-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NjQf3qm2Mq3mO+xaHW+hnRjIjQgFBsJ/e7MXJwkjRwZKMysFy2WAnAjarf7x+sKd I9lB9BuINubUYWj2XQqBpQ== 0000950170-99-000494.txt : 19990402 0000950170-99-000494.hdr.sgml : 19990402 ACCESSION NUMBER: 0000950170-99-000494 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CYBEAR INC CENTRAL INDEX KEY: 0001036824 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 133936988 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-24671 FILM NUMBER: 99583241 BUSINESS ADDRESS: STREET 1: 5000 BLUE LAKE DRIVE CITY: BOCA RATON STATE: FL ZIP: 33431 BUSINESS PHONE: 5619941270 MAIL ADDRESS: STREET 1: 407 E GRAND RIVER CITY: BRIGHTON STATE: MI ZIP: 48116 FORMER COMPANY: FORMER CONFORMED NAME: 1997 CORP DATE OF NAME CHANGE: 19970331 10-K405 1 U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission File No. 333-24671 CYBEAR, INC. (Exact name of Registrant as specified in its charter) Delaware 13-3936988 - -------------------------------- -------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5000 Blue Lake Drive, Suite 200 Boca Raton, Florida 33431 - -------------------------------- -------------------------- (Address of principal (Zip Code) executive offices) (561) 999-3500 -------------- (Registrant's telephone number, including area code) Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: None Indicate by check mark whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___ Indicate by check mark disclosure of delinquent filers in response to Item 405 of Regulation S-K (ss. 229.405) is not contained herein and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The number of shares outstanding of the Registrant's Common Stock is 13,269,400 (as of March 26, 1999). The aggregate market value of the voting stock held by non-affiliates of the Registrant was approximately $315,148,250 (as of March 26, 1999). DOCUMENTS INCORPORATED BY REFERENCE None As used in this Report, the terms "we," "us," "our," the "Company" and "Cybear" mean Cybear, Inc. and its subsidiaries (unless the context indicates a different meaning). FORWARD-LOOKING STATEMENTS Some of the information in this Report contains forward-looking statements within the meaning of the federal securities laws. These statements include, among others, product development plans, strategies, expectations regarding competition and market acceptance of our products and the Internet as a secure and reliable communications and commerce medium, and possible effects of pending and future government regulation. Forward-looking statements typically are identified by use of terms like "may," "will," "expect," "anticipate," "estimate" and similar words, although some forward-looking statements are expressed differently. You should be aware that Cybear's actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including our limited operating history and substantial operating losses, availability of capital resources, ability to effectively compete, economic conditions, unanticipated difficulties in product development, ability to gain market acceptance and market share, ability to manage growth, reliance on short-term non-exclusive contracts, Internet security risks and uncertainty relating to the evolution of the Internet as a medium for commerce, dependence on third party content providers, dependence on our key personnel, ability to protect our intellectual property, Year 2000 problems and the impact of future government regulation on our business. You should also consider carefully the risks described in this Report or detailed from time to time in our filings with the Securities and Exchange Commission (the "Commission"). toni PART I ITEM 1. BUSINESS OVERVIEW Cybear is an information technology company using the Internet and Internet-based browser technologies to develop applications designed to improve communications and increase efficiencies for healthcare providers. Cybear has focused its efforts on developing its Solutions product line, an Internet Service Provider ("ISP") system that provides information and Internet-based productivity applications to the participants in the healthcare industry. In March 1999, Cybear introduced its first Solutions product, SolutionsMD, which is designed to address the communications and operational needs of physicians. Cybear's other Solutions products, derived from SolutionsMD, will provide Internet-based productivity software applications and communication networks for other participants in the healthcare industry. SolutionsMD is a subscription-based Internet portal site that provides a combination of healthcare content, practice management tools, the entry point to a comprehensive communications network and ongoing access to further Solutions products and services. We intend to market our first product, SolutionsMD to physicians and physician organizations throughout the United States. Over the next year, we intend to supplement our core SolutionsMD product by introducing SolutionsNet, SolutionsRx and SolutionsHosp. These complementary products will contain applications, content and connectivity features that the more specialized users of these products will find useful. Our ability to create private communications networks is an important improvement over the paper and fax communications typically used by physicians and their staffs and other healthcare providers. We believe that our Solutions products will provide the structured communications and information necessary to improve the efficiency and quality of patient care, meeting the information demands of managed care and other reimbursement systems. -1- In addition to our subscribers, we believe advertisers will be attracted to our site because of our ability to target physicians by specialty, interact with them electronically and allow them to order pharmaceutical samples and other goods over a secure network. OUR RECENT MERGER We were incorporated in Delaware on February 5, 1997 and are in the development stage. On November 20, 1998, Cybear, Inc., a then 98% owned subsidiary of Andrx Corporation ("Andrx"), merged with a wholly-owned subsidiary of 1997 Corp. Andrx is a company that formulates and commercializes controlled-release pharmaceuticals using proprietary drug delivery technologies. 1997 Corp. was a "blank check" company seeking a business combination with an operating entity. Upon completion of the merger, Cybear, Inc. became a wholly-owned subsidiary of 1997 Corp. and 1997 Corp. changed its name to Cybear, Inc. As of December 31, 1998, Cybear, Inc. was 95% owned by Andrx Corporation. The merger was intended to be a tax-free reorganization for federal income tax purposes and was treated as a recapitalization of Cybear, Inc. for accounting and financial reporting purposes. CORPORATE INFORMATION Our executive offices are located at 5000 Blue Lake Drive, Suite 200, Boca Raton, Florida 33431. Our telephone number is (561) 999-3500 and our web site address is www.cybear.com. Information contained on our web site is not part of this Report. 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, the acceptance of capitated, risk-based contracts by healthcare providers has created increased demands for real-time accurate clinical and administrative information among network providers. Despite these needs, healthcare organizations have been allocating as little as 2% of their operating budgets for information technology ("IT"). This is significantly less than the level of IT expenditures by other U.S. industries, like manufacturing, insurance and banking, which have been allocating 4%, 7% and 10%, respectively, of their operating budgets to IT. Many healthcare providers have not adopted sufficient communication and information technology functions necessary to efficiently maintain quality care and improved reimbursement. As a result, wasted efforts, redundant tests and procedures and administrative inefficiencies are a daily part of medical practice. It is not unusual for patients and providers to experience delays in obtaining authorizations, to access specialists or to have diagnostic or therapeutic procedures performed. For example, physicians find it increasingly difficult to monitor the thousands of different medications covered by insurers, so pharmacists often times 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. This complex communication currently depends on the inefficiencies inherent in mail, telephone and fax communications. These methods are inefficient and contribute to the difficulties physicians and networks are experiencing with clinical and expense management. 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 -2- 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 are not Y2K compliant. We believe that the Internet is a transformational communications technology that will be best suited to handle complex communications between healthcare providers and payors. The Internet's open architecture, universal accessibility and acceptance makes it a powerful communications medium overcoming many of the limitations of legacy healthcare IT systems. Additionally, the Internet has gained wide acceptance in the healthcare community initially as an information access and gathering tool, with approximately 75% of U.S. physicians accessing the Internet regularly for that purpose only. Consequently, the deployment of various applications, content and tools will more readily be accepted by physicians and their office staffs. THE CYBEAR SOLUTION We developed SolutionsMD to meet healthcare providers' need to improve the accuracy and efficiency of communications with other providers, third party payors and provider networks. In order to meet the demands of managed care, a system needs to quickly collect and deliver patient information at the point of care, track physician activities and patterns, identify trends and issues that affect the critical components of managed care such as quality, cost, outcomes, variability and patient satisfaction and facilitate prospective utilization review. We also believe that there will be a strong demand for real-time clinical and practice management solutions that are easy to use, secure and cost effective. Our Solutions integrated set of Internet-based products and services are 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 payors that must interact to successfully manage patient care. These products will include applications, information and data transfer capabilities designed by us to meet their particular needs and through our dedicated ISP, will allow for the creation of secure intranets for members of these networks to communicate and share private information. Our Internet-based technology platform allows for efficient installation, maintenance and customization using the subscriber's existing computer system. CYBEAR'S COMPETITIVE ADVANTAGES We believe our extensive healthcare experience combined with our own sales force, our Internet-based technology platform and our in-house software development capabilities provide us with a competitive advantage to be the leading Internet communications and applications provider for the healthcare community. Our main strengths are: /bullet/ We Have Extensive Healthcare Experience - Our Chief Executive Officer is a physician with experience practicing medicine, managing provider networks and providing practice management services. Other members of our senior management and Board of Directors have extensive experience in healthcare practice management and pharmaceutical industries. Our 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, we believe we are able to develop and deliver products that are useful to our subscribers and we can build meaningful and lasting subscriber and advertiser relationships. /bullet/ We Have Our Own Sales Force - We have an in-house sales and marketing staff that has long-standing ties to key segments of the healthcare industry, including physician practices, -3- physician organizations and pharmaceutical companies. We believe that these relationships will allow us to rapidly expand our subscriber base. /bullet/ We Have an Internet-Based Technology Platform - Unlike our competitors, we provide direct Internet access to our subscribers through our own ISP rather than having to depend on others for Internet access. Being an ISP allows us to provide a secure medium for transmission of sensitive patient and transactional information in an easy to use, low cost, fast and reliable manner. Our ISP platform also allows us to provide more value to our subscribers through web-hosting and the ability to develop private intranets, which we believe will result in subscribers being less likely to switch to a competitor's product or service. /bullet/ We Have Extensive In-House Software Development Capabilities -We have an in-house software development team made up of over 20 programmers, allowing us to provide easy to use, low cost tools for day-to-day operational and management needs of medical practices and networks. This allows us to create flexible Java language-based applications to address the particular needs of different segments of the healthcare industry. Our in-house development capability together with our server-based applications technology will allow us to make continuous improvements to our products. CYBEAR'S STRATEGY Our strategy to become the leading Internet-based platform linking physicians with other healthcare providers, third party payors and participants in the healthcare industry is based upon several elements, including: /bullet/ Rapidly Building a Physician Subscriber Base - We are marketing SolutionsMD to physicians, their staff and physician organizations that have ever-increasing and complex communications needs. In addition to individual physician subscribers, large physician organizations will either subscribe to encourage their members to subscribe to SolutionsMD. We expect administrative staff, particularly office managers, schedulers and billers will be regular users of many of the administrative tools of SolutionsMD. /bullet/ Using Physician Subscriber Base to Obtain Additional Industry Users - By developing a physician-centered subscriber base, we believe that we will attract non-physician subscribers such as pharmacies, hospitals and Independent Practice Associations ("IPA's") who will use our future products to communicate and transact business with our SolutionsMD physician subscribers. To this end, we are actively pursuing strategic relationships with key healthcare, technology and content partners to enable us to offer higher quality products and solutions to other segments of the healthcare industry. /bullet/ Using Connectivity to Retain Subscribers - We believe that our ISP-related ability to link physician organizations through private networks will improve communications and administrative efficiency, and that this in turn will limit the desire and ability of individual subscribers to discontinue subscribing to our products and services in favor of competitors. /bullet/ Building Brand Recognition - We believe that establishing the SolutionsMD and our other Solutions brands and building brand recognition is critical to our ability to attract and retain new subscribers, advertisers and e-commerce co-marketers. We have allocated significant resources and commenced a marketing campaign to develop awareness of Cybear and SolutionsMD through advertising, product promotion and strategic relationships. /bullet/ Capitalizing on Multiple Revenue Sources - We intend to generate revenues from multiple sources, including subscription fees, advertising revenues, e-commerce sales commissions -4- and transaction fees. We believe that this revenue model will reduce dependence on any single revenue source and maximize our revenue generating potential. PRODUCTS OUR TECHNOLOGY PLATFORM Our Internet-based technology platform for our Solutions product line includes a dedicated ISP, which ensures secure and reliable Internet access to our subscribers, the use of Java language-based programming to design our user applications, and a fully-redundant Network Operations Center ("NOC") to provide scalability and reliability to our subscriber base. COMMON FEATURES OF SOLUTIONS PRODUCTS Each of our Solutions products will share the following common features tailored to meet the needs of the targeted user:
Component Features - ---------------------------------------------------------------------------------------------------------------------- ISP-Based Communications System /bullet/ Automatic configuration of the user's computer /bullet/ Dial-in from any location in the U.S. through a network of local numbers /bullet/ Customizable front-end image that may include the name and service mark of the user or the user's network /bullet/ On-demand customer support /bullet/ E-mail, private network capabilities and web hosting services /bullet/ Tiered multiple user groups for password secure Intranet communications with others in the relevant healthcare delivery system, with the ability to control access to information as desired /bullet/ User group menus comprising larger groups or organizations defined by a common interest or situation - ---------------------------------------------------------------------------------------------------------------------- Content and Applications /bullet/ A portal entry point notifying users of new information and product updates relevant to the particular user group /bullet/ A web site template, search engine/directory, and online newsletter publisher, each customizable to the needs of the user, and web site access and usage tracking /bullet/ Software applications tools to streamline day-to-day healthcare administrative and operational tasks /bullet/ Lifestyle information geared for the e-commerce needs of healthcare professionals - ----------------------------------------------------------------------------------------------------------------------
-5- SOLUTIONSMD SolutionsMD includes a broad range of practice management tools to assist physicians and their office staff, increase physician productivity and enhance potential reimbursement. SolutionsMD is designed to manage communications between physicians and the various other segments of the healthcare industry that interact with them. Cybear launched SolutionsMD in March 1999. The following highlights the SolutionsMD physician, practice and office tools: PHYSICIAN TOOLS
Application Content Benefit - ---------------------------------------------------------------------------------------------------------------------- Continuing Education /bullet/ Continuing Medical Education Keeps physicians updated on their /bullet/ Medical Library education, and allows patient, /bullet/ Conference calendar disease and clinical research. /bullet/ Clinical Studies - ---------------------------------------------------------------------------------------------------------------------- Prescription Management /bullet/ Managed Care Tracks the medications covered by /bullet/ Formularies different insurance carriers, /bullet/ FDA Approvals minimizes changes and substitutions /bullet/ Formulary Prescription of patient medications. Profiling - ---------------------------------------------------------------------------------------------------------------------- Certification Assistance /bullet/ Credentialing Database Updates physician's profile /bullet/ Utilization Benchmarking regarding education, hospital privileges, licensure, etc. Allows comparison of patient management and treatment to standard clinical protocols and treatment regimes. - ----------------------------------------------------------------------------------------------------------------------
OFFICE TOOLS
Application Content Benefit - ---------------------------------------------------------------------------------------------------------------------- Supply Replacement /bullet/ Medical Supplies Online ordering of medical, Injectables Vaccines pharmaceutical and office supplies /bullet/ Office Supplies frees staff time and insures availability. - ---------------------------------------------------------------------------------------------------------------------- Staff Services /bullet/ Human Resources Helps track required human resource /bullet/ Policy and Procedures documentation, contains staff /bullet/ Office Training policies and procedures, online /bullet/ OSHA Compliance training courses, and OSHA /bullet/ Disaster Protocols compliance evaluation and protocols. - ---------------------------------------------------------------------------------------------------------------------- Infrastructure Support /bullet/ Office Forms Database Extensive repository of office forms for all needs, both business and clinical. - ----------------------------------------------------------------------------------------------------------------------
-6- PRACTICE TOOLS
Application Content Benefit - ---------------------------------------------------------------------------------------------------------------------- Managed Care Applications /bullet/ Contract Manager Helps manage differing insurance /bullet/ Eligibility and contracts, checks a patient's Authorization insurance status, obtains referral /bullet/ Capitation Evaluation authorization and evaluates managed care payments. - ---------------------------------------------------------------------------------------------------------------------- Care Management /bullet/ Patient Satisfaction Survey Patient services including /bullet/ Patient Education satisfaction evaluation, educational /bullet/ Patient Support handouts, online patient support /bullet/ Practice Benchmarks links and evaluation of practice by comparing to standard norms. - ---------------------------------------------------------------------------------------------------------------------- Coding Management /bullet/ Coding Newsletter Updates and trains staff on coding /bullet/ Medicare Training changes, simplifies billing with /bullet/ ICD 9 Online online procedure and disease /bullet/ CPT 4 Online listings, and compares practice /bullet/ HCFA Norms coding to HFCA audit criteria. - ---------------------------------------------------------------------------------------------------------------------- Practice Compliance /bullet/ Compliance Newsletter Keeps practice abreast of compliance /bullet/ Legislative Update issues and legislative initiatives, /bullet/ Legal Resources alerts regarding fraud and abuse /bullet/ Fraud and Abuse Alerts issues and evaluates health care attorney qualifications. - ----------------------------------------------------------------------------------------------------------------------
FUTURE SOLUTIONS PRODUCTS Cybear is developing additional Internet-based products and services targeted to the needs of other healthcare providers such as physician organizations, pharmacies and hospitals. Like physicians, all of these providers interact and must communicate with patients and others in their field as well as with other segments of the healthcare community. These products are based on our Internet-based technology platform, and will add tools specially designed to meet the needs of the expected users. Cybear anticipates that these future products will attract new subscribers that will benefit from the connectivity features to communicate among themselves and with physicians. Among the Solutions products currently in development are: /bullet/ SOLUTIONSNET is designed for physician networks and healthcare business organizations at the management and operational level. The target market for this product includes physician organizations with the need to improve communications with and among their members and improve their ability to manage risk. SolutionsNet will contain all of the features and services of SolutionsMD and will serve as the SolutionsMD management interface to allow an organization to manage their SolutionsMD Intranet. In addition, -7- SolutionsNet will contain numerous additional web-based applications designed specifically for the healthcare business organization including: /bullet/ Online real-time eligibility and authorization transaction capability for varying plan sizes. /bullet/ Quality assurance tracking of patient satisfaction and customer service through all levels of the organization. /bullet/ Benchmarking statistical information to compare the SolutionsNet user's performance to goals and standards. /bullet/ Prescription management tools that give the organization the ability to effectively manage and analyze prescription utilization. /bullet/ Online consulting services for support and guidance through a network of partners. /bullet/ SOLUTIONSRX is targeted to the approximately 21,000 independent pharmacists, a segment of the healthcare community that is experiencing increasing market pressure due to consolidation and the growth of national pharmacy chains. SolutionsRx will have applications that can be used by independent pharmacies to better compete with chains, and Cybear believes that these applications will be useful to the pharmacy chain market as well. In addition to standard portal products, SolutionsRx will offer unique programs developed by Cybear, including: /bullet/ Drug dosing and compounding calculations and drug imaging identification to ensure proper delivery of the accurate amount of medication based on a patient's demographics. /bullet/ Online prescription refilling and renewal. /bullet/ E-commerce through the pharmacist's web page. /bullet/ Access to numerous journals, regulatory information, formulary listings and clinical study summaries. /bullet/ SOLUTIONSHOSP is targeted to hospital systems and hospital-physician networks. SolutionsHosp will complement and enhance the functionality of existing hospital-based information systems, and will serve as the interface to SolutionsMD subscribers. SolutionsHosp will contain all of the tools and resources as SolutionsMD as well as several specific applications designed for this market including: /bullet/ Delivery of discharge orders and updates to admitting physicians. Physicians will be able to complete admission paperwork via the secure Intranet. /bullet/ Access to transcription services to easily complete and access chart notes. /bullet/ A sophisticated indexing and search system to quickly locate chart content and create summaries and reports for hospital staff and management. /bullet/ Two-way secure connectivity among hospital lab and imaging departments and the medical staff. These products will be packaged in a similar product configuration to SolutionsMD and utilize a similar marketing strategy. Cybear expects to release the initial versions of these three products over the next year. OTHER PRODUCTS UNDER DEVELOPMENT Cybear is developing a consumer-oriented healthcare web site that will be marketed to other web sites and ISPs to become the healthcare channel for these providers. This site will be content-neutral and will use some of the content developed for SolutionsMD. -8- Additionally, in parallel with SolutionsMD, Cybear will continue to develop and test additional management applications including its electronic prescription management product designed for use in physician office-based practices. STRATEGIC RELATIONSHIPS An essential element of Cybear's growth strategy is the development and use of various strategic partnering relationships that will serve to more rapidly increase the subscriber base, provide high-quality content and ensure that Cybear's Internet-based technology platform will remain state-of-the art. In focusing Cybear's strategic relationships on distribution, content and technology, Cybear ensures its subscriber base a continuing flow of useful Internet-based product. The following is a brief description of our key strategic relationships: DISTRIBUTION PARTNERS INTERNATIONAL ONCOLOGY NETWORK. A physician practice management organization serving 1,000 oncologists. Cybear is its preferred ISP and Internet business applications provider. THE IPA ASSOCIATION OF AMERICA ("T.I.P.A.A.A."). The preeminent organizing body for independent practice associations in the United States that represents over 200,000 physicians across the country. In 1998, Cybear entered into a three-year strategic alliance with T.I.P.A.A.A. to become its preferred ISP and Internet business applications provider. T.I.P.A.A.A. has actively endorsed Cybear's Solutions product line and will help to market Cybear's products to T.I.P.A.A.A.'s membership. OMNA PRACTICE MANAGEMENT. A multi-specialty physician practice management organization. Cybear is its preferred ISP and Internet business applications provider. PHYMATRIX CORPORATION. A publicly-traded physician practice management company serving over 12,000 physicians. Cybear is its preferred ISP and Internet business applications provider. CONTENT PARTNERS DATA ADVANTAGE CORP. A provider of hospital statistic databases and rating mechanisms useful for benchmarking comparisons. ENVOY CORPORATION. A provider of online transaction processing applications. Envoy's transaction network provides online eligibility verification for numerous managed care organizations. INFOSPACE, INC. A nonmedical Internet content provider specializing in general information such as telephone and address directories, government, weather and lifestyle information content. MEDIMEDIA USA, INC. Creator of the Infoscan database of drug formularies categorized by managed care organizations. MEDPAPER, INC.. A provider of organizational communications software that provides a template for creation of broadcast "newsletter" information via the Internet. -9- MOORE MEDICAL SUPPLY. A medical supply provider with online supply ordering facilities. REUTERS HEALTH INFORMATION, INC. A leading provider of custom news feeds focusing on healthcare, business and entertainment as well as Moneynet portfolio content. VISTAR TECHNOLOGIES, INC. A provider of online physician credentialing forms generation and printing services. TECHNOLOGY PARTNERS ANDOVER GROUP. A technology standards organization sponsored by Hewlett Packard that works with Microsoft Health Users Group ("MSHUG") in developing medical transmission standards. GTE. A leading telecommunications infrastructure provider. Cybear is a partner in GTE's beta program of ADSL networks in the Tampa market as well as a GTE dial-up partner. MICROSOFT HEALTH USERS GROUP. The technology standards organization that jointly developed the current standards by which medical data is transmitted. Cybear is a committee member of MSHUG, which allows Cybear to provide input on the development of future medical data transmission standards. SUN MICROSYSTEMS. The leading developer of 100% Java language-based software applications. Cybear is a member of the Sun Development Group and has collaborated with Sun Microsystems in the development of Java software tools. We are actively pursuing strategic relationships with other key distribution, content and technology leaders that we believes will further our growth strategies and competitive advantages. Certain of our existing relationships, as well as others that may be established in the future, involve or may involve the sale or issuance of our common stock to our partners. For example, our three-year strategic alliance with T.I.P.A.A.A. entered into in 1998 provides that, in exchange for Cybear's preferred vendor status, Cybear agrees to make three $100,000 annual payments to T.I.P.A.A.A. and to grant T.I.P.A.A.A. an option to purchase 100,000 shares of its common stock. The first 30,000 of such options have an exercise price of $3.00 per share, have a seven-year term and vest at the rate of one share for every two T.I.P.A.A.A. physicians that become and remain a Cybear user for a minimum of three months. In the event that such 30,000 options are not vested by the expiration date of the agreement, the options shall vest in 2003. After the first 30,000 options have vested, the remaining 70,000 options will vest at the rate of one share for every two T.I.P.A.A.A. physicians that become and remain a Cybear subscriber for a minimum of three months during the term of this agreement. These 70,000 options will have an exercise price equal to the market price of Cybear's common stock on the date these options vest and will have a five-year term from the date of grant. MARKETING AND SALES GENERAL We market our products and services primarily through two mechanisms: our in-house sales force and our strategic distribution partnerships. We have hired an in-house sales force of individuals with healthcare backgrounds and relationships oriented to building the physician subscriber base. The sales force activity will be complemented by senior management in approaching other -10- segments of the healthcare community, including the pharmaceutical, medical device and supplies and ancillary service providers. We believe both through direct sales and through distribution partnerships, we will have more rapid product penetration and revenue generation. We plan to continue recruiting additional sales and marketing staff. To complement our sales strategy, we have a multifaceted marketing approach that includes advertising, direct mailing, telemarketing, trade show visibility and direct selling activity. Our marketing efforts take a business partnership approach, with a focus on developing three main revenue bases: subscribers, advertisers and e-commerce co-marketing/revenue-sharing relationships. In addition to our two-pronged sales efforts and our multifaceted marketing approach, we believe that the generation of revenue in the following three major areas underscores the importance of diversified revenue streams in our financial model: SUBSCRIBER MARKETING Our subscriber marketing strategy is to identify and attract selected targets with large physician affiliations within the managed care arena to permit the maximum product penetration with a minimum investment of resources. Primary targets include physician organizations with a high probability of conversion and a high probability of successful distribution to and utilization by the physician. Our senior management is actively involved in marketing discussions with these larger entities, and our established relationships represent successful implementations of this strategy. Cybear also has deployed its marketing staff to build its individual and small group physician subscriber base, offering promotional trial subscriptions, with the intention that trial subscribers will become continuing subscribers after they have had the opportunity to use our SolutionsMD and experience its practice enhancing capabilities. We plan to employ this technique in marketing our other Solutions products. SITE ADVERTISING The 650,000 physicians in the United States who are SolutionsMD's targeted customers make more than 80% of the decisions regarding the $1.0 trillion domestic annual healthcare expenditures. With almost $1.5 million in decision making power per physician, this is a highly sought after audience. As has been demonstrated in other market areas, the Internet has a unique ability to deliver effective, targeted, and interactive messaging and communication to its target. That focus, combined with the tremendous purchasing power of a physician user base, makes SolutionsMD a valuable advertising and product promotion medium to potential advertisers such as pharmaceutical companies. Cybear will provide very targeted advertising alternatives for various areas of business seeking to increase their healthcare market share, from large pharmaceutical companies seeking to present specific products to the particular healthcare specialists that would likely prescribe and administer such products, to consumer goods distributors seeking marketing to local healthcare practitioners. Cybear's strategy to attract advertisers is to build its base of subscribers from the healthcare community to include not only individual practitioners but also large organizations of practitioners of particular specialties, so that businesses seeking to advertise on SolutionsMD will be able to -11- access their desired targeted audience. Our SolutionsNet and SolutionsHosp products will include a portal page that is co-branded by Cybear and the network sponsor. Advertisers will also participate in special partnership and/or sponsorship opportunities and will have a presence on SolutionsMD beyond a typical targeted banner advertisement. Special services and promotional programs will be available to partners and sponsors that will greatly increase their visibility to SolutionsMD users. Advertisers also have the flexibility to purchase general or targeted advertisements. E-COMMERCE CO-MARKETING Cybear's marketing efforts are also directed to establishing co-marketing relationships with other e-commerce businesses, whereby the Solutions product line serves as a medium for these other e-commerce ventures to sell their goods or services to Cybear's subscribers with Cybear sharing in the revenues of such sales. Our alliances with Office Max and Moore Medical Supply are two examples of this potential revenue generating, product enhancing marketing avenue. CUSTOMER SERVICE AND SUPPORT Cybear believes that effective customer service is essential to attracting and retaining subscribers 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 will be provided through its customer service and sales support centers 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. Cybear's customer service center screens all requests for telephone support and directs the call to the appropriate customer service personnel. Personnel are trained to both resolve technical problems and to answer inquiries on product usage. Cybear also has trained customer satisfaction associates to ensure proper use and customer satisfaction. NETWORK OPERATIONS CENTER Our NOC located in Boca Raton, Florida, is a state-of-the-art network control and hosting facility which manages, maintains and supports the SolutionsMD network and its users. The NOC includes all the hardware, software, and personnel necessary to support the ISP, our product lines and corporate data processing needs. The NOC includes a Network Consulting Group and other personnel to assist with customer support and troubleshooting. COMPETITION Cybear's competitors include online services or web sites targeted to healthcare, general purpose ISPs, publishers and distributors of offline media, healthcare information companies and large data processing and information companies. Many of these competitors have substantial installed customer bases in the healthcare industry and the ability to fund significant product development and acquisition efforts. Cybear believes that the principal competitive factors in its market include knowledge of user needs and client service, system quality and product features, price and the effectiveness of marketing and sales efforts. There can be no assurance that Cybear will be competitive with respect to any individual factor or combination thereof. To be competitive, Cybear must incorporate leading technologies, enhance its existing services and content, develop new technologies that address the increasingly sophisticated and varied -12- needs of healthcare professionals and healthcare consumers and respond to technological advances and emerging industry standards and practices on a timely and cost-effective basis. There can be no assurance that Cybear will be successful in using new technologies effectively or adapting SolutionsMD 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 resources to devote to the development, promotion and sale of their services; longer operating histories; greater financial, technical and marketing resources; greater name recognition; and larger subscriber bases than Cybear and, therefore, may have a greater ability to attract subscribers and advertisers. 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 strategic partners from entering into competing businesses or directly competing with it. GOVERNMENT REGULATION AND HEALTHCARE REFORM The healthcare industry is subject to changing political, economic and regulatory influences that may affect the procurement practices and operation of healthcare organizations. Cybear's products are designed to function within the structure of the healthcare financing and reimbursement system currently being used in the United States. During the past several years, the healthcare industry has been subject to an increase in governmental regulation of, among other things, reimbursement rates. Proposals to reform the U.S. healthcare system have been and will continue to be considered by the U.S. Congress. These programs may contain proposals to increase governmental involvement in healthcare and otherwise change the operating environment for Cybear's potential customers. Healthcare organizations may react to these proposals and the uncertainty surrounding such proposals by curtailing or deferring investments, including those for Cybear's products. On the other hand, changes in the regulatory environment have in the past increased and may continue to increase the needs of healthcare organizations for cost-effective information management and thereby enhance the marketability of Cybear's products and services. Cybear cannot predict with any certainty what impact, if any, such proposals or healthcare reforms might have on Cybear's results of operations, financial condition and business. Cybear's products and services are not directly subject to governmental regulations, although the proposed user base is subject to extensive and frequently changing federal and state laws and regulations. However, with regard to healthcare issues on the Internet, the recently enacted Health Insurance Portability and Accountability Act of 1996, mandates the use of standard transactions, standard identifiers, security and other provisions by the year 2000. 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. -13- There are currently few laws or regulations that specifically regulate communications or commerce on the Internet. However, laws and regulations may be adopted in the future that address issues such as online content, user privacy, pricing and characteristics and quality of products and services. For example, although it was held unconstitutional, the Communications Decency Act of 1996 prohibited the transmission over the Internet of certain types of information and content. In addition, several telecommunications carriers are seeking to have telecommunications over the Internet regulated by the FCC in the same manner as other telecommunications services. Because the growing popularity and use of the Internet has burdened the existing telecommunications infrastructure in many areas, local exchange carriers have petitioned the FCC to regulate ISPs in a manner similar to long distance telephone carriers and to impose access fees on the ISPs. Internet user privacy has become an issue in the United States. Current United States privacy law consists of a few disparate statutes directed at specific industries that collect personal data, none of which specifically covers the collection of personal information online. Cybear cannot guarantee that the United States will not adopt legislation purporting to protect such privacy. Any such legislation could affect the way in which Cybear is allowed to conduct its business, especially those aspects that involve the collection or use of personal information, and could have a material adverse effect on Cybear's business, financial condition and operating results. Moreover, it may take years to determine the extent to which existing laws governing issues such as property ownership, libel, negligence and personal privacy are applicable to the Internet. With regard to copyright infringement liability, Congress recently enacted the Online Copyright Infringement Liability Limitation Act as part of the Digital Millennium Copyright Act which limits the copyright liability of ISPs for certain transmissions through their systems. Through this law, an ISP can avoid liability for copyright infringement with respect to the ISP's transmitting, routing, linking, and storing materials through its service if the materials are transmitted or stored by or at the direction of a person other than the ISP through an automatic process without selection of the materials by the ISP, the ISP does not select the recipients of the materials except as an automatic response to the request of another person, the materials are not accessible by unanticipated recipients, and the materials are transmitted without modification of content. The ISP must not have actual knowledge or information making it apparent that materials on its system infringe, and must have procedures in place to deal with allegations of infringement, including a designated person to receive notifications of claimed infringement, a commitment to remove allegedly 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. -14- INTELLECTUAL PROPERTY Cybear considers its methodologies, computer software and knowledge bases to be proprietary. Cybear owns all of its applications. Cybear seeks to protect its proprietary information through nondisclosure agreements with its employees. Cybear's policy is to have employees enter into nondisclosure agreements containing provisions prohibiting the disclosure of confidential information to anyone outside Cybear, requiring disclosure to Cybear of any new ideas, developments, discoveries or inventions conceived during employment, and requiring assignment to Cybear of proprietary rights to such matters that are related to Cybear's business. Cybear also relies on a combination of trade secrets, copyright and trademark laws, contractual provisions and technical measures to protect its rights in various methodologies, systems and products and knowledge bases. Cybear believes that because of the rapid pace of technological change in the EDI industry, trade secret and copyright protection are less significant than factors such as the knowledge, ability, experience and integrity of Cybear's employees, frequent product enhancements and the timeliness and quality of support services. Cybear has filed one patent application and several copyright applications relating to its software technology and has obtained trademark protection for the name Cybear. There can be no assurance that these or other applications will result in issued patents or copyrights. Any infringement or misappropriation of Cybear's intellectual property rights would disadvantage Cybear in its efforts to retain and attract new customers in a highly competitive market and could cause Cybear to lose revenues or incur substantial litigation expense. Although Cybear believes that its products do not infringe on the intellectual property rights of others, there can be no assurance that such a claim will not be asserted against Cybear in the future. If asserted, such a claim could cause Cybear to lose revenues or incur substantial litigation expense. EMPLOYEES As of March 15, 1999, Cybear had 65 full-time employees. None of such employees is a member of a labor union and Cybear considers its relationship with its employees to be good. ITEM 2. PROPERTIES Cybear currently leases 21,648 square feet of space in Boca Raton, Florida housing its corporate headquarters and network systems. This facility is located in a high-technology office park and includes a state-of-the-art power and communications infrastructure that will be adequate for Cybear's needs for the foreseeable future. The lease provides for annual rent of $270,600, excluding taxes, insurance, utilities and common area maintenance charges, and has a five-year term beginning on January 1, 1999, with one five-year renewal option at market rates. Cybear currently leases approximately 5,725 square feet of space in Tampa, Florida, for its software development staff, pursuant to two leases expiring in November 1999, each with a one-year renewal option, at a current total annual rent of approximately $95,000. Cybear also subleases approximately 4,000 square feet of office space in Ridgefield Park, New Jersey housing its business development and marketing activities. This lease is for a term of five years beginning November 1998, and the rent under this lease is $10,000 per month plus $417 per month for electrical service. Cybear has adequate insurance for these premises. -15- ITEM 3. LEGAL PROCEEDINGS On March 18, 1998, Andrx received a letter from counsel for Medix Resources, Inc. ("Medix") and its subsidiary, Cymedix Lynx Corporation ("Cymedix") alleging the theft and unlawful appropriation by Andrx, Cybear, and certain directors, officers and employees of Cybear and Andrx of certain computer medical software and internet medical communications technology allegedly owned by Cymedix. The letter demanded trebled damages totaling $396.6 million pursuant to the civil theft provisions of Florida law, including Florida's Racketeer Influenced and Corrupt Organization Act and certain other provisions of federal and state law. On March 23, 1998, Cybear and Andrx filed a complaint against Medix and Cymedix in Broward County, Florida for libel and slander arising from the improper public dissemination of the contents of the aforesaid demand letter. On June 2, 1998, Medix, on behalf of Cymedix, filed a complaint against Cybear, Andrx and certain of their directors, officers and employees in Hillsborough County, Florida making the same allegations as were reflected in the aforesaid demand letter. On December 22, 1998, the Medix complaint was provisionally dismissed and transferred to Broward County Florida by the Hillsborough County Court. In February 1999, this matter was settled, with all of the parties respectively releasing the others from any liability, through the payment to Medix of $125,000. 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 other legal proceeding or aware of any other claim, the adverse outcome of which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on Cybear's business, operating results and financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS In a special meeting of shareholders held on November 19, 1998, 1997 Corp. submitted the following matters to the record holders of its 45,000 then outstanding shares for approval: (1) the merger of Cybear Capital Corp., a wholly owned subsidiary of 1997 Corp. (the former name of the Company), with and into Cybear, Inc., a Florida corporation, (2) the subsequent amendment of the 1997 Corp.'s Certificate of Incorporation to increase the number of shares of the 1997 Corp.'s common stock from 10 million shares to 25 million shares and to change the Company's name from "1997 Corp." to "Cybear, Inc.," and (3) adoption of Cybear, Inc.'s Employee Stock Option Plan as the Company's stock option plan. All of these matters were approved by a majority of the 1997 Corp.'s shareholders present in person or by proxy and entitled to vote thereon. The following is a tabulation of votes cast in person at the meeting or by proxy solicitation: FOR AGAINST ABSTAINED --- ------- --------- Merger 44,640 100 50 Amendment of Certificate of Incorporation 44,640 100 50 Adoption of Cybear, Inc. Stock Option Plan 39,640 100 5,050 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION Our common stock has been traded on the OTC Bulletin Board under the symbol "CYBR" since January 28, 1999. High and low bid prices for the common stock during the period from January 28, 1999 through March 26, 1999 ranged from $3.25 to $25.25 according to information obtained from the OTC Bulletin Board. On March 26, 1999, the last reported sales price was $23.75 per share. The quotations are over-the-market quotations and, accordingly, reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Because only 269,400 shares are freely tradable, there has been a limited public market for our common stock and the prices may not reflect the true value of our common stock. HOLDERS At March 22, 1999, there were approximately 28 holders of record of Cybear's common stock. Cybear believes the number of beneficial owners of its common stock is approximately 325. -16- DIVIDENDS Cybear has not paid dividends on its common stock and does not intend to pay dividends for the foreseeable future. Cybear intends to retain any earnings, to finance the development and expansion of its business. -17- ITEM 6. SELECTED FINANCIAL DATA This section presents selected historical financial data of Cybear. You should read this selected financial data together with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Report as well as Cybear's Consolidated Financial Statements and related notes contained in Item 8 of this Report. The selected data in this section is not intended to replace the Consolidated Financial Statements. Cybear derived the statement of operations data and balanced sheet data from the audited consolidated financial statements contained in Item 8 of this Report. Those financial statements were audited by Arthur Andersen LLP, independent certified public accountants.
STATEMENT OF OPERATIONS DATA*: FOR THE PERIOD FROM CUMULATIVE FROM FEBRUARY 5, 1997 FEBRUARY 5, 1997 (INCEPTION) TO FOR THE YEAR ENDED (INCEPTION) TO DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1998 ----------------- ----------------- ----------------- Revenues $ 95,927 $ -- $ 95,927 Software development expenses $ 945,497 $ 1,621,422 $ 2,566,919 General and administrative expenses $ 680,779 $ 2,264,252 $ 2,945,031 Loss from operations $(1,530,349) $(4,170,571) $(5,700,920) Net loss $(1,558,569) $(2,481,012) $(4,039,581) Basic and diluted net loss per share $ (0.12) $ (0.19) $ (0.31) Basic and diluted weighted average shares of common stock outstanding 12,768,303 13,030,999 12,906,266 BALANCE SHEET DATA: DECEMBER 31, 1997 DECEMBER 31, 1998 ----------------- ----------------- Working capital deficit $(1,378,412) $(3,235,200) Total assets $ 395,456 $ 3,331,951 Total liabilities $ 1,410,119 $ 3,799,568 Stockholders' deficit $(1,014,663) $( 467,617)
*Certain prior year amounts have been reclassified to conform with the current year presentation. -18- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. CYBEAR'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THIS REPORT AND DETAILED FROM TIME TO TIME IN CYBEAR'S FILINGS WITH THE COMMISSION. THE FOLLOWING DISCUSSION ALSO SHOULD BE READ TOGETHER WITH CYBEAR'S CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES CONTAINED IN ITEM 8 OF THIS REPORT. INTRODUCTION Cybear, a Delaware corporation in the development stage, was incorporated on February 5, 1997. Cybear is an information technology company using the Internet and Internet-based browser technologies to develop applications designed to improve communications and increase efficiencies for healthcare providers. Cybear has focused its efforts on developing its Solutions product line, an Internet service provider system that provides information and Internet-based productivity applications to the healthcare community. In March 1999, Cybear introduced its first Solutions product, SolutionsMD, which addresses the communications and operational needs of physicians. Cybear's other Solutions products, derived from SolutionsMD, will provide Internet-based productivity software applications and communication networks for other constituents of the healthcare community. From February 5, 1997 (inception) through December 31, 1998, Cybear's principal activities have consisted of developing its products, establishing its administrative, selling and marketing, network operations and customer support infrastructure and providing software development services to Andrx. RECENT MERGER. On November 20, 1998, Cybear, Inc., a Florida corporation, merged with 1997 Corp. pursuant to a Merger Agreement and Plan of Reorganization dated July 15, 1998. 1997 Corp. was a "blank check" company that had a registration statement on file with the Securities and Exchange Commission to seek a business combination with an operating entity. Upon consummation of the merger, Cybear, Inc. became a wholly-owned subsidiary of 1997 Corp. 1997 Corp. changed its name to Cybear, Inc. and 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. (the Florida corporation that merged into 1997 Corp.) for accounting and financial reporting purposes. The result of the merger was that the holders of Cybear, Inc.'s (the Florida corporation) common stock own 13,000,000 shares of Cybear's common stock or approximately 98% of Cybear's common stock and the 1997 Corp.'s original shareholders own 269,400 shares of Cybear's common stock or approximately 2% of Cybear's common stock. See Note 1 of the Notes to the Consolidated Financial Statements. RELATIONSHIP WITH ANDRX. As of December 31, 1998, Cybear was 95% owned by Andrx and has been funded primarily through Andrx. In September 1998, Andrx and Cybear entered into a Credit Agreement with respect to Andrx's funding obligations to Cybear. The Credit Agreement provides that Andrx will continue to fund Cybear's operations until Cybear is in a position to raise at least $4,000,000 on its own (whether through debt or equity) or 12 months from the consummation of the above-described merger, whichever occurs first, and that Andrx will make at least $3,000,000 available to Cybear on Cybear's demand. Interest accrues on the unpaid principal amount from the date of borrowing until the principal amount is repaid in full, at an -19- annual interest rate equal to the prime rate plus 1/2%. Cybear recorded $28,220 in interest expense on the balance due to Andrx for the period from February 5, 1997 (inception) to December 31, 1997 and $210,441 for the year ended December 31, 1998. Cybear and Andrx have a corporate services agreement whereby Andrx provides Cybear with various services such as executive management, accounting and finance, legal, payroll and human resources. For the period from February 5, 1997 (inception) to December 31, 1997 and for the year ended December 31, 1998, Cybear 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 $110,000 for the period from February 5, 1997 (inception) to December 31, 1997 and $120,000 for the year ended December 31, 1998. Cybear and Andrx have a tax allocation agreement that provides, among other things, for the allocation of federal income tax liabilities to Cybear at the approximate amounts that would have been computed as if Cybear and Andrx had filed separate income tax returns. Cybear recorded a tax benefit of $1,900,000 for the year ended December 31, 1998, reflecting the reimbursement from Andrx for the utilization of Cybear's tax attributes pursuant to the tax allocation agreement. PRODUCTS AND SOURCES OF REVENUE. Cybear introduced SolutionsMD to the healthcare community in March 1999. With respect to SolutionsMD, Cybear anticipates that its revenues will initially consist of recurring revenues from product subscriptions. SolutionsMD is sold to subscribers on an individual monthly subscription basis with the monthly subscription fee for the basic product package initially set at $24.95 per user. A premium package with more applications is expected to be released in the second half of 1999 at a monthly subscription fee of $34.99. Cybear may consider giving subscription discounts for paid-in-advance contracts. Subscribers will also be able to purchase additional services for additional fees. Currently, all subscriptions are on a month-to-month basis, payable in advance. Advance billings and collections relating to future product usage will be recorded as deferred revenue and recognized when revenue is earned. If Cybear is successful in building its subscriber base, brand recognition and increasing traffic on its web site, Cybear expects to generate additional revenues through advertising and sponsorships on its Solutions products. Advertising revenues will be derived principally from short-term contracts in which Cybear will guarantee a minimum number of page impressions to be delivered to subscribers over a specified period of time for a fixed fee. Sponsorship revenues will be derived principally from contracts that have typically longer terms than standard advertising contracts and will involve more integration with Cybear's services such as the placement of logos on the home page or other sections of Cybear's applications. Revenues on advertising and sponsorship contracts will be recognized ratably in the period in which the advertisement is displayed, provided that no significant Cybear obligations remain, at the lesser of the ratio of impressions delivered over the total guaranteed impressions or the straight line basis over the term of the contract. To the extent that minimum guaranteed impressions are not met, Cybear will defer recognition of the corresponding revenues until the guaranteed impressions are achieved. With respect to its management applications products, Cybear plans to build a customer base consisting of physician organizations, pharmacies and hospitals and anticipates that its primary source of revenues derived from such management applications products will be in the form of transaction fees. Cybear will recognize revenue when services are provided. -20- Cybear's strategy is to rapidly develop a broad customer base and a source of revenue by marketing SolutionsMD and its other Solutions products once introduced, which are intended to provide a one-stop location on the Internet for the healthcare community to locate relevant news, healthcare-related information and customizable features unique to each user. Cybear's launched product, SolutionsMD, will provide a base for the marketing of Cybear's other Solutions products to the healthcare industry. Over the next year, Cybear intends to build on its SolutionsMD by introducing further products such as SolutionsNet, SolutionsRx and SolutionsHosp that are targeted to other areas of the healthcare community such as pharmacists, independent practice associations and hospitals. These products will have many of the same features as SolutionsMD with certain different applications and services tailored to the target market. Cybear has incurred net operating losses and negative cash flows from operating activities since its inception. As of December 31, 1998, CyBear had an accumulated deficit of $4,039,581. In addition, Cybear intends to continue to invest heavily in product development and marketing. As a result, Cybear expects to continue to incur substantial operating losses for the foreseeable future, and may not achieve or sustain profitability. In addition, Cybear may offer promotional packages to subscribers at subsidized prices. These arrangements may require Cybear to incur significant expenses, and Cybear cannot guarantee that it will generate sufficient revenues to offset these expenses. Cybear cannot be certain that it can achieve sufficient revenues in relation to its expenses to ever become profitable. If Cybear does achieve profitability, it cannot be certain that it can sustain or increase profitability on a quarterly or annual basis in the future. If Cybear's revenues fall short of its projections, its business, financial condition and operating results would be materially adversely affected. Cybear may also need to raise additional capital through public or private debt or equity financings to fund the deployment of its Solutions products. However, Cybear may not be able to raise additional capital on favorable terms or at all. Cybear's quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, some of which are outside its control. These factors include: the number of subscribers to SolutionsMD and their use of the site, market acceptance of Cybear's products, Cybear's ability to timely release its connectivity products, advertisers or sponsors on Cybear's web site, fees Cybear may pay for distribution, service or content agreements and promotional arrangements or other costs Cybear may incur as it expands its operations, Cybear's ability to attract and retain personnel with the necessary strategic, technical and creative skills required to develop and service its customers, the amount and timing of capital expenditures and other costs relating to the expansion of Cybear's operations, the introduction of new products or services by Cybear or its competitors, pricing changes in the industry, technical difficulties in the use of the Internet or Cybear's web site, system downtime, undetected software errors, the level of traffic on Cybear's web site and the level of usage of the Internet generally, future government regulations that may affect healthcare or the Internet and general economic conditions. Due to all of these factors, in some future quarter Cybear's operating results may fall below market expectations. If this happens, the trading price of Cybear's common stock would likely decline, perhaps significantly. As a result of Cybear's limited operating history and the emerging nature of the products and markets in which it competes, Cybear's historical financial data is of limited value in planning -21- future operating expenses. Accordingly, Cybear's planned expenses are based in part on its expectations concerning future revenues and are fixed to a large extent. Cybear expects its expenses to increase significantly in the future as it continues to incur significant network operations, operations support, sales and marketing, product development and administrative expenses. Cybear's success depends on its ability to increase its revenues to offset its expenses. Cybear cannot guarantee that it will be able to generate sufficient revenues to offset its expenses or that it will be able to achieve profitability. If its revenues fall short of its projections, Cybear's business, financial condition and operating results could be materially and adversely affected. RESULTS OF OPERATIONS FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998 Revenues were $95,927 for the period from February 5, 1997 (inception) to December 31, 1997 and consisted of software development services rendered to Andrx. Cybear had no revenues for the year ended December 31, 1998 as it is in the development stage. Software development costs were $945,497 for the period from February 5, 1997 (inception) to December 31, 1997 compared to $1,621,422 for the year ended December 31, 1998. Software development costs include outside consultant fees, payroll, benefits and housing expenses of employees involved in the creation, design and development of Cybear's products. Also included in the period from February 5, 1997 (inception) to December 31, 1997, are the costs of providing software development services to Andrx. The increase in the software development costs for the year ended December 31, 1998 reflects the progress and expansion of Cybear's development activities. General and administrative expenses were $680,779 for the period from February 5, 1997 (inception) to December 31, 1997 compared to $2,264,252 for the year ended December 31, 1998. General and administrative expenses include costs incurred in the areas of sales and marketing, network operations and maintenance, administration, and customer support. The increase in general and administrative expenses for the year ended December 31, 1998 relates to the establishment of the administrative, selling and marketing and customer support infrastructure and the establishment of a network operations center. In the year ended December 31, 1998, Cybear recorded $159,897 to write off the unamortized portion of a software license obtained from a third party in 1997. The software was to be used as a means to handle certain types of electronic data interchange ("EDI") messages in Cybear's Internet-based management applications. In the fourth quarter of 1998, new EDI standards were approved for use in the medical systems community in the U.S. and are now released as open standards to the development community. Cybear has now adopted these new standards to be compatible with the industry standards and has integrated them into its software development process. This has rendered obsolete the software licensed by Cybear. In the year ended December 31, 1998, Cybear recorded a settlement charge of $125,000 in connection with a legal settlement reached with Medix and Cymedix to settle all previously outstanding legal disputes between the companies. Interest expense was $28,220 in the period from February 5, 1997 (inception) to December 31, 1997. Interest expense was $210,441 for the year ended December 31, 1998. Interest expense represents interest on advances from Andrx under the Credit Agreement between the two companies to fund Cybear's operations. At December 31, 1998, such net advances including interest -22- amounted to $5,357,179 and bear interest at prime (7.75% at December 31, 1998) plus 1/2%. Cybear's taxable results are included in the consolidated income tax return of Andrx. Cybear's taxable results will be included in the consolidated income tax return of Andrx as long as Andrx owns at least 80% of the common stock of Cybear. Cybear and Andrx have a tax allocation agreement that provides, among other things, for the allocation of federal income tax liabilities to Cybear at the approximate amounts that would have been computed as if Cybear had filed separate income tax returns. Cybear recorded a tax benefit of $1,900,000 for the year ended December 31, 1998 reflecting the reimbursement from Andrx for the utilization of Cybear's tax attributes pursuant to the tax allocation agreement. As of December 31, 1998, Cybear has a net operating loss carryforward in the amount of approximately $800,000 which is available to offset future earnings. Under the provisions of SFAS No. 109, Cybear has provided a valuation allowance to reserve against 100% of its deferred tax asset given Cybear's history of net losses. The following table sets forth the selected quarterly data for the year ended December 31, 1998:
FISCAL 1998 QUARTER ENDED -------------------------------------------------------------- MARCH 31 JUNE 30 SEPT. 30 DEC. 31 ----------- ----------- ----------- ----------- Revenue $ -- $ -- $ -- $ -- Operating expenses: Software development 305,793 449,812 413,721 452,096 General and administrative 224,681 350,771 577,623 1,111,177 Write-off of software license -- -- -- 159,897 Litigation settlement charge -- -- -- 125,000 ----------- ----------- ----------- ----------- Total operating expenses 530,474 800,583 991,344 1,848,170 ----------- ----------- ----------- ----------- Loss from operations (530,474) (800,583) (991,344) (1,848,170) Interest expense on due to Andrx Corporation (32,102) (47,547) (65,610) (65,182) ----------- ----------- ----------- ----------- Loss before income taxes (562,576) (848,130) (1,056,954) (1,913,352) Income tax benefit -- -- -- 1,900,000 ----------- ----------- ----------- ----------- Net loss $ (562,576) $ (848,130) $(1,056,954) $ (13,352) =========== =========== =========== ===========
LIQUIDITY AND CAPITAL RESOURCES From February 5, 1997 (inception) through December 31, 1998, Cybear has incurred a net loss of $4,039,581 and has been dependent upon funding from Andrx. As of December 31, 1998, Cybear owed Andrx $2,344,727. As of December 31, 1998, Cybear had $3,983 in cash and a working capital deficit of $3,235,200. Net cash used in operating activities for the period from February 5, 1997 (inception) through December 31, 1997 was $1,397,238 compared to $1,386,300 for the year ended December 31, 1998. Net cash used in operating activities was primarily attributable to Cybear's loss from operations offset by accounts payable and accrued liabilities. -23- Net cash used in investing activities for the period from February 5, 1997 (inception) through December 31, 1997 was $400,535 compared to $2,699,123 for the year ended December 31, 1998. For the period from February 5, 1997 (inception) through December 31, 1997, Cybear invested $240,535 in capital expenditures consisting mainly of computer hardware and software used in the development of its products. In addition, Cybear entered into an agreement with a third party to license the use of the third party's software for an unlimited period of time. Cybear purchased this license for $160,000. In 1998, Cybear wrote-off the unamortized portion of this software license as noted above. In 1998, Cybear invested $2,341,123 in capital expenditures consisting mainly of computer hardware and software used in the establishment of its network operations center and the development of its products, and leasehold improvements to the rented space housing its corporate headquarters and network operations center. Cybear also capitalized $358,000 in software development costs associated with the development of SolutionsMD. Net cash provided by financing activities for the period from February 5, 1997 (inception) through December 31, 1997 was $1,798,773 compared to $4,088,406 for the year ended December 31, 1998. For the period from February 5, 1997 (inception) to December 31, 1997, net cash provided by financing activities consisted of proceeds from issuance of shares of Cybear's stock and funding from Andrx. In February 1997, Cybear issued 12,870,000 shares of common stock to Andrx for an aggregate amount of $500,000 and 130,000 shares of convertible preferred stock for a promissory note of $30,000. The promissory note was paid in full and the preferred stock was converted into 130,000 shares of common stock. In addition, Cybear received advances of $1,268,773 from Andrx to fund its operations. In 1998, net cash provided by financing activities consisted of advances from Andrx to fund Cybear's operations and the reimbursement from Andrx for the utilization of Cybear's tax attributes pursuant to the tax allocation agreement. The advances bear interest at prime (7.75% at December 31, 1998) plus 1/2%. On November 20, 1998, upon consummation of the merger with 1997 Corp., the then outstanding "Due to Andrx" of $3,012,452 was converted into additional paid-in capital to Cybear. In September 1998, Andrx and Cybear entered into a Credit Agreement with respect to Andrx's funding obligations to Cybear. The Credit Agreement provides that Andrx will continue to fund Cybear's operations until Cybear is in a position to raise at least $4,000,000 on its own (whether through debt or equity) or 12 months from the consummation of the above-described merger, whichever occurs first, and that Andrx will make at least $3,000,000 available to Cybear on Cybear's demand. Interest accrues on the unpaid principal amount from the date of borrowing until the principal amount is repaid in full, at an annual interest rate equal to the prime rate plus 1/2%. In the year ended December 31, 1998, Cybear recorded a settlement charge of $125,000 in connection with a legal settlement reached with Medix and Cymedix to resolve all previously outstanding legal disputes between the companies. The disputes involved allegations of misappropriation by Cybear, Andrx and certain of their respective officers, directors and employees of medical software and Internet communications technology allegedly owned by Cymedix, and Cybear's claims for defamation against Cymedix and Medix relating to such allegations. 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 other legal proceeding or aware of any other claim, the adverse outcome of which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on Cybear's business, operating results and financial condition. -24- Cybear anticipates that its cash requirements will continue to increase as it continues to expend substantial resources to build its infrastructure, develop its products and establish its sales and marketing, network operations, customer support and administrative organizations. Andrx is committed to the required funding of Cybear's operations until Cybear is able to raise capital from third parties or the next twelve months. From February 5, 1997 (inception) through December 31, 1998, Cybear has been dependent upon funding from Andrx. As of December 31, 1998, Cybear owed Andrx $2,344,727. Cybear currently anticipates that its available cash resources and available funding from Andrx will be sufficient to meet its presently anticipated working capital and capital expenditure requirements for at least the next 12 months. Based on Andrx's most recent financial statements, Cybear believes that Andrx currently has the resources to fund Cybear's cash requirements for at least the next 12 months. In March 1999, Cybear announced that it intends to file a registration statement for a public offering of its common stock. Cybear expects to complete such offering during the second quarter of 1999. No assurance can be given that the registration statement will be filed or that, if filed, the offering will be consummated. YEAR 2000 The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Cybear's computer equipment and software and devices with embedded technology that are time-sensitive may recognize a date using "00" as the Year 1900 rather than the Year 2000. This could result in a system failure or a miscalculation, causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. Based upon its identification and assessment efforts to date, Cybear believes that certain of the computer equipment and software it currently uses will require replacement or modification. In the ordinary course of replacing computer equipment and software, Cybear will attempt to obtain replacements that are Year 2000 compliant. Utilizing both internal and external resources to identify and assess needed Year 2000 remediation, Cybear began its Year 2000 identification, assessment, remediation and testing efforts in the fourth quarter 1998 and expects to complete such activities by third quarter 1999 and that such efforts will be completed prior to any currently anticipated impact on its computer equipment and software. Cybear estimates that as of March 15, 1999, it had completed approximately 40% of the initiatives that it believes will be necessary to fully address potential Year 2000 issues relating to its computer equipment and software. The projects comprising the remaining 60% of the initiatives are in process and expected to be completed on or about the third quarter 1999. Cybear has also mailed letters to its significant vendors and service providers to determine the extent to which interfaces with such entities are vulnerable to Year 2000 issues and whether the products and services purchased from or by such entities are Year 2000 compliant. As of March 15, 1999, Cybear had received responses on Internet documentation from approximately 92% of such third parties, and 93% of the companies that have responded have provided written assurance that they are Year 2000 compliant, with the remaining 7% expecting to address all their significant Year 2000 issues on a timely basis. A follow-up mailing to significant vendors and service providers that did not initially respond, or whose responses were deemed unsatisfactory by Cybear, was conducted in March 1999. Cybear believes that the cost of its Year 2000 identification, assessment, remediation and testing efforts, as well as currently anticipated costs to be incurred by Cybear with respect to Year 2000 issues of third parties, will not exceed $500,000 and will be funded from current existing financial resources. As of the date of this prospectus, Cybear had incurred costs of approximately $100,000 -25- related to its Year 2000 identification, assessment, remediation and testing efforts. These costs were for planning, analysis, repair or replacement of existing software, upgrades of existing software, or evaluation of information received from significant vendors, service providers, or customers. Other non-Year 2000 efforts have not been and are not expected to be materially delayed. Cybear has not yet completed comprehensive analysis of the operational problems and costs (including loss of revenues) that would be reasonably likely to result from the failure by Cybear and certain third parties to complete efforts necessary to achieve Year 2000 compliance on a timely basis. A contingency plan for dealing with the most reasonably likely worst case scenario is under development and should be completed by December 31, 1999. The costs of Cybear's Year 2000 identification, assessment, remediation and testing efforts and the dates on which Cybear believes it will complete such efforts are based upon management's best estimates, which were derived using numerous assumptions regarding future events, including the continued availability of certain resources, third-party remediation plans, and other factors. Cybear cannot assure you that these estimates will prove to be accurate, and actual results could differ materially from those currently anticipated. Specific factors that could cause such material differences include, but are not limited to, the availability and cost of personnel trained in Year 2000 issues, the ability to identify, assess, remediate and test all relevant computer codes and embedded technology and other similar uncertainties. In addition, variability of definitions of "compliance with Year 2000" and the variety of different products and services and combinations thereof sold by Cybear may lead to claims relating to Year 2000 compliance whose impact on Cybear is not currently estimable. Cybear cannot provide assurance that the aggregate cost of defending and resolving such claims, if any, will not materially adversely affect Cybear's results of operations. NEW ACCOUNTING PRONOUNCEMENTS Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. Cybear has adopted the provisions of SFAS No. 130 beginning January 1, 1998, as required. Cybear's comprehensive losses and net losses are the same for all periods presented. 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. Cybear has adopted the provisions of SFAS No. 131 for the year ending December 31, 1998 as required. Currently, Cybear does not believe it has any separately reportable business segments or other disclosure information required by the Statement. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," 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 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 -26- results on the hedged item in the income statement, and requires that a company formally document, designate and assess the effectiveness of transactions that receive hedge accounting. SFAS No. 133 is effective for fiscal years beginning after June 15, 1999. A company may also implement the provision of SFAS No. 133 as of the beginning of any fiscal quarter June 16, 1998 and thereafter. SFAS No. 133 cannot be applied retroactively. SFAS No. 133 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 has not yet quantified the impact of adopting SFAS No. 133 on its financial statements and has not determined the timing or method of its adoption of SFAS No. 133. -27- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE ---- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS.........................F-2 CONSOLIDATED BALANCE SHEETS................................................F-3 CONSOLIDATED STATEMENTS OF OPERATIONS......................................F-4 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT...........................F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS......................................F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.................................F-7 F-1 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To Cybear, Inc.: We have audited the accompanying consolidated balance sheets of Cybear, Inc. (a Delaware corporation in the development stage) and subsidiary, a 95% owned subsidiary of Andrx Corporation and subsidiaries, as of December 31, 1997 and 1998, and the related consolidated statements of operations, shareholders' deficit and cash flows for the period from February 5, 1997 (inception) to December 31, 1997, for the year ended December 31, 1998 and for the cumulative period from February 5, 1997 (inception) to December 31, 1998. 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 generally accepted auditing standards. 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 subsidiary as of December 31, 1997 and 1998, and the results of their operations and their cash flows for the period from February 5, 1997 (inception) to December 31, 1997, for the year ended December 31, 1998 and for the cumulative period from February 5, 1997 (inception) to December 31, 1998, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Fort Lauderdale, Florida, February 12, 1999. F-2
CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED BALANCE SHEETS DECEMBER 31, ---------------------------- 1997 1998 ----------- ----------- ASSETS Current assets: Cash $ 1,000 $ 3,983 Receivable from Blue Lake Ltd. -- 366,000 Prepaid expenses 30,707 194,385 ----------- ----------- Total current assets 31,707 564,368 Property and equipment, net 189,065 2,406,629 Software development costs -- 358,000 Software license 160,000 -- Other assets 14,684 2,954 ----------- ----------- Total assets $ 395,456 $ 3,331,951 =========== =========== LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable $ 64,813 $ 1,153,059 Accrued liabilities 76,533 301,782 Due to Andrx Corporation 1,268,773 2,344,727 ----------- ----------- Total current liabilities 1,410,119 3,799,568 ----------- ----------- Commitments and contingencies (Notes 7 and 11) Shareholders' deficit: Convertible preferred stock, $.01 par value; 2,000,000 shares authorized, none issued and outstanding at December 31, 1997 and 1998 -- -- Common stock, $.001 par value; 25,000,000 shares authorized, 13,000,000 and 13,269,400 shares issued and outstanding at December 31, 1997 and 1998, respectively 13,000 13,269 Additional paid-in-capital 530,906 3,558,695 Deficit accumulated during development stage (1,558,569) (4,039,581) ----------- ----------- Total shareholders' deficit (1,014,663) (467,617) ----------- ----------- Total liabilities and shareholders' deficit $ 395,456 $ 3,331,951 =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these balance sheets. F-3
CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE PERIOD FROM CUMULATIVE FROM FEBRUARY 5, 1997 FEBRUARY 5, 1997 (INCEPTION) TO FOR THE YEAR ENDED (INCEPTION) TO DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1998 -------------------- ------------------ ----------------- Revenues: Software development services to Andrx Corporation $ 95,927 $ - $ 95,927 ------------ ------------ ------------ Operating expenses: Software development 945,497 1,621,422 2,566,919 General and administrative 680,779 2,264,252 2,945,031 Write-off of software license -- 159,897 159,897 Litigation settlement charge -- 125,000 125,000 ------------ ------------ ------------ Total operating expenses 1,626,276 4,170,571 5,796,847 ------------ ------------ ------------ Loss from operations (1,530,349) (4,170,571) (5,700,920) Interest expense on due to Andrx Corporation (28,220) (210,441) (238,661) ------------ ------------ ------------ Loss before income taxes (1,558,569) (4,381,012) (5,939,581) Income tax benefit -- 1,900,000 1,900,000 ------------ ------------ ------------ Net loss $ (1,558,569) $ (2,481,012) $ (4,039,581) ============ ============ ============ Basic and diluted net loss per share $ (0.12) $ (0.19) $ (0.31) ============ ============ ============ Basic and diluted weighted average shares of common stock outstanding 12,768,303 13,030,999 12,906,266 ============ ============ ============
The accompanying notes to consolidated financial statements are an integral part of these statements. F-4
CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT DEFICIT CONVERTIBLE ACCUMULATED PREFERRED STOCK COMMON STOCK ADDITIONAL DURING TOTAL ---------------------- ------------------------- PAID-IN DEVELOPMENT SHAREHOLDERS' SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE DEFICIT --------- --------- ----------- ----------- ----------- ----------- ------------- FEBRUARY 5, 1997 (INCEPTION) -- $ -- -- $ -- $ -- $ -- $ -- Issuance of shares of common stock to Andrx Corporation as promoter -- -- 12,870,000 12,870 487,130 -- 500,000 Issuance of shares of convertible preferred stock 130,000 130 -- -- 29,870 -- 30,000 Shares of common stock issued in connection with conversion of shares of convertible preferred stock (130,000) (130) 130,000 130 -- -- -- Options granted to consultants -- -- -- -- 13,906 -- 13,906 Net loss -- -- -- -- -- (1,558,569) (1,558,569) --------- --------- ----------- ----------- ----------- ----------- ----------- BALANCE, DECEMBER 31, 1997 -- -- 13,000,000 13,000 530,906 (1,558,569) (1,014,663) Shares of common stock issued in connection with merger with 1997 Corp. -- -- 269,400 269 (269) -- -- Conversion of due to Andrx Corporation upon consummation of merger with 1997 Corp. -- -- -- -- 3,012,452 -- 3,012,452 Options granted to consultants -- -- -- -- 15,606 -- 15,606 Net loss -- -- -- -- -- (2,481,012) (2,481,012) --------- --------- ----------- ----------- ----------- ----------- ----------- BALANCE, DECEMBER 31, 1998 -- $ -- 13,269,400 $ 13,269 $ 3,558,695 $(4,039,581) $ (467,617) ========= ========= =========== =========== =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-5
CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE PERIOD FROM CUMULATIVE FROM FEBRUARY 5, 1997 FEBRUARY 5, 1997 (INCEPTION) TO FOR THE YEAR ENDED (INCEPTION) TO DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1998 ------------------- ------------------ ------------------ Cash flows from operating activities: Net loss $(1,558,569) $(2,481,012) $(4,039,581) Adjustments to reconcile net loss to net cash used in operating activities - Write-off of software license -- 159,897 159,897 Provision for litigation settlement -- 125,000 125,000 Depreciation and amortization 51,470 123,662 175,132 Non cash charges for options granted to consultants 13,906 15,606 29,512 Changes in operating assets and liabilities: Receivable from Blue Lake Ltd. -- (366,000) (366,000) Prepaid expenses (30,707) (163,678) (194,385) Other assets (14,684) 11,730 (2,954) Accounts payable 64,813 1,088,246 1,153,059 Accrued liabilities 76,533 100,249 176,782 ----------- ----------- ----------- Net cash used in operating activities (1,397,238) (1,386,300) (2,783,538) ----------- ----------- ----------- Cash flows from investing activities: Purchases of property and equipment (240,535) (2,341,123) (2,581,658) Software development costs -- (358,000) (358,000) Purchase of software license (160,000) -- (160,000) ----------- ----------- ----------- Net cash used in investing activities (400,535) (2,699,123) (3,099,658) ----------- ----------- ----------- Cash flows from financing activities: Advances from Andrx Corporation 1,268,773 5,988,406 7,257,179 Payments on due to Andrx Corporation -- (1,900,000) (1,900,000) Proceeds from issuance of shares of common stock 500,000 -- 500,000 Proceeds from promissory note issued for purchase of shares of convertible preferred stock 30,000 -- 30,000 ----------- ----------- ----------- Net cash provided by financing activities 1,798,773 4,088,406 5,887,179 ----------- ----------- ----------- Net increase in cash 1,000 2,983 3,983 Cash, beginning of period -- 1,000 -- ----------- ----------- ----------- Cash, end of period $ 1,000 $ 3,983 $ 3,983 =========== =========== =========== Supplemental disclosure of non-cash activities: Conversion of due to Andrx into additional paid-in capital $ -- $ 3,012,452 $ 3,012,452 =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part of these statements. F-6 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 (1) GENERAL Cybear, Inc. ("Cybear" or the "Company"), a Delaware corporation in the development stage, was incorporated on February 5, 1997. As of December 31, 1998, Cybear, Inc. was a 95% owned subsidiary of Andrx Corporation ("Andrx"). Cybear is an information technology company using the Internet and Internet-based browser technologies to develop applications designed to improve communications and increase efficiencies within the healthcare community. The Company has focused its efforts on developing SolutionsMD, an Internet service provider system ("ISP") that will provide information and Internet-based applications to the healthcare community. The Company is also developing a suite of Internet-based management applications and communication networks for the healthcare community. From February 5, 1997 (inception) through December 31, 1998, the Company's principal activities have consisted of developing its products, establishing its administrative, selling and marketing, customer support and network operations infrastructure and providing software development services to Andrx. 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. Under the terms of the Merger Agreement, all outstanding Cybear, Inc. (FL) common shares were cancelled and were converted by virtue of the Merger into a total of 13,000,000 1997 Corp. common shares. All outstanding employee stock options of Cybear, Inc. (FL) were assumed by 1997 Corp. There was no change in the ownership of the 270,000 registered shares of 1997 Corp. common stock outstanding immediately prior to the Merger (after giving effect to a five-for-one common stock dividend payable on each of the 45,000 outstanding shares of 1997 Corp.). As required by Rule 419 promulgated pursuant to the Securities Act of 1933, as amended, stockholders of 1997 Corp. were required to reconfirm their purchase of 1997 Corp.'s common shares and each stockholder who rejected or failed to approve the Merger Agreement was paid his or her pro rata share of the funds deposited in the Rule 419 escrow account at Continental Stock Transfer and Trust Company, or approximately $5.13 per share. Funds were returned for a total of 100 shares. The result of the Merger was that the holders of Cybear Inc. (FL)'s common stock own 13,000,000 shares of Cybear, Inc.'s common stock or approximately 98% of Cybear, Inc.'s common stock and the 1997 Corp.'s original shareholders own 269,400 shares of Cybear, Inc.'s common stock or approximately 2% of Cybear, Inc.'s common stock. F-7 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 MANAGEMENT'S PLANS From February 5, 1997 (inception) through December 31, 1998, the Company has incurred a net loss of $4,039,581 and has been dependent upon funding from Andrx. Management anticipates incurring additional net losses in the near term, as the focus of the Company's business is to develop and market its products. In September 1998, Andrx and Cybear entered into a credit agreement with respect to Andrx's funding obligations to Cybear. The credit agreement provides that Andrx will continue to fund Cybear's operations until Cybear is in a position to raise at least $4,000,000 on its own (whether through debt or equity) or 12 months from the consummation of the Merger, whichever date is earlier and that Andrx will make at least $3,000,000 available to Cybear on Cybear's demand. Interest will accrue on the unpaid principal amount from the date of borrowing until the principal amount is repaid in full, at an annual interest rate equal to the prime rate plus 1/2% (see Note 8). Cybear is planning to introduce SolutionsMD to the healthcare community in the first quarter of 1999. The Company has not yet completed third-party testing of its Internet-based management applications or the development or testing of certain system enhancements. The Company will be required to commit considerable time, effort and resources to finalize such development and adapt its software to satisfy specific requirements of potential customers. There can be no assurance that Cybear will successfully develop its products, achieve or sustain profitability or positive cash flow from its operations. The likelihood of the success of the Company must be considered in light of the problems, expenses, complications and delays frequently encountered in connection with the development of new business ventures. Cybear's business risks include its limited operating history, its history of losses, the emerging and competitive nature of its markets, the greater financial, marketing and other resources of its competitors, the rapid technology change in its industry, changes in government regulations, dependence on network infrastructure, telecommunications carriers and content providers, dependence on a limited number of key personnel, dependence on continued growth in the use of the Internet and its adoption as an advertising medium, security risks involved with Internet commerce and market acceptance and profitability of its products. F-8 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accompanying consolidated financial statements include the accounts of Cybear, Inc. and its subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles 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. PROPERTY AND EQUIPMENT, NET Property and equipment is recorded at cost less accumulated depreciation or amortization. Depreciation or amortization is provided using the straight-line method over the following estimated useful lives: Computer hardware and software 3 years Furniture and fixtures 5 years Leasehold improvements Lesser of useful life or term of lease Major renewals and betterments are capitalized, while maintenance and repairs are expensed as incurred. SOFTWARE LICENSE, NET In 1997, Cybear entered into an agreement with a third party to license the use of their software as a means to handle certain types of electronic data interchanges ("EDI") messages in the Company's Internet-based management applications. As of December 31, 1997, the Company had capitalized $160,000 under this agreement. In the fourth quarter of 1998, new EDI standards were approved for use in the medical systems community in the U.S. and are now released as open standards to the development community. The Company has now adopted these new standards to be compatible with the industry standards and has integrated them into its software development process. This has rendered obsolete the software licensed by the Company. Accordingly, the Company has written off its software license in its consolidated statement of operations for the year ended December 31, 1998. IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF The Company utilizes the provisions of Financial Accounting Standards Board ("FASB") Statement on Financial Accounting Standards ("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 circumstance indicate F-9 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 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 future cash flow value. Except for the write-off of its software license as noted above, such provisions had no impact on the Company's financial position or results of operations as of or for the period from February 5, 1997 (inception) to December 31, 1997 and for the year ended December 31, 1998. REVENUE RECOGNITION Software development service revenues which to date have been rendered to Andrx are recognized at the time the services are rendered. SOFTWARE DEVELOPMENT COSTS SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed", requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on the Company's product development process, technological feasibility is established upon completion of a working model. Once technological feasibility has been established, such costs are capitalized until the software has completed beta testing and is generally available. Software 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. As of December 31, 1998, the Company has achieved technical feasibility for SolutionsMD but not for its Internet-based management applications. Accordingly, the capitalized software development costs represent only costs associated with the development of the Company's SolutionsMD product. Software development costs for SolutionsMD were incurred with third-party vendors. The Company did not record any amortization of its capitalized software development costs in the year ended December 31, 1998 as it had not yet released SolutionsMD. START-UP COSTS All costs to organize the Company and start up its operations are expensed as incurred. 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 period from February 5, 1997 (inception) to December 31, 1997 and for the year ended December 31, 1998, 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 10). F-10 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 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". The Company's taxable results will be included in the consolidated income tax return of Andrx as long as Andrx owns at least 80% of the common stock of the Company (see Note 6). NET LOSS PER SHARE SFAS No. 128, "Earnings Per Share". SFAS No. 128 specifies the computation, presentation and disclosure requirements for earnings or loss per share. The provisions of SFAS No. 128 are effective for financial statements for periods ended after December 15, 1997. The Company has adopted the provisions of SFAS No. 128. For the period from February 5, 1997 (inception) to December 31, 1997, and for the year ended December 31, 1998, basic and diluted net loss per share is based on the weighted average number of shares of common stock outstanding. Since the effect of common stock equivalents was antidilutive, all such equivalents were excluded in diluted loss per share. FAIR VALUE OF FINANCIAL INSTRUMENTS As of December 31, 1997 and 1998, the carrying amounts of the receivable from Blue Lake Ltd., the accounts payable, accrued liabilities and the due to Andrx approximate fair value. In accordance with SFAS No. 107, "Disclosures about fair value of financial instruments", the fair value of the due to Andrx was estimated based on future cash flows discounted at current interest rates available to the Company for instruments with similar characteristics. COMPREHENSIVE INCOME SFAS No. 130, "Reporting Comprehensive Income", requires that all items that are required to be recognized under accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. The Company has adopted the provisions of SFAS No. 130 as of January 1, 1998. The adoption of the provisions of this standard had no impact on the Company's existing reporting disclosures. Cybear's comprehensive losses and net losses are the same for all periods presented. BUSINESS SEGMENTS SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", establishes standards for reporting information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company has adopted the provisions of SFAS No. 131 in the year ended December 31, 1998, as required. Currently, the Company does not believe it has any separately reportable business segments or other disclosure information required by the Statement. F-11 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 DERIVATIVES SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", 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 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 is effective for fiscal years beginning after June 15, 1999. A company may also implement the provision of SFAS No. 133 as of the beginning of any fiscal quarter after issuance. SFAS No. 133 cannot be applied retroactively. SFAS No. 133 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 has not yet quantified the impacts of adopting SFAS No. 133 on its financial statements and has not determined the timing of or method of adoption of SFAS No. 133. RECLASSIFICATION Certain prior year amounts have been reclassified to conform to the current year presentation. (3) RECEIVABLE FROM BLUE LAKE LTD. In September 1998, the Company entered into a lease agreement with Blue Lake Ltd. ("Blue Lake") to house its corporate headquarters and network systems (see Note 7). As part of the lease agreement, Blue Lake has agreed to pay the Company $406,667 ("Landlord Contribution") of the total costs incurred by the Company to improve the rented space prior to its occupancy. Payment of the Landlord Contribution is due 30 days from the date of receipt by Blue Lake of copy of an invoice and other support documents from the contractor. As of December 31, 1998, 90% of the leasehold improvements were completed and invoiced, and as such the Company recorded a receivable of $366,000 from Blue Lake. The Company has collected the receivable in 1999. (4) PROPERTY AND EQUIPMENT, NET Property and equipment is summarized as follows: DECEMBER 31, --------------------------- 1997 1998 ----------- ----------- Computer hardware and software $ 164,410 $ 1,806,831 Furniture and fixtures 73,408 241,911 Leasehold improvements 2,717 532,916 ----------- ----------- 240,535 2,581,658 Less: accumulated depreciation and amortization (51,470) (175,029) ----------- ----------- Property and equipment, net $ 189,065 $ 2,406,629 =========== =========== F-12 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 (5) ACCRUED LIABILITIES Accrued liabilities consist of the following: DECEMBER 31, --------------------- 1998 1997 -------- -------- Payroll and employee benefits $ 76,533 $116,782 Litigation settlement charge -- 125,000 Other -- 60,000 -------- -------- $ 76,533 $301,782 ======== ======== (6) INCOME TAXES The components of the income tax benefit are summarized as follows: DECEMBER 31, ----------------------- 1998 1997 -------- ---------- Current $ -- $1,900,000 Deferred -- -- -------- ---------- Total $ -- $1,900,000 ======== ========== The Company and Andrx have a tax allocation agreement that provides, among other things, for the allocation of federal income tax liabilities to the Company at the approximate amounts which would have been computed as if the Company had filed separate income tax returns. The tax benefit reflects the reimbursement from Andrx for the utilization of Cybear's tax attributes pursuant to the tax allocation agreement. 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, ------------------------ 1997 1998 --------- --------- Net operating loss carryforward $ 576,500 $ 324,989 Tax over book depreciation (2,597) (7,525) Operating reserves -- 24,704 Software license (50,180) -- --------- --------- 523,723 342,168 Valuation allowance (523,723) (342,168) --------- --------- Net $ -- $ -- ========= ========= As of December 31, 1998, the Company has a net operating loss carryforward in the amount of approximately $800,000 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. 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 F-13 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 significant shareholders over a three-year period in excess of 50%. (7) 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, 1998 are as follows: 1999 $ 608,000 2000 545,000 2001 450,000 2002 450,000 2003 313,000 ---------- $2,366,000 ========== In addition, as part of the Company's President's contract, effective September 15, 1998, Andrx has issued to the President 20,000 options to purchase common stock of Andrx, at its then market price, vesting in four annual increments of 5,000 shares on the anniversary of the date of grant and for payment of $50,000, a warrant to purchase 650,000 shares of common stock of the Company exercisable at its then market price of $3.00 per share, beginning on April 30, 1999 (the "Warrant Exercise Date"). The warrant expires seven years after the Warrant Exercise Date subject to contractual obligations with Andrx. As such transactions were effected at market prices, there is no impact on the Company's accompanying consolidated financial statements. PRODUCT LIABILITY Software products such as those to be offered by the Company frequently contain undetected errors or failures when first introduced or as new versions are released. Testing of the Company's products is particularly challenging because it is difficult to simulate the wide variety of computing environments in which the Company's potential customers may deploy these products. There can be no assurance that defects, errors or difficulties will not cause delays in product introductions, result in increased costs and diversion of development resources, require design modifications or decrease market acceptance or customer satisfaction with the Company's products. In addition, there can be no assurance that, despite testing by the Company and by potential customers, errors will not be found after commencement of commercial introduction, resulting in loss of or delay in market acceptance, which could have a material adverse effect upon the Company's business, operating results and financial condition. OPERATING LEASES In September 1998, Cybear entered into a lease with Blue Lake Ltd. (see Note 3) for 18,400 square feet of space in Boca Raton, Florida to house its corporate headquarters and network systems. In January 1999, the leased premises were enlarged to 21,648 square feet. The lease provides for an annual base rent of $271,000 excluding taxes, insurance, utilities and common area maintenance charges and has a five-year term commencing on January 1, 1999 with one five-year renewal option at market rates. 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 (see Note 8), for 4,000 square feet of office space in Ridgefield Park, New Jersey to house its business development and sales activities. The lease provides for $120,000 and $5,000 in annual base rent and electricity, respectively, and has a five-year term commencing on November 1, 1998. In addition, the Company agreed to pay a security deposit of $20,000. For the year ended December 31, 1998, the Company has recorded an expense of $20,834 relative to this lease which had not been paid as of December 31, 1998. In October 1998, the Company entered into a three year lease with Bell South Telecommunications, Inc. to provide business Internet service to the Company. This lease is effective January 1999 and provides for $159,000 in annual recurring charges. F-14 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 In addition, the Company leases various office equipment and telephone lines 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, 1998: 1999 $ 994,000 2000 1,004,000 2001 979,000 2002 566,000 2003 537,000 ------------ $ 4,080,000 ============ Rent expense amounted to $130,000 for the period from February 5, 1997 (inception) to December 31, 1997 and $145,000 for the year ended December 31, 1998. PREFERRED VENDOR AGREEMENTS In 1998, the Company entered into a three-year strategic alliance with The IPA Association of America ("TIPAAA"), the nation's leading trade association focused on physician independent practice associations whereby Cybear will become the preferred ISP and Internet business applications provider for TIPAAA. In consideration of its preferred vendor status, Cybear agreed to make to TIPAAA three $100,000 annual payments and to grant TIPAAA an option to purchase 100,000 shares of its common stock . The first 30,000 of such options have an exercise price of $3.00 per share and have a seven (7) year term and shall vest at the rate of one share for every two TIPAAA physicians that become and remain a Cybear user for a minimum of three months. In the event, that all such options are not vested by the expiration date of the agreement, such options shall vest in 2003. After such 30,000 have vested, the remaining 70,000 options will vest at the rate of one share for every two TIPAAA physicians that become and remain a Cybear user for a minimum of three months during the term of this agreement. These 70,000 options will have an exercise price equal to the market price of Cybear common stock on the date such options vest and shall have a five (5) year term from the date of grant. The Company will record charges to earnings for the options that vest. In the year ended December 31, 1998, the Company has paid and recorded the annual fee of $100,000 to prepaid expenses. The Company will start amortizing the annual fees over the term of its contract with TIPAAA when its SolutionsMD product is launched. In February 1999, the Company entered into a three-year agreement with PhyMatrix Corporation ("PhyMatrix") whereby Cybear will receive preferential access to all PhyMatrix physicians to use Cybear's ISP and applications. PhyMatrix will use Cybear's applications as the means of communicating with its physician group practices and independent practice associations ("PhyMatrix Business Partners") and PhyMatrix will market Cybear's ISP and its applications for business development purposes. In consideration of its preferred vendor status, Cybear agreed to, among other things, to consult with and provide advice to PhyMatrix concerning hardware and software that may be required by PhyMatrix to electronically communicate with the PhyMatrix Business Partners, to create, when commercially practicable, applications and efficiencies that are of interest to PhyMatrix, to advance to PhyMatrix the funds for hook-ups or dial-up modems that Cybear believes to be reasonably necessary to run Cybear's applications and establish electronic communications between the PhyMatrix Business Partners, and after recouping any advance noted above, pay to PhyMatrix, on a quarterly basis, 50% of the net revenues that Cybear derives from PhyMatrix directly or from the PhyMatrix Business Partners F-15 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 or from any business developed through PhyMatrix. Cybear's net revenues are defined as the total amount collected by Cybear from PhyMatrix or PhyMatrix Business Partners, before interest and taxes attributable thereto. LICENSE AGREEMENT In October 1998, the Company entered into a three-year license agreement effective January 1999, with Medimedia USA, Inc. ("MMUSA") whereby MMUSA granted a non exclusive license to use the InfoScan formulary database ("Licensed Product") and related documentation for the lookup of drug formulary statuses by the Company and its customers. The Company is permitted to use the Licensed Product internally and to integrate it into its software products. In return, the Company has agreed to pay MMUSA an annual database access fee of $20,000 and a fee per prescription equal to 10% of the Company's receipts per script from licensees, users, subscribers or retail pharmacies connecting to Cybear client installations. Total fees paid by Cybear shall not exceed $150,000 in any one year. In the year ended December 31, 1998, the Company has paid and recorded the annual database access fee of $20,000 to prepaid expenses. The annual fee will be amortized in 1999. (8) RELATED PARTY TRANSACTIONS The Company and Andrx have a corporate services agreement whereby Andrx provides the Company with various services of its management such as executive management, accounting and finance, legal, payroll and human resources. For the period from February 5, 1997 (inception) to December 31, 1997 and for the year ended December 31, 1998, 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 $110,000 for the period from February 5, 1997 (inception) to December 31, 1997 and $120,000 for the year ended December 31, 1998. The Company and Andrx have a tax allocation agreement that provides, among other things, for the allocation of federal income tax liabilities to the Company at the approximate amounts which would have been computed as if the Company had filed separate income tax returns. The Company recorded a tax benefit of $1,900,000 for the year ended December 31, 1998 reflecting the reimbursement from Andrx for the utilization of Cybear's tax attributes pursuant to the tax allocation agreement (see Note 6). Due to Andrx in the accompanying balance sheets represents advances from Andrx to fund the Company's operations and the related accrued interest. Such advances bear interest at prime (7.75% at December 31, 1998) plus 1/2%. On November 20, 1998, upon consummation of the merger with 1997 Corp., the then outstanding Due to Andrx of $3,012,452 was converted into additional paid-in capital to the Company. In September 1998, Andrx and Cybear entered into a credit agreement with respect to Andrx's funding obligations to Cybear. The credit agreement provides that Andrx will continue to fund Cybear's operations until Cybear is in a position to raise at least $4,000,000 on its own (whether through debt or equity) or 12 months from the consummation of the merger with 1997 Corp., whichever date is earlier and that Andrx will make at least $3,000,000 available to Cybear on Cybear's demand. The Company recorded $28,220 in interest expense on the Due to Andrx for the period from February 5, 1997 (inception) to December 31, 1997 and $210,441 for the year ended December 31, 1998. As of December 31, 1998, the Company has not paid any interest expense on the Due to Andrx. F-16 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 From February 5, 1997 (inception) to December 31, 1997, the Company provided Andrx with software development services. The Company charged Andrx based on mutually agreed upon allocation methods. Software development services charged to Andrx were $95,927 for the period from February 5, 1997 (inception) to December 31, 1997. The Company did not provide Andrx with software development services for the year ended December 31, 1998. In February 1997, Cybear entered into an agreement with Group One Enterprises, Inc. ("Group One"), a minority shareholder of the Company, whereby Group One agreed to provide certain consulting services to the Company. The agreement with Group One was terminated in 1997. Costs incurred for services provided by Group One were $68,000 for the period from February 5, 1997 (inception) to December 31, 1997. In September 1998, Andrx agreed to sell to the Company's chairman 333,333 shares of Cybear common stock for $1 million or at its then current market price of $3.00 per share. Andrx will use such proceeds to fund its loan commitment to Cybear. As of December 31, 1998, Andrx had sold 233,333 shares to the Company's chairman for $700,000. In January 1999, Andrx sold the remaining 100,000 under this agreement to the Company's chairman for $300,000. As such transactions were effected at market prices, there is no impact on the Company's accompanying consolidated financial statements. (9) CONVERTIBLE PREFERRED STOCK In February 1997, the Company issued 130,000 shares of convertible preferred stock to Group One for a promissory note of $30,000. The fair value of the convertible preferred stock was $0.23 per share as determined by the Company's Board of Directors. As of December 31, 1997, the promissory note was paid in full. The preferred stock issued had the same voting and dividend rights as the common stock but had a liquidation preference and was convertible into common stock of the Company on a one-for-one basis if the consulting agreement with Group One was terminated before an initial public offering. The agreement with Group One was terminated in 1997 and the 130,000 shares of preferred stock were converted into 130,000 shares of common stock. (10) STOCK INCENTIVE PLAN The Company has reserved 1,000,000 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 January 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 800,000 to 1,800,000. 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. Had compensation cost for the Company's stock options been based on fair value at the grant dates consistent with the methodologies of SFAS No. 123, the F-17 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 Company's pro forma basic and diluted net loss and basic and diluted net loss per share would have been $1,590,717 and $0.12 for the period from February 5, 1997 (inception) to December 31, 1997 and $2,581,962 and $0.20 for the year ended December 31, 1998, respectively. A summary of the Plan's activity is as follows:
OUTSTANDING EXERCISABLE ---------------------------------------------- ------------------- NUMBER OF EXERCISE PRICE PER SHARE WTD. AVG. SHARES ------------------------------- EXERCISE UNDER OPTION LOW HIGH WTD. AVG. SHARES PRICE ------------ ------ ----- --------- ------ --------- 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 =======
OPTIONS OUTSTANDING AT EXERCISABLE OPTIONS AT DECEMBER 31, 1998 DECEMBER 31, 1998 - --------------------------------------------------------------- ------------------------ RANGE OF WEIGHTED AVG. WEIGHTED AVG. WEIGHTED AVG. EXERCISE REMAINING LIFE EXERCISE EXERCISE PRICES SHARES (YEARS) PRICE SHARES PRICE - ------------- ------- -------------- ------------- --------- ------------- $1.00 - $1.00 280,000 8.2 1.0 70,000 $1.00 $2.00 - $2.00 130,500 9.4 2.0 -- -- $3.00 - $3.00 574,583 9.8 3.0 -- -- ------- ------ 985,083 9.3 2.3 70,000 $1.00 ======= ======
The range of weighted average fair market value per share as of the grant date was $0.70 for the stock options granted during the period from February 5, 1997 (inception) to December 31, 1997 and $1.50 to $2.23 for the stock options granted during the year ended December 31, 1998. The fair market value of each option grant was estimated using the Black-Scholes option pricing model with the following assumptions: FOR THE PERIOD FROM FEBRUARY 5, 1997 (INCEPTION) TO FOR THE YEAR ENDED DECEMBER 31, 1997 DECEMBER 31, 1998 ----------------- ----------------- Risk-free interest rate 5.3% 4.8% Average life of options (years) 6.0 4.5 Average volatility 75% 85% Dividend yield -- -- F-18 CYBEAR, INC. AND SUBSIDIARY (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 AND 1998 (11) LITIGATION On March 18, 1998, Andrx received a letter from counsel for Medix Resources, Inc. ("Medix") and its subsidiary, Cymedix Lynx Corporation ("Cymedix") alleging the theft and unlawful appropriation by Andrx, the Company, and certain directors, officers and employees of the Company and Andrx of certain computer medical software and internet medical communications technology allegedly owned by Cymedix. The letter demanded trebled damages totaling $396.6 million pursuant to the civil theft provisions of Florida law, including Florida's Racketeer Influenced and Corrupt Organization Act and certain other provisions of federal and state law. On March 23, 1998, the Company and Andrx filed a complaint against Medix and Cymedix in Broward County, Florida for libel and slander arising from the improper public dissemination of the contents of the aforesaid demand letter. On June 2, 1998, Medix, on behalf of Cymedix, filed a complaint against the Company, Andrx and certain of their directors, officers and employees in Hillsborough County, Florida making the same allegations as were reflected in the aforesaid demand letter. On December 22, 1998, the Medix complaint was provisionally dismissed and transferred to Broward County Florida by the Hillsborough County Court. In February 1999, this matter was settled, with all of the parties respectively releasing the others from any liability, through the payment to Medix of $125,000 which was accrued in the accompanying consolidated financial statements for the year ended December 31, 1998. From time to time, the Company may be involved in litigation relating to claims arising out of its operations in the normal course of business. The Company is not currently a party to any other legal proceeding or aware of any other claim, the adverse outcome of which, individually or in the aggregate, could reasonably be expected to have a material adverse effect on the Company's business, operating results and financial condition. (12) EVENT SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED) In March 1999, the Company announced that it intends to file a registration statement for a public offering of its common stock. Cybear expects to complete such offering during the second quarter of 1999. No assurance can be given that the registration statement will be filed or that, if filed, the offering will be consummated. F-19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The directors and executive officers of Cybear are set forth below. All directors hold office for one year or until their successors have been elected and qualified. Vacancies in the existing Board are filled by majority vote of the remaining directors. NAME AGE POSITION(S) HELD - ---- --- ---------------- John H. Klein 52 Chairman and Director Edward E. Goldman, M.D. 53 President, Chief Executive Officer and Director Debra S. Richman 40 Executive Vice President-Business Development Scott Lodin 42 Secretary and Director Alan P. Cohen 43 Director Joel L. Stocker 51 Vice President for Legal Affairs JOHN H. KLEIN became the Chairman and a director of Cybear on September 1, 1998. Mr. Klein has been a director of Hackensack University Medical Center in New Jersey since 1997, and became a director of Sunbeam Corporation in February 1999. Mr. Klein was the Chief Executive Officer, Chairman of the Board and a director of MIM Corporation, a publicly traded pharmacy management company, from May 1996 to May 1998. From 1989 to 1994, Mr. Klein served as President, Chief Executive Officer, a director and a member of the Executive Committee of the Board of Directors of Zenith Laboratories, Inc. ("Zenith"), a manufacturer of multi-source generic pharmaceutical drugs, which was acquired by IVAX Corporation ("IVAX"), a major multi-source generic pharmaceutical manufacturer and marketer. From January 1995 to January 1996, Mr. Klein was a member of the Executive Committee of IVAX and was President of IVAX's North American Multi-Source Pharmaceutical Group. -28- EDWARD E. GOLDMAN, M.D. became the President and Chief Executive Officer of Cybear on September 1, 1998. From October 1985, he had served as founding partner and executive officer of PhyMatrix Corporation, a publicly traded physician practice management company, where he was Executive Vice President of Physician Development and Chief Medical Officer. From February 1983 to September 1994, he served as Chairman of Pal-Med Health Services, a multi-divisional healthcare company engaged in practice management, risk contracting and the operation of imaging centers, ambulatory surgeries and ancillary service facilities. DEBRA S. RICHMAN joined Cybear as Executive Vice President--Business Development in August 1998. From 1996 to 1998, Ms. Richman was the Executive Vice President/Marketing for PhyMatrix. From 1994 to 1996 she was the Executive Vice President/Chief Operating Officer of CompreMedx Medical Management, Inc., a start-up physician management company. From 1989 to 1994 she had various positions with Caremark International (previously Baxter International), including as Vice President, Physician Networks and Vice President, Business Development, Orthopedic Services. Ms. Richman is also a Vice President and director of TIPAAA, which has an agreement with Cybear, as disclosed under "Business--Marketing." SCOTT LODIN has been Secretary and a director of Cybear since February 5, 1997 (inception). He joined Andrx in January 1994 and is its Vice President, General Counsel and Secretary. Prior to joining Andrx, Mr. Lodin was Special Counsel to Hughes, Hubbard & Reed (and a predecessor law firm) in Miami, Florida, where he practiced primarily in the areas of corporate and commercial law for over 13 years. ALAN P. COHEN was the Chairman and a director of Cybear from February 5, 1997 (inception) to August 31, 1998, when he resigned as Chairman upon John Klein's assuming such position. He remains a director of Cybear. Mr. Cohen has been the Chairman of the Board, Chief Executive Officer and a director of Andrx, which he founded in August 1992. He is a graduate of the University of Florida and is a registered pharmacist. In 1984, Mr. Cohen founded Best Generics, Inc., a generic drug distribution firm ("Best"), which was sold to IVAX Corporation ("IVAX") in 1988. Mr. Cohen served as President of Best from April 1989 until June 1990. Alan P. Cohen and certain members of his family controlled Corner Drugstore, Inc., a privately-held retail drugstore chain. Corner Drugstore, Inc. filed for reorganization under Chapter 11 of the United States Bankruptcy Code in December 1994. JOEL L. STOCKER became Vice President for Legal Affairs in February of 1999. Mr. Stocker's career has focused on the representation of healthcare providers and insurers. Mr. Stocker founded and chaired the Health Law Department of Greenberg Traurig, P.A. At Greenberg -29- Traurig, Mr. Stocker co-chaired the firm's technology committee. Mr. Stocker was a principal shareholder at Greenberg and a member of the firm for 10 years. Prior to that, he managed Wood, Lucksinger and Epstein's Miami, Florida health law practice. Mr. Stocker is a graduate of the University of Michigan Law School. Cybear is currently searching for a Chief Financial Officer. -30- ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth information concerning compensation for 1998 received by the Chief Executive Officer (the "CEO"). No executive officer of Cybear received compensation in 1997 and 1998 in excess of $100,000. Mr. Cohen and Mr. Lodin are employees of Andrx and were compensated by Andrx. ANNUAL COMPENSATION ------------------- FISCAL OTHER ANNUAL NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION - --------------------------- ---- ------ ------ ------------ Edward E. Goldman, M.D. 1998 $72,115 -- (1) President and CEO (1) Dr. Goldman joined Cybear in September 1998. Pursuant to his employment agreement, Andrx has issued to Edward Goldman, upon payment of $50,000, a warrant to purchase 650,000 shares Cybear held by Andrx common stock at its then market price of $3.00 per share and stock options for 20,000 shares of common stock of Andrx having an exercise price per share of the fair market value of Andrx common stock at the close of business on the date of grant. See "Employment Agreements." STOCK OPTION GRANTS IN 1998 No grants of stock options were made to the CEO during 1998. COMPENSATION OF DIRECTORS Non-employee directors of Cybear do not receive cash compensation for their services. Messrs. Cohen and Lodin are employees of Andrx and were compensated by Andrx. Messrs. Klein and Goldman are employees of Cybear. EMPLOYMENT AGREEMENTS Cybear entered into a five-year employment agreement effective as of September 15, 1998 with Edward Goldman, M.D. pursuant to which he serves as Cybear's President and Chief Executive Officer. The agreement provides for an annual salary of $250,000 during the first two years and $300,000 for the remaining three years. The agreement may be renewed for additional two-year periods upon the agreement of the parties. The agreement also provides that Dr. Goldman will continue to receive his salary until the expiration of the term of the employment agreement if his employment is terminated by Cybear for any reason other than death or "good cause" or by Dr. Goldman by reason of a material breach of the agreement by Cybear. In the event of such a termination, Dr. Goldman is entitled to -31- receive full compensation to which he would otherwise be entitled under the agreement as if he had not so terminated his employment and was continuing to serve as an employee thereunder for the full term of the agreement, payable in a single lump sum distribution in cash or in equivalent marketable securities of Andrx (without any present value adjustment) on the date of such termination. In the event Dr. Goldman's employment with Cybear is terminated within six months following a "Change in Control" of Cybear, then Cybear is obligated to pay him on the date of such termination a single lump sum distribution (without any present value adjustment) equal to his salary for the remaining term of the agreement. Notwithstanding the foregoing, Dr. Goldman's employment will not be deemed terminated if, in lieu of his position with Cybear, Andrx or any other entity owned or controlled by Andrx offers him a replacement position, where he will perform similar executive duties and will receive a compensation package at least equal to the one set forth in the agreement; provided, however, that he is not required be appointed as president and chief executive officer of any entity, but rather that he shall continue to perform employment duties generally performed by senior management personnel of an entity in the healthcare industry. In recognition of the potential value of Dr. Goldman to Cybear and to induce him to forego other employment opportunities, Andrx agreed to issue to Dr. Goldman upon payment of $50,000, a warrant to purchase 650,000 shares of Cybear common stock held by Andrx (the "Warrant") at its then market price of $3.00 per share. In addition, Andrx has issued to Dr. Goldman stock options for 20,000 shares of Andrx common stock having an exercise price, per share, of the fair market value of Andrx stock at the close of business on the date of grant. As such transactions were effected at market prices, there is no impact on Cybear's consolidated financial statements. The stock to be issued pursuant to the exercise of the Warrant includes piggyback registration rights. The Warrant is exercisable commencing on April 30, 1999 (the "Warrant Exercise Date"). The Warrant shall be exercisable for a period of seven years after the Warrant Exercise Date, subject to contractual obligations with Andrx. Cybear has entered into an employment agreement with Debra Richman, Cybear's Executive Vice President--Business Development. The agreement provides for a two-year term, a base salary of $160,000 and $80,000 in deferred compensation that is payable in eight $10,000 quarterly installments. Ms. Richman was also granted options to purchase 100,000 shares of Cybear's common stock at its then market price of $3.00 per share under Cybear's 1997 Stock Option Plan. The options will vest and become exercisable in two annual increments, as follows: two increments of 37,500 shares each will vest on the first and second anniversary of the agreement and the remaining 25,000 options will vest and become exercisable only if the agreement is renewed and then at the end of the first calendar year of a renewal period. In the event that Ms. Richman's employment by Cybear is terminated by Cybear prior to the expiration of the initial two-year term for any reason that does not constitute cause (as defined in the agreement), she will be entitled to receive the balance of any unpaid base compensation for the remaining portion of the initial term and any remaining unpaid portion of the deferred compensation, as well as any accrued entitlements, including any unused vacation and -32- unreimbursed business expenses. In addition in the event of such termination of employment by Cybear for other than cause during the first year of her employment, options to purchase 50,000 shares shall accelerate and become vested, and, if in the event of such termination during the second year of employment, options to purchase 37,500 shares shall accelerate and become vested. Messrs. Cohen and Lodin are employees of Andrx and do not have employment agreements with Cybear. Cybear does not have any agreements, plans or understandings to pay any cash compensation to Messrs. Cohen and Lodin for serving as directors or officers of Cybear. Mr. Lodin spends approximately 20% of his time on Cybear matters. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION Cybear had no compensation committee during 1998. Messrs. Cohen and Lodin participated in deliberations of Cybear's Board of Directors concerning compensation of executive officers. -33- ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of Cybear's common stock as of March 26, 1999, by (i) each person owning more than 5% of such common stock, (ii) each director and executive officer; and (iii) by all directors and executive officers as a group:
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF CLASS BENEFICIAL OWNER(1), (2) BENEFICIAL OWNERSHIP OUTSTANDING - ------------------------ -------------------- ----------- Andrx Corporation 12,536,667 94.5% John Klein 333,333 2.5% Edward E. Goldman, M.D. - - Debra Richman - - Scott Lodin 12,536,667(3) 94.5% Alan P. Cohen 12,536,667(3) 94.5% Joel L. Stocker - - All directors and executive officers as a group (six persons) 12,870,000 97.0% - --------------------------------------- (1) Except as indicated, the address of each person named in the table is c/o Cybear, Inc., 5000 Blue Lake Drive, Suite 200, Boca Raton, Florida 33431. (2) Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of Common Stock listed, which include shares of common stock that such persons have the right to acquire a beneficial interest within 60 days from the date of this Report. (3) Represents shares owned indirectly by Andrx Corporation.
-34- ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Messrs. Cohen and Lodin are executive officers of Andrx and none of such persons are required to commit his full time to the affairs of Cybear and it is likely that such persons will not devote a substantial amount of time to the affairs of Cybear. Such personnel may have conflicts of interest in allocating management time among various business activities. Since its inception in February 1997, Andrx has funded substantially all of Cybear's operations through loans or purchases of shares of Cybear common stock. As of December 31, 1998, such funding including interest amounted to $5,857,179. Andrx and Cybear have entered into a corporate services agreement pursuant to which Andrx provides certain legal, financial and administrative services to Cybear in exchange for $120,000 per annum. Andrx and Cybear have also entered into a tax allocation agreement pursuant to which Cybear will be responsible for its tax liabilities as if it had filed separate income tax returns. Cybear recorded a tax benefit of $1,900,000 for the year ended December 31, 1998 reflecting the reimbursement from Andrx for the utilization of Cybear's tax attributes pursuant to the tax allocation agreement. In September 1998, Andrx agreed to sell John Klein, the Chairman of Cybear, 333,333 shares of Cybear common stock for $1,000,000 or its then market price of $3.00 per share. As of March 15, 1999, Andrx had sold the 333,333 shares of Cybear common stock for $1,000,000. Andrx will use such proceeds to fund its loan commitment to Cybear. As such transactions were effected at market prices, there is no impact on Cybear's consolidated financial statements. In September 1998, Andrx agreed to issue to Edward Goldman, M.D., Cybear's President, upon payment of $50,000, a warrant to purchase 650,000 shares of Cybear common stock held by Andrx (the "Warrant") at its then market price of $3.00 per share. In addition, Andrx issued to Dr. Goldman stock options for 20,000 shares of Andrx common stock having an exercise price, per share, of the fair market value of Andrx stock at the close of business on the date of grant. The stock to be issued pursuant to the exercise of the Warrant includes piggyback registration rights. The Warrant is exercisable commencing on April 30, 1999 (the "Warrant Exercise Date"). The Warrant shall be exercisable for a period of seven years after the Warrant Exercise Date, subject to contractual obligations with Andrx. As such transactions were effected at market prices, there is no impact on Cybear's consolidated financial statements. In November, 1998, Cybear entered into a five year sublease agreement with Strategy Business and Technology Solutions, LLC (the "Lessor"), a company owned by John Klein, whereby Cybear leases approximately 4,000 square feet of office space in Ridgefield Park, New Jersey, to house its business development and sales activities. Cybear agreed to pay the Lessor $10,000 and $417 per month in base rent and electricity, respectively. In addition, Cybear agreed to pay a security deposit of $20,000. For the year ended December 31, 1998, Cybear has recorded an expense of $20,834 relative to this lease which had not been paid as of December 31, 1998. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for a description of a credit agreement and other funding obligations of Andrx to Cybear. -35- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Documents filed as part of this Report (1) Financial Statements. See the Index to Consolidated Financial Statements contained in Item 8 of this Report for a description of Cybear's Consolidated Financial Statements filed with this Report. (2) Consolidated Financial Statement Schedules All schedules for which provision is made in applicable regulations of the Commission are not required under the related instructions, are inapplicable or the required information has been included in Cybear's consolidated financial statements and therefore such schedules have been omitted. (3) Exhibits EXHIBIT DESCRIPTION 3.1 Registrant's Certificate of Incorporation, as amended 3.2 Registrant's Bylaws (1) 10.1 Stock Option Plan* 10.2 Employment Agreement between the Registrant and Edward Goldman, M.D.* 10.3 Employment Agreement between the Registrant and Debra Richman* 10.4 Form of Indemnification Agreement between the Registrant and each of its directors and executive officers* 10.5 Corporate Services Agreement between the Registrant and Andrx Corporation(1) 10.6 Credit Agreement between Andrx Corporation and the Registrant(1) 10.7 Tax Allocation Agreement between Andrx Corporation and the Registrant 10.8 Lease Agreement relating to premises located at 5000 Blue Lake Dr., Suite 200, Boca Raton, Florida 10.9 First Amendment to Lease Agreement relating to premises located at 5000 Blue Lake Dr., Suite 200, Boca Raton, Florida 10.10 Lease Agreement relating to premises located at 105 Challeger Rd., Ridgefield Park, New Jersey 27.1 Financial Data Schedule (SEC use only) - --------------------------- * Management Compensation Plan or Arrangement. (1) Previously filed as an Exhibit to the Registrant's Registration Statement on Form SB-2, including the post-effective amendments thereto (File No. 333-24671) and incorporated herein by reference. -36- (b) Reports On Form 8-K On December 7, 1998, the Registrant filed a Current Report of 8-K to disclose the acquisition by merger of Cybear, Inc., a Florida corporation and certain related matters. (c) Item 601 Exhibits The exhibits required by Item 601 of Regulation S-K are set forth in (a)(3) above. (d) Financial Statement Schedules The financial statement schedules required by Regulation S-K are set forth in (a)(2) above. -37- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CYBEAR, INC. By: /s/ EDWARD E. GOLDMAN ---------------------------------------------- Edward E. Goldman, M.D. President, Chief Executive Officer and Director Date: March 29, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- /s/ JOHN H. KLEIN Chairman and Director March 29, 1999 - --------------------- John H. Klein /s/ EDWARD E. GOLDMAN President, Chief Executive Officer and Director March 29, 1999 - --------------------- (Principal Executive and Financial Officer) Edward E. Goldman, M.D. /s/ CLAUDE BERTRAND Controller March 29, 1999 - --------------------- (Principal Accounting Officer) Claude Bertrand /s/ DEBRA RICHMAN Executive Vice President-Business March 29, 1999 - --------------------- Development Debra Richman /s/ ALAN COHEN Director March 29, 1999 - --------------------- Alan Cohen /s/ SCOTT LODIN Vice President, General Counsel, Secretary March 29, 1999 - --------------------- and Director Scott Lodin
-38- EXHIBIT INDEX EXHIBIT DESCRIPTION - ------- ----------- 3.1 Registrant's Certificate of Incorporation, as amended 10.1 Stock Option Plan* 10.2 Employment Agreement between the Registrant and Edward Goldman* 10.3 Employment Agreement between the Registrant and Debra Richman* 10.4 Form of Indemnification Agreement between the Registrant and each of its directors and executive officers* 10.7 Tax Allocation Agreement between Andrx Corporation and the Registrant 10.8 Lease Agreement relating to premises located at 5000 Blue Lake Dr., Suite 200, Boca Raton, Florida 10.9 First Amendment to Lease Agreement relating to premises located at 5000 Blue Lake Dr., Suite 200, Boca Raton, Florida 10.10 Lease Agreement relating to premises located at 105 Challeger Rd., Ridgefield Park, New Jersey 27.1 Financial Data Schedule (SEC use only) - --------------------------- * Management Compensation Plan or Arrangement. EX-3.1 2 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF 1997 CORP. The undersigned, being the incorporator of 1997 Corp. (the "Corporation") hereby certifies as follows: FIRST: The name of the Corporation is 1997 Corp. SECOND: The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of New Castle, Delaware 19801. The registered agent in change thereof is The Corporation Trust Company. THIRD: 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 Delaware. FOURTH: The total number of shares that this Corporation shall have authority to issue is (i) 10,000,000 shares of Common Stock, $.001 par value per share ("Common Stock"), and (ii) 2,000,000 shares of Preferred Stock, $.01 par value per share ("Preferred Stock"). There shall be no preemptive rights with respect to the Corporation's shares of stock. The following is a further statement of the designations and the powers, preferences and rights, and the relative participating, optional or other special rights, and the qualifications, limitations and restrictions granted to or imposed upon the respective slasses of shares of capital stock of the Corporation or the holders thereof. COMMON STOCK 1. GENERAL. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series. 2. VOTING. The holders of Common Stock are entitled to one 1 vote for each share held at all meetings of stockholders (and written actions in lieu of meetings). There shall be no cumulative voting. 3. DIVIDENDS. Dividends may be declared and paid on the Common Stock from funds lawfully available therefore as and when determined by the Board of Directors and subject to any preferential dividend rights or restrictions of any then outstanding Preferred Stock. 4. LIQUIDATION. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will be entitled to receive all assets of the Corporation available for distribution to its stockholders after payment of creditors and subject to any preferential rights of any then outstanding Preferred Stock. PREFERRED STOCK. Preferred Stock may be issued from time to time in one or more series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided herein or by law. Different series of Preferred Stock shall not be construed to constitute different classes of shares for the purposes of voting by classes unless expressly provided for herein or by law. Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in connection with the creation of any such series, by resolution or resolutions providing for the issuance of the shares thereof, to determine and fix such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full extent now or hereafter permitted by the General Corporation law of the State of Delaware. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of preferred Stock may provide that such series shall be superior or rank equally or be junior to the Preferred Stock of any other series to the extent permitted by law. FIFTH: The Corporation is to have perpetual existence. 2 SIXTH: The number of directors which shall constitute the entire Board of Directors shall be as set forth in the by-laws of the Corporation. The board of directors is expressly authoized to adopt, amnend or repeal the by-laws of the Corporation. SEVENTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockhoder thereof or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Cor[poration, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctined by the court to which said application has been made, be binding on all the creditors of stockholders of this Corporation, as the case may be, and also on this Corportion. EIGHTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. NINTH: No director of the Corporation shall be 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 General Corporation law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. 3 directors, agents and such other parties to the full extent permitted by Delaware law. ELEVENTH: (i) Any vacancies in the Board of Directors for any reason and any newly created directorships resulting by reason of any increase in the number of directors may be filled only by the Board of Directors (unless there are no reamining directors), acting by a majority of the remaining directors then in office, although less than a quorum, and any directors so chosen shall hold office until the next election of directors and until their successors are elected and qualified. (ii) any director, or the entire Board of Directors, may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 75% of the voting power of all the shares of capital stock of the Corporation then entitled to vote generally in the election of directors, voting together as a single class. TWELFTH: Special meetings of stockholders of the Corporation may be called only by (i) the Board of Directors pursuant to a resolution adopted by a majority of the entire Board of Directors, either upon motion of a director or upon written request of the holders of at least 50% of the voting pwoer of all the shares of capital stock of the Corporation then entitled to vote generally in the election of directors, voting together as a single class, or (ii) the President of the Corporation. THIRTEENTH: In addition to any requirements of the General Corporation Law of Delaware (and notwithstanding the fact that a lesser percentage may be specified by the General Corporation Law of Delaware), the affirmative vote of the holders of at least 75% of the voting power of all of the shares of capital stock of the Corporation then entitled to vote generally in the election of directors, voting together as a single class, shall be required for the stockholders of the Corporation to amend, alter, change, adopt or repeal Articles Eleventh, Twelfth or Thirteenth hereof. FOURTEENTH: The name of the incorporator is Richard L. Campbell, whose address is 250 Park Avenue, 12th Floor, New York, New York 10177. IN WITNESS WHEREOF: I hereunto set my hand this 12th day of March, 1997 and I affirm that the foregoing certificate is my act and deed and that the facts stated therein are true. /s/ RICHARD L. CAMPBELL --------------------------- Richard L. Campbell, Incorporator CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF 1997 CORP. ----------- PURSUANT TO SECTION 242 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE ----------- 1997 CORP., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies as follows: FIRST: The name of the corporation (which is hereinafter referred to as the "Corporation") is 1997 CORP. SECOND: The original Certificate of Incorporation was filed with the Secretary of State of Delaware on March 17, 1997. THIRD: The Certificate of Incorporation of the Corporation, is hereby amended by deleting Article First and the first paragraph of Article Fourth in their entirety and substituting in lieu thereof the following: "FIRST: The name of the corporation is "CyBear Inc."; and "FOURTH: The authorized capital stock of the Corporation shall consist of (i) 25,000,000 shares of common stock, $.001 par value per share ("Common Stock") and (ii) 2,000,000 shares of preferred stock, $.01 par value per share ("Preferred Stock"). IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by its President this 19th day of November 1998. 1997 CORP By /s/ Judith Haselton, President -------------------------------- Judith Haselton, President EX-10.1 3 EXHIBIT 10.1 CYBEAR, INC. 1997 STOCK OPTION PLAN (Adopted by 1997 Corp., a Delaware corporation, now named Cybear, Inc.) 1. PURPOSE. The purpose of the CyBear, Inc. 1997 Stock Option Plan (the "Plan") is to advance the interests of CyBear, Inc., 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 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 thirty percent (30%) 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 thirty percent (30%) 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 the Company's 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 -2- 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 immediately preceding such date, unless the Committee in its sole discretion shall determine otherwise in a fair and uniform 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, 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, (ii) if the Common Stock is quoted on the National Association of Securities Dealers Automated Quotations System ("NASDAQ"), or any similar system of automated dissemination of quotations of securities prices in common use, the mean between the closing high bid and low asked quotations for such day of the Common Stock on such system, or (iii) if neither clause (i) nor (ii) is 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 10 preceding days. If the information set forth in clauses (i) through (iii) above is unavailable or inapplicable to the Company (E.G., if the Company's Common Stock is not then publicly traded or quoted), then the "Fair Market Value" of a Share shall be the fair market value (I.E., the price at which a willing seller would sell a Share to a willing buyer when neither is acting under compulsion and when both have reasonable knowledge of all relevant facts) of a share of the Common Stock on the business day immediately preceding such date as the Committee in its sole and absolute discretion shall determine in a fair and uniform manner. (k) "Incentive Stock Option" shall mean an incentive stock option as defined in Section 422 of the Code. (l) "Non-Employee Directors" shall have the meaning set forth in Rule 16b-3(b)(3)(i) (17 C.F.R. /section/ 240.16(b)-3(b)(3)(i)) under the Securities Exchange Act of 1934, as amended. (m) "Non-Statutory Stock Option" or "Nonqualified Stock Option" shall mean an Option which is not an Incentive Stock Option. -3- (n) "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. ?229.401(b)) shall be only such person designated as an "Officer" pursuant to the foregoing provisions of this paragraph. (o) "Option" (when capitalized) shall mean any stock option granted under this Plan. (p) "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. (q) "Plan" shall mean this 1997 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. (r) "Securities Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. (s) "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. (t) "Subsidiary" shall mean any corporation (other than the Company) in any unbroken chain of corporations beginning with the Company if, at the time of the granting of the Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. 3. SHARES AND OPTIONS. Subject to adjustment in accordance with Section 10 hereof, the Company may grant to Optionees from time to time Options to purchase an aggregate of up to One Million (1,000,000) Shares from Shares held in the Company's treasury or from authorized and unissued Shares. 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 -4- 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 10 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 Subsidiaries. Neither this Plan nor any Option granted under this Plan shall -5- 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 -6- 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 an individual Option agreement evidencing such Option, except as otherwise provided in Section 5(b) or this Section 8. (a) The expiration date(s) of an Option shall be determined by the Committee at the time of grant, but in no event shall an Option be exercisable after the expiration of 10 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 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; (iii) one year after the date on which the Optionee's employment is terminated by reason of a mental or physical disability (within the meaning of Code Section 22(e)) as determined by a medical doctor satisfactory to the Committee; or -7- (iv) 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) 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. (c) 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 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. -8- (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. No Option granted hereunder shall be sold, pledged, assigned, hypothecated, disposed or otherwise transferred by the Optionee other than by will or the laws of descent and distribution, unless otherwise authorized by the Board, and no Option shall be exercisable during the Optionee's lifetime by any person other than the Optionee. 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) (A) 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 -9- (B) 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 -10- 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 10 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. 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. 17 TERMINATION DATE. This Plan shall terminate ten years after the date of adoption by the Board of Directors. -11- EX-10.2 4 EXHIBIT 10.2 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement"), dated as of August 24, 1998, is hereby made between Cybear, Inc. ("Employer"), a subsidiary of Andrx Corporation ("Andrx"), and Edward Goldman, M.D., an individual ("Employee"). W I T N E S S E T H WHEREAS, Employer is in the business of developing information technologies and systems for use in the healthcare industry; and WHEREAS, Employee has experience and specialized expertise in the management and operation of healthcare delivery systems and the healthcare industry; and WHEREAS, Employer desires to employ the Employee, Employee desires to accept such employment and Andrx is ready and willing to guarantee the performance by Employer of this Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the mutual promises, representations and warranties set forth herein, and for other good and valuable consideration, it is hereby agreed as follows: 1. EMPLOYMENT. Employer hereby agrees to employ the Employee, and the Employee hereby accepts such employment, upon the terms and conditions set forth herein. 2. TERM. Subject to the provisions of Section 9 hereof, the Employee's employment under this Agreement shall continue for a period of five (5) years from the date hereof ("Term"). This Agreement may be renewed by the parties at the end of the initial Term for successive two (2) year periods (which, if renewed, shall also be considered part of the "Term") on such terms and conditions as the parties may then agree in writing. 3. POSITION AND DUTIES. (a) Employee shall have the position of President and Chief Executive Officer of Employer. In this capacity, Employee shall have the primary responsibility and authority for the strategic planning and operation of the business of Employer and such other duties as are generally recognized as within the scope of employment of a President and Chief Executive Officer, subject only to the direction of the Board of Directors of Employer. (b) During the Term, the Employee shall, subject to the direction and control of Employer's Board of Directors, perform and discharge Employee's duties in accordance with this Agreement, and shall devote his best talents, efforts and abilities to the performance of his duties hereunder. Employee shall report directly to the Chairman and the Board of Directors of Employer. (c) Employee shall at all times perform his duties in accordance with Employer's policies and procedures and all federal, state and local laws, rules and regulations. (d) During the Term, Employee shall devote the preponderance of his business time to his employment. Employee may have outside investments and activities that do not interfere with the performance of his duties hereunder, including but not limited to consulting assignments and serving on boards of directors or advisory committees of other entities, provided he requests Employer's consent (which shall not be unreasonably withheld) before accepting or undertaking any new activity or assignment. 4. COMPENSATION. For the Employee's services hereunder, Employer shall pay the Employee compensation during the Term in such amounts and in accordance with the terms set forth on Exhibit A, attached to and incorporated as part of this Agreement. 5. BENEFITS. Andrx maintains a 401(k) plan and group medical, dental and life insurance plans for all of its full-time employees. As a member of the Andrx management team, Employee and his family will be entitled to immediately participate in the Andrx medical insurance plan (beginning the first day of the month after Employee reports to work) and will receive certain other benefits, including life insurance in the amount of Employee's annual salary, four weeks of paid vacation (which may not be carried over to subsequent years) and disability insurance coverage. Andrx and CyBear reserve the right to make changes to the benefit packages which they individually or collectively offer to its or their management. 6. FACILITIES. Employer shall provide Employee with a suitable office, secretarial support and such other equipment and materials as may be necessary for Employee's performance of his duties under this Agreement. 7. REIMBURSEMENT OF EXPENSES. Employer shall pay or reimburse the Employee for all reasonable business expenses actually incurred or paid by the Employee in the performance of his duties hereunder. Employee shall present expense statements or vouchers or such other supporting information as Employer may reasonably require of the Employee. 8. RECORD KEEPING. Employee shall prepare and timely submit to Employer such reports and records as are reasonably requested by Employer related to Employee's duties hereunder. All business records of Employer are and shall remain the property of Employer and not Employee. 9. TERMINATION. This Agreement may be terminated prior to the expiration of the Term in the manner described in this Section 9. (a) Termination by Employer for Good Cause. Employer shall have the right immediately to terminate the employment of the Employee for "Good Cause" (as such term is defined herein) by written notice to the Employee specifying the particulars of the conduct of the Employee forming the basis for such termination. (b) Termination upon Death. The employment of the Employee hereunder shall terminate immediately upon Employee's death. (c) Termination by Employee. Employee shall have the right to terminate this Agreement in the event of a material breach of this Agreement which continues uncured for 2 thirty (30) days after written notice to Employer of such breach. Employee shall also have the right to terminate his employment for any other reason (or for no reason at all), provided he gives Employer at least sixty (60) days prior written notice to Employer of such desire, and in such event, Employee and both Employer and Andrx shall thereafter be relieved of his or their obligations under this Agreement. (d) Termination upon Change of Control. In the event Employee's employment with the Employer is terminated within six (6) months following a "Change in Control" of the Employer (as defined below), then the Employer shall pay to Employee on the date of such termination a single lump sum distribution (without any present value adjustment) equal to Employee's salary for the remaining Term of this Employment Agreement. Notwithstanding the foregoing, Employee's employment shall not be deemed terminated if, in lieu of his position with Employer, Andrx or any other entity owned or controlled by Andrx offers Employee a replacement position, wherein Employee will perform similar executive duties and will receive a compensation package at least equal to the one set forth in this Agreement; provided, however, the provisions of this section shall not require that Employee be appointed as President and Chief Executive of any entity, but rather that he shall continue to perform employment duties generally performed by senior management personnel of an entity in the healthcare industry. (e) Termination Date. Any notice of termination given pursuant to the provisions of this Agreement shall specify therein the effective date of such termination (the "Termination Date"). (f) CERTAIN DEFINITIONS. (i) For purposes of this Agreement, "Good Cause" shall mean: conviction of Employee of, plea of guilty to, or plea of no contest to, a felony or a crime of moral turpitude, Employee's breach of a material provision of this Agreement which continues uncured for thirty (30) days after written notice to Employee of such breach, Employee's material neglect of his responsibilities, actions by Employee which cause CyBear's or any Andrx entity's image or reputation to materially suffer, and Employee's breach of any material provision of any other agreement with or any fiduciary obligation due to Employer or Andrx. (ii) For purposes of this Agreement, "Change of Control" shall mean any of the following events: the reorganization or consolidation of the Employer, with one or more other companies, other than through a public offering of stock of Employer or a transaction following which at least fifty percent (50%) of the ownership interests of the company resulting from such transaction are owned by one or a group of related persons who, collectively, prior to such transaction, did not own more than fifty percent (50%) of the outstanding voting shares of the Employer; or the sale of all or substantially all of the assets of the Employer; and the sale or merger of Employer where Employer is not the surviving entity. 10. OBLIGATIONS OF COMPANY ON TERMINATION. (a) In the event of a termination claimed by the Employer to be for "Good Cause" pursuant to Section 9 above, Employee shall have the right to have the justification for 3 said termination determined by arbitration. In such event, Employee shall serve on the Employer, within thirty (30) days of receipt of notice of termination, a written request for arbitration. The Employer immediately shall request the appointment of an arbitrator by the American Arbitration Association and thereafter the issues shall be determined under the rules of the American Arbitration Association and the decision of the arbitrator shall be final and binding on both parties. The parties shall use all reasonable efforts to facilitate and expedite the arbitration, and shall act to cause the arbitration to be completed as promptly as possible. Expenses of the arbitration shall be borne by the Employer pending a final determination of this matter at which time such expenses shall borne by the non-prevailing party. (b) In the event of Employee's termination pursuant to the first sentence of Section 9(c), Employee shall: (i) be entitled to receive the full compensation to which he would otherwise be entitled under this Employment Agreement as if Employee had not so terminated his employment and was continuing to serve as an employee hereunder for the full Term of this Agreement, payable in a single lump sum distribution in cash or in equivalent marketable securities of Andrx (without any present value adjustment) on the date of such termination. If Employee terminates this Employment Agreement for any reason other than pursuant to the first sentence of Section 9(c), except as otherwise provided in this Agreement, Employee shall be entitled to no further compensation or other benefits under this Employment Agreement, except as to that portion of any unpaid salary and other benefits accrued and earned by him hereunder up to and including the effective date of such termination. 11. CONFIDENTIALITY; NON-COMPETITION. Employee's employment by CyBear is conditioned upon his execution of Andrx Confidentiality and Non-Competition Agreement, a copy of which is attached hereto as Exhibit B. 12. EFFECTIVE DATE. Employee's employment shall be deemed effective on the date he reports to work (September 15, 1998). 13. ADDITIONAL COMPENSATION. (a) In recognition of the potential value of Employee to Employer and to induce Employee to forego other employment opportunities and to accept employment pursuant to this Agreement, Andrx shall issue to Employee, within thirty (30) days of the execution of this Agreement and payment of $50,000, a warrant to purchase 650,000 shares of Employer's stock (the "Warrant"), representing five (5%) percent of the total issued and outstanding common stock of Employer on the date Employer agreed to merge with 1997 Corp. The stock to be issued pursuant to the exercise of the Warrant shall, if restricted in any manner, include piggyback registration rights at the earliest possible date and in connection with the next registration of securities by Employer with the Securities and Exchange Commission. (b) In order to obtain all or part of the stock underlying the Warrant, Employee shall pay to Employer the amount of One Million Nine Hundred Fifty Thousand Dollars ($1,950,000) or the corresponding part thereof. 4 14. ANDRX OBLIGATIONS. (a) In addition to the compensation to be granted hereunder to Employee by Employer, Andrx shall cause stock options to be issued to Employee for 20,000 shares of Andrx common stock having an exercise price, per share, of the fair market value of Andrx stock at the close of business on the date of grant. Such options shall vest in four annual increments of 5,000 shares on each anniversary of the date of grant. (b) As described above, the Warrant will allow Employee to purchase up to 650,000 shares of Employer's stock at a price of $3.00 per share, beginning on the date Andrx's ownership percentage in Employer is less than 80% or August 31, 2000, whichever is sooner (the "Warrant Exercise Date"). The Warrant shall be exercisable in whole or in part for a period of seven years after the Warrant Exercise Date, provided (i) Employee has not previously resigned his position as the President and Chief Executive Officer of Employer, (ii) Employee's position as the President and Chief Executive Officer of Employer was not terminated for good cause (as defined above), and (iii) Eployee's exercise of any portion of such Warrant does not, in the reasonable opinion of Andrx, cause or result in unfavorable accounting consequences for Andrx (including, but not limited to a loss of the ability to utilize the pooling of interests method of accounting). If Employee's ability to exercise the Warrant is delayed as a result of (iii) above, the term of the Warrant shall be extended for a like period of time, provided such delays shall not result in the Warrant term extending beyond a period of nine years. 15. Intentionally deleted. 16. SEVERABILITY. Should any provision of this Agreement be held, by a court of competent jurisdiction, to be invalid or unenforceable, such invalidity or unenforceability shall not render the entire Agreement invalid or unenforceable, and this Agreement and each individual provision hereof shall be enforceable and valid to the fullest extent permitted by law. 17. SUCCESSORS AND ASSIGNS. This Agreement and all rights under this Agreement are personal to the Employee and shall not be assignable by either party without the written consent of the other party. All of the Employee's rights under the Agreement shall inure to the benefit of his heirs, personal representatives, designees or other legal representatives, as the case may be. This Agreement shall inure to the benefit of and be binding upon Employer and its successors and assigns. 18. GOVERNING LAW. This Agreement shall be construed in accordance with and governed by the laws of the State of Florida, without regard to the conflicts of laws rules thereof. The venue for any action arising from or relating to this Agreement shall be in Broward County, Florida. 19. NOTICES. All notices, requests and demands given to or made upon the respective parties hereto shall be deemed to have been given or made three (3) business days after the date of mailing, when mailed by registered or certified mail, postage prepaid, or on the date of delivery if delivered by hand, or one business day after the date of delivery by Federal Express or similar overnight delivery service, addressed to the parties at their addresses set forth below or to such other addresses furnished by notice given in accordance with this Section 19: To Employer: CyBear, Inc. 4001 SW 47th Avenue Ft. Lauderdale, FL 33314 Attn: John Klein, Chairman 5 With a copy to: 4001 SW 47th Avenue Ft. Lauderdale, FL 33314 Attn: Scott Lodin, VP / General Counsel To Employee: Edward Goldman, M.D. 7000 W. Cypresshead Drive Parkland, FL 33067 To Andrx: 4001 SW 47th Avenue Ft. Lauderdale, FL 33314 Attn: Scott Lodin, VP / General Counsel 20. WITHHOLDING. All payments required to be made by Employer to the Employee under this Agreement shall be subject to withholding taxes, Social Security and other payroll deductions in accordance with the law and Employer's policies applicable to employees of Employer. 21. COMPLETE UNDERSTANDING. This Agreement supersedes any prior contracts, understandings, discussions and agreements relating to employment between the Employee and Employer and constitutes the complete understanding between the parties with respect to the subject matter hereof. No statement, representation, warranty or covenant has been made by either party with respect to the subject matter hereof except as expressly set forth herein. 22. MODIFICATION; WAIVER. This Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by Employer and the Employee, or in the case of a waiver, by the party against whom the waiver is to be effective. Any such waiver shall be effective only to the extent specifically set forth in such writing. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. 23. MUTUAL REPRESENTATIONS. Employee represents and warrants to Employer that the execution and delivery of this Agreement and the fulfillment of the terms hereof will not constitute a default under or conflict with any agreement or other instrument to which Employee is a party or by which Employee is bound and does not require the consent of any person or entity. Employer represents and warrants to the Employee that this Agreement has been duly authorized, executed and delivered by Employer and that the fulfillment of the terms hereof will not constitute a default under or conflict with any agreement or other instrument to which it is a party or by which it is bound. Each party hereto warrants and represents to the other that this Agreement constitutes the valid and binding obligation of such party enforceable against such party in accordance with its terms. 24. INDEMNIFICATION. Employer and Andrx, jointly and severally, agree to indemnify, defend and hold harmless Employee from and against any losses, liabilities, damages, deficiencies, all suits, proceedings, actions, judgments, claims, charges, damages (including 6 special or consequential damages), assessments, costs or expenses (including interest, penalties and reasonable attorneys' fees and disbursements), fines and penalties incurred or suffered by Employee, whether suit is instituted or not, and, if instituted, whether at any trial and appellate level, raised by any third party (collectively, a "Loss") in connection with any and all matters relating in any manner to the litigation pending between Employer and/or Andrx, on the one hand, and Medix Resources, Inc. or Cymedix Lynx Corporation, on the other, or the facts and circumstances underlying such litigation. Employer also agrees to indemnify and hold Employee harmless for his actions on behalf of Employer, to the fullest extent permitted by law. 25. HEADINGS/CONSTRUCTION. The headings in this Agreement are for convenience of reference only and shall not control or affect the meaning or construction of this Agreement. This Agreement shall not be construed against the party drafting the document as the terms herein have been negotiated at arms' length and both parties have had the opportunity to ask questions and to seek the advice of independent counsel. 26. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by the other party hereto. 27. ATTORNEY'S FEES. In the event any action is commenced arising from or related to this Agreement, the prevailing party shall be entitled to reasonable attorney's fees (at all levels), court costs and out-of-pocket expenses. IN WITNESS WHEREOF, Employer has caused this Agreement to be duly executed by one of its officers duly authorized to enter into and execute this Agreement, and the Employee has manually signed his name hereto, all as of the day and year first above written. ANDRX CORPORATION CYBEAR, INC. By: /s/ SCOTT LODIN By: /s/ EDWARD GOLDMAN M.D. -------------------------------- ------------------------------ Title: Vice President, General Title: President and CEO ----------------------------- --------------------------- Counsel and Secretary --------------------------------- EDWARD GOLDMAN, M.D. 7 EXHIBIT "A" COMPENSATION During the Term of this Agreement, Employer shall pay Employee the following compensation for services rendered in the amounts and according to the schedule set forth below: ANNUAL SALARY: Two Hundred Fifty Thousand ($250,000) Dollars for each twelve month period during the first Twenty-Four (24) months of the Term and Three Hundred Thousand ($300,000) Dollars for each Twelve (12) month period commencing with month Twenty-Five (25) and continuing until expiration of the Term of the Agreement. Employer shall pay the salary amounts above, in arrears, in accordance with Employer's regular payroll schedule; provided, however, salary payments shall be not less frequent than monthly. 8 EX-10.3 5 EXHIBIT 10.3 November 5, 1998 Ms. Debra S. Richman 2373 Broadway, Apt. 923 New York, New York 10024 Dear Ms. Richman: This will confirm the terms and conditions of your employment by CyBear, Inc. ("CyBear") which have been mutually agreed upon by you and CyBear. Commencing as of August 17, 1998 (the "Commencement Date"), you will serve as CyBear's Executive Vice President - Business Development. You will be employed for a two-year term (the "Initial Term") from the Commencement Date, subject to renewal by mutual agreement of the parties. Approximately ninety days prior to the expiration of the Initial Term, the parties will enter into discussions concerning a renewal of your employment. You will be based in an office to be located in New York or New Jersey, at CyBear's discretion. Any request that you relocate will be subject to the mutual agreement of the parties. If you agree to relocate, CyBear will reimburse you for your reasonable relocation costs. Your base compensation during the Initial Term will be at the annual rate of $160,000. In addition, you will be entitled to receive a Signing Bonus in the amount of $80,000 payable in eight quarterly installments of $10,000 each (less applicable withholding) on the last day of each three month period after the Commencement Date, during the Initial Term. You will also receive an auto allowance in the amount of $450.00 monthly. As a CyBear executive, you will be entitled to participate in our affiliated company's 401-K Plan (the "401-K Plan") (a copy of which has been or will be provided to you) and its group, medical, dental and life insurance plans, as well as a short-term disability plan. You will be entitled to three weeks of paid vacation each year. Your reasonable business expenses will be reimbursed. STOCK OPTIONS In addition to the above, pursuant to CyBear's 1997 Stock Option Plan (the "Plan"), CyBear will immediately issue to you options to purchase (the "Stock Options") from CyBear an aggregate of 100,000 shares of CyBear's common stock at an exercise price of $3.00 per share. The Stock Options will, except as otherwise set out below, vest and become exercisable in two annual increments, as follows: Two increments of 37,500 shares each will vest and become exercisable, respectively, one year from the Commencement Date and two years from the Commencement Date, subject to the provisions set forth under "Termination of "Employment" below. In the event that your employment is renewed beyond the Initial Term, the remaining 25,000 shares of CyBear common stock at an exercise price of $3.00 per share will be issued to you and will vest and become exercisable at the end of the first calendar year of a renewal period. As set forth in the Plan, the Stock Options will be exercisable for a period of ten years from the date of vesting and, upon exercise, the shares purchased pursuant thereto will be registered and freely transferable. ADDITIONAL STOCK OPTIONS In addition to the Stock Options referred to above, during the discussions concerning a renewal of your employment, the parties will seek to reach mutual agreement on additional stock options to be issued during such renewal period. TERMINATION OF EMPLOYMENT In the event of the termination of your employment by CyBear prior to the expiration of the Initial Term, where such termination is for "cause" as hereinafter defined or in the event of the termination of your employment by you prior to the expiration of the Initial Term, then CyBear's sole obligation to you shall be to pay to you all base salary and other accrued entitlements up to the date of such termination of employment. For purposes of this agreement, cause shall be defined as (a) your conviction (after trial or upon a plea) of any fraud, embezzlement, or other misappropriation; (b) your failure to perform any of your material duties, which failure is not cured within ten days after CyBear gives you written notice of such failure; (c) your representations under this agreement being not true and correct as of the date of this agreement; or (d) your material breach of the provisions of the Confidentiality and Non-Competition Agreement you execute. For purposes of this agreement, your death or disability for a period of three consecutive months during the Initial Term shall be deemed to be "cause" under this agreement. In the event that your employment by CyBear is terminated by CyBear prior to the expiration of the Initial Term for any reason that does not constitute cause hereunder, you shall be entitled to receive (i) the balance of any unpaid base compensation for the remaining portion of the Initial Term, (ii) any remaining unpaid portion of the Signing Bonus, (iii) any accrued entitlements, including unused vacation and unreimbursed business expenses, and (iv) the continued contribution to the monthly cost of any COBRA health insurance benefits you obtain for the balance of the Initial Term in an amount equal to 50% of CyBear's contribution to those health insurance benefits while you were an employee. In addition to the foregoing, in the event of such termination of employment by CyBear for other than cause, CyBear agrees to immediately vest such additional Stock Options, allowing you to purchase the shares from CyBear: (a) if such termination for other than cause occurs during the first year of the Initial Term, of $50,000 shares of CyBear's common stock at an exercise price of $3.00 per share; and (b) if such termination for other than cause occurs during the second year of the Initial Term, of the balance of the stock for which the Stock Options have been granted, making a total of vested options to purchase an aggregate of 75,000 shares of CyBear's common stock at an exercise price of $3.00 per share. NON-COMPETITION During the Initial Term and any subsequent renewal term, while employed by CyBear, you will be required to refrain from competing as described in Paragraph 6 of the Andrx Confidentiality and Non-Competition Agreement (the "Non-Compete Agreement"). In the event that you terminate your employment with CyBear during the Initial Term or any agreed renewal term, you will also be required to refrain from competing, as set for the in the Non-Compete Agreement, until the expiration of the Initial Term or any agreed upon renewal term. Similarly, in the event that CyBear terminates your employment, whether or not for a reason that constitutes cause hereunder, during the Initial Term or any agreed upon renewal term, you will be required to refrain from competing, as set forth the in the Non-Compete Agreement, until the expiration of the Initial Term or any agreed upon renewal term. If we do not reach agreement on a renewal of this Agreement, you will not be subject to the Non-Compete Agreement after the expiration of the Initial Term. In all events, you shall be required to adhere to the confidentiality and other provisions set forth in the Non-Compete Agreement. The provisions of this Paragraph shall, with respect to the applicable period during which you are required to refrain from competing, supersede the conflicting provisions of the Non-Compete Agreement. ADVERSE CHANGE IN CONDITIONS An adverse change in your conditions of employment (an "Adverse Change") shall be deemed to occur if for reasons other than for cause (a) there is any material reduction of or change in your position or the duties assigned to you as Executive Vice President-Business Development and the responsibilities attendant upon such position; (b) there is any other material diminution in the status, working conditions and/or economic benefits to which you may at any time become entitled as an employee of CyBear; or (c) there has been a "change in control" of CyBear and your employment is terminated by the Company. For purposes of this agreement, a change in control shall be deemed to have occurred in the event that there is, whether by merger, an acquisition of CyBear by any party other than Andrx, or otherwise, a change in the party controlling the management and policies of CyBear. In the event of an Adverse Change, you may elect, by written notice to CyBear, to treat such Adverse Change as a termination of your employment by CyBear for other than cause. REPRESENTATION By your execution of this agreement, you are confirming your representation to CyBear that you're acceptance of a position with CyBear and the performance of your duties will not violate the terms of any non-compete, non-disclosure or other agreements to which you are a party. NOTICES All notices under this agreement shall be in writing and shall be given by certified mail, overnight courier, or by hand delivery at the appropriate address below or at a substitute address designated by written notice to the other parties to the agreement: if to you, at: 2373 Broadway, Apt. 923 New York, NY 10024 with a copy to: Merril A. Mironer, Esq. Rosenman & Colin LLP 575 Madison Avenue New York, NY 10022-2585 if to CyBear or Andrx: 4001 SW 47th Avenue Ft. Lauderdale, FL 33314 Attn: President with a copy to: Scott Lodin, Esq. V.P. and General Counsel 4001 SW 47th Avenue Ft. Lauderdale, FL 33314 MISCELLANEOUS This agreement supersedes all previous agreements and understandings among the parties hereto and contains the entire understanding of the parties relating to is subject matter. It may not be modified or terminated except by a written agreement signed by all of the parties hereto. This agreement has been entered into in the State of Florida and the validity, interpretation and legal effect of this agreement shall be governed by and construed in accordance with the laws of the State of Florida applicable to contracts entered into and performed entirely within the State of Florida. We acknowledge that you, CyBear and Value Options, Inc. will be participating in a joint business venture that is separate from, and not related to, your employment by CyBear as described in this letter. From time to time, we understand that you will be undertaking various consulting assignments for other companies, where such companies are not engaged in any business that is competitive with CyBear. So long as such assignments do not detract from the performance of your responsibilities for CyBear, we have no objection to you undertaking any new consulting assignments, Provided that CyBear agrees that such business relationships are not competitive with the business of CyBear. Attached hereto as Schedule B is a list of your current consulting arrangements. CyBear hereby consent to such existing consulting arrangements. If the above accurately reflects our agreement, please so indicate by signing a copy of this agreement where indicated below and returning the signed copy to me by either fax (at 954-792-1034) or by mail. CYBEAR, INC. By: /s/ EDWARD GOLDMAN ---------------------------- Edward Goldman, MD Chief Executive Officer ANDRX CORPORATION By: /s/ ALAN P. COHEN ---------------------------- Alan P. Cohen Chairman and CEO Agreed to and accepted on this 24th day of November, 1998 /s/ DEBRA S. RICHMAN - ------------------------------ DEBRA S. RICHMAN EX-10.4 6 EXHIBIT 10.4 FORM OF INDEMNIFICATION AGREEMENT THIS INDEMNIFICATION AGREEMENT (this "Agreement"), dated as of the ___ day of _____, 1999, by and between Cybear, Inc., a Delaware corporation with its principal place of business at 5000 Blue Lake Drive, Suite 200, Boca Raton, FL (the "Company"), and _________________, who resides at _______________________ (the "Executive"). R E C I T A L S: A. The Company currently receives the benefits of the services of the Executive as a member of the Company's Board of Directors and an executive officer. B. The Executive has requested indemnification and the Company is willing to indemnify the Executive as a member of the Company's Board of Directors and an executive officer to the fullest extent permitted by applicable law and regulation. NOW, THEREFORE, in consideration of the mutual premises and covenants contained herein, the Company and the Executive agree as follows: SECTION 1. MANDATORY INDEMNIFICATION IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN THOSE BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 5 hereof and to the extent and except as otherwise provided hereunder, the Company shall indemnify and hold harmless the Executive from and against any and all claims, damages, reasonable expenses (including, without limitation, attorneys' and paralegals' fees), judgments, penalties, fines (including excise taxes assessed with respect to an employee benefit plan) and amounts paid in settlement and all other liabilities actually incurred by the Executive in connection with the investigation, defense, prosecution, settlement or appeal of any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company) and to which the Executive was or is a party or is threatened to be made a party by reason of the fact that the Executive is or was a director, officer, stockholder, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise, or by reason of anything done or not done by the Executive in any such capacity or capacities; provided, however, that this Agreement shall not eliminate or limit the liability of the Executive (i) for any breach of the Executive's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for the willful or negligent payment of unlawful dividends or unlawful stock repurchases or redemptions in violation of Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the Executive derived an improper personal benefit. For purposes of this Agreement, the Executive is considered to be serving as a fiduciary or similar capacity or as an agent of an employee benefit plan at the Company's request if his duties to the Company also impose duties 1 on, or otherwise involve services by, the Executive to the plan or to participants in or beneficiaries of the plan. Notwithstanding the foregoing, the Company shall only indemnify the Executive for amounts paid in settlement if such settlement was consented to by the Company, which consent shall not be unreasonably withheld. SECTION 2. MANDATORY INDEMNIFICATION IN ACTIONS OR SUITS BY OR IN THE RIGHT OF THE COMPANY. Subject to Section 5 hereof and to the extent and except as otherwise provided hereunder, the Company shall indemnify and hold harmless the Executive from and against any and all reasonable expenses (including, without limitation, attorneys' and paralegals' fees) and/or amounts paid in settlement actually incurred by the Executive in connection with the investigation, defense, settlement or appeal of any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor and to which the Executive was or is a party or is threatened to be made a party by reason of the fact that the Executive is or was a director, officer, stockholder, employee or agent of the Company, or is or was serving at the request of the Company as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, or by reason of anything done or not done by the Executive in such capacity or capacities, provided that (i) the Executive acted in good faith and in a manner the Executive reasonably believed to be in or not opposed to the best interests of the Company (ii) indemnification for amounts paid in settlement shall not exceed the estimated expense of litigating the proceeding to conclusion, (iii) no indemnification shall be made in respect of any claim, issue or matter as to which the Executive shall have been adjudged to be liable for misconduct in the performance of his duty to the Company unless and only to the extent that the court in which such action, suit or proceeding was brought (or any other court of competent jurisdiction) shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, the Executive is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper, and (iv) no indemnification shall be made in respect of any claim, issue or matter in which the Executive shall have been adjudged to be liable for any willful or negligent payment of unlawful dividends or unlawful stock repurchases or redemptions in violation of Section 174 of the General Corporation Law of the State of Delaware or for any transaction in which the Executive derived a personal benefit. Notwithstanding the foregoing, the Company shall only indemnify the Executive for amounts paid in settlement, if such settlement was consented to by the Company, which consent shall not be unreasonably withheld. SECTION 3. MANDATORY INDEMNIFICATION AGAINST EXPENSES INCURRED WHILE TESTIFYING. Subject to Section 5 hereof, the Company shall indemnify the Executive against expenses (including attorneys' fees and paralegals' fees) incurred or paid by the Executive as a result of providing testimony in any proceeding, whether civil, criminal, administrative or investigative (including but not limited to any action or suit by or in the right of the Company to procure a judgment in its favor), by reason of the fact that the Executive is or was an officer, director, stockholder, employee, consultant, adviser or agent of the Company, or is or was serving at the request of the Company as an officer, director, partner, trustee, employee, adviser or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise 2 SECTION 4. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF NEGLIGENCE. Except as otherwise specified in Section 2 herein, the Company shall reimburse the Executive for any expenses (including attorneys' fees and paralegals' fees) and amounts actually and reasonably incurred or paid by him in connection with the investigation, defense, settlement or appeal of any action or suit described in Section 2 hereof that results in an adjudication that the Executive was liable for negligence, gross negligence or recklessness (but not willful misconduct) in the performance of his duty to the Company; provided, however, that the Executive acted in good faith and in a manner he believed to be in the best interests of the Company. SECTION 5. AUTHORIZATION OF INDEMNIFICATION. 5.1 INDEMNIFICATION DETERMINATION. Any indemnification under Sections 1 and 2 hereof (unless ordered by a court) and any reimbursement made under Section 3 hereof, shall be made by the Company only as authorized in the specific case upon a determination (the "Determination") that indemnification or reimbursement of the Executive is proper in the circumstances because the Executive has met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof, as the case may be and which Determination shall be based on the presumptions, if applicable, set forth in this Section 5. Subject to Subsections 6.6, 6.7 and 6.8 of this Agreement, the Determination shall be made in the following order of preference: (1) first, by the Company's Board of Directors (the "Board") by majority vote or consent of a quorum consisting of directors who are not, at the time of the Determination, named parties to such action, suit or proceeding ("Disinterested Directors"); or (2) next, if such a quorum of Disinterested Directors cannot be obtained, by majority vote of a committee duly designated by the Board (in which designation all directors, whether or not Disinterested Directors, may participate) consisting solely of two or more Disinterested Directors; or (3) next, if such a committee cannot be designated, by independent legal counsel (who may be the outside counsel regularly employed by the Company) in a written opinion; or (4) next, if such legal opinion cannot be obtained, by vote of the holders of a majority of the Company's common stock that are represented in person or by proxy and entitled to vote at a meeting called for such purpose or by a written consent of the holders of a majority of the outstanding shares of common stock of the Company in lieu thereof. 5.2 NO PRESUMPTIONS. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea OF NOLO CONTENDERE or its equivalent, shall not, of itself, create a presumption that the Executive did not act in good faith 3 and in a manner which the Executive reasonably believed to be in or not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. 5.3 BENEFIT PLAN CONDUCT. The Executive's conduct with respect to an employee benefit plan for a purpose the Executive reasonably believed to be in the interests of the participants in and beneficiaries of the plan shall be deemed, in rendering a Determination, to be conduct that the Executive reasonably believed to be not opposed to the best interests of the Company. 5.4 RELIANCE AS SAFE HARBOR. For purposes of rendering any Determination hereunder, the Executive shall be deemed to have acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe the Executive's conduct was unlawful, if the Executive's action is based on (i) the records or books of account of the Company or another enterprise, including financial statements, (ii) information supplied to the Executive by the officers of the Company or another enterprise in the course of their duties, (iii) the advice of legal counsel for the Company or another enterprise, or (iv) information or records given or reports made to the Company or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or another enterprise. The term "another enterprise" as used in this Subsection 5.4 shall mean any other corporation or any partnership, joint venture, trust, employee benefit plan or other enterprise of which the Executive is or was serving at the request of the Company as a director, officer, partner, trustee, employee or agent. The provisions of this Subsection 5.4 shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Executive may be deemed to have met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof, as the case may be. 5.5 SUCCESS ON MERITS OR OTHERWISE. Notwithstanding any other provision of this Agreement, to the extent that the Executive has been successful on the merits or otherwise in defense of any action, suit or proceeding described in Sections 1 or 2 hereof, or in defense of any claim, issue or matter therein, the Executive shall be indemnified against expenses (including, without limitation, attorneys' and paralegals' fees) actually and reasonably incurred by the Executive in connection with the investigation, defense, settlement or appeal thereof. For purposes of this Subsection 5.5, the term "successful on the merits or otherwise" shall include, but not be limited to, (i) any termination, withdrawal, or dismissal (with or without prejudice) of any claim, action, suit or proceeding against the Executive without any express finding of liability or guilt against the Executive, (ii) the expiration of 120 days after the making of any claim or threat of an action, suit or proceeding without the institution of the same and without any promise or payment made to induce a settlement, or (iii) the settlement of any action, suit or proceeding under Section 1, 2 or 3 hereof pursuant to which the Executive pays less than $10,000. 5.6 PARTIAL INDEMNIFICATION OR REIMBURSEMENT. If the Executive is entitled under any provision of this Agreement to indemnification and/or reimbursement by the Company for some or a portion of the claims, damages, expenses (including, without limitation, attorneys' and paralegals' fees), judgments, fines or amounts paid in settlement by the Executive in connection with the investigation, defense, settlement or appeal of any action specified in 4 Sections 1, 2 or 3 hereof, but not, however, for the total amount thereof, the Company shall nevertheless indemnify and/or reimburse the Executive for the portion thereof to which the Executive is entitled. The party or parties making the Determination shall determine the portion (if less than all) of such claims, damages, expenses (including, without limitation, attorneys' and paralegals' fees), judgments, fines or amounts paid in settlement for which the Executive is entitled to indemnification and/or reimbursement under this Agreement. SECTION 6. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN SATISFIED. 6.1 COSTS. All costs of making the Determination required by Section 5 hereof shall be borne solely by the Company, including, but not limited to, the costs of legal counsel, proxy solicitations and judicial determinations, and all costs of defending any suits or proceedings challenging payments to the Executive under this Agreement. Provided the Executive prevails in such matter, the Company shall also be solely responsible for paying all reasonable expenses incurred by the Executive to enforce this Agreement, including, but not limited to, the costs incurred by the Executive to obtain court-ordered indemnification pursuant to Section 9 hereof, regardless of the outcome of such application or proceeding. 6.2 TIMING OF THE DETERMINATION. The Company shall use its best efforts to make the Determination contemplated by Section 5 hereof promptly. In addition, the Company agrees: (1) if the Determination is to be made by the Board or a committee thereof, such Determination shall be made not later than 15 days after a written request for a Determination (a "Request") is delivered to the Company by the Executive; (2) if the Determination is to be made by independent legal counsel, such Determination shall be made not later than 30 days after a Request is delivered to the Company by the Executive; and (3) if the Determination is to be made by the stockholders of the Company, such Determination shall be made not later than 90 days after a Request is delivered to the Company by the Executive. The failure of the Company to use its best efforts to make a Determination within the above-specified time period shall constitute a Determination approving full indemnification or reimbursement of the Executive notwithstanding anything herein to the contrary. A Determination may be made in advance of (i) the Executive's payment (or incurring) of expenses with respect to which indemnification or reimbursement is sought, and/or (ii) final disposition 5 of the action, suit or proceeding with respect to which indemnification or reimbursement is sought. 6.3 REASONABLENESS OF EXPENSES. Notwithstanding anything contained herein to the contrary, prior to the payment of any expenses hereunder, the Company shall determine the reasonableness of such expenses as provided below. The Board shall use its best efforts to ensure that the evaluation and finding as to the reasonableness of expenses incurred by the Executive for purposes of this Agreement shall be made (in the following order of preference) within 15 days of the Executive's delivery to the Company of a request for reimbursement of expenses that includes a reasonable accounting of expenses incurred: (1) first, by the Board by a majority vote of a quorum consisting of Disinterested Directors; or (2) next, if a quorum cannot be obtained under subdivision (1), by majority vote or consent of a committee duly designated by the Board (in which designation all directors, whether or not Disinterested Directors, may participate), consisting solely of two or more Disinterested Directors. All expenses shall be considered reasonable for purposes of this Agreement if the finding contemplated by this Subsection 6.3 is not made within the prescribed time due to the Company's failure to use its best efforts to comply therewith. The finding required by this Subsection 6.3 must be made in advance of the payment (or incurring) of the expenses for which indemnification or reimbursement is sought. 6.4 PAYMENT OF INDEMNIFIED AMOUNT. Immediately following a Determination that the Executive has met the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof, as the case may be, and/or the finding of reasonableness of expenses contemplated by Subsection 6.3 hereof, the Company shall pay to the Executive in cash the amount to which the Executive is entitled to be indemnified and/or reimbursed, as the case may be, without further authorization or action by the Board; provided, however, that the expenses for which indemnification or reimbursement is sought have actually been incurred by the Executive and the Executive is able to provide appropriate receipts. 6.5 STOCKHOLDER VOTE ON DETERMINATION. The Executive and any other stockholder who is a party to the proceeding for which indemnification or reimbursement is sought shall be entitled to vote on any Determination to be made by the Company's stockholders, including a Determination made pursuant to Subsection 6.7 hereof. In addition, in connection with each meeting at which a stockholder Determination will be made, the Company shall solicit proxies that expressly include a proposal to indemnify or reimburse the Executive. The Company proxy statement relating to the proposal to indemnify or reimburse the Executive shall not include a recommendation against indemnification or reimbursement. 6.6 SELECTION OF INDEPENDENT LEGAL COUNSEL. If the Determination required under Section 5 is to be made by independent legal counsel, such counsel shall be selected by the Executive with the approval of the Board of Directors, which approval shall not be unreasonably withheld. The fees and expenses incurred by counsel in making any Determination 6 (including Determinations pursuant to Subsection 6.8 hereof) shall be borne solely by the Company regardless of the results of any Determination and, if requested by counsel, the Company shall give such counsel an appropriate written agreement with respect to the payment of their fees and expenses and such other matters as may be reasonably requested by counsel. 6.7 RIGHT OF EXECUTIVE TO APPEAL AN ADVERSE DETERMINATION BY BOARD. If a Determination is made by the Board or a committee thereof that the Executive did not meet the applicable standard of conduct set forth in Sections 1, 2 or 3 hereof, upon the written request of the Executive and the Executive's delivery of $500 to the Company, the Company shall cause a new Determination to be made by the Company's stockholders at the next regular or special meeting of stockholders. Subject to Section 9 hereof, such Determination by the Company's stockholders shall be binding and conclusive for purposes of this Agreement. 6.8 RIGHT OF EXECUTIVE TO SELECT FORUM FOR DETERMINATION. If, at any time subsequent to the date of this Agreement, "Continuing Directors," as defined below, do not constitute a majority of the members of the Board, or there is otherwise a change in control of the Company (as contemplated by Item 403(c) of Regulation S-K promulgated under the Securities Act of 1933, as amended), then upon the request of the Executive, the Company shall cause the Determination required by Section 5 hereof to be made by independent legal counsel selected by the Executive and approved by the Board (which approval shall not be unreasonably withheld), which counsel shall be deemed to satisfy the requirements of Subsection 6.6 hereof. If none of the legal counsel selected by the Executive are willing and/or able to make the Determination, then the Company shall cause the Determination to be made by a majority vote or consent of a Board committee consisting solely of Continuing Directors. If there are no Continuing Directors, then the Company shall cause the Determination required by Section 5 hereof to be made by the stockholders at the next regular or special meeting of stockholders. For purposes of this Agreement, a "Continuing Director" means either a member of the Board at the date of this Agreement or a person nominated to serve as a member of the Board by a majority of the then Continuing Directors. 6.9 ACCESS BY EXECUTIVE TO DETERMINATION. The Company shall afford to the Executive and his representatives ample opportunity to present evidence of the facts upon which the Executive relies for indemnification or reimbursement, together with other information relating to any requested Determination. The Company shall also afford the Executive the reasonable opportunity to include such evidence and information in any Company proxy statement relating to a stockholder Determination. 6.10 JUDICIAL DETERMINATIONS IN DERIVATIVE SUITS. In each action or suit described in Section 2 hereof, the Company shall cause its counsel to use its best efforts to obtain from the Court in which such action or suit was brought (i) an express adjudication whether the Executive is liable for negligence or misconduct in the performance of his duty to 7 the Company, and, if the Executive is so liable, (ii) a determination whether and to what extent, despite the adjudication of liability but in view of all the circumstances of the case (including this Agreement), the Executive is fairly and reasonably entitled to indemnification. SECTION 7. SCOPE OF INDEMNITY. The actions, suits and proceedings described in Sections 1 and 2 hereof shall include, for purposes of this Agreement, any actions that involve, directly or indirectly, activities of the Executive both in his official capacities as a Company director or officer and actions taken in another capacity while serving as director or officer, including, but not limited to, actions or proceedings involving (i) compensation paid to the Executive by the Company, (ii) activities by the Executive on behalf of the Company, including actions in which the Executive is plaintiff, (iii) actions alleging a misappropriation of a "corporate opportunity," (iv) responses to a takeover attempt or threatened takeover attempt of the Company, (v) transactions by the Executive in Company securities, and (vi) the Executive's preparation for and appearance (or potential appearance) as a witness in any proceeding relating, directly or indirectly, to the Company. In addition, the Company agrees that, for purposes of this Agreement, all services performed by the Executive on behalf of, in connection with or related to any subsidiary of the Company, any employee benefit plan established for the benefit of employees of the Company or any subsidiary, any corporation or partnership or other entity in which the Company or any subsidiary has a 5 % ownership interest, or any other affiliate of the Company, shall be deemed to be at the request of the Company. SECTION 8. ADVANCE FOR EXPENSES. 8.1 MANDATORY ADVANCE. Reasonable expenses (including, without limitation, attorneys' and paralegals' fees) incurred by the Executive in investigating, defending, settling or appealing any action, suit or proceeding described in Sections 1 or 2 hereof shall be advanced by the Company in advance of the final disposition of such action, suit or proceeding upon the request by the Executive and said expenses shall be paid within 10 days following the Executive's delivery to the Company of such written request for an advance pursuant to this Section 8, together with a reasonable accounting of such expenses. However, prior to the payment of any expenses hereunder, the Company shall determine the reasonableness of such expenses as provided in Subsection 6.3. 8.2 UNDERTAKING TO REPAY. The Executive hereby undertakes and agrees to repay to the Company any advances made pursuant to this Section 8 if and to the extent that it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company for such amounts, as described above. 8.3 MISCELLANEOUS. The Company shall make the advances contemplated by this Section 8 regardless of the Executive's financial ability to make repayment, and regardless whether indemnification of the Executive by the Company will ultimately be required. Any advances and undertakings to repay pursuant to this Section 8 shall be unsecured and interest-free. 8 SECTION 9. COURT ORDERED INDEMNIFICATION. Regardless of whether the Executive has met the standard of conduct set forth in Sections 1, 2 or 3 hereof, as the case may be, and notwithstanding the presence or absence of any Determination whether such standards have been satisfied, the Executive may apply for indemnification (and/or reimbursement pursuant to Sections 3 or 13 hereof) to the court conducting any proceeding to which the Executive is a party or to any other court of competent jurisdiction. Upon receipt of an application, the court, after giving any notice the court considers necessary, may order indemnification (and/or reimbursement) if it determines the Executive is fairly and reasonably entitled to indemnification (and/or reimbursement) in view of all the relevant circumstances (including this Agreement). SECTION 10. NONDISCLOSURE OF PAYMENTS. Except as required by applicable securities laws, neither party shall disclose any payments under this Agreement unless prior approval of the other party is obtained. Any payments to the Executive that must be disclosed shall, unless otherwise requested by law, be described only in Company proxy or information statements relating to special/annual meetings of the Company's stockholders and the Company shall afford the Executive the reasonable opportunity to review all such disclosures and, if requested, to explain in such statement any mitigating circumstances regarding the event reported. SECTION 11. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action shall be brought and no cause of action shall be asserted by or on behalf of the Company (or any of its subsidiaries) against the Executive, his spouse, heirs, executors, personal representatives or administrators after the expiration of two years from the time the Executive ceases (for any reason) to serve as either an officer or director of the Company, and any claim or cause of action of the Company (or any of its subsidiaries) shall be extinguished and deemed released unless asserted by filing of a legal action within such two-year period. SECTION 12. INDEMNIFICATION OF EXECUTIVE'S ESTATE. Notwithstanding any other provision of this Agreement, and regardless of whether indemnification of the Executive would be permitted and/or required under this Agreement, if the Executive is deceased, the Company shall indemnify and hold harmless the Executive's estate, spouse, heirs, administrators, personal representatives and executors (collectively the "Executive's Estate") against, and the Company shall assume, any and all claims, damages, expenses (including attorneys' and paralegals' fees), penalties, judgments, fines and amounts paid in settlement actually incurred by the Executive or the Executive's Estate in connection with the investigation, defense, settlement or appeal of any action described in Sections 1 or 2 hereof, to the same extent as the Executive. Indemnification of the Executive's Estate pursuant to this Section 12 shall be mandatory and not require a Determination or any other finding that the Executive's conduct satisfied a particular standard of conduct. SECTION 13. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding any other provision of this Agreement, and regardless of the presence or absence of any Determination, the Company promptly (but not later than 30 days following the 9 Executive's submission of a reasonable accounting) shall reimburse the Executive for all attorneys' fees and related court costs and other expenses incurred by the Executive in connection with the investigation, defense, settlement or appeal of any action described in Section 1 or 2 hereof (including, but not limited to, the matters specified in Section 6 hereof). SECTION 14. MISCELLANEOUS. 14.1 NOTICE PROVISION. Any notice, payment, demand or communication required or permitted to be delivered or given by the provisions of this Agreement shall be deemed to have been effectively delivered or given and received on the date personally delivered to the respective party to whom it is directed, or when deposited by registered or certified mail, return receipt requested, with postage and charges prepaid and addressed to the parties at the addresses set forth above their signatures to this Agreement. 14.2 ENTIRE AGREEMENT. Except for the Company's Certificate of Incorporation, this Agreement constitutes the entire understanding of the parties and supersedes all prior understandings, whether written or oral, between the parties with respect to the subject matter of this Agreement. 14.3 SEVERABILITY OF PROVISIONS. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable; this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Agreement; and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of each such illegal, invalid, or unenforceable provision, there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid, and enforceable. 14.4 APPLICABLE LAW. This Agreement shall be governed by and construed under the laws of the State of Delaware, without application of the principles of conflicts of laws. 14.5 EXECUTION IN COUNTERPARTS. This Agreement and any amendment may be executed simultaneously or in two or more counterparts, each of which together shall constitute one and the same instrument. 14.6 COOPERATION AND INTENT. The Company shall cooperate in good faith with the Executive and use its best efforts to ensure that the Executive is indemnified and/or reimbursed for liabilities described herein to the fullest extent permitted by law. 14.7 AMENDMENT. No amendment, modification or alteration of the terms of this Agreement shall be binding unless in writing, dated subsequent to the date of this Agreement, and executed by the parties. 10 14.8 BINDING EFFECT. The obligations of the Company to the Executive hereunder shall survive and continue as to the Executive even if the Executive ceases to be a director, officer, employee and/or agent of the Company. Each and all of the covenants, terms and provisions of this Agreement shall be binding upon and inure to the benefit of the successors to the Company and, upon the death of the Executive, to the benefit of the estate, heirs, executors, administrators and personal representatives of the Executive. 14.9 GENDER AND NUMBER. Wherever the context shall so require, all words herein in the male gender shall be deemed to include the female or neuter gender, all singular words shall include the plural and all plural words shall include the singular. 14. 10 NON-EXCLUSIVITY. The rights of indemnification and reimbursement provided in this Agreement shall be in addition to any rights to which the Executive may otherwise be entitled by statute, bylaw, agreement, vote of stockholders or otherwise. 14. 11 EFFECTIVE DATE. The provisions of this Agreement shall cover claims, actions, suits and proceedings whether now pending or hereafter commenced and shall be retroactive to cover acts or omissions or alleged acts or omissions which heretofore have taken place. IN WITNESS WHEREFORE, the undersigned have executed this Agreement as of the date first above written. THE COMPANY: CYBEAR, INC. a Delaware corporation By: ------------------------------- Name: ------------------------- Title: ------------------------ EXECUTIVE: [NAME] - ---------------------------------- EX-10.7 7 EXHIBIT 10.7 FEDERAL INCOME TAX ALLOCATION AGREEMENT THIS FEDERAL INCOME TAX ALLOCATION AGREEMENT (the "Agreement") is entered into as of the 2nd day February 1997, between Andrx Corporation, a Florida corporation ("Parent"), and Cybear, Inc., a Florida corporation ("Subsidiary"). WITNESSETH: WHEREAS, Parent and Subsidiary are members of an "affiliated group" of corporations (as that term is defined in Section 1504, and is used in Section 1501, of the Internal Revenue Code of 1986, as amended (the "Code")) of which Parent is the common parent (Parent and Subsidiary are sometimes referred to herein, collectively, as the "Group" and individually as the "Member"); WHEREAS, Parent and Subsidiary have agreed to file a consolidated federal income tax return in lieu of separate returns; and WHEREAS, Parent and Subsidiary desire to establish a method for apportioning the Group's consolidated federal income tax liability among the members of the Group and for reimbursing Parent for the payment of the Group's federal income tax liability. NOW, THEREFORE, Parent and Subsidiary agree as follows: 1. CONSOLIDATED RETURN TO BE FILED. Parent and Subsidiary shall file a consolidated return in lieu of separate returns with respect to the income tax imposed by Chapter 1 of the Code beginning for the taxable year ending December 31, 1997 and for any subsequent taxable periods for which the Group is required or permitted to make a consolidated federal income tax return. All consolidated federal income tax returns and amendments thereof required or permitted to be filed by the Group, including all consents and elections, shall be prepared and filed by Parent. Parent shall take all other actions it determines are necessary or appropriate with respect to the Group's federal income tax liability. 2. APPORTIONMENT OF TAX LIABILITY. The Group's consolidated federal income tax liability shall be apportioned among the members of the Group in accordance with the ratio which that portion of the Group's consolidated taxable income attributable to each Member having taxable income bears to the Group's consolidated taxable income, as provided in Sections 1552(a)(1) and 1552(b) of the Code and utilizing the provisions of Treasury Regulations Section 1.1552-1(a)(1). 3. COMPENSATION FOR USE OF DEDUCTIONS, NET OPERATING LOSSES AND CREDITS. Parent and Subsidiary acknowledge that the federal income tax liability apportioned to each Member under Section 2 of this Agreement shall be the federal income tax liability of the Member for purposes of determining the Member's earnings and profits under the Code. Parent and Subsidiary, however, agree that each Member shall be compensated for the use by other members of the Group of deductions, net operating losses, credits and other tax attributes generated by such Member. Accordingly, each Member whose "separate return tax liability" for the taxable year is in excess of such Member's apportioned amount of the Group's consolidated federal income tax liability for the taxable year determined under Section 2 hereof shall pay such excess to Parent for allocation and distribution by Parent to the members of the Group that generated the deductions, net operating losses, credits and other tax attributes utilized by such Member. For purposes of this Agreement, the "separate return tax liability" of each Member for the taxable year shall be determined as if such Member were filing a separate tax return under the Code, and shall be determined without reference to the provisions of Treasury Regulations Section 1.1502-12. 4. LIABILITY FOR THE PAYMENT OF APPORTIONED TAX LIABILITY. Each Member shall be liable only for (x) the portion of the Group's consolidated federal income tax liability apportioned to it under Section 2 hereof and (y) the excess of such Member's separate return tax liability over the apportioned amount as determined under Section 3 hereof. Each Member shall pay to Parent all such amounts within thirty (30) days of receipt of a statement from Parent indicating such amount or amounts. Within ten (10) days of receipt thereof, Parent shall allocate and pay such amounts to the members of the Group that generated the deductions, net operating losses, credits and other tax attributes used by other members of the Group. Each Member hereby agrees to indemnify, hold harmless and defend all other members of the Group from any and all loss, liability, cost, expense or claim of or to the other members of the Group, including without limitation, the fees of counsel with respect thereto, resulting or arising from the amounts determined as owed by such Member pursuant to Sections 2 and 3 of this Agreement. 5. ESTIMATED TAX PAYMENTS. Parent may assess each Member for its share of estimated federal income tax payments to be made by the Group. Payment of the assessment to Parent shall be made within thirty (30) days after such assessment. The payment shall be credited against the portion of the Group's consolidated tax liability apportioned to the Member under this Agreement. 6. EFFECT OF CARRYBACK/CARRYFORWARD TO YEAR NOT COVERED BY THIS AGREEMENT. If part or all of a consolidated net operating loss or tax credit is allocated to a Member pursuant to Treasury Regulations Section 1.1502-21T(b), and such loss or credit is carried back or forward to a year in which the Member filed a separate income tax return or joined in a consolidated federal income tax return of another affiliated group, any refund or reduction in tax liability arising from such carry-back or carryover shall be retained by the Member. The Parent shall determine whether an election shall be made not to carry back any consolidated net operating loss arising in a consolidated return year (including any portion allocated to a Member under Treasury Regulations Section 1.1502-79) in accordance with Section 172(b)(3) of the Code. 7. ADJUSTMENTS FOR REFUNDS AND DEFICIENCIES. If the group's consolidated federal income tax liability is adjusted for any taxable period, whether by means of an amended return, claim for refund, audit by the Internal Revenue Service or 2 otherwise, the liabilities of each Member shall be recomputed under Sections 2 and 3 of the Agreement to give effect to such adjustments. Parent shall determine the effect of the adjustments and shall provide to the members of the Group a statement indicating the portion of each adjustment attributable to each Member. If the adjustment results in a refund for any Member, Parent shall pay to such Member the portion of the refund attributable to such Member within ten (10) days after being notified by Parent of the receipt of the refund. If the adjustment results in a deficiency for any Member, such Member shall pay to Parent the amount of the deficiency attributable to such Member within ten (10) days after the receipt of a statement from Parent indicating the amount attributable to such Member. If any interest is to be paid or received as a result of a consolidated federal income tax deficiency or refund, such interest shall be allocated to the members of the Group in the ratio each Member's portion of the change in the Group's consolidated federal income tax liability bears to the total change in the Group's consolidated federal income tax liability. Any penalty shall be allocated upon such basis as Parent deems just and proper in view of all applicable circumstances. 8. TERMINATION. This Agreement shall apply to the taxable year ending on December 31, 1997 and all subsequent taxable periods, unless Parent and Subsidiaries terminate this Agreement in writing. Notwithstanding such termination, this Agreement shall continue in effect with respect to any payment or refunds due for all taxable periods to which this Agreement applies. Failure of one or more parties hereto to qualify by meeting the definition of a member of an "affiliated group" under Section 1504 of the Code shall not operate to terminate this Agreement with respect to the other parties hereto so long as two or more parties continue to qualify. 9. AVAILABILITY OF RECORDS. All materials, including, but not limited to, returns, supporting schedules, work papers, correspondence and other such documents, relating to the Group's consolidated federal income tax return filed for a taxable year during which this Agreement was in effect shall be made available to any Member that was included in the return during Parent's regular business hours for seven (7) years after the date the return was filed. 10. MEMBER LEAVING GROUP. Any Member which leaves the Group shall continue to be bound by this Agreement. Any tax allocation/sharing or similar agreement subsequently entered into by any Member leaving the Group, should incorporate the Agreement therein. 11. ADDITIONAL MEMBERS OF THE GROUP. Parent and Subsidiary recognize and acknowledge that from time to time other corporations may become members of the affiliated group (as that term is defined in Section 1504 of the Code) and hereby agree that each of those corporations shall become a party to this Agreement by executing an Addendum Agreement under which the corporation becomes one of the "Subsidiaries" and a "Member" under this Agreement as though it was an original party thereto. For this purpose, the then existing members of the Group hereby expressly bind themselves to the Addendum 3 Agreement by Parent's execution of the Addendum Agreement without further action on their part. 12. MISCELLANEOUS. This Agreement shall be binding upon and inure to the benefit of Parent and its successors and each of the members and their respective successors. This Agreement shall be construed under and governed by the laws of the State of Florida. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date written above. ANDRX CORPORATION By: /s/ ANGELO C. MALAHIAS ------------------------------------------ Angelo C. Malahias Its: Vice President and Chief Financial Officer Date: September 15, 1998 CYBEAR, INC. By: /s/ EDWARD E. GOLDMAN ------------------------------------------ Edward E. Goldman, M.D. Its: President and Chief Executive Officer Date: September 15, 1998 4 EX-10.8 8 EXHIBIT 10.8 Standard Lease between Blue Lake, Ltd. and Cybear, Inc., a Florida corporation Dated September 14, 1998 INDEX TO BLUE LAKE CORPORATE CENTER STANDARD LEASE LEASE PAGE NO. -------- 1. PREMISES; BUILDING; AND COMMON AREAS............................ 1 2. LEASE TERM; LEASE DATE.......................................... 2 3. RENT............................................................ 3 4. SECURITY DEPOSIT................................................ 6 5. USE............................................................. 6 6. ACCEPTANCE OF PREMISES; LANDLORD'S WORK......................... 6 7. PARKING......................................................... 7 8. BUILDING SERVICES............................................... 7 9. SECURITY........................................................ 9 10. REPAIRS, MAINTENANCE AND UTILITIES.............................. 9 11. TENANT'S ALTERATIONS............................................ 10 12. LANDLORD'S ADDITIONS AND ALTERATIONS............................ 11 13. ASSIGNMENT AND SUBLETTING....................................... 11 14. TENANT'S INSURANCE COVERAGE..................................... 13 15. LANDLORD'S INSURANCE COVERAGE................................... 14 16. WAIVER OF RIGHT OF RECOVERY..................................... 14 17. DAMAGE OR DESTRUCTION BY CASUALTY............................... 14 18. CONDEMNATION AND EMINENT DOMAIN................................. 15 19. LIMITATION OF LANDLORD'S LIABILITY; INDEMNIFICATION............. 15 20. RELOCATION OF TENANT............................................ 16 21. COMPLIANCE WITH LAWS AND PROCEDURES............................. 16 22. RIGHT OF ENTRY.................................................. 17 23. DEFAULT......................................................... 17 24. LANDLORD'S REMEDIES FOR TENANT'S DEFAULT........................ 18 25. LANDLORD'S RIGHT TO PERFORM FOR TENANT'S ACCOUNT................ 19 26. LIENS........................................................... 20 27. NOTICES......................................................... 20 28. MORTGAGE ESTOPPEL CERTIFICATE; SUBORDINATION.................... 20 29. ATTORNMENT AND MORTGAGEE'S REQUEST.............................. 21 30. TRANSFER BY LANDLORD............................................ 22 31. SURRENDER OF PREMISES; HOLDING OVER............................. 22 32. NO WAIVER, CUMULATIVE REMEDIES.................................. 22 33. WAIVER.......................................................... 22 34. CONSENTS AND APPROVALS.......................................... 23 35. RULES AND REGULATIONS........................................... 23 36. SUCCESSORS AND ASSIGNS.......................................... 23 37. QUIET ENJOYMENT................................................. 23 38. ENTIRE AGREEMENT................................................ 23 39. HAZARDOUS MATERIALS............................................. 23 40. BANKRUPTCY PROVISIONS........................................... 25 41. FIRE PREVENTION SYSTEMS......................................... 26 42. SPECIAL EVENTS.................................................. 27 43. MISCELLANEOUS................................................... 27 44. DELIVERY OF GUARANTY............................................ 29 45. CONFIDENTIALITY................................................. 29 46. SIGNAGE CRITERIA................................................ 29 47. CARPOOLING, MASS TRANSIT AND TRAFFIC CONTROL.................... 29 48. LEASE CONTINGENCIES............................................. 29 49. ASSOCIATION..................................................... 29 50. VENDING MACHINES................................................ 30 51. FOOD SERVICE.................................................... 30 52. AUDITORIUM/CONFERENCE CENTER.................................... 30 53. TELECOMMUNICATIONS.............................................. 30 54. INCENTIVE PROGRAMS.............................................. 31 55. SAVING PROVISION................................................ 31 56. SATELLITE DISH.................................................. 31 BASIC LEASE INFORMATION RIDER BLUE LAKE CORPORATE CENTER STANDARD LEASE PREAMBLE Date of Lease September 14, 1998 ("Lease Commencement Date") PREAMBLE Landlord: BLUE LAKE, LTD., a Florida limited partnership. PREAMBLE Tenant: CYBEAR, INC. a Florida corporation, authorized to do business in the State of Florida SECTION 1 Premises: A portion of the second floor of 5000 Blue Lake Drive, as shown on Exhibit "A" of Blue Lake Corporate Center, Boca Raton, Florida, being hereby designated as: Suite 200. The office building campus (as shown on Exhibit "F") including parking spaces, driveways, walkways, drainage systems, utility systems, green space areas and other elements of the "Blue Lake Corporate Center" are hereinafter collectively referred to as the "Building." SECTION 1 Net Rentable Area of Premises: [18,400] square feet which is stipulated and agreed by the parties (based on [16,000] square feet of usable area and a fifteen (15%) add-on factor); provided, however, that within ten (10) days after substantial completion of the Improvements to the Premises, either Landlord or Tenant shall be entitled to have the Premises measured in accordance with BOMA Standards (ANSI Z65.1-1996). Following such measurement, if it is determined that in fact the Premises contain more or less than the Rentable Area set forth above, Base Rent, Tenant's Share, and any other provision which is based on the amount of square footage leased by Tenant shall be ratably modified. The Rentable Area of the Premises includes restrooms, electrical and mechanical rooms over which the Tenant is herein granted exclusive control and dominion which are themselves deemed part of the Premises, except that Landlord shall maintain such restrooms, electrical and mechanical rooms which are shared among tenants. SECTION 2 Rent Commencement Date: The earlier to occur of (i) the "Completion Date" as defined in the Work Letter, notwithstanding that any Tenant finish work, special fixtures or equipment or decorative treatment has not been performed by Tenant or (ii) the date that Tenant first uses the Premises or any portion thereof for any purpose permitted under this Lease, but in no event shall the Rent Commencement Date occur later than January 1, 1999. SECTION 2 Tenant Access for Improvements Prior to Commencement Date: Upon the execution of this Lease and all addenda hereto, and the delivery by Tenant to Landlord of the appropriate insurance certificates reflecting Tenant's securing of all insurance required by Tenant hereunder and following the recordation of a Notice of Commencement prepared and recorded in accordance Florida Statute 713.10 and Landlord's reasonable approval of Tenant's construction contract for the purpose of confirming the inclusion of a lien prohibition provision in accordance with Section 26 of this Lease, Tenant and Tenant's contractor and sub-contractors shall be provided reasonable access to the Premises at all reasonable times in order to make improvements to the Premises. All work will be defined in the Work Letter attached hereto as Exhibit "B". SECTION 2 Expiration Date: Five (5) years after Rent Commencement Date. SECTION 2 Lease Term: From the Rent Commencement Date plus Five (5) years after the Rent Commencement Date, unless sooner terminated pursuant to any provision hereof; provided, however, that if the Rent Commencement Date is a date other than the first day of a calendar month, said Term shall extend for said number of days at said in addition to the remainder of the calendar month following the Rent Commencement Date. SECTION 2 Renewal Term(s): One Renewal Term of Five (5) years; at Market Rate Rent. SECTION 3 Base Rent: Tenant agrees to pay to Landlord as Rent for the Premises, in advance without demand, deduction or set off (except as otherwise may be specifically provided in the Lease), from and after the Rent Commencement Date and throughout the term, the Annual Base Rent in the amounts as indicated in the following Schedule of Base Rent in equal monthly installments, plus applicable sales tax. Page I ------------------ Blue Lake Standard Lease SCHEDULE OF BASE RENT - ------------------------------------------------------------------------------ PERIOD PER SQUARE FOOT ANNUAL BASE RENT MONTHLY BASE RENT - ------------------------------------------------------------------------------ Months 1 -12: $12.50 $230,000 $19,167.17 - ------------------------------------------------------------------------------ Months 13-24: $12.88 $236,992 $19,749.33 - ------------------------------------------------------------------------------ Months 25-36: $13.27 $244,168 $20,347.33 - ------------------------------------------------------------------------------ Months 37-48: $13.67 $251,528 $20,960.67 - ------------------------------------------------------------------------------ Months 49-60: $14.08 $259,072 $21,589.33 - ------------------------------------------------------------------------------ Each monthly installment in accordance with the above Schedule shall be due and payable on or before the first day of each calendar month succeeding the Rent Commencement Date, except that the rental payment for any fractional calendar month commencing on the Rent Commencement Date of the Lease shall be prorated. SECTION 3 Base Year for Overhead Rent: Calendar year 1999. Estimated per square foot Overhead Rent in Base Year $4.50 SECTION 3 Cap on "Controllable Operating Expenses" (as defined): eight (8.0%) percent applied non-cumulatively. SECTION 3 Tenant's Share: 1.039%. Landlord and Tenant acknowledge that Tenant's Share has been obtained by taking the Net Rentable Area of the Premises and dividing such number by [1,770,600] square feet, being the rentable area contained in the Building as determined by Landlord, and multiplying such quotient by 100. In the event Tenant's Share is changed during a calendar year by reason of a change in the Net Rentable Area of the Premises, Tenant's Share shall thereafter mean the result obtained by dividing the new Net Rentable Area of the Premises by [1,770,600] and multiplying such quotient by 100. SECTION 4 Security Deposit Received: $ N/A Date Received:________________________ Prepaid First Month's Rent $ N/A (including Florida sales tax) Date Received: _________________________ Prepared First Month's Overhead Rent: $ N/A (including Florida sales tax) Date Received: _________________________ Prepaid Last Month's Rent $ N/A (including Florida sales tax) Date Received: _________________________ Prepaid Last Month's Overhead Rent: $ N/A (including Florida sales tax) Date Received: _________________________ Deposit for Energy Management: $ N/A Date Received:_________________________ Deposit for Electric Utilities: $ N/A Date Received:_________________________ Guarantor: Andrx Corporation, a Florida corporation 4001 S. W. 47th Avenue, Suite 201 Fort Lauderdale, Florida 33314 Attention: Scott Lodin, Esq. SECTION 5 Use of Premises: Corporate offices, including software development, internet related sales and service (but not retail sales), and the supporting use of conference and computer facilities, employee breakroom and related non-commercial facilities for employee use only. Page II ------------------ Blue Lake Standard Lease Tenant's Address for Notices Prior to Commencement Date: Cybear, Inc. c/o Andrx Corporation 400 S. W. 47th Avenue, Suite 201 Fort Lauderdale, Florida 33314 Attention: Scott Lodin, Esq. Tenant's Address for Notices After Commencement Date: Tenant The Premises; Attention: Mr. Todd MacLeod with a copy to Tenant's pre-Commencement Date Address Landlord's Address for Notices: Blue Lake, Ltd. 5000 Blue Lake Drive, Suite 100 Boca Raton, Florida 33432 Attention: Michael D. Masanoff, Executive Vice President With copies of default notices only to: Sachs, Sax & Klein, P.A. Suite 4150 301 Yamato Road Boca Raton, Florida 33431 Attention: Michael S. Greene, Esq. SECTION 8 Standby Electrical Generator System Subscription Fee: $500,000.00; pursuant to Rider attached hereto as Exhibit "G" SECTION 15 Amount of General Comprehensive Liability Insurance: $1,000,000.00 per occurrence $3,000,000.00 in the aggregate. WORK LETTER: PARAGRAPH 3G. Landlord's Contribution: $ 15.00 per usable square foot PARAGRAPH 6. Tenant's Construction Agent: /s/ Bill Tucker Tenant may, from time to time, identify a substituted Tenant's Construction Agent from a list of persons pre-approved by Landlord to act as a Tenant's Construction Agent for the Building, or such other person as requested by Tenant having experience in construction of the type and nature of the undertaking pursuant to the Work Letter, and who shall be reasonably acceptable to Landlord. Certain of the information relating to the Lease, including many of the principal economic terms, are set forth in the foregoing Basic Lease Information Rider (the "BLI Rider"). The BLI Rider and the Lease are, I by this reference, hereby incorporated into one another. In the event of any direct conflict between the terms of the BLI Rider and the terms of the Lease, the BLI Rider shall control. Where the Lease simply supplements the BLI Rider and does not conflict directly therewith, the Lease shall control. IN WITNESS WHEREOF, Landlord and Tenant have signed this BLI Rider as of this 14 day of September, 1998. WITNESSES: "TENANT" CYBEAR, INC., a Florida corporation /s/ [ILLEGIBLE] - ----------------------------------- /s/ [ILLEGIBLE] - ----------------------------------- (As to Tenant) By: /s/ SCOTT LODIN ------------------------------------- Name: Scott Lodin Title: Vice President/General Counsel (SEAL) WITNESSES: "LANDLORD" BLUE LAKE, LTD., /s/ [ILLEGIBLE] a Florida limited partnership - ----------------------------------- /s/ [ILLEGIBLE] By: Blue Lake, Inc., a Florida - ----------------------------------- corporation, its general partner (As to Landlord) By: /s/ [ILLEGIBLE] ------------------------------------- Authorized Agent [Illegible} Executive Vice President Page III ------------------ Blue Lake Standard Lease BLUE LAKE CORPORATE CENTER STANDARD LEASE THIS LEASE ("Lease") is made as of today of the 14th day of September, 1998, by and between BLUE LAKE, LTD., a Florida limited partnership ("Landlord") and BEAR, INC., a Florida corporation, authorized to do business in the State of Florida ("Tenant"). WITNESSETH: 1. PREMISES; BUILDING; AND COMMON AREAS. A. PREMISES; BUILDING; AND COMMON AREAS. Landlord leases to Tenant and Tenant leases from Landlord the Premises described in the Basic Lease Information Rider (the "BLI Rider") attached to the front of this Lease and incorporated into this Lease by this reference, and as more particularly outlined on the floor plan attached hereto as Exhibit "A" and by this reference incorporated herein ("Premises"). The parties hereby agree that the Premises contain the number of Net Rentable Area set forth in the BLI Rider. The Premises constitute a portion of the office building campus, including parking spaces, driveways, walkways, drainage systems, utility systems, green space areas, and other elements of the Blue Lake Corporate Center (collectively the "Building"). In addition to the Premises, Tenant has the right to use, in common with others, the lobby, public entrances, public stairways, public areas and public elevators of the Building (the "Common Areas"). The Common Areas serving the Building will at all times be subject to Landlord's exclusive control and management in accordance with the terms and provisions of this Lease. In addition, the Tenant shall be entitled to use during the term of this Lease, up to four thousand square feet of raised flooring located in the Building and identified by Landlord as available for the Premises. Such raised flooring shall be accepted by the Tenant in its "as is, where is, with all faults" condition and Tenant shall be solely responsible for removing the flooring from its current location and installing such in the Premises. Tenant shall return the flooring to the Landlord at the expiration or earlier termination of this Lease, in its current condition, reasonable wear and tear excepted. B. RIGHT OF FIRST REFUSAL. Provided that no default beyond any applicable notice and cure periods shall have occurred under this Lease, the Landlord grants to the Tenant a right of first refusal, exercisable from the date hereof and continuing through one (1) year prior to the expiration of the term of this Lease, unless Tenant, prior to such one (1) year, elects to renew the term hereof as provided in Paragraph 2B hereof, inclusive, to lease the Expansion Premises as described on Exhibit "A-1" attached hereto and made a part hereof upon the terms herein provided (the "Right of First Refusal Term"). If during the Right of First Refusal Term the Landlord shall receive a BONAFIDE third-party offer to lease all or a portion of the Expansion Premises ("Third Party Offer"), then Landlord shall advise Tenant, in writing, of Landlord's intention to accept such Third Party Offer and shall furnish to Tenant all of the basic terms and conditions of such Third Party Offer (the "Landlord's Notice"). Tenant shall thereafter have the option, within ten (10) days following Tenant's receipt of Landlord's Notice, to exercise its Right of First Refusal to lease not less than all of the entire Expansion Premises (notwithstanding a Third Party Offer for the lease of less than all of the Expansion Premises) by giving notice of its election to exercise its Right of First Refusal in writing to Landlord (the "Tenant's Acceptance"). If Tenant timely exercises the right of first refusal, Landlord and Tenant shall, within five (5) business days thereafter, enter into an amendment to this Lease affirming the covenants and conditions contained in this Lease, except that the amendment, with respect to the Expansion Premises shall contain the applicable business terms and conditions as contained in the Third Party Offer. If Tenant waives or fails to exercise its right of first refusal, the Landlord may then lease all or such portion of the Expansion Premises to any other party, including the third party offerer on the same terms and conditions set forth in the Landlord's notice and the Right of First Refusal shall thereafter be terminated on a self-effectuating basis and be of no further force or effect until the third party lease expires (after all elected renewal terms thereof) Notwithstanding the immediately preceding sentence, Landlord may, additionally, request the Tenant to execute a written certification of the lapse and termination of the Right of First Refusal as herein contained. C. NO RESERVATION. Nothing herein shall constitute a reservation or other rights in or to the Expansion Premises or shall impose an obligation on the Landlord to abstain from marketing the Page 1 ------------------ Blue Lake Standard Lease Expansion Premises for lease to third parties, subject to this right of first refusal. 2. LEASE TERM; LEASE DATE A. GENERAL. The lease term ("Lease Term") is for the period of time set forth in the BLI Rider, commencing on the Lease Commencement Date set forth in the BLI Rider ("Commencement Date") and ending on the Lease expiration date set forth in the BLI Rider ("Expiration Date"). Tenant's obligation to pay all rent, including Base Rent, Overhead Rent and Additional Rent, (collectively, "Rent"), as such terms are hereafter defined, will commence on the Rent Commencement Date. Tenant shall observe and perform all of its obligations under this Lease (except its obligations to conduct business), from the earlier to occur of the date that the Premises are delivered to Tenant for the purpose of commencement of the Tenant's improvements to the Premises or the date Tenant otherwise takes possession of the Premises (until the Commencement Date) in the same manner as though the Lease Term began when the Premises were so delivered to Tenant. Except as specifically provided in the BLI Rider, under no circumstances, however, may Tenant enter into possession of the Premises prior to the earlier to occur of the date that the Premises are delivered to Tenant for the purpose of commencement of Tenant's improvements to the Premises or the Commencement Date without the express written consent of Landlord and subject to any reasonable terms of the consent. Tenant shall not be required to pay Rent (as such term is hereinafter defined) for any period prior to the Rent Commencement Date or as otherwise stated in the BLI. However, Tenant shall pay for all utilities and services consumed by or on behalf of Tenant prior to the Rent Commencement Date for construction, fixturing and move-in. Upon Landlord's request, Tenant shall execute a "Rent commencement Expiration Certification Rider" in the form attached hereto and made a part hereof as Exhibit "I". B. RENEWAL OPTION. Landlord grants to Tenant an option (the "Option") to extend the term of this Lease for one (1) additional period of five (5) years (the "Renewal Term") under the terms set forth below. Tenant shall not be entitled to exercise the Option unless each of the following conditions shall be fully satisfied at the time of its exercise: (i) the Lease shall be in full force and effect; (ii) the Tenant originally named in this Lease, or its permitted assignees, shall be in possession of the entire Premises; and (iii) Tenant shall not then be in default under any of the material terms, provisions, covenants or conditions of the Lease beyond any applicable notice and cure periods. In order to exercise the Option, Tenant must first give written request to Landlord, not less than twelve (12) months prior to the Expiration Date of the Initial Lease Term for delivery of Landlord's determination of Market Rent, as defined below. Base Rent for each Renewal Term shall be equal to the Market Rent, as determined in accordance with this section ("Market Rent"). Within thirty (30) days following its receipt of Tenant's request, Landlord shall advise Tenant of Market Rent for each year of the respective Renewal Term. Market Rent (including escalations for successive years of the Renewal Term) shall be determined by Landlord in its reasonable judgment. Landlord's determination of the Market Rent shall be based, as Landlord reasonably deems appropriate, upon then current and projected rents for space in the Building, adjusted for any special conditions applicable to such space and leases, for location, length of term, amount of space and other factors Landlord deems relevant in computing rents for space in the Building, including adjustments for anticipated inflation. Tenant may exercise its option by notifying Landlord; within 30 days from the date on which Tenant was first advised by Landlord of its determination of Market Rent, that Tenant has elected to exercise the Option at the Market Rent determined by Landlord or proceed as provided below. If Tenant exercises the Option as provided, the Expiration Date of the Lease shall be extended for the length of the Renewal Term and Base Rent shall be adjusted to Market Rent. If Tenant shall fail to timely exercise the Option as provided. Tenant shall be deemed to have waived its right to exercise the Option and to occupy the Premises beyond the initial Term of the Lease or beyond any previously exercised Renewal Term of this Lease. The Base Year for the Renewal Term shall be the first Lease year of the Renewal Term. Upon a determination of Base Rent for the First Lease Year of the Renewal Term, Landlord and Tenant shall agree on a Base Rent schedule, in the same format set forth in the BLI Rider for the Initial Lease Term, for the balance of the Renewal Term, based upon the herein above prescribed formula. Landlord's determination shall be based, as Landlord reasonably deems appropriate, upon then current and projected rents for space in the Building, adjusted for any special conditions applicable to such space and leases, for location, length of term, amount of space and other factors Landlord deems relevant in computing rents for space in the Building, including adjustments for anticipated inflation. Any agreement of Landlord and Tenant regarding the amount of Market Rent shall be in writing signed by them within thirty (30) days after the date Tenant was first advised by Landlord of its initial determination of Market Rent, in which event Tenant shall be deemed to have exercised the Option. If Landlord and Tenant are unable to agree upon Market Rent in writing within such thirty (30) day period, Tenant may nevertheless exercise its option by notifying Landlord, within 30 days from the date on which Tenant was first advised by Landlord of its initial determination of Market Rent, that Tenant has elected to exercise the Option at the Market Rent determined by Landlord subject to a reservation of Tenant's right to arbitrate Landlord's determination of Market Rent in accordance with this Section. If Tenant exercises the Option as provided, the termination date of the Lease shall be extended for a period of five (5) years and Base Rent shall be adjusted to Market Rent. If Tenant shall fail to timely exercise the Option as provided, Tenant shall be deemed to have waived its right to exercise the Option and to occupy the Premises beyond the initial term of the Lease. If the parties cannot agree in writing on Market Rent and Tenant timely exercises the Option, Page 2 ------------------ Blue Lake Standard Lease then within thirty (30) days after Tenant's exercise of the Option, Tenant and Landlord shall each select a licensed real estate appraiser with at least ten (10) years substantial commercial leasing expertise particularly in the this area of Palm Beach County, Florida and notify the other party of such selection, and the selected appraisers shall in turn select a similar third appraiser who will determine Market Rent. If the appraisers are unable to agree on a third appraiser within sixty (60) days after Tenant's exercise of the Option, Market Rent shall be determined by suit for declaratory relief. The cost of the third appraiser and any court costs shall be shared equally by the parties. If either party fails to timely select a appraiser and notify the other party of such selection, the other party's timely selected appraiser shall unilaterally determine Market Rent. If Tenant elects to exercise the Option subject to its reservation to contest Market Rent, Tenant shall nonetheless on the commencement of the Renewal Term begin paying Base Rent at the Market Rate determined by Landlord. If Market Rent is ultimately determined to be other than the amount initially determined by Landlord, the next due payment or payments of Rent shall be appropriately adjusted to reflect such overpayment or underpayment retroactive to commencement of the Renewal Term. 3. RENT A. BASE RENT. Beginning on the Rent Commencement Date, and continuing during the Lease Term, Tenant will pay to Landlord in lawful It is estimated that on or before March 31 following a United States Currency as the base rent for the Premises ("Base Rent") the amounts set forth in the BLI Rider, with same being payable without demand, setoff or deduction except as otherwise specifically provided in this Lease, in advance, on or before the first day of each month, in equal monthly installments of the amounts set forth in the BLI Rider, plus applicable sales and other such taxes as are now or later enacted. All payments of Base Rent, Overhead Rent, (and Security Deposits if subsequently applicable during the Lease Term), and any other sums due from Tenant under this Lease shall be made by wire transfer to such account as may be designated (or re-designated from time to time) by Landlord's written notice. Such Rent shall be immediately payable to Landlord upon written demand and any failure to so pay, subject to the grace provisions set forth in Section 3, shall constitute an Event of Default. B. OVERHEAD RENT Beginning on the Rent Commencement Date, Tenant shall pay Tenant's Share, as defined in the BLI Rider, of (I) the total amount of the annual Operating Expenses (as hereafter defined). And (ii) the total amount of Taxes (as hereafter defined). As used herein, "Overhead Rent" means the total of Tenant's allocated Share of Operating Expenses and Taxes. B.1. "CAP" ON CONTROLLABLE OPERATING EXPENSES. Notwithstanding the foregoing, in no event shall the Tenant's share of the Controllable Operating Expenses be increased by more than eight (8%) percent, on a non-cumulative basis, from that charged to the Tenant, as part of Overhead Rent, for the immediately preceding calendar year. Increases in Operating Expenses that are not deemed "controllable" as defined hereunder shall not be limited by the foregoing sentence. Controllable Operating Expenses do not include (i) Taxes, (ii) utility charges and fees (including, but not limited to, water, sewer, electrical, telephone, chilled water and ventilation and air-conditioning charges, cable communications and the like), (iii) premiums for any increases in insurance contracted for by Landlord to the extent that any such increases shall be a commercially reasonable judgment by Landlord, and in conformance with responsible management customary for a Building of the size, nature and character of the Building; (iv) minimum wage changes, and (v) costs resulting from changes in law, to the extent however that any such cost is incurred as to an item which is otherwise chargeable as an Operating Expense and is not otherwise an exclusion from Operating Expenses. B.2. ESTIMATES OF OVERHEAD RENT. Prior to each subsequent calendar year; beginning with the calendar year immediately following the Base Year, Landlord shall, in advance, reasonably estimate for each such calendar year the total amount of the Overhead Rent. One-twelfth (1/12) of the estimated Overhead Rent shall be payable monthly, along with the monthly payment of the Base Rent. B. Overhead Rent Beginning on the Rent Commencement Date, Tenant shall pay Tenant's Share, as defined in the BLI Rider, of (i) the total amount of the annual Operating Expenses (as hereafter defined) and (ii) the total amount of Taxes (as hereafter defined). As used herein, "Overhead Rent" means the total of Tenant's allocated Share of Operating Expenses and Taxes. B.3. RECONCILIATION STATEMENT. It is estimated that on or before March 31 following a calendar year for which Overhead Rent is payable hereunder, Landlord shall provide Tenant with a reconciliation statement showing the amount of the actual components of Overhead Rent for the immediately previous calendar year only. Notwithstanding the provisions of the immediately preceding sentence, should Landlord fail to provide Tenant with a reconciliation statement by June 30 for the immediately preceding calendar year, Tenant shall have no further liability for any additional payment to Landlord that would otherwise be reflected and required in the said reconciliation statement for the preceding year. If the reconciliation statement reflects an underpayment in either component of Overhead Rent, Landlord shall also deliver to Tenant an invoice which Tenant shall pay within thirty (30) days following receipt of such invoice. If the reconciliation statement reflects an overpayment in either component of Overhead Rent, Tenant shall be entitled to either, at Landlord's option, to a credit against the next month's payment of Rent together with a refund check from Landlord for the balance of such overpayment or a refund check from the Landlord for the entire amount of such overpayment If the Lease has expired, the overpayment shall be refunded. In no event shall the Base Rent under this Lease be reduced by virtue of this Section. As used in this paragraph 3., the following terms shall have the following meanings: (1) The term "Operating Expenses" shall mean (i) any and all reasonable costs of ownership, management, operation, repair and maintenance of the Building, including, without limitation, wages, salaries, professionals' fees, taxes, Page 3 ------------------ Blue Lake Standard Lease insurance, benefits and other payroll burdens of all employees, Building Management fee, Common Area janitorial, maintenance, guard and other services, building management office rent or rental value, power, fuel, water, waste disposal, chilled water and hearing, ventilating and air conditioning charges, stand-by electric generator system maintenance, upkeep, monitoring and refueling charges, landscaping care, lighting, garbage removal, window cleaning, system maintenance, parking area care, fees and assessments paid to or on behalf of the "Association" (as later defined herein), and any and all other utilities not separately metered for the Premises or a portion thereof, materials, supplies, maintenance, repairs, insurance applicable to the Building and Landlord's personal property and depreciation on personal property, and (ii) the cost (amortized over such reasonable period as Landlord shall determine together with interest at the rate of twelve percent (12%) per annum on the unamortized balance) of any capital improvements made to the Building by Landlord after the date of this Lease that reduce in a commercially reasonable manner Operating Expenses or made to the Building by Landlord after the date of this Lease that are required under any governmental law or regulation; provided, however, that Operating Expenses shall not include real property taxes, depreciation on the Building, costs of tenants' improvements, marketing or advertising costs for the rental or sale of the Building, costs of electricity or other utilities separately metered for other tenant's spaces, executive or managerial salaries or benefits above the level of management, consulting fees not related to operation, management or repairs, market study fees, capital repairs or replacements (except as provided above), real estate broker's commissions, costs of repairs covered and paid by insurance (subject to deductibles paid by Landlord), fines or penalties for Landlord's failure to pay taxes and assessments before such became delinquent, or any other obligation on time, points, fees and interest charges, principal payments or any other payments of any kind related to Landlord's financing or refinancing of the Building as a whole, transaction costs directly incurred in a sale or transfer of the Building, expenses resulting from defective construction work performed by Landlord, the initial acquisition and installation costs of the stand-by electrical generator and related systems, interest and capital items other than those referred to in subsection (ii) above. Landlord shall maintain accounting books and records in accordance with sound accounting principles. Landlord hereby agrees to deduct each calendar year from the amount of the Operating Expenses the total amount of any and all sums, amounts or charges paid by Tenant or other tenants of the Building directly to Landlord or its agent for specific tenant requested services or specific utility charges, if applicable. Notwithstanding anything to the contrary in the definition of "Operating Expenses", Operating Expenses shall, also, not include any of the following: (a) Legal fees, accounting fees or other expenses related to the defense of Landlord's title to or interest in the Premises or the Building. (b) Payment of debt service on loans secured by a mortgage or lien encumbering the Building or any portion or interest of or in the Building. (c) All costs and expenses which have been paid by Landlord and reimbursed directly to Landlord by third-parties, including other tenants in the Building, rather than through Operating Expenses. (d) Legal fees and disbursements incurred for negotiation of leases or enforcement of leases. (e) Rent and additional rent payable under a ground lease or any other superior lease encumbering the Building. (f) Costs for which Landlord is compensated by insurance proceeds or for which Landlord would have been compensated by insurance proceeds had Landlord carried the insurance required by this Lease. (g) Any fee or expenditure paid to an entity related to Landlord materially in excess of the amount which would be paid in an arms length transaction for materials or services of comparable quality (but only to the extent of such excess). (h) All costs and expenses, including fines, penalties and legal fees) incurred due to a violation caused by Landlord in connection with any new improvements constructed by Landlord within or as part of the Building. (i) Salaries or fringe benefits of full-time personnel of Landlord for any time periods performing for properties other than the Building. (j) Any bad debt loss, rent loss, or reserves for bad debts or rent loss. (k) Costs incurred by Landlord for repairs or replacements to the extent that Landlord is actually reimbursed under warranties or guaranties. (l) Any compensation paid to clerks, attendants, or other persons in any potential commercial parking garage constructed to support the Building for which separate parking fees or charges will be made to tenants. (m) The cost of installing and maintaining any specialty facility, such as a dining facility, athletic or recreational club, or luncheon club if such facility is exclusive to any single tenant of the Building. (n) Costs for sculptures, paintings, and other objects of art located within or outside of the Building, other than the cost of maintaining such sculptures, paintings and objects. Page 4 ------------------ Blue Lake Standard Lease (2) The term "Taxes" shall mean the amount actually incurred by Landlord (exclusive of any penalties, interest or late fees) of all impositions, taxes, assessments (special or otherwise), water and sewer assessments and other governmental liens or charges of any and every kind, nature and sort whatsoever, ordinary and extraordinary, foreseen and unforeseen, and substitutes therefor, including all taxes whatsoever (except for taxes for the following categories which shall be excluded from the definition of Taxes: any inheritance, estate, succession, transfer or gift taxes imposed upon Landlord or any income taxes specifically payable by Landlord as a separate tax-paying entity without regard to Landlord's income source as arising from or out of the Building and/or the land on which it is located) attributable in any manner to the Building, the land on which the Building is located and the approximately 350 acre portion of the property surrounding the building, shown on Exhibit "F" hereto (but excluding the assessed value of any new building(s) and the land allocated to such new building(s) constructed on such campus), or the rents (however the term may be defined) receivable therefrom, or any part thereof, or any use thereon, or any facility located therein or used in conjunction therewith or any charge or other amount required to be paid to any governmental authority. For purposes hereof, until such time as a separate tax folio is established for the Building and the approximate 350 acre campus, the taxes on the Building and other improvements shall be determined from the assessment line-item therefor and the taxes on the approximate 350 acres campus shall be determined by comparison to the assessment for unimproved land located in the Arvida Park of Commerce located in Boca Raton, Florida. The term "Taxes" does not include income, excess profits, estate inheritance, succession, transfer of capital tax assessments on Landlord or on Rent. Tenant hereby agrees that the Overhead Rent from time to time computed by Landlord shall be final and binding for all purposes of this Lease unless, within ninety (90) days after Landlord provides Tenant with written notice of the amount thereof, Tenant provides Landlord with written notice (i) disputing the mathematical accuracy of such amount or whether such is a proper Operating Expense under this Lease (the "Disputed Amount"), and (ii) designating an attorney or accountant, reasonably acceptable to Landlord, and appointed by Tenant, at its sole cost and expense, to review the mathematical accuracy of the Disputed Amount, or whether such is a proper Operating Expense under this Lease with Landlord and/or its designated representatives Tenant shall within thirty (30) days of invoice, pay all of Landlord's reasonable costs and expenses in connection with such review, including reasonable attorneys' fees and accountants' fees, unless as a result thereof the Disputed Amount is demonstrated to reflect a mathematical error in excess of three and one-half percent (3.5%) of the amount actually due from Tenant. If such error is in excess of three and one-half percent (3.5%), Landlord shall pay, within thirty (30) days of invoice, Tenant's reasonable costs and expenses in connection with such review, including reasonable attorneys' fees and accounting fees. Landlord hereby agrees, in the event it receives such notice from Tenant, to cooperate in promptly completing such review and promptly refunding any portion of the Disputed Amount which exceeds the amount actually due from Tenant. Such an audit shall be at Tenant's expense, at any time within ninety (90) days after Landlord's annual statement is delivered to Tenant for such calendar year, provided, that Tenant shall give Landlord not less than fifteen (15) days prior written notice of any such audit and sign a confidential non-disclosure agreement prior to the audit reasonably acceptable to Tenant and subject to any qualifications expressly provided in this Lease. Notwithstanding the foregoing, in no event shall Tenant have the right to dispute or audit Overhead Rent to the extent that such Overhead Rent is less than $4.50 per square foot of Rentable Area. C. LATE CHARGE. Tenant covenants and agrees to pay a late charge in the amount of Five (5.0%) percent of any payment of Base Rent and Overhead Rent not received by Landlord within three (3) days from written notice from Landlord and within ten (10) days from written notice from Landlord for all other payments due hereunder. Tenant shall also pay Landlord interest at a rate equal to twelve percent (12%) per annum accruing on any Rent(s) outstanding beyond such three (3) day period or ten (10) day period, as applicable. Tenant shall pay Landlord any such late charge(s) or interest within five (5) days after landlord notifies Tenant of same. D. DEFINITION OF RENT. The term "Rent" shall refer collectively to Base Rent, Overhead Rent and Additional Rent. The term "Additional Rent" is sometimes used herein to refer to any and all other sums payable by Tenant hereunder, including, but not limited to, parking charges and sums payable on account of default by Tenant. All Rent shall be paid by Tenant without offset, demand or other credit except as otherwise specifically provided herein, and shall be payable only in lawful money of the United States of America which shall be legal tender in payment of all debts and dues, public and private, at the time of payment. All sums payable by Tenant hereunder by check shall be obtained against a financial institution located in the United States of America. The Rent shall be paid by Tenant at the Building management office located in the Building or elsewhere as designated by Landlord in writing to Tenant. Any Rent payable for a portion of a month shall be prorated based upon the number of days in the applicable calendar month. E. RENT TAXES. In addition to Base Rent and Overhead Rent, Tenant shall and hereby agrees to pay to Landlord each month a sum equal to any sales tax, tax on rentals and any other similar charges now existing or hereafter imposed, based upon the privilege of leasing the space leased hereunder or based upon the amount of rent collected therefor. F. COMMENCEMENT OTHER THAN FIRST DAY. If the Commencement Date occurs on any Page 5 ------------------ Blue Lake Standard Lease day other than the first day of the month, or the Lease Term ends on a date other than the last day of a calendar month, Tenant shall occupy the Premises under the terms of this Lease and the pro rata portion of the Rent shall be paid by Tenant; provided, however, that in such an event the Commencement Date, for the purposes of this Lease, shall be deemed to be the first day of the month immediately following the month in which possession is given. G. OVERHEAD RENT AFTER EXPIRATION DATE. Overhead Rent for the final months of this Lease is due and payable even though it may not be calculated until subsequent to the Expiration Date of the Lease. 4. SECURITY DEPOSIT. A. SECURITY DEPOSIT. [Intentionally Omitted.] B. SECURITY INTEREST. Landlord waives any statutory and common law liens for rent, except as any tenant improvements installed or constructed in the Premises, which waiver shall be automatic and self-executing. Notwithstanding the foregoing, Landlord agrees to execute such reasonable documents requested by Tenant to evidence such waiver set forth herein. 5. USE A. GENERAL. Tenant will use and occupy the Premises solely specific uses set forth in the BLI Rider and for no other use whatsoever. Tenant shall, at its own cost and expense, obtain any and all licenses and permits necessary for such use. Tenant acknowledges that its type of business, as above specified, is a material consideration for Landlord's execution of this Lease. Tenant will not commit waste upon the Premises nor suffer or permit the Premises or any part of them to be used in any manner, or suffer or permit anything to be done in or brought into or kept in the Premises or the Building, which would: (i) violate any law or requirement of public authorities, (ii) cause injury to the Building or any part thereof, (iii) annoy or offend other tenants or their patrons or interfere with the normal operations of HVAC, plumbing or other mechanical or electrical systems of the Building or the elevators installed therein, (iv) constitute a public or private nuisance, or (v) alter the appearance of the exterior of the Building or of any portion of the interior other than the Premises pursuant to the provisions of this Lease. Tenant agrees and acknowledges that Tenant shall be responsible for obtaining, and for any and all costs of obtaining, any special amendments to the certificate of occupancy for the Premises and/or the Building and any other governmental permits, authorizations or consents required solely on account of Tenant's use of the Premises. B. PROHIBITED USES. Notwithstanding anything to the contrary in this Lease or the BLI Rider, including but not limited to, the "Use of Premises" Section of the BLI Rider, Tenant hereby covenants and agrees that Tenant's business is not and shall not be, and that Tenant shall not use the Premises or any part thereof, or permit the Premises or any part thereof to be used without Landlord's prior written consent, [(i) for the business of photographic, multilith or multigraph reproductions or offset printing; (ii) for a retail banking, trust company, depository, guarantee or safe deposit business open to the general public, or indoor automated teller machines, (iii) as a savings bank, a savings and loan company open to the general public, (iv) for the sale to the general public of travelers checks, money orders, drafts, foreign exchange or letters of credit or for the receipt of money for transmission, (v) as a stock broker's or dealer's office or for the underwriting or sale of securities open to the general public, (vi) as a restaurant, cafeteria, bar, or an establishment for the sale of confectionery, soda, beverages, sandwiches, ice cream or baked goods or for the preparation, dispensing or consumption of food or beverages in any manner whatsoever, (vii) as a news or cigar stand, (viii) as an employment agency, labor union office, physician's or dentist's office, dance or music studio, school (except for the training of employees and clients of Tenant), (ix) as a barber shop or beauty salon, (x) for the business of (a) operating a shared office facility, that is, a business which subleases space and/or offers centralized services to subtenants or customers on a shared basis, such as secretarial, receptionist, telephone, etc., or (b) for a fee to persons inside or outside of the Building, providing as a service word processing, secretarial, video conferencing, conference services, telephone answering, receptionist or mail receipt services, (xi) for any services or uses to the general public to be conducted on the Premises, (xii) amateur recreational uses or movie theaters, (xiii) retail sales, including but not limited to drug stores or florists, or (xiv) warehousing, showroom and wholesale uses. Nothing in this Section shall preclude Tenant from using any part of the Premises for photographic, multilith or multigraph reproductions to the extent that such uses are incidental to Tenant's own business or activities. 6. ACCEPTANCE OF PREMISES; LANDLORD'S WORK Taking possession of the Premises by Tenant shall be conclusive evidence that the Premises were in good and satisfactory condition when possession was so taken subject to latent defects and Landlord's maintenance and repair obligations provided in this Lease. Unless expressly stated herein to the contrary, Landlord has no obligation to repair, improve, or add to the Premises subsequent to Tenant's taking possession thereof and Tenant shall, at its sole cost and expense and in compliance with the provisions of this Lease, be responsible for any changes, alterations, replacements or repairs, maintenance and decorations to the Premises. Except as may be specifically provided in this Lease, Tenant shall not be required to make alterations to the structural or base building improvements of the Building. Neither Landlord nor Landlord's agents have made any representations or promises with respect to the physical condition of the Building or the Premises, Page 6 ------------------ Blue Lake Standard Lease or any other matter or thing affecting or relating to Premises except as herein expressly set forth, and no use, and its right to permit its principals and guests to rights, easements or licenses are acquired by Tenant use, the parking facilities pursuant to this Lease are by implication or otherwise, except as expressly set subject to the following conditions: (i) Landlord forth in the provisions of this Lease. Notwithstanding Deserves the right to reasonably reduce the number of the foregoing, Landlord represents and warrants to Tenant that it has not received any notice that the Building is currently in violation of any laws, regulations or ordinances. Any existing ceiling system and demountable partitions are to be removed from the Premises to the delivery of the Premises at Landlord's expense. Improvements if any, to be made to the Premises by Tenant shall be made in accordance with the Work Letter. Landlord's published list of pre-approved general contractors and architects for The Blue Lake Corporate Center, as may be amended from time to time Landlord at its option (except if Landlord has already approved a general contractor or architect), shall have exclusive right to bid for Tenant's construction contracts. Improvements, if any, to be made to the Premises by Landlord are specifically set forth in Work Letter and there are no others. All leasehold improvements (as distinguished from trade fixtures and apparatus) installed in the Premises at any time, whether by or on behalf of Tenant or by or on behalf of Landlord, shall not be removed from the Premises at any time, unless such removal is consented to in advance by Landlord; and at the expiration of this Lease (either on the Expiration Date or upon such earlier termination as provided in this Lease), all such leasehold improvements shall be deemed to be part of the Premises, shall not be removed by Tenant when it vacates the Premises, and title thereto shall vest solely in Landlord without payment of any nature to Tenant. All trade fixtures and apparatus (as distinguished from leasehold improvements) owned by Tenant and installed in the Premises shall remain the property of Tenant and shall be removable at any time, including upon the expiration of the Term; provided that Tenant shall repair any damage to the Premises caused by the removal of said trade fixtures and apparatus and shall restore the Premises to substantially the same condition as existed prior to the installation of said trade fixtures and apparatus. The taking of possession by Tenant (or any permitted assignee or subtenant of Tenant) of all or any portion of the Premises for the conduct of business will be deemed conclusive evidence that Tenant has found the Premises, and all of their fixtures and equipment, acceptable, subject to latent defects and Landlord's maintenance and repair obligations provided in this Lease. 7. PARKING A. RESERVATIONS. Landlord has and reserves the right to reasonably alter the methods used to control parking and the right to reasonably establish such controls and rules and regulations (such as parking stickers to be affixed to vehicles) regarding parking that Landlord may deem desirable. Without liability, Landlord will have the right to tow or otherwise remove vehicles improperly parked, blocking ingress or egress lanes, or violating parking rules, at the expense of the offending tenant and/or owner of the vehicle. B. CONDITIONS. Tenant's right to use, and its right to permit its principals and guests to use, the parking facilities pursuant to this Lease are subject to the following conditions: (i) Landlord reserves the right to reasonably reduce the number of spaces in the parking area by not more than ten percent (10%) of the then number of parking area spaces in the parking area and/or reasonably change access thereto so long as such does not materially reduce the number of parking spaces within reasonable priximity to the Premises; and none of the foregoing shall entitle Tenant to any claim against Landlord or to any abatement of Rent (or any part thereof); (ii) Landlord has no obligation to provide a parking lot attendant and Landlord shall have no liability on account of any loss or damage to any caused by the negligence or willful misconduct of Landlord, or its agents, employees or contractors, Tenant hereby agreeing to bear the risk of loss for same; (iii) Tenant, its agents, employees and invitees, shall park their automobiles and other vehicles only where and as reasonably designated from time to time by Landlord within the parking area so long as such remain in reasonable proximity to the Premises; and (iv) if and when so requested by Landlord, Tenant shall furnish Landlord with the license numbers of any vehicles of Tenant, its agents and employees. 8. BUILDING SERVICES A. GENERAL. In general, the services set forth below will be provided by Landlord or Landlord's licensee or an independent contractor contracted for by Landlord at a service level set, defined and regulated consistent with office buildings of similar quality to and in the same immediate geographic area as the Building. During the Lease Term, the regular business hours ("Business Hours") of the Building (including the auditorium and cafeteria) will be 7:00 a.m. to 7:00 p.m., Monday through Saturday, except holidays generally recognized by state and federal governments or as may be shortened in accordance with applicable policies or regulations adopted by any utility company servicing the Building or government. During periods other than Business Hours chilled water will be available from Landlord or its energy manager on prior request on an as-available basis at the per-ton-pricing from time-to-time then in effect, except if such chilled water is separately metered to the Premises, in which event Tenant shall pay the costs of such chilled water as provided in below. Landlord reserves the right to increase the Business Hours. The Building will be accessible to Tenant, its subtenants, agents, servants, employees, contractors, invitees or licensees (collectively, "Tenant's Agents") twenty-four hours per day, seven days per week except in the case of temporary closure due to emergencies, repairs, casualty, governmental or quasi-governmental requirements or as Landlord reasonably deems necessary in order to prevent damage or injury to person or property. Landlord shall use reasonable efforts not to materially disturb or interfere with Tenant's business or Tenant's use of the Premises in connection with any such entry. Page 7 ------------------ Blue Lake Standard Lease (1) ELECTRICITY: (a) Landlord is the exclusive vendee of electrical utility services for the Project. There shall be installed, at Landlord's expense, in conformance with the Work Letter, separate electric metering for the Premises. Tenant shall pay all applicable security deposits required to secure electrical services as provided in the BLI Rider. Landlord shall be solely responsible for the expenses of all sub-metering for all other utility services to the Premises, to the extent such may be reasonably sub-metered. In the event that sub-metering is not available until completion of all demising work for the Premises prior to the Rent Commencement Date electric power will be available through the auspices of lighting and general office equipment use in amounts consistent with Building Standard Electric Capacities. Landlord reserves the right after business hours during non-Business Hours to turn off all unnecessary lighting in the unoccupied areas of the Building to minimize the energy consumption of the Building. Tenant will not, without written consent of Landlord connect with electric current except through existing electrical outlets in the Premises, any major apparatus or major device for the purpose of using electric current, except for Tenant's ability to add a supplemental package air-conditioning unit as provided in this Section 8. (2) STAND-BY ELECTRIC GENERATOR RIDER. Tenant may participate in the stand-by electric generator service program available to the Building by executing the stand-by electric generator subscription rider attached hereto and made a part hereof as Exhibit "G". (3) AIR-CONDITIONING SERVICES: Landlord agrees that either Landlord or its designated utility manager (the "Utility Manager") shall provide, air-conditioning services to the Premises which air-conditioning services (including chilled water) shall be separately metered to the Premises and billed directly by either Landlord or the Utility Manager directly to Tenant. During Business Hours, air conditioning consistent with comparable buildings in the Boca Raton area shall be supplied to the Premises for the purposes of comfort control in the Premises during regular business hours consistent with comparable office buildings in the Boca Raton area. Landlord and Tenant agree that Landlord's air-conditioning system is not designed to cool machinery and equipment. Tenant shall not re-direct, or in any manner modify, the air-conditioning duct distribution to accommodate Tenant's build-out unless any such modifications are first approved in writing by the Landlord, which modifications shall be designed only by an engineer pre-approved by the Landlord. If Tenant requires additional air-conditioning services for comfort control during Business Hours, (i.e., in excess of Building Standard) or during non-Business Hours Landlord shall, in response to Tenant's request for any such additional air-conditioning service accommodate Tenant subject to availability at the then prescribed per-ton hour basis which service shall be billed to Tenant as Additional Rent. At the time of the execution of this Lease, the per-ton hour charge for additional air-conditioning services is $.24. This rate may be subject to change during the Lease Term as evaluated and determined by FPL Services, the Utility Manager or a similar service. At Landlord's option, Landlord may secure air-conditioning controls (thermostats) in lockable metal boxes to regulate the efficiency and use of the system. The Landlord may, at its option, contract with FPL Services, or such other provider of chilled-water distribution system sources as the Landlord may reasonably elect. (4) WATER AND SEWER: Landlord agrees to provide municipally supplied cold water and sewer services to the Common Areas for lavatory purposes. (5) ELEVATOR SERVICE: Subject to events of force majeure, Tenant shall have passenger elevator access to the Premises twenty-four (24) hours per day, seven days per week; however, access for deliveries and use of freight elevators are subject to Landlord's reasonable rules and regulations. (6) WINDOW WASHING: Landlord will provide exterior window washing with reasonable frequency. B. INTERRUPTION OF SERVICES. Tenant understands and agrees that Landlord does not warrant that any of the services referred to above, or any other services which Landlord may supply, will be free from interruption. Tenant acknowledges that any one or more of such services may be suspended by reason of accident or repairs, alterations or improvements necessary to be made, or by strikes or lockouts, or by reason of operation of law, or other causes beyond the control of Landlord. No such interruption or discontinuance of service will be deemed an eviction or a disturbance of Tenant's use and possession of the Premises or any part thereof, or render Landlord liable to Tenant for damages or abatement of Rent or relieve Tenant from the responsibility of performing any of Tenant's obligations under this Lease. However, to the extent that electrical service is interrupted for more than five (5) consecutive business days due to the negligence or willful act of the Landlord, its agents, employees or contractors, and such interruption prevents the Tenant from occupying the Premises for its business operations and Tenant does not occupy the Premises for the duration of such interruption, Rent shall abate to the extent that such interruption continues beyond the five (5) consecutive business day period. C. FIBER OPTICS. Tenant may contract with BellSouth, which has been provided access through the underlying property by Landlord for telecommunication service wiring and installation and which has been designated by the Landlord as the vendor of choice at the Blue Lake Building, for Page 8 ------------------ Blue Lake Standard Lease voice and data telecommunication wiring and services, and installing any telecommunication products and, specifically, dual access points for Tenant's fiber optic lines, at Tenant's sole expense. To the extent that such installation requires the digging of a trench through the Property in order to gain dual access points, the Tenant shall provide the Landlord with plans and schematics for the referenced installation which plans and schematics shall be subject to the reasonable satisfaction of the Landlord and which installation shall be further subject to the approval, as necessary, of the City of Boca Raton or other agencies having jurisdiction thereon. D. UTILITY DEREGULATION: Landlord has advised Tenant that presently, Florida Power & Light ("Electric Service Provider") is the utility company selected by Landlord to provide utility service for the Building. Notwithstanding the foregoing, if permitted by law, Landlord shall have the right at any time and from time to time during the Lease Term to either contract for service from a different company or companies providing electric service (a such company shall hereinafter be referred to as an "Alternate Service Provider") or continue to contract for service from the Electric Service Provider. Tenant shall cooperate with Landlord, the Electric Service Provider and any Alternate Service Provider at all times and, as reasonably necessary, shall allow Landlord, Electric Service Provider, and any Alternate Service Provider reasonable access to the Building's electric lines, feeders, risers, wiring and any other machinery within the Premises. Landlord shall be in no way liable or responsible for any loss, damage or expense that Tenant may sustain or incur by reason of change, failure, interference, disruption or defect in the supply or character of the electric energy furnished to the Premises (except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees or contractors), or if the quantity or character of the electric energy supplied by the Electric Service Provider or any Alternate Service Provider is no longer available or suitable for Tenant's requirements, then no such change, failure, defect, unavailability or unsuitability shall constitute an actual or constructive eviction, in whole or in part, or entitle Tenant to any abatement or diminution of Rent, or relieve Tenant from any of its obligations under the Lease. 9. SECURITY With respect to security for the Building and the parking lot, Landlord and Tenant hereby agree as follows: Security of the Premises is the sole responsibility of the Tenant and that the Landlord has no liability for breach of security to the Premises. Tenant may at Tenant's expense install a security system to the Premises; provided, however, that Tenant, in addition to access otherwise required hereunder, will provide Landlord adequate access to the Premises in case of emergencies particularly regarding Premises that contain fire sprinkler risers and equipment. Landlord will install in the Building, an access device, such as a keypad or card reader, as Landlord may deem appropriate for the Building, in Landlord's sole and absolute discretion. All repairs required to the Premises caused by security breaches are the responsibility of the Tenant, except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees or contractors, however, Landlord may elect to effect such repairs, if appropriate to insure continued security, protection of property, or safety of life. The cost of such repairs shall be Additional Rent. A. TENANT'S RESPONSIBILITY. Tenant shall: (1) abide by all reasonable policies, procedures and rules and regulations for use of the access system, (2) report promptly the loss or theft of all keys which would permit unauthorized entrance to the Premises, Building or parking lot, (3) promptly report to Landlord door-to-door solicitation or other unauthorized activity in the Building or parking lot, and (4) promptly inform the Landlord's security contractor in the event of a break-in or other emergency. In addition, Tenant may, at its option and sole cost and expense, install its own interior security system pursuant to plans to be submitted to Landlord for Landlord's approval, which approval shall not be unreasonably withheld. The Tenant shall deliver mechanic's lien releases prior to the initiation of the work. B. INTERRUPTION OF SECURITY. Tenant acknowledges that the above security provisions may be suspended or modified at Landlord's sole discretion or as a result of causes beyond the reasonable control of Landlord. No such interruption, discontinuance or modification of security service will constitute an eviction, constructive eviction, or a disturbance of Tenant's use and possession of the Premises, and further, no interruption, discontinuance or modification of security service will render Landlord liable to Tenant or third-parties for damages, abatement of Rent, or otherwise, or relieve Tenant of the responsibility of performing Tenant's obligations under this Lease. C. HURRICANE SHUTTER OPTION. Tenant may, at Tenant's sole cost and expense (which shall include all expenses reasonably incurred by Landlord unless plans for hurricane shutters were incorporated as part of the initial construction document review process) install protective hurricane shutters one the interior of the windows of the Premises. Any such installation of hurricane shutters shall be subject to the prior approval of the Landlord, which approval shall not be unreasonably withheld. The hurricane shutters shall be approved by the Landlord as to size, color, type of shutter, mode of attachment and such other criteria as Landlord shall from time-to-time determine. The Tenant must also receive the approval of the City of Boca Raton, Florida prior to the installation of hurricane shutters. 10. REPAIRS, MAINTENANCE AND UTILITIES A. LANDLORD'S RESPONSIBILITIES. During the Lease Term, Landlord shall maintain the Page 9 ------------------ Blue Lake Standard Lease level of repairs and maintenance (and replacements if needed) for the Building, the Common Areas, and all other areas serving the Building, in a manner comparable to office buildings of similar quality to and in the immediate geographic area of the Building and perform or have performed all such repairs and maintenance. Landlord's responsibilities for repairs and maintenance with respect to this paragraph are as follows: (1) the structural, foundation, and roof systems of the Building and the surface parking lot, (2) the Building standard electrical and mechanical systems, (3) the primary water and sewer systems, life-safety, air conditioning, and sprinkler systems, of the Building and to the Premises (excluding, however, those systems which are installed by Tenant for Tenant's sole use), (4) the Building Common Areas and the common area furniture, fixtures, and equipment and exterior windows, (5) the landscaped areas in and about the Building, (6) the parking lot, driveways, sidewalks, drainage systems and exterior Common Areas, and (7) replacement of Building standard fluorescent light bulbs in the Common Areas. B. TENANT'S RESPONSIBILITIES. Tenant shall at its own cost and expense keep and maintain all parts of the Premises and such portion of the Building within the exclusive control of Tenant in good condition, promptly making all necessary repairs and replacements, whether ordinary or extraordinary, with materials and workmanship of the same character, kind and quality as the original, including but not limited to interior windows, glass and plate glass, doors, skylights, any, special office entries, interior walls and finish work, floors and floor coverings, heating and air conditioning, electrical systems and fixtures, sprinkler systems, water heaters, truck doors, and plumbing work and fixtures, all of the foregoing systems inside the Premises. Tenant as part of its obligation hereunder shall keep the whole of the Premises in a clean and sanitary condition. Tenant will as far as possible keep all such parts of the Premises from Deteriorating, ordinary wear and tear excepted, and from falling temporarily out of repair, and upon termination of this Lease in any way. Tenant will yield up the Premises to Landlord in good condition and repair, loss by fire or other casualty covered by insurance to be secured pursuant to section 14 excepted (but not excepting any damage to glass or loss not reimbursed by insurance because of the existence of a deductible under the appropriate policy, ordinary wear and tear excepted). Tenant shall not damage any demising wall or disturb the integrity and supports provided by any demising wall and shall, at its sole cost and expense, properly repair any damage or injury to any demising wall caused by Tenant or its employees, agents or invitees. Tenant shall, at its own cost and expense, as additional rent, pay for the repair of any damage to the Premises or the Building, resulting from and/or caused in whole or in part by the negligence or misconduct of Tenant, its agent, servants, employees, patrons, customers, or any other person entering upon the Building as a result of Tenant's business activities caused by Tenant's default hereunder. C. REPAIRS AND MAINTENANCE; MISCELLANEOUS. Notwithstanding Anything to the contrary in this Lease, Landlord shall have no responsibility to repair or maintain the Building, any of its components, the Common Areas, the Premises, or any fixture, improvement, trade fixture, or any item of personal property contained in the Building, the Common Areas, and/or the Premises if such repairs or maintenance are required because of the occurrence of any of the following: (i) the improper acts, misuse, improper conduct, omission or neglect of Tenant or Tenant's Agents, or (ii) the conduct of business in the Premises. Should Landlord elect to make repairs or maintenance occasioned by the occurrence of any of the foregoing, Tenant shall pay as Additional Rent all such reasonable costs and expenses incurred by Landlord. Landlord shall have the right to reasonably approve in advance all work, repair, maintenance or otherwise, to be performed under this Lease by Tenant and all of Tenant's repairmen, contractors, subcontractors and suppliers performing work or supplying materials. Tenant shall be responsible for all permits, inspections and certificates for accomplishing the above. Tenant shall obtain lien waivers for all work done in or to the Premises, by contractors, subcontractors, and suppliers retained by Tenant. 11. TENANT'S ALTERATIONS A. GENERAL. During the Lease Term, Tenant will make no alterations, additions or improvements in or to the Premises or the Building envelope, structure, roof, mechanical and plumbing systems, electrical systems, or any area in which asbestos has been located (as noted in the Environmental Report (as hereinafter defined) or as identified in writing by the Landlord), and will perform no work the cost of which is in excess of $20,000.00 in the aggregate (any and all of such alterations, additions or improvements other than those set forth in the Work Letter attached hereto are collectively referred to in this Lease as the "Alteration(s)", and the foregoing Alterations collectively referred to as "Major Alterations"), without the prior written consent of Landlord, which consent shall not be unreasonably withheld. Tenant shall submit to Landlord detailed drawings and plans of the proposed Major Alterations at the time Landlord's consent is sought. Upon Landlord's consent to any proposed Major Alterations by Tenant, such consent will be conditioned upon Tenant's agreement to comply with all reasonable requirements established by Landlord, including safety requirements and the matters referenced in Section 22 of this Lease. All Alterations shall be done in compliance with all other applicable provisions of this Lease and with all applicable laws, ordinances, directives, rules and regulations of government or authorities having jurisdiction, including, without limitation, the Americans with Disabilities Act (ADA), the Florida Accessibility Code, and all laws dealing with the abatement, storage, transportation and disposal of asbestos or other hazardous materials, which work, shall be effected by contractors and consultants reasonably approved by Landlord and in compliance with all applicable laws and with Page 10 ------------------ Blue Lake Standard Lease Landlord's rules and regulations. Tenant may provide Landlord with a list of proposed contractors and consultants regularly engaged by Tenant for minor Alterations such as carpeting, painting, and low voltage wiring. Once such list has been approved by Landlord, the Tenant shall not be required to obtain separate approvals for such contractors and consultants for each such minor Alterations project. Notwithstanding anything to the contrary contained in this Section, Tenant shall not penetrate or disrupt the structural columns of the Building located within the Premises; and shall not penetrate or disrupt any area within three (3) feet of any structural column in performing any Alterations, without Landlord's prior written consent which shall not be unreasonably withheld or delayed. All Material Alterations shall be performed by those pre-qualified architects and contractors designated by Landlord as approved for the Blue Lake Corporate Center, a list of which are attached hereto and made a part hereof as Exhibit "B-3", which list is subject to amendment from time-to-time. If Tenant elects to remove any Major Alterations at the expiration of the Lease, Tenant shall repair any and all damage caused to the Premise by such removal. Additionally, prior to the commencement of any work by or for Tenant, Tenant shall furnish to Landlord certificates evidencing the existence of builder's risk, comprehensive general liability, and worker's compensation insurance complying with the requirements of Insurance Section of this Lease. Any damage to any part of the Building that occurs as a result of any Alterations shall be repaired by Tenant, as soon as reasonably practicable, to the reasonable satisfaction of Landlord. Tenant and its contractor and all other persons performing any Alterations shall abide by the Landlord's reasonable job site rules and regulations and reasonably cooperate with Landlord's construction representative in coordinating all of the work in the Building including, without limitation, the hours of work, parking, and use of the construction elevator. Landlord shall not charge any other fee to Tenant in respect of Landlord's construction representative. All alterations will comply with the requirements of any energy efficiency program offered by the electric service provided to the Building to the extent practicable. All materials used in any Major Alterations, including, without limitation, paint, carpet, wall or window coverings, carpet glues, and any other chemicals shall be subject to Landlord's prior written reasonable approval. All alterations shall be done in a good and workmanlike manner. Tenant shall, prior to the commencement of any Alterations, obtain and exhibit to Landlord any governmental permit required for the Alterations. Within ten (10) days after completion of any Alteration, Tenant shall deliver to the Landlord, copies of any plans and specifications for such Alteration. All contractors, sub-contractors, mechanics, laborers and materialmen shall be put on notice of and shall be subject to the fact that Tenant is not authorized to subject Landlord's interest in the Building or the Premises to any claim for construction, mechanics, laborer's and materialman's liens and all persons dealing directly or indirectly with Tenant may not look to the Landlord's interest in the Premises as security for payment, all as more fully provided in Section 26 of this Lease. B. ALTERATION COSTS. (1) Tenant shall pay to Landlord as Additional Rent (or to its nominee or designated contractor, as Landlord may direct) in connection with all Major Alterations (other than the initial tenant improvements) reasonable fees and costs of Landlord's engineers, architects, and construction managers for review and approval of all plans and specifications for such Major Alteration, and for all other reasonable costs and expenses incurred by Landlord as a result of or in connection with each such Major Alteration, based on an hourly fee and reasonable and customary hours expended for each such Major Alteration. (2) The Major Alteration costs shall be paid monthly installments during the course of the performance of the Major Alteration, within thirty (30) days from receipt of Landlord's reasonably detailed invoice. Within thirty (30) days after completion of the Major Alteration, Tenant shall pay to Landlord the entire balance of the Major Alteration costs if not theretofore paid in full. 12. LANDLORD'S ADDITIONS AND ALTERATIONS Landlord has the right to make changes in and about the Building and parking areas, including, but not limited to, signs, entrances, address or name of Building. Such changes may include, but not be limited to, rehabilitation, redecoration, refurbishment and refixturing of the Building and expansion of or structural changes to the Building. The right of Tenant to quiet enjoyment and peaceful possession given under the Lease will not be deemed breached or interfered with by reason of Landlord's actions pursuant to this paragraph so long as such actions do not materially deprive Tenant of its use and enjoyment of the Premises. If Landlord voluntarily changes the street address of the Building, then Landlord will reimburse Tenant for all reasonable expenses incurred by Tenant in connection with reprinting stationery, business cards, and brochures due to such change (but not to exceed $5,000.00), unless Landlord provides Tenant at least one hundred twenty (120) days prior written notice of such change. 13. ASSIGNMENT AND SUBLETTING A. LANDLORD'S CONSENT REQUIRED. Except as provided below with respect to assignment of this Lease following Tenants bankruptcy, neither Tenant, nor Tenant's legal representatives or successors-in-interest by operation of law or otherwise will effect a "Transfer", as herein defined without first obtaining the consent of Landlord, which consent Landlord shall not unreasonably withhold or delay provided that all of the requirements of paragraph B. of this Section 13 are satisfied. As used in this Section 13, any of the following shall be deemed to be a Transfer ("Transfer"): assignment of this Lease, in whole or in part; sublet of all or any part of the Premises; any license allowing anyone other than Tenant to use or occupy all or any part of the Page 11 ------------------ Blue Lake Standard Lease Premises; a pledge or encumbrance by mortgage or other instrument of Tenant's interest in this Lease; any transfer of corporate shares as described in paragraph C. of this Section 13; or any transfer of partnership interest as described in paragraph D. of this Section 13. Consent by Landlord to any transfer shall not constitute a waiver of the requirement for such consent to any subsequent transfer. Upon such approved assignment, Tenant shall not be released from its obligations hereunder arising after such assignment has been accomplished, unless the approved assignee specifically assumes, in writing, for the benefit of the Landlord, all such obligations, in which event Tenant shall be released of all such obligations hereunder. B. CONDITIONS FOR TRANSFER APPROVAL. Unless all of the following conditions are satisfied, Landlord withholding of consent will be deemed reasonable: (1) In Landlord's reasonable judgment, the proposed assignee or subtenant or occupant is engaged in a business or activity, which (a) is in keeping with the then zoning requirements, (b) is limited to the use of the Premises as set forth in the BLI Rider, and (c) will not violate any negative covenant as to use contained in any other lease of office space in the Building; (d) use of the Premises by the proposed transferee or assignee will not violate or create any potential violation of any laws or any other agreements affecting the Premises, the Building, the Landlord or other tenants; (2) The proposed transferee is a reputable person of good character, in Landlord's reasonable judgment, and has sufficient financial wherewithal to discharge its obligations under this Lease and/or the proposed Agreement of Assignment or the Sublease. (3) The form of the proposed sublease or instrument of assignment or occupancy shall be reasonably satisfactory to Landlord, and shall comply with the applicable provisions of this Section; (4) There shall not be more than a total of three (3) occupying entities (including Tenant and any assignee or sublessee requiring approval by Landlord hereunder) of the Premises; and (5) The proposed subtenant or assignee or occupant shall not be entitled, directly or indirectly, to diplomatic or sovereign immunity and shall be subject to the service of process in, and the jurisdiction of the courts of the State of Florida. (6) Such transferee (if an assignment) shall assume in writing, in a form reasonably acceptable to Landlord, all of Tenant's obligations hereunder and Tenant shall provide Landlord with a copy of such assumption/ transfer document; (7) Tenant shall reimburse Landlord for all of its reasonable out-of-pocket costs and expenses incurred with respect to the transfer, not to exceed $5,000.00. (8) Tenant to which the Premises were initially leased shall continue to remain liable under this Lease for the performance of all terms, including but not limited to, payment of Rental due under this Lease; (9) Tenant's Guarantor, if any, shall continue to remain liable under the terms of the Guaranty of this Lease and, if Landlord deems it necessary, such guarantor shall execute such documents necessary to insure the continuation of its guaranty; (10) Each of Landlord's Mortgagees shall have consented in writing to such transfer. (11) Tenant shall give notice of a requested transfer to Landlord, which notice shall be accompanied by (a) a conformed or photostatic copy of the proposed assignment or sublease, the effective or commencement date of which shall be at least thirty (30) days after the giving of such notice, (b) a statement setting forth in reasonable detail the identity of the proposed assignee or subtenant, the nature of its business and its proposed use of the Premises, (c) current financial information with respect to the proposed assignee or subtenant, including, without limitation, its most recent financial report and (d) such other information as Landlord may reasonably request. (12) The proposed use of the Premises by the Transferee will not require increased services from the Landlord from that provided to Tenant under the Lease. (13) Then sublease or assignment will not violate any exclusivity clause contained in any lease affecting any portion of the Building. C. TRANSFER OF CORPORATE SHARES. Notwithstanding anything to the contrary contained in this Lease, Tenant may assign this Lease or sublet all or any portion of the Premises from time to time, without Landlord's consent, to any entity controlling, controlled by or under common control with Tenant, or to any successor of Tenant resulting from a merger or consolidation of Tenant, or as a result of a sale by Tenant of all or substantially all of its assets or stock, provided that no such transfer shall relieve Tenant or the Guarantor from any liability under this Lease, whether accrued to the date of such transfer or thereafter accruing. In addition, any change in the controlling interest in the stock of Tenant as a result of an initial public offering of Tenant's stock, and any transfer of the capital stock of Tenant by persons or parties through the "over-the-counter market" or through any recognized stock exchange, shall not be deemed to be a transfer requiring Landlord's consent. Landlord shall not be entitled to receive any portion of Page 12 ------------------ Blue Lake Standard Lease the Transfer consideration as described below arising out of an assignment or sublease not requiring Landlord's consent. Tenant shall provide written notice of such assignment or subletting, together with the name and address of the assignee or subtenant, five (5) days prior to the assignment or subletting to the extent permitted by law, but in no event more than ten (10) days after such assignment or subletting. D. ACCEPTANCE OF RENT FROM TRANSFEREE. The acceptance by Landlord of the payment of Rent following any assignment or other transfer prohibited by this Section shall not be deemed to be a consent by Landlord to any such assignment or other transfer nor shall the same be deemed to be a waiver of any right or remedy of Landlord hereunder. Following a permitted sub-lease, if Tenant breaches any of the terms and provisions of this Lease, Landlord may elect to receive directly from the Sub-tenant due or payable to Tenant by Sub-Tenant pursuant to the Sub-Lease, and upon receipt of a written notice from Landlord referencing this section, Sub-Tenant shall have to pay to Landlord any and all sums becoming due or payable under the Sub-Lease. Tenant shall receive from Landlord a corresponding credit for such sums against any payments then due or thereafter becoming due from Tenant. Neither the giving of such written notice to Sub-Tenant nor the receipt of such direct payments from the Sub-Tenant shall cause the Landlord to assume any of Tenant's duties, obligations, and/or liabilities under any sublease, nor shall such event impose upon Landlord the duty or obligation to honor the sublease or subsequently to accept Sub-Tenant's attornment. E. If, this Lease is purported to be assigned, without the consent of the Landlord, or the Premises are sublet or occupied by anyone other than Tenant, Landlord may accept rents from the assignee, subtenant or occupant and apply the net amount received to the Rent reserved in this Lease, but no such assignment, subletting, occupancy or acceptance of Rent shall be deemed a waiver of the requirement for Landlord's consent as contained in this section or constitute a novation or otherwise release Tenant from its obligations under this Lease. F. If Landlord shall consent to any Transfer, Tenant shall in consideration therefor, pay to Landlord as Additional Rent, an amount equal to one hundred (100%) percent of the Transfer Consideration, or Landlord may elect to recapture the Transferred portion of the Premises and terminate this Lease with respect to that portion only. For purposes of this paragraph, the term Transfer consideration shall mean in any Lease Year (i) any rents, additional charges or other consideration payable to Tenant by the transferee of the Transfer which is in excess of the Base Rent and Overhead Rent accruing during such Lease Year, net of the reasonable costs incurred by Tenant in connection with the Transfer including but not limited to reasonable fees paid to Tenant's attorneys and accountants with respect to the Transfer, broker commissions, and advertising costs associated therewith, and improvement costs. Landlord shall have the right to audit Tenant's books and records during normal business hours, at a location in South Florida reasonably designated by Tenant, upon reasonable notice to determine the amount of Transfer Consideration payable to Landlord. In the event such audit reveals an understatement of Transfer Consideration in excess of five percent (5%) of the actual Transfer Consideration due Landlord, Tenant shall pay for the cost of such audit within ten (10) business days after Landlord's written demand for same otherwise, Landlord shall be solely responsible for the costs of such audit. G. Any permitted sublease shall provide: (i) the subtenant shall comply with all applicable terms and conditions of this Lease to be performed by Tenant (except as to Rent); (ii) the sublease is expressly subject to all of the terms and provisions of this Lease; and (iii) unless Landlord elects otherwise, the sublease will not survive the termination of this Lease (whether voluntarily or involuntarily) or resumption of possession of the Premises by Landlord following a default by Tenant. The sublease shall further provide that if Landlord elects, the sublease shall further survive a termination of this Lease or resumption of possession of the Premises by Landlord following a default by Tenant, the subtenant will, at the election of Landlord, attorn to the Landlord and continue to perform its obligations under its sublease as if this Lease had not been terminated and the sublease were a direct lease between the Landlord and subtenant. The sublease shall otherwise be in form and substance reasonably satisfactory to the Landlord's lawyer. Any permitted assignment of lease shall contain an assumption by the Assignee of all terms, covenants and conditions of this Lease to be performed by the Tenant and shall otherwise be in form and substance reasonably satisfactory to the Landlord's lawyer. H. BUILDING DIRECTORY ADDITIONS. The listing or posting of any name, other than that of Tenant, whether on the door or exterior wall of the Premises, the Building's tenant directory in the lobby or elevator, or elsewhere shall not (i) constitute a waiver of Landlord's rights to withhold consent of any sublease or assignment pursuant to this Section 13; (ii) be deemed an implied consent by Landlord to any sublease of the Premises or any portion thereof, to any assignment or transfer of the Lease, or to any unauthorized occupancy of the Premises, except in accordance with the express terms of that Lease; or (iii) operate to vest any right or interest in the Lease or in the Premises. Any such listing as described in this subsection shall constitute a privilege extended by Landlord to Tenant and shall be immediately revocable at Landlord's will by notice to Tenant. 14. TENANT'SINSURANCE COVERAGE A. GENERAL. Tenant agrees that, at all times during the Lease Term (as well as prior and subsequent thereto if Tenant or any of Tenant's Agents should then use or occupy any portion of the Premises), it will keep in force, with an insurance company licensed to do business in the State of Florida, and at least A+lX-rated in the most current Page 13 ------------------ Blue Lake Standard Lease edition of Best's Insurance Reports and acceptable to Landlord, (i) without deductible in excess of $5,000.00, comprehensive general liability insurance, including coverage for bodily injury and death, property damage and personal injury and contractual liability as referred to below, in the amount of not less than the amount set forth in the BLI Rider, combined single limit per occurrence for injury (or death) and damages to property, (ii) with deductible of not more than Five Thousand Dollars ($5,000.00), insurance on an "All Risk or Physical Loss" basis, including sprinkler leakage, vandalism, malicious mischief, fire and extended coverage, covering all improvements to the Premises, fixtures, furnishings, removable floor coverings, equipment, signs and all other decoration or stock in trade, in the amounts of not less than the full replacement value thereof, and (iii) workmen's compensation and employer's liability insurance, if required by statute. Such policies will: (i) include Landlord, Landlord's Lender, and Landlord's affiliates, or such other parties as Landlord may reasonably designate as additional insured's, (ii) be considered primary insurance, (iii) include within the terms of the policy or by contractual liability endorsement coverage insuring Tenant's indemnity obligations under paragraph 19 for bodily injury and property damage, and (v) provide that it may not be canceled or changed without at least thirty (30) days prior written notice from the company providing such insurance to each party insured thereunder. Tenant will also maintain throughout the Lease Term worker's compensation insurance with not less than the maximum statutory limits of coverage. B. EVIDENCE. The insurance coverages to be provided by Tenant will be for a period of not less than one year. At least thirty (30) days prior to the Commencement Date, Tenant will deliver to Landlord original certificates of all such paid-up insurance; thereafter, at least thirty (30) days prior to the expiration of any policy Tenant will deliver to Landlord such original certificates as will evidence a paid-up renewal or new policy to take the place of the one expiring. Any insurance required of Tenant under this Lease may be furnished by Tenant under an umbrella or blanket policy carried by Tenant. Such umbrella or blanket policy shall contain an endorsement that names Landlord as an additional insured, references the Premises, and provides for a minimum limit available for the Premises equal to the insurance amounts required in the Lease. 15. LANDLORD'S INSURANCE COVERAGE A. GENERAL. Landlord will at all times during the Lease Term maintain a policy or policies of insurance insuring the Building against loss or damage by fire, explosion or other hazards and contingencies typically covered by insurance for an amount acceptable to the mortgagees encumbering the Building. Landlord reserves the right, in its reasonable business judgement, to self insure in lieu of maintaining such policies. B. TENANT'S ACTS. Tenant will not do or permit anything to be done upon or bring or keep or permit anything to be brought or kept upon the Premises which will increase Landlord's rate of insurance on the Building. If by reason of the failure of Tenant to comply with the terms of this Lease, or by reason of Tenant's occupancy (even though permitted or contemplated by this Lease), the insurance rate shall at any time be higher than it would otherwise be, Tenant will reimburse Landlord for that part of all insurance premiums charged because of such violation or occupancy by Tenant. Tenant agrees to comply with any reasonable requests or recommendation made by Landlords insurance underwriter inspectors. C. EXCLUSIONS. Tenant acknowledges that Landlord will not carry insurance on tenant improvements, furniture, furnishings, trade fixtures, equipment installed in or made to the Premises by or for Tenant, in accordance with the Work Letter attached hereto, and Tenant agrees that Tenant, and not Landlord, will be obligated to promptly repair any damage thereto or replace the same. 16. WAIVER OF RIGHT OF RECOVERY Except as otherwise provided in this Lease, neither Landlord nor Tenant shall be liable to the other for any damage to any building, structure or other tangible property, or any resulting loss of income, or losses under worker's compensation laws and benefits, even though such loss or damage might have been occasioned by the negligence of such party, its agents or employees. The provisions of this Section shall not limit the indemnification for liability to third parties pursuant to Section 19. As used in this section 16.A., "damage" refers to any loss, destruction or other damage. 17. DAMAGE OR DESTRUCTION BY CASUALTY A. LANDLORD'S ABSOLUTE RIGHT TO TERMINATE. If by fire or other casualty the Premises or the Building is damaged or destroyed to the extent of Twenty Five (25%) Percent or more of the insured value thereof but in the reasonable estimation of Landlord made within thirty (30) days of the fire or casualty cannot be restored in less than two hundred ten (210) days from the date of Landlord's notice, Landlord or Tenant will have the option of terminating this Lease or any renewal thereof by serving written notice upon the other within ninety (90) days from the date of the casualty and any prepaid Rent or Additional Rent will be prorated as of the date of destruction and the unearned portion of such Rent will be refunded to Tenant without interest. If neither party elects to terminate, Landlord shall promptly commence to restore and diligently and continuously complete within such two hundred and ten (210) days. B. QUALIFIED RIGHT TO TERMINATE. In addition to the foregoing, if this Lease is not cancelled and the Landlord undertakes such reconstruction or repair but does not complete the reconstruction or repair within two hundred ten (210) Page 14 ------------------ Blue Lake Standard Lease days after the date of the fire or other casualty, then the Tenant shall have the additional right to terminate this Lease by written notice to the Landlord delivered within thirty (30) days after the expiration of such two hundred ten (210) day period. C. OBLIGATION TO RESTORE. If by fire or other casualty either the Premises or the Building is destroyed or damaged, but only to the extent of less than Twenty-Five (25%) Percent of the insured value of the Premises or the Building (as applicable), and more than one (1) year remains in either the initial Lease Term or Renewal Term, as applicable, then Landlord will restore the Premises within ninety (90) days of the date of the fire or other casualty subject to events of force majeure. D. RENT ADJUSTMENTS. In the event of restoration by Landlord, all Base Rent and Additional Rent paid in advance shall be apportioned as of the date of damage or destruction and all such Base Rent and Additional Rent as above described, thereafter accruing, shall be equitably and proportionally adjusted according to the nature and extent of the destruction or damage, pending substantial completion of rebuilding, restoration or repair. In the event the destruction or damage is so extensive as to make it impossible for Tenant to conduct Tenant's business in the Premises, Rent and Additional Rent will be fully abated until the Premises are substantially restored by Landlord or until Tenant resumes use and occupancy of the Premises, whichever shall first occur. In lieu of abating Rent and Additional Rent, as provided above, Landlord shall have the right to temporarily or permanently relocate Tenant to another space reasonably acceptable to Tenant. Landlord will not be liable for any damage, whether proximate or consequential, to, or any inconvenience or interruption of the business of Tenant or Tenant's Agents, occasioned by fire or other casualty except to the extent caused by the negligence or its willful misconduct of the Landlord, its agents, employees or contractors. E. QUALIFICATIONS. Notwithstanding the foregoing, Landlord's obligation to restore exists (i) only if and/or to the extent, that the insurance proceeds received by Landlord are sufficient to compensate Landlord for its restoration costs and/or (ii) the area unaffected by the casualty may, as determined by Landlord's reasonable business judgment, be restored as a profitable, and self functioning unit. 18. CONDEMNATION AND EMINENT DOMAIN A. ABSOLUTE RIGHT TO TERMINATE. If all or a material part of the Premises or the Building or the parking spaces is taken for any public or quasi-public use under any governmental law, ordinance or regulation or by right of eminent domain or by purchase in lieu thereof, and the taking would prevent or materially interfere with the use of the Premises for the purpose for which they are then being used, this Lease will terminate and the Rent will be abated during the unexpired portion of this Lease effective on the date physical possession is taken by the condemning authority and any unearned portion of Rent prepaid will be refunded to Tenant. Tenant will have no claim to the condemnation award, other than as to its Tenant Improvements, trade fixtures, moving expenses, and other out of pocket damages so long as such does not diminish the Landlord's award. B. OBLIGATION TO RESTORE. In the event an immaterial part of the Premises or the Building or the parking spaces is taken for any public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain or by purchase in lieu thereof, and this Lease is not terminated as provided in subsection A above, then Landlord shall, subject to the remaining provisions of this Section, at Landlord's expense, as soon as reasonably practicable, restore the portion of the Premises (for which Landlord receives the condemnation award pursuant hereto) and the Building to the extent necessary to make them reasonably tenantable. The Rent payable under this Lease during the unexpired portion of the Lease Term shall be adjusted to such an extent as may be fair and reasonable under the circumstances. Tenant shall have no claim to the condemnation award with respect to the leasehold estate but, in a separate proceeding, may make a separate claim for trade fixtures and tenant improvements installed in the Premises by and at the expense of Tenant and Tenant's moving expense. In no event will Tenant have any claim for the value of the unexpired Lease Term. C. QUALIFICATIONS. Notwithstanding the foregoing, Landlord's obligation to restore exists (i) only if and/or to the extent, that the condemnation or similar award received by Landlord is sufficient to compensate Landlord for its loss and its restoration costs and/or (ii) the area unaffected by the condemnation or similar proceeding may, as determined by Landlord's reasonable business judgment, be restored as a profitable, and self functioning unit. 19. LIMITATION OF LANDLORD'S LIABILITY; INDEMNIFICATION A. PERSONAL PROPERTY. All personal property placed or moved into the Building will be at the sole risk of Tenant or other owner. Landlord will not be liable to Tenant or others for any damage to person or property arising from theft, vandalism, air-conditioning malfunction, the bursting or leaking of water pipes, any act or omission of any cotenant or occupant of the Building or of any other person, or otherwise, except to the extent caused by the negligence or willful misconduct of the Landlord, its agents, employees or contractors. B. LIMITATIONS. Notwithstanding any contrary provision of this Lease: (i) Tenant will look solely (to the extent insurance coverage is not applicable or available) to the interest of Landlord (or its successor as Landlord hereunder) in the Building (including proceeds of sale, insurance and condemnation) for the satisfaction of any judgment or other judicial process requiring the payment of money Page 15 ------------------ Blue Lake Standard Lease as a result of any negligence or breach of this Lease by Landlord or its successor or of Landlord's managing agent (including any beneficial owners, partners, corporations and/or others affiliated or in any way related to Landlord or such successor or managing agent) and Landlord has no personal liability hereunder of any kind. C. INDEMNITY. Tenant agrees to indemnify, defend and hold harmless Landlord and its agents from and against all claims, causes of actions, liabilities, judgments, damages, losses, costs and expenses, including reasonable attorneys' fees and costs, including appellate proceedings and bankruptcy proceedings, incurred or suffered by Landlord and arising from or in any way connected with the Premises or the use thereof or any acts, omissions, neglect or fault of Tenant or any of Tenant's Agents, including, but not limited to, any breach of this Lease or any death, personal injury or property damage occurring in or about the Premises or the Building or arising from environmental Concerns, as hereafter defined, except to the extent caused by the Landlord, its agents, employees, or contractors. Tenant will reimburse Landlord upon request for all costs incurred by Landlord in the interpretation and enforcement of any provisions of this Lease and/or the collection of any sums due to Landlord under this Lease, including collection of agency fees, and reasonable attorneys' fees and costs, regardless of whether litigation is commenced, and through all appellate actions and proceedings, including bankruptcy proceedings, if litigation is commenced. The foregoing claims, causes of actions, liabilities, judgments, damages, losses, costs and expenses shall include but not be limited to any of same arising from Tenant's failure to comply with any of the requirements of Americans with Disabilities Act ("ADA") or Florida Accessibility Code ("FAC")within the Premises and/or any and all claims or liability arising from the performance of the repair, renovation, and/or maintenance described above. This indemnity shall include, but not be limited to, claims or liabilities asserted against Landlord based upon negligence, strict liability or other liability by operation of law to any third party or government entity, and all costs, attorney's fees, expenses, and liabilities incurred by Landlord in the defense of any such claim. Landlord shall defend any such claim at Tenant's expense by counsel selected by Landlord. Tenant shall not alter, cut, drill, penetrate, remove or damage any portion of the Premises in which Landlord has identified to Tenant the presence or suspected presence of asbestos, without Landlord's prior written consent. Tenant indemnifies Landlord from and against any and all damages, liabilities, fines, costs and expenses, including without limitation reasonable attorneys fees and costs, from Tenant's violation or breach of this covenant. 20. RELOCATION OF TENANT A. GENERAL. Recognizing that the Building is large and the needs of tenants as to space may vary from time to time, and in order for Landlord to accommodate Tenant and prospective tenants, Landlord expressly reserves the right, prior to and/or during the Lease Term, at Landlord's sole expense, to move Tenant from the Premises and relocate Tenant in other comparable space of Landlord's choosing of approximately the same dimensions and at least the same size within the Building (or additions to the Building or new construction related to the Building or the campus in which Building is located), which other space will be decorated by Landlord at its expense. Landlord shall, in exercising its right to relocate the Tenant, make said decision in full consideration and deference to the nature of Tenant's business which business operates (including Tenant's on-line computer network) on a twenty-four (24) hour basis, seven (7) days per week. Landlord may use decorations and materials from the existing Premises, or other materials, so that the space in which Tenant is relocated will be comparable in its interior design and decoration to the space from which Tenant is removed. B. NO INTERFERENCE. During the relocation period Landlord will use reasonable efforts not to unduly interfere with Tenants business activities (recognizing that such business operations may only be shut down for a de minimus period of time during the relocation, and will not limit Tenant's access to the Premises prior to such relocation. Landlord agrees to substantially complete the relocation within a reasonable time under all then existing circumstances. C. PREMISES. This Lease and each of its terms and conditions will remain in full force and effect and be applicable to any such new space and such new space will be deemed to be the Premises demised hereunder; upon request Tenant will execute such documents which may be requested to evidence, acknowledge and confirm the relocation (but it will be effective even in the absence of such confirmation). D. COSTS. Landlord's obligation for expenses of removal and relocation will be the actual cost of relocating and decorating Tenant's new space, moving expenses, telephone and computer relocation and all other reasonable costs arising directly from such relocation, and Tenant agrees that Landlord's exercise of its election to remove and relocate Tenant will not release Tenant in whole or in part from its obligations hereunder for the full Lease Term. No rights granted in this Lease to Tenant, including the right of peaceful possession and quiet enjoyment, will be deemed breached or interfered with by reason of Landlord's exercise of the relocation right reserved herein. E. NOTICE. If Landlord exercises its relocation right under this paragraph, Tenant will be given ninety (90) days prior notice in writing. 21. COMPLIANCE WITH LAWS AND PROCEDURES A. COMPLIANCE. Except as otherwise provided herein, Tenant, at its sole cost, will promptly comply with all applicable laws, guidelines, rules, regulations and requirements, whether of Page 16 ------------------ Blue Lake Standard Lease federal, state, or local origin, applicable to the Premises, including, but not limited to, the Americans with Disabilities Act, 42 U.S.C. 12101 et seq. The FAC (as to the interior of the Premises), and those for the correction, prevention and abatement of nuisance, unsafe conditions, or other grievances arising from or pertaining to the use or occupancy of the Premises. Tenant acknowledges that (i) the Premises and the parking facilities may contain potentially hazardous substances, including, but not limited to, asbestos containing materials, radon gas, mineral fibers, and other like materials (all of such materials are referred to herein as "Environmental Concerns") and (ii) Tenant has been advised that the Premises and the Building do contain either encapsulated or non-friable asbestos containing materials. Accordingly, Tenant agrees that Tenant and Tenant's Agents shall comply with all operation and maintenance programs and guidelines implemented or promulgated from time to time by Landlord or its consultants, including, but not limited to, those matters set forth in subsections B and C below, in order to reduce the risk to Tenant, Tenant's Agents or any other tenants of the Building of injury from Environmental Concerns. Except as otherwise provided herein, Tenant at its sole cost and expense shall be solely responsible for taking any and all measures which are required to substantially comply with the requirements of the ADA and the FAC within the Premises. Landlord shall be responsible for causing compliance of the Building, other than the Premises, with the requirements of the ADA and the FAC, the cost of such compliance being an Operating Expense hereunder. Any Alterations to the Premises made by or on behalf of Tenant for the purpose of complying with the ADA and FAC or which otherwise require compliance with the ADA and FAC shall be done in accordance with this Lease; provided, that Landlord's consent to such Alterations shall not constitute either Landlord's assumption, in whole or in part, of Tenant's responsibility for substantial compliance with the ADA and FAC, or representation or confirmation by Landlord that such Alterations comply with the provisions of the ADA and FAC. Notwithstanding the foregoing, Landlord shall be solely responsible at its sole cost and expense, for making any changes or improvements which are required pursuant to the terms of this Lease, to the condition of the Premises delivered by Landlord to Tenant. B. NOTICE PRIOR TO WORK. Except as provided in Section 11, Tenant shall provide thirty (30) days notice to Landlord prior to the performance by Tenant, Tenant's Agents or contractors of any repairs, renovation and/or major structural or mechanical systems maintenance, to the Premises. Such notice shall include a detailed description of the work contemplated. Tenant shall not perform, or cause to be performed, any such repair, renovation and/or maintenance without the written consent of Landlord and, if such consent is granted, the repair, renovation and/or maintenance must be performed in accordance with the terms of Landlord's consent. 22. RIGHT OF ENTRY Landlord and its agents will have the right to enter the Premises during all reasonable hours to make necessary repairs to the Premises upon reasonable prior notice. In the event of an emergency, Landlord or its agents may enter the Premises at any time, without notice (except that Landlord shall make a good faith effort to contact Tenant's designated representative by telephone prior to such entry), to appraise and correct the emergency condition. Said right of entry will, after reasonable prior notice, likewise exist for the purpose of removing placards, signs, fixtures, alterations, or additions which do not conform to this Lease. Landlord or its agents will have the right to exhibit the Premises at any time to prospective tenants within one hundred and eighty days (180) before the Expiration Date of the Lease. 23. DEFAULT A. EVENTS OF DEFAULT BY TENANT. The following shall, upon the giving of notice to Tenant of the nature of the default and the expiration of any applicable grace period afforded Tenant hereunder as set forth in Section 23.B. constitute an Event of Default under this Lease. If (1) Tenant fails to make any payment of Rent when due (a "Monetary Default"); or (2) Tenant fails to fulfill any of the terms or conditions, covenants, agreements or any rules and regulations attached to this Lease, as Exhibit "C" or promulgated by Landlord under this Lease which shall in all instances be reasonable and have as close to equal application to all tenants of the Building as is practicable (a "Non-Monetary Default"); or (3) the appointment of a trustee or a receiver to take possession of all or substantially all of Tenant's assets occurs, and such appointment is not dismissed within thirty (30) days after appointment, or if the attachment, execution or other judicial seizure of all or substantially all of Tenant's assets located at the Premises, or of Tenant's interest in this Lease, occurs; or (4) Tenant or any of its successors or assigns or any guarantor of this Lease ("Guarantor"), if any, should file any voluntary petition in bankruptcy, reorganization or arrangement, or an assignment for the benefit of creditors or for similar relief under any present or future statute, law or regulation relating to relief of debtors; or (5) Tenant or any of its successors or assigns or any Guarantor should be adjudicated bankrupt or have an involuntary petition in bankruptcy, reorganization or arrangement filed against it and such proceeding is not dismissed within thirty (30) days of filing; or (6) Tenant, before the expiration of the Lease Term and without the prior written consent of Landlord, vacates the Premises or abandons possession of the Premises, and fails to pay Rent on a timely basis; or (7) Tenant shall permit, allow or suffer to exist any lien by or through Tenant, judgment, writ, assessment, charge, attachment or execution upon Landlord's or Tenant's interest in this Lease or to the Premises, and/or the fixtures, improvements and furnishings located thereon, whether claimant or holder thereof has acquired its right by or through Tenant, unless such lien, judgment, writ, assessment, charge, attachment or execution is discharged of record or transferred from Page 17 ------------------ Blue Lake Standard Lease the Property by bond within ten (10) days following notice to Tenant. B. GRACE PERIOD. Notwithstanding anything contained in this Lease to the contrary, Tenant shall have (i) a period of three (3) calendar days after written notice from Landlord of a Monetary Default with respect to payment of Base Rent or Overhead Rent; (ii) a period of ten (10) days after notice from Landlord of a Monetary Default, other than as to payment of Base Rent or Overhead Rent; and (iii) a period of twenty (20) days after notice from Landlord of a Non-Monetary Default in which to cure the Event of Default. In addition, provided that the Event of Default does not involve an emergency that must be addressed in a shorter time frame, the grace period for Non-Monetary Defaults shall be extended for such time as is reasonably necessary to complete such cure if the Event of Default is of a nature that it cannot be completely cured within the twenty (20) day period solely as a result of nonfinancial circumstances outside of Tenant's control, provided that Tenant has promptly commenced all appropriate actions to cure the default after notice and those actions are thereafter diligently and continuously pursued by Tenant in good faith. However, if the Non-Monetary Default is not cured prior to a maximum of ninety (90) days from the date of the notice of the Non-Monetary Default, then Landlord may pursue all of its remedies. The notice of a Non-Monetary Default to be given under this subsection may be combined with the notice required under Section 83.20(3), Florida Statutes or any successor statute and this Lease shall not be construed to require Landlord to give two separate notices to Tenant before proceeding with any remedies. C. REPEATED LATE PAYMENT. Regardless of the number of times of Landlord's prior acceptance of late payments and/or late charges, (i) if Landlord notifies Tenant four (4) times in any 1 2-month period that Rent has not been paid when due, then any other late payment within such 12-month period shall automatically constitute an event of default hereunder and (ii) the mere acceptance by Landlord of late payments of Rent in the past shall not, regardless of any applicable laws to the contrary, thereafter be deemed to waive Landlord's right to strictly enforce this Lease, including Tenant's obligation to make payment of Rent on the exact day same is due, against Tenant. 24. LANDLORD'S REMEDIES FOR TENANT'S DEFAULT A. LANDLORD'S OPTIONS. Upon an Event of Default by Tenant under this Lease, Landlord may, at its option exercise any of the remedies enumerated below, in addition to such other remedies as may be available under Florida law: (1) terminate this Lease and Tenant's right of possession by notice to Tenant; or (2) terminate Tenant's right to possession but not the Lease and/or proceed in accordance with any and all provisions of paragraph B below. B. LANDLORD'S REMEDIES. If there is an Event of Default by Tenant under this Lease (subject to applicable notice and cure periods), in addition to all other remedies available to Landlord at law or in equity, Landlord may: (1) Terminate this Lease by notice to Tenant and retake possession of the Premises; (a) Terminate Tenant's right of possession by notice to Tenant without terminating this Lease and retaking possession of the Premises and relet the Premises or any part of the Premises in the name of Landlord, or otherwise, as Tenant's agent, for a term shorter or longer than the balance of the Lease Term, and may grant concessions or free rent to the new tenant, thereby terminating Tenant's tenancy in the Premises and right to possess the Premises, without terminating Tenant's obligations to pay (a) the entire balance of all forms of Base Rent and Additional Rent for the remainder of the Lease Term, plus (b) the Reletting Expenses, and (c) the unamortized balance of any brokerage commissions paid by Landlord in connection with this Lease, any allowances granted to Tenant under this Lease, and the cost of any Tenant Improvements made by Landlord. Landlord shall have no obligation to relet the Premises, and its failure to do so, or failure to collect rent on reletting, shall not affect Tenant's liability under this Lease. Landlord shall not, in any event, be required to pay Tenant any surplus of any sums received by Landlord on a reletting of the Premises in excess of the rent provided in this Lease. If Landlord decides to relet the Premises or a duty to relet is imposed by law, Landlord shall only be required to use commercially reasonable efforts to relet the Premises. Commercially reasonable efforts shall not require Landlord to: (i) use any greater efforts than Landlord then uses to lease other properties Landlord or its affiliates owns or manages; (ii) relet the Premises in preference to any other space in the Building; (iii) relet the Premises to any party that Landlord could reasonably reject as a transferee under the Assignment or Subletting section of this Lease; (iv) accept rent in an amount which is less than the fair market rental for the Premises; (v) perform any tenant improvements, grant any tenant improvement allowances, grant any "free rent," or otherwise pay any sums or grant any monetary concessions in order to obtain a new tenant; (vi) observe any instruction given by Tenant about the reletting process or accept any tenant offered by Tenant unless the offered tenant leases the entire Premises and the criteria of this subsection are otherwise fully met. Any entry or reentry by Landlord, whether had or taken under summary proceedings or otherwise, shall not absolve or discharge Tenant from liability under this Lease so long as Landlord's actions are not in violation of applicable laws. "Reenter" and "re-entry" as used in this Lease are not restricted to their technical legal meaning. No reentry or taking possession of the Premises by Landlord shall be construed as an election on Landlord's part to accept a surrender of Page 18 ------------------ Blue Lake Standard Lease the Premises unless a notice of such intention is given to Tenant; (2) Stand by and do nothing, and hold Tenant liable for all Base Rent and additional rent payable under this Lease through the remainder of the Lease Term; provided by law; (3) Institute any action as (4) Obtain injunctive and declaratory relief, temporary or permanent, or both, against Tenant or any acts, conduct or omissions of Tenant, and further to obtain specific performance of any term, covenant, or condition of this Lease; (5) After regaining possession of the Premises, remove all or any part of Tenant's Property from the Premises and any property removed may be stored at the cost of, and for the account of, Tenant, and Landlord shall not be responsible for the care or safekeeping of Tenant's Property whether in transport, storage, or otherwise, and Tenant waives any and all claims against Landlord for loss, destruction, damage or injury that may be occasioned by any acts taken by Landlord under this subsection. Landlord may retain possession of Tenant's Property until all storage charges and all other amounts owed by Tenant to Landlord under this Section 23 have been paid in full. Nothing set forth in this subsection shall limit Landlord's rights to enforce any lien or security interest in favor of Landlord against Tenant's Property or Landlord's rights under the End of Term section of this Lease; and (6) If all or any part of the Premises is then assigned, sublet, transferred, or occupied by someone other than Tenant, Landlord, at its option, may collect directly from the assignee, subtenant, transferee, or occupant all rent becoming due to Tenant by reason of the assignment, sublease, transfer, or occupancy. Any collection directly by Landlord from the assignee, subtenant, transferee, or occupant shall not be construed to constitute a novation or a release of Tenant from the further performance of its obligations under this Lease. C. ACCELERATION. If Landlord exercises the remedies provided in Subsections (2), (3) or (4) above, Landlord may declare the entire balance of all forms of Rent due under this Lease for the remainder of the Lease Term to be forthwith due and payable and may collect the then present value of the rents calculated using a discount rate equal to the yield then obtainable from the United States Treasury Bill or Note with a maturity date closest to the date of expiration of the Lease Term) by distress or otherwise, provided, however that Landlord shall utilize commercially reasonable attempts to mitigate its damages. The accelerated additional rent for expenses shall be calculated by multiplying the highest additional rent amount for Expenses payable by Tenant in any calendar year times the number of calendar years (including any fractional calendar year) remaining in the Lease Term following the date of default. If Landlord exercises the remedy provided in Subsection (2) above and collects from Tenant all forms of rent owed for the remainder of the Lease Term, Landlord shall account to Tenant, at the date of the expiration of the Lease Term for amounts actually collected by Landlord as a result of reletting, net of the Tenant's obligations under Subsections 24 B. 2(a)-(c). D. GUARANTY. In addition to the remedies of the Landlord contained in this Section 24, a separate action or actions may, at Landlord's option, be brought and prosecuted against the Guarantor, if any, whether or not any action is first or subsequently brought against Tenant or whether or not Tenant is joined in any such action. The Landlord may, at its sole option, proceed against the Tenant without first seeking recourse against the Guarantor and may pursue any other remedy in Landlord's power whatsoever and the Tenant waives any right to complain of delay in enforcement of Landlord's rights under this Lease. E. Notwithstanding the foregoing or anything to the contrary contained in this Lease, any and all rights and remedies of Landlord and Tenant set for forth in this Lease shall be exercisable only to the extent permitted by Florida law at the time of exercise. Any waivers by Tenant of damages or liability shall be applicable only to the extent Landlord's actions are in material accordance with applicable law and only to the extent that Landlord or its agents, employees or contractors are not negligent or willfully at fault. F. Landlord shall not be deemed to be in default of this Lease unless and until Landlord fails to cure any default within thirty (30) days after written notice from Tenant; provided, however, that if such default reasonably requires more than thirty (30) days to cure, Landlord shall have a reasonable time to cure such default, provided Landlord commences to cure within such thirty (30) day period and thereafter diligently prosecutes such cure to completion. In the event of an uncured default by Landlord, Tenant shall have the right to exercise any available legal and equitable remedies. 25. LANDLORD'S RIGHT TO PERFORM FOR TENANT'S ACCOUNT. Should Tenant fail to observe or perform any term or condition of this Lease within a provided grace period following notice, Landlord may at any time thereafter, perform the same for the account of Tenant in a commercially reasonable manner. If Landlord makes any expenditure or incurs any obligation for the payment of money in connection with such performance for Tenant's account (including reasonable attorneys' fees and costs in instituting, prosecuting and/or defending any action or proceeding through appeal), the sums paid or obligations incurred, with interest at Twelve Percent (12%) per annum, will be paid by Tenant to Landlord within ten (10) days after rendition of a bill or statement to Tenant. In the event Tenant, in the performance or non-performance of any term or Page 19 ------------------ Blue Lake Standard Lease condition of this Lease, should cause an emergency situation to occur or arise within the Premises or in the Building, Landlord will have all rights set forth in this paragraph immediately without the necessity of providing Tenant any advance notice. 26. LIENS A. GENERAL. In accordance with the applicable provisions of the Florida Construction Lien Law and specifically Florida Statutes, Section 713.10, no interest of Landlord whether personally or in the Premises, or in the underlying land or Building of which the Premises are a part, or the leasehold interest aforesaid shall be subject to liens for improvements made by Tenant or caused to be made by Tenant hereunder. Further, Tenant shall have no power or authority to create any lien or permit any lien to attach to the present estate, reversion, or other estate of Landlord in the Premises or in the Building, and all mechanics, materialmen, contractors, artisans and other parties contracting with Tenant or its representatives or privies as to the Premises or any part of the Premises are hereby charged with notice that they must look to the Tenant to secure payment of any bill for work done or material furnished or for any other purpose during this Lease term. The foregoing provisions are made with express reference to Section 713.10 of the Florida Statutes. Notwithstanding the foregoing provisions, Tenant, at its expense, shall cause any liens filed against the Premises or the Building for work or materials claimed to have been furnished to Tenant to be discharged of record or properly transferred to a bond under Section 713.24 of the Florida Statutes within ten (10) days after notice to Tenant. Landlord has recorded a notice of the foregoing in the Public Records of Palm Beach County, Florida, pursuant to the provisions of Section 713.10 Florida Statutes. B. DEFAULT. Notwithstanding the foregoing, if any construction lien or other lien, attachment, judgment, execution, writ, charge or encumbrance is filed against the Building or the Premises or this leasehold, or any alterations, fixtures or improvements therein or thereto, as a result of any work action or inaction done by or at the direction of Tenant or any of Tenant's Agents, Tenant will discharge same of record within ten (10) days after the filing thereof and written notice from either Landlord or the lien or, failing which Tenant will be in default under this Lease. Further, Tenant agrees to indemnify, defend and save Landlord harmless from and against any damage or loss, including reasonable attorneys' fees, incurred by Landlord as a result of any liens or other claims arising out of or related to work performed in the Premises by or on behalf of Tenant. In such event, without waiving Tenant's default, Landlord, in addition to all other available rights and remedies, without further notice, may discharge the same of record by payment, bonding or otherwise, as Landlord may elect, and upon request Tenant will reimburse Landlord for all costs and expenses so incurred by Landlord plus interest thereon at the rate of eighteen percent (18%) per annum. 27. NOTICES Notices to Tenant under this Lease will be in writing (unless otherwise specifically provided herein) addressed to Tenant and mailed or delivered to the address set forth for Tenant in the BLI Rider. Notices to Landlord under this Lease (as well as the required copies there of) will be in writing and addressed to Landlord (and its agents) and mailed or delivered to the address set forth in the BLI Rider. Notices will be personally delivered or given by registered or certified mail, return receipt requested. As used herein, personal delivery includes delivery by overnight courier. Notices delivered personally will be deemed to have been given as of the date of delivery and notices given by mail will be deemed to have been given forty-eight (48) hours after the time said properly addressed notice is placed in the mail. Each party may change its address from time to time by written notice given to the other as specified above. 28. MORTGAGE ESTOPPEL CERTIFICATE; SUBORDINATION Landlord has the unrestricted right to convey, mortgage and refinance the Building, or any part thereof. Tenant and Landlord agree, within ten (10) days after notice but not more than twice in any calendar year, to execute and deliver to the other or its mortgagee or designee such instruments as the other or its mortgagee may reasonably require, certifying (i) whether this Lease is in full force and effect (or if there shall have been any modification, that the Lease is in full force and effect as modified and stating the modification, (ii) the amount of any prepaid rent paid under this Lease, (iii) the dates to which the rents and other charges have been paid, (iv) whether or not Tenant claims any defenses or offsets concerning its obligations under this Lease and whether or not the other is in default in the performance of any covenant, agreement, or condition contained in this Lease on its part to be performed, and if so, specify each defense, offset or default of which the party may have knowledge, and (v) such other matters as may be reasonably required by institutional lenders or purchasers in similar estoppel certificates. Nothing contained in this Section shall constitute a waiver by Landlord of any default in payment of rent or other charges existing as of the date of any notices or certificates under this Section. Subject to the provisions hereof, this Lease is and at all times will be subject and subordinate to all present and future mortgages or ground leases which may affect the Building and/or the parking lot, and to all recastings, renewals, modifications, consolidations, replacements, and extensions of any such mortgage(s), and to all increases and voluntary and involuntary advances made thereunder. The foregoing will be self-operative and no further instrument of subordination will be required. However, in confirmation of this subordination, Tenant shall execute promptly any certificate that Landlord may request provided that, without limiting Landlord's right of specific performance and right to injunctive relief, the Tenant's failure to do so shall constitute an Event of Default under the Lease. In the event that the Page 20 ------------------ Blue Lake Standard Lease holder ("Lender") of any encumbrance ("Mortgage") on the Building or any other person acquires title to the Building pursuant to the exercise of any remedy provided for in the Mortgage or by reason of the acceptance of a deed in lieu of foreclosure (the Lender, any other such person and their participants, successors and assigns being referred to herein as the "Purchaser"), Tenant covenants and agrees to attorn to and recognize and be bound to Purchaser as its new Landlord, and except as provided below, this Lease shall continue in full force and effect as a direct Lease between Tenant and Purchaser, except that, notwithstanding anything to the contrary herein or in the Lease. It is an express condition of the subordination of this Lease set forth herein, that so long as Tenant is not in material default under any provision of this Lease beyond any applicable notice or cure period, and no event has occurred that has continued to exist for a period of time (after notice, if any, required by this Lease) as would entitle Landlord to terminate this Lease or would cause without further action by Landlord, the termination of this Lease or would entitle Landlord to dispossess the Tenant thereunder: A. The right of possession of Tenant to the Premises and Tenant's rights hereunder shall not be terminated or disturbed by any steps or proceedings taken by Lender or anyone claiming by or through Lender in the exercise of any of its rights under the Mortgage or the indebtedness secured thereby; B. This Lease shall not be terminated or affected and Tenant's possession, use, and enjoyment of the Premises shall not be disturbed by said exercise of any remedy provided for in the Mortgage, and any sale by Lender of the Building pursuant to the exercise of any rights and remedies under the Mortgage or otherwise, shall be made subject to this Lease and the rights of Tenant hereunder. C. In no event shall Lender or any other Purchaser be: (1) liable for any act or omission of Landlord or any prior landlord (except to the extent such continue without cure after acquisition of the Building by the Lender and such may be cured by Lender with its reasonable efforts; (2) subject to any offsets or defenses that the Tenant might have against Landlord or any prior landlord; (3) bound by any payment or rent or additional rent that Tenant might have paid to Landlord or any prior landlord for more than the current month unless the same is delivered to the Lender or the Purchaser; or (4) bound by any material amendment or modifications of the Lease made without Lender's or such other Purchaser's prior written consent, which shall not be unreasonably withheld or delayed. D. Provided that Landlord has previously notified Tenant of Lender's address for notice, Tenant agrees to give written notice to Lender as soon as reasonably practicable of any default by Landlord that would entitle Tenant to cancel this Lease, and agrees that notwithstanding any provision of this Lease, no notice of cancellation thereof given on behalf of Tenant shall be effective unless Lender has received said notice and has failed within 30 days of the date of receipt thereof to cure Landlord's default, or if the default cannot be cured within 30 days, has failed to promptly commence and to diligently pursue the cure of Landlord's default which gave rise to such right of cancellation. Tenant further agrees to give such notices to any successor of Lender, provided that such successor shall have given written notice of Tenant of its acquisition of Lender's interest in the Mortgage and designated the address to which such notices are to be sent. E. Tenant acknowledges that Landlord may execute and deliver to Lender an Assignment of Leases and Rents conveying the rentals under this Lease as additional security for the loan secured by the Mortgage, and Tenant hereby expressly consents to such Assignment. F. Within ten (10) days after the execution of this Lease, and as a condition to the effectiveness of this Lease, Landlord shall obtain, for the benefit of Tenant, a Subordination, Non-disturbance and Attornment Agreement from each and every Lender as of the date of this Lease, such Subordination, Non-Disturbance and Attornment Agreement to be in form substantially similar to that attached hereto as Exhibit "J". Landlord represents and warrants to Tenants that, as of the date of this Lease, it is the fee simple owner of the Building, and that, as of the date hereof, there are no (i) ground leases of all or any part of Landlord's interest in the Building, or (ii) mortgages with respect to the Building, other than with Lenders providing such Subordination, Non-Disturbance and Attornment Agreements to Tenant. G. Notwithstanding anything to the contrary contained in this Lease, after the date of this Lease, any subordination of this Lease to a mortgage or any ground lease shall be conditioned on Tenant obtaining a. Subordination, Non-Disturbance and Attornment Agreement from the applicable Lender and ground lessor, such Subordination, Non-Disturbance and Attornment Agreement in a form substantially similar to that attached hereto as Exhibit "J". 29. ATTORNMENT AND MORTGAGEE'S REQUEST A. ATTORNMENT. Subject to the provisions of Section 28, if any mortgagee of the Building comes into possession or ownership of the Premises, or acquires Landlord's interest by foreclosure of the mortgage or otherwise, upon the mortgagee's request Tenant will attorn to the mortgagee. Page 21 ------------------ Blue Lake Standard Lease 30. TRANSFER BY LANDLORD If Landlord's interest in the Building terminates by reason of a bona fide sale or other transfer, Landlord will, upon assumption by the new owner of the Landlord's obligations hereunder from and after the date of transfer, thereupon be released from all further liability to Tenant under this Lease. At the expiration or termination of the Lease Term, Tenant shall deliver to Landlord all keys to the Premises and make known to Landlord the location and combination of all safes, locks and similar items. 31. SURRENDER OF PREMISES; HOLDING OVER A. SURRENDER. Tenant agrees to surrender the Premises to Landlord on the Expiration Date (or sooner termination of the Lease Term pursuant to other applicable provisions hereof) in as good condition as they were at the commencement of Tenant's occupancy, ordinary wear and tear, and damage by fire and windstorm excepted. B. RESTORATION. In all events, Tenant will promptly restore all damage caused in connection with any removal of Tenant's personal property. Tenant will pay to Landlord, upon request, all damages that Landlord may suffer on account of Tenant's failure to surrender possession as and when aforesaid and will indemnify Landlord against all liabilities, costs and expenses (including all reasonable attorneys' fees and costs if any) arising out of Tenant's delay in so delivering possession, including claims of any succeeding tenant. C. REMOVAL. Upon expiration of the Lease Term, at Landlord's option, Tenant may not be required to remove from the Premises, Building Standard Items (as defined in the Work Letter), all of such Building Standard Items are the property of Landlord or tenant improvements installed prior to the Rent Commencement Date unless Landlord shall require such removal during the review and approval of the plans and specifications as provided in the Work Letter. D. HOLDOVER. In the event of a holding-over by Tenant, after the expiration of the Lease or the early termination of the Lease without the written consent of Landlord, Tenant shall, in addition to being responsible for any liquidated damages provided by Florida statute, also indemnify Landlord against all claims for damages by any other tenant to whom Landlord may have leased all or any part of the Premises covered hereby effective after the termination of this Lease so long as Landlord has previously provided Tenant notice of such lease. No payments of money by Tenant after the expiration of the Lease Term of the earlier termination of this Lease will reinstate, continue or extend the Term; reduce the liability of Tenant to Landlord for damages; or affect any termination notice given by Landlord to Tenant. No extension of the Lease Term will be valid unless and until the same will be reduced to writing and signed by both Landlord and Tenant. E. NO SURRENDER. No offer of surrender of the Premises, by delivery to Landlord or its agent of keys to the Premises or otherwise, will be binding on Landlord unless accepted by Landlord, in writing, specifying the effective surrender of the Premises. At the expiration or termination of the Lease Term, Tenant shall deliver to Landlord all keys to the Premises and make known to Landlord the location and combinations of all locks, safes and similar items. 32. NO WAIVER, CUMULATIVE REMEDIES A. NO WAIVER. No waiver of any provision of this Lease by either party will be deemed to imply or constitute a further waiver by such party of the same or any other provision hereof. The rights and remedies of Landlord and Tenant under this Lease or otherwise are cumulative and are not intended to be exclusive and the use of one will not be taken to exclude or waive the use of another, and Landlord and Tenant will be entitled to pursue all rights and remedies available under the laws of the State of Florida. B. RENT PAYMENTS. No receipt of money by Landlord from Tenant at any time, or any act, or thing done by, Landlord or its agent shall be deemed a release of Tenant from any liability whatsoever to pay Rent, Additional Rent, or any other sums due hereunder, unless such release is in writing, subscribed by a duly authorized officer or agent of Landlord and refers expressly to this Section. Any payment by Tenant or receipt by Landlord of less than the entire amount due at such time shall be deemed to be on account of the earliest sum due. No endorsement or statement on any check or any letter accompanying any check or payment shall be deemed an accord and satisfaction. In the case of such a partial payment or endorsement, Landlord may accept such payment, check or letter without prejudice to Its right to collect all remaining sums due and pursue all of its remedies under the Lease. 33. WAIVER LANDLORD AND TENANT HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM INVOLVING ANY MATTER WHATSOEVER ARISING OUT OF OR IN CONNECTION WITH (i) THIS LEASE, (ii) THE PREMISES, (iii) TENANT'S USE OR OCCUPANCY OF THE PREMISES, OR (iv) THE RIGHT TO ANY STATUTORY RELIEF OR REMEDY. TENANT FURTHER~WAIVES THE RIGHT TO INTERPOSE ANY PERMISSIVE COUNTERCLAIM OF ANY NATURE IN ANY ACTION OR PROCEEDING COMMENCED BY LANDLORD TO OBTAIN POSSESSION OF THE PREMISES. IF TENANT VIOLATES THIS PROVISION BY FILING A PERMISSIVE COUNTERCLAIM, WITHOUT PREJUDICE TO LANDLORD'S RIGHT TO HAVE SUCH COUNTERCLAIM DISMISSED, THE PARTIES STIPULATE THAT SHOULD THE COURT PERMIT TENANT TO MAINTAIN THE COUNTERCLAIM, THE Page 22 ------------------ Blue Lake Standard Lease COUNTERCLAIM SHALL BE SEVERED AND TRIED SEPARATELY FROM THE ACTION FOR POSSESSION PURSUANT TO RULE 1.270(b) OF THE FLORIDA RULES OF CIVIL PROCEDURE OR OTHER SUMMARY PROCEDURES SET FORTH IN SECTION 51.01 1, FLORIDA STATUTES (1993). THE WAIVERS SET FORTH IN THIS SECTION ARE MADE KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY BY TENANT. TENANT FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED IN THE MAKING OF THIS WAIVER BY INDEPENDENT COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THESE WAIVERS WITH COUNSEL. THIS PROVISION IS A MATERIAL INDUCEMENT TO LANDLORD IN AGREEING TO ENTER INTO THIS LEASE. 34. CONSENTS AND APPROVALS [Intentionally Omitted] 35. RULES AND REGULATIONS Tenant agrees to abide by all rules and regulations attached hereto as Exhibit "C" and incorporated herein by this reference, as reasonably amended and supplemented from time to time by Landlord. Landlord will not be liable to Tenant for violation of the same or any other act or omission by any other tenant except to the extent the same materially affects Tenant's use and enjoyment of the Premises as provided in this Lease. All rules and regulations shall, to the extent reasonably practicable, be uniformly applicable to all tenants and occupants and shall not interfere with Tenant's use of the Premises in any material manner. In the event of a conflict between the rules and regulations and the provisions of this Lease, the provisions of this Lease shall prevail. 36. SUCCESSORS AND ASSIGNS This Lease will be binding upon and inure to the benefit of the respective heirs, personal and legal representatives, successors and permitted assigns of the parties hereto. 37. QUIET ENJOYMENT In accordance with and subject to the terms and provisions of this Lease, Landlord warrants that it has full right to execute and to perform under this Lease and to grant the estate demised. Tenant, upon Tenant's payment of Rent and performing of all of the terms, conditions, covenants, and agreements as and when required in this Lease, shall peaceably and quietly have, hold and enjoy the Premises during the full Lease Term. 38. ENTIRE AGREEMENT This Lease, together with the BLI Rider, exhibits, schedules, addenda and guaranties (as the case may be) fully incorporated into this Lease by this reference, contains the entire agreement between the parties hereto regarding the subject matters referenced herein and supersedes all prior oral and written agreements between them regarding such matters. This Lease may be modified only by an agreement in writing dated and signed by Landlord and Tenant after the date hereof. 39. HAZARDOUS MATERIALS A. REPRESENTATION. Tenant represents, warrants and covenants that (1 ) the Premises will not be used for any dangerous, noxious or offensive trade or business and that it will not cause or maintain a nuisance there, (2) it will not bring, generate, treat, store, use or dispose of Hazardous Substances at the Premises other than use in the ordinary course of business and in compliance with all applicable laws, (3) it shall, with respect to Tenant's use and occupancy of the Premises, the parking lot and any other area of the Building, as applicable, at all times comply with all Environmental Laws (as hereinafter defined) and shall cause the Premises, while in the possession and control of Tenant to comply, and (4) Tenant will keep the Premises free of any lien imposed pursuant to any Environmental Laws. Only for purposes of this paragraph entitled "Representation", the term "Premises" shall mean, only with respect to Tenant's use and occupancy of the Premises, the Building including Common Areas, parking areas, greenspace and all other elements thereof. B. REPORTING REQUIREMENTS. Tenant warrants that it will promptly deliver to the Landlord, (i) copies of any documents received from the United States Environmental Protection Agency and/or any state, county or municipal environmental or health agency concerning the Tenant's operations upon the Premises; and (ii) copies of any documents submitted by the Tenant to the United States Environmental Protection Agency and/or any state, county or municipal environmental or health agency concerning its operations on the Premises, including but not limited to copies of permits, licenses, annual filings, registration forms. C. TERMINATION, CANCELLATION, SURRENDER. At the Expiration Date or earlier termination of this Lease, Tenant shall surrender the Premises to Landlord free of any and all Hazardous Substances which have been placed on, in or about the Premises by Tenant or Tenant's agents, and in compliance with all Environmental Laws. Landlord may at Landlord's expense at the end of the term, order a clean-site certification, environmental audit or site assessment with respect to the Premises the cost of which shall be reimbursed by Tenant to Landlord in the event such environmental audit reflects a violation of this Section 39 by Tenant. D. ACCESS AND INSPECTION. Landlord shall have the right, subject to not materially disturbing Tenant's peaceful use and occupancy of the Premises and the Common Areas and subject to reasonable advance notice, except in the instance of emergencies, but not the obligation, at all times during Page 23 ------------------ Blue Lake Standard Lease the term of this Lease to (i) enter upon and inspect the Premises, (ii) conduct tests and investigations and take samples to determine whether Tenant is in compliance with the provisions of this article, and (iii) request lists of all Hazardous Substances used, stored or located on the Premises; the cost of all such inspections, tests and investigations to be borne by Landlord, unless, however, said inspections, tests and investigations reflect a violation of Environmental Laws by Tenant in which instance the Tenant shall promptly either pay or reimburse Landlord for all inspections, tests and investigations. Promptly upon the written request of Landlord, from time to time, if Landlord shall reasonably suspect a violation of Environmental Laws, Landlord may obtain an environmental site assessment or environmental audit report prepared by an environmental engineering firm acceptable to Landlord to assess, with a reasonable degree of certainty, the presence or absence of any Hazardous Substances and the potential costs in connection with abatement, clean-up, or removal of any Hazardous Substances found on, under, at, or without the Premises. If such audit reveals a violation of Environmental Laws caused by Tenant or Tenant's agents, or the presence of Hazardous Substances not in the Premises upon delivery of possession to Tenant, and such was not caused by Landlord or its agents, the Tenant shall pay the cost of such audit. Tenant will reasonably cooperate with Landlord, at no cost or expense to Tenant, and allow Landlord and Landlord's representatives access, upon ten (10) days notice (except in the case of an emergency), to any and all parts of the Premises and to the records of Tenant with respect to the Premises for environmental inspection purposes at any time. In connection therewith, Tenant hereby agrees that Landlord, or Landlord's agent, may perform any testing upon or of the Premises that Landlord's deems reasonably necessary for the evaluation of environmental risks, costs, or procedures, including soils or other sampling or coring. Landlord shall repair and restore the Premises damaged during such testing unless testing reveals a violation by Tenant of Environmental Laws in which case all such expenses shall be that of Tenant. Landlord shall use reasonable effort to minimize any disruption or interference with Tenant's operations in the Premises in connection with such inspection and/or testing. E. VIOLATIONS - ENVIRONMENTAL DEFAULTS. Tenant shall give to Landlord immediate verbal and follow-up written notice of any actual or threatened spills, releases or discharges of Hazardous Substances on the Premises, caused by the acts or omissions of Tenant or its agents, employees, representatives, invitees, licensees, subtenants, customers or contractors. Tenant covenants to promptly investigate, clean up and otherwise remediate any spill, release or discharge of Hazardous Substances in or about the Premises or the Building, including but not limited to those caused by the acts or omissions of Tenant or its agents, employees, representatives, invitees, licensees, subtenants, customers or contractors at Tenant's sole cost and expense; such investigation, clean up and remediation to be performed in accordance with all Environmental Laws and after Tenant has obtained Landlord's written consent, which shall not be unreasonably withheld or delayed. Tenant shall return the Premises to the condition existing prior to the introduction of any such Hazardous Substances by Tenant or Tenant's agents. (1) In the event of (1) a violation of an Environmental Law by Tenant, (2) a release, spill or discharge of a Hazardous Substance on or from the Premises, or (3) the discovery of an environmental condition requiring response which violation, release, or condition is attributable to the acts or omissions of Tenant, its agents, employees, representatives, invitees, licensees, subtenants, customers, or contractors, or (4) an emergency environmental condition which is the result of an act of Tenant (collectively "Environmental Defaults"), Landlord shall have the right, but not the obligation, within ten (10) business days after notice to Tenant, except in the case of an emergency which requires more prompt action, to enter the Premises, to supervise and approve any actions taken by Tenant to address the Environmental Default; and in the event Tenant fails to immediately address such Environmental Default, then Landlord may perform, at Tenant's expense, any lawful actions necessary to address the Environmental Default. (2) Landlord has the right, but not the obligation to cure any Environmental Defaults, has the reasonable right to suspend some or all of the operations to the extent that the operations have caused the Environmental Default of the Tenant until it has determined to its sole satisfaction that appropriate measures have been taken, and has the right to terminate this Lease upon the occurrence of an Environmental Default. F. ADDITIONAL RENT. Any expenses which the Landlord incurs, which are to be at Tenant's expense pursuant to this Article, will be considered Additional Rent under this Lease and shall be paid by Tenant on demand by Landlord. G. ASSIGNMENT AND SUBLETTING. Notwithstanding anything to the contrary in this Lease, the Landlord may condition its approval of any assignment or subletting by Tenant to an Assignee or Subtenant that in the judgment of the Landlord, reasonably exercised, does not create any additional environmental exposure. H. INDEMNIFICATIONS. (1) INDEMNIFICATION OF LANDLORD. Tenant shall indemnify, defend (with counsel approved by Landlord) and hold Landlord and Landlord's affiliates, shareholders, directors, officers, employees and agents harmless from and against any and all claims, judgments, damages (including consequential damages), penalties, fines, liabilities, losses, suits, administrative proceedings, costs and expenses of any kind or nature which arise out of or in anyway related to any Environmental Default by Tenant, its agents, employees, representatives, invitees, licensees, subtenants, customers or contractors during or after the term of this Lease Page 24 ------------------ Blue Lake Standard Lease (including, but not limited to, attorneys', consultant, laboratory and expert fees expert fees and including without limitation, diminution in the value of the Premises, damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises and damages arising from any adverse impact on marketing of space), arising from or related to the use, presence, transportation, storage, disposal, spill, release or discharge of Hazardous Substances on or about the Premises, to the extent caused by Tenant or Tenant's agents, employees, representatives, invitees, licensees, subtenants, customers or contractors. (2) INDEMNIFICATION OF TENANT. Landlord shall indemnify, defend (with counsel reasonably approved by Tenant) and hold Tenant and Tenant's affiliates, shareholders, directors, officers, employees and agents, harmless from and against any and all claims, judgments, damages (including consequential damages), penalties, fines, liabilities, losses, suits, administrative proceedings, costs and expenses of any kind or nature which arise out of or are in any way related to an environmental condition constituting a violation of this Section, except due to the acts of Tenant or Tenant's agents, employees, representatives, invitees, licensees, subtenants, customers or contractors. I. DEFINITIONS. (1) "Hazardous Substance" means, (i) asbestos and any asbestos containing material and any substance that is then defined or listed in, or otherwise classified pursuant to, any Environmental Laws or any applicable laws or regulations as a "hazardous substance", "hazardous material", "hazardous waste", "infectious waste", "toxic substance", "toxic pollutant" or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity, or Toxicity Characteristic Leaching Procedure (TCLP) toxicity, (ii) any petroleum and drilling fluids, produced waters, and other wastes associated with the exploration, development or production of crude oil, natural gas, or geothermal resources and (iii) petroleum products, polychlorinated biphenyls, urea formaldehyde, radon gas, radioactive material (including any source, special nuclear, or by-product material), and medical waste. Excepted from the foregoing shall be substances (for example, those used in construction or cleaning supplies or office machines) which contain Hazardous Substances but in amounts and/or quantities which comply with all Environmental Laws as herein below defined. (2) "Environmental Laws" collectively means and includes all present and future laws and any amendments (whether common law, statute, rule, order, regulation or otherwise), permits, and other requirements or guidelines of governmental authorities applicable to the Premises and relating to the environment and environmental conditions or to any Hazardous Substance (including, without limitation, CERCLA, 42 U.S.C. 9601, et. seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. 6901, et seq., the Hazardous Materials Transportation Act, 49 U.S.C. 1801, et seq., the Federal Water Pollution Control Act, 33 U.S.C. 1251, et seq., the Clean Air Act, 33 U.S.C. 7401, et seq., the Clear Air Act, 42 U.S.C. 741, et seq., the Toxic Substances Control Act,15 U.S.C. 2601 -2629, the Safe Drinking Water Act, 42 U.S.C. 300f-300j, the Emergency Planning and Community Right-To-Know Act, 42 U.S.C. 1101, et seq., and any so-called "Super Fund" or "Super Lien" law, any law requiring the filing of reports and notices relating to hazardous substances, environmental laws administered by the Environmental Protection Agency, and any similar state and local laws and regulations, all amendments thereto and all regulations, orders, decisions, and decrees now or hereafter promulgated thereunder concerning the environment, industrial hygiene or public health or safety.) J. RADON. RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risk to persons who are exposed to it over time. Levels of radon that exceed Federal and State Guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county public health unit. K. SURVIVAL OF INDEMNIFICATIONS. All indemnities herein shall survive termination or expiration of this Lease. 40. BANKRUPTCY PROVISIONS A. EVENT OF BANKRUPTCY. If this Lease is assigned to any person or entity pursuant to the provisions of the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), any and all monies or other consideration payable to Landlord or otherwise to be delivered to Landlord in connection with such assignment shall be paid or delivered to Landlord, shall be and remain the exclusive property of Landlord, and shall not constitute the property of Tenant or of the estate of Tenant within the meaning of the Bankruptcy Code. Any and all monies or other considerations constituting Landlord's property under this Section not paid or delivered to Landlord shall be held in trust for the benefit of Landlord and shall be promptly paid or delivered to Landlord. Any person or entity to which this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be deemed without further act or deed to have assumed all of the obligations arising under this Lease on and after the date of such assignment. For purposes of this Lease, an "Event of Bankruptcy" shall mean the filing of a voluntary petition by Tenant or the entry of an order for relief against Tenant, under Chapter 7, 11 or 13 of the Bankruptcy Code (or the conversion to a Chapter 11 or 13 proceeding of a proceeding that is filed by or against Tenant under any other Chapter of the Bankruptcy Code). Page 25 ------------------ Blue Lake Standard Lease B. ADDITIONAL REMEDIES. In addition to any rights or remedies herein before or hereinafter conferred upon Landlord under the terms of this Lease, the following remedies and provisions shall specifically apply in the event Tenant is in default of this Lease beyond applicable notice and cure periods: (1) In all events, any receiver or trustee in bankruptcy shall either expressly assume or reject this Lease within ninety (90) days following the entry of an "Order for Relief" or within such earlier time as may be provided by applicable law. (2) In the event of an assumption of this Lease by a debtor or by a trustee, such debtor or trustee shall within thirty (30) days after such assumption (i) cure any default or provide adequate assurance that defaults will be promptly cured; (ii) compensate Landlord for actual pecuniary loss or provide adequate assurance that compensation will be made for actual losses, including, but not limited to, all attorneys" fees and costs incurred by Landlord resulting from any such proceedings; and (iii) provide adequate assurance of future performance. (3) Where an Event of Default exists under this Lease beyond applicable notice and cure periods, the trustee or debtor assuming this Lease may not require Landlord to provide services or supplies incidental to this Lease before its assumption by such trustee or debtor, unless Landlord is compensated under the terms of this Lease for such services and supplies provided before the assumption of such Lease. (4) The debtor or trustee may only assign this Lease if (i) it is assumed and the assignee agrees to be bound by this Lease, (ii) adequate assurance of future performance by the assignee is provided, whether or not there has been a default under this Lease, and (iii) the assignee has been approved by Landlord in accordance with Section 13 or is an assignee permitted under Section 13. Any consideration paid by any assignee in excess of the rental reserved in this Lease shall be the sole property of, and paid to, Landlord. (5) Landlord shall be entitled to the Rent provided under the Federal Bankruptcy Code subsequent to the commencement of an Event of Bankruptcy. (6) Any security deposit given by Tenant to Landlord to secure the future performance by Tenant of all or any of the terms and conditions of this Lease shall be automatically transferred to Landlord upon the entry of an "Order of Relief", such being deemed a material part of the consideration for Landlord's agreement to enter into this Lease. (7) The parties agree that Landlord is entitled to adequate assurance of future performance of the terms and provisions of this Lease in the event of an assignment under the provisions of the Bankruptcy Code. For purposes of any such assumption or assignment of this Lease, the parties agree that the term "adequate assurance" shall include, without limitation, at least the following: (i) any proposed assignee must have, as demonstrated to Landlord's reasonable satisfaction, a net worth (as defined in accordance with generally accepted accounting principles consistently applied) in an amount sufficient to assure that the proposed assignee will have the resources to meet the financial responsibilities under this Lease, including the payment of all Rent; the financial condition and resources of Tenant are material inducements to Landlord entering into this Lease; (ii) any assumption of this Lease by a proposed assignee shall not adversely affect Landlord's relationship with any of the remaining tenants in the Building taking into consideration any and all other "use" clauses and/or "exclusivity" clauses which may then exist under their leases with Landlord; and (iii) any proposed assignee must not be engaged in any business or activity which it will conduct on the Premises and which will subject the Premises to contamination by any Hazardous Materials. 41. FIRE PREVENTION SYSTEMS After the Landlord installs the base sprinkler system, the Tenant shall be responsible for the cost of any change, modification, alteration or installation of any new or existing sprinkler system, fire extinguishing system and/or fire detection system which may now or hereafter be required as follows: A. If the National Board of Fire Underwriters or any local Board of Fire Underwriters or Insurance Exchange (or other bodies hereafter exercising similar functions) shall require or recommend the installation of fire extinguishers, a Sprinkler system," fire detection and prevention equipment (including, but not limited to, smoke detectors and heat sensors), or any changes, modifications, alterations, or the installation of additional sprinkler heads or other equipment for any existing sprinkler, fire extinguishing system, and/or fire detection system for any reason, to the extent attributable to Tenant's specific use of the Premises or Alterations performed by Tenant; OR B. If any law, regulation, or order or if any bureau, department, or official of the Federal, State, and/or Municipal Governments shall require or recommend the installation of fire extinguishers, a "sprinkler system," fire detection and prevention equipment (including, but not limited to, smoke detectors and heat sensors), or any changes, modifications, alterations, or the installation of additional sprinkler heads or other equipment for any existing sprinkler system, fire extinguishing system, and/or fire detection system for any reason, to the extent attributable to Tenant's specific use of the Premises or Alterations performed by Tenant; OR C. If any such installations, changes, modifications, alterations, sprinkler heads, or other equipment become necessary to prevent the imposition of a penalty, an additional charge, or an increase in the fire insurance rate as fixed by said Page 26 ------------------ Blue Lake Standard Lease Board or Exchange, from time to time, or by any fire insurance company as a result of the use of the Premises whether or not the same is a Permitted Use under this Lease. D. The Landlord may elect to perform the work and charge the cost thereof to Tenant as Additional Rent. The Tenant shall pay to Landlord the full cost of such work within thirty (30) days after Landlord has presented invoices and/or paid receipts for the same. If the Landlord does not elect to perform such work, the Tenant shall immediately proceed, at its sole cost, to perform the work upon the following conditions: (i) a general contractor licensed in Florida and reasonably approved by Landlord shall be utilized (ii) all laws, ordinances and regulations governing such work shall be complied with (iii) a payment and performance bond in Landlord's favor and with a surety acceptable to Landlord shall be obtained (iv) the construction contract and all plans and specifications for the work shall be subject to Landlord's reasonable approval. 42. SPECIAL EVENTS The Tenant shall not, without the prior written consent of the Landlord which shall not be unreasonably withheld or delayed, schedule, advertise or undertake any exposition, promotion or other type of special event at the Premises. Any approval of the Landlord to a special event may include, but not be limited to, at the Landlord's option, to reasonable conditions such as guidelines for traffic and pedestrian control, security, parking and other considerations in the interest of maintaining the health and safety for both the Tenant's invitees as well as that of other tenants. In addition, the Landlord may, in its reasonable discretion, require the Tenant to have delivered a bond by a surety acceptable to Landlord to guaranty any financial undertakings of any indemnification in connection with a special event. 43. MISCELLANEOUS A. If Tenant has a lease for other space in the Building, an Event of Default by Tenant under such lease beyond applicable notice and cure periods will constitute a default hereunder. B. If any term or condition of this Lease or the application thereof to any person or circumstance is, to any extent, invalid or unenforceable, the remainder of this Lease, or the application of such term or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, is not to be affected thereby and each term and condition of this Lease is to be valid and enforceable to the fullest extent permitted by law. This Lease will be construed in accordance with the laws of the State of Florida. C. Submission of this Lease to Tenant does not constitute an offer, and this Lease becomes effective only upon execution and delivery by both Landlord and Tenant. D. Tenant acknowledges that it has not relied upon any statement, representation, prior or contemporaneous written or oral promises, agreements or warranties, except such as are expressed herein. E. Tenant agrees to pay, before delinquency, all taxes assessed during the Lease Term agreement (i) all personal property, trade fixtures, and improvements located in or upon the Premises and (ii) any occupancy interest of Tenant in the Premises. Landlord agrees to pay all real estate taxes and assessments against the Building before the Building would be sold by tax deed to pay such delinquent taxes. F. If Tenant, with Landlord's consent, occupies the Premises or any part thereof for the purpose of conducting business prior to the Rent Commencement Date all provisions of this Lease will be in full force and effect commencing upon such occupancy, and Base Rent and Additional Rent, where applicable, for such period will be paid by Tenant at the same rate herein specified. G. Each party represents and warrants that it has not dealt with any agent or broker in connection with this transaction except for Blue Lake Realty, Inc. and the agents or brokers specifically set forth in the BLI Rider whose commissions shall be paid by Landlord pursuant to separate agreement. If either party's representation and warranty proves to be untrue, such party will indemnify the other party against all resulting liabilities, costs, expenses, claims, demands and causes of action, including reasonable attorneys" fees and costs through all appellate actions and proceedings, if any. The foregoing will survive the end of the Lease Term. H. Neither this Lease nor any memorandum hereof will be recorded by Tenant. I. Nothing contained in this Lease shall be deemed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venturer or any association between Landlord and Tenant, it being expressly understood and agreed that neither the method of computation of Rent nor any other provisions contained in this Lease nor any act of the parties hereto shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant. J. Whenever in this Lease the context allows, the word "including" will be deemed to mean "including without limitation". The headings of articles, sections or paragraphs are for convenience Page 27 ------------------ Blue Lake Standard Lease only and shall not be relevant for purposes of interpretation of the provisions of this Lease. K. Except as otherwise stated in this Lease, this Lease does not create, nor will Tenant have, any express or implied easement for or other rights to air, light or view over or about the Building or any part thereof. L. Landlord reserves the right, upon reasonable advance notice to Tenant, except in the case of an emergency, to use, install, monitor, and repair pipes, ducts and conduits within the walls columns, and ceilings of the Premises. Landlord shall use all reasonable efforts to not materially interfere with Tenant's peaceful use and occupancy of the Premises. M. Any acts to be performed by candors under or in connection with this Lease may be delegated by Landlord to its managing agent or other authorized person or firm. Provided, however that any such delegation shall not reduce or alter the obligations to be performed by Landlord as set forth in this ease. N. It is acknowledged that each of the parties hereto has been fully represented by legal counsel and that each of such legal counsel has contributed substantially to the content of this Lease. Accordingly, this Lease shall not be more strictly construed against either party hereto by reason of the fact that one party may have drafted or prepared any or all of the terms and provisions hereof. O. If more than one person or entity is named herein as Tenant, their liability hereunder will be joint and several. In case Tenant is a corporation, Tenant (a) represents and warrants that this Lease has been duly authorized, executed and delivered by and on behalf of Tenant and constitutes the valid and binding agreement of Tenant in accordance with the terms hereof, and (b) Tenant shall deliver to Landlord or its agent, within three (3) business days of the execution of this Lease, executed by Tenant, certified resolutions of the board of directors authorizing Tenant's execution and delivery of this Lease and the performance of Tenant's obligations hereunder. In case Tenant is a partnership, Tenant represents and warrants that all of the persons who are general or managing partners in said partnership have executed this Lease on behalf of Tenant, or that this Lease has been executed and delivered pursuant to and in conformity with a valid and effective authorization therefor by all of the general or managing partners of such partnership, and is and constitutes the valid and binding agreement of the partnership and every partner therein in accordance with its terms. It is agreed that each and every present and future partner in Tenant, to the extent that Tenant is a partnership, shall be and remain at all times jointly and severally liable hereunder and that neither the death, resignation or withdrawal of any partner, nor the subsequent modification or waiver of any of the terms and provisions of this Lease, shall release the liability of such partner under the terms of this Lease unless and until Landlord shall have consented in writing to such release. P. Landlord has made no inquiries about and makes no representations (express or implied) concerning whether Tenant's proposed use of the Premises is permitted under applicable law, including applicable zoning law; should Tenant's proposed use be prohibited, Tenant shall be obligated to comply with applicable law and this Lease shall nevertheless remain in full force and effect. Landlord covenants that the Building is zoned to permit corporate headquarters office use as contemplated in the BLI Rider. Q. Notwithstanding anything to the contrary in this Lease, if Landlord or Tenant cannot perform any of its non-monetary obligations due to events beyond that party's control, the time provided for performing such obligations shall be extended by a period of time equal to the duration of such events. Events beyond either party's control include, but are not limited to, hurricanes and floods and other acts of God, war, civil commotion, labor disputes, strikes, fire, flood or other casualty, shortages of labor or material, government regulation or restriction and weather conditions. Nothing herein contained shall constitute a waiver or mitigation of Tenant's responsibility to pay Rent. R. Notwithstanding anything to the contrary contained in this Lease, in the event of any litigation under this Lease the prevailing party will be reimbursed by the non-prevailing party for all reasonable attorneys' fees and costs including through all appellate actions and proceedings, including bankruptcy proceedings. S. This Lease and the schedules and riders attached, form part of this Lease together with the Rules and Regulations adopted and promulgated by Landlord and set forth all the covenants, promises, assurances, agreements, representations, conditions, warranties, statements and understandings ("Representations") between Landlord and Tenant concerning the Premises and the Building and there are no Representations, either oral or written between them other than those in this Lease. This Lease supersedes and revokes all previous negotiations, arrangements, letters of intent, offers to lease, lease proposals, brochures, Representations and information conveyed whether oral or in writing, between the parties hereto or their respective representatives or any other person purporting to represent Landlord or Tenant. Tenant acknowledges it has not been induced to enter into this Lease by any representations not set forth in this Lease, and has not relied on any such Representations not set forth herein, no such Representations not set forth herein shall be used in the interpretation or construction of this Lease, and the Landlord shall have no liability for any consequences arising as a result of any such Representations not set forth herein. Except as herein otherwise provided, no subsequent alteration, amendment, change, or addition to this Lease shall be binding upon Landlord or Tenant unless in writing and signed by each of them. Page 28 ------------------ Blue Lake Standard Lease T. Time shall be of the essence for all actions required under this Lease. 44. DELIVERY OF GUARANTY If Tenant is required to deliver a Guaranty by a Guarantor, Tenant shall deliver a guaranty in the form of guaranty (the "Guaranty"),together with the form of Guarantor's resolution in the form attached hereto attached as Exhibit "K", and the Guarantor's certificate of financial standing attached hereto as Exhibit "K" fully executed by each Guarantor. If a Guaranty is required pursuant to the BLI Rider then, at or prior to the parties' execution of this Lease Landlord has delivered to Tenant a form of guaranty (the "Guaranty") to be signed by each Guarantor identified in the BLI Rider. Tenant's failure to deliver the Guaranty fully executed by the Guarantor within 5 days from the earliest date on which this Lease has been signed by the parties shall constitute an Event of Default. 45. CONFIDENTIALITY Landlord and Tenant acknowledge that the terms and provisions of this Lease have been negotiated based upon a variety of factors, occurring at a coincident point in time, including, but not limited to: (i) the individual principals involved and the financial strength of Tenant, (ii) the nature of tenant's business and use of the Premises, (iii) the current leasing market place and the economic conditions affecting rental rates, (iv) the present and projected tenant mix of the Building, and (v) the projected juxtaposition of tenants on the floor(s) upon which the Premises are located and the floors within the Building. Therefore, recognizing the totality, uniqueness, complexity and interrelation of the aforementioned factors, the Tenant agrees that information concerning Landlord and the Blue Lake Building, and the financial terms of this Lease, are confidential and proprietary information and Tenant agrees that it will use all reasonable efforts to not permit the duplication or disclosure (whether by word of mouth, mechanical reproduction, physical tender or visual or oral transmission or review) of any such information, including the terms and conditions of this Lease to third parties who could, in any way, be considered presently or in the future as prospective tenants of the Building, to any person, unless such duplication, use, or disclosure is specifically authorized by Landlord in writing. Confidential information is not meant to include any information that is in the public domain. In addition, Tenant agrees to use all reasonable efforts to keep the terms and conditions as contained herein confidential, with the following exceptions: A. Tenant may disclose the contents of this Lease to its advisors in the contemplated transaction, so long as the advisor agrees in wroting to use all reasonable efforts to maintain confidentiality; B. Tenant may disclose such information as required by court order; C. Tenant may disclose such information as required by any laws, regulations or requirements applicable to Tenant or any affiliate of Tenant; and D. Tenant may disclose the contents of this Lease to potential assignees or subtenants, so long as such potential assignees or subtenants agree in writing to use all reasonable efforts to maintain confidentiality. Tenant shall issue no press release or statement to the media regarding this Lease without the Landlord's prior approval, which approval shall not be unreasonably withheld or delayed. 46. SIGNAGE CRITERIA Tenant shall be permitted to erect or enplace a sign, as applicable, in conformance with the BLOC design criteria for the Premises as attached hereto and made a part hereof as Exhibit "H". 47. CARPOOLING, MASS TRANSIT AND TRAFFIC CONTROL Tenant acknowledges that, due to the nature and size of the Building, Landlord may be required by applicable governmental authorities to participate in, and require tenants to participate in, carpool programs, mass transit programs, flexible shift and other flexible time programs, and other frame reduction programs and measures. Tenant agrees to participate in and comply with such programs and measures required by applicable governmental authorities or agreed to by Landlord with respect to the Building. Tenant's breach of this provision shall not be a default under this Lease or expose Tenant otherwise to damages or injunction. 48. LEASE CONTINGENCIES This Lease shall be conditioned and contingent upon the occurrence of the following event: within ten (10) days from the Effective Date hereof, Landlord's mortgagee(s) and other lenders have approved this Lease and the Tenant (including but not limited to Tenant's financial condition). 49. ASSOCIATION The Building, in which the Premises are located shall be subject to a Declaration of Restrictive Covenants, Easements and Conditions (the "Declaration") which shall govern certain matters with respect to the development, management and maintenance of the Building and to satisfy contents of this Lease to its advisors in the requirements with respect to surface water management, drainage and other aspects of the agrees in writing to use all reasonable efforts to Building. The Declaration shall provide for the creation maintain confidentiality; of a property owner's association ("Association") to perform certain management, operational and maintenance obligations pursuant thereto. The Association will have the authority to levy fees and assessments against the Building, including the Building, to pay for the obligations of the Association. Page 29 ------------------ Blue Lake Standard Lease This Lease is subject to the Declaration, upon the recordation of the Declaration, and to the rights of the Association pursuant thereto. Additionally, fees and assessments of the Association paid by the Landlord shall be deemed Operating Expenses for the purpose of determining Overhead Rent. The Declaration shall not materially impair Tenant's rights under this Lease. 50. VENDING MACHINES No Tenant shall obtain, or accept for use in the Premises, vending machines or pay telephones, or other similar services from any persons other than those specifically designated by Landlord to offer or distribute such services. Landlord shall designate at least one vendor for such services. 51. FOOD SERVICE At all times during the term of the Lease (subject; however, to reasonable temporary interruptions), Landlord will provide a cafeteria or other food service facility within the Building campus to serve breakfast and lunches to employees of Tenant and other tenants. The scope and types of food to be served, and all other aspects of such food service facility shall be determined in Landlord's sole discretion. 52. AUDITORIUM/CONFERENCECENTER Landlord will make available to Tenant on an as available, first come - first serve basis, the existing auditorium and conference center, at a cost no greater a cost than that charged to other tenants, together with Landlord's charges for setup and cleanup, and for any damages thereto resulting from Tenant's use thereof. 53. TELECOMMUNICATIONS A. TENANT'S RESPONSIBILITY. Tenant acknowledges and agrees that all telephone and telecommunications and data services, including wiring and installation therefor, desired by Tenant shall be ordered and utilized at the sole expense of Tenant. Unless Landlord otherwise requests or consents in writing, all of Tenant's telecommunications equipment shall be and remain solely in the Premises and the telephone closets on the floor on which the Premises is located, in accordance with the rules and regulations adopted by Landlord from time to time. Unless otherwise specifically agreed to in writing, Landlord shall have no responsibility for the maintenance of Tenant's telecommunications or data equipment, including wiring; nor for any wiring or other infrastructure to which Tenant's telecommunications or data equipment may be connected. Tenant agrees that, to the extent any such service is interrupted, curtailed or discontinued, Landlord shall have no obligation or liability with respect thereto and it shall be the sole obligation of Tenant at its expense to obtain substitute service, unless caused by the negligence or willful misconduct of the Landlord, its agents, employees, or contractors. B. REMOVAL OF EQUIPMENT AND WIRING AND OTHER FACILITIES. Any and all telecommunications and data equipment installed in the Premises or elsewhere in the Building or the Project by or on behalf of Tenant, including wiring, or other facilities for telecommunications or data transmittal reception, shall be removed prior to the expiration or earlier termination of the Term, by Tenant at its sole cost or, at Landlord's election, by Landlord at Tenant's sole cost, with the cost therefor to be paid as Additional Rent. C. NEW TELECOMMUNICATIONS OR DATA PROVIDER INSTALLATIONS. Tenant acknowledges that the Landlord has or will enter into an agreement with a telephone, telecommunications or data provider for the installation and maintenance of telecommunications lines to and within the Building and that such lines will be the exclusive lines serving the Building and the Premises. In the event that Tenant wishes at any time to utilize the services of a telephone, telecommunications or data provider whose equipment is not then servicing the Project, no such provider shall be permitted to install its line within the Building or Project without first securing the prior written approval of Landlord, which approval shall be in the Landlord's sole and absolute discretion. The Landlord's approval, if given, shall not be deemed any kind of warranty or representation by Landlord, including without limitation, any warranty or representation as to the suitability, confidence, or financial strength of the provider without limitation of the foregoing standard and may be conditioned upon such terms as shall be determined by Landlord in its reasonable judgment. D. LIMITS ON PROVIDER RELATIONSHIP. Notwithstanding anything herein to the contrary, no telephone, telecommunications or data provider shall be deemed a third-party beneficiary of this Lease. E. INSTALLATION AND USE OF WIRELESS TECHNOLOGIES. Subject to Paragraph 56 hereof, Tenant shall not utilize any wireless communications or data equipment (other than usual and customary cellular telephones), including antenna and satellite receiver dishes, within the Premises, or the Building or the Project, without Landlord's prior written consent, which consent may be arbitrarily withheld. Such consent may be conditioned in such manner so as to p protect Landlord's financial interest and the interest of the Building and the other tenants therein, in a manner similar to the arrangement described in the immediately preceding paragraphs. F. CONSENT NOT LANDLORD WARRANTY. Landlord's consent under this Section shall not be deemed any kind of warranty or representation by Landlord, including without limitation, any warranty or representation as to the suitability, competence or financial strength of provider. G. TENANT RESPONSIBLE FOR SERVICE INTERRUPTION. Tenant agrees that to the extent service by its provider is interrupted, curtailed or discontinued, Landlord shall have no obligation or liability with Page 30 ------------------ Blue Lake Standard Lease respect thereto and it shall be the sole obligation of Tenant at its expense to obtain substitute service as to another, except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees or its contractors.. H. NO THIRD PARTY RIGHTS. The provisions of this Section may be enforced solely by the Tenant and Landlord, and are not for the benefit of any other party, specifically without limitation, no telephone or telecommunications provider shall be deemed a third party beneficiary of the Lease. I. LIABILITY FOR EQUIPMENT INTERFERENCE. In the event that telecommunications or data equipment, wiring and facilities or satellites and antenna equipment of any kind installed by or at the request of Tenant within the Premises, on the roof, or elsewhere within or on the Building, or the Project, causes interference to equipment used by another party, Tenant shall assume all liability related to such interference. Tenant shall use reasonable efforts, and shall cooperate with Landlord and other parties to promptly eliminate such interference. In the event that Tenant is unable to do so, Tenant will substitute alternative equipment which remedies the situation. If such interference persists, Tenant shall discontinue the use of such equipment, and at Landlord's discretion, remove such equipment according to the foregoing specifications. Tenant agrees to and shall indemnify and hold Landlord harmless or any liabilities and claims against Landlord resulting from such interference. 54. INCENTIVE PROGRAMS. Tenant acknowledges advice from Landlord that Landlord may, from time to time, apply for various loans, grants and/or other incentive programs ("Incentive Programs"), which may enhance the value of the Building. It is anticipated that certain applications for solicitations may require a tenant or other possessor of portions of the Building to be the applicant, co-applicant or participating party in applying for and/or securing the Incentive Program(s). Within five (5) business days of Landlord's request, Tenant shall, at Landlord's expense execute, to the extent required as to any Incentive Program, any and all applications, petitions and/or other documentation in support of Incentive Program. In any instance in which an Incentive Program is applied for and secured, Tenant hereby irrevocably assigns and quit-claims to Landlord any and all rights and interests which Tenant may claim in and to any benefits or proceeds of t the Incentive Programs. The assignment contained in the immediately preceding sentence is self-effectuating without need for further confirmation to be effective; however, at the request of Landlord, Tenant shall execute and deliver such assignment(s), confirmations with supporting documentation as may from time-to-time be required by Landlord in furtherance of this Section. Landlord covenants with Tenant that Tenant shall not incur any liability or obligation by virtue of or associated with the application, processing or any participation in the securing of any Incentive Program, and Landlord shall indemnify Tenant in connection therewith. Tenant further agrees that, except that to the extent necessary in processing any application for Incentive Programs, Tenant will use all reasonable efforts to have all information received by Tenant or any employee, shareholder, attorney, accountant or other party acting by, through or under Tenant shall and remain confidential as proprietary information owned and reserved solely by Landlord. Landlord may exclusively, and its sole option, prepare a memorandum of this Section which shall be executed by Tenant upon request of Landlord and which may be recorded in the public records of Palm Beach County, Florida. 55. SAVING PROVISION. If any provision of this Lease, or its application to any situation shall be invalid or unenforceable to any extent, the remainder of this Lease, or the application thereof to situations other than that as to which it is invalid or unenforceable, shall not be affected thereby and every provision of this Lease shall be valid and enforceable to the fullest extent permitted by law. 56. SATELLITE DISH. Landlord agrees that Tenant, at its sole cost and expense, has the right to install a satellite dish, fibre optics and microwave transmission equipment (collectively, the "Satellite Dish") on the roof of the Building. Should Tenant elect to install a Satellite Dish on the roof of the Building, Tenant agrees to install the Satellite Dish in accordance with all applicable codes and laws and sound engineering and construction practices. Tenant further agrees to use any specified roofing contractor or other general contractor required by Landlord to install the Satellite Dish so as avoid any compromise to the roof structure or membrane. The architectural and engineering plans and specifications for the Satellite Dish and any required Alterations to the Building in connection therewith shall be subject to the Landlord's approval as an Alteration under this Lease. Tenant warrants and represents that any emissions from the Satellite Dish are not harmful to humans and indemnifies the Landlord from and against any claims thereof in the same manner as for any other Environmental Default hereunder. Page 31 ------------------ Blue Lake Standard Lease IN WITNESS WHEREOF, the parties have signed and delivered this Lease as of the day and year first above written. WITNESSES: "TENANT" CYBEAR, INC., a Florida corporation /s/ [ILLEGIBLE] - ----------------------------------- /s/ [ILLEGIBLE] - ----------------------------------- (As to Tenant) By: /s/ SCOTT LODIN ------------------------------------- Print Name: Scott Lodin Title: Vice President/General Counsel (SEAL) WITNESSES: "LANDLORD" BLUE LAKE, LTD., /s/ [ILLEGIBLE] a Florida limited partnership - ----------------------------------- /s/ [ILLEGIBLE] By: Blue Lake, Inc., a Florida - ----------------------------------- corporation, its general partner (As to Landlord) By: /s/ [ILLEGIBLE] ------------------------------------- Print Name: [Illegible] Authorized Agent: Executive Vice President Page 32 ------------------ Blue Lake Standard Lease EXHIBIT "A" FLOOR PLAN Page 33 ------------------ Blue Lake Standard Lease EXHIBIT "A" EXHIBIT "A-1" EXPANSION EXHIBIT "B" WORK LETTER AGREEMENT In the event of any inconsistencies between this Agreement and the Lease dated currently herewith to which this Agreement is attached as Exhibit "B", this Agreement shall control. Capitalized terms used in this Agreement shall, unless otherwise specifically set forth herein, have the same meanings as in the Lease. 1. Tenant shall complete or cause the completion of improvements to the Premises as shown on the Final Plans (defined below) and as more fully described in this Section (the "Work"). Tenant shall retain an architect and engineer from and amongst a group which shall consist of the published list of pre-approved architects and engineers at Blue Lake Corporate Center, listed pursuant to Schedule B-3 to prepare complete and detailed architectural plans and specifications, and structural, mechanical and engineering plans and specifications, showing the Work (collectively, the "Construction Plans"). Subject to the Landlord's Contribution for Tenant Improvements, the cost of the Construction Plans shall be the responsibility of Tenant. The Construction Plans shall be prepared in a manner as will be acceptable to Landlord in its reasonable discretion. The Work shall meet or exceed the minimum standards for the Work ("Minimum Building Materials and Construction") attached hereto as Exhibit "B-1" and otherwise as determined by Landlord in its reasonable discretion. It is the intent of the parties that Exhibit "B-1" set forth the minimum quality of the Work, however, Exhibit "B-1" shall not be construed to require any particular quantity of the items described therein except to the extent required by applicable codes or laws. The Construction Plans shall be consistent with all applicable laws, codes, ordinances and regulations, including but not limited to the Americans with Disabilities Act of 1990, of governmental and quasi-governmental entities having jurisdiction regarding the Work and/or the Building. Tenant's Construction Plans shall include, but not be limited to, indication or identification of the following: A. locations and structural design of all floor area requiring live load capacities in excess of 75 pounds per square foot; areas; B. the density of occupancy in large work C. the location of any food service areas or vending equipment rooms if permitted by Landlord; D. areas requiring 24-hour air conditioning, Tenant's supplemental air-conditioning units (if any), and electrical consumption subverters if required by Landlord; E. location of rooms for telephone equipment; F. locations and types of plumbing, if any, required for toilets (other than core facilities), sinks, drinking fountains, etc.; G. light switching of offices, conference rooms, etc.; H. layouts for specially installed equipment, including computers, size and capacity of mechanical and electrical services required and heat projection of equipment; I. dimensioned location of: (a) electrical receptacles (120 volts), including receptacles for wall clocks, and telephone outlets and their respective locations (wall or floor), (b) electrical receptacles for use in the operation of Tenant's business equipment which requires 208 volts or separate electrical circuits, (c) electronic calculating, CRT systems, etc., and (d) special audio-visual requirements; J. special fire protection equipment and raised flooring where permitted by Building systems and otherwise approved by Landlord; K. reflected ceiling plan; L. information concerning air conditioning loads, including, but not limited to, air volume amounts at all supply vents; M. non-building standard ceiling heights and/or materials; N. materials, colors and designs of wall coverings and finishes; O. painting and decorative treatment required to complete all construction; P. swing of each door; Q. a schedule for doors (including dimensions for undercutting of doors to clear carpeting) and frames complete with hardware; and R. all other information necessary to make the work complete and in all respects ready for operation. 2. Tenant shall deliver Construction Plans to Landlord for Landlord's approval. Landlord shall respond to Tenant's request for approval of Tenant's Construction Plans within ten (10) business days of their submission, during which time the Landlord's architect and engineer ("Landlord's Consultants") will Page 34 ------------------ Blue Lake Standard Lease review the Construction Plans. In the event Landlord or Landlord's Consultants shall reasonably disapprove of all or a portion of Tenant's Construction Plans, it shall set forth its reasons therefor in writing in reasonable detail within such ten (10) business day period. Tenant shall be required to incorporate any reasonable changes to the Construction Plans as required by Landlord. Landlord or Landlord's Consultants shall respond to `Tenant's request for consent of its revised plans within three (3) business days of submission unless the revisions are substantial in which event Landlord's response shall be within five (5) business days thereafter. Neither the recommendation or designation by the Landlord of a pre-approved list of architects or contractors shall be deemed to create any liability on the part of Landlord with respect to the Construction Plans (whether with respect to design, functionality, specifications, compliance with legal requirements or otherwise). Tenant shall reimburse Landlord for reasonable architect, engineer and other professional fees incurred by Landlord in connection with review of Tenant's Construction Plans and Revisions to the extent that such relate to an a Landlord-approved structural, roof or mechanical system modification. However, (i) Tenant may use Landlord's Contribution, if provided for in the BLI Rider, for such reimbursement, and (ii) reimbursement shall be limited to customary rates. 3. As used herein, "Final Plans" refers to the Construction Plans after the same have been approved in writing by Landlord. The Landlord Contribution to cost of construction, if any, is set forth in the BLI Rider. Tenant shall be responsible for the entire cost of demolition, if any, and Tenant's Initial Improvements including any revisions to the Final Plans ("Revisions") subject to the Landlord's Contribution. Tenant shall obtain, or cause to be obtained, all necessary governmental permits and commence and diligently pursue at its sole cost and expense construction of the Work contemplated by the Final Plans, substantially in accordance with the Final Plans. Tenant shall obtain Landlord's prior written approval of its building permit application before submission of same. If applicable, Tenant's plans shall include all information necessary to reflect Tenant's requirement for the installation of any supplemental air conditioning system and ductor, electrical, plumbing and other mechanical systems and all work necessary to connect any special or non-standard facilities to the Building's base mechanical, electrical and structural systems. Tenant's submission shall include not less than one (1) set of sepias, three (3) signed and sealed sets, and six (6) bidding sets of black and white prints for each bidder. A. PERFORMANCE OF WORK. The Work shall be constructed in a good and workmanlike manner substantially in accordance with the Construction Plans. The Work shall be subject, at the option of Landlord, to the inspection of Landlord, Landlord's Architect and Landlord's General Contractor from time to time, during the period in which the Work is being performed, provided that such inspection does not unreasonably interfere with the completion of the Work. If such inspections reveal that any of the Work is not being constructed substantially in conformance with the provisions of this Agreement or the Final Plans, Tenant at its expense shall correct same forthwith. Only new, first class materials shall be used in the performance of the Work. At all times during the construction of the Work, it shall be Tenant's responsibility to cause each of Tenant's contractors and subcontractors to maintain protection of the Premises in such a manner as to prevent any damage to the Work, or to adjacent property and improvements by reason of the performance of the Work. Tenant's contractor and subcontractors shall properly secure the Premises, including, to the extent required, the furnishing of temporary guard rails and barricades. Landlord for good cause shall have the right to require Tenant to terminate any construction work at any time being performed by or on behalf of Tenant in the Premises, and to require that any contractor or subcontractor, or any employee of same, leave the Building. Upon written notification, setting forth in reasonable detail such good cause, from Landlord to Tenant to cease any work, Tenant shall forthwith remove from the Premises all agents, employees and contractors of Tenant performing such work until such time as Landlord shall have given its written consent for the resumption of such construction work (such consent not to be unreasonably withheld or delayed), and Tenant shall have no claim for damages of any nature whatsoever against Tenant in connection therewith. B. CHANCE ORDERS. Landlord's written approval shall be obtained by Tenant prior to the undertaking of any construction work which deviates from or modifies in a substantial manner from the Final Plans. Should Tenant or Tenant's contractor request or desire to make any substantial changes to the Final Plans, Tenant shall submit same to Landlord for its approval which shall not be unreasonably withheld or delayed. C. INSURANCE. During the course of construction, Tenant or Contractor shall provide builder's risk insurance equal to the replacement cost of any improvements being constructed, naming Landlord as an additional insured as its interests may appears, and owners and contractors protective liability insurance in an amount of not less than $3,000,000. In addition, Tenant shall maintain the insurance required pursuant to the Lease. D. BUILDING RULES AND REGULATIONS. During the course of construction, Tenant and Contractor shall comply the with Building rules and regulations relating to construction within the Building. Attached hereto as Exhibit "C are such rules and regulations, which Tenant and Contractor shall initial and cause to be posted during the course of construction. E. NOTICE OF COMMENCEMENT. Tenant agrees not to cause or permit the Contractor to commence construction and shall not disburse any funds to Contractor, any subcontractors, sub- Page 35 ------------------ Blue Lake Standard Lease subcontractors, materialmen and laborers until a Notice of Commencement is recorded pursuant to Chapter 713.13 of the Florida Statutes, a certified copy of such Notice of Commencement has been posted on the construction site, and an Affidavit of such posting is furnished to Landlord. Such Notice of Commencement shall not be recorded without Landlord's prior written consent to the form and content of same which shall not be unreasonably withheld or delayed. The form of the Notice of Commencement shall be in accordance with Exhibit "B-2" attached hereto. Landlord shall be named on the Notice of Commencement to receive copies of Notices to Owner. Landlord may desire to inquire and communicate directly with various parties named in statements provided to Landlord by Tenant and Contractor or those parties who give a Notice to Owner. Tenant hereby authorizes Landlord to make such inquiries and authorize those parties to furnish the information required by Landlord. F. LIENS. Pursuant to the provisions of the Florida Construction Lien Law (Chapter 713) and this Lease, the interest of the Landlord shall not be subject to the liens for improvements made by the Tenant, Contractor, any subcontractor, sub-subcontractor, materialman, supplier or laborer, and the Lease is hereby deemed to expressly prohibit such liability. Tenant agrees to notify Contractor, any subcontractors, sub-subcontractors, materialmen, laborers and suppliers doing Work for Tenant on the Premises of this provision. G. LANDLORD'S CONTRIBUTION. Notwithstanding anything to the contrary contained herein, Tenant acknowledges that Landlord is merely providing the Landlord's Contribution as an incentive for Tenant to enter into this Lease and Landlord is not in any way acting as a contractor or as any other party with respect to construction of the Work, and further, that neither the Landlord nor the Building are liable for, nor stand as security for the claims or liens of any Contractor, subcontractors, sub- subcontractors, materialmen, laborers and other third parties, hired by or on behalf of the Tenant, except to the extent caused by the negligence or willful misconduct of Landlord, its agents, employees, or contractors. H. PAYMENT OF LANDLORD'S CONTRIBUTION. Payment of Landlord's Contribution ("Payment"), shall be made by Landlord (at its election in a check payable jointly to Tenant and Contractor), monthly, within thirty (30) days after satisfaction of the following conditions: (1) The Construction Contract has been fully performed by the Contractor to date; and (2) Tenant submits verifiable receipts that it has paid in full the Contractor on the Construction Contract through the date of the particular payment; and (3) As to final payment, all punchlist relating to the Work has been completed; and (4) Tenant's architect has certified to Landlord, in form reasonably acceptable to Landlord, that all of the Work has been performed (as to monthly payments) or completed (as to final payment) substantially in accordance with the Final Plans, except as modified by change orders approved in writing by Landlord; and (5) The Contractor has furnished to both the Landlord and Landlord's Architect, a duly and properly executed Contractor's Progress Payment Affidavit or Final Affidavit, as applicable, complying in all respects to the provisions of Chapter 713 of Florida Statutes (the "Construction Lien Law"), a duly and properly executed Contractor's Partial Release of Lien or Final Release of Lien, as applicable, all in such form and having such content as is satisfactory to Landlord in its reasonable discretion, duly and properly executed Partial Releases of Lien or Final Releases of Lien, as applicable, from each and every subcontractor, sub-subcontractor, materialman, supplier and laborer and such other documents as Landlord shall be entitled to under the Construction Lien Law, all in such form and having such content as is satisfactory to Landlord in its reasonable discretion. In the event Contractor does not furnish to Landlord all of the aforesaid final releases of lien, then Landlord shall be entitled to subtract from the amount that Landlord determines is necessary to transfer to bond or to pay in full any subcontractor, sub-subcontractor, materialman, laborer who has not furnished a Release of Lien (but no reduction in the Payment shall be made if the Contractor posts a cash bond or other surety accessible to Landlord covering such amounts). Landlord shall have the right to pay directly any subcontractor, sub-subcontractor, materialman, supplier and laborer listed on the Contractor's Affidavit given in connection with the Contractor's Application for Payment, and any such other subcontractor, sub-subcontractor, materialman, supplier and laborer who has given a Notice to Owner; and (6) As to final payment, certification by Tenant in form satisfactory to Landlord that Tenant accepts the Premises, and that all Work has been substantially completed in accordance with the Final Plans; and (7) As to final payment, receipt by Landlord of two (2) sets of detailed and complete As-Built Final Plans of the Work, including all architectural, structural, mechanical, plumbing and electrical work done in the Premises; and (8) As to final payment, evidence reasonably satisfactory to Landlord that the Work is substantially complete in accordance with the Final Plans and evidence of approval of such completion by local governmental authorities; and Page 36 ------------------ Blue Lake Standard Lease (9) As to final payment, Tenant is in occupancy of the Premises and has made its first monthly installment of Base Rent, and is not otherwise in default of the Lease beyond applicable notice and cure periods; and (10) As to final payment, Landlord receives a copy of the Certificate of Occupancy. All progress payments shall be subject to a ten (10%) percent retainage held by Landlord until final payment of Landlord's Contribution. 4. Tenant shall have the right to make Revisions from time to time after Final Plans have been prepared. Ail Revisions, of a substantial nature (i.e., those that are material, structural or mechanical in nature) shall be subject to Landlord's prior written approval, which shall not be unreasonably withheld or delayed. Landlord shall either approve or disapprove such Revisions within five (5) business days after submission thereof by Tenant. Without limiting the generality of the foregoing, no Revision will be approved unless (a) all changes to and modifications from the Final Plans are circled or highlighted as per standard practices and (b) said Revisions conform with the requirements of this Work Letter. The cost of any Revisions shall be home solely by Tenant and the Revisions shall not delay the Commencement Date hereunder. 5. Tenant shall use due diligence to complete the Work as soon as may be practicable. 6. Tenant shall notify Landlord of the date of Substantial Completion at least five (5) days prior thereto. As used herein, "Substantial Completion" shall mean that, with the exception of punch-list items, the Work shall have been completed in accordance with the Final Plans. Landlord and Tenant shall thereupon set a mutually convenient time for Tenant's Construction Agent and Landlord or Landlord's Consultant to inspect the Premises. Upon completion of the inspection, Tenant's construction Agent shall acknowledge in writing that substantial completion has occurred. Page 37 ------------------ Blue Lake Standard Lease EXHIBIT "B-1" TO WORK LETTER AGREEMENT 1. PARTITIONS (A) Demising Walls: One hour fire rated construction (unless otherwise required by code due to existing conditions), full height from floor slab to underside of upper deck, 3-5/8" 25 gauge (or as structurally required for height to underside of upper deck) steel studs spaced per code requirements, 3-1/2" fiberglass batt insulation for sound attenuation full height of wall, Type "X" 5/8" gypsum board, taped and finished 2" above ceiling height ready to receive finishes, and fire taped to the underside of the upper deck. Construction to include both sides of wall. (B) Interior Partitions: Non-rated wall construction, framed above ceiling height 2", or to ceiling height (with zip bead), 3-5/8" 25 gauge steel studs spaced per code requirements, minimum 5/8" gypsum board, taped and finished ready to receive finishes. (C) Interior Face of Concrete/Masonry Walls: Non-rated wall construction, furred above ceiling height 2", furring strips spaced per applicable code, minimum Liz'' gypsum board, taped and finished ready to receive finishes. No alterations or changes to exterior wall without the written consent of the Landlord 2. DOORS (A) Interior Entry Doors: (i). Main Entry: C-Label fire rated door, 3'-0" X 8'-0" X 1-3/4", two flush solid core wood, paint grade, steel frame. (ii). Secondary Entry: same as above. Landlord to review for access to mechanical systems and door requirements. Doors to be recessed within the tenant space. (B) Exterior Entry Doors: Two flush glass and aluminum non-label doors, 3'-0" X B'-0", with aluminum frame. (C) Interior Doors: Solid core wood, 3'-0" X 8'-0", paint grade, hollow metal frame. Match existing for spaces re-using existing doors. 3. HARDWARE (A) Interior Entry Doors: Three (3) pair Hager BB1279 4.5" X 4.5" US 26D finish hinges, Lever lockset Schlage "D"! series Athens model with US 26D finish and to have top and bottom flush bolts with threshold and weatherstrips, two door closers LCN Smooth Series with US 26D finish, two door stoppers model IVES 435/436 and eight door silencers model IVES 20. (B) Exterior Entry Doors: Three (3) pair Hager BB1279 4.5" X 4.5" US 26D finish hinges, Lever lockset Schlage "D" series Athens model with US 26D finish and to have top and bottom flush bolts with threshold and weatherstrips, two door closers LCN Smooth Series with US 26D finish, two door stoppers model IVES 435/436 and eight door silencers model IVES 20. (C) Interior Doors: Three (3) Hager BB1279 4.5" X 4.5" US 26D finish hinges, Lever latchset Schlage "D" series Athens model with US 26D finish, one door stopper model IVES 435/436 and four door silencers model IVES 20. (D) Tenant shall provide one entry keyed to the Landlord's building master key (see building engineer) that entry shall be the closest door to the fire alarm control panel. 4. CEILINGS (A) For new construction: 2' X 2' Armstrong Cortega #704 ceiling tile with 15" X 16" white metal grid at 9'-0" above finish floor. (B) Existing construction: Match existing. 5. FLOORING (A) Carpet: Shaw, Lotus or equivalent 26 ounce commercial grade textured loop pile direct glue down carpet in work areas and offices. Vinyl base. (B) Vinyl (VCT) tiles in kitchen areas. (C) Ceramic tiles (4" X 4") in bathrooms. 6. FINISHES (A) Paint - Walls primed first coat, latex based paint single color. Page 38 ------------------ Blue Lake Standard Lease (B) Window Treatments are to be mini-blinds, white, Levelor, to match existing. The Y-buildings (001, 002, 031, 032, 003, 005) shall be vertical blinds Satique-off white/3522. (C) No wallcoverings to be used on exterior masonry/concrete walls. 7. MECHANICAL (A) Controls All thermostats and other controls to match existing controls (Johnson Controls, Robert-Shaw, see Building Engineer). (B) Variable Air Volume Box: Match existing VAV (Trane, Carrier) (C) Registers, Grills: MetalAire white perforated air diffuser series 7000 Model PCS-CB-5 (4-way) all 24" X 24" (D) Ductor: Ducting shall be 24 gauge sheet metal construction with appropriate connections and hangers as per code. Match existing shall be code compliant. 8. ELECTRICAL (A) Light Fixtures: 2' X 4' four tube recessed fluorescent fixture with electronic ballast and T-8 lamps or match/re-use existing lighting. (B) Light Switches: Toggle type single pole single throw switch. (C) Exit Lights: Battery backup and/or emergency lighting circuit direct wired. Installed per code. (D) Receptacles: Wall mounted duplex at 110 volts 20 amp rating at 16" above finish floor as per code. (E) Telephone: Modular wall mounted outlets with pull string conduit stubbed above ceiling with pull-string. 3/4" inch conduit supplied from telephone room to leased space. (F) Power: Electric to be individually metered. 9. PLUMBING Common area restrooms as per existing. New bathrooms and/or renovation of existing bathrooms as below and are to be ADA compliant: (A) Toilet Partitions: Formica laminate or equal solid color with 1-1/4" thick panels and 5'-10" high mounted with stainless steel hardware. (B) Vanity Top: Formica laminate or equivalent solid color with ADA compliant design. (C) Water Closet: Wall mounted, American Standard (D) Per applicable code for ADA and density requirements. 10. LIFE SAFETY SYSTEMS (A) Fire alarm panel to be Thorn AutoCall AL-1 500. (B) Approved fire alarm contractor is WSA Systems, Inc., contact Brad Golub (954) 422-9662. (C) Fire Sprinkler system per code 11. EXTERIOR ENTRIES All exterior entries to be per approved style as attached. Landlord to review. (A) Y-building entries. (B) Flex building entries. (C) Building 021/022/023/042 west face entries. 12. ARCHITECTURAL STANDARDS (A) Drawing standards. (B) CAD storage maintenance standards 13. SIGNAGE (A) Exterior signage to be submitted by tenant and approved in writing by Landlord. (B) Interior signage package to be submitted by tenant and approved in writing by Landlord. (C) Temporary directional signage: tenant to submit to Landlord a signage package. Landlord to review and approve in writing. 14. OTHER (A) Any exterior details, modifications, temporary signage, posters, banners, etc.., to be reviewed and approved in writing by Landlord prior to installation. Page 39 ------------------ Blue Lake Standard Lease EXHIBIT I FORM OF NOTICE OF COMMENCEMENT Permit No.______________________________ Tax Folio No.___________________________ NOTICE OF COMMENCEMENT STATE OF FLORIDA COUNTY OF PALM BEACH The undersigned hereby gives notice that improvement will be made to certain real property, and in accordance with Chapter 713, Florida Statutes, the following information is provided in this Notice of Commencement. 1. Description of property: (legal description of the property, and street address if available) See Exhibit "A" attached hereto and made a part hereof. 2. General description of improvement: Tenant's build-out of leasehold improvements to a portion of 5000 Blue Lake Drive, Boca Raton, Florida, pursuant to Work Letter Exhibit to Lease between Owner and Cybear, Inc.. 3. Owner information a. Name and address: Cybear, Inc. c/o Andrx Corporation 400 S. W. 47th Avenue, Suite 201 Fort Lauderdale, Florida 33314 Attention: Scott Lodin, Esq. b. Interest in property: Leasehold c. Name and address of fee simple titleholder (if other than Owner): N/A Blue Lake, Ltd. 5000 Blue Lake Drive, Suite 100 Boca Raton, Florida 33431 Attn: Michael D. Masanoff, Exec. Vice President 4. Contractor (name and address): a. Name and address: b. Fax Number: 5. Surety a. Name and address: N/A b. Phone Number: c. Fax Number: (optional, if service by fax is acceptable). d. Amount of bond: $ Page 40 ------------------ Blue Lake Standard Lease 6. Lender: (name end address) a. Name and address: b. Fax Number: (optional, if service by fax is acceptable). 7. Persons within the State of Florida designated by Owner upon whom notices or other documents may be served as provided by Section 713.13(1)(a)7., Florida Statutes. (name and address) Blue Lake, Ltd. 5000 Blue Lake Drive Suite 100 Boca Raton, Florida 33432 Att: Michael D. Masanoff, Executive Vice President 8. In addition to himself, Owner designates___________________ (name) ___________________(address) to receive a copy of the Lienor's Notice as provided in Section 713.13(1)(b), Florida Statutes. 9. Expiration date of notice of commencement: Six (6) months from the date of recordation. CYBEAR, INC., a Florida Corporation By: /s/ SCOTT LODIN ---------------------------------- Print Name: Scott Lodin Title: Vice President/General Counsel Sworn to and subscribed before me this 14th day of September, 1998, by Scott Landin as V.P./General Counsel of CYBEAR, INC., a Florida corporation, who is personally known to me. /s/ ALLISON A. LICHTER ----------------------------- Notary Public My Commission Expires: 3/14/00 NOTARY PUBLIC STATE OF FLORIDA ALLISON A. LICHTER COMMISSION # CC 540391 EXPIRES MAR 14, 2000 BONDED THRU ATLANTIC BONDING CO., INC. Page 41 ------------------ Blue Lake Standard Lease EXHIBIT "B-2" LIST OF PRE-APPROVED BLUE LAKE CORPORATE CENTER CONTRACTORS Page 42 ------------------ Blue Lake Standard Lease EXHIBIT "B-2" BLCC APPROVED GENERAL CONTRACTORS AND ARCHITECHTS (AS OF JUNE 1, 1998) CONTRACTORS SHAKMAN CONSTRUCTION MICHAEL GOLDMAN BOCA RATON, FLORIDA TELEPHONE: 561-750-8288 SEAWOOD BUILDERS BETTYY MASI DEERFIELD BEACH, FLORIDA TELEPHONE: 954-421-4200 BOCA CONTRACTING CORP. CHARLES JOHNSON BOCA RATON, FLORIDA TELEPHONE: 561 -998-3311 ARCHITECTS PGAC ARCHITECTS IAN NESTLER BOCA RATON, FLORIDA TELEPHONE: 561-998-3311 GEORGE F. WHITE & ASSOCIATES JEFF FAICMAN BOCA RATON, FLORIDA TELEPHONE: 561-997-6698 SLATTERY & ROOT ARCHITECTS PAUL SLATTERY BOCA RATON, FLORIDA TELEPHONE: 561-392-3720 EXHIBIT "C" RULES AND REGULATIONS 1. The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors, and halls shall not be obstructed or encumbered by any Tenant or used for any purpose other than ingress and ingress to and from the Premises. 2. No awnings or other projections shall be attached to the outside walls of the Building without the prior written consent of Landlord. No curtains, blinds, shades, or screens shall be attached to or hung in, or used in connection with, any window or door of the Premises, without the prior written consent of Landlord. Tenant shall be required to use only Landlord's standard blinds and Tenant shall comply with any and all energy conservation measures instituted by Landlord. Such awnings, projections, curtains, blinds, shades, screens or other fixtures must be of a quality, type, design, and color, and attached in the manner approved by Landlord. 3. No sign, advertisement, notice or other lettering shall be exhibited, inscribed, painted or affixed by any Tenant on any part of the outside of the Premises or Building or on the inside of the Premises if the same can be seen from the outside of the Premises without the prior written consent of Landlord except that the name of Tenant may appear on the entrance door of the Premises. In the event of a violation of the foregoing by Tenant, Landlord may remove same without any liability and may charge the expense incurred by such removal to the Tenant or Tenants violating this rule. Interior signs on doors and the directory shall be inscribed, painted or affixed for each Tenant by Landlord at the expense of such Tenant and shall be of a size and style acceptable to the Landlord. Tenant must furnish Landlord with evidence of compliance with applicable legal requirements including Florida's Fictitious Name Law if Tenant desires to identify itself by a name other than its legal name. 4. Tenant shall not occupy or permit any portion of the Premises demised to it to be occupied as an office for a public stenographer or typist, or as a barber or manicure shop, or as an employment bureau. Tenant shall not engage or pay any employees on the Premises, except those actually working for Tenant at the Premises, nor advertise for labor giving an address at the Premises. The Premises shall not be used for gambling, lodging, or sleeping or for any immoral or illegal purposes. 5. The sashes, sash doors, skylights, windows, and doors that reflect or admit light and air into the halls, passageway or other public places in the Building shall not be covered or obstructed by any Tenant nor shall any bottles, parcels or other articles be placed on the window sills. No materials shall be placed in the corridors or vestibules nor shall any articles obstruct any air conditioning supply or exhaust vent. 6. The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed and no sweepings, rubbish, rags, or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures by Tenant, its servants, employees, agents, or licensees shall be borne by Tenant. 7. No Tenant shall mark, paint, drill into, or in any way deface any part of the Premises or the Building of which they form a part. No boring, cutting, or stringing of wires shall be permitted, except with the prior written consent of Landlord, and as it may direct. Should a Tenant require telegraphic, telephonic, annunciator or other communication service, Landlord will direct the electricians where and how wires are to be introduced and placed, and none shall be introduced or placed except as Landlord shall direct. Electric current shall not be used for power or heating without Landlord's prior written permission. Neither Tenant nor Tenant's Agents including, but not limited to, electrical repairmen and telephone installers, shall lift, remove or in any way alter or disturb any of the interior ceiling materials of the Premises or building, nor shall any of same have any access whatsoever to the area above the interior ceiling of the Premises or the Building except with the prior written consent of Landlord and in accordance with guidelines established by Landlord. No antennas shall be permitted. 8. No bicycles, vehicles, or animals of any kind shall be brought into or kept in or about the Premises, and no cooling shall be done or permitted by any Tenant on said Premises. Bicycles shall be locked in the racks provided therefor. No Tenant shall cause or permit any unusual or objectionable odors to be produced upon or permeate from the Premises. 9. Landlord shall have the right to retain a passkey and to enter the Premises at any time, to examine same or to make such alterations and repairs as may be deemed necessary, or to exhibit same to prospective Tenants during normal business hours. 10. No Tenant shall make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with occupants of this or neighboring buildings or premises or those having business with them, whether by the use of any musical instrument, radio, talking machine, unmusical noise, whistling, singing, or in any other way. No Tenant shall throw anything out of doors, windows, skylights, or down the passageways. 11. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by any Tenant, nor shall any changes be made in existing locks or the mechanism thereof. Each Tenant must, upon the termination of his tenancy restore to the Landlord all keys of offices and toilet rooms, either Page 43 ------------------ Blue Lake Standard Lease furnished to, or otherwise procured by, such Tenant. Tenant shall pay to the Landlord the cost of any lost keys. 12. Tenant will refer all contractors, contractors' representatives and installation technicians, rendering any service to Tenant, to Landlord for Landlord's supervision, approval, and control before performance of any contractual service. This provision shall apply to all work performed in the building, including installations of telephones, telegraph equipment, electrical devices and attachments, and installations of any nature affecting floors, walls, woodwork, trim, windows, ceilings, equipment or any other physical portion of the Building. 13. All removals, or the carrying in or out of any safes, freight, furniture or bulky matter of any description must take place during the hours which the Landlord or its agent may determine from time to time. All such movement shall be under supervision of Landlord and in the manner agreed between Tenant and Landlord by pre-arrangement before performance. Such pre-arrangements initiated by Tenant will include determination by Landlord, subject to his decision and control, of the time, method, and routing of movement and limitations imposed by safety or other concerns which may prohibit any article, equipment or any other item from being brought into the building. Landlord reserves the right to prescribe the weight and position of all safes, which must be placed upon 2-inch thick plank strips to distribute the weight. Any damage done to the Building or to other Tenants or to other persons in bringing in or removing safes, furniture or other bulky or heavy articles shall be paid for by the Tenant. 14. Tenant agrees that all machines or machinery placed in the Premises by Tenant will be erected and placed so as to prevent any vibration or annoyance to any other Tenants in the Building of which the Premises are a part, and it is agreed that upon written request of Landlord, Tenant will, within ten (10) days after the mailing of such notice, provide approved settings for the absorbing, preventing, or decreasing of noise from any or all machines or machinery placed in the Premises. 15. Each Tenant shall, at its expense, provide artificial light for the employees of the Landlord while doing janitor service or other cleaning, and in making repairs or alterations in said Premises. 16. The requirements of Tenant will be attended to only upon written application at the office of the Building. Employees of Landlord shall not receive or carry messages for or to any Tenant or other person nor contract with or render free or paid services to any Tenant or Tenant's agent, employees, or invitees. 17. Canvassing, soliciting, and peddling in the Building is prohibited and each Tenant shall cooperate to prevent the same. 18. Landlord will not be responsible for lost, stolen, or damaged property, equipment, money, or jewelry from Tenant's area or public rooms regardless of whether such loss occurs when area is locked against entry or not, except due to the negligence or willful misconduct of the Landlord, its agents, employees or contractors. 19. Landlord specifically reserves the right to refuse admittance to the Building from 6 p.m. to 8 a.m. daily, or on Saturdays, Sundays or legal holidays, to any person or persons who cannot furnish satisfactory identification, or to any person or persons who, for any other reason in the Landlord's judgment, should be denied access to the Premises. Landlord, for the protection of the Tenant and Tenant's effects may prescribe hours and intervals during the night and on Saturdays, Sundays and holidays, when all persons entering and departing the Building shall be required to enter their names, the offices to which they are going or from which they are leaving, and the time of entrance and departure in a register provided for the purpose by the Landlord. 20. Tenant shall remit the sum of TEN and NO/100 DOLLARS ($10.00) per key/card to Landlord as security for any and all replacement buildings access keys/cards provided to Tenant by Landlord, if Landlord elects, in its sole discretion to install such system. 21. Landlord may refuse admission to the Building outside of ordinary business hours to any person not known to Landlord or Landlord's agent in charge or not having a pass issued by Landlord or not property identified, and may require all persons admitted to or leaving the Building outside of ordinary business hours to register. Tenants, employees, agents and visitors shall be permitted to enter and leave the Building whenever appropriate arrangements have been previously made between Landlord and Tenant with respect thereto. Each tenant shall be responsible for all persons for whom he requests such permission and shall be liable to Landlord for all acts of such persons. Any person whose presence in the Building at any time shall, in the judgment of Landlord, be prejudicial to the safety, character, reputation and interests of the Building or its tenants may be denied access to the Building or may be ejected therefrom. In case of invasion, riot, public excitement or other commotion, Landlord may prevent all access to the Building during the continuance of the same, by closing the doors or otherwise, for the safety of the tenants and protection of property in the Building. Landlord may require any person leaving the Building with any package or other object to exhibit a pass from the Tenant from whose leased premises the package or object is being removed, but the establishment and enforcement of such requirements shall not impose any responsibility on the Landlord for the protection of any Tenant against the removal of property from the leased premises of Tenant. Landlord shall in no way be liable to any Tenant for damages or loss arising from the admission, exclusion or ejection of any person to or from Tenant's leased premises or the Building under the provision of this rule, except due to Page 44 ------------------ Blue Lake Standard Lease the negligence or willful misconduct of the Landlord, its agents, employees or contractors. 22. Tenant shall not obtain or accept for use in its leased premises ice, drinking water, food, beverage, towel, barbering, boot blacking, floor polishing, lighting maintenance, cleaning or other similar services from any persons not authorized by Landlord in writing to furnish such services. 23. There shall not be used in any space, or in the public halls of the Building, either by Tenant or by jobbers or others, in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards. 24. Tenant shall not permit its employees, licensees and invitees to loiter around the hallways, plazas, lobbies, stairways, elevators, front, roof or any other part of the Building used in common by the occupants thereof nor permit them to use the same for purposes of lunches, coffee breaks or other similar activities. 25. Tenant shall not advertise or permit any advertising which, in Landlord's reasonable opinion, tends to impair the reputation of the Building or its desirability as a building for offices or for financial, insurance and other institutions and businesses of like nature; and upon written notice from the Landlord, Tenant shall refrain from or discontinue any such advertising. 26. Each tenant, before closing and leaving the said leased premises at any time, shall see that all windows are closed. All tenants must observe strict care not to leave their windows open when it rains, and for any default or carelessness in these respects, or any of them, shall make good any injury sustained by other tenants, and to Landlord for damage to paint, plastering, or other parts of the Buildings, resulting from default or carelessness. 27. Landlord reserves the right to make such other and further reasonable rules and regulations as in its judgment may from time to time be needed for the safety, care and cleanliness of the Premises, and for the preservation of good order therein and any such other or further rules and regulations shall be binding upon the parties hereto with the same force and effect as if they had been inserted herein at the time of the execution hereof. 28. Tenant covenants and agrees, at its sole cost and expense, to comply with all present and future laws, orders and regulations of all state, federal, municipal, and local governments, departments, commissions and boards regarding the collection, sorting, separation, and recycling of waste products, garbage, refuse, and trash. Tenant shall, as required, sort and separate such waste products, garbage, refuse and trash into such categories as provided by law. Each separately sorted category of waste products, garbage, refuse, and trash shall be placed in separate receptacles reasonably approved by Landlord. Such separate receptacles may, at the Landlord's option be removed from the Premises in accordance with a collection schedule prescribed by law. Landlord reserves the right to refuse to collect or accept from Tenant any waste products, garbage, refuse or trash that is not separated and sorted and required by law and to require Tenant to arrange for such collection at Tenant's sole cost and expense, utilizing a contractor reasonably satisfactory to Landlord. Tenant shall pay all costs, expenses, fines, penalties or damages that may be imposed on Landlord or Tenant by reason of Tenant's failure to comply with the provisions of this Section, and, at Tenant's sole cost and expense shall indemnify, defend, and hold Landlord harmless (including legal fees and expenses) from and against any actions, claims and suits arising from such non-compliance, utilizing counsel reasonable satisfactory to Landlord. Page 45 ------------------ Blue Lake Standard Lease EXHIBIT "D-1" CORPORATE RESOLUTIONS The undersigned Officer of CYBEAR, INC., a Florida corporation authorized to transact business in Florida (the "Corporation") hereby certifies that the following is a true and correct copy of the Resolutions adopted at a duly called meeting of the Directors of the Corporation held on September 13, 1998, at which a quorum of Directors were present and voting throughout: "BE IT RESOLVED, that this Corporation enter into a Lease with BLUE LAKE, LTD., (the "Landlord") for space in The Blue Lake Corporate Center, Boca Raton, Florida. "BE IF FURTHER RESOLVED, that the President or any other officer of this Corporation, acting singly or together, be and hereby is and are authorized and directed to negotiate the specific terms and conditions of the Lease and the rent and charges in connection therewith and to execute and deliver on behalf of this Corporation such Lease and such other documents as may be necessary or required by Landlord with respect to the Lease. "BE IT FURTHER RESOLVED, that the foregoing Resolutions are in conformity with the Articles of Incorporation and the By-Laws of the Corporation, and are within its corporate powers. The authority given hereunder shall be deemed retroactive to the extent necessary or convenient for the full effectuation of these Resolutions. In such event, all acts performed prior to the adoption of these Resolutions, but which are necessary or convenient for the full effectuation of these Resolutions, are hereby ratified, adopted and affirmed. The authority conferred by these Resolutions shall continue in full force and effect until actual written notice of revocation of these Resolutions shall have been received by the Landlord." I FURTHER CERTIFY (i) that the above Resolutions were duly enacted by the Board of Directors called for that purpose and held in accordance with the Articles of Incorporation and By-Laws of the Corporation and the statutes of the State of the incorporation of the Corporation; (ii) that the Directors of the Corporation have full power and authority to bind the Corporation pursuant thereto; and (iii) that the Resolutions are in full force and effect and have not been altered, modified, rescinded or revoked in any way. IN WITNESS WHEREOF, I have affixed my name as Vice President General Counsel of the Corporation, and have affixed the corporate seal of the Corporation this 13th day of September, 1998. CYBEAR, INC. By: /s/ SCOTT LODIN ---------------------------------- Print Name: Scott Lodin Title: Vice President/General Counsel Page 46 ------------------ Blue Lake Standard Lease EXHIBIT "F" CAMPUS SKETCH Page 47 ------------------ Blue Lake Standard Lease EXHIBIT "F" CAMPUS SKETCH EXHIBIT "G" STAND-BY ELECTRIC GENERATOR RIDER SUBSCRIPTION AGREEMENT BLUE LAKE CORPORATE CENTER SUPPLEMENT TO LEASE FOR SUBSCRIPTION TO STANDBY POWER FACILITIES This Supplement to Lease for Subscription to Standby Power Facilities Program ("Supplement") is made as of Able , 199t ("Agreement Date") between BLUE LAKE, LTD., a Florida limited partnership, Suite 100, 5000 Blue Lake Drive, Boca Raton, Florida 33431 ("Landlord") and ________________ ("Tenant"), 5000 Blue Lake Drive Ste. 200, Boca Raton Raton, Florida, 33431. WHEREAS, Tenant has entered into a lease with Landlord dated 9/14/98 ("Lease") for the premises described on Exhibit "A" attached hereto and made a part hereof ("Premises"). WHEREAS, Landlord has elected to install standby electric power generators ("Generator(s)") to provide for standby power service ("Standby Power") to subscribing tenants of the Blue Lake Corporate Center ("Center") as part of Landlord's Standby Power Facilities Program ("Power Program"). Tenants of the Center may subscribe ("Subscribing Tenants") until the Generator(s) capacity available to tenants has been fully subscribed or otherwise reserved by Landlord. WHEREAS, the Tenant has elected to subscribe to the Power Program, and Landlord has agreed to such subscription, as provided in this Supplement to the Lease for its Premises. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the Landlord and the Tenant hereby agree as follows: TERMS 1. RELATIONSHIP TO LEASE. This Supplement modifies and amends the Lease as specifically provided herein. In all other respects the Lease is ratified, remains in full force and effect without change, and the terms of the Lease shall be deemed incorporated herein. Capitalized terms not defined herein shall have the meanings set forth in the Lease. In the event of any inconsistencies between the Lease and this Supplement, as it relates or applies to the Power Program, the terms of this Supplement shall control. 2. TERM. The term of this Supplement shall commence on the date hereof and continue for the balance of the Lease Term and any renewals thereof. 3. CAPACITY RESERVATION AND RESERVATION CHARGE. Tenant hereby subscribed the Power 7 Program, and Landlord hereby accepts such subscription, for the reservation of______________________________ megawatts of Generator capacity ("Capacity Reservation") for the Premises. Tenant's,Capacity Reservation is expressly conditioned on Tenant paying to Landlord on or before ___________________ 199_ ("Due Date"), the sum of $_______________ (Capacity Reservation Charge"), in federal wire transfer funds. If the Tenant fails to pay the Capacity Reservation Charge on or before the Due Date, the Capacity Reservation shall be canceled, and this Supplement shall automatically terminate without the requirement of further notice or demand by Landlord, in which event Landlord may sell to, and/or reserve for the Capacity Reservation to other Subscribing Tenant(s). To the extent that the Generators have been placed in service prior to the Agreement Date, the Tenant's Capacity Reservation shall not become effective and the Tenant shall have no right to Standby Power, unless and until the Capacity Reservation Charge is paid to Landlord, on or before the Due Date. The Capacity Reservation Charge is neither refundable nor subject to proration or abatement. 4. SERVED SYSTEMS. a. Tenant acknowledges that the Standby Power for Tenant's Capacity Reservation shall be limited to serving the equipment and systems described on EXHIBIT "B" attached hereto and made a part hereof ("Served Systems"). Tenant acknowledges and agrees that, the Capacity Reservation Page 48 ------------------ Blue Lake Standard Lease includes Standby Power for Center air conditioning services ("Center AC") to the Premises, which represents forty (40%) percent ("Center AC Capacity") of the Capacity Reservation (except if, and only to the extent that, Tenant has installed, pursuant to the Lease, a separate or supplemental air conditioning system for any portion of the Premises.) All Served Systems shall be connected to electrical panels and/or breakers separate from the main panels and breakers for the Premises, so as to permit the disconnection of all electrical systems and equipment, other than Served Systems, from the Standby Power. b. In the event that Center AC is not supplied to the Premises because Tenant, under the Lease, has installed a separate or supplemental air conditioning system ("Premises AC"), then Tenant's Capacity Reservation may be applied to the Premises AC to the extent that Center AC Capacity is not used for the Premises. c. Tenant shall solely be responsible for the compatibility with the Generators, of the Served Systems, including but not limited to, electrical systems, wire, conduit, panels, transformers, switchgear, and breakers in the Premises, and Tenant's equipment (including but not limited to trade equipment, office equipment, and other electrically-powered equipment) to be connected to the Standby Power, Tenant, prior to the Served Systems being connected to the Generator, shall make, at Tena sole cost and expense, any and all modifications and enhancements to the Served Systems necessary for such to be compatible with the Generators. Landlord shall have no liability or responsibility for damage or injury to Served Systems or any of Tenant's Equipment or personnel, due to such incompatibility, or for any resulting business interruption (and any direct, indirect, consequential, or special damages related thereto), such being expressly waived by Tenant. 5. GENERATOR OPERATION. a. SERVICE COMMENCEMENT DATE. The Landlord shall place the Generators in operation on or before December 31, 1998 ("Service Commencement Date"), subject to Force Majeure (as hereinafter defined). b. TENANT'S TEMPORARY GENERATORS. If Landlord has, under separate agreement, permitted Tenant to operate a mobile, temporary backup generator for its Premises, Tenant shall, within ten (10) days after the Generators have been placed in operation, disconnect such mobile, temporary backup generator and remove such from Landlord's property, and shall restore the Landlord's property to the condition existing prior to the installation of such mobile temporary backup generators. Tenant indemnifies Landlord from and against any and all claims, demands, responsibility, liability, damages, fines, penalties, costs and expenses; including but not limited to reasonable attorney's fees and costs, arising from or related to Tenant's installation, use, operation or removal of the Tenant's mobile, temporary backup generators, including but not limited to any violations of environmental law or the contamination of Landlord's property with hazardous or toxic materials or with petroleum products. c. EMERGENCY SERVICE USE. The Generators are only intended for limited emergency backup use and are not designed for, nor does the Generators' fuel storage tank have sufficient capacity for, more than temporary, limited use of the Generators. d. STARTUP DELAY. In the event of a power failure ("Outage"), the Generators are designed to start up over la period of one to thirty minutes]. The Tenant acknowledges and agrees that the Landlord shall not be liable or responsible for any resulting direct, indirect, consequential, or special damages that may occur due to an interruption of Tenant's business or business operations, or to Tenant's Equipment, or to Served Systems or any of the Premises due to any delay in the startup of Generators. Tenant shall be responsible to provide for its own backup uniform power supply) to its Premises and the Served Systems to address any startup delay of the Generators. e. EMERGENCY REPRESENTATIVE: Tenant designates ______________ and ____________________ as its "Emergency Representative(s)" for contact by Landlord in the event of an Outage. The Emergency Representative(s) shall have full authority to act on behalf of Tenant in the event of an Outage or other emergency and shall be required to be available to Landlord in the event of an emergency or an Outage. Tenant shall provide to Landlord in writing after- hours contact information for its Emergen Representatives, including but not limited to home addresses and telephone numbers, cellular telephone numbers and pager numbers. Notices to Tenant under this Supplement shall be deemed made to Tenant if delivered or made to the Emergency Representative. Tenant shall notify the Page 49 ------------------ Blue Lake Standard Lease Landlord in writing of any changes in the after-hours contact information of the Emergency Representative. Tenant shall provide written notice to Landlord of any changes in its Emergency Representative(s) or in the appointment of temporary Emergency Representative(s) in the absence of those otherwise identified by the Tenant pursuant hereto, together with their contact information as provided above. The Emergency Representative(s) shall participate in emergency drills and, in the event of an emergency or an Outage, shall be available to meet with Landlord and the emergency representatives of other tenants to address emergency procedures implemented by Landlord as a result thereof. e. GENERATOR OPERATION DURING EXTENDED OUTAGE. For the purposes hereof, any Outage lasting more than one hour shall be referred to as an "Extended Outage". Tenant acknowledges and agrees that, at the contemplated total capacity of the Generators, the Generators' fuel storage capacity for the Blue Lake Corporate Center is not sufficient for continuous or extended use of the Generators at the capacity of the Power Program (as may be increased as Generator capacity is increased from time time) for all potential Subscribing Tenants. In the event of an Extended Outage or a series of Outages, Landlord shall have the right, but not the obligation, to regulate, reduce, and limit the availability of Standby Power to Subscribing Tenants, including but not limited to Tenant in Landlord's sole and absolute discretion, to essential needs in order to meet the Federal Emergency Management Agency's ("FEMA") [seven (7)] day generator recommendations, the safety of tenants of the Center, the availability of fuel, or the operating conditions and requirements of the Generators. In order to manage the Power Program in the best interests of the Center, the Landlord has established the following rules, procedures and protocols for responding to an Extended Outage: (1) DEFINITIONS: LEVEL ONE OUTAGE: An Extended Outage lasting more than one hour, but anticipated by Landlord, in Landlord's sole judgement and discretion, to last less than three (3) hours. LEVEL TWO OUTAGE: An Extended Outage lasting or anticipated by Landlord, in Landlord's sole judgement and discretion, to last more than, three (3) hours, but less than 24 hours. LEVEL THREE OUTAGE: An Extended Outage lasting or anticipated by Landlord, in Landlord's sole judgement and discretion, to last more than 24 hours. (2) EXTENDED OUTAGE PROTOCOLS: In the event of an Extended Outage, the Landlord has established the following emergency protocols ("Protocols") for each level of Extended Outage. Tenant shall comply with the Protocols as invoked by Landlord from time to time. LEVEL ONE OUTAGE: Tenant's Served Systems may operate as anticipated under this Supplement. The Landlord shall notify the Tenant of the occurrence of a Level One Outage. LEVEL TWO OUTAGE: Tenant's Served Systems may operate as anticipated under this Supplement. Tenant shall turn off or disconnect all non-Served Systems within one (1) hour from Landlord's notice of Level Two Outage. Tenant's personnel not required in the operation of the Served Systems may be required by the Landlord to immediately leave the Premises and the Center, and Tenant shall comply with Landlord's emergency procedures and rules promulgated from time to time in accordance with the Lease. The Landlord may, in Landlord's sole discretion, (i) reduce or eliminate Center AC, (ii) reduce or eliminate non-emergency Common Area systems and services (including but not limited to operation of the Food Court, conference centers, and other services provided by the Landlord to the Center), and (iii) require that Tenant turn off or disconnect non-essential Served Systems, which shall be accomplished within one (1) to three (3) hours from Landlord's request to Tenant. The Landlord shall regularly update the Tenant's Emergency Representative on the changes in status and anticipated duration of the Level Two Outage. LEVEL THREE OUTAGE: Only essential Served Systems may operate as anticipated under this Supplement. Tenant shall turn off or disconnect all non-essential Served Page 50 ------------------ Blue Lake Standard Lease Systems and non-Served Systems within one (1) hour from Landlord's notice of a Level Three Outage. Tenant's personnel not required in the operation of the Served Systems shall immediately leave the Premises and the Center, and Tenant shall comply with Landlord's emergency procedures and rules promulgated from time to time in accordance with the Lease. The Landlord may, in Landlord's sole discretion, (i) reduce or eliminate Center AC, (ii) reduce or eliminate non-emergency Common Area systems and services (including but not limited to operation of the Food Court, conference centers, and other services provided by the Landlord to the Center), and (iii) require that Tenant turn off, reduce, or disconnect all Served Systems as the availability of necessary fuel supply may require. During a Level Three Outage, the Landlord shall regularly report to Tenant as to the status of the Extended Outage, anticipated actions by Landlord, and the availability of fuel supplies, and shall use all reasonable efforts to notify Tenant of an impending shut down of Standby Power at least sixty (60) minutes prior to such shut down. The Tenant acknowledges and agrees that, upon Landlord's request, the Tenant will immediately disconnect all non-essential Served Systems from the Standby Power. Further, Tenant acknowledges and agrees that, in the event of a Level Three Outage, fuel may become exhausted and additional fuel unavailable, and, therefore, the Generators will be shut down and Standby Power discontinued to the Premises, Served Systems and all Tenant Equipment. Tenant agrees to cooperate with Landlord in maximizing the fuel supplies and in obtaining deliveries of additional fuel supplies. Tenant hereby waives, releases and holds harmless the Landlord, its partners, affiliates, subsidiaries, officers, employees, and agents from all claims, demands, damages, liability, costs and expenses with respect to the Landlord's regulation, reduction, limitation, and discontinuation of the Standby Power, Landlord's decisions, acts and omissions relating thereto, or the inability to deliver the Standby Power hereunder. f. GENERATOR MAINTENANCE PROGRAM. Landlord intends to enter into a service agreement for the maintenance of the Generators with a generator maintenance company selected by Landlord in its sole and absolute discretion. The service agreement shall provide for maintenance of the Generators in accordance with the National Fire Protection Agency Level 2 standards for emergency generators. Copies of the maintenance and repair records for the Generators shall be kept at the offices of Blue Lake Management, Inc. ("Management") for inspection by the Tenant upon reasonable written notice during business normal hours. 6. EXCESS DEMAND LOAD. Tenant acknowledges and agrees that the Landlord is providing Standby Power to other Subscribing Tenants and that Tenant may not exceed its Capacity Reservation during any Outage. If the Tenant exceeds its Capacity Reservation during an Outage ("Excess Demand"), Landlord may, in Landlord's sole and absolute discretion: (i) require that Tenant immediately disconnect non-essential Served Equipment and reduce the actual load to the Capacity Reservation, (ii) if Tenant fails to do so immediately, Landlord may reduce Standby Power to the Premises so that the actual load is at the Capacity Reservation, or (iii) if there is sufficient Generator capacity for other Subscribing Tenants, as Landlord shall determine in its sole and absolute discretion, charge the Tenant an additional fee for the Excess Demand equal to 200% of the then current Capacity Reservation Fee prorated for the actual load in excess of the Capacity Reservation ("Excess Demand Fee"). All of the foregoing are in addition to Landlord's other rights and remedies under this Supplement and at law or in equity, and, further, are in addition to Protocols implemented by Landlord in the event of an Extended Outage. Such Excess Demand Fee shall be billed by Landlord and paid by Tenant as Additional Rent under the Lease. 7. USE CHARGES. a. The Tenant shall pay for fuel consumed by the Generators during an Extended Outage in proportion of its Capacity Reservation to the total of all Capacity Reservations of Subscribing Tenants. The cost of fuel for non-Extended Outages shall be charged as an Operating Expense under the Lease. b. All other costs of maintaining, repairing, testing and servicing the Generators shall be treated, budgeted and invoiced as Operating Expenses under the Lease; however, such costs shall not be limited by any provisions of the Lease limiting Operating Expenses or Overhead Rent. Page 51 ------------------ Blue Lake Standard Lease 8. COVENANTS OF TENANT. The Tenant covenants that: a. The Tenant shall not cause or voluntarily permit any modification or alteration to any of the Served Systems or the Premises which would have the effect of increasing the level of electrical demand for the Premises or which would adversely affect the Generators or Landlord's ability to provide the Standby Power. b. The Tenant shall maintain, repair and replace the Served Systems as necessary and appropriate in accordance with prudent and sound engineering practices so that the Served Systems is in proper condition to receive, distribute, and or utilize the Standby Power without damage to Served Systems or the Generators. 9. DEFAULT BY TENANT; TERMINATION BY LANDLORD. Landlord may terminate this Supplement, discontinue the delivery of Standby Power to Tenant, and remove the any and all equipment connecting the Premises to the Generators, upon the occurrence of any one of the following events: a. Failure of Tenant to pay any charges, including but not limited to the Capacity Reservation Charge, due hereunder, as and when due. b. Default by Tenant under the Lease, which is not cured within any applicable cure periods (so ling as the Lease is also terminated). c. Tenant's actual electric load connected to the Generators increases in excess of the Capacity Reservation and Tenant fails to immediately disconnect such of Tenant's Equipment so as to reduce the actual load below the Capacity Reservation or enter into an agreement with Landlord in Landlord's sole and absolute discretion and providing for an increase in Tenant's Capacity Reservation, subject to availability and price. 10. NO WAIVER. The failure of a party to enforce any term of this Supplement or a party's waiver of the nonperformance of a term by the other party shall not be construed as a general waiver or amendment of that term, but the term shall remain in effect and enforceable in the future. This Supplement can only be amended by written agreement of the Parties. 11. INTERRUPTION OF BACKUP SERVICE. Landlord shall have the right to temporarily interrupt the delivery of Standby Power to the Premises for purposes of inspection, maintenance, repair, replacement, construction, installation, removal or alteration of the Generators and related equipment or to prevent and emergency situation from arising. Landlord shall give twenty-four (24) hours notice to Tenant of any planned interruption of more than seven (7) days in delivery of Standby Power reasonably in advance of such planned interruption. 12. PERMITTED ASSIGNMENT. a. This Supplement, and the Capacity Reservation, shall not be transferred, assigned, subcontracted, or sold by Tenant, in whole or part, other than in connection with a permitted Transfer of Lease to a permitted Transferee, so long as the permitted Transferee does not require or present a Demand Load greater than that of the Tenant. b. The Landlord may assign its obligations, rights and duties under this Supplement, separate and apart from the Lease, without the consent of the Tenant. In such event, the Lease shall continue in full force and effect without change, abatement or offset, and Landlord shall be automatically relieved of all liability and obligations under this Supplement so long as such are expressly assumed in writing by the assignee. 13. FORCE MAJEURE. The obligations of Landlord and Tenant hereunder, and Landlord's ability to install, maintain, and operate the Generators and to provide the Standby Power pursuant hereto are subject to the occurrence of events or circumstances that are beyond the reasonable control of Landlord and/or Tenant, as applicable, or their respective agents, employees or contractors, including, without limitation, strikes, lockouts or picketing (legal or illegal); governmental action and condemnation; riot, civil commotion, insurrection, and war; fire or other casualty, accident, acts of God or the enemy; adverse weather conditions; unavailability of fuel, power, supplies or materials; the passage or reasonably Page 52 ------------------ Blue Lake Standard Lease unexpected interpretation or application of any statute, law, regulation or moratorium of any governmental restriction or order; or delays in issuance of permits or approvals. IN WITNESS WHEREOF, the parties hereto have executed this Supplement as of the day and year first above written. LANDLORD: BLUE LAKE, LTD., a Florida limited partnership By: BLUE LAKE, INC., a Florida corporation, general partner. By: /s/ MICHAEL MASANOFF --------------------------------------------- Michael Masanoff Executive Vice President Date: 9/14/98 TENANT: By: /s/ SCOTT LODIN ----------------------------------------------- Name: Scott Lodin Its: Vice President/General Counsel Date: 9/14/98 Page 53 ------------------ Blue Lake Standard Lease EXHIBIT "H" SIGNAGE CRITERIA To be submitted by Landlord as approved by all applicable governing bodies. Page 54 ------------------ Blue Lake Standard Lease EXHIBIT "I" RENT COMMENCEMENT/EXPIRATION CERTIFICATE Page 55 ------------------ Blue Lake Standard Lease EXHIBIT "J" SUBORDINATION NON-DISTURBANCE AGREEMENTS Page 56 ------------------ Blue Lake Standard Lease EXHIBIT "K" LEASE GUARANTY Page 57 ------------------ Blue Lake Standard Lease LEASE GUARANTY FOR VALUE RECEIVED, and in consideration for and as an inducement to BLUE LAKE, LTD., as LANDLORD to lease the PREMISES referred to in the annexed LEASE dated August __, 1998 (the "LEASE") to CYBEAR, INC., a Florida corporation, as TENANT therein named, the undersigned does hereby, jointly and severally if more than one, guaranty to LANDLORD the punctual payment of the Base Rent, Overhead Rent and all Additional Rent and other charges (hereinafter collectively called "RENTS") and the due performance of all the other terms, covenants and conditions contained in said LEASE on the part of the TENANT to be paid and/or to be performed thereunder, and if any default shall be made by the TENANT under said LEASE, the undersigned does hereby covenant and agree to pay to the LANDLORD in each and every instance such sum or sums of money as the TENANT is and shall become liable for and/or obligated to pay under said LEASE and/or fully to satisfy and perform such other terms, covenants and conditions of said LEASE on the part of the TENANT to be performed thereunder and to pay also any and all damages, expenses and attorneys fees (hereafter collectively called "DAMAGES") that may be suffered or incurred by LANDLORD in consequence of the nonpayment of said RENTS or the nonperformance of any such other terms, covenants and conditions of said LEASE; such payments of RENTS to be made monthly or at such other intervals as the same shall or may become payable under said LEASE, including any accelerations thereof, such performance of said other terms, covenants and conditions to be made when due under said LEASE and such DAMAGES to be paid when incurred by LANDLORD, all without requiring any notice from LANDLORD, all without requiring any notice from LANDLORD to the undersigned of such non-payments, non-performance, or non-observance or proof of notice or demand, all of which the undersigned hereby expressly waives, but without limiting Tenant's right to receive notices required to be given to Tenant under the Lease, and the maintenance of any action or proceeding by the LANDLORD to recover any sum or sums that may be or become due under said LEASE, or to secure the performance of any of the other terms, covenants and conditions of said LEASE or to recover damages, shall not preclude the LANDLORD from thereafter instituting and maintaining subsequent actions or proceedings for any subsequent default or defaults of TENANT under said LEASE. The undersigned does hereby consent that without affecting the liability of the undersigned under this Guaranty and without notice to the undersigned, time may be given by LANDLORD to TENANT for payment of RENTS and performance of said other terms, covenants and conditions, or any of them, and such time extended and indulgences granted, from time to time, or the TENANT may be dispossessed or the LANDLORD may avail itself of or exercise any or all of the rights and/or remedies against the TENANT provided by law or by said LEASE, and may proceed either against the TENANT alone or jointly against the TENANT and the undersigned or against the undersigned alone without proceeding against the TENANT. The undersigned does hereby further consent to any subsequent change, modification and/or amendment of said LEASE in any of its terms, covenants or conditions, or in the RENTS payable thereunder, and/or to any assignment or assignments of said LEASE, and/or to any renewals or extensions thereof ("OPTION PERIODS"), all of which may be made without notice to or consent of the undersigned and without in any manner releasing or relieving the undersigned from liability under this Guaranty. The undersigned does hereby further agree that in respect of any payments made by the undersigned hereunder, the undersigned shall not have any rights based on surety ship or otherwise to stand in the place of LANDLORD so as to compete with LANDLORD as a creditor of TENANT, unless and until all claims of LANDLORD under said LEASE shall have been fully paid and satisfied. The undersigned acknowledges receipt of valuable consideration received in its undertaking of this GUARANTY and it is acknowledged by the undersigned that the LEASE herein guaranteed by the undersigned is of benefit and value to the undersigned and would not have been negotiated or consummated by LANDLORD without this LEASE Guaranty being executed and delivered by the undersigned. As a further inducement to LANDLORD to made said LEASE and in consideration therefor, LANDLORD and the undersigned hereby agree that in any action, proceeding or counterclaim brought by either LANDLORD or the undersigned against the other on any matters whatsoever arising out of or in any way connected with said LEASE or this Guaranty, that LANDLORD and the undersigned shall and do hereby waive trial by jury. This Guaranty or any of the provisions hereof cannot be modified, waived or terminated, unless in writing, signed by the parties hereto. The provisions of this Guaranty shall apply to and bind and inure to the benefit of the undersigned and LANDLORD and their respective heirs, legal representatives, successors and assigns. The prevailing party shall be entitled to payment of all attorneys' fees incurred in connection with any litigation arising out of this guaranty including, without limitation, fees at the trial and all appellate levels. IN WITNESS WHEREOF, the undersigned have executed, or caused to be executed, this Guaranty on September 13, 1998. WITNESSES: ANDRX CORPORATION, a Florida corporation /s/ [ILLEGIBLE] - ----------------------------------- /s/ [ILLEGIBLE] - ----------------------------------- By: /s/ SCOTT LODIN ------------------------------------- Title: V.P. General Counsel Address: 4001 SW 47th Ave Ft. Lauderdale, FL 3314 EX-10.9 9 EXHIBIT 10.9 FIRST AMENDMENT TO BLUE LAKE CORPORATE CENTER STANDARD LEASE BETWEEN BLUE LAKE, LTD. AND CYBEAR, INC. THIS FIRST AMENDMENT TO LEASE (this "Amendment") is made by and between BLUE LAKE, LTD. (the "Landlord") and CYBEAR, INC.(FL), successor by merger to Cybear, Inc. (the "Tenant") as of this 4th day of February, 1999. WITNESSETH: WHEREAS, Landlord and Tenant are bound under that certain Blue Lake Corporate Center Standard Lease dated September 14, 1998 (the "Lease") regarding certain leased premises (the "Existing Premises") described in the Lease, being located in Blue Lake Corporate Center, Boca Raton, Florida; and WHEREAS, Tenant desires to increase the area of the Existing Premises to that more particularly described on Exhibit "A-revised" hereto (the "Enlarged Premises"), and, which thereby will result in a decrease in the size of the Expansion Premises described in the Lease ("Existing Expansion Premises) as more particularly described in Exhibit "A-1-revised" hereto ("Reduced Expansion Premises") and Landlord has agreed to lease the Enlarged Premises to Tenant and to decrease the area of the Existing Expansion Premises to the Reduced Expansion Premises, subject to and on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the sum of TEN and NO/100 DOLLARS ($10.00) paid by Tenant to Landlord, the mutual promises contained herein, and other good and valuable considerations, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant do hereby agree as follows: 1. RECITALS. The foregoing recitals are true and correct and are hereby incorporated by this reference as if set forth in their entirety. 2. DEFINED TERMS. Terms in this Amendment shall have the same meaning as ascribed to said terms in the Lease, unless otherwise provided in this Amendment. As hereby amended, the Lease and this Amendment shall hereinafter be referred to as the "Lease". 3. ENLARGED PREMISES. Attached hereto as Exhibit "A-revised" is a floor plan of the Enlarged Premises. Exhibit "A" of the Lease is hereby replaced with Exhibit "A-revised" as attached hereto and made a part hereof which the parties hereto stipulate contains 21,648 square feet of Net Rentable Area based on 18,824 usable square feet and a fifteen (15%) percent add-on factor. The term, "Premises" shall be deemed to be, and shall be defined as, the Enlarged Premises. Attached hereto as Exhibit "A-1-revised" is a floor plan of the Reduced Expansion Premises. Exhibit "A-1" of the Lease is hereby replaced with Exhibit ,'A-1- revised" attached hereto and made a part hereof, which the parties stipulate contains 16,420 square feet of Net Rentable Area, based on 14,278 usable square feet and a fifteen (15%) percent add-on factor. Landlord and Tenant 1 agree that the foregoing calculation shall be dispositive of the actual Net Rentable Area and that no further measurement shall be made of the Premises pursuant to Section 1 of the BLI Rider to the Lease. The Rentable Area of the Premises includes restrooms, electrical and mechanical rooms over which the Tenant is herein granted exclusive control and dominion which are themselves deemed part of the Premises, except that Landlord shall maintain such restrooms, electrical and mechanical rooms which are shared among tenants. 4. TENANT'S SHARE. Tenant's Share (as set forth in Paragraph 3 of the BLI Rider and as defined in the Lease) for the Enlarged Premises shall be increased to 1.22%. 5. BASE RENT. Section 3 of the BLI Rider to the Lease is hereby replaced with the following: Base Rent: Tenant agrees to pay to Landlord as Rent for the Premises, in advance without demand, deduction or set off (except as otherwise may be specifically provided in the Lease), from and after the Rent Commencement Date and throughout the term, the Annual Base Rent in the amounts as indicated in the following Schedule of Base Rent in equal monthly installments, plus applicable sales tax. SCHEDULE OF BASE RENT - ------------------------------------------------------------------------------ PERIOD PER SQUARE FOOT ANNUAL BASE RENT MONTHLY BASE RENT - ------------------------------------------------------------------------------ Months 1-12: $12.50 $270,600.00 $22,550.00 - ------------------------------------------------------------------------------ Months 13-24: $12.88 $278,826.24 $23,235.52 - ------------------------------------------------------------------------------ Months 25-36: $13.27 $287,268.96 $23,939.08 - ------------------------------------------------------------------------------ Months 37-48: $13.67 $295,928.16 $24,660.68 - ------------------------------------------------------------------------------ Months 49-60: $14.08 $304,803.84 $25,400.32 - ------------------------------------------------------------------------------ Each monthly installment in accordance with the above Schedule shall be due and payable on or before the first day of each calendar month succeeding the Rent Commencement Date, except that the rental payment for any fractional calendar month commencing on the Rent Commencement Date of the Lease shall be prorated. 6. DEMISING OF PREMISES, The Landlord is not and shall not be responsible for the design or construction of any Tenant improvements (other than for any Landlord's Contribution as defined and as may be provided in the Lease) or for the demising of the Premises, other than for the construction of a temporary wall, as depicted on Exhibit "B" attached hereto and designated as "Temporary 2 Demising Wall", which shall be installed at Landlord's expense. However, the Tenant further acknowledges that if Tenant does not exercise its Right of First Refusal pursuant to Paragraph 1.B of the Lease, the Reduced Expansion Premises or portions thereof may be leased to third party(ies) or used for common areas, and in such event, a corridor will be required to be constructed between the Reduced Expansion Premises and the stairs as depicted on Exhibit "B" attached hereto ("Corridor") for the purpose of fire egress in accordance with applicable codes, standards, ordinances and laws. The Tenant acknowledges and agrees that it shall be responsible for removing from the area of the Corridor all of Tenant's improvements, personal property, equipment, furnishings and fixtures. Tenant shall pay for all actual reasonable costs and fees associated with (i) the demolition, removal and relocation of the improvements located in the Corridor including, but not limited to, ceilings, HVAC, life-safety, lighting, alarms, electrical, plumbing and other mechanical systems; and (ii) the cost of designing, permitting and constructing the Corridor, including but not limited to the fire-rated wall, and the installation of ceilings, HVAC, lighting, alarms, life-safety, electrical, plumbing and other mechanical systems serving the Corridor ("Corridor Expenses"). The Landlord shall prepare an estimate of the Corridor Expenses prior to commencing work on the Corridor, and within ten (10) days from receipt of Landlord's estimate, Tenant shall deposit with Landlord the amount shown therein. After completion of all work associated with the Corridor, the Landlord shall notify the Tenant of actual Corridor Expenses. If the actual Corridor Expenses are less than the amount deposited by Tenant with the Landlord, the Landlord shall refund the excess amount so deposited within fifteen (15) days and if the actual Corridor Expenses are greater than the amount so deposited, the Tenant shall pay such costs and fees within fifteen (15) days from receipt of Landlord's notice. 7. TENANT IMPROVEMENTS. Tenant shall complete or cause the completion of improvements to the Enlarged Premises in accordance with the Work Letter Agreement to the Lease. The Landlord's Contribution shall apply to the Enlarged Premises on the same basis as provided in the Work Letter Agreement to the Premises. 8. SUPPLEMENTAL AIR CONDITIONING. Landlord agrees that Tenant, at its sole cost and expense, may install a backup emergency supplemental air conditioning system for the Enlarged Premises (the "Backup AC")on the roof of the Building. Should Tenant elect to install a Backup AC on the roof of the Building, Tenant agrees to install the Backup AC in accordance with all applicable codes and laws and sound engineering and construction practices. Tenant further agrees to use any specified architect, engineer, roofing contractor or other general contractor reasonably required by Landlord to design and install the Backup AC so as avoid any compromise to the roof structure or membrane, or to other elements of the Building. The architectural and engineering plans and specifications for the Backup AC and any required Alterations to the Building in connection therewith shall be subject to the Landlords approval as an Alteration under this Lease. Tenant covenants and agrees that the Backup AC shall only be use for emergency backup use in the event of the cessation of air conditioning provided by the Landlord or the Utility Manager pursuant to the terms of the Lease, and the Tenant shall not use the Backup AC in lieu of the air conditioning services provided by the Landlord or the Utility Manager pursuant to Section 8.A.(3) of the Lease. The Tenant shall be responsible to maintain, repair and replace the roof in the area of the Backup AC and any supporting or related roofing systems, such maintenance, repair and replacement, subject to the Landlord's prior 3 written approval. If the Tenant fails to promptly, and as and when appropriate or necessary, maintain, repair or replace the roof and supporting and related systems, the Landlord may perform such maintenance, repair or replacement, and such shall be charged to the Tenant as Additional Rent. 9. TENANT STIPULATIONS. Tenant acknowledges that, as a result of a merger, it is the tenant under the Lease, has assumed all of Cybear, Inc.'s obligations, liabilities and responsibilities under the Lease, and hereby stipulates, agrees and affirms that there are no other assignees, sublessees or transferees of the Lease, or any part thereof, or any person or firm occupying or having the right in the future to occupy the Existing Premises, or any part thereof, except as has been approved in writing by Landlord. As of the date hereof, Landlord and Tenant are not aware of the occurrence of any event of default under the Lease by either Landlord or Tenant. 10. RATIFICATION. Except as herein specifically amended, the terms of the Lease are incorporated herein by reference as fully set forth herein and shall apply to and bind the Enlarged Premises. In the events of any conflict or ambiguity between this Amendment and the Lease, this Amendment shall pre-empt and control. The parties hereby ratify and confirm their rights and obligations under the Lease as modified by this Amendment Landlord and Tenant each represent and warrant to the other that (i)the execution and delivery of the Amendment has been fully authorized by all necessary corporate action, and (ii) this Amendment is valid, binding and legally enforceable in accordance with its terms. 11. STROKED. Each party represents and warrants that it has not dealt with any agent or broker in connection with this transaction except for Blue Lake Realty, Inc. and the agents or brokers specifically set forth in the BLI Rider to the Lease whose commissions shall be paid by Landlord pursuant to separate agreement. If either party's representation and warranty proves to be untrue, such party will indemnify the other party against all resulting liabilities, costs, expenses, claims, demands and causes of action, including reasonable attorneys' fees and costs through all appellate actions and proceedings, if any. The foregoing will survive the end of the Lease Term. IN WITNESS WHEREOF, Landlord and Tenant have signed this Amendment as of this 4th day of February, 1999. WITNESSES: "TENANT" CYBEAR, INC. (FL), a Florida corporation __________________________ __________________________ By: /s/ TODD MACLEOD ---------------------------------- Name: Todd MacLeod -------------------------------- Title: EVP-Operations ------------------------------- 4 WITNESSES: "LANDLORD" _________________________ BLUE LAKE, LTD., a Florida limited partnership _________________________ By: Blue Lake, Inc., a Florida corporation, its general partner By: MICHAEL MASANOFF --------------------------------------- Executive Vice President 5 Revised Exhibit A Enlarged Premises Revised Exhibit "A-1" Reduced Expansion Premises Exhibit B Demising Corridor/Temporary Wall ASSIGNMENT OR SUBLETTING The parties acknowledge that they have entered into this Sublease only on account of the strategic relationship of the Sublessor to the Subtenant. Therefore the Sublessor acknowledges that Subtenant shall be allowed to assign this Sublease or sublet any of the Space without the written consent of the Sublessor. Subtenant acknowledges however that the approval of the Lessor, which is not to be unreasonably withheld, a condition to any such assignment or sublease. EX-10.10 10 EXHIBIT 10.10 STRATEGIC BUSINESS AND TECHNOLOGY SOLUTIONS, LLC SUBLEASE TO CYBEAR, INC. THIS AGREEMENT is made as of the 1st day of October, 1998 between Strategic Business and Technology Solutions, LLC having an address at c/o Huttle Profita LLC, 300 Glenpointe Centre East, Teaneck, NJ 07666 (hereinafter referred to as "Sublessor") and CyBear, Inc., a Delaware Corporation having an address at 5000 Blue Lake Drive, Boca Raton, Florida 33431 (hereinafter referred to as "Subtenant"). WHEREAS, on or about October 15, 1998 the Sublessor entered into a lease with Samsung America, Inc. and Samsung Semiconductor, Inc. (hereinafter referred to as "Lessor") for the premises known as the Seventh Floor of 105 Challenger Road, Ridgefield Park, NJ 07660 (the "Premises") which lease expires on August 31, 2003 (the "Original Lease"); and WHEREAS, the Subtenant desires to let and lease a portion of the Premises from the Sublessor. NOW, THEREFORE, the parties hereto agree as follows: 1. DEMISE OF TERM. Subject to the provisions of this Sublease, Sublessor does hereby sublease to Subtenant approximately 4,000 square feet of the Premises located as shown on Exhibit A hereto (the "Space"). The term of the Sublease will commence as of November 1, 1998 and shall terminate on October 31, 2003. However, if the Original Lease is terminated for any reason, this Sublease shall also terminate as of the same date. 2. BASIC RENT. Subtenant agrees to pay Sublessor annual base rent for the Space equal to $120,000.00 per year, payable by the Subtenant in equal monthly installments of $10,000.00 (the "Basic Rent") on the first day of each month during the term of the Sublease. The Subtenant also agrees to pay, as additional rent, the sum of $416.67 per month on the first day of every month for electricity consumed by the Subtenant. In the event the Sublessor is required to pay more than the sum of $1.25 per square foot annually for electrical consumption at the Premises, then the monthly charge to the Subtenant for electrical consumption shall be increased proportionately. 3. NO DEFAULT. Sublessor warrants and represents that it is not in material default of any of the terms or covenants of the Original Lease; that all rent due under the Original Lease has been paid to date; and that the Original Lease is in full force and effect. 4. USE OF SPACE. The Subtenant shall use and occupy the space for general office and administrative purposes only, and for no other use or purpose. Sublessee shall use the Premises in a careful, lawful, safe and proper manner at all times, and agrees to cooperate with the Sublessor and any other subtenants of the Premises so that all parties can use and enjoy the Premises. 5. COMMON AREAS. The Subtenant and its business invitees shall be entitled to the use of the reception area at the entrance to the Premises, the lavatory facilities located in the Premises, the four conference rooms near the entrance to the Premises, as 2 well as any common hallways required for ingress or egress to the Space. The Subtenant acknowledges that the Sublessor as well as other subtenants will also utilize the reception area, lavatories and conference rooms as well as common hallways (which may be located within the Space) in order to gain ingress and egress to other portions of the Premises. Subtenant shall also have the right to the use of the common areas of 105 Challenger Road, Ridgefield Park, New Jersey (the Building) to the same extent as the Sublessor under the terms of the Original Lease. 6. ASSIGNMENT OR SUBLETTING. The Subtenant acknowledges that the Sublessor has entered into this Sublease only on account of the Strategic relationship of the Sublessor to the Subtenant, and therefore the Subtenant acknowledges that under no circumstances shall it be allowed to assign this Sublease or sublet any of the Space without the written consent of the Sublessor which may be either granted or withheld in the sole and absolute discretion of the Sublessor. The Sublessor shall not be required to act reasonably in considering whether or not to approve a proposed assignment or sublease, and may arbitrarily withhold approval to a proposed assignment or sublease. Subtenant also acknowledges that the approval of the Lessor shall also be required as a condition to any assignment or sublease. 7. CONDITION OF SPACE. The Subtenant accepts the Space in "as is" condition, and acknowledges that Sublessor shall not be required to make any improvements or perform any repairs to the Space. Subtenant agrees to be solely responsible to obtain any and 3 all permits or approvals required for the Subtenant to occupy the Space. 8. BROKERS. The Sublessor and the Subtenant warrant and represent to each other that no broker or other intermediary was involved in bringing about this transaction, and each agrees to indemnify and hold the other harmless from any claims for a brokerage commission incurred on account of the actions of the other party. 9. ASSUMPTION OF OBLIGATIONS. Subtenant agrees to assume and discharge toward the Sublessor and Lessor, all of the covenants and obligations set forth in this paragraph 9 which the Sublessor has undertaken to the Lessor in the Original Lease, as concerns the Subtenant's occupancy of the Space. The Lessor and the Sublessor shall have the right to enforce against the Subtenant all of the rights and remedies which the Lessor has against the Sublessor as set forth in this paragraph 9 specifically including, but not limited to, all of the same rights and remedies which the Lessor would be entitled to assert against the Sublessor in the event of a breach by the Sublessor: A. USE AND OCCUPANCY. Lessee shall use and occupy the Demised Premises for general office and administrative purposes and for no other purpose. Lessee shall use the Demised Premises in a careful, safe and proper manner. Lessee agrees to indemnify and save harmless Lessor from and against (i) all claims of whatever nature against Lessor arising from any act, omission, or negligence of Lessee, its contractors, licensees, agents, servants, employees, invitees,or visitors, including any claims arising from any act, omission or negligence of Lessee, (ii) all claims against Lessor arising from any accident, injury or damage whatsoever caused to any person or to the property of any person and occurring during the Term in or about the Demised Premises provided same is not caused by the 4 omission or negligence of Lessor, (iii) all claims against Lessor arising from any accident, injury or damage occurring outside of the Demised Premises or anywhere within or about Lessor's Building where such accident, injury or damage results or is claimed to have resulted from an act or omission of Lessee or Lessee's agents, employees, invitees or visitors, including any claims arising from any act, omission, or negligence of Lessee, and (iv) any breach, violation or non-performance of any covenant, condition or agreement in this Lease set forth and contained on the part of Lessee to be fulfilled, kept, observed and performed. This indemnity and hold harmless agreement shall include indemnity from and against any and all liability, fines, suits, demands, costs and expenses of any kind or nature incurred in or in connection with any such claim or proceeding brought thereon and the defense thereof. In any event, there shall be absolutely no personal liability on the part of the Lessor to the Lessee with respect to any of the terms, covenants and conditions of this Lease and Lessee shall look solely to the equity of the Lessor or any successors in interest to the Lessor in the fee or leasehold estate of the Lessor, as the case may be, for the satisfaction of each and every remedy of the Lessee in the event of any breach by the Lessor of any of the terms, covenants and conditions of this Lease to be performed by the Lessor. Such exculpation of personal liability is to be absolute and without any exculpation whatsoever. B. CARE AND REPAIR OF PREMISES. Lessee shall commit no act of waste and shall take good care of the Premises and fixtures and appurtenances therein, and shall, in the use and occupancy of the Premises, conform to all laws, orders and regulations of the federal, state, county and municipal governments or any agency or department thereof. Lessee shall make all necessary repairs, not including structural repairs, to the Premises at Lessee's sole cost and expense to preserve the Premises in good condition and working order. All of Lessee's repairs shall be of a first class quality and done in a good and workmanlike manner and performed by such contractors that have been approved by Lessor and have executed and delivered Lessor's standard indemnity agreement and provided a certificate of insurance evidencing liability coverage in such an amount and by such carrier satisfactory to Lessor. All such work shall be scheduled in consultation with and subject to the approval of Lessor. If Lessor shall fail to make such repairs as necessary, Lessor shall nevertheless make the necessary repairs but Lessee shall pay to Lessor, as additional rent, immediately upon demand, the costs therefor. All alterations, additions and improvements made by Lessee to the Premises, which are so attached to the Premises that they cannot be removed without material injury to the Premises, shall become the property of Lessor upon installation. Not later than the last day of the term, Lessee shall, at Lessee's expense, (i) remove all Lessee's personal property and those improvements made by Lessee which have not become the property of Lessor, as 5 hereinabove provided, (including trade fixtures, cabinetwork, movable paneling, partitions and the like); (ii) repair all injury done by or in connection with the installation or removal of said property and improvements; and (iii) surrender the Premises in as good conditions as they were at the beginning of the term, reasonable wear and damage done by fire, the elements, casualty, or other cause not due to the misuse or neglect of fault of or by Lessee, Lessee's agents, servants, visitors or licensees excepted. All other property of Lessee remaining on the Premises after the last day of the term of this Lease shall be conclusively deemed abandoned and may be removed by Lessor, and Lessee shall reimburse Lessor for the cost of such removal. Lessor may have any such property stored at Lessee's risk and expense. Any fixtures placed upon the Demised Premises shall be the property of the Lessor. Lessee shall not mortgage, hypothecate, assign, or otherwise permit a lien to attach to said fixtures. At Lessor's option, prior to vacating the Demised Premises at the expiration or earlier termination of this Lease, Lessee shall remove all the telephone and computer cable, wiring and flooring and deliver the Demised Premises in broom clean condition. If during the last sixty (60) days of the term of this Lease, Lessee shall have removed all or substantially all of its property and personnel from the Premises, Lessor may, at anytime thereafter, enter upon the Premises to commence the alteration and renovation of the Premises. Lessor's entry upon the Premises as aforesaid shall not affect or modify Lessee's obligation to pay Basic and Additional Rent which shall not be reduced or abated. If Lessor shall enter upon the Premises and commence the alteration and/or renovation of the Premises as provided herein, Lessee shall not thereafter occupy the Premises. C. ALTERATIONS, ADDITIONS OR IMPROVEMENTS. Lessee shall not make any non-structural alterations, additions or improvements in, to or about the Premises without first obtaining the express written consent of Lessor, which consent shall not be unreasonably withheld or delayed. Lessor's consent may be subject to such terms and conditions as Lessor may reasonably require including the requirement that Lessee solely utilize union labor. If, in Lessor's sole opinion, the proposed alteration, addition or improvement shall affect or impact on any structural or mechanical systems in the Building, Lessor may withhold its consent with or without cause. Lessee shall not install any air-conditioning or heating systems of any kind whatsoever within the Demised Premises. D. ACTIVITIES INCREASING FIRE INSURANCE RATES. Lessee shall not do or suffer anything to be done on the Premises which will increase the rate of fire insurance on the Building. E. COMPLIANCE WITH RULES AND REGULATIONS. Lessee shall observe and comply with the rules and regulations hereinafter set forth in Exhibit B attached hereto and made a part hereof and with 6 such further reasonable rules and regulations as Lessor may prescribe, on written notice to the Lessee, for the security, safety, care and cleanliness of the Building the comfort, quiet and convenience of other occupants of the Building. Lessee shall not place a load upon any floor of the Demised Premises exceeding the floor load per square foot area which it was designed to carry and which is allowed by law. Lessor reserves the right to prescribe the weight and position of all safes, business machines and mechanical equipment. Such installations shall be placed and maintained by Lessee, at Lessee's expense, in settings sufficient, in Lessor's judgment, to absorb and prevent vibration, noise and annoyance. F. INSOLVENCY OF LESSOR. Either (i) the appointment of a receiver to take possession of all or substantially all of the assets of Lessee, or (ii) a general assignment of Lessee for the benefit of creditors, or (iii) any action taken or suffered by Lessee, voluntarily or involuntarily, under any insolvency or bankruptcy or reorganization act of law, shall constitute a default of this Lease by Lessee. G. DEFAULT OF LESSEE. Any of the following events shall be a default of Lessee: (i) Lessee's default in the payment on the due date of the Basic Rents and/or additional rents and/or any other payment required of Lessee by this Lease, unless Lessee shall cure such default within five (5) days after the due date of such Basic Rent and/or additional rent and/or other payment required of Lessee hereunder; (ii) Lessee's default in the performance of any of the other covenants of Lessee or conditions of this Lease, unless Lessee shall cure such default within fifteen (15) days after notice of such default given by Lessor (or if any such default is of such nature that it cannot be completely cured within such period, then unless Lessee shall commence such curing within fifteen (15) days after notice of such default given by Lessor and shall thereafter proceed with reasonable due diligence and in good faith to cure such default and shall succeed in curing such default within a reasonable period of time, and provided that the existence of such default for more than fifteen (15) days does not, in Lessor's reasonable judgment, itself result in substantial damages to Lessor and place Lessor in risk of substantial damage by such additional time to cure such default); (iii) insolvency of Lessee as set forth in the preceding paragraph above; (iv) the sale or attempted sale by or under execution or other legal process of Lessee's leasehold interest hereunder and/or substantially all of Lessee's other assets; (v) the initiation of legal proceedings to effect, or resulting in, the seizure, sequestering or impounding of any of Lessee's goods of chattels used in, or incident to, the operation of the Premises by Lessee; (vi) assignment by operation of law of Lessee's leasehold interest hereunder; (vii) any attempt by Lessee to assign the within Lease or sublet the Demised Premises without the express prior written consent of the Lessor; or (viii) any act of omission of Lessee constituting and anticipatory breach or repudiation of this Lease. 7 H. LESSOR'S REMEDIES ON DEFAULT OF LEASE. Upon any default of Lessee as set forth in this Lease, Lessor, at Lessor's sole option, may elect and enforce any of the remedies hereinafter provided in this paragraph; provided, however, that Lessor may, at Lessor's sole option, elect and enforce multiple remedies from among those remedies hereinafter provided to the extent such remedies are not inconsistent and are not legally mutually exclusive and to the extent Lessor, in Lessor's reasonable judgment, deem the enforcement of such multiple remedies necessary or appropriate to indemnify and make Lessor whole from any loss or damage as a result of the default or defaults of Lessee; and provided further that Lessor, at Lessor's sole discretion, may successively elect and enforce any number of the remedies hereinafter provided to the extent that Lessor, in Lessor's reasonable judgment, deems necessary or appropriate to indemnify and make Lessor whole from any loss or damage as a result of the default or defaults of Lessee: (i) Termination and Lessee's Liabilities. Lessor shall have the right to terminate this Lease forthwith, and upon notice of such termination given by Lessor to Lessee in accordance with the notice provisions of this Lease, Lessee's right to possession, use and enjoyment of the Demised Premises shall cease, and Lessee shall immediately quit and surrender the Demised Premises to Lessor, but Lessee shall remain liable to Lessor as hereinafter provided. Upon such termination of this Lease, Lessor may at any time thereafter re-enter and resume possession of the Premises by any lawful means and remove Lessee and/or other occupants and their goods and chattels. In any case where Lessor has recovered possession of the Premises by reason of Lessee's default, Lessor may, at Lessor's option, occupy the Premises or cause the Premises to be redecorated, altered, divided, consolidated with other adjoining Premises, or otherwise changed or prepared for reletting, and may relet the Premises or any portion thereof prepared for reletting, and may relet the Premises or any part thereof as agent of Lessee or otherwise, for a term or terms to expire prior to, at the same time as, or subsequent to, the original expiration date of this Lease, at Lessor's sole option, and Lessor shall receive the rent therefor. Rent so received shall be applied first to the payment of such expenses as Lessor may have incurred in connection with the recovery of possession, redecorating, altering, dividing, consolidating with other adjoining Premises, or otherwise changing or preparing for reletting, and the reletting, including brokerage and reasonable attorney's fees, and then to the payment of damages in amounts equal to the rent (basic and additional) and other payments required of Lessee hereunder and to the costs and expenses of performance of the other covenants of Lessee as herein provided. Lessee agrees, in any such case, whether or not Lessor has relet, to pay to Lessor damage equal to the basic and additional rent and other sums herein agreed to be paid by Lessee, less the net proceeds of the reletting, if any, as ascertained from time to 8 time, and the same shall be payable by Lessee on the several rent days above specified. Lessee shall not be entitled to any surplus accruing as a result of any such reletting. In reletting the Premises as aforesaid, Lessor may grant rent concessions and Lessee shall not be credited therewith. No such reletting shall constitute a surrender and acceptance of or be deemed evidenced thereof. If Lessor elects, pursuant hereto, actually to occupy and use the Premises or any part thereof during any part of the balance of the term as originally fixed or since extended, there shall be allowed against Lessee's obligation for rent, other payments and damages as herein defined, during the period of Lessor's occupancy, the reasonable value of such occupancy, equal to in any event the basic and additional rent herein reserved. In no event shall such occupancy by Lessor be construed as a release of Lessee's liability hereunder. (ii) Specific Performance of Lease. Lessor she have the right to enforce Lessee's specific performance of each and every covenant, condition and other provision of this Lease. (iii) Liquidated Damages. In any case where Lessor has recovered possession of the Premises by reason of Lessee's default, Lessor may at Lessor's option, and at any time thereafter, and without notice or other action by Lessor, and without prejudice to any other rights or remedies it might have hereunder or at law or equity, become entitled to recover from Lessee, as damages for such default, in addition to such other sums herein agreed to be paid by Lessee, to the date of re-entry, expiration and/or dispossess, an amount equal to the difference between (a) the sum of the Basic Rent and additional rents and other payments reserved in the Lease and required of Lessee hereunder from the date of such default to the date of expiration of the original term demised, and (b) the then fair and reasonable rental value of the Premises for the same period. Said damages shall become due and payable to Lessor immediately upon such default of this Lease and without regard to whether this Lease be terminated or not; and if this Lease be terminated, without regard to the manner in which it is terminated. In the computation of such damage, the difference between any installments of rent (basic and additional) thereafter becoming due and the fair and reasonable rental value of the Premises for the period for which such installment was payable shall be discounted to the date of such default at the rate of not more than four (4%) percent per annum. (iv) Waiver of Right of Redemption. Lessee hereby waives all right of redemption to which Lessee or any person under Lessee might be entitled to by law or in equity. (v) Other Remedies. Lessor's remedies hereunder are in addition to any remedy allowed by law or in equity. 9 (vi) Non-exclusivity. The remedies set forth above shall be non-exclusive and the Lessor's election to enforce any remedy shall not be deemed a waiver of any other remedy Lessor may be entitled to hereunder or as allowed by law or in equity. (vii) Lessor's Duty to Mitigate. Lessor and Lessee acknowledge that Lessor's obligation to mitigate damages in the event of Lessee's breach shall be satisfied by providing adequate information to the commercial brokerage community as to the availability for letting of the Demised Premises; having the Demised Premises available for inspection by prospective tenants during Building Hours, and by the acceptance of a commercially reasonable offer for all or a portion of the Demised Premises, which acceptance shall be evidenced by the execution of a lease agreement in form and providing terms substantially the same as the form utilized for all space tenants at the Building and without material changes therefrom. Lessor shall be under no obligation to accept any offer other than a commercially reasonable offer. Lessor's actions required hereunder, including providing information as to the availability of the Demised Premises for letting, the showing of the Demised Premises to prospective lessees and the evaluation and acceptance of proposed offers to let, shall be in the ordinary course of business and shall neither discriminate in favor of nor against the Demised Premises. I. SUBORDINATION OF LEASE. This Lease shall, at Lessor's option, or at the option of any holder of any underlying or ground lease or holder of a first institutional mortgage or deed of trust, be subject and subordinate to any such underlying leases and to any such first institutional mortgage and/or Deed of Trust which may now or hereafter affect the real property of which the Premises form a part, and also to all renewals, modifications, consolidations and replacements of said underlying lease and said first institutional mortgage an/or Deed of Trust. Although no instrument or act on the part of Lessee shall be necessary to effectuate such subordination, Lessee will, nevertheless, execute and deliver such further instruments confirming such subordination of this lease as may be desired by the holder of said first institutional mortgage and/or Deed of Trust of by any of the lessors under such underlying or ground leases. Lessee hereby appoints Lessor attorney-in-fact, irrevocably, to execute and deliver any such instrument for Lessee. If any underlying or ground lease to which this Lease is subject shall terminate, Lessee shall, on timely request, attorn to the owner of the reversion. Lessor shall use reasonable efforts to obtain from its institutional mortgagee a non-disturbance agreement in form customarily used by the mortgagee, for the benefit of Lessee. J. RIGHT TO CURE LESSEE'S BREACH. If Lessee breaches any covenant or condition of this lease, Lessor may, on reasonable notice to Lessee (except that no notice need be given in case of emergency), cure such breach at the expense of Lessee and the 10 reasonable amount of all expenses, including attorney's fees, incurred by Lessor in so doing (whether paid by Lessor or not) shall be deemed additional rent payable on demand. K. MECHANIC'S LIEN. Lessee shall, within fifteen (15) days after notice from Lessor, discharge or satisfy by bonding or otherwise any mechanic's liens or other liens for equipment, material, labor or goods or services claimed to have been furnished to the Premises on Lessee's behalf. L. RIGHT TO INSPECT AND REPAIR. Lessor may enter the Premises but shall not be obligated to do so (except as required by any specific provision of this Lease) at any reasonable time on reasonable notice to Lessee (except that no notice need be given in case of emergency) for the purpose of inspection of the making of such repairs, replacement or additions, in, to, on and about the Premises or the Building, as Lessor deems necessary or desirable. Lessee shall have no claim or cause of action against Lessor for interruption to Lessee's business, however occurring. M. INTERRUPTION OF SERVICE. Interruption or curtailment of any service maintained in the Building or at the Office Building Area, if caused by force majeure, as hereinafter defined, shall not entitle Lessee or any claim against Lessor or to any abatement in rent, and shall not constitute a constructive or partial eviction, unless Lessor fails to take measures as may be reasonable under the circumstances to restore the service within five (5) days after receipt of notice from Lessee regarding such interruption or curtailment. If the Premises are rendered untenantable in whole or in part for a period of thirty (30) consecutive days by the making of repairs or replacements, other than those made with Lessee's consent or caused by misuse or neglect by Lessee, or Lessee's agents, servants, visitors or licensees, Lessee shall have the right to make such repairs or replacements and offset the cost thereof against the Basic Rent. In no event shall Lessee be entitled to claim a constructive eviction from the Premises, unless Lessee shall first have notified Lessor in writing of the condition or conditions giving rise thereof, and, if the complaints be justified, unless Lessor shall have failed within thirty (30) days, after receipt of such notice, to remedy, to commence and proceed with due diligence to remedy such condition or conditions, subject to force majeure, as hereinafter defined. N. LESSEE'S ESTOPPEL. Lessee shall, from time to time, on not less than seven (7) days' prior written request by Lessor, execute, acknowledge and deliver to Lessor a written statement certifying that the Lease is unmodified and in full force and effect, or that the Lease is in full force and effect as modified and listing the instruments of modification; the dates to which the rents and charges have been paid; and whether or not, to the best of the Lessee's knowledge, Lessor is in default hereunder, and if so, specifying the nature of the default. It is intended that any 11 such statement delivered pursuant to this paragraph may be relied upon by a prospective purchaser of Lessor's interest or mortgagee of Lessor's interest or assignee of any mortgage or Lessor's interest. Lessee shall promptly provide Lessor with its most recent financial statements prepared in accordance with generally accepted accounting principles and/or tax returns for submission to Lessor's mortgagee. O. HOLDOVER TENANCY. If Lessee holds possession of the Premises after the term of this Lease, Lessee shall become a tenant from month to month under the provisions herein provided, but, at a monthly Basic Rental of one hundred fifty (150%) percent of the Basic Rent for the last month of the lease term or any renewed or extended term, payable in advance on the first day of each month, and such tenancy shall continue until terminated by Lessor, or until Lessee shall have give to Lessor a written notice, at least sixty (60) days prior to the intended date of termination of intent to terminate such tenancy. P. LESSOR'S WORK. Lessee acknowledges that it has inspected and is fully familiar with the Demised Premises and that it has accepted the Demised Premises in "AS IS" condition. Lessee shall be solely responsible for obtaining a Certificate of Occupancy from the Village of Ridgefield Park at Lessee's sole cost and expense. No "high hats" or other lighting fixtures shall be permitted without the express written consent of the Lessor. Lessee agrees to maintain 100% covering of the floor area within the Demised Premises utilizing carpeting, vinyl floor tiles, hardwood or a similar covering. No bare concrete floors shall be permitted. Q. RIGHT TO SHOW PREMISES. Lessor may show the Premises, on reasonable notice to Lessee, during business hours, and, during the twelve (12) months prior to termination of this Lease, to prospective tenants, during business hours. R. WAIVER OF TRIAL BY JURY. To the extent such waiver is permitted by law, the parties waive trial by jury in any action or proceeding brought in connection with this Lease or the Premises. S. NO RECORDATION. Lessee agrees not to record of file this Lease or any memorandum thereof in any public recording office, including the Bergen County Clerks' Office. Any such recording or filing shall constitute a default hereunder entitling Lessor to all available remedies, including but not limited to termination and re-entry. T. PERSONAL LIABILITY. Notwithstanding anything to the contrary provided in this Lease, it is specifically understood and 12 agreed such agreement being a primary consideration for the execution of this Lease by Lessor, that there shall be absolutely no personal liability on the part of Lessor, its partners, shareholders of partners, affiliated Company, its successors, assigns or any mortgagee in possession (for the purposes of this paragraph, collectively referred to as "Lessor"), with respect to any of the terms, covenants and conditions of the Lease, and that Lessee shall look solely to the equity of Lessor in the Building for the satisfaction of each and every remedy of Lessee in the event of any breach by Lessor of any of the terms, covenants and conditions of this Lease to be performed by Lessor, such exculpation of liability to be absolute and without any exceptions whatsoever. U. ATTORNEY'S FEES. In the event Lessor shall employ an attorney to enforce any of the conditions of this Lease, or to enforce Lessee's covenants hereunder, or any of Lessor's rights, remedies, privileges or options under this Lease, or at law or in equity, the Lessor shall be entitled to reimbursement from Lessee of all costs and expenses incurred or paid by Lessor in so doing, including, but not by way of limitation, all reasonable attorney's fees and costs incurred or paid by Lessor at any time or times in connection therewith, whether the matter is settled privately, or by arbitration, or by legal action at the trial court level and at any and all appellate court levels, provided, however, that Lessor shall be entitled to reimbursement as provided in this paragraph only if Lessor shall prevail in such arbitration or legal action or that the matter or issue shall be settled in Lessor's favor. V. APPLICABILITY TO HEIRS AND ASSIGNS. The provisions of this Lease shall apply to, bind and inure to the benefit of Lessor and Lessee, and their respective heirs, successors, legal representatives and assigns. It is understood that the term "Lessor" as used in this Lease means only the owner, a mortgagee in possession or a term lessee of the Building, so that in the event of any sale of the Building and/or the parcel of land upon which the Building is situate (the "Office Building Area") and/or of any lease thereof, or if a mortgagee shall take possession of the Premises, the Lessor named herein shall be and hereby is entirely freed and relieved of all covenants, obligations and liabilities of Lessor hereunder accruing thereafter, and it shall be deemed without further agreement that the purchaser, the term lessee of the Building, or the mortgagee in possession has assumed and agreed to carry out any and all covenants and obligations of Lessor hereunder. In the event of any sale or transfer as provided hereinabove, the liability of the Lessor hereunder shall cease and Lessee agrees to present any claim to the purchaser, successor or assigns. W. WAIVER. Lessee agrees that the failure of Lessor in one or more instances to insist upon strict performance or observance of one or more of the covenants or conditions hereunder, 13 or to exercise any rights, remedies, privileges, or option provided by law or in equity or provided or reserved to Lessor in this Lease, shall not operate or be construed as a relinquishment or waiver for the future of such covenant or condition or of the right to enforce the same or to exercise such right, remedy, privilege or option; but rather, the same shall continue in full force and effect. The receipt and acceptance by Lessor of Basic Rents and/or additional rents and/or any other payments hereunder, or any part or portion thereof, shall not be a waiver of any other Basic Rents and/or additional rents and/or any other payments hereunder, or any part or portion thereof, and such receipt and acceptance by Lessor, though with knowledge on the part of Lessor of the breach of any covenant or conditions of this Lease, shall not be, or operate as, a waiver of such breach or a waiver of any right, remedy, privilege or option of Lessor arising hereunder or at law or in equity on account of such breach in the absence of such receipt or acceptance. No waiver by Lessor of any of the provisions of this Lease, or of any of Lessor's rights, remedies, privileges or options under this Lease, shall be deemed to have been made unless made by Lessor in writing. If Lessor shall consent to the assignment of this Lease or to a subletting of all or a portion of the Demised Premises, or if any such assignment or subletting may be made hereunder without Lessor's consent, no further assignment or subletting shall be made without the prior written consent of Lessor, unless otherwise expressly permitted elsewhere in this Lease (this provision with respect to an assignment or subletting without Lessor's consent shall not constitute a waiver, or any way lesson Lessor's rights and remedies with respect to an assignment or subletting made without Lessor's consent). X. NO UNLAWFUL OCCUPANCY. Lessee shall not use or occupy, nor permit or suffer, the Demised Premises or any part thereof to be used or occupied for any unlawful purpose deemed by Lessor disreputable or not in keeping with the high-class nature of the complex of which the Demised Premises forms a part, or extra-hazardous, nor in such manner as to constitute a nuisance of any kind, nor for any purpose or in any way in violation of any present or future governmental laws, ordinances, requirements, orders, directions, rules or regulations. Lessee shall immediately upon the discovery of any such unlawful, illegal, disreputable or extra-hazardous use not in keeping with the high-class nature of the building of which the Demised Premises forms a part, take all necessary steps, legal and equitable, to compel the discontinuance of such sue and to oust and remove any subtenants, occupants or other persons guilty of such unlawful, illegal, disreputable or extra-hazardous use. Y. ENVIRONMENTAL/ISRA COMPLIANCE. (i) Lessee shall indemnify and hold Lessor harmless including attorneys and professional fees, with respect to any and all liability pursuant to and/or under any federal and state 14 environmental statute, law, regulation, rule or ordinance and from all suits, fines, claims and actions of whatsoever nature arising out of the use and/or storage of any substance determined by the New Jersey Department of Environmental Protection and Energy ("NJDEPE") or the United States Environmental Protection Agency ("EPA") to be hazardous or toxic and any damages or liabilities therefrom. Lessee's liability shall be limited to claims, damages or contamination arising from Lessee's use and occupancy of the Demised Premises and use of the common areas. Lessee shall promptly provide Lessor with a copy of any notice, correspondence, or document received by Lessee from and/or disclosure required to be submitted by Lessee to any governmental agency in respect of environmental, health and safety matters including but not limited to NJDEPE, EPA and OSHA. (ii) Lessee shall, at Lessee's own expense, comply with the Industrial Site Recovery Act, N.J.S.A. 13: 1K-6 et seq., the regulations promulgated thereunder and any amending and successor legislation and regulations ("ISRA"). Lessee shall, at Lessee's own expense, make all submissions to, provide all information to, and comply with all requirements of the Industrial Site Evaluation Element or its successor ("Element") of the New Jersey Department of Environmental Protection and Energy or its successor ("NJDEPE"). (iii) If ISRA is applicable, Lessee's obligations under this paragraph shall arise if there is a closing of operations, a transfer of ownership or operations, or a change in ownership at or affecting the Premises pursuant to ISRA. (iv) Lessee represents and warrants to Lessor that Lessee intends to use the Premises for general office and administrative purposes which has the following Standard Industrial Classification ("S.I.C.") numbers as defined by the most recent edition of the Standard Industrial Classification Manual published by the Federal Executive Office of the President, Office of Management and Budget: 7389, Lessee's use of the Demised Premises shall be restricted to the classification set forth above. Prior to the Lease Commencement Date, Lessee shall supply to Lessor an affidavit of an officer or partner of Lessee setting forth Lessee's S.I.C. number and a detailed description of the use. The affidavit shall be supplemented and updated in the event of any change but no less frequently than every two (2) years. (v) If ISRA is applicable, Lessee shall, at Lessee's sole cost and expense, obtain a letter of non-applicability from the Element prior to the termination of the Lease Term and shall promptly provide to Lessor copies of Lessee's submission and the Element's non-applicability letter. (vi) Lessee shall notify Lessor in advance of all meetings scheduled between Lessee or Lessee's representatives and 15 NJDEPE or any other environmental authority, and Lessor and Lessor's representatives shall have the right, but not the obligation, to attend and participate in all such meetings. (vii) Lessee shall permit Lessor and Lessor's agents, servants, and employees, including but not limited to legal counsel and environmental consultants and engineers, access to the premises for the purposes of environmental inspection and sampling during regular business hours, or during other hours either by agreement of the parties or in the event of any environmental emergency. Lessee shall not restrict access to any part of the Premises, and Lessee shall not impose any conditions to access. In the event that Lessor's environmental inspection shall include sampling and testing of the Premises, Lessor shall use its best efforts to avoid unreasonably interfering with Lessee's use of the Premises, and upon completion of sampling and testing shall, to the extent reasonably practicable, repair and restore the affected areas of the Premises from any damage caused by the sampling and testing. (viii) Lessee shall indemnify, defend, and hold harmless Lessor from and against all claims, liabilities, losses, damages, penalties and costs, foreseen or unforeseen, including without limitation, counsel, engineering and other professional or expert fees, which Lessor may incur resulting directly or indirectly, wholly or partly from Lessee's action or non-action with regard to Lessee's obligations under this paragraph. (ix) This paragraph shall survive the expiration or earlier termination of this Lease. Lessee's failure to abide by the terms of this paragraph shall be restrainable by injunction. Z. AMERICANS WITH DISABILITY ACT. Notwithstanding anything herein to the contrary, Lessee shall be obligated to, and have the responsibility of complying with all of the relevant terms, conditions and requirements of the Americans with Disability Act (the "ADA") to the extent the ADA is applicable to Lessee's use and occupancy of the Demised Premises. To the extent the provisions of the ADA mandate modifications to the Demised Premises, such modifications shall be made by Lessee at its sole cost and expense, but in coordination and consultation with Lessor. In the event Lessee shall fail to comply with the requirements of the ADA, Lessor may, but shall not be obligated, take such steps as may be necessary to comply with the ADA and Lessee shall pay Lessor, upon demand, the cost thereof which shall be deemed Additional Rent. AA. RELOCATION OF LESSEE. Lessor hereby reserves the right, at its sole expense and on at least sixty (60) days prior written notice, to require Lessee to move from the Premises to other space within the Building, but not below the fourth (4th) floor, of comparable size (i.e. an entire floor) and decor in order to permit Lessor to consolidate the space leased to Lessee with any other 16 space leased or to be leased to another tenant. In the event of any such relocation, Lessor will pay all expenses of preparing and decorating the new premises so that the same shall be substantially similar to the Premises from which Lessee is moving and Lessor will also pay the expense of moving Lessee's furniture and equipment to the relocated premises. Lessor shall use its reasonable efforts not to disrupt Lessee's business operations in completing the relocation. In such event, this Lease and each and all of the terms, covenants and conditions hereof, shall remain in full force and effect and thereupon be deemed applicable to such new space except that the description of the Premises shall be revised and if applicable, Lessee's Proportionate Share shall likewise be revised. 10. DEFAULT BY SUBTENANT. In the event the Subtenant shall default in any of its obligations under this Sublease, or in any of the obligations which the Subtenant has assumed toward the Sublessor and Lessor pursuant to paragraph 9 hereof, then the Sublessor shall have the right to exercise against the Subtenant all of the same rights and remedies which the Lessor would have the right to assert against the Sublessor pursuant to those terms and conditions of the Original Lease which have been included in paragraph 9 of this Sublease. The Subtenant acknowledges and agrees that the Sublessor as well as its members and officers shall be entitled to exculpation from any personal liability under this Sublease to the same extent that the Lessor and its officers and stockholders are entitled to exculpation from personal liability as set forth in those terms and conditions of the Original Lease which have been included in paragraph 9 hereof. 11. ADDITIONAL RENT. It is expressly agreed that Subtenant will pay, in addition to the Basic Rent provided in paragraph 2 above, additional rent to cover Subtenant's proportionate share, as hereinafter defined, of the increased cost to Sublessor, for each of the categories enumerated herein, over the "Base Period Costs" (as hereinafter defined) for said categories. 17 A. OPERATING COSTS ESCALATION. If the Operating Costs (as hereinafter defined) incurred for the Building and Office Building Area for any calendar year or proportionate part thereof during the Term of the Sublease shall be greater than the Base Operating Costs incurred during the Base Period (as hereinafter defined), adjusted proportionately for periods less than a lease year (as hereinafter defined), then Subtenant shall pay to Sublessor, as additional rent, its proportionate share (as hereinafter defined) of such excess Operating Costs. Operating Costs means each and every item of cost and expense of whatever variety or description paid or incurred for maintenance and variety or description paid or incurred for maintenance and operation of the Office Building Area and Building of which the Premises form a part (excluding Real Estate Taxes), including by way of illustration and not of limitation, fuel, utilities, electric, water, sewer, heating, ventilating and air conditioning, service contracts, elevators, plumbing/sprinkler pumps and motors, roofing and waterproofing, widow and glass, water treatment, painting, rubbish removal, tools and equipment, metal maintenance, general building supplies, locks and keys, signage and directory, security, masonry repairs, personal property taxes, management fees, direct labor, (including all wages and salaries), fringe benefits, unemployment taxes, social security taxes, worker's compensation, insurance and other similar taxes which may be levied upon the Lessor with respect to such wages and salaries; disability benefits, hospitalization, medical, surgical, union and general 18 welfare benefits, any pensions, retirement, or life insurance plan and other benefit or similar expense respecting employees of the Lessor; uniforms and working clothes for such employees; Lessor's expenses imposed pursuant to law or to any collective bargaining agreement), fire and other insurance, trash removal, data processing costs, interior and exterior landscaping and decoration, repairs, replacements and improvements which are necessary or appropriate for the continued operation of the Building and Office Building Area as a first class office building or are made in compliance with requirements of any federal, state or local law or governmental regulation, whether or not such law or regulation is valid or mandatory, management fees for the management of the Building, or if no managing agent is employed by the Lessor, a sum in lieu thereof which is not in excess of the then prevailing rates for management fees in Bergen County, New Jersey, attorneys' fees, appraisal and other experts fees incurred in pursuance of any real estate tax appeal, accounting fees and all other items properly constituting direct operating costs or that portion of a capital expenditure amortized during the Base Period and/or applicable lease year according generally accepted accounting principles, but not including depreciation of Building or equipment, interest, income or excess profits, taxes, costs of maintaining the Lessor's corporate or other existence, franchise taxes, or any expenditures required to be capitalized for federal income tax purposes in excess of that portion of the said capital expenditure amortized during the Base Period and/or applicable lease year. As used in 19 this subparagraph A, the Base Operating Costs shall be the Operating Costs incurred during the Base Period with respect to the establishment of the Base Operating Costs (as said Base Period is hereinafter defined in subparagraph E). If such Base Period is less than three hundred sixty-five (365) days, then the Base Operating Costs shall be determined by analyzing the Operating Costs incurred during such Base Period. B. TAX ESCALATION. (i) If the Real Estate Taxes (as hereinafter defined in subparagraph B (ii) (b) for the Building and Office Building Area at which the Demised Premises are located for any Sublease year or proportionate part thereof during the Sublease term, shall be greater than the Base Real Estate Taxes (as hereinafter defined in subparagraph B (ii) (b), incurred in the Base Period adjusted proportionately for periods less than a sublease year, then the Subtenant shall pay to Sublessor as additional rent its proportionate share, as hereinafter defined, of all such excess Real Estate Taxes. (ii) As used in this subparagraph (ii), the words and terms which follow mean and include the following: (a) "Base Real Estate Taxes" shall mean those real estate taxes assessed against the Building and Office Building Area as provided for in the tax bill issued by the Village of Ridgefield Park for the year commencing July 1, 1999. (b) "Real Estate Taxes" shall mean the property taxes and assessments imposed upon the Building and the 20 land upon which it stands, or upon the rent, as such, payable to the Lessor. If due to a future change in the method of taxation, any franchise, income or profit tax shall be levied against Lessor in substitution for, or in lieu of, or in addition to, any tax which would otherwise constitute a Real Estate Tax, such franchise, income or profit tax shall be deemed to be a Real Estate Tax for the purposes hereof; conversely, any additional Real Estate Tax hereafter imposed in substitution for, or in lieu of, any franchise, income or profit tax (which is not in substitution for, or in lieu of, or in addition to, a Real Estate Tax as hereinbefore provided) shall not be deemed a Real Estate Tax for the purpose hereof. (c) In the event Lessor is successful, as a result of a tax appeal or protest, in obtaining a reduction in Real Estate Taxes for any period for which Subtenant has paid additional rent pursuant to subparagraph B hereof, Subtenant shall be entitled to a rebate for its proportionate share of the reduction less all costs and expenses incurred in pursuance of the said tax appeal or protest, including filing fees, legal fees and expert fees. Sublessor shall pay the rebate within 30 days after receipt of the same from Lessor. A reduction shall be deemed final thereby entitling Subtenant to the rebate hereunder only upon final judgment of a court of competent jurisdiction and not until the time for filing any appeal therefrom has expired. Nothing contained herein shall be deemed to give Lessee standing to file a tax appeal Subtenant expressly acknowledges that the right to file such a tax appeal shall be solely that of the Lessor. 21 C. LEASE YEAR. As used in this paragraph, sublease year shall mean the calendar year within which possession is delivered, and each twelve (12) month calendar year thereafter. Once the Base Period Costs are established, in the event any sublease year is less than twelve (12) months, then the Base Period Costs for the categories listed above shall be adjusted to equal the proportion that said period bears to twelve (12) months, and Subtenant shall pay to Sublessor as additional rent for such period, an amount equal to Subtenant's proportionate share, as hereinafter defined, of the excess for said period over the adjusted Base Period Costs with respect to each of the categories listed above. D. PAYMENT. The increase in Base Period Costs shall be paid by Subtenant as set forth in this subparagraph. Upon receipt of a notice of increase from Lessor, the Sublessor shall advise Subtenant, in writing, of Subtenant's proportionate share of the increase in the Operating Costs and Real Estate Taxes over the Base Period Costs as Lessor has estimated for the next twelve (12) months, in the exercise of Lessor's reasonable business judgment. Subtenant's proportionate share of the estimated increase shall be paid by Subtenant in twelve (12) equal monthly installments. The estimated increase, and the monthly installments shall be adjusted at the expiration of each sublease year to reflect the actual increases in Operating Costs as reported by Lessor and, after each annual tax bill has been issued, to reflect the actual increase in Real Estate Taxes. All of these payments shall be deemed to be additional rent. Any overage shall be refunded to Subtenant within thirty (30) days after Sublessor has received a refund from Lessor. 22 Notwithstanding anything herein contained to the contrary, in the event the last sublease year prior to termination is less than twelve (12) months, the Base Period Costs shall be proportionately reduced to correspond to the duration of said final period. E. BASE PERIOD. (i) The Base Period with respect to the establishment of the Base Operating Costs shall be the calendar year 1999. (ii) The Base Period with respect to the establishment of the Base Real Estate Taxes shall mean the calendar year 1999 as set forth in the tax bill issued for the second half of 1999. F. BILLS AND CHARGES. Lessor has agreed to maintain bills and charges for the previous 12 month period which, provided Operating Cost Escalation shall increase by more than five (5%) percent in any calendar year during the term of the Sublease, shall be open to Sublessor and its representatives at all reasonable times and upon reasonable notice, so that Sublessor can determine that such Operating and Tax Costs have, in fact, been paid or incurred. In the event of any disagreement as to one or more charges not settled between Sublessor and Lessor, such disagreement shall be referred to an independent certified public accountant mutually acceptable to Sublessor and Lessor. If Sublessor and Lessor shall fail to agree upon such an accountant, either party may refer the dispute to the American Arbitration Associate (the 23 "AAA"). The decision of the accountant or the AAA, as applicable, shall be final and binding. Sublessor and Lessor shall share equally the costs and expenses incurred with respect to such arbitration and Subtenant shall reimburse Sublessor for its pro rata share thereof. Pending resolution or determination of any dispute, Subtenant shall pay to Sublessor the sum as billed by Sublessor. Sublessor has no right to review such bills and charges more than once in any 12 month period and then may only review bills and charges for the said 12 month period. Sublessor shall not be required to contest or review any Operating or Tax Costs, and the Subtenant shall be bound by any agreement or determination reached by Sublessor. G. For purposes of this Sublease, the Subtenant's proportionate share of the Premises is agreed to be 22.47%. 12. SIGNAGE. Subtenant shall not place any signs of any nature whatsoever on or about the entry or other door or on any exterior wall of the Premises or Building; signage shall be limited to the name of the Subtenant on the wall in reception area of the Premises as approved by Sublessor. Provided that Lessor maintains a computerized directory in the Building lobby, Sublessor shall make available on the Building directory a sufficient number of lines or a sufficient amount of space for Subtenant's use to accommodate Subtenant's firm name in a style approved by Sublessor. 13. LATE CHARGES. Anything in this Sublease to the contrary notwithstanding, at Sublessor's option, Subtenant shall pay a "Late Charge" of five (5%) percent of any installment of rent or 24 additional rent paid more than five (5) days after the due date thereof, to cover the extra expense involved in handling delinquent payments. 14. ACCORD AND SATISFACTION. No payment by Subtenant or receipt by Sublessor of a lesser amount than the rent and additional charges payable hereunder shall be deemed to be other than a payment on account of the earliest stipulated Basic Rent and additional rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment for rent or additional rent be deemed an accord and satisfaction, and Sublessor may accept such check or payment without prejudice to Sublessor's right to recover the balance of such rent and additional rent or pursue any other remedy provided herein or by law. 15. SUBTENANT'S INSURANCE. A. Subtenant covenants to provide on or before the commencement date, a comprehensive policy of general liability insurance, naming the Lessor and Sublessor as additional named insureds, insuring Subtenant, Sublessor, and Lessor against any liability commonly insured against and occasioned by accident resulting from any act or omission on or about the Premises and any appurtenances thereto. Said policy is to be written by an insurance company licensed and qualified to do business in the State of New Jersey and reasonably satisfactory to Sublessor and Lessor. The policy shall have a combined single limit of not less than Three Million ($3,000,000.00) Dollars in respect of injury to any one person and any one accident, and One Million 25 ($1,000,000.00) Dollars in respect of property damage. Said limits shall be subject to periodic review and the Sublessor and Lessor reserve the right to increase said coverage limits if, in the reasonable opinion of Lessor or Sublessor, said coverage becomes inadequate and is less than commonly maintained by tenants in similar buildings in the area by tenants making similar uses. At least thirty (30) days prior to the expiration or cancellation date of any policy, the Subtenant shall deliver a renewal or replacement policy with proof of the payment of the premium therefor to Lessor and Sublessor. B. Subtenant covenants and represents, said representation being specifically designed to induce Sublessor to execute this Sublease, that Subtenant's (i) personal property, fixtures and any other items which Subtenant may bring to the Premises, and (ii) business which may be subject to any claim for damages, interruption or destruction due to Lessor's or Sublessor's negligence shall be fully insured by a policy of insurance covering all risks with no deductible which policy shall specifically provide for a waiver of subrogation for Lessor and Sublessor and all Building tenants without regard to whether or not same shall cost an additional premium and notwithstanding anything to the contrary contained in this Sublease. Should Subtenant fail to maintain said all risk insurance with the required waiver of subrogation, or fail to maintain the liability insurance, naming Lessor and Sublessor as additional named insureds, then Subtenant shall be in default hereunder and shall be deemed to have breached its covenants as set forth herein. 26 16. CASUALTY AND EMINENT DOMAIN. In the event the Original Lease terminates on account of any damage by fire or other cause to the Building or Premises or on account of the exercise of any right of eminent domain or threat thereof, then this Sublease shall terminate on the same date that the Original Lease terminates. In such case, Basic Rent and additional rent shall be paid up to the date of termination of this Sublease. Subtenant agrees that it shall not be entitled to any part of any award for any taking by eminent domain or payment in lieu thereof, however Subtenant may file a separate claim for any taking of the Subtenant's fixtures and improvements which have not become the Lessor's property, and for moving expenses provided the same shall in no way affect or diminish Lessor's award, and under no circumstances shall Subtenant have any right to any part of the award resulting from the value of the sublease held estate of the Subtenant. In the event the Sublease does not terminate on account of such damage or eminent domain proceedings, then the Subtenant shall be entitled to its pro rata share of any abatement or reduction of Basic Rent or additional rent allowed by the Lessor to the Sublessor. Notwithstanding the foregoing, in the event of any loss or damage to the building or the Premises or any contents, each party shall first look to any insurance in its favor before making any claim against the other party, and to the extent possible without additional cost, each party shall obtain, for each policy of insurance, provisions permitting waiver of any claim against the other party (including the Sublessor and Lessor) for loss or damage 27 within the scope of such insurance, and each party, to the extent permitted, for itself and its insurers waives all such insured claims against the other party. 17. INDEMNITY. The Subtenant agrees to indemnify and hold the Sublessor harmless from any claim, action, or demand arising from or relating to its failure to perform its obligations under this Sublease or those obligations of the Sublessor to the Lessor under the Original Lease which have been assumed by the Subtenant in accordance with paragraph 9 hereof, including reasonable attorneys' fees and expenses in defense of any such claim. Without limiting the generality of the foregoing indemnity, the Subtenant specifically agrees that it shall be solely responsible for any Basic Rent, additional rent, or other charges which may be due the Lessor from the Sublessor as a result of the Subtenant's failure to vacate the Space and the Premises and give possession thereof to the Lessor upon the expiration of the Original Lease or this Sublease, whichever occurs first. 18. SERVICES TO BE PROVIDED. While Subtenant is not in default under any of the provisions of this Lease, Sublessor agrees to furnish, except on holidays as set forth on Exhibit C attached hereto and made a part hereof, the following: A. The cleaning services, as set forth in Exhibit D attached hereto and made a part hereof, and subject to the conditions therein stated. Except as set forth in Exhibit D, Subtenant shall pay Sublessor the cost of all other cleaning services required by Subtenant. 28 B. Heating, ventilating and air conditioning (herein "HVAC") as appropriate for the season, during "Building Hours", as hereinafter defined. In the event Subtenant shall require HVAC other than during Building Hours (as defined elsewhere herein), Subtenant shall give not less than twenty-four (24) hours notice to Sublessor and shall pay Sublessor, upon demand, the sum of $75.00 for each hour, or portion thereof, of HVAC provided outside Building Hours. C. Electric current for usual office requirements and equipment which shall include typewriters and collators, copying machines, calculators, clocks, water coolers, personal computers and similar office equipment; provided, however, that Sublessor shall not be required to provide electrical current for any office equipment needing greater than fifteen amp service. D. As used herein, the term "Building Hours" shall be Monday through Friday, 8 o'clock a.m. to 6 o'clock p.m., and on Saturday 8 o'clock a.m. to 1 o'clock p.m. E. Notwithstanding the requirements of Exhibit D or any other provision of this Lease, Sublessor shall not be liable for failure to furnish any of the aforesaid services when such failure is due to actions or omissions of Lessor or any third party or force majeure. Sublessor shall not be liable, under any circumstances, for loss of, or injury to Subtenant or to the business or property of Subtenant through or in connection with or incidental to the furnishing of, or failure to furnish, any of the aforesaid services or for any interruption to Subtenant's business, however occurring. 29 19. PARKING SPACES. Sublessor represents that pursuant to the terms of the Original Lease, the Subtenant has been allocated the use of 71 parking spaces at the Building, and the Subtenant shall be entitled to the use of such parking spaces in common with the Sublessor and any other subtenants. The Sublessor reserves the right to allocate and reserve such parking spaces, so long as such allocation is made upon a fair and reasonable basis. Neither Sublessor nor Lessor shall be responsible or liable for any damage to any vehicles or the contents thereof as a result of fire, theft, vandalism and/or collision. 20. SECURITY DEPOSIT. The Subtenant shall deposit with Sublessor upon the execution hereof, the sum of Twenty Thousand ($20,000) Dollars as security for the performance of Subtenant's obligations hereunder. If Sublessor applies any part of said deposit to cure any default of Subtenant, then Subtenant shall upon demand deposit with Sublessor the amount so applied so that at all times Sublessor will have the full security deposit on hand. The Subtenant shall not be entitled to any interest on the security deposit, and under no circumstances shall the Subtenant be entitled to treat the security deposit as an advance payment of rent. 21. NO LIABILITY FOR PROPERTY. Neither Lessor nor Sublessor shall be liable for any loss of or damage to personal property of Subtenant or any interruption of Subtenant's business from any cause whatsoever, including but not by way of limitation, theft, casualty or vandalism, and Subtenant covenants and agrees to make no claim against Lessor or Sublessor for any such loss. 30 22. NO OPTION. The provision of a draft or drafts of this Sublease to the Subtenant or its attorneys shall not be considered as the extension of any option to the Subtenant, or the making of any offer on the part of the Sublessor. In addition, the effectiveness of this Sublease is subject to the following conditions: A. The Lessor's mortgagee's approval of the Original Lease; and B. The Sublessor obtaining a Certificate of Occupancy from the local municipality, or such documentation as the Sublessor shall deem sufficient to prove that no such certificate is required. 23. MISCELLANEOUS. A. No change, modification or termination of any of the terms, provisions, covenants, promises or conditions of this Sublease agreement shall be effective unless made in writing and signed or initialed by all parties hereto or their successors or assigns. B. This Sublease agreement shall be governed by and construed in accordance with the substantive and procedural laws of the State of New Jersey, and Sublessor and Subtenant acknowledge that they are subject to the jurisdiction of the courts of the State of New Jersey. C. If any paragraph, subparagraph or other provision of this Sublease agreement, or application of such paragraph, subparagraph or provision, is held invalid, then the remainder of 31 the Sublease agreement, and the application of such paragraph, subparagraph or provision to persons, parties or circumstances other than those with respect to which it is held invalid, shall not be affected thereby. D. The Subtenant warrants and represents that the Sublessor nor anyone acting on behalf of Sublessor has made any representations, promises, or warranties to Subtenant, other than specifically as set forth in this Sublease agreement. E. Subtenant warrants and represents that this Sublease has been duly authorized and approved by its Board of Directors, and that the corporate officers executing this Sublease have the power and authority to execute the same. Subtenant warrants and represents that it is not insolvent, and that it has no present intention to commence bankruptcy or other debtor relief proceedings. 24. NOTICE. Except as otherwise provided in this Sublease, all notices, demands, requests, consents, approvals or other communications (for the purposes of this paragraph, collectively called "Notices") required or permitted to be given hereunder or which are given with respect to this Sublease shall be in writing and shall be sent by registered or certified mail, return receipt requested, postage prepaid, or delivered by hand delivery or by a nationally recognized overnight courier service addressed as follows: 32 TO SUBLESSOR: At the Premises, with a copy to Michael Profita, Esq., Huttle Profita LLC, 300 Glenpointe Centre East, Teaneck, NJ 07666. TO SUBTENANT: At the address set forth on page 1 of this Agreement. Notices given as provided herein shall be deemed given two days after the date of registration or certification as to mailings, or as to overnight and hand delivery, on the day of delivery. STRATEGIC BUSINESS AND TECHNOLOGY SOLUTIONS, LLC, SUBLESSOR By: /s/ JOHN KLEIN ---------------------------------- JOHN KLEIN, MANAGING MEMBER CYBEAR, INC., SUBTENANT By: /s/ [ILLEGIBLE] ------------------------------------ 33 7TH FLOOR LAYOUT FINAL AS OF APRIL 23, 1998 CYBEAR EXHIBIT A EXHIBIT "B" RULES AND REGULATIONS 1. OBSTRUCTION OF PASSAGEWAYS: The sidewalks, entrances, passages, courts, elevators, vestibules, stairways, corridors and public parts of the building shall not be obstructed or encumbered by Lessee or used by Lessee for any purpose other than ingress and egress. 2. PROJECTIONS FROM BUILDING: No equipment or other fixtures shall be attached to the outside walls or the windowsills of the building or otherwise affixed so as to project from the building, without the prior written consent of Lessor. 3. SIGNS: No sign or lettering shall be affixed by Lessee to any part of the outside of the premises, or any part of the inside of the premises so as to be clearly visible from the outside of the premises, without the prior written consent of Lessor. Lessor shall place Lessee's name 1) next to the primary entry door to the Lessee's building standard sign premises and on the touchscreen directory in the lobby of the building, 2) in conformance with the building standards. Lessee shall not have the right to have additional names placed on the directory without Lessor's prior written consent. 4. WINDOWS Windows in the premises shall not be covered or obstructed by Lessee. No bottles, parcels, bookshelves or other articles shall be placed on the windowsills, in the halls, or in any other part of the building other than the leased premises. EXHIBIT "B" RULES AND REGULATIONS 5. FLOOR COVERING: Lessee shall not lay linoleum or other similar floor covering so that the same shall come in direct contact with the floor of the premises. If linoleum or other similar floor covering is desired to be used, an interlining of builder's deadening felt first shall be fixed to the floor by a paste or other material that may easily be removed with water, the use of cement or other similar material being expressly prohibited. 6. INTERFERENCE WITH OCCUPANTS OF BUILDING: Lessee shall not make, or permit to be made, any unseemly or disturbing noises and shall not interfere with other tenants or those having business with them. 7. LOCKS: KEYS: Two additional keys are provided for each primary entrance door. No additional locks or bolts of any kind shall be placed on any of the doors by Lessee. Lessee shall, on the termination of Lessee's tenancy, deliver to Lessor, all keys to any space within the building, either furnished to or otherwise procured by lessee, and in the event of the loss of any keys furnished, Lessee shall pay to Lessor the cost thereof. 8. MOVEMENT OF FURNITURE FREIGHT OR BULKY MATTER: The carrying in or out of freight, furniture, or bulky matter of any description must take place during such hours as lessor may from time to time, reasonably determine and only after advance notice to the Lessor. The persons employed by Lessee for such work must be reasonably acceptable to the Lessor. Lessee may, subject to such provisions, move freight, furniture, bulky matter, and other material into or out of the premises on Saturdays between the hours of 9:00 a.m. and l:00 p.m., provided Lessee pays additional costs, if any, incurred by Lessor for elevator operators or security guards, and for other expenses occasioned by such activity of Lessee If, at least five (5) days prior to such activity, Lessor requests that lessee deposit with lessor, as security for Lessee's obligation to pay such additional costs, a sum which Lessor reasonably estimates to be the amount of such additional cost, the Lessee shall deposit such amount with Lessor as security for such cost. EXHIBIT "B" RULES AND REGULATIONS 9. SAFES AND OTHER HEAVY EQUIPMENT: Lessor reserves the right to prescribe the weight and position of all safes and other heavy equipment so a: to distribute properly the weight thereof and to prevent any unsafe condition from arising. Business machines and other equipment shall be placed and maintained by Lessee at Lessee's expense in settings sufficient in Lessor's reasonable judgement to absorb and prevent unreasonable vibration, noise and annoyance. 10. NON-OBSERVANCE OR VIOLATION OF RULES BY OTHER TENANTS: Lessor shall not be responsible to Lessee for the non-observance or violation of any of these rules and regulations by any other tenant. 11. AFTER HOUR USE: Lessor reserves the right to exclude from the Building between the hours of 6:00 p m. and 6:00 a.m. and at all hours on Saturdays, Sundays and Building Holidays, all persons who do not present a pass to the building signed by the Lessee. Each Lessee shall be responsible for all persons for whom such a pass is issued and shall be liable to the Lessor for the acts of such persons. 12. PLUMBING FACILITIES USE Lessee shall not use the Office Building's plumbing facilities for any purpose other than that for which they were constructed and will not permit any foreign substance of any kind to be thrown therein and the expense of repairing any breakage, seepage or damage, no matter where occurring, resulting from a violation of this provision by Lessee or Lessee's servants, employees, agents, invitees or licensees shall be borne by Lessee. Wasteful and excessive or unusual use or misuse of Building Standard Office Electrical Service, Water, Sewer or other utilities is prohibited. 13. VEHICLES: No bicycles, mopeds, motorcycles or other vehicles of any kind shall be brought into or kept in, on or about the Premises, Office Building or Office Building Area, except in those locations specifically designated by Lessor for same. EXHIBIT "B" RULES AND REGULATIONS 14. ANIMALS: No animal of any kind's shall be brought into, kept in, on or about the Premises, Office Building or Office Building Area 15. LESSOR'S RIGHTS: Lessor hereby reserves to itself any and all rights not granted to Lessee hereunder, including, but not limited to, the following rights which are reserved to Lessor for its purpose in operating the Office Building and Office Building Area: a) the exclusive right to the use of the name of the Office Building for all purposes, except that Lessee may use the name as its business address and for no other purpose; b) the right to change the name of the Office Building at any time and from time to time, without incurring any liability to Lessee for so doing; c) the right to install and maintain a sign or signs on the exterior of the Office Building and/or anywhere in the Office Building Area; d) the exclusive right to use or dispose of the use of all or any part of the roof of the Office Building and Office Building Area; e) the right to grant anyone the right to conduct any particular business or undertaking in the Office Building or Office Building Area. 16. MOVING: Moving in and out of the Office Building must be coordinated with the Lessor. At the discretion of the Lessor, moving may be required to be done under the supervision of management personnel. No furniture will be moved in the Office Building's elevators without the permission of the Lessor and until necessary pads have been installed. EXHIBIT "C" BUILDING HOLIDAYS BUILDING HOLIDAYS SHALL BE AS FOLLOWS: 1. Memorial Day 2. Independence Day 3. Labor Day 4. Thanksgiving Day and the day after 5. Christmas Day 6. New Year's Day 7. Monday before or Friday after if July 4th falls on Tuesday or Thursday. EXHIBIT "D" CLEANING SERVICES NIGHTLY SERVCIES -RESTROOM AREA: 1. Sweep, mop and sanitize floors 2. Wash and polish mirrors, powder shelves, bright work, etc. 3. Clean and sanitize commodes, toilet seats, wash basins and urinals 4. Dust partitions, tile walls, dispensers, doors and receptacles 5. Empty and clean towel and sanitary disposal receptacles 6. Remove wastepaper and refuse to a designated area in the premises 7. Fill toilet tissue, soap and towel dispenser with supplies as needed OCCASIONAL SERVICE-RESTROOM AREA: 1. Wash partitions, tile walls, enamel surface and power scrub lavatory floors 2. High dust walls and ceilings 3. Dust exterior of lighting fixtures ENTRANCE LOBBIES AND PUBLIC AREAS AS REQUIRED (NIGHTLY): 1. Sweep and damp mop (as required) flooring and vacuum carpeting 2. Clean cigarette urns and replace sand or water 3. Clean elevator cabs 4. Clean entrance glass doors (daily) 5. Clean lobby glass other than doors as required. EX-27.1 11
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 11-MOS 12-MOS DEC-31-1997 DEC-31-1998 FEB-05-1997 JAN-01-1998 DEC-31-1997 DEC-31-1998 1,000 3,983 0 0 0 366,000 0 0 0 0 31,707 564,368 240,535 2,581,658 (51,470) (175,029) 395,456 3,331,951 1,410,119 3,799,568 0 0 0 0 0 0 13,000 13,269 (1,027,663) (480,886) 395,456 3,331,951 95,927 0 95,927 0 0 0 0 0 1,626,276 4,170,571 0 0 28,220 210,441 (1,558,569) (4,381,012) 0 1,900,000 (1,558,569) (2,481,012) 0 0 0 0 0 0 (1,558,569) (2,481,012) (0.12) (0.19) (0.12) (0.19)
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