-----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, IP608cUme4vZ5LMFPVpnpV0783ybLwmbTxQvh451qjMhxm/54mMrRi0Yi/xRHNBK +AXM52K9O1MeowWeR3WgOA== 0000950152-02-005943.txt : 20020807 0000950152-02-005943.hdr.sgml : 20020807 20020806191306 ACCESSION NUMBER: 0000950152-02-005943 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20020730 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020807 FILER: 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-27602 FILM NUMBER: 02721074 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 8-K 1 l95721ae8vk.txt NCS HEALTHCARE, INC. 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: August 6, 2002 Date of earliest event reported: July 30, 2002 NCS HEALTHCARE, INC. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation) 00-27602 34-1816187 (Commission File No.) (IRS Employer Identification No.) 3201 Enterprise Parkway, Suite 220, Beachwood, Ohio 44122 (Address of principal executive offices, including ZIP code) (216) 378-6800 (Registrant's telephone number, including area code) Not Applicable (Former name or former address, if changed since last report) ITEM 5. OTHER EVENTS. On July 28, 2002, NCS HealthCare, Inc. ("NCS"), Genesis Health Ventures, Inc. ("Genesis") and Geneva Sub, Inc., a wholly owned subsidiary of Genesis ("Sub") entered into a definitive Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which Sub will merge with and into NCS (the "Proposed Merger"), with NCS surviving as a wholly owned subsidiary of Genesis. If the Proposed Merger is completed, each outstanding share of common stock of NCS, par value $0.01 per share ("NCS Common Stock"), other than the NCS Common Stock held by NCS and other than dissenting shares, will be converted into the right to receive 0.1 of a share of common stock of Genesis, par value $0.02 per share. The completion of the Proposed Merger is subject to regulatory approvals and other customary conditions, including the approval of the holders of a majority of the outstanding voting power of NCS Common Stock. At the closing of the Proposed Merger, Genesis will repay in full the outstanding debt of NCS, which includes $206 million of senior debt, and will redeem $102 million of 5.75% convertible subordinated debentures, including any accrued and unpaid interest. In connection with the Merger Agreement, on July 28, 2002, NCS entered into agreements (the "Voting Agreements") with certain stockholders of NCS beneficially owning in the aggregate a majority of the outstanding voting power of NCS Common Stock. In the Voting Agreements, such stockholders agreed (1) to vote their shares of NCS Common Stock in favor of adoption and approval of the Merger Agreement and against proposals for certain other transactions and (2) not to transfer their shares of NCS Common Stock prior to the consummation of the Proposed Merger. The foregoing descriptions of the Proposed Merger, the Merger Agreement and the Voting Agreements are qualified in their entirety by reference to the text of the Merger Agreement and the Voting Agreements, which are attached as Exhibits 2.1, 10.1 and 10.2, respectively, to NCS's Form 8-K filed with the SEC on July 30, 2002 and are incorporated herein by reference. Between July 30, 2002 and August 2, 2002, five shareholder lawsuits (three of which are purported class action lawsuits) were filed against NCS and its directors in connection with the Proposed Merger and, in one case, against Genesis and Sub (the "Stockholder Claims"). The Stockholder Claims allege that the directors of NCS breached their fiduciary duties, and certain other duties, to stockholders by entering into the Merger Agreement and seek various relief, including an injunction against consummation of the Proposed Merger, rescinding the Proposed Merger if the same is consummated prior to a final judgment on the Stockholder Claims, declaring the Voting Agreements null and void and compensatory damages and costs. NCS does not believe that the Stockholder Claims have merit. The foregoing descriptions of the Stockholder Claims are qualified in their entirety by reference to the text of the Stockholder Claims, which are attached hereto as Exhibits 99.1, 99.2, 99.3, 99.4 and 99.5 and are incorporated herein by reference. The following five lawsuits were each filed in the Court of Chancery in the State of Delaware in and for New Castle County on the dates indicated: 1. Dr. Dorrin Beirch and Robert M. Miles on behalf of themselves and all other similarly situated v. NCS HealthCare, Inc., Jon H. Outcalt, Kevin B. Shaw, Richard L. Osborne, and Boake A. Sells, filed on July 30, 2002. 2. Omnicare, Inc. v. NCS HealthCare, Inc., Jon H. Outcalt, Kevin B. Shaw, Boake A. Sells, Richard L. Osborne, Genesis Health Ventures, Inc. and Genesis Sub, Inc., filed on August 1, 2002. 3. Anthony Noble v. NCS HealthCare, Inc., Richard L. Osborne, Jon H. Outcalt, Boake A. Sells, and Kevin B. Shaw, filed on August 1, 2002. 4. Jeffery Treadway v. Jon H. Outcalt, Kevin B. Shaw, Boake A. Sells, Richard L. Osborne, and NCS HealthCare, Inc., filed on August 2, 2002. 5. Tillie Saltzman v. Jon H. Outcalt, Kevin B. Shaw, Boake A. Sells, Richard L. Osborne, and NCS HealthCare, Inc., filed on August 2, 2002. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS, AND EXHIBITS (c) Exhibits. 99.1 Beirch & Miles Complaint, dated July 30, 2002. 99.2 Omnicare Complaint, dated August 1, 2002. 99.3 Noble Complaint, dated August 1, 2002. 99.4 Treadway Complaint, dated August 2, 2002. 99.5 Saltzman Complaint, dated August 2, 2002. SIGNATURE Pursuant to the requirements 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. NCS HEALTHCARE, INC. Dated: August 6, 2002 By: /s/ Kevin B. Shaw ----------------------------------------- Name: Kevin B. Shaw Title: President, Chief Executive Officer and Director Dated: August 6, 2002 By: /s/ William B. Byrum ------------------------------- Name: William B. Byrum Title: Executive Vice President and Chief Operating Officer Dated: August 6, 2002 By: /s/ Gerald D. Stethem ------------------------------- Name: Gerald D. Stethem Title: Senior Vice President and Chief Financial Officer EXHIBIT LIST Exhibit No. Description - ----------- ----------- 99.1 Beirch & Miles Complaint, dated July 30, 2002. 99.2 Omnicare Complaint, dated August 1, 2002. 99.3 Noble Complaint, dated August 1, 2002. 99.4 Treadway Complaint, dated August 2, 2002. 99.5 Saltzman Complaint, dated August 2, 2002. EX-99.1 3 l95721aexv99w1.txt EXHIBIT 99.1 Exhibit 99.1 THE COURT OF CHANCERY OF THE STATE OF DELAWARE COUNTY OF NEW CASTLE - ---------------------------------------- Dr. DORRIN BEIRCH and ROBERT M. MILES on behalf of themselves and all others similarly situated, Plaintiffs, C.A. No. 19786 CLASS ACTION COMPLAINT v. ---------------------- NCS HEALTHCARE, INC., JON H. OUTCALT, KEVIN B. SHAW, RICHARD L. OSBORNE, AND BOAKE A SELLS, Defendants, - ---------------------------------------- Plaintiffs, by their attorneys, allege upon information and belief, except as to paragraph 1 which is alleged on personal knowledge, as follows: 1. Plaintiffs are, and have been at all relevant times, the owners of shares of the common stock of NCS Healthcare, Inc. ("NCS or the "Company"). 2. NCS is a corporation organized and existing under the laws of the State of Delaware; maintains its principal corporate offices at 3201 Enterprise Parkway, suite 220, Beachwood, OH 44122; and is a provider of pharmacy services to long-term care institutions, including skilled nursing facilities, assisted living facilities and other institutional healthcare settings. 3. Defendant Jon H. Outcalt is the Chairman of the Board of Directors of NCS and is the controlling shareholder of the company with approximately 66% voting control over NCS. 4. Defendant Kevin B. Shaw is President, Chief Executive officer, secretary and Director of NCS; defendant Shaw has approximately 21.7% voting control of NCS. 5. Defendants Richard L. Osborne and Boake A. Sells are Directors of NCS and each has approximately 1.8% voting control of NCS. 6. By virtue of the individual defendants' positions as officers and/or directors of NCS, and Outcalt's position as majority stockholder, the individual defendants have fiduciary relationships with the plaintiffs and other public shareholders of NCS and owe plaintiffs and other NCS shareholders the highest obligation of good faith, fair dealing, loyalty, and due care. 7. The defendants have signed a definitive merger agreement to allow the Company to be acquired at an unfairly low price in breach of their fiduciary duties to NCS' public shareholders. CLASS ACTION ALLEGATIONS ------------------------ 8. Plaintiffs bring this action on their behalf and as a shareholders' class action, pursuant to Delaware law, on behalf of all shareholders of the common stock of the Company and their successors in interest, who are threatened with injury arising from defendants' actions. 9. This action is properly maintainable as a class action. a. The class, numbering in the thousands, is so numerous that joinder of all members is impracticable; approximately 18.5 million publicly held shares of NCS is held by hundreds if not thousands of shareholders throughout the country. b. There are questions of law and fact which are common to the class, including, INTER ALIA, the following: (i) did defendants breach their fiduciary and other common law duties owed by them to plaintiffs and the members of the class; (ii) are defendants, by agreeing for NCS to enter into the proposed merger with Genesis Health Ventures, Inc., pursuing a course of conduct designed to eliminate the public shareholders of NCS without adequate disclosure, without adequate consideration, and in violation of their fiduciary duties; (iii) will the individual defendants negotiate at arms-length and in good-faith on behalf of NCS public shareholders; and (iv) is the class entitled to injunctive relief or damages as a result of the wrongful conduct of the defendants. (c) Plaintiffs are committed to prosecuting this action and have retained competent counsel experienced in litigation of this nature. Plaintiffs' claims are similar to those of the Class and plaintiffs have no interest that are adverse to the Class. 10. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interest of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 11. Defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate. SUBSTANTIVE ALLEGATIONS ----------------------- 12. On July 29, 2002 the Company announced that it entered into a definitive merger agreement with Genesis Health Ventures, Inc. ("Genesis") whereby each share of NCS common stock will be exchanged for 0.1 shares of Genesis common stock, and Genesis will repay in full the outstanding debt of NCS, including $206 million of senior debt. In addition, Genesis will redeem $102 million of 5.75% convertible subordinated debentures, including any accrued and unpaid interest owed by the Company. 13. The transaction, which was unanimously approved by the Board of directors of NCS, is valued at approximately $340 million. At the proposed exchange rate of 0.1 Genesis shares (trading at approximately $16 per share) for each NCS share, shareholders of NCS would be receiving approximately $1.60 per share in the proposed transaction. 14. Although the $1.60 offer per share represents a significant premium over NCS' closing price of $0.74 before announcement of the transaction, the proposed transaction does not represent the true value of the assets and future prospects underlying each share of NCS. 15. In fact, a leading provider of pharmaceutical care for the elderly, Omnicare, Inc. ("Omnicare"), has offered $3 per share in cash for each NCS share. Omnicare, among other things, serves approximately 729,500 residents in long-term care facilities in 45 states, provides clinical research services for the pharmaceutical and biotechnology industries in 27 countries, and has annual sales of approximately $2.1 billion. 16. In a letter to the Company dated July 26, 2002, Omnicare offered to purchase NCS for $3 per share in cash, or $400 million. 17. Omnicare has stated that it is "prepared to negotiate quickly" and its cash offer is not subject to financing contingencies of "break-up" fees that would deter potential acquirers from offering a higher price for the Company. In fact, Omnicare has already presented NCS with a draft merger agreement, which was sent along with Omnicare's July 28, 2002 letter. 18. It does not appear that defendants sought a third party buyer for NCS, nor did they shop the Company in order to obtain a higher price. On the contrary, defendants have agreed to vote their shares in favor of this merger transaction in the face of a superior offer from Omnicare and prior to shopping the Company. 19. The proposed consideration of $1.60 per share does not represent the true value of the assets and future prospects of NCS and does not adequately reflect the value of the NCS' common stock. Defendants' agreement to the transaction for inadequate consideration constitutes a breach of their fiduciary duties. 20. Defendants have breached their fiduciary duties to plaintiffs and NCS' public shareholders by not renegotiating and/or reformulating the terms of the merger. Absent injunctive relief of the Court, plaintiffs and the Class will be irreparably harmed as a result of defendants' breaches of their fiduciary duties. 21. In light of the foregoing, the Individual Defendants must, as their fiduciary obligations require, act independently so that the interests of NCS's public stockholders will be protected; and adequately ensure that no conflicts of interest exist between the interests of the defendants, including Outcalt, and their fiduciary obligations so NCS's public stockholders or, if such conflicts exist, to ensure that all conflicts are resolved in the best interests of NCS's public stockholders. 22. Plaintiffs and the Class have no adequate remedy at law. WHEREFORE, plaintiffs demand judgment against the defendants jointly and severally, as follows: (1) declaring this action to be a class action and certifying plaintiffs as the class representatives and their counsel as class counsel; (2) enjoining, preliminarily and permanently, the proposed transaction between NCS and Genesis; (3) in the event that the transaction is consummated prior to the entry of this Court's final judgment, rescinding it or awarding to plaintiffs and the Class rescissory damages; (3) directing that defendants account to plaintiffs and the other members of the class for all damages caused by them and account for all profits and any special benefits obtained as a result of their breaches of their fiduciary duties; (4) awarding to plaintiffs the costs and disbursements of this action, including a reasonable allowance for the fees and expenses of plaintiffs' attorneys and experts; and (5) granting plaintiffs and the other members of the Class any further relief the Court deems just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By /s/ Carmella P. Keener -------------------------------- 919 North Market Street, Suite 1401 P.O. Box 1070 Wilmington, Delaware 19899-1070 Tel: (302) 656-4433 Attorneys for Plaintiffs OF COUNSEL: BEATIE AND OSBORN LLP 521 Fifth Avenue, 34th Floor New York, New York 10175 Tel: (212) 888-9000 EX-99.2 4 l95721aexv99w2.txt EXHIBIT 99.2 Exhibit 99.2 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - ---------------------------------------------X : OMNICARE, INC. : : Plaintiff, : 19800 : -vs.- : COMPLAINT : --------- NCS HEALTHCARE, INC., JON H. OUTCALT, : KEVIN B. SHAW, BOAKE A. SELLS, : RICHARD L. OSBORNE, GENESIS HEALTH VENTURES, : INC., and GENESIS SUB, INC., : : Defendants, : - ---------------------------------------------X Plaintiff Omnicare, Inc. ("Omnicare"), by its undersigned counsel, alleges upon knowledge as to itself and its own acts and upon information and belief as to all other matters, as follows: NATURE OF THE ACTION -------------------- 1. Pursuant to an Agreement and Plan of Merger by and among Genesis Health Ventures, Inc., ("Genesis"), Genesis Sub, Inc. ("Genesis Sub"), and NCS Healthcare, Inc; ("NCS"), dated as of July 28, 2002 (the "Genesis Merger Agreement"), NCS has agreed to merge with Genesis Sub (the "Proposed Genesis Merger"). Days before NCS entered into the Genesis Merger Agreement, Omnicare made a substantially superior all-cash offer, but defendants Jon H. Outcalt, Kevin B. Shaw, Boake A. Sells, and Richard L. Osborne, members of NCS's board of directors (collectively, the "Director Defendants"), in violation of their fiduciary duties to NCS stockholders, declined even to consider Omnicare's superior offer. Moreover, they agreed to terms in the Genesis Merger Agreement that make it virtually impossible for Omnicare's offer, or any other offer from any other bidder, to be accepted. 2. The Genesis Merger Agreement substantially undervalues NCS. This merger is in fact a low premium acquisition of NCS for approximately half of what Omnicare has offered. 3. On July 26, 2002, prior to NCS's entry into the Genesis Merger Agreement, Omnicare, which has been attempting to negotiate an acquisition of NCS or its assets since last summer, offered to acquire NCS for $3.00 per share in cash, with Omnicare assuming and/or retiring existing NCS debt at its full principal amount plus accrued interest. The Director Defendants never responded to Omnicare's proposal. 4. Instead, the Director Defendants, in violation of their fiduciary obligations to NCS stockholders, approved the Proposed Genesis Merger and the Genesis Merger Agreement, which provide NCS stockholders with approximately half the value being offered by Omnicare. In further violation of their fiduciary obligations to NCS stockholders, the Director Defendants have also agreed to a host of onerous and draconian defensive measures with respect to the Proposed Genesis Merger that are disproportionate to any perceived threat posed to NCS and that effectively preclude acceptance of any superior bid, including the premium offer made by Omnicare. 5. Although NCS stockholders will theoretically have the opportunity to vote for or against the acquisition, the outcome of that vote is already a foregone conclusion. Because holders of NCS Class A shares are allowed one vote per share, while holders of NCS Class B shares (namely, Director Defendants Outcalt and Shaw, and no one else) are allowed ten votes per share, Defendants Outcalt and Shaw control sufficient voting strength to ensure approval of the Genesis Merger Agreement. 6. Such approval is guaranteed by the fact that NCS, Genesis and Director Defendants Outcalt and Shaw have executed an agreement, pursuant to which, in further violation of their fiduciary obligations to NCS stockholders, Director Defendants Outcalt and Shaw have granted Genesis an "irrevocable proxy" to vote all their shares of NCS Class B common stock in favor of the Genesis Merger Agreement (the "Director Proxy Lock-Up"). 7. While the Director Proxy Lock-Up is ostensibly terminable if the Genesis Merger Agreement is terminated, the Genesis Merger Agreement contains a provision prohibiting the NCS Board of Directors from terminating the Genesis Merger Agreement prior to the stockholder vote to approve it (the "No Termination Provision"). As a result, Genesis and the NCS Board of Directors have "locked-up" the acquisition of NCS and have forced an inferior deal upon the NCS stockholders. 8. To clinch the coercive, onerous and preclusive effects of these actions, the Genesis Merger Agreement provides that, if the Proposed Genesis Merger does not obtain the required stockholder approval, thus preventing consummation of the merger (an unlikely event given the other provisions described above), NCS will face a $6 million penalty if it pursues any alternative acquisition within 12 months of the termination of the Genesis Merger Agreement (the "Break-up Penalty"). This provision, while no more than a transparent attempt to prevent other bidders from offering NCS stockholders fair value for their shares, provides Genesis and Genesis Sub with a windfall, while betraying the interests of NCS stockholders by making it difficult for NCS to negotiate with third parties willing to offer NCS stockholders greater value than they will realize through the Proposed Genesis Merger. 9. Thus, the Director Defendants, by agreeing to the No Termination Provision, the Director Proxy Lock-Up, the Break-up Penalty and the rest of the indisputably inferior terms offered by Genesis, have effectively abdicated their fiduciary duties to manage NCS and have impermissibly locked NCS stockholders into a transaction that denies them anything close to fair value for their shares. The Director Defendants in effect decided not only to take a "fiduciary holiday," but to put their fiduciary duties into permanent receivership. 10. Accordingly, Omnicare is forced to bring this action to secure declaratory and injunctive relief against the breaches of fiduciary duty by the Director Defendants alleged herein, and the aiding and abetting of such breaches of fiduciary duty by Genesis and Genesis Sub alleged herein. PARTIES ------- 11. Plaintiff Omnicare is a corporation organized and existing under the laws of the State of Delaware with its principal place of business in Covington, Kentucky. Omnicare is an important participant in the institutional pharmacy business, with annual sales in excess of $2.1 billion during its last fiscal year. Omnicare is a stockholder of NCS. 12. Defendant NCS is a corporation organized and existing under the laws of the State of Delaware and its principal place of business in Beachwood, Ohio. NCS is an independent provider of pharmacy and related services to long-term care and acute care facilities, including skilled nursing centers, assisted living facilities and hospitals. 13. Defendant Jon H. Outcalt is Chairman of the Board of Directors of NCS and a founding principal of NCS. Outcalt has been a member of the Board since 1986. As a Director of NCS, Outcalt owes fiduciary duties of loyalty and care to NCS stockholders. 14. Defendant Kevin B. Shaw is a founding principal and has been President, Secretary and a Director of NCS since 1986. As an Officer and Director of NCS, Shaw owes fiduciary duties of loyalty and care to NCS stockholders. 15. Defendant Boake A. Sells has been a member of the Board since 1993 and serves on the Audit and Human Resources Committees of the Board. As a Director of NCS, Sells owes fiduciary duties of loyalty and care to NCS stockholders. 16. Defendant Richard L. Osborne has been a member of the Board since 1986 and serves on the Audit and Human Resources Committees of the Board. As a Director of NCS, Osborne owes fiduciary duties of loyalty and care to NCS stockholders. 17. Defendant Genesis is a corporation organized and existing under the laws of the State of Pennsylvania with its principal place of business in Kennett Square, Pennsylvania. 18. Defendant Genesis Sub, a wholly owned subsidiary of Genesis, is a corporation organized and existing under the laws of the State of Delaware. Genesis Sub was formed by Genesis to acquire NCS. FACTUAL BACKGROUND ------------------ Negotiations Between Omnicare And NCS - ------------------------------------- 19. Omnicare has been analyzing a combination with NCS for quite some time with the assistance of its legal and financial advisors. 20. Since July 2001, Omnicare and NCS have been in discussions about a possible acquisition of NCS or its assets by Omnicare. 21. On August 29, 2001, Omnicare sent NCS a written proposal to acquire the assets of NCS, an asset purchase agreement and a due diligence request list. 22. On several occasions in October, 2001, NCS, directly or through its financial advisors, produced to Omnicare information relating to NCS's financial and business matters. The Omnicare Merger Proposal - ---------------------------- 23. On July 26, 2002, Joel F. Gemunder, President and CEO of Omnicare, sent a letter to defendant Jon H. Outcalt, Chairman of the Board of Directors of NCS, proposing an acquisition of NCS by Omnicare in a merger transaction pursuant to which NCS stockholders would receive $3.00 per share in cash and Omnicare would assume and/or retire existing NCS debt at its full principal amount plus accrued interest. 24. On July 28, 2002, Mr. Gemunder sent another letter to Mr. Outcalt, expressing Omnicare's disappointment that NCS and its representatives had continued to refuse to meet with Omnicare to discuss Omnicare's proposal to acquire NCS. The letter noted that Omnicare's $3.00 per share offer represented more than four times NCS's current stock price, which was already at its highest level in two years. 25. The letter also noted that this proposal would provide almost $400 million in cash to NCS's security holders, and reiterated Omnicare's continued belief that such a proposal provides exceptional value to the NCS security holders. 26. The letter further recited that Omnicare's Board had authorized this proposal, that Omnicare was prepared to negotiate quickly and execute a mutually acceptable definitive merger agreement and that Omnicare, having done extensive due diligence on NCS, would need to do only confirmatory due diligence, which would involve only a review of certain non-public information typical for a transaction of this type, in order to proceed with a definitive merger agreement. The letter stated that, with the cooperation of the NCS board members, such confirmatory due diligence could be completed and a definitive merger agreement could be executed in one week. To help clarify and facilitate its proposal, Omnicare enclosed a draft merger agreement, which contained provisions customary for transactions of this type. 27. Significantly, as the letter pointed out, Omnicare's proposal is not subject to any financing contingencies, did not contain any request for voting or similar agreements from any NCS stockholder, and did not require that NCS agree to a "breakup" or similar fee that might act as a deterrent to someone willing to provide greater value to NCS's equity and debt holders. The letter expressed Omnicare's belief that the security holders of NCS should have the option to choose a transaction providing them with the greatest value without any impediment to that choice or the payment of any penalty for that choice. 28. Mr. Gemunder's letter concluded by expressing the hope that Mr. Outcalt and the other members of the NCS Board of Directors view this proposal as Omnicare does -- an excellent opportunity for the equity and debt holders of NCS to realize full value for their securities to an extent not likely to be available to them in the marketplace. That letter concluded as follows: In the context of a negotiated transaction, we are prepared to discuss all aspects of our proposal with you, including structure, economics and your views as to be proper roles for our respective management and employees in the combined company. We would also consider a stock transaction in order to allow NCS stockholders to share in the upside of the combined companies. With respect to structure, we would be willing to discuss acquiring the securities of NCS in a tender offer. We wish, and are prepared, to meet immediately with you and the other directors, management and advisors to answer any questions about our proposal and to proceed with negotiations leading to the execution of a definitive merger agreement. We continue to believe that there are clear and compelling advantages to both Omnicare and NCS from the combination of our two companies and that such a transaction would create significant value for each of our companies and our respective security holders. We trust that you and the other members of the NCS Board of Directors will give this proposal immediate and serious consideration. Your fiduciary duties to your equity and debt holders require no less. We look forward to hearing from you promptly. 29. To date, no response has been forthcoming. The Genesis Merger Agreement - ---------------------------- 30. On July 29, 2002, NCS announced that, on July 28, 2002, it had entered into a Genesis Merger Agreement. Under the terms of the Genesis Merger Agreement, each outstanding share of NCS would be exchanged for 0.1 shares of Genesis. This offer purportedly represented a value of $1.60 per share of NCS stock (far less than the $3.00 per share in cash offered by Omnicare). Meanwhile, the Director Defendants simply ignored Omnicare's all-cash proposal with a value of four times NCS's current stock price. 31. The Genesis Merger Agreement and the associated Director Proxy Lock-Up have effectively locked up NCS for Genesis and precluded any superior offer. The Director Proxy Lock-Up, for example, requires that Director Defendants Outcalt and Shaw, who collectively hold approximately 65% of the voting power of all stockholders of NCS through their holdings of NCS Class B common stock, (a) grant a proxy to Genesis to vote their respective shares of NCS common stock in favor of adoption and approval of the Proposed Genesis Merger and against proposals for other transactions no matter how superior, and (b) not transfer their shares of NCS common stock prior to consummation of the Proposed Genesis Merger. 32. By agreeing to the terms of the Director Proxy Lock-Up, the Director Defendants have surrendered any ability to fulfill their fiduciary duties to NCS and its stockholders. Although the Genesis Merger Agreement purports to permit the Director Defendants to furnish non-public information to or enter into discussions with "any Person in connection with an unsolicited bona fide written Acquisition Proposal by such person," that provision is completely illusory. The Director Proxy Lock-Up combined with the No Termination Provision of the Genesis Merger Agreement effectively prevents the NCS Board from accepting any alternative proposal. 33. In addition to the constraint of the Director Proxy Lock-Up and the No Termination Provision of the Genesis Merger Agreement, NCS's ability to negotiate with third parties willing to offer NCS stockholders greater value is further hampered by requiring that, if the Proposed Genesis Merger fails to obtain the required stockholder approval (which, by the way, is not currently possible), thus preventing the consummation of the proposed merger, NCS must pay the $6 million Break-up Penalty if it enters into an alternative acquisition agreement, an acquisition is consummated, or the Board recommends that NCS enter into such agreement within 12 months of the termination of the Genesis Merger Agreement. This penalty amounts to an astounding 15% of the equity value of the transaction. 34. The Director Proxy Lock-Up, the No Termination Provision and the Break-up Penalty (a) impede Omnicare's ability (as well as the ability of any other third party) to conclude a merger with NCS for greater value than that provided by the Genesis Merger Agreement despite that agreement's economic inferiority to the Omnicare Proposed Merger and, therefore, (b) preclude stockholder consideration of merger proposals from parties such as Omnicare who wish to offer NCS stockholders greater value than that offered by the Proposed Genesis Merger. 35. The Director Defendants have impermissibly denied NCS stockholders the benefit of the more favorable terms offered by Omnicare and have effectively abdicated their responsibility to manage the corporation in accordance with their fiduciary duties to NCS and its stockholders. 36. The Director Defendants have breached their fiduciary duties by approving the Genesis Merger Agreement, of which the Director Proxy Lock-Up is an essential component. 37. To prevent ongoing irreparable injury to Omnicare and all other NCS stockholders, Omnicare brings this action seeking injunctive and other relief, among other things, declaring the Genesis Merger Agreement and the Director Proxy Lock-Up null and void. COUNT I ------- BREACH OF FIDUCIARY DUTY AGAINST THE DIRECTOR DEFENDANTS 38. Omnicare repeats and realleges each of the preceding allegations as if set forth fully herein. 39. By virtue of their positions as directors of NCS, the Director Defendants owe duties to NCS and its stockholders. These duties include, but are not limited to, the obligation to consider and fully evaluate all offers for NCS, the obligation to exercise due care in conducting the affairs of NCS, the obligation not to put self-interest and personal or other consideration ahead of the interests of NCS stockholders, and the obligation not to take unreasonable defensive measures that are disproportionate to any perceived threat posed to NCS. 40. The decisions of the Director Defendants with respect to the Director Proxy Lock-Up and the Genesis Merger Agreement demonstrate a lack of good faith, could not have been based upon a reasonable inquiry, and unreasonably preclude Omnicare or any other third party from entering into an agreement that offers greater value to NCS stockholders than that offered by the Proposed Genesis Merger. 41. The Director Defendants have breached their duties of care and loyalty by agreeing to enter into the Genesis Merger Agreement and the Director Proxy Lock-Up. 42. Additionally, in further breach of their fiduciary duties, the Director Defendants have failed even to consider Omnicare's superior offer. 43. The Director Defendants have willfully and purposely refused to explore Omnicare's bid, even when Omnicare specifically invited NCS representatives to engage in discussions with respect to that bid. The Director Defendants' willful blindness and refusal to fully inform themselves of Omnicare's superior offer constitutes a breach of the Director Defendants' fiduciary duties. 44. Unless enjoined by this Court, the Director Defendants will continue to breach their fiduciary duties to the detriment of NCS and its stockholders thereby preventing NCS's stockholders from even considering potentially superior merger proposals, such as the Omnicare Merger Proposal. 45. Omnicare has no adequate remedy at law. COUNT II -------- AIDING AND ABETTING BREACH OF FIDUCIARY DUTY AGAINST GENESIS AND GENESIS SUB 46. Omnicare repeats and realleges each of the preceding allegations as if set forth fully herein. 47. By virtue of their positions as directors of NCS, the Director Defendants owe fiduciary duties to the stockholders of NCS. 48. The Director Defendants have breached their fiduciary duties to the detriment of NCS and its stockholders. 49. Genesis and Genesis Sub have aided and abetted the Director Defendants in their breaches of fiduciary duty. As direct participants in the Director Proxy Lock-Up and the Genesis Merger Agreement, Genesis and Genesis Sub purposefully, knowingly and substantially aided and abetted the Director Defendants in their breach of fiduciary duties by insisting upon and agreeing to the excessive and unreasonable features and "penalty" provisions of the Genesis Merger Agreement and the Director Proxy Lock-Up, which were designed by Genesis, Genesis Sub and NCS to interfere with Omnicare's or any other superior merger proposals. 50. Unless enjoined, Genesis and Genesis Sub will continue to aid and abet the Director Defendants' breaches of fiduciary duties to NCS and its other stockholders. 51. Omnicare has no adequate remedy at law. WHEREFORE, Omnicare prays for judgment as follows: a. Preliminarily and permanently enjoining NCS, the Director Defendants, Genesis, Genesis Sub, and their respective officers, directors, employees, agents and all persons acting on their behalf from taking further steps or any actions with respect to (i) the Director Proxy Lock-Up and/or (ii) the Genesis Merger Agreement; b. Preliminarily and permanently enjoining Genesis and Genesis Sub from aiding and abetting the Director Defendants' breaches of their fiduciary duties of loyalty and care; c. Declaring the Genesis Merger Agreement and the Director Proxy Lock-Up null and void; and d. Granting Omnicare such other and further relief as this Court may deem just and proper, including the costs and disbursements of this action and reasonable attorneys' fees. Dated: Wilmington, Delaware August 1, 2002 POTTER ANDERSON & CORROON LLP By /s/ Donald J. Wolfe, Jr. ----------------------------------- Donald J. Wolfe, Jr. Hercules Plaza 1313 N. Market Street P.O. Box 951 Wilmington, DE 19899 (302) 984-6015 Of counsel: Robert C. Myers David F. Owens Melanie R. Moss DEWEY BALLANTINE LLP 1301 Avenue of the Americas New York, New York 10019-6092 Telephone (212) 259-8000 PAC-533464 EX-99.3 5 l95721aexv99w3.txt EXHIBIT 99.3 Exhibit 99.3 IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - -----------------------------------------------x ANTHONY NOBLE, : : Civil Action No. Plaintiff, : 19807 : -against- : : NCS HEALTHCARE, INC., RICHARD L. OSBORNE, : JON H. OUTCALT, BOAK A. SELLS, KEVIN B. SHAW, : : Defendants. : - -----------------------------------------------x SHAREHOLDER CLASS ACTION COMPLAINT ---------------------------------- Plaintiff, by his attorneys, for his complaint against defendants, alleges as follows: PARTIES ------- 1. Plaintiff Anthony Noble owns common stock of NCS Healthcare, Inc. ("NCS"). 2. Defendant NCS Healthcare, Inc. is a Delaware corporation with executive offices at 3201 Enterprise Parkway, Suite 2200, Beachwood, Ohio 44122. As of February 7, 2002, there were 18,461,599 shares of Class A stock and 5,255,210 shares of Class B stock outstanding. The Class B stock carries ten votes per share and is convertible any time into Class A stock on a one-for-one basis. The Board of Directors of NCS has three classes of Directors. The NCS certificate of incorporation sets the size of the Board at seven, but there are currently only four directors of NCS. 3. Defendant Richard L. Osborne is a Director of NCS. Osborne beneficially owns 101,403 shares of Class B stock. 4. Defendant Jon H. Outcalt is Chairman of the Board and a Director of NCS. Outcalt beneficially owns 3,476,086 shares of Class B stock. 5. Defendant Boak A. Sells is a Director of NCS. Sells beneficially owns 92,185 shares of Class B stock. 6. Defendant Kevin B. Shaw is President, Chief Executive Officer and Secretary and a Director of NCS. Shaw beneficially owns 1,141,134 shares of Class B stock. 7. The foregoing individuals ("Individual Defendants") as directors of NCS owe the NCS public shareholders fiduciary duties. CLASS ACTION ALLEGATIONS ------------------------ 8. Plaintiff brings this action on his own behalf and as a class action pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all NCS stockholders (except defendants herein and any person, firm, trust, corporation or other entity related to or affiliated with any of the defendants) and their successors in interest, who are or will be threatened with injury arising from defendants' actions as more fully described herein. 9. This action is properly maintainable as a class action. 10. The class of stockholders for whose benefit this action is brought is so numerous that joinder of all Class members is impracticable. 11. There are questions of law and fact which are common to the Class including, INTER ALIA, the following: (a) whether the Individual Defendants have breached their fiduciary and other common law duties owed by them to plaintiff and the members of the Class: (b) whether plaintiff and the other members of the Class will be damaged irreparably by defendants' failure to take action designed to inform themselves regarding the best value for the public shareholders' interest in NCS. 2 12. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. The claims of plaintiff are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Accordingly, plaintiff will fairly and adequately represent the Class. 13. The prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members of the Class and establish incompatible standards of conduct for the party opposing the Class. 14. Defendants have acted and are about to act on grounds generally applicable to the Class, thereby making appropriate final injunctive relief with respect to the Class as a whole. SUBSTANTIVE ALLEGATIONS ----------------------- 15. On Sunday, July 28, 2002, Joel F. Gemunder, President and Chief Executive Officer of Omnicare, Inc., forwarded a letter to Defendant Outcalt communicating an offer by Omnicare to purchase NCS for $3 per share in cash and the assumption of debt. According to Omnicare, the NCS Board has refused to meet with Omnicare regarding a potential acquisition. 16. On July 29, 2002, NCS announced that it agreed to be acquired by Genesis Health Ventures Inc., in a transaction in which NCS stock will be exchanged for Genesis stock, valuing NCS at approximately $1.60 per share. Reportedly, NCS shareholders holding approximately 65% of the voting power of NCS agreed to the Genesis transaction. On Friday, July 26, 2002, NCS stock closed at $.74 per share. 17. On August 1, 2002, Omnicare announced its intention to commence a cash tender offer for all of the outstanding shares of common stock of NCS at $3.50 per share. 18. The NCS Board is obligated to protect the interests of the public stockholders and to inform itself regarding the value of alternatives in order to act in the best interest of the stockholders. 3 The Board's failure to inform itself and investigate the offer by Omnicare and the agreement with Genesis in the face of the offer by Omnicare without so informing itself constitute breaches of fiduciary duties to the public stockholders. The cash offer by Omnicare, on its face, represents twice the value to the public stockholders of NCS. Further, NCS has only four directors, two of whom are executive officers. 19. Plaintiff has no adequate remedy at law. WHEREFORE, plaintiff demands judgment as follows: A. declaring this to be a proper class action; B. enjoining, preliminarily and permanently, the acquisition by Genesis under the terms presently proposed pending due consideration of information regarding alternatives, including Omnicare; C. to the extent, if any, that the transaction complained of is consummated prior to the entry of this Court's final judgment, rescinding the same or awarding rescissory damages to the Class; D. directing that defendants account to plaintiff and the Class for all damages caused to them and account for all profits and any special benefits obtained by defendants as a result of their unlawful conduct; E. awarding to plaintiff the costs and disbursements of this action, including a reasonable allowance for the fees and expenses of plaintiff's attorneys and experts; and F. granting such other and further relief as the Court deems appropriate. 4 Dated: August 1, 2002 CHIMICLES & TIKELLIS LLP /s/ Pamela S. Tikellis ---------------------------------------- Pamela S. Tikellis Robert J. Kriner, Jr. One Rodney Square P.O. Box 1035 Wilmington, Delaware 19899 (302) 656-2500 Attorneys for Plaintiff OF COUNSEL: WOLF, HALDENSTEIN, ADLER FREEMAN & HERZ, LLP 270 Madison Avenue New York, NY 10016 (212) 545-4600 5 EX-99.4 6 l95721aexv99w4.txt EXHIBIT 99.4 Exhibit 99.4 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - -----------------------------------------------x Jeffery Treadway, : : Civil Action No. 19810-NC Plaintiff, : : v. : : Jon H. Outcalt, Kevin B. Shaw, : Boake A. Sells, Richard L. Osborne : and NCS Healthcare, Inc., : : Defendants. : - -----------------------------------------------x COMPLAINT --------- Plaintiff, Jeffery Treadway, by his attorneys, alleges upon information and belief, except as to paragraph 1 which is alleged upon personal knowledge, as follows: THE PARTIES ----------- 1. Plaintiff Jeffery Treadway ("plaintiff") is the owner of common stock of NCS Healthcare, Inc. ("NCS" or the "Company") and has been the owner of such shares continuously since prior to the wrongs complained of herein. 2. Defendant NCS is a corporation duly existing and organized under the laws of the State of Delaware, with its principal executive offices located at 3201 Enterprise Parkway, Suite 220, Beachwood, OH. NCS provides pharmacy and related services to long-term care and acute care facilities. The Company purchases and dispenses prescription and non-prescription pharmaceuticals, and provides management services, medical record keeping, and drug therapy evaluation. 3. Defendant Jon H. Outcalt ("Outcalt") is and at all times relevant hereto has been Chairman of the Board of Directors of NCS. Mr. Outcalt owns approximately 263,895 shares of NCS Class A Stock and 3,476,086 shares of Class B Stock. Class A Stock carries one vote per share and Class B Stock carries ten votes per share. Therefore, Mr. Outcalt controls approximately 49% of the voting power of the Company. 4. Defendant Kevin B. Shaw ("Shaw") is and at all times relevant hereto has been President, Chief Executive Officer, Secretary and a director of NCS. Mr. Shaw owns approximately 106,041 Class A Stock and 1,141,134 shares of Class B Stock, and therefore, controls approximately 16% of the voting power of the Company. In the aggregate, Messrs. Outcalt and Shaw control approximately 65% of the Company's voting power. 5. Defendant Boake A. Sells ("Sells") is and at all times relevant hereto has been a director of NCS. Mr. Sells also provides NCS with consulting services pursuant to a consulting agreement with NCS. 6. Defendant Richard L. Osborne ("Osborne") is and at all times relevant hereto has been a director of NCS. 7. The defendants referred to in paragraphs 3 through 6 are collectively referred to herein as the "Individual Defendants." 8. The Individual Defendants are in a fiduciary relationship with plaintiff and the other public stockholders of NCS, and owe them the highest obligations of good faith, fair dealing, due care, loyalty and full, candid and adequate disclosure. CLASS ACTION ALLEGATIONS ------------------------ 9. Plaintiff brings this action on his own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of herself and the public shareholders of NCS common stock (the "Class"). Excluded from the Class are defendants herein and any person, firm, 2 trust, corporation or other entity related to or affiliated with any of the defendants. 10. This action is properly maintainable as a class action. 11. The Class is so numerous that joinder of all members is impracticable. As of May 10, 2002, NCS had approximately 18.4 million shares of Class A Stock and 5.2 million shares of Class B Stock outstanding. 12. There are questions of law and fact which are common to the Class, including, INTER ALIA, the following; (a) whether defendants have breached their fiduciary and other common law duties owed by them to plaintiff and the other members of the Class; and (b) whether plaintiff and the other members of the Class would be irreparably damaged were the transactions complained of herein consummated. 13. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 14. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 3 15. Defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate. SUBSTANTIVE ALLEGATIONS ----------------------- 16. On July 29, 2002, NCS announced that it entered into a merger agreement with Genesis Health Ventures, Inc. ("Genesis"), pursuant to which Genesis would acquire all of the shares of NCS common stock for 0.1 share of Genesis common stock, valuing each share of NCS at approximately $1.60 per share. The agreement also provides for the assumption of $308 million in debt, valuing the deal at approximately $340 million. 17. Though the $1.60 per share consideration is a premium over the closing price of NCS stock the day prior to the announcement, the transaction does not represent the true value of the assets and the future prospects of the Company. 18. In fact, Omnicare, Inc. ("Omnicare"), a leading provider of pharmaceutical care for the elderly, has offered up to $3.50 per share in cash for each NCS share, and intends to commence a cash tender offer for all outstanding shares of NCS at $3.50 per share. 19. Omnicare, among other things, serves approximately 729,500 residents in long-term care facilities in 45 sates, provides clinical research services for the pharmaceutical and biotechnology industries in 27 countries, and has annual sales of approximately $2.1 billion. 20. In a letter to the Company dated July 28, 2002, Omnicare offered to purchase each outstanding share of NCS for $3 per share in cash, or $400 million. Omnicare has stated that it is "prepared to negotiate quickly" and its cash offer is not subject to financing contingencies or "break-up" fees that would deter potential acquirers from offering a higher price for the Company. In fact, 4 Omnicare has already presented NCS with a draft merger agreement, which was sent along with Omnicare's July 28, 2002 letter. 21. On August 1, 2002, Omnicare said it would increase its offer for NCS to $3.50 per share, and intends to commence a tender offer at that price. 22. It does not appear that defendants sought a third party buyer for NCS, nor did they shop the Company in order to obtain a higher price. On the contrary, defendants have agreed to vote their shares in favor of this merger transaction in the face of a superior offer from Omnicare and prior to shopping the Company. 23. The proposed consideration of $1.60 per share does not represent the true value of the assets and future prospects of NCS and does not adequately reflect the value of the NCS' common stock. Defendants' agreement to the transaction for inadequate consideration constitutes breach of their fiduciary duties. 24. Defendants have breached their fiduciary duties to plaintiffs and NCS' public shareholders by not renegotiating and/or reformulating the terms of the merger. Absent injunctive relief of the Court, plaintiff and the Class will be irreparably harmed as a result of defendants' breaches of their fiduciary duties. 25. In light of the foregoing, the Individual Defendants must, as their fiduciary obligations require, act independently so that the interests of NCS' public stockholders will be protected; and adequately ensure that no conflicts of interest exist between the interests of defendants, including Outcalt, and their fiduciary obligations to NCS' public stockholders or, if such conflicts exist, to ensure that all conflicts are resolved in the best interests of NCS' public stockholders. 5 26. Plaintiff and the Class have no adequate remedy at law. WHEREFORE, plaintiff prays for judgment and relief as follows: A. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative; B. Preliminarily and permanently enjoining defendants and all persons acting in concert with them, from proceeding with, consummating or closing the transaction; C. In the event the buyout is consummated, rescinding it and setting it aside or awarding rescissory damages to the Class; D. Directing defendants to account to Class members for their damages sustained as a result of the wrongs complained of herein; E. Awarding plaintiff the costs of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; F. Granting such other and further relief as this Court may deem just and proper. ROSENTHAL, MONHAIT, GROSS & GODDESS, P.A. By: /s/ Carmella P. Keener ----------------------------------- Suite 1401, 919 Market Street P.O. Box 1070 Wilmington, DE 19899 (302) 656-4433 OF COUNSEL: CAULEY GELLER BOWMAN & COATES, LLP Once Boca Place 2255 Glades Road, Ste. 421A Boca Raton, FL 33431 6 EX-99.5 7 l95721aexv99w5.txt EXHIBIT 99.5 Exhibit 99.5 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY - -----------------------------------------------x Tillie Saltzman, : : Civil Action No. 19811 NC Plaintiff, : : v. : : Jon H. Outcalt, Kevin B. Shaw, : Boake A. Sells, Richard L. Osborne : and NCS Healthcare, Inc., : : Defendants. : - -----------------------------------------------x COMPLAINT --------- Plaintiff, Tillie Saltzman, by her attorneys, alleges upon information and belief, except as to paragraph 1 which is alleged upon personal knowledge, as follows: THE PARTIES ----------- 1. Plaintiff Tillie Saltzman ("plaintiff") is the owner of common stock of NCS Healthcare, Inc. ("NCS" or the "Company") and has been the owner of such shares continuously since prior to the wrongs complained of herein. 2. Defendant NCS is a corporation duly existing and organized under the laws of the State of Delaware, with its principal executive offices located at 3201 Enterprise Parkway, Suite 220, Beachwood, OH. NCS provides pharmacy and related services to long-term care and acute care facilities. The Company purchases and dispenses prescription and non-prescription pharmaceuticals, and provides management services, medical record keeping, and drug therapy evaluation. 3. Defendant Jon H. Outcalt ("Outcalt") is and at all times relevant hereto has been Chairman of the Board of Directors of NCS. Mr. Outcalt owns approximately 263,895 shares of NCS Class A Stock and 3,476,086 shares of Class B Stock. Class A Stock carries one vote per share and Class B Stock carries ten votes per share. Therefore, Mr. Outcalt controls approximately 49% of the voting power of the Company. 4. Defendant Kevin B. Shaw ("Shaw") is and at all times relevant hereto has been President, Chief Executive Officer, Secretary and a director of NCS. Mr. Shaw owns approximately 106,041 Class A Stock and 1,141,134 shares of Class B Stock, and therefore, controls approximately 16% of the voting power of the Company. In the aggregate, Messrs. Outcalt and Shaw control approximately 65% of the Company's voting power. 5. Defendant Boake A. Sells ("Sells") is and at all times relevant hereto has been a director of NCS. Mr. Sells also provides NCS with consulting services pursuant to a consulting agreement with NCS. 6. Defendant Richard L. Osborne ("Osborne") is and at all times relevant hereto has been a director of NCS. 7. The defendants referred to in paragraphs 3 through 6 are collectively referred to herein as the "Individual Defendants." 8. The Individual Defendants are in a fiduciary relationship with plaintiff and the other public stockholders of NCS, and owe them the highest obligations of good faith, fair dealing, due care, loyalty and full, candid and adequate disclosure. CLASS ACTION ALLEGATIONS ------------------------ 9. Plaintiff brings this action on her own behalf and as a class action, pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of herself and the public shareholders of NCS common stock (the "Class"). Excluded from the Class are defendants herein and any person, firm, 2 trust, corporation or other entity related to or affiliated with any of the defendants. 10. This action is properly maintainable as a class action. 11. The Class is so numerous that joinder of all members is impracticable. As of May 10, 2002, NCS had approximately 18.4 million shares of Class A Stock and 5.2 million shares of Class B Stock outstanding. 12. There are questions of law and fact which are common to the Class, including INTER ALIA, the following: (a) whether defendants have breached their fiduciary and other common law duties owed by them to plaintiff and the other members of the Class; and (b) whether plaintiff and the other members of the Class would be irreparably damaged were the transactions complained of herein consummated. 13. Plaintiff is committed to prosecuting this action and has retained competent counsel experienced in litigation of this nature. Plaintiff's claims are typical of the claims of the other members of the Class and plaintiff has the same interests as the other members of the Class. Accordingly, plaintiff is an adequate representative of the Class and will fairly and adequately protect the interests of the Class. 14. The prosecution of separate actions by individual members of the Class would create the risk of inconsistent or varying adjudications with respect to individual members of the Class which would establish incompatible standards of conduct for defendants, or adjudications with respect to individual members of the Class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 3 15. Defendants have acted, or refused to act, on grounds generally applicable to, and causing injury to, the Class and, therefore, preliminary and final injunctive relief on behalf of the Class as a whole is appropriate. SUBSTANTIVE ALLEGATIONS ----------------------- 16. On July 29, 2002, NCS announced that it entered into a merger agreement with Genesis Health Ventures, Inc. ("Genesis"), pursuant to which Genesis would acquire all of the shares of NCS common stock for 0.1 share of Genesis common stock, valuing each share of NCS at approximately $1.60 per share. The agreement also provides for the assumption of $308 million in debt, valuing the deal at approximately $340 million. 17. Though the $1.60 per share consideration is a premium over the closing price of NCS stock the day prior to the announcement, the transaction does not represent the true value of the assets and the future prospects of the Company. 18. In fact, Omnicare, Inc. ("Omnicare"), a leading provider of pharmaceutical care for the elderly, has offered up to $3.50 per share in cash for each NCS share, and intends to commence a cash tender offer for all outstanding shares of NCS at $3.50 per share. 19. Omnicare, among other things, serves approximately 729,500 residents in long-term care facilities in 45 states, provides clinical research services for the pharmaceutical and biotechnology industries in 27 countries, and has annual sales of approximately $2.1 billion. 20. In a letter to the Company dated July 28, 2002, Omnicare offered to purchase each outstanding share of NCS for $3 per share in cash, or $400 million. Omnicare has stated that it is "prepared to negotiate quickly" and its cash offer is not subject to financing contingencies or "break-up" fees that would deter potential acquirers from offering a higher price for the Company. In fact, 4 Omnicare has already presented NCS with a draft merger agreement, which was sent along with Omnicare's July 28, 2002 letter. 21. On August 1, 2002, Omnicare said it would increase its offer for NCS to $3.50 per share, and intends to commence a tender offer at that price. 22. It does not appear that defendants sought a third party buyer for NCS, nor did they shop the Company in order to obtain a higher price. On the contrary, defendants have agreed to vote their shares in favor of this merger transaction in the fact of a superior offer from Omnicare and prior to shopping the Company. 23. The proposed consideration of $1.60 per share does not represent the true value of the assets and future prospects of NCS and does not adequately reflect the value of the NCS' common stock. Defendants' agreement to the transaction for inadequate consideration constitutes breach of their fiduciary duties. 24. Defendants have breached their fiduciary duties to plaintiffs and NCS' public shareholders by not renegotiating and/or reformulating the terms of the merger. Absent injunctive relief of the court, plaintiff and the Class will be irreparably harmed as a result of defendants' breaches of their fiduciary duties. 25. In light of the foregoing, the individual Defendants must, as their fiduciary obligations require, act independently so that the interests of NCS' public stockholders will be protected; and adequately ensure that no conflicts of interest exist between the interests of defendants, including Outcalt, and their fiduciary obligations to NCS' public stockholders or, if such conflicts exist, to ensure that all conflicts are resolved in the best interests of NCS' public stockholders. 5 26. Plaintiff and the Class have no adequate remedy at law. WHEREFORE, plaintiff prays for judgment and relief as follows: A. Ordering that this action may be maintained as a class action and certifying plaintiff as the Class representative; B. Preliminarily and permanently enjoining defendants and all persons acting in concert with them, from proceeding with, consummating or closing the transaction; C. In the event the buyout is consummated, rescinding it and setting it aside or awarding rescissory damages to the Class; D. Directing defendants to account to Class members for their damages sustained as a result of the wrongs complained of herein; E. Awarding plaintiff the costs of this action, including a reasonable allowance for plaintiff's attorneys' and experts' fees; F. Granting such other and further relief as this Court may deem just and proper. ROSENTHAL, MONHALT, GROSS & GODDESS, P.A. By: /s/ Carmella P. Keener ------------------------------------- Suite 1401, 919 Market Street P.O. Box 1070 Wilmington, DE 19899 (302) 656-4433 OF COUNSEL: SCHIFFRIN BARROWAY Three Bala Plaza East Suite 400 Bala Cynwyd, PA 19004 (610) 667-7706 6 -----END PRIVACY-ENHANCED MESSAGE-----