Omnicare, Inc. v. NCS Healthcare, Inc.

Genesis Health Ventures, Inc. (Genesis) (defendant) entered into negotiations to acquire NCS Healthcare, Inc. (NCS) (defendant). At the urging of Genesis, the parties entered into an exclusivity agreement, which prevented NCS from engaging in any negotiations in regards to a competing acquisition or transaction. Subsequently, Omnicare, Inc. (Omnicare) (plaintiff) contacted NCS about a proposed transaction. NCS did not respond due to the exclusivity agreement with Genesis, but NCS did use Omnicare's proposed transaction to negotiate more favorable terms with Genesis. Complementary to Genesis’s merger proposal was a voting agreement under which Jon Outcalt, Chairman of the NCS board, and Kevin Shaw, NCS President and CEO, agreed to vote all of their shares—combined, a majority of NCS shares—in favor of the merger agreement. This voting agreement effectively meant that NCS shareholder approval of the merger was guaranteed even if the NCS board did not recommend its approval. The merger agreement, which contained a clause restricting the rights of NCS to discuss an alternative merger with a third party, was then executed. The merger agreement did not contain a fiduciary out clause, which would have given the NCS board the opportunity to opt out of the agreement if it needed to do so to discharge its fiduciary duties to the corporation. Meanwhile, before the official—although futile—NCS shareholder vote on the Genesis merger proposal, Omnicare submitted a merger proposal that was superior to that of Genesis. At that point, the NCS board withdrew its recommendation that the shareholders vote in favor of the Genesis merger agreement. However, the Genesis merger agreement provided that the proposal still must be submitted to a shareholder vote and, because of the Outcalt/Shaw voting agreement and the omission of a fiduciary out clause, that meant that the merger agreement was going to be approved no matter what. Omnicare brought suit.