EXHIBIT 25
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
NCS HEALTHCARE, INC., )
)
PLAINTIFF, ) CASE NO.: 1: 02CV1635
)
V. )
)
OMNICARE, INC., )
)
DEFENDANT. )
FIRST AMENDED COMPLAINT
Plaintiff NCS HealthCare, Inc. ("NCS"), by and through its undersigned
attorneys, for its complaint against Omnicare, Inc. ("Omnicare"), states and
alleges upon knowledge as to itself and its own actions and upon information and
belief as to all other matters, as follows:
INTRODUCTION
1. This action is brought, among other things, to enjoin continuing
violations of the federal securities laws by Omnicare.
2. On August 8, 2002, Omnicare, through its wholly-owned subsidiary,
NCS Acquisition Corp., commenced an unsolicited tender offer for all outstanding
NCS Class A and Class B common shares at a price of $3.50 per share in cash (the
"Purported Omnicare Offer"). Omnicare commenced the Purported Omnicare Offer by
filing with the SEC a Tender Offer Statement on Schedule TO, including the offer
to purchase, dated August 8, 2002 that forms a part thereof (the "Offer to
Purchase").
3. As described more fully below, Omnicare's Offer to Purchase is
materially false and misleading. Among other things, the Purported Omnicare
Offer involves a critical, material, and
deliberately undisclosed condition -- thus effectively rendering the Purported
Omnicare Offer illusory.
4. Further, Omnicare's Offer to Purchase repeatedly seeks to mislead
NCS stockholders into believing that NCS (prior to entering into a merger
agreement with Genesis Health Ventures Inc., described below) was not interested
in serious negotiations with Omnicare, for the deliberate purpose of causing NCS
stockholders to tender into the Purported Omnicare Offer and to vote against the
pending Genesis Merger described below.
THE PARTIES
5. NCS is a Delaware corporation with its principal place of business
located in Beachwood, Ohio. NCS is an independent provider of pharmacy services
to long-term care institutions including skilled nursing facilities, assisted
living facilities and other institutional health care settings. The Class A
common stock of NCS is publicly traded under the symbol NCSS.OB.
6. Omnicare is a Delaware corporation with its principal place of
business located in Covington, Kentucky. Omnicare is the single largest
competitor of NCS in the institutional pharmacy business.
JURISDICTION AND VENUE
7. The Court has subject matter jurisdiction with respect to this
action pursuant to 28 U.S.C. Section 1331 in that NCS seeks relief for
Omnicare's violation of 15 U.S.C. Section 78n(e), otherwise known as Section
14(e) of the Securities Exchange Act of 1934, as amended ("Section 14(e)").
8. Venue is proper in this Court pursuant to 28 U.S.C. Section 1391(b)
in that Omnicare is deemed to reside in this judicial district pursuant to 28
U.S.C. Section 1391(c). The claims asserted here arose in this District, and the
acts and transactions complained of have occurred, are occurring and unless
enjoined, will continue to occur in this District.
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BACKGROUND
9. On July 28, 2002, NCS entered into an agreement and plan of merger
(the "Genesis Merger Agreement") with Genesis Health Ventures, Inc. ("Genesis"),
pursuant to which NCS would be merged with Geneva Sub., Inc., a wholly owned
subsidiary of Genesis (the "Genesis Merger").
10. Under the terms of the Genesis Merger Agreement, each share of NCS
common stock (approximately 23.7 million shares outstanding) will be exchanged
for 0.1 of a share of Genesis common stock. Significantly, the Genesis Merger
Agreement also provides that Genesis will repay in full the outstanding debt of
NCS (including accrued and unpaid interest and redemption premium), which
consists of defaulted senior, subordinated and trade debt of approximately $350
million.
11. NCS had been weathering deteriorating conditions in the healthcare
industry and a general downturn in the company's business since approximately
1999. The NCS board was, and remains, faced with managing a company in default
on its debt - consisting of senior, subordinated and trade debt of approximately
$350 million - with fiduciary duties to both shareholders and creditors.
12. The Genesis Merger Agreement was the result of a substantial
process of examining various restructuring alternatives, painstakingly
undertaken by NCS and its advisors for a period in excess of two years.
13. Part of this process also involved failed discussions with Omnicare
about proposals made by Omnicare to purchase NCS's assets under Section 363 of
the United States Bankruptcy Code. NCS and NCS's advisors maintained the view
throughout the discussions with Omnicare that a Section 363 asset sale would not
maximize value for all of NCS's stakeholders. In
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contrast, the Genesis Merger Agreement provides full payment of all of NCS's
debt and provides significant value to NCS based on current market prices (worth
approximately $38 million).
14. After not hearing directly from Omnicare for almost five months, in
the early morning of July 26, 2002, Omnicare transmitted to NCS a letter from
Joel Gemunder, President and CEO of Omnicare, in which Mr. Gemunder proposed
that Omnicare acquire NCS in a merger transaction pursuant to which NCS
stockholders would receive $3.00 per share in cash. In that letter, Mr. Gemunder
noted the need for Omnicare to conduct "confirmatory due diligence" involving
the review of unspecified non-public information before the proposed acquisition
could be completed.
15. On August 1, 2002, Omnicare announced publicly that it intended to
commence a cash tender offer for all of the outstanding shares of Class A and
Class B common stock of NCS at a price of $3.50 per share.
16. On August 8, 2002, Omnicare commenced its tender offer to purchase
all of the outstanding shares of Class A and Class B common stock of NCS (the
"Purported Omnicare Offer"), subject to the terms and conditions contained in an
Offer to Purchase dated August 8, 2002. A copy of the Offer to Purchase is
attached hereto at Exhibit A and is incorporated herein by reference. Although
the Offer to Purchase lists nine significant conditions, among numerous others,
that must be satisfied in Omnicare's sole discretion, or waived in order for the
Purported Omnicare Offer to be consummated by Omnicare, the Offer to Purchase
does not identify the completion of due diligence as a condition to the offer.
17. On the same day that it commenced the Purported Omnicare Offer,
Omnicare transmitted a letter to NCS in which Mr. Gemunder insisted on behalf of
Omnicare that "we need to complete confirmatory due diligence" with respect to
"non-public information regarding NCS"
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and stated that Omnicare "would expect . . . to begin our confirmatory
investigation of NCS's non-public information as soon as possible."
18. Although the August 8 letter was filed with the SEC, the contents
of this letter have not been included by Omnicare in any mailing to
stockholders, and are not disclosed in the Offer to Purchase.
19. Thus, although the July merger proposal due diligence condition was
disclosed, the August 8 tender offer due diligence condition remains undisclosed
by Omnicare, no doubt because disclosure would have made clear to NCS
stockholders the illusory nature of the purported tender offer.
20. Significantly, although Omnicare purports to summarize the "MOST
SIGNIFICANT CONDITIONS TO THE OFFER" at the very beginning of the Offer to
Purchase, that summary does not reference the undisclosed due diligence
condition which, again, would have highlighted the illusory nature of the
Purported Omnicare Offer.
OMNICARE'S MATERIALLY FALSE AND MISLEADING DISCLOSURES
The Undisclosed Due Diligence Condition In The Purported Omnicare Offer
21. The satisfactory completion by Omnicare of its requested review and
investigation of unspecified non-public information regarding NCS is an
undisclosed material condition to the effectiveness of the Purported Omnicare
Offer. Further, the determination whether such undisclosed condition has been
satisfied is to be made by Omnicare in its sole discretion and judgment.
22. The failure of Omnicare to disclose in the Offer to Purchase that
the Purported Omnicare Offer is conditioned on the satisfactory completion by
Omnicare of a review and investigation of non-public information regarding NCS
and that the determination whether such
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condition has been satisfied is to be made by Omnicare in its sole discretion
and judgment constitutes a material omission that renders the Offer to Purchase
materially misleading.
Omnicare's Other Materially False and
Misleading Statements In The Offer To Purchase
23. Omnicare has also made other materially false and misleading
statements to NCS shareholders in the Offer to Purchase. For example, on page 4
of the Offer to Purchase, in a section entitled "Summary Term Sheet," Omnicare
claims that "[w]e have tried repeatedly to discuss with NCS HealthCare the
potential acquisition of NCS HealthCare by Omnicare."
24. This statement is materially false and misleading because Omnicare
did not submit its initial indication of interest to acquire NCS for $3.00 per
share in cash until July 26, 2002. Prior to that time, Omnicare had made no
effort to communicate directly with NCS for at least five months. Moreover, the
only indications of interest submitted by Omnicare prior to that time
contemplated a purchase of NCS's assets under Section 363 of the United States
Bankruptcy Code at a purchase price substantially lower than the amount of NCS's
outstanding debt obligations, and which would have provided no recovery to NCS's
equity holders.
25. Omnicare's obvious intention in making this statement is to
deliberately mislead NCS shareholders into believing that NCS had not been
interested in serious negotiations with Omnicare.
26. Moreover, on page 18 of the Offer to Purchase, Omnicare claims that
it was "frustrated by the slow pace of the negotiation of the confidentiality
agreement" between NCS and Omnicare, apparently because NCS "requested that
Omnicare indicate in writing specifically the limited due diligence materials
that it would need to review" and that communications between the parties be
made through their respective advisors.
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27. Omnicare's obvious intention in making this statement is to
deliberately mislead NCS shareholders into believing that NCS had not been
interested in serious negotiations with Omnicare.
28. The Offer to Purchase omits to disclose that it was Omnicare's
refusal to agree to standard provisions in the confidentiality agreement -
provisions that were contained in at least 36 other confidentiality agreements
that NCS had executed with other parties expressing interest in a transaction
with NCS - that resulted in the delay in executing a confidentiality agreement.
The Offer to Purchase further fails to disclose that the restrictions imposed on
Omnicare's ability to engage in discussions directly with NCS management were
due to Omnicare's apparent failure to respect NCS's desire to maintain the
confidentiality of their discussions that led to the delay in executing the
confidentiality agreement, and NCS's request for a specific list of due
diligence materials made in connection therewith.
29. Also on page 18 of the Offer to Purchase, Omnicare states that NCS
"never responded to Omnicare's written proposal" dated August 29, 2001, which
contained its second indication of interest contemplating a purchase of NCS's
assets under Section 363 of the United States Bankruptcy Code.
30. Again, the obvious, deliberate intention of Omnicare is to mislead
NCS shareholders into believing that NCS had not been interested in serious
negotiations with Omnicare.
31. This statement is false and misleading because NCS did, in fact,
respond to Omnicare's second indication of interest. Although concerned that
Omnicare was unwilling to agree to certain standard provisions in the proposed
confidentiality agreement, NCS engaged in discussions with Omnicare regarding a
possible transaction, and ultimately executed a confidentiality agreement with
Omnicare in late September 2001.
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32. Thereafter, in October 2001, representatives of NCS's financial
advisor, Brown Gibbons, met with representatives of Omnicare's financial advisor
to review Omnicare's indication of interest, Brown Gibbons' analysis of the
potential synergies associated with a combination of Omnicare and NCS and the
Company's views regarding an appropriate transaction structure and acceptable
valuations for NCS. Given the potential $77 to $87 million of operating
synergies Brown Gibbons believed were associated with such a transaction, Brown
Gibbons expressed the view that a bankruptcy sale under Section 363 did not
maximize value to NCS's stakeholders and requested that Omnicare reconsider its
proposed transaction structure. Brown Gibbons further suggested a non-bankruptcy
acquisition of NCS that would provide value to all of the Company's stakeholders
and recognize the potential operating synergies associated with a combination of
NCS and Omnicare.
33. Moreover, on page 18 of the Offer to Purchase, Omnicare claims that
it was "[f]rustrated by the lack of any response from the Company's senior
management" apparently because "during the period from August to mid-November
2001, the Company failed to respond to Omnicare's repeated requests for . . .
information . . . or to engage in any meaningful discussions regarding a
potential transaction with Omnicare."
34. Again, the clear intention of Omnicare is to deliberately mislead
NCS shareholders into believing that NCS had not been interested in serious
negotiations with Omnicare.
35. In fact, this statement is materially false and misleading because
in October 2001 and again in January 2002, NCS continued its efforts to engage
Omnicare in discussions regarding a non-bankruptcy transaction that, in Brown
Gibbons' estimation, would provide $77 to $87 million of operating synergies.
Further, from August 2001 through January 2002, Brown Gibbons attempted to
communicate with Omnicare regarding a potential non-bankruptcy
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transaction and further review of the due diligence materials provided by NCS.
However, Omnicare never responded to NCS in any meaningful manner.
36. Further, on page 19 of the Offer to Purchase, Omnicare claims that
by July 2002, "Omnicare had made repeated requests to discuss its proposal with
the Company, the Company was experiencing financial difficulties and Omnicare
still had not been able to hold any discussions with the Company regarding
Omnicare's interest in acquiring the Company."
37. Again, the obvious, deliberate intention of Omnicare is to mislead
NCS shareholders into believing that NCS had not been interested in serious
negotiations with Omnicare.
38. In fact, Omnicare had not directly communicated with NCS about any
proposal since February 2002. Moreover, prior to July 26, 2002, Omnicare had
never indicated an interest in a non-bankruptcy acquisition of NCS, much less an
acquisition in which equity holders would receive $3.00 per share in cash.
Rather, all of Omnicare's proposals were indications of interest contemplating a
purchase of NCS's assets under Section 363 of the United States Bankruptcy Code
at purchase prices insufficient to provide any recovery to NCS equity holders.
Omnicare's Materially Misleading Statements Continue
39. Omnicare's materially false and misleading statements continue as
its solicitation of NCS shareholders continues. On August 20, 2002, Omnicare
issued a press release which states, among other things, that "[w]e have
repeatedly advised the NCS board that Omnicare is prepared to execute a merger
agreement substantially identical to the NCS/Genesis Merger Agreement, which is
no more conditional than the NCS/Genesis transaction."
40. This statement is deliberately and materially false and misleading
because it omits to disclose that Omnicare's execution of the merger agreement
is subject to Omnicare's satisfactory completion of due diligence.
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Omnicare's Deliberate Purpose
41. Finally, Omnicare effectively contends in state court litigation in
Delaware that the public stockholders of NCS will control the outcome of the
vote on the merger. The deliberate purpose of the misleading disclosures
described above is to persuade NCS stockholders to tender into Omnicare's offer
and to vote against the merger. Omnicare's Offer to Purchase is misleading for
the further reason that it omits to disclose that failure to consummate the
Genesis Merger could, in light of the undisclosed due diligence and other vague
and undefined conditions, leave NCS without any merger partner in the future.
IRREPARABLE HARM
42. Plaintiff and NCS shareholders have been irreparably harmed by the
defendants' violations of law. They have been, and are still being, immediately
and irreparably injured as a result of the above described actions of Omnicare
in that, among other things:
(a) Each of the foregoing omitted, false or misleading facts
is material in that each would be considered important to a
shareholder of NCS in determining whether to vote for the
Genesis Merger Agreement; and
(b) Plaintiff and NCS shareholders have been and will continue
to be denied material information to which they are lawfully
entitled and which is essential to making an informed decision
with respect to whether to tender, hold or sell in the market
their shares.
VIOLATION OF SECTION 14(e)
(COUNT I)
43. Plaintiff repeats and realleges the allegations of Paragraphs 1-38,
inclusive, hereof.
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44. Section 14(e) of the Exchange Act, 15 U.S.C. Section 78n(e), makes
it unlawful "for any person to make any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made,
in the light of the circumstances under which they are made, not misleading, or
to engage in any fraudulent, deceptive, or manipulative acts or practices, in
connection with any tender, or any solicitation of security holders in
opposition to or in favor of any such offer, request or invitation."
45. Section 14(e) of the Exchange Act and the SEC regulations
thereunder are thus intended to ensure that shareholders confronted with a
tender offer are provided with all the information about the offeror and the
offer necessary for them to make an informed investment decision whether to
tender their shares to the offeror, sell their shares in the market, or hold
their shares.
46. Omnicare, by the use and means and instruments of interstate
commerce or of the mails and in connection with the Purported Omnicare Offer,
has made untrue statements of material fact and has omitted to state material
facts necessary in order to make statements that it has made, in light of the
circumstances under which such statements were made, not misleading and have
engaged in acts, practices and a course of conduct which has operated as a fraud
and deceit upon the shareholders of NCS.
47. By virtue of the foregoing, Omnicare has violated, and continues to
violate, Section 14(e) of the Exchange Act.
48. NCS has no adequate remedy at law for this violation of Section
14(e).
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WHEREFORE, Plaintiff prays for the entry of judgment in favor of NCS
and against Omnicare:
(i) preliminarily and permanently enjoining the Purported Omnicare
Offer until such time as Omnicare makes appropriate corrective
disclosures directly to the stockholders of NCS; and
(ii) such further and/or additional relief as the Court deems fair and
equitable.
Respectfully submitted,
/s/ H. Jeffrey Schwartz
-----------------------------
H. Jeffrey Schwartz (0014307)
Mark A. Phillips (0047347)
BENESCH, FRIEDLANDER, COPLAN
& ARONOFF LLP
2300 BP Tower
200 Public Square
Cleveland, OH 44114-2378
Tele: (216) 363-4500
Fax: (216) 363-4588
mphillips@bfca.com
Of Counsel:
Edward P. Welch
Edward B. Micheletti
SKADDEN, ARPS, SLATE, MEAGHER
& FLOM, LLP
One Rodney Square
P.O. Box 636
Wilmington, DE 19899-0636
Tele: (302) 651-3000
Fax: (302) 651-3001
ewelch@skadden.com
emich@skadden.com