-----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, S+XugXXZ9ueL6e/B3Amp7AgUaaRnm/Mtec2IEiK4YXYrwuiNPJ4gjuCwUXstDOrQ WHG72pi9mZwXimiDejrwFg== 0000950117-02-002483.txt : 20021024 0000950117-02-002483.hdr.sgml : 20021024 20021024172700 ACCESSION NUMBER: 0000950117-02-002483 CONFORMED SUBMISSION TYPE: SC TO-T/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20021024 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: NCS HEALTHCARE INC CENTRAL INDEX KEY: 0001004990 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 341816187 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC TO-T/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-47039 FILM NUMBER: 02797769 BUSINESS ADDRESS: STREET 1: 3201 ENTERPRISE PKWY STREET 2: STE 2200 CITY: BEACHWOOD STATE: OH ZIP: 44122 BUSINESS PHONE: 2165143350 MAIL ADDRESS: STREET 1: 1400 MCDONALD INVESTMENT CENTER STREET 2: 800 SUPERIOR AVE CITY: CLEVELAND STATE: OH ZIP: 44114 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: OMNICARE INC CENTRAL INDEX KEY: 0000353230 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-DRUG STORES AND PROPRIETARY STORES [5912] IRS NUMBER: 311001351 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T/A BUSINESS ADDRESS: STREET 1: 100 E RIVERCENTER BLVD STREET 2: STE 1600 CITY: COVINGTON STATE: KY ZIP: 41101 BUSINESS PHONE: 6063923300 MAIL ADDRESS: STREET 1: 100 E RIVERCENTER BLVD STREET 2: STE 1600 CITY: COVINGTON STATE: KY ZIP: 41101 SC TO-T/A 1 a33587.txt OMNICARE, INC. ________________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- SCHEDULE TO/A (RULE 14d-100) TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AMENDMENT NO. 21 ------------------- NCS HEALTHCARE, INC. (Name of Subject Company (Issuer)) OMNICARE, INC. NCS ACQUISITION CORP. (Names of Filing Persons (Offerors)) CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE (Title of Class of Securities) 62887410 (CUSIP Number of Class A Common Stock) AND CLASS B COMMON STOCK, PAR VALUE $0.01 PER SHARE (Title of Class of Securities) NOT APPLICABLE (CUSIP Number of Class B Common Stock) PETER LATERZA, ESQ. VICE PRESIDENT AND GENERAL COUNSEL OMNICARE, INC. 100 EAST RIVERCENTER BOULEVARD COVINGTON, KENTUCKY 41011 TELEPHONE: (859) 392-3300 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Filing Persons) COPY TO: MORTON A. PIERCE, ESQ. DEWEY BALLANTINE LLP 1301 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10019 TELEPHONE: (212) 259-8000 ------------------- CALCULATION OF FILING FEE Transaction Valuation* Amount of Filing Fee $91,816,869 $18,363.37
* Estimated for purposes of calculating the amount of the filing fee only. This amount assumes the purchase of (i) 18,460,599 shares of the class A common stock, par value $0.01, of NCS HealthCare, Inc. (the 'Company'), representing all of the outstanding shares of such class as of July 28, 2002 (less 1,000 shares of such class owned by Omnicare, Inc.), (ii) 5,255,210 shares of the class B common stock, par value $0.01, of the Company, representing all of the outstanding shares of such class as of July 28, 2002, (iii) 2,422,724 shares reserved for issuance upon the exercise of outstanding options to purchase class A common stock and (iv) 94,858 shares reserved for issuance upon the exercise of outstanding options to purchase class B common stock. The number of outstanding shares and shares reserved for issuance upon the exercise of options is contained in the Current Report on Form 8-K filed by the Company on July 30, 2002. [X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: $18,363.37 Filing party: Omnicare, Inc. Form or Registration No.: SC TO Date Filed: August 8, 2002 [ ] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [x] third-party tender offer subject to Rule 14d-1 [ ] issuer tender offer subject to Rule 13e-4 [ ] going private transaction subject to Rule 13e-3 [ ] amendment to Schedule 13D under Rule 13d-2 Check the following box if the filing is a final amendment reporting the results of the tender offer [ ] ________________________________________________________________________________ This Amendment No. 21 amends and supplements the Tender Offer Statement on Schedule TO filed with the Securities and Exchange Commission (the "Commission") on August 8, 2002 (the "Schedule TO") by Omnicare, Inc., a Delaware corporation ("Omnicare"), and NCS Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly-owned subsidiary of Omnicare. The Schedule TO relates to a tender offer by Purchaser to purchase all of the outstanding shares of class A common stock, par value $0.01 per share, and class B common stock, par value $0.01 per share, of NCS HealthCare, Inc. (the "Company") for a purchase price of $3.50 per share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated August 8, 2002 (the "Offer to Purchase"), and in the related Letter of Transmittal (the "Letter of Transmittal" which, together with the Offer to Purchase, as hereby or hereafter amended or supplemented from time to time, constitute the "Offer"). Copies of the Offer to Purchase and the related Letter of Transmittal are filed with the Schedule TO as Exhibits (a)(1)(A) and (a)(1)(B), respectively. Capitalized terms used and not defined herein shall have the meanings assigned such terms in the Offer to Purchase and the Schedule TO. Item 11. Additional Information. The following is hereby added to the end of Section 18 ("Legal Proceedings") of the Offer to Purchase: On October 22, 2002, the Company, Genesis Health Ventures, Inc., Geneva Sub, Inc., Boake A. Sells and Richard L. Osbourne (collectively, the "Defendants") filed with the Delaware Chancery Court reply memoranda in support of their motions to dismiss Omnicare's Second Amended Complaint. In their memoranda, the Defendants oppose, among other things, Omnicare's argument that it has suffered unique harm as a potential acquiror and therefore has standing to maintain its lawsuit. Copies of the memoranda are attached hereto as Exhibits (a)(1)(GG) and (a)(1)(HH) and are incorporated herein by reference. Item 12. Exhibits. Item 12 is hereby amended and supplemented with the following information: Exhibit (a)(1)(GG) The NCS Defendants' Reply Memorandum of Law in Support of Their Motion to Dismiss Omnicare's Second Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 22, 2002. Exhibit (a)(1)(HH) Reply Brief of Defendants Genesis Health Ventures, Inc. and Geneva Sub, Inc. in Support of Their Motion to Dismiss the Second Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 22, 2002. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: October 24, 2002 OMNICARE, INC. By: /s/ DAVID W. FROESEL, JR. ------------------------------- Name: David W. Froesel, Jr. Title: Senior Vice President and Chief Financial Officer NCS ACQUISITION CORP. By: /s/ DAVID W. FROESEL, JR. ------------------------------ Name: David W. Froesel, Jr. Title: Vice President and Chief Financial Officer EXHIBIT INDEX (a)(1)(A) Offer to Purchase dated August 8, 2002.* (a)(1)(B) Letter of Transmittal.* (a)(1)(C) Notice of Guaranteed Delivery.* (a)(1)(D) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.* (a)(1)(E) Letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.* (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.* (a)(1)(G) Summary Advertisement, published August 8, 2002.* (a)(1)(H) Press Release issued by Omnicare, Inc. on August 8, 2002.* (a)(1)(I) Complaint filed in the Chancery Court, New Castle County, Delaware on August 1, 2002.* (a)(1)(J) Press Release issued by Omnicare, Inc. on August 8, 2002.* (a)(1)(K) First Amended Complaint filed in the Chancery Court, New Castle County, Delaware on August 12, 2002.* (a)(1)(L) Press Release issued by Omnicare, Inc. on August 20, 2002.* (a)(1)(M) First Amended Complaint filed in the United States District Court for the Northern District of Ohio on August 21, 2002.* (a)(1)(N) Press Release issued by Omnicare, Inc. on August 26, 2002.* (a)(1)(O) Press Release issued by Omnicare, Inc. on September 6, 2002.* (a)(1)(P) Selected material from a presentation of Omnicare, Inc. at the Bear Stearns 15th Annual Healthcare Conference on September 17, 2002 at The Waldorf Astoria, New York, New York.* (a)(1)(Q) Press Release issued by Omnicare, Inc. on September 20, 2002.* (a)(1)(R) Motion for Summary Judgment as to Count I of the First Amended Complaint filed in the Chancery Court, New Castle County, Delaware on September 30, 2002.* (a)(1)(S) Motion to Dismiss the First Amended Complaint filed in the United States District Court for the Northern District of Ohio on September 13, 2002.* (a)(1)(T) Opposition to Omnicare's Motion to Dismiss and Motion for Preliminary Injunction filed in the United States District Court for the Northern District of Ohio on September 30, 2002.* (a)(1)(U) Press Release issued by Omnicare, Inc. on October 4, 2002.* (a)(1)(V) Defendant's Motion to Dismiss the Second Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 3, 2002.* (a)(1)(W) Omnicare's Reply Memorandum of Law in Further Support of the Motion to Dismiss the First Amended Complaint filed in the United States District Court for the Northern District of Ohio on October 15, 2002.* (a)(1)(X) Second Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 16, 2002.* (a)(1)(Y) Plaintiff's Memorandum of Law in Opposition to the NCS Defendants' Motion to Dismiss Omnicare's Second Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 17, 2002.* (a)(1)(Z) Omnicare's Memorandum of Law in Opposition to Plaintiff's Motion for Preliminary Injunction filed in the United States District Court for the Northern District of Ohio on October 17, 2002.* (a)(1)(AA) The NCS Defendants' Memorandum of Law in Opposition to Omnicare's and the Class Plaintiffs' Motion for Summary Judgment filed in the Chancery Court, New Castle County, Delaware on October 17, 2002.* (a)(1)(BB) Defendant Jon H. Outcalt's Brief in Opposition to Omnicare's Motion for Summary Judgment on Count I of the First Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 17, 2002.* (a)(1)(CC) Defendant Kevin B. Shaw's Memorandum of Law in Opposition to Omnicare's Motion for Summary Judgment on Count I of the Second Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 17, 2002.* (a)(1)(DD) Brief of Defendants Genesis Health Ventures, Inc. and Geneva Sub, Inc. in Opposition to Omnicare's and the Class Plaintiffs' Motions for Summary Judgment on Count I of their Complaints filed in the Chancery Court, New Castle County, Delaware on October 17, 2002.* (a)(1)(EE) Press Release issued by Omnicare, Inc. on October 22, 2002.* (a)(1)(FF) Reply Memorandum of Law in Further Support of Omnicare's Motion for Summary Judgment as to Count I of the Second Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 22, 2002.* (a)(1)(GG) The NCS Defendants' Reply Memorandum of Law in Support of Their Motion to Dismiss Omnicare's Second Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 22, 2002. (a)(1)(HH) Reply Brief of Defendants Genesis Health Ventures, Inc. and Geneva Sub, Inc. in Support of Their Motion to Dismiss the Second Amended Complaint filed in the Chancery Court, New Castle County, Delaware on October 22, 2002. (a)(5)(A) Form of Agreement and Plan of Merger proposed by Omnicare, Inc.* (a)(5)(B) Agreement and Plan of Merger executed by Omnicare, Inc.* (b)(1) Three-year, $495.0 million Credit Agreement, dated as of March 20, 2001, among Omnicare, Inc., as the Borrower, the Guarantors named therein and the lenders named therein, as the Lenders, Lehman Commercial Paper Inc., as a Syndication Agent, Sun Trust Bank, as a Documentation Agent, Deutsche Banc Alex. Brown, as a Documentation Agent, and Bank One, NA, with its main office in Chicago, Illinois, as the Administrative Agent. (Incorporated by reference to Exhibit 99.3 of Omnicare's Current Report on Form 8-K filed with the Securities and Exchange Commission on March 23, 2001). (c) None. (d)(1) Confidentiality Agreement, dated August 29, 2001, between Omnicare, Inc. and NCS HealthCare, Inc.* (e) None. (f) None. (g) None. (h) None.
- --------------------- * Previously filed. STATEMENT OF DIFFERENCES ------------------------ The section symbol shall be expressed as................................. 'SS' The paragraph symbol shall be expressed as............................... [p] EX-99 3 ex99-a1gg.txt EXHIBIT (A)(1)(GG) Exhibit (a)(1)(GG) IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - -------------------------------------------- : OMNICARE, INC., : Plaintiff, : C.A. No. 19800 : : v. : : NCS HEALTHCARE, INC., JON H. OUTCALT, : KEVIN B. SHAW, BOAKE A. SELLS, : RICHARD L. OSBORNE, GENESIS HEALTH : VENTURES, INC., and GENEVA SUB, INC., : : Defendants. : - -------------------------------------------- THE NCS DEFENDANTS' REPLY MEMORANDUM IN SUPPORT OF THEIR MOTION TO DISMISS OMNICARE'S SECOND AMENDED COMPLAINT Pursuant to Court of Chancery Rule 12(b)(6), Defendants NCS Healthcare, Inc. ("NCS"), Boake A. Sells and Richard L. Osborne (collectively, the "NCS Defendants") hereby reply to Omnicare's Memorandum of Law in Opposition to the NCS Defendants' Motion to Dismiss Omnicare's Second Amended Complaint. INTRODUCTION 1. In its Memorandum of Law in Opposition to the NCS Defendants' Motion to Dismiss Omnicare's Second Amended Complaint ("Omnicare Mem."), Omnicare, Inc. ("Omnicare") unsuccessfully attempts to divert attention from a critical fact: it did not own NCS stock until after it learned of the NCS Defendants' alleged wrongdoing. Unable to muster any relevant authority, Omnicare is reduced to relying upon inapplicable case law, a misreading of cases cited in the NCS Defendants' Motion to Dismiss Omnicare's Second Amended Complaint ("NCS Motion to Dismiss") and misleading excerpts from secondary sources to bolster its arguments. 2. Whether or not Omnicare's complaint states an individual or derivative claim is not an issue in this motion. The key issue is whether a bidder may buy a lawsuit for alleged breaches of fiduciary duties by acquiring stock after the purported breaches have occurred. This Court has never previously recognized standing in such circumstances, and should not do so here. 2 ARGUMENT 3. The crux of the Second Amended Complaint involves allegations about actions the NCS Board purportedly took (or failed to take) on or before July 28, 2002. As explained in the NCS Motion to Dismiss, Omnicare lacks standing to bring these claims. See, e.g., U-H Acquisition Co. v. Barbo, C.A. No. 13279, 1994 WL 34688, at *5 (Del. Ch. Jan. 31, 1994) (holding that arms-length tender offeror who was not a unitholder lacked standing to bring fiduciary duty claims against general partner); Brown v. Automated Mktg. Sys., Inc., C.A. No. 6715, 1982 WL 8782, at *2 (Del. Ch. Mar. 22, 1982) (holding that purchaser of stock lacked standing to pursue individual claims based on pre-purchase breaches of fiduciary duty in approving a merger agreement). A. The NCS Defendants Are Not Asserting That Omnicare's Claims Are Derivative 4. Omnicare's opposition to this motion is apparently premised on its claim that it has stated an individual, rather than a derivative, claim because of its status as a bidder. This contention however, sidesteps the legal question posed by the motion: Can a bidder who owns no shares at the time of a board's alleged breach of fiduciary duty to its stockholders later purchase shares and assert claims for the alleged prior breach? Omnicare does not (and cannot), cite a single case holding that bidders can buy fiduciary duty claims in this manner. 5. The NCS Defendants do not contest that Omnicare has attempted to bring an individual claim. Rather, the NCS Defendants seek enforcement of "the general 3 equitable principles ... with regard to the standing of a shareholder to sue for corporate wrongs." Brown, No. 6715, 1982 WL 8782, at *2. The Genesis Merger Agreement and the Voting Agreements had already been approved at the time of Omnicare's purchase of NCS stock. Omnicare "ought to take things as [it] found them when [it] voluntarily acquired an interest." Id (citing Home Fire Ins. Co. v. Barber. 93 N.W. 1024, 1029 (Neb. 1903)). Because Omnicare "holds exactly what [it] got and in the condition in which [it] got it, there is no ground for complaint." Id. B. Stockholders Who Acquire Stock Only After An Alleged Breach Of Fiduciary Duty Lack Standing To Sue For That Breach 6. This Court has held repeatedly that, to have standing to sue for a breach of fiduciary duty, one must be owed fiduciary duties at the time of the alleged breach. Omnicare's attempts to distinguish these holdings are unavailing. 7. For example, Omnicare misleadingly attempts to distinguish Brown as involving a derivative action rather than an individual one. (Omnicare Mem. [p] 16) Omnicare is evidently confused by Brown's recognition that the "policy embodied in [8 Del. C. 'SS' 327] is the prevention of the evil of purchasing stock in order to maintain a derivative action designed to attack a transaction which occurred prior to the purchase of the stock." Brown. 1982 WL 8782, at *1 (citing Maclary v. Pleasant Hills. Inc., 109 A.2d 830 (Del. Ch. 1954)); Newkirk v. W. J. Rainey, Inc., 76 A.2d 121 (Del. Ch. 1950). Alternatively, Omnicare may be confused by Westlaw's misleading description of the 4 case in its opening headnote. See Brown. 1982 WL 8782, at synopsis ("Plaintiff brought a shareholders' derivative action ...."). 8. The Brown opinion itself, however, describes the action as a "purported class action brought on behalf of the public shareholders of Automated Marketing Systems, Inc." Brown. 1982 WL 8782, at *1 (emphasis added). Rather than dismissing a derivative action under 8 Del. C. 'SS' 327, this Court in Brown applied the "general equitable principles" embodied in that statute to dismiss an individual action brought by a stockholder who acquired shares only after the actions of which she complained. See Brown. 1982 WL 8782, at *2-3. 9. Moreover, rather than substantively address U-H Acquisition Co. v. Barbo, ("U-Haul"), Omnicare brushes it aside as involving "the wholly inapplicable context of limited partnership law." (Omnicare Mem. [p] 16) Omnicare, however, completely ignores the fact that the U-H Court relied upon Delaware corporation law in reaching its decision. See U-Haul 1994 WL 34688, at *3-4 (discussing standing in stockholder derivative suit). In fact, this Court in U-Haul specifically applied corporation law in the context of a standing issue, holding that: For a plaintiff to have standing to bring an individual action in the corporate context, he must allege either "an injury which is separate and distinct from that suffered by other shareholders or a wrong involving a contractual right of a shareholder which exists independently of any right of the corporation. See id. (quoting Lipton v. News Int'l. PLC, 514 A.2d 1075, 1078 (Del. 1986)). Additionally, it is well settled that, just as a board of directors owes fiduciary duties to its stock- 5 holders, a general partner owes fiduciary duties to its limited partners and unitholders. See Gotham Partners, L.P. v. Hallwood Realty Partners. L.P., No. 372, 2001, 2002 WL 31303135, at *5 (Del. Oct. 11, 2002); Sonet v. Plum Creek Timber Co., C.A. No. 16931, 1999 WL 160174, at *6 (Del. Ch. Mar. 18, 1999) (stating fiduciary duty of disclosure in corporate context is equally applicable to fiduciaries of limited partnerships); Sonet v. Timber Co.. L.P., 722 A.2d 319, 322 (Del. Ch. 1998) ("[U]nless limited by the partnership agreement, the general partner has the fiduciary duty to manage the partnership in its interest and in the interests of the limited partners.") Accordingly, Omnicare's contention that U-Haul is "wholly inapplicable" misses the mark. (Omnicare Mem. [p] 16) 10. Undoubtedly, Omnicare did not substantively address U-Haul because it has no response to the holding of that case. In U-Haul. this Court squarely addressed the standing issue raised on this motion in the context of a limited partnership, holding that U-Haul, a non-unitholder tender offeror, was not owed any fiduciary duties by the general partner. U-Haul, 1994 WL 34688, at *5. This Court concluded that "U-Haul therefore lacks standing to bring a claim for breach of a fiduciary duty by the general partners because it could not be owed any fiduciary duty by the general partners." Id. Similarly, Omnicare, a hostile bidder who was not a stockholder at the time of the alleged breach of fiduciary duty, cannot bring a breach of a fiduciary duty claim because it was not owed any duties at the time of the alleged breach. 6 11. As for Omnicare's standing to pursue such claims here, this Court explained in In re Gaylord Container Corp. S'holders Litig. that a bidder's standing to challenge defensive measures enacted by the target is tied to its status as a stockholder. 747 A.2d 71, 77 n.7 (Del. Ch. 1999). Given that Omnicare was not an NCS stockholder until after July 28, 2002, there is not even a "bare thread" to support Omnicare's standing to sue NCS for breach of fiduciary duty or violation of Section 141(a).(1) See Gaylord Container, 747 A.2d at 77 n.7; U-Haul, 1994 WL 34688, at *5. 12. Omnicare's other authority misses the mark. In each of Tate & Lyle, GM Sub, and MacAndrews & Forbes, the bidder owned shares of the defendant company's stock as of the time of the alleged breach of fiduciary duty. See Tate & Lyle PLC v. Staley Continental. Inc., C.A. No. 9813, 1998 WL 46064, at *4 (Del. Ch. May 9, 1988) (indicating Tate & Lyle's purchase of shares prior to implementation and use of defensive measures underlying complaint); MacAndrews & Forbes Holdings. Inc. v. Revlon, Inc., C.A. No. 8126, 1985 WL 21129, at *1 (Del. Ch. Oct. 9, 1985) ("MacAndrews and Pantry Pride together held 30,000 shares of Revlon stock prior to August 19, 1985, the first significant date in this case"); GM Sub Corp. v. Liggett Group, Inc., C.A. No. 6155, 1980 WL 6430, at *1-2 (Del. Ch. Apr. 25, 1980) (denying request for restraining order brought by "a substantial shareholder"). - ------------------ (1) Because Omnicare lacks standing to bring breach of fiduciary duty claims against the NCS Board, it also lacks standing to allege that Genesis aided and abetted these breaches. 7 13. Similarly, Omnicare's reliance upon In re Tri-Star Pictures, Inc., Litig., 634 A.2d 319 (Del. 1993), is misplaced given that the shareholder plaintiffs owned stock at the time of the transactions of which they complained. In Tri-Star the Supreme Court simply held that shareholder plaintiffs' standing was not extinguished by a merger because the dilution of their voting power was unique. Unlike Tri-Star, where the shareholder plaintiffs had standing because they owned stock at the time of the allegedly wrongful events until it was extinguished by the merger, Omnicare did not hold stock when the events of which they complained had occurred. 14. Omnicare's description of this Court's holding in Emerson is also unhelpful. There, this Court noted that the question of the bidder's standing to pursue similar claims "need not be decided to resolve [the bidder's] motion ... [which was] determined on other grounds with no different result." Emerson Radio Corp. v. International Jensen. Inc., C.A. Nos. 15130, 14992, 1996 WL 483086, at *14 (Del. Ch. Aug. 20, 1996). Here, this Court must decide this question to resolve this motion, as it is the only subject of the motion. 15. Further, Omnicare's contention that "the interests of the parties and the public would clearly be disserved if Omnicare's breach of fiduciary duty claims . . . were not adjudicated" (Omnicare Mem. [p] 14) is similarly misplaced, since those claims will be adjudicated in Civil Action No. 19786, pursued by certain NCS stockholders whose standing to bring those claims cannot be questioned. Indeed, in Brown, this Court denied 8 that the interests of the parties and the public would be served by allowing a stockholder to pursue fiduciary duty claims premised on actions prior to her acquisition of the stock. See Brown. 1982 WL 8782, at *3 (quoting Bangor Punta Operations v. Bangor & A. R. Co., 417 U.S. 703 (1974)).(2) C. Voting Rights 16. Omnicare also lacks standing to enforce the terms of the NCS Certificate in connection with Count I of the Second Amended Complaint, because it did not own shares of NCS stock at the time of the alleged "violation" of that Certificate. "A certificate of incorporation is viewed as a contract among shareholders...," Waggoner v. Laster, 581 A.2d 1127,1134 (Del. 1990), and "strangers to a contract ordinarily acquire no rights under it ...." Insituform of N. Am., Inc. v. Chandler, 534 A.2d 257, 268 (Del. Ch. 1987). 17. On July 28, 2002, the date of the alleged violation, Omnicare did not own any shares of NCS stock, and thus was not a beneficiary of the provisions of the NCS Certificate. Omnicare's interest in the provisions of the NCS Certificate at that time was indistinguishable from the public's in general, and it has no standing to pursue the alleged violation. Stuart Kingston Inc. v. Robinson, 596 A.2d 1378, 1382 (Del. 1991); Insituform, 534 A.2d at 268. 18. This Court should not permit Omnicare to buy a lawsuit simply to prosecute these purported violations of NCS's Certificate in furtherance of their takeover - ------------- (2) In addition, the considerable discovery material unearthed by the plaintiff in Brown did not prevent her complaint from being dismissed. See Brown, 1982 WL 8782, at *3. 9 efforts. See, e.g., Brown, 1982 WL 8782, at *2 ("the purchaser ought to take things as he found them when he voluntarily acquired an interest"); Gibson v. Gillespie, 152 A. 589, 593 (Del. Super. Ct. 1928) ("[N]o encouragement should be given to litigation by the introduction of a party to enforce those rights which the owners are not disposed to prosecute."). 19. Omnicare's claim that it "faces special harm in the form of voting-power dilution" is erroneous. (Omnicare Mem. [p] 21) As of the time the Voting Agreements were executed, Omnicare had no voting power to dilute. Any harm to Omnicare resulting from the Voting Agreements would be self-inflicted. 10 WHEREFORE, for all of the foregoing reasons and the authorities cited, the NCS Defendants respectfully request that this Court grant their Motion to Dismiss Omnicare's Second Amended Complaint. /s/ Edward P. Welch ----------------------------------- Edward P. Welch Edward B. Micheletti Katherine J. Neikirk James A. Whitney SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP One Rodney Square P.O. Box 636 Wilmington, Delaware 19899-0636 (302) 651-3000 Attorneys for the NCS Defendants OF COUNSEL: Mark A. Phillips BENESCH, FRIEDLANDER, COPLAN & ARONOFF LLP 2300 BP Tower, 200 Public Square Cleveland, Ohio 44114-2378 (216) 363-4500 DATED: October 22, 2002 11 CERTIFICATE OF SERVICE I, James A. Whitney, hereby certify that I caused to be served two copies of The NCS Defendants' Reply Memorandum in Support of Their Motion to Dismiss Omnicare's Second Amended Complaint on October 22, 2002, by hand, upon the following counsel of record: Donald J. Wolfe, Jr., Esquire Potter, Anderson & Corroon LLP Hercules Plaza 1313 N. Market Street Wilmington, Delaware, 19801 David C. McBride, Esquire Young, Conaway, Stargatt & Taylor LLP 1000 West Street, 17th Floor Wilmington, Delaware 19801 Jon E. Abramczyk, Esquire Morris, Nichols, Arsht & Tunnell 1201 North Market Street Wilmington, Delaware 19801 Edward M. McNally, Esquire Morris, James, Hitchens & Williams LLP 222 Delaware Avenue, 10th Floor Wilmington, Delaware 19801 By Facsimile Paul Vizcarrondo, Esquire Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 /s/ James A. Whitney -------------------- James A. Whitney EX-99 4 ex99-a1hh.txt EXHIBIT (A)(1)(HH) Exhibit (a)(1)(HH) IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - --------------------------------------) ) OMNICARE, INC., ) ) Plaintiff, ) ) v. ) C.A. No. 19800 ) NCS HEALTHCARE, INC., JON H. ) OUTCALT, KEVIN B. SHAW, BOAKE A. ) SELLS, RICHARD L. OSBOURNE, ) GENESIS HEALTH VENTURES, INC., and ) GENEVA SUB, INC. ) ) Defendants. ) - --------------------------------------) REPLY BRIEF OF DEFENDANTS GENESIS HEALTH VENTURES, INC. AND GENEVA SUB, INC. IN SUPPORT OF THEIR MOTION TO DISMISS THE SECOND AMENDED COMPLAINT YOUNG CONAWAY STARGATT & TAYLOR LLP David C. McBride Bruce L. Silverstein Christian Douglas Wright OF COUNSEL: Adam W. Poff Paul Vizcarrondo, Jr. The Brandywine Building Theodore N. Mirvis 1000 West Street, 17th Floor John F. Lynch P.O. Box 391 Lauryn P. Gouldin Wilmington, DE 19899-0391 WACHTELL, LIPTON, ROSEN & KATZ (302) 571-6639 51 West 52nd Street New York, NY 10019 Attorneys for Defendants Genesis (212) 403-1000 Health Ventures, Inc. and Geneva Sub, Inc. DATED: October 22, 2002 TABLE OF CONTENTS
Page ---- PRELIMINARY STATEMENT.................................................................1 REPLY ARGUMENT........................................................................1 I. OMNICARE'S "BIDDER STANDING" ARGUMENT...........................................2 A. The policy against the "purchase" of a lawsuit...............................2 B. The requirement that the plaintiff own shares at the time of the alleged breach of duty...............................................................5 C. "Bidder standing."...........................................................6 II. OMNICARE'S "VOTING RIGHTS" ARGUMENT............................................12 CONCLUSION...........................................................................13
TABLE OF AUTHORITIES
Case Page - ---- ---- Alabama By-Products Corp. v. Cede & Co., Del. Supr., 657 A.2d 254 (1995)..............................................3 Arnold v. Society for Savs. Bancorp, Inc., Del. Ch., C.A. No. 12883, 1995 WL 376919, Chandler, V.C. (June 15, 1995)...............................................5 Avacus Partners, L.P. v. Brian, Del. Ch., C.A. No. 11001, 1990 WL 161909, Allen, C. (Oct. 24, 1990)....................................................5 Bangor Punta Operations, Inc. v. Bangor & A. R. Co., 417 U.S. 703 (1974)......................................................4, 11 In re Beatrice Cos., Inc. Litig., Del. Supr., 522 A.2d 865, 1987 WL 36708, Horsey, J. (Feb. 20, 1987) (ORDER).......................................2 n.l Brown v. Automated Marketing Sys., Inc., Del. Ch., C.A. No. 6715, 1982 WL 8782, Brown, C. (Mar. 22, 1982).............................................3 n.l, 4 City Capital Assocs. Ltd. Partnership v. Interco, Inc., Del. Ch., 551 A.2d 787 (1988)................................................7 Condec Corp. v. Lunkenheimer Co., Del. Ch., 230 A.2d 769 (1967)................................................7 Crane v. Harsco Corp., D. Del., 511 F. Supp. 294 (1981).........................................8 n.4 Dieter v. Prime Computer, Inc., . Del. Ch., 681 A.2d 1068 (1996)........................................3, 4 n.3 Emerson Radio Corp. v. International Jensen Inc., Del. Ch., C.A. Nos. 15130,14992, 1996 WL 483086, Jacobs, V.C. (Aug. 20, 1996)......................................9, 10,10 n.5 In re Gaylord Container Corp. Sh. Litig., Del. Ch., 747 A.2d 71 (1999).........................................3, 10, 11 Glaser v Norris, Del. Ch., C.A. No. 9538, 1989 WL 79875, Chandler, V.C. (July 13, 1989)...............................................5
ii GM Sub Corp. v. Liggett Group, Inc., Del. Ch., C.A. No. 6155, 1980 WL 6430, Brown, V.C. (April 25, 1980).............................................7, 10 Home Fire Ins. Co. v. Barber, Neb. Supr., 93 N.W. 1024 (1903)..............................................4 IM2 Merchandising and Mfg., Inc. v. Tirex Corp., Del. Ch., C.A. No. 18077, 2000 WL 1664168, Strine, V.C. (Nov. 2, 2000)...............................................3, 5 Leung v. Schuler, Del. Ch., C.A. No. 17089, 2000 WL 264328, Jacobs, V.C. (Feb. 29, 2000).................................................5 Lipton v. News Int'l, Del. Supr., 514 A.2d 1075 (1986).........................................7, 10 MacAndrews & Forbes, Inc. v. Revlon, Inc., Del. Ch., C.A. No. 8126, 1985 WL 21129, Walsh, J. (Oct. 9, 1985)..............................................6, 7, 10 Moran v. Household Int'l, Inc., Del. Ch., 490 A.2d 1059, aff'd, Del. Supr., 500 A.2d 1346 (1985)..................................7, 10 Newell Co. v. Vermont Amer. Corp., N.D. Ill., 725 F. Supp. 351 (1989).......................................8 n.4 Packer v. Yampol, Del. Ch., C.A. No. 8432, 1986 WL 4748, Jacobs, V.C. (April 18, 1996)............................................7, 10 Rosenthal v. Burry Biscuit Corp., Del. Ch., 60 A.2d 106 (1948).................................................3 Sanders v. Devine, Del. Ch., C.A. No. 14679, 1997 WL 599539, Lamb, V.C. (Sept. 24, 1997)...............................................4, 5 In re Sunstates Corp. Sh. Litig., Del. Ch., C.A. No. 13284, 2001 WL 432447, Lamb, V.C. (April 18, 2001) .............................................4 n.3 Tate & Lyle PLC v. Staley Continental, Inc., Del. Ch., C.A. No. 9813, 1988 WL 46064, Hartnett, V.C. (May 9, 1988)..........................................6, 7, 10
iii Thorpe v. CERBCO, Inc., Del. Ch., C.A. No. 11713, 1993 WL 35967, Allen, C. (Jan. 26, 1993).................................................4, 5 In re Tri-Star Pictures, Inc., Litig., Del. Supr., 634 A.2d 319 (1993)..........................................7, 10 U-H Acquisition Co. v. Barbo, Del. Ch., C.A. No. 13279, 1994 WL 34688, Hartnett, V.C. (Jan. 31, 1994)........................................7, 8 n.4 Weiss v. Leewards Creative Crafts, Inc., Del. Ch., C.A. No. 12384, 1993 WL 155493, Chandler, V.C. (April 29, 1993)..............................................5 Williams v. Geier, Del. Ch., C.A. No. 8456, 1987 WL 11285, Berger, V.C. (May 20,1987)...................................................7 Other Authorities - ------------------ 8 Del. C. 'SS'327...........................................................3 n.2, 4
iv PRELIMINARY STATEMENT On August 24, 2002, the Genesis defendants moved to dismiss based in part on Omnicare's lack of standing. By letter submitted to the Court on October 11, 2002, the Genesis defendants joined in NCS' motion to dismiss (filed October 3, 2002), and reserved the right to file a reply brief. This reply brief is submitted by the Genesis defendants in response to Omnicare's answering brief in opposition to dismissal filed October 17, 2002 (cited as "OAB at _____"). REPLY ARGUMENT As Omnicare's answering brief makes clear, it is undisputed that Omnicare did not own NCS shares at the time of the misconduct it alleges. On Sunday, July 28, 2002, the NCS board approved the NCS/Genesis Merger Agreement and the Voting Agreements by which Messrs. Outcalt and Shaw committed to Genesis and NCS to vote their Class A and Class B shares for the merger. Sec. Am. Compl. [p][p] 42-43. On Monday morning, July 29, well before the market opened, Genesis and NCS issued a joint press release announcing the deal, and outlining clearly and in detail the specific terms of the Merger Agreement and the commitment in the Voting Agreements to vote in favor of the merger. See OMN04673 (July 29, 2002 Press Release, PRNewswire, 7:03 am.) (Ex. A hereto). Later in the day on Monday, July 29, 2002, after learning the terms of the NCS/Genesis deal, Omnicare purchased 1000 shares of NCS (see NCS Motion to Dismiss at Ex. A), undoubtedly in an effort to acquire some sort of standing to proceed with this lawsuit. There is no dispute that, when it purchased those shares, Omnicare was aware of the Merger Agreement and Voting Agreements that had been signed the day before. Three days later, on August 1, 2002, Omnicare initiated this lawsuit. Sec. Am. Compl. [p] 49. Omnicare's opposition to dismissal is based on two propositions: (1) that it has standing as a putative "bidder" for NCS notwithstanding that it owned no NCS shares at the time of the fiduciary wrongs asserted, all of which allegedly occurred on July 28, 2002; and (2) that as to the Voting Agreements, it has standing as a "current" stockholder because it is threatened with the "prospective" wrong of infringement of its voting power as a 1000 share owner. OAB at 1-2, 12. Both of Omnicare's arguments are without support in Delaware law, contravene the longstanding policy against the purchase of a lawsuit, and are irreconcilable with the settled principle that fiduciary duties are owed to stockholders at the time of the conduct in question. There is no such thing as "bidder standing" in the absence of share ownership at the time of the alleged wrong, and Omnicare's "current" stockholder status does not provide it with standing to attack the Voting Agreements that were executed, and known to Omnicare, before it purchased its 1000 shares on July 29, 2002. I. OMNICARE'S "BIDDER STANDING" ARGUMENT Omnicare's "bidder standing" argument is without support, and contrary to both the established public policy against the purchase of a lawsuit and the equally fundamental principle that any breach of fiduciary duty claim must be based on the existence of the fiduciary relationship between the plaintiff and the defendants at the time of the alleged breach. A. The policy against the "purchase" of a lawsuit. Not only was Omnicare not a shareholder at the time of the misconduct alleged in its complaint,(1) it purchased its NCS shares with full knowledge of the existence and terms of the - ----------------------- (1) The time when a claim arises for purposes of barring lawsuits by plaintiffs who acquire shares after the fact is the time when the transaction is approved by the board of directors and publicly disclosed. "In the case of a proposed merger, the plaintiff must have been a stockholder at the time the terms of the merger were agreed upon because it is the terms of the merger, rather than the technicality of its consum- (footnote continued) 2 Merger Agreement and the Voting Agreements. This attempt to buy itself a lawsuit against NCS, the NCS directors and Genesis is in direct contravention of the longstanding and fundamental Delaware public policy against the "evil" of purchasing shares in order "to attack a transaction which occurred prior to the purchase of the stock." Rosenthal v. Burry Biscuit Corp., Del. Ch., 60 A.2d 106, 111 (1948). That policy has been rigorously enforced. See, e.g., IM2 Merchandising & Mfg., Inc. v. Tirex Corp., Del. Ch., C.A. No. 18077, 2000 WL 1664168, at *6, Strine, V.C. (Nov. 2, 2000) (dismissing breach of fiduciary duty claim where alleged breach occurred prior to plaintiffs' acquisition of shares). The General Assembly adopted 8 Del. C. 'SS' 327 to enforce this policy in derivative actions. See Alabama By-Products Corp. v. Cede & Co., Del. Supr., 657 A.2d 254, 264 n.12 (1995).(2) The same policy has been applied to direct claims. See In re Gaylord Container Corp. Sh. Litig., Del. Ch., 747 A.2d 71, 82 n.15 (1999) (noting that individuals "who buy stock and challenge the earlier adoption of properly disclosed defensive measures" ought to be "barred from recovery"); Dieter v. Prime Computer, Inc., Del. Ch., 681 A.2d 1068, 1072 (1996) (putative class plaintiff bought shares after merger agreement announced; "same policy and . . . rationale" supporting contemporaneous ownership requirement in derivative context "would - -------------------- (footnote continued) mation, which are challenged." In re Beatrice Cos., Inc. Litig., Del. Supr., 522 A.2d 865, 1987 WL 36708, at *3, Horsey, J. (Feb. 20, 1987) (ORDER); Brown v. Automated Marketing Sys., Inc., Del. Ch., C.A. No. 6715, 1982 WL 8782, at *2, Brown, V.C. (Mar. 22, 1982) ("[I]t is not the merger itself that constitutes the wrongful act of which plaintiff complains, but rather it is the fixing of the terms of the transaction ..."). (2) 8 Del. C. 'SS' 327 states the contemporaneous ownership rule that in a derivative action, the complaint must allege "that the plaintiff was a stockholder of the corporation at the time of the transaction of which such stockholder complains or that such stockholder's stock thereafter devolved upon such stockholder by operation of law." 3 arguably apply here [in direct action] as well" ).(3) In Brown v. Automated Marketing Sys., Inc., Del. Ch., C.A. No. 6715, 1982 WL 8782, Brown, C. (Mar. 22, 1982), the Court quoted from Dean Roscoe Pound's opinion in Home Fire Ins. Co. v. Barber, Neb. Supr., 93 N.W. 1024, 1029 (1903), in explicating that the policy of 8 Del. C. 'SS' 327 is not specific to derivative claims but derives from "general equitable principles." Id. at *2 (referring to "appropriate outrage" by defendants as to stockholder-plaintiff who acquired shares after the merger in question was approved). Cf. Bangor Punta Operations, Inc. v. Bangor & A. R. Co., 417 U.S. 703, 711 (1974) (basic equitable principle that plaintiffs that acquired shares after disputed transactions occurred were barred from recovery). Likewise, Delaware courts have enforced this policy outside of the derivative action context by holding that a plaintiff who bought shares after corporate disclosures could not pursue claims for breach of the fiduciary duty of disclosure. See Thorpe v. CERBCO, Inc., Del. Ch., C.A. No. 11713, 1993 WL 35967, at *3, Allen, C. (Jan. 26, 1993) ("[W]hile plaintiffs may have standing to complain about any breach of duty that occurs while they are shareholders, they have no direct right to be awarded judicial relief for [acts that occurred prior to their purchase of shares]."); Sanders v. Devine, Del. Ch., C.A. No. 14679, 1997 WL 599539, at *5, Lamb, V.C. (Sept. 24, 1997) ("In the present case, plaintiff was not a stockholder at the time the prospectus was issued, therefore, as a matter of law, there can be no liability under any fiduciary duty theories for the disclosures made in connection with the offering."). - ------------------- (3) Of course, as this Court has elsewhere noted, the Court in Dieter did not directly decide the point, as the procedural context there was not on a motion to dismiss but concerned opposition to such a stockholder's serving as a class representative. In re Sunstates Corp. Sh. Litig., Del. Ch., C.A. No. 13284, 2001 WL 432447, at *3 & n.12, Lamb, V.C. (Apr. 18, 2001). 4 B. The requirement that the plaintiff own shares at the time of the alleged breach of duty. Omnicare's standing argument also ignores - and directly contravenes - the first and fundamental element of any breach of fiduciary duty claim: the existence of a fiduciary relationship at the time of the breach. See Sanders v. Devine, 1997 WL 599539, at *5 ("In order to prevail on a breach of fiduciary duty claim, plaintiff. . . must first establish that at the time [of the wrong] he was a person to whom a fiduciary duty was owed."); Thorpe v. CERBCO, Inc., 1993 WL 35967, at *3; Leung v. Schuler, Del. Ch., C.A. No. 17089, 2000 WL 264328, at *6, Jacobs, V.C. (Feb. 29, 2000); Arnold v. Society for Savs. Bancorp, Inc., Del. Ch., C.A. No. 12883, 1995 WL 376919, at *6-7, Chandler, V.C. (June 15, 1995); Weiss v. Leewards Creative Crafts, Inc., Del. Ch., C.A. No. 12384, 1993 WL 155493, at *3, Chandler, V.C. (April 29, 1993); cf Glaser v. Norris, Del. Ch., C.A. No. 9538, 1989 WL 79875, at *9, Chandler, V.C. (July 13, 1989) (holding that defendants did not owe fiduciary duty to plaintiffs-unit holders prior to plaintiffs' acquisition of the units). This Court should not hesitate to enforce these elemental standing requirements and dismiss Omnicare's action. Delaware's policy against permitting plaintiffs to acquire stock and then challenge transactions agreed to before the purchase "might be easily frustrated if individuals could place orders to purchase stock on the same day the challenged transaction occurred." Avacus Partners, L.P. v. Brian, Del. Ch., C.A. No. 11001, 1990 WL 161909, at *6, Allen, C. (Oct. 24, 1990). Delaware courts enforce that policy by denying standing to after-the-fact purchasers and dismissing their complaints. See, e.g., IM2 Merchandising, 2000 WL 1664168, at *6. 5 C. "Bidder standing." Omnicare's "bidder standing" argument - that it has standing without regard to any share ownership "because it is seeking to acquire control of NCS" (OAB, Point I) - is entirely without precedential support. Omnicare cites no case - none at all - holding that a bidder that did not own shares at the time of the alleged breach of duty by the target board nonetheless has standing. Omnicare cites no case - none at all - in which a bidder was permitted to pursue a claim and obtain relief against a target board's actions that preceded its ownership of shares. Although Omnicare ignores the point, in both of the principal cases on which it relies - Tate & Lyle PLC v. Staley Continental, Inc., Del. Ch., C.A. No. 9813, 1988 WL 46064, Hartnett, V.C. (May 9, 1988), and MacAndrews & Forbes, Inc. v. Revlon, Inc., Del. Ch., C.A. No. 8126, 1985 WL 21129, Walsh, J. (Oct. 9, 1985) - the bidders whose standing was at issue (and for whom standing was ultimately held to exist) were stockholders at the time of the alleged fiduciary breaches. See Tate & Lyle, 1988 WL 46064, at *4; MacAndrews & Forbes, 1985 WL 21129, at *1. The issue addressed in both Tate & Lyle and MacAndrews & Forbes Holdings was whether the plaintiff-bidders' claims were direct (individual) rather than derivative, as the latter denomination raised the question of the bidders' status as an adequate representative of all the stockholders in light of the ostensible conflict between the bidder as buyer and the stockholder body as sellers. See MacAndrews & Forbes, 1985 WL 21129, at *4-5 (holding that the claims asserted were individual and possibly derivative, but the bidder could pursue the claims in a derivative posture as well); Tate & Lyle, 1988 WL 46064, at *8 (simply citing MacAndrew & Forbes in rejecting target's contention that plaintiff-bidder could not challenge target's compensation payments as a derivative claim). As the discussion in Omnicare's brief itself makes clear, the focus of these cases was on the direct/derivative distinction. See OAB at 5-7. 6 But neither Tate & Lyle nor MacAndrews & Forbes held (or suggested) in any respect that a plaintiff-bidder who owned no shares at the time of the target board's alleged breach had standing to pursue either direct or derivative claims. In the other cases cited by Omnicare, the plaintiffs (including the plaintiff-bidders) likewise owned shares at the time of the alleged breach. See Lipton v. News Int'l, Del. Supr., 514 A.2d 1075, 1076 (1986) (News, the plaintiff, owned nearly 7% of Warner prior to Warner entering into share exchange agreement with Chris-Craft and BHC, Inc.); Williams v. Geier, Del. Ch., C.A. No. 8456, 1987 WL 11285, at *3, Berger, V.C. (May 20, 1987) (plaintiff owned stock at the time of the alleged wrong); Moran v. Household Int'l, Inc., Del. Ch., 490 A.2d 1059, 1064 (1985) (plaintiffs owned stock at the time of the board's adoption of the challenged poison pill provisions), aff'd, Del. Supr., 500 A.2d 1346 (1985); Condec Corp. v. Lunkenheimer Co., Del. Ch., 230 A.2d 769, 772 (1967) (plaintiff-bidder owned shares prior to the challenged defensive transaction); GM Sub Corp. v. Liggett Group, Inc., Del. Ch., C.A. No. 6155, 1980 WL 6430, at *1, Brown, V.C. (April 25, 1980) (plaintiff-bidder was "substantial shareholder" of defendant at time of challenged conduct of board); Packer v. Yampol, Del. Ch., C.A. No. 8432, 1986 WL 4748, at *5, Jacobs, V.C. (April 18, 1996) (plaintiff-bidder owned 10.6% of defendant's stock prior to the challenged issuance of preferred stock); In re Tri-Star Pictures, Inc., Litig., Del. Supr., 634 A.2d 319, 321 (1993) (plaintiffs were minority stockholders at time of alleged breach). See also City Capital Assocs. Ltd. Partnership v. Interco, Inc., Del. Ch., 551 A.2d 787, 800 (1988) (holding "that [CCA, the bidder], as a shareholder, has standing to assert the rights of a shareholder of Interco to require the board to redeem the stock rights in issue"); U-H Acquisition Co. v. Barbo, Del. Ch., C.A. No. 13279, 1994 WL 34688, at *4, Hartnett, V.C. (Jan. 31, 1994) (plaintiff-bidder for publicly-held limited partnership lacked standing on both 7 derivative and individual claims challenging fiduciary misconduct thwarting tender offer; tender offeror not owed any fiduciary duty).(4) None of these decisions permitted a party that did not own shares at the time of the alleged breach of fiduciary duty to maintain such a claim - whether individual or derivative. Indeed, reflective of Omnicare's inability to support its "bidder standing" argument, much of the argument in Omnicare's opposition is a red herring. In the first sentence of its preliminary statement, Omnicare aptly frames the issue presented by the NCS opening brief as follows: "The NCS Defendants claim that Omnicare lacks standing to prosecute this action because Omnicare did not own shares of NCS common stock on or before July 28, 2002 . . ." OAB at 1. Oddly, however, thereafter Omnicare ignores this fundamental defect and, instead, debates with itself the question of whether its claims are derivative or individual. See OAB at 5, et seq. This effort to evade the principal - and fundamental - issue presented by the motion to dismiss, and instead to focus on a nonissue that was never even raised in NCS's moving papers, is telling. The dispositive issue is not whether Omnicare's claims are derivative or individual. The dispositive point is that, because it owned no shares at the time of the alleged misconduct, Omnicare has no standing to complain of that conduct - derivatively or individually. - --------------------- (4) U-H also so held even as to an affiliate of the bidder who was an assignee of units but had not been admitted as a substitute limited partner. Id. at *5. Omnicare's only response to U-H is that it "involves the wholly inapplicable context of limited partnership law." OAB at 9 ([p] 16). There is no reason that the difference in context renders U-H inapplicable. The fundamental point is the same: there is no such thing as "bidder standing" in the absence of share (or unit) ownership at the time of the alleged target breach of duty. See also Newell Co. v. Vermont Amer. Corp., N.D. Ill., 725 F. Supp. 351, 368 (1989) (applying Delaware law) (holding that plaintiff-bidder did not have "an individual claim in its capacity as a tender offeror for the Board's breach of fiduciary duties. Established precedent is that a board owes no duty to a tender offeror.") (emphasis added); cf. Crane v: Harsco Corp., D. Del., 511 F. Supp. 294, 304 (1981) (tender offeror's claim that corporation's repurchase of shares frustrated its tender offer was "not a sufficient basis for an individual action under Delaware law"). 8 Omnicare cites only one case that is claimed to support entertaining a plaintiff-bidder's breach of fiduciary duty claims without regard to the bidder's ownership of shares. OAB at 8 ([p] 14) (citing Emerson Radio Corp. v. International Jensen Inc., Del. Ch., C.A. Nos. 15130, 14992, 1996 WL 483086, at *14, Jacobs, V.C. (Aug. 20, 1996)). Emerson provides no support to Omnicare's position here. The plaintiff-bidder in Emerson owned no shares but sought a preliminary injunction against a proposed merger of the target (Jensen) with another corporation, seeking to require a new auction. In denying relief (along with denying similar relief sought by stockholder-plaintiffs), the Court squarely noted that the plaintiff-bidder had no standing: In its capacity as a bidder, Emerson has no claims to raise, because neither Jensen nor its Board owes a duty to an interested potential acquiror to deal with that acquiror. As the Chancellor has aptly put it: [I]t is a simple and I would have thought well understood fact that one [in the position of a tender offeror] possesses no legal right to have an owner of an asset supply him with information or negotiate with him. Thus, it simply is not a legal wrong to a would-be buyer for an owner to ignore or reject an offer of sale. Gagliardi v. Trifoods Int'l Inc., Del. Ch., C.A. No. 14725, Mem. Op. at 21, Allen, C. (July 19, 1996). Rather, any duty Jensen's board may have to deal with Emerson as a potential buyer was owed solely to Jensen's stockholders, as a corollary of the Board's fiduciary duty to achieve the highest available value for shareholders. That is why plaintiffs who seek to assert breach of fiduciary duty claims of this kind have been persons to whom such fiduciary duties were owed, i.e., stockholders of the target corporation. Emerson, 1996 WL 483086, at *13. While noting the defendants' point that "no Delaware court has recognized the standing of a non-stockholder bidder for a target company," id., the Court also noted the plaintiff-bidder's position that it should be accorded standing, but held that it was ultimately unnecessary for it to decide the point which was raised only at the preliminary injunction hearing itself: This question need not be decided to resolve Emerson's motion. That motion can be determined on other grounds with no different result. Moreover, a refusal by this Court to entertain the fiduciary duty claims on this threshold ground would 9 disserve the interests of the parties and the public. Although the Shareholder Plaintiffs do not advance the same claims as Emerson, they do own Jensen stock and they have joined in Emerson's position. And importantly, the merits of the defendants' conduct have now been the subject of discovery, briefing and argument (albeit expedited). For this Court now to refuse to review that conduct would be wasteful of the parties' considerable investment of effort and resources, and deprive Jensen's shareholders and the public of such benefit that this Court's (and any reviewing Court's) determinations might have. Accordingly, the Court will proceed on the assumption, but without deciding, that Emerson has standing to assert its claims. Id. at *14.(5) The Court then determined the preliminary injunction motion "with no different result," i.e., the motion was denied. Emerson thus provides no support for Omnicare's "bidder standing" argument, nor does it support according standing to Omnicare here, where the standing issue was raised well before any preliminary injunction hearing - indeed, before any such hearing was even requested to be scheduled by Omnicare (or the stockholder-plaintiffs) and before any deposition discovery had even begun. The knotty (but here irrelevant) question addressed in the principal authorities on which Omnicare relies - whether stockholder claims challenging corporate defensive conduct are properly denominated as individual/direct claims or as derivative claims - has recently been canvassed by this Court. In re Gaylord Container Corp. Sh. Litig., Del. Ch., 747 A.2d 71, 75-83 (1999) (stockholder class action challenge to rights plan and defensive charter and bylaw amendments) (discussing, e.g., Moran, Tate & Lyle, GM Sub, Packer, MacAndrews & Forbes, Tri-Star, and Lipton). In Gaylord, the Court noted that under the Delaware precedents, bidder standing "has remained putatively tethered, if only by a bare thread, to its status as a stockholder." Id. at 77 n.7. - ------------------- (5) In Emerson, the plaintiff-bidder owned no shares as the confidentiality agreement it signed as a condition to its due diligence precluded it from acquiring shares. See id. at *4. 10 Even having recognized that bidder standing requires share ownership - the point that Omnicare's discussion of Gaylord ignores, see OAB at 9 ([p] 15) - the Court there noted the "certain amount of undeniable doctrinal incoherence" to which "the practice of according bidders standing as stockholders leads." Gaylord, 747 A.2d at 81 n.14 (emphasis in original). Whatever the "practical" reasons for that practice, id., the practice is bidders standing as stockholders - - not, as Omnicare would have it, bidder standing as bidders even if nonstockholders. "Doctrinal incoherence" is one thing. To recognize bidder standing as nonstockholders would go far beyond that, to doctrinal anarchy. Cf. Bangor Punta, 417 U.S. at 717 ("If deterrence were the only objective, then in logic any plaintiff willing to file a complaint would suffice. No injury or violation of a legal duty to the particular plaintiff would have to be alleged. The only prerequisite would be that the plaintiff agree only to accept the recovery, lest the supposed wrongdoer be allowed to escape a reckoning. Suffice it to say that we have been referred to no authority which would support so novel a result, and we decline to adopt it."). Omnicare's "bidder standing" theory indeed is without any reasonable limitations. On Omnicare's theory, "bidder standing" does not require Omnicare to have purchased any NCS shares on July 29 - or ever; it is enough that Omnicare has made a bid for NCS. Presumably, in Omnicare's view, the same bidder standing would attach to anyone who expresses such an intent even if for the first time at any point after a merger agreement is signed - e.g., weeks or months later, but so long as before (or simultaneously with?) the filing of its complaint alleging that the merger agreement was a fiduciary wrong or perhaps just before the entry of a judgment. There is no warrant to so unmoor settled standing principles, and to treat bidders as some specially protected class of litigants, immunized from fundamental requirements applicable to all other parties. 11 II. OMNICARE'S "VOTING RIGHTS" ARGUMENT Omnicare separately argues that its automatic conversion claim against the Voting Agreements under the NCS charter states an individual and not derivative claim. OAB at 9-22 ([p][p] 17-22). While Onmicare's secondary argument at least is based on its "current" ownership of NCS shares - unlike its primary bidder standing argument under which any share ownership is irrelevant - Omnicare (again) devotes its argument to establishing that a claim of voting infringement is an individual claim. Omnicare fails to address why it should be accorded standing to attack the Voting Agreements that were known to it before it bought its 1000 shares on July 29. Omnicare's only reference to standing on that claim is the uncited declaration (OAB at 12 ([p] 21)) that the claim is "not derivative, and Omnicare has standing to assert that claim," and the argument - really just an observation - that the alleged injury to its voting rights at the stockholders meeting on the NCS/Genesis merger is not "in the past, but rather a prospective threat to Omnicare's voting rights." OAB at 12 ([p] 22). Prospective impact or not, the obvious point that Omnicare continues to ignore is that it bought its 1000 shares with full knowledge of the merger and the Voting Agreements. Omnicare offers no basis for any special consideration of its attack on the Voting Agreements. Omnicare should no more be allowed to buy that claim than any of its other claims. 12 CONCLUSION Omnicare's action should be dismissed for lack of standing. Respectfully submitted, YOUNG CONAWAY STARGATT & TAYLOR LLP /s/ David C. McBride ------------------------------------- David C. McBride Bruce L. Silverstein Christian Douglas Wright OF COUNSEL: Adam W. Poff Paul Vizcarrondo, Jr. The Brandywine Building Theodore N. Mirvis 1000 West Street, 17th Floor John F. Lynch P.O. Box 391 Lauryn P. Gouldin Wilmington, DE 19899-0391 WACHTELL, LIPTON, ROSEN & KATZ (302) 571-6639 51 West 52nd Street New York, NY 10019 Attorneys for Defendants Genesis Health (212) 403-1000 Ventures, Inc. and Geneva Sub, Inc. DATED: October 22, 2002 13 CERTIFICATE OF SERVICE I, Christian Douglas Wright, Esquire, hereby certify that I caused copies of the foregoing document to be served on October 22, 2002 upon the following counsel of record: BY HAND DELIVERY - ---------------- Donald J. Wolfe, Jr., Esquire Potter Anderson & Corroon LLP 1313 N. Market Street Wilmington, DE 19801 Edward P. Welch Esquire Skadden, Arps, Slate, Meagher & Flom LLP One Rodney Square Wilmington, DE 19801 Jon E. Abramczyk, Esquire Morris, Nichols, Arsht & Tunnell 1201 N. Market Street Wilmington, DE 19801 Michael A. Weidinger, Esquire Morris, James, Hitchens & Williams LLP 222 Delaware Avenue - 10th Fl. Wilmington, DE 19801 /s/ Christian Douglas Wright ----------------------------- Christian Douglas Wright -----END PRIVACY-ENHANCED MESSAGE-----