IN THE COURT OF CHANCERY OF DELAWARE
NEW CASTLE COUNTY
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OMNICARE, INC.,
Plaintiff,
-vs.-
NCS HEALTHCARE, INC., JON H. OUTCALT,
KEVIN B. SHAW, BOAKE A. SELLS,
RICHARD L. OSBORNE, GENESIS HEALTH
VENTURES, INC., and GENEVA SUB, INC.,
Defendants.
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FIRST AMENDED COMPLAINT
Plaintiff Omnicare, Inc. ("Omnicare") 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"), Geneva Sub, Inc. ("Geneva Sub"), and NCS
Healthcare, Inc. ("NCS"), dated as of July 28, 2002 (the "Genesis Merger
Agreement"), NCS has agreed to merge with Geneva Sub (the "Proposed Genesis
Merger"). Days before NCS entered into the Genesis Merger Agreement, under which
stockholders would receive only about $1.60 per share in Genesis common stock,
Omnicare made a substantially superior all-cash offer of $3.00 per share, 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 and statutory duties to NCS
stockholders, declined even to consider that offer. Nor have they responded in
any meaningful way to a cash tender offer Omnicare commenced on
August 8, 2002 of $3.50 per share for all outstanding shares of NCS common
stock. Moreover, they agreed to terms in the Genesis Merger Agreement that were
intended to make it impossible for Omnicare's superior offer, or any other offer
from any other bidder, to be accepted by NCS or its stockholders.
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 had previously offered and even less than half of what it is
currently offering.
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 for a year, offered to acquire NCS for $3.00 per share in
cash, with Omnicare assuming and/or retiring existing NCS debt. The Director
Defendants never responded to that proposal, nor have they made any substantive
response to Omnicare's new, higher offer of $3.50 per share in cash.
4. Instead, in violation of their fiduciary obligations to NCS
stockholders, the Director Defendants approved the Proposed Genesis Merger and
the Genesis Merger Agreement, which provide NCS stockholders with less than half
the value being offered by Omnicare. In further violation of their fiduciary
obligations to NCS stockholders, they 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. Specifically, Defendants have attempted to structure the Genesis
Merger Agreement so that the stockholders will theoretically have the
opportunity to vote on it, while making the outcome of that vote a foregone
conclusion.
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6. The Genesis Merger Agreement is premised upon the concept that
Messrs. Outcalt and Shaw control sufficient voting strength to ensure approval
because, while holders of Class A shares are allowed one vote per share, holders
of Class B shares (principally Mr. Outcalt, with 3,476,086 such shares, and Mr.
Shaw, with 1,141,134) are allowed ten votes per share. Defendants have attempted
to guarantee such approval by means of voting agreements executed in conjunction
with the Genesis Merger Agreement, pursuant to which Messrs. Outcalt and Shaw
have granted Genesis an irrevocable proxy to vote all their shares of Class B
common stock (the "Locked-Up Shares") in favor of the Genesis Merger Agreement
(the "Director Proxy Lock-Up"). While the Director Proxy Lock-Up is ostensibly
terminable if the Genesis Merger Agreement is terminated, the Genesis Merger
Agreement prohibits the Director Defendants from terminating the Genesis Merger
Agreement prior to the stockholder vote to approve it (the "No Termination
Provision").
7. As explained below, the Director Proxy Lock-Up violates NCS's
Amended and Restated Certificate of Incorporation ("the NCS Certificate") and,
by transferring all control of their Class B shares, Messrs. Outcalt and Shaw
have irrevocably converted their Class B shares into Class A shares.
Nonetheless, as designed, the Director Proxy Lock-Up and the No Termination
Provision constitute blatant violations of fiduciary duty which improperly seek
to preclude any possibility of NCS stockholders receiving the benefit of
superior offers.
8. The Genesis Merger Agreement also prevents the Director Defendants
from even considering alternative offers (the "No Shop Provision").
Specifically, they may not:
(i) solicit, initiate, encourage (including by way of furnishing
information), facilitate or induce inquiries with respect to any
competing proposal;
(ii) discuss, negotiate or furnish non-public information with respect
to any competing proposal;
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(iii) approve, endorse or recommend any competing proposal; or
(iv) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or relating to any
competing proposal.
9. While the Genesis Merger Agreement purports to provide a "fiduciary
out," it is a mere pretense. The Director Proxy Lock-Up is designed to ensure
that the "out" can never actually be exercised and that no other offer,
regardless of its superiority, can displace the collusive deal the Directors
Defendants struck with Genesis.
10. To clinch the coercive, onerous and preclusive effects of these
actions, the Genesis Merger Agreement further provides that if the Proposed
Genesis Merger does not obtain the required stockholder approval, thus
preventing consummation of the merger (an unlikely event if the other provisions
described above have their intended effect), 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 Geneva 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.
11. Thus, the Director Defendants, by agreeing to the Director Proxy
Lock-Up, the No Termination Provision, the No Shop Provision, 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 sought to lock NCS stockholders into a transaction that denies
them anything close to fair value. In effect, they decided not only to take a
"fiduciary holiday," but to put their fiduciary duties into permanent
receivership.
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12. Ultimately, however, this entire scheme must fail because it
violates not only the Director Defendants' duties under Delaware law, but also
the NCS Certificate, which prohibits Messrs. Outcalt and Shaw as Class B
stockholders from transferring their voting power to Genesis and provides that,
as a result of their doing so, those Class B shares (having ten votes per share)
automatically and irrevocably converted into Class A shares (having one vote per
share).
13. Accordingly, Omnicare brings this action to secure (i) declaratory
relief with respect to the illegal Director Proxy Lock-Up and (ii) declaratory
and injunctive relief against the Director Defendants' breaches of fiduciary
duty and Genesis and Geneva Sub's aiding and abetting of such breaches.
PARTIES
14. 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 a leader 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.
15. Defendant NCS is a corporation organized and existing under the
laws of the State of Delaware with 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.
16. Defendant Jon H. Outcalt has been Chairman of the Board of NCS
since 1986. As such, he owes fiduciary duties to NCS stockholders.
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17. Defendant Kevin B. Shaw has been President, Secretary and a
Director of NCS since 1986, and Chief Executive Officer of NCS since 1995. As
such, he owes fiduciary duties to NCS stockholders.
18. Defendant Boake A. Sells has been a member of the Board since 1993.
As such, he owes fiduciary duties to NCS stockholders. In addition to his
director's fee, he has been receiving a $10,000 per month consulting fee from
NCS.
19. Defendant Richard L. Osborne has been a member of the Board since
1986. As such, he owes fiduciary duties to NCS stockholders.
20. 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.
21. Defendant Geneva Sub, a wholly owned subsidiary of Genesis, is a
corporation organized and existing under the laws of the State of Delaware.
Geneva Sub was formed by Genesis to acquire NCS.
FACTS
Omnicare's Attempts to Negotiate with NCS
22. Since approximately April 2000, NCS has been in default under its
senior credit facility. Thereafter, NCS elected not to make an interest payment
due February 15, 2001 on its outstanding bonds and began a series of discussions
with its banks and with a committee of bondholders (the "Ad Hoc Committee")
regarding a possible restructuring of its debt.
23. In July 2001, Omnicare President and CEO Joel F. Gemunder expressed
an interest in acquiring NCS. Mr. Shaw responded that the Director Defendants
would review Omnicare's interest. In a July 20, 2001 letter to the Director
Defendants, Mr. Gemunder stated
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that Omnicare was prepared to offer approximately $225 million in cash to
acquire NCS's assets, was willing to discuss the details of its proposal, and
would need only limited due diligence.
24. An August 9, 2001 letter from NCS's counsel directed Omnicare to
conduct all further communications with NCS's advisors, rather than directly
with NCS.
25. On August 29, 2001, frustrated by the slow pace of negotiations
with NCS's advisors, Omnicare sent NCS, the Ad Hoc Committee and their
respective legal and financial advisors a written offer to pay $270 million in
cash to acquire NCS, excluding cash and certain liabilities. Given NCS's
then-existing financial situation, the proposal contemplated a purchase pursuant
to Section 363 of the United States Bankruptcy Code, but Omnicare made clear
that it was open to other alternatives. NCS never responded.
26. In late September 2001, the parties' advisors agreed to the terms
of a confidentiality agreement. Nonetheless, NCS never provided the detailed
financial information that Omnicare needed (and repeatedly requested) to
evaluate a transaction. Indeed, in October 2001, NCS's financial advisors
proposed that Omnicare buy NCS, make a modest cash payment to stockholders and
pay off bondholders at a modest discount to par, but NCS refused to provide the
financial data Omnicare needed to analyze the proposal.
27. Because NCS would not respond to Omnicare, Omnicare met in November
2001 with the Ad Hoc Committee and its financial and legal advisors to discuss
Omnicare's interest in NCS. After the Ad Hoc Committee stated that it believed
that it could obtain NCS's support for a transaction, Omnicare and the Ad Hoc
Committee negotiated such a transaction over the ensuing months. However, those
negotiations were unsuccessful, as NCS refused to participate directly or
meaningfully in the process.
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The Omnicare Merger Proposal
28. In July 2002, Omnicare began to suspect that NCS was negotiating
with other parties. Accordingly, on July 26, 2002, Mr. Gemunder sent Mr. Outcalt
a letter, with copies to the other Director Defendants, proposing a merger
transaction in which Omnicare would pay NCS stockholders $3.00 per share in cash
and assume and/or retire existing debt.
29. On July 29, 2002, compelled by NCS's failure to respond, Mr.
Gemunder sent another letter, which Omnicare made public, expressing
disappointment that NCS continued to refuse to meet with Omnicare and noting
that Omnicare's $3.00 per share offer represented more than four times NCS's
current stock price, which was already at a two-year high.
30. The letter pointed out that this proposal would provide an
excellent opportunity to realize more value than was likely available in the
marketplace.
31. The letter further recited that Omnicare had secured its own
Board's authorization, was prepared to negotiate quickly and execute a mutually
acceptable definitive merger agreement and would need only confirmatory due
diligence consisting of a review of certain non-public information typical for
such a transaction. The letter stated that, with the Director Defendants'
cooperation, an agreement could be executed in a week. To facilitate matters,
Omnicare enclosed a draft merger agreement with customary provisions.
32. Omnicare's proposal contained no financing contingency and --
consistent with Omnicare's belief that NCS stockholders should be able to choose
a transaction providing the greatest value with no impediment to, or penalty
for, that choice -- no request for voting agreements or a break-up fee that
might deter other bids.
33. The letter further stated 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
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views as to the 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 trust that you and the other members of the NCS Board of
Directors will give this proposal immediate and serious
consideration. . . .
34. NCS never responded to that letter.
The Genesis Merger Agreement
35. Indeed, on July 29, 2002, NCS announced that, on July 28, 2002, it
had entered into the Genesis Merger Agreement. Under the terms of the Genesis
Merger Agreement, each outstanding share of NCS would be exchanged for 0.1 of a
share of Genesis. This offer purportedly represented a value of $1.60 per share
of NCS stock at the time the transaction was announced (far less than the $3.00
per share in cash then being offered by Omnicare). The Director Defendants
simply ignored Omnicare's all-cash proposal with a value of four times NCS's
current stock price.
36. As designed by Defendants, in flagrant violation of Delaware law
and the NCS Certificate, the Genesis Merger Agreement and the associated
Director Proxy Lock-Up would have the effect of locking up NCS for Genesis and
precluding superior offers. The Director Proxy Lock-Up, for example, requires
that Messrs. Outcalt and Shaw, who collectively held approximately 65% of the
voting power of all NCS stockholders through their holdings of Class B common
stock, (a) grant Genesis a proxy to vote their respective shares 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
prior to consummation of
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the Proposed Genesis Merger. In addition, the No Shop Provision was designed to
prevent the Director Defendants from even considering alternative offers.
37. NCS's ability to negotiate with third parties willing to offer NCS
stockholders greater value is further hampered by the requirement that NCS pay
the $6 million Break-Up Penalty if it enters into an acquisition agreement with
another company, if any such an acquisition is consummated, or if the Board
recommends that NCS enter into such an 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.
38. The Director Proxy Lock-Up, the No Termination Provision, the No
Shop Provision and the Break-Up Penalty (a) impede Omnicare's (and any other
third party's) ability to conclude a merger with NCS for greater value than the
Genesis Merger Agreement provides and, therefore, (b) are designed to preclude
stockholder consideration of superior proposals to acquire NCS.
Events Subsequent to the
Announcement of the Genesis Merger Agreement
39. By August 1, 2002, in light of the Director Defendants' continuing
refusal even to respond to (let alone consider) its proposal, Omnicare
reluctantly concluded that it had no choice but to commence this action to
prevent ongoing irreparable injury to Omnicare and all other NCS stockholders.
40. In a press release that day announcing Omnicare's intention to
commence a tender offer for all outstanding shares of NCS common stock and to
raise its offer to $3.50 per share in cash, Mr. Gemunder said,
We are taking these steps after continued refusals by NCS to discuss
Omnicare's offer to acquire the company. We believe that the board of
directors of NCS has breached its fiduciary duties by entering into the
Genesis agreement while they were fully aware of our superior offer.
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Omnicare's offer will deliver more than twice the value to NCS
stockholders, and the NCS board should not prevent their stockholders
from accepting this offer.
41. On August 8, 2002, Omnicare, through a wholly-owned subsidiary,
commenced its tender offer for all outstanding shares of NCS common stock at
$3.50 per share in cash.
42. That same day, Mr. Gemunder sent the Director Defendants a letter
stating that their refusal even to discuss Omnicare's offer and their apparent
disregard of their fiduciary duties had left Omnicare no alternative but to take
its offer directly to NCS stockholders. That letter reiterated that Omnicare
would prefer to work with NCS toward a transaction maximizing value for
stockholders, bondholders and creditors, and remained willing to discuss all
aspects of its offer, including structure, price and type of consideration, and
to execute a merger agreement substantially identical to the Genesis Merger
Agreement, except that it would include neither a break-up fee, voting
agreements nor any other feature designed to deter competing bids.
43. Mr. Gemunder further noted that Omnicare could consummate such a
transaction very quickly, and would need only matter of days to complete
confirmatory due diligence if provided with reasonable access to certain
customary non-public information.
44. To date, Omnicare has received no response to that letter or to its
tender offer other than a meaningless August 9, 2002 press release in which NCS
states as follows:
Omnicare's tender offer is under consideration by NCS HealthCare's
Board of Directors. On or before August 22, 2002, NCS HealthCare will
advise its stockholders of its position with respect to the tender
offer, along with the reasons for its position. NCS HealthCare requests
its stockholders to defer taking any action with respect to Omnicare's
tender offer until they have been advised of NCS HealthCare's position.
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Count I
Declaratory Judgment that the Director Proxy
Lock-Up Violates the NCS Certificate and that the
Locked-Up Shares Have Converted into Class A Shares
(Against All Defendants)
45. Omnicare realleges each preceding allegation as if set forth fully
herein.
46. There exists an actual, substantial and immediate controversy
within this Court's jurisdiction, resulting from the conduct alleged herein,
which will be redressed by a judicial decision favorable to Omnicare and the
other NCS stockholders.
47. The Court, thus, may properly declare the rights, obligations and
other legal relationships of the parties to this action with respect to the
Director Proxy Lock-Ups, the status of the Locked-Up Shares and all other
matters alleged herein.
48. Section 7(a) of the NCS Certificate prohibits transfers of Class B
shares, or any interest in those shares, to anyone, including Genesis, who is
not a permitted transferee. Thus, Section 7(a) states as follows:
no person holding any shares of Class B Common Stock may transfer, and
the Corporation shall not register the transfer of, such shares of
Class B Common Stock or any interest therein, whether by sale,
assignment, gift bequest, appointment or otherwise.
49. In violation of this provision, Messrs. Outcalt and Shaw entered
into the Director Proxy Lock-Up and thereby (a) granted Genesis an irrevocable
proxy, coupled with an interest, to vote their respective Class B shares (i.e.,
the Locked-Up Shares), and (b) agreed not to transfer their shares of NCS common
stock prior to consummation of the Proposed Genesis Merger, which, in light of
the No Termination Provision, would be a foregone conclusion. As a result,
Messrs. Outcalt and Shaw have improperly transferred not only an interest in,
but all meaningful indicia of ownership in and rights to, their Class B shares
to Genesis.
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50. That transfer automatically and irrevocably converted those Class B
shares into Class A shares. Pursuant to Section 7(d) of the NCS Certificate:
[a]ny purported transfer of shares from Class B Common Stock other than
to a permitted transferee shall automatically, without any further act
or deed on the part of the Corporation or any other person, result in
the conversion of such shares into shares of Class A Common Stock.
(emphasis added).
51. Accordingly, Omnicare is entitled to a judgment declaring that
Messrs. Outcalt and Shaw's grant of irrevocable proxies with respect to, and
conveyance of interests (indeed, effectively their entire interests) in, their
respective Class B shares violates Section 7 of the NCS Certificate and that, by
operation thereof, the Locked-Up Shares have been irrevocably converted into
Class A shares.
52. Omnicare has no adequate remedy at law.
COUNT II
Violation of 8 Del. C. 'SS' 141
(Against the Director Defendants)
(In the Alternative to Count I)
53. Omnicare realleges each preceding allegation as if set forth fully
herein.
54. By virtue of their positions as directors of NCS, the Director
Defendants owe duties to NCS stockholders pursuant to 8 Del. C. 'SS' 141,
including, but not limited to, managing NCS's business and affairs and not
taking steps to disable themselves from doing so.
55. By agreeing to the terms of the Director Proxy Lock-Up and the
Genesis Merger Agreement, the Director Defendants have surrendered any ability
to fulfill these statutory duties to NCS and its stockholders.
56. Their decisions with respect to the Director Proxy Lock-Up and the
Genesis Merger Agreement constitute a series of deliberate actions undertaken
for the purpose of disabling themselves from managing the business and affairs
of NCS.
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57. The Director Defendants have thus violated 8 Del. C.'SS' 141.
58. Unless enjoined by this Court from taking further actions with
respect to the Director Proxy Lock-Up and/or the Genesis Merger Agreement, the
Director Defendants will continue to violate 8 Del. C.'SS' 141 to the detriment
of NCS and its stockholders.
59. Omnicare has no adequate remedy at law.
COUNT III
Breach of Fiduciary Duty
(Against the Director Defendants)
(In the Alternative to Counts I and II)
60. Omnicare realleges each preceding allegation as if set forth fully
herein.
61. By virtue of their positions as directors of NCS, the Director
Defendants owe fiduciary duties to NCS stockholders including, but not limited
to, considering and fully evaluating all offers for NCS, exercising due care in
conducting NCS's affairs, not putting self-interest and personal or other
consideration ahead of NCS stockholders' interests, and not taking unreasonable
defensive measures that are disproportionate to any perceived threat posed to
NCS.
62. 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 offering NCS stockholders greater value than the Proposed Genesis
Merger.
63. The Director Defendants have breached their fiduciary duties by
approving and agreeing to enter into the Genesis Merger Agreement, of which the
Director Proxy Lock-Up is an essential component.
64. In further breach of their fiduciary duties, they have also failed,
in any meaningful way, even to consider Omnicare's superior offer.
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65. 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. Their belated, half-hearted assertion that they are now
supposedly "considering" Omnicare's tender offer cannot mask the fact that they
have already committed themselves to an alternative course of action that is
intended to consign NCS stockholders to the vastly inferior offer put forward by
Genesis.
66. In further breach of their fiduciary duties, the Director
Defendants waived, with respect to all transactions contemplated by the Genesis
Merger Agreement, all protections afforded by the provisions of 8 Del. C. 'SS'
203 and any other state takeover law or state law limiting or restricting
business combinations or the ability to acquire or vote shares.
67. 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 stockholders from even considering
potentially superior merger proposals, such as Omnicare's Proposal.
68. Omnicare has no adequate remedy at law.
COUNT IV
Aiding and Abetting Breach of Fiduciary Duty
(Against Genesis and Geneva Sub)
(In the Alternative to Counts I and II)
69. Omnicare realleges each preceding allegation as if set forth fully
herein.
70. By virtue of their positions as directors of NCS, the Director
Defendants owe NCS stockholders fiduciary duties.
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71. The Director Defendants have breached those duties to the detriment
of NCS stockholders.
72. Genesis and Geneva Sub have aided and abetted these breaches. As
direct participants in the Director Proxy Lock-Up and the Genesis Merger
Agreement, Genesis and Geneva 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, Geneva Sub and NCS to interfere with
Omnicare's or any other superior merger proposals.
73. Unless enjoined, Genesis and Geneva Sub will continue to aid and
abet the Director Defendants' breaches of fiduciary duties to NCS and its other
stockholders.
74. Omnicare has no adequate remedy at law.
Count V
Declaratory Judgment that the Break-Up
Penalty Is Unreasonable, Invalid and Unenforceable
(Against All Defendants)
75. Omnicare realleges each preceding allegation as if set forth fully
herein.
76. There exists an actual, substantial and immediate controversy
within this Court's jurisdiction, resulting from the conduct alleged herein,
which will be redressed by a judicial decision favorable to Omnicare and the
other NCS stockholders.
77. The Court, thus, may properly declare the rights, obligations and
other legal relationships of the parties to this action with respect to the
Break-Up Penalty and all other matters alleged herein.
78. By virtue of their positions as directors of NCS, the Director
Defendants owe fiduciary duties to NCS stockholders including, but not limited
to, considering and fully
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evaluating all offers for NCS, exercising due care in conducting NCS's affairs,
not putting self-interest and personal or other consideration ahead of NCS
stockholders' interests, and not taking unreasonable defensive measures that are
disproportionate to any perceived threat posed to NCS.
79. The decisions of the Director Defendants with respect to the
Break-Up Penalty 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 offering NCS stockholders greater value
than the Proposed Genesis Merger.
80. The Director Defendants have breached their fiduciary duties by
approving to the Break-Up Penalty.
81. Accordingly, Omnicare is entitled to a judgment declaring that the
Break-Up Penalty is unreasonable, invalid and unenforceable.
82. Omnicare has no adequate remedy at law.
WHEREFORE, Omnicare prays for judgment as follows:
a. Declaring that the Director Proxy Lock-Up violates Section 7 of the
NCS Certificate and by operation thereof the Locked-Up Shares have been
irrevocably converted into Class A shares;
b. In the alternative, declaring that the Director Defendants violated
8 Del. C. 'SS' 141 in agreeing to the terms of the Genesis Merger Agreement and
the associated Director Proxy Lock-Up, and, therefore, that the Genesis Merger
Agreement is null and void;
c. In the alternative, preliminarily and permanently enjoining (i) NCS,
the Director Defendants, Genesis, Geneva 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 the Director Proxy Lock-Up and/or
the Genesis Merger Agreement; and (ii) Genesis and
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Geneva Sub, and their respective officers, directors, employees, agents and all
persons acting on their behalf from aiding and abetting the Director Defendants'
breaches of their fiduciary duties;
d. Declaring that the Break-Up Penalty is unreasonable, invalid and
unenforceable; and
e. Granting Omnicare such further relief as may be just and proper,
including the costs and disbursements of this action and reasonable attorneys'
fees.
Respectfully submitted,
POTTER ANDERSON & CORROON LLP
By: /s/ Donald J. Wolfe, Jr.
------------------------------
Donald J. Wolfe, Jr.
Kevin R. Shannon
Michael A. Pittenger
John M. Seaman
Hercules Plaza
1313 N. Market Street
P. O. Box 951
Wilmington, DE 19899
(302) 984-6000
Counsel for Plaintiff Omnicare, Inc.
Of counsel:
Robert C. Myers
Seth C. Farber
James P. Smith III
David F. Owens
Melanie R. Moss
DEWEY BALLANTINE LLP
1301 Avenue of the Americas
New York, New York 10019-6092
Telephone (212) 259-8000
August 12, 2002
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