Exhibit 99.1
THE COURT OF CHANCERY OF THE STATE OF
DELAWARE COUNTY OF NEW CASTLE
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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,
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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
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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
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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
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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