Exhibit 99.1
COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO
MICHAEL PETROVIC ) CASE NO.:
on behalf of himself and )
all others similarly situated ) JUDGE:
20336 Wallingford Lane )
Barrington, Illinois 60010 )
)
Plaintiffs )
)
v. )
)
NCS HEALTHCARE, INC. ) CLASS ACTION COMPLAINT
3201 Enterprise Parkway, Suite 220 ) ----------------------
Beachwood, Ohio 44122 )
)
JON H. OUTCALT )
c/o NCS HEALTHCARE, INC. )
3201 Enterprise Parkway, Suite 220 )
Beachwood, Ohio 44122 )
)
KEVIN B. SHAW )
c/o NCS HEALTHCARE, INC. )
3201 Enterprise Parkway, Suite 220 )
Beachwood, Ohio 44122 )
)
RICHARD L. OSBORNE )
c/o NCS HEALTHCARE, INC, )
3201 Enterprise Parkway, Suite 220 )
Beachwood, Ohio 44122 )
)
and )
)
BOAKE A. SELLS )
c/o NCS HEALTHCARE, INC. )
3201 Enterprise Parkway, Suite 220 )
Beachwood, Ohio 44122 )
)
Defendants )
Plaintiff, by his attorneys, alleges upon information and belief,
except as to paragraph 1 which is alleged on personal knowledge, as follows:
1. Plaintiff is, and has been at all relevant times, the owner 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.
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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 plaintiff and other public
shareholders of NCS and owe plaintiff 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. Plaintiff brings this action on his behalf and as a shareholders'
class action, pursuant to Ohio and 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:
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(i) did defendants breach their fiduciary and other common law
duties owed by them to plaintiff 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) Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature.
Plaintiff's claims are similar to those of the Class and plaintiff
has no interests 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
interests of the other members not parties to the adjudications or substantially
impair or impede their ability to protect their interests.
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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
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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 28, 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 or "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, plaintiff and the Class will
be irreparably harmed as a result of defendants' breaches of their fiduciary
duties.
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21. 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 the 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's public stockholders.
22. Plaintiff and the Class have no adequate remedy at law.
WHEREFORE, plaintiff demands judgment against the defendants jointly
and severally, as follows:
(1) declaring this action to be a class action and certifying plaintiff
as the class representative and his 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 plaintiff and the
Class rescissory damages;
(4) directing that defendants account to plaintiff 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;
(5) 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
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(6) granting plaintiff and the other members of the Class any further
relief the Court deems just and proper.
Of Counsel: /s/ Ronald H. Isroff
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BEATIE AND OSBORN LLP Ronald H. Isroff (0021930)
Edward Korsinsky Michael N. Ungar (0016989)
521 Fifth Avenue, 34th Floor David D. Yeagley (0042433)
New York, New York 10175 ULMER & BERNE LLP
Tel: (212)888-9000 Penton Media Building
1300 East Ninth Street, Suite 900
Cleveland, Ohio 44114-1583
Telephone (216) 621-8400
Fax (216)621-7488
E-mail: risroff@ulmer.com
E-mail: mungar@ulmer.com
E-mail: dyeagley@ulmer.com
Attorneys for Plaintiffs
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