 Consent of Broad and Cassel (included in its opinion filed as Exhibit 5.1)(2)
23.2 Consent of Arthur Andersen LLP(2)
23.3 Consent of SG Cowen Securities Corporation (2)
99.1 Form of Proxy Card of Andrx Corporation(3)
99.2 Form of Proxy Card of Cybear, Inc.(3)
</TABLE>
----------------
(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) Previously filed.
(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.
II-1
<PAGE>
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 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.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-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 July 18,
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.
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>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Alan P. Cohen Co-Chairman, Chief Executive Officer and July 18, 2000
---------------------------------- director (Principal Executive Officer)
Alan P. Cohen
/s/ * Co-Chairman, Chief Scientific Officer July 18, 2000
---------------------------------- and director
Chih-Ming J. Chen, Ph.D.
/s/ Elliot F. Hahn President and director July 18, 2000
----------------------------------
Elliot F. Hahn, Ph.D.
/s/ Angelo C. Malahias Vice President and Chief Financial July 18, 2000
---------------------------------- Officer (Principal Financial and
Angelo C. Malahias Accounting Officer)
/s/ * director July 18, 2000
----------------------------------
Melvin Sharoky, M.D.
/s/ * director July 18, 2000
----------------------------------
Lawrence J. DuBow
/s/ * director July 18, 2000
----------------------------------
Irwin C. Gerson
/s/ * director July 18, 2000
----------------------------------
Michael A. Schwartz, Ph.D.
By: /s/ Angelo C. Malahias July 18, 2000
-------------------------------
Angelo C. Malahias
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
-------- -------------------------------------------
5.1 Opinion of Broad and Cassel
8.1 Opinion of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of SG Cowen Securities Corporation
