<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER , 1997
REGISTRATION NO. 333-22765
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
OMNICARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE (PRIMARY STANDARD 31-1001351
(STATE OF INCORPORATION) INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION
CLASSIFICATION CODE NO.)
NUMBER)
</TABLE>
50 East RiverCenter Blvd. -- Suite 1530
Covington, Kentucky 41011
(606) 655-1180
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
Cheryl D. Hodges
c/o Omnicare Management Company
2800 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202-4728
(513) 762-6666
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies to:
<TABLE>
<S> <C>
Morton A. Pierce John F. Bales, III
Dewey Ballantine Morgan, Lewis & Bockius LLP
1301 Avenue of the Americas 2000 One Logan Square
New York, New York 10019 Philadelphia, Pennsylvania 19103
(212) 259-8000 (215) 963-5000
</TABLE>
------------------------
Approximate date of commencement of proposed sale of the securities to the
public: Upon consummation of the Merger described herein.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Restriction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
TITLE OF EACH PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(2)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
$1.00 par value....... 710,060 shares N/A $710,060 $215.17(3)
==================================================================================================
</TABLE>
(1) Represents the maximum number of shares of common stock of Omnicare, Inc.,
par value $1.00 per share, that the Registrant would issue in exchange for
the common stock of Coromed, Inc., par value $.01 per share, and in exchange
for options to acquire the common stock of Coromed, Inc.
(2) Calculated pursuant to Rule 457(f) under the Securities Act of 1933 based on
the par value of the maximum number of Omnicare shares to be issued.
(3) $557.83 was previously paid with the filing of the Form S-4 Registration
Statement on March 4, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE TIME UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE> 2
PROXY STATEMENT OF
COROMED, INC.
FOR SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD , 1997
PROSPECTUS
OMNICARE, INC.
RELATING TO THE OFFERING OF UP TO 710,060 SHARES OF COMMON
STOCK, PAR VALUE $1.00 PER SHARE OF OMNICARE.
This Proxy Statement of Coromed, Inc., a Delaware corporation ("Coromed"),
and Prospectus of Omnicare, Inc., a Delaware corporation ("Omnicare") (the
"Proxy Statement/ Prospectus") is being furnished to the holders of common stock
of Coromed, par value $.01 per share ("Coromed Common Stock"), in connection
with the solicitation of proxies by the Board of Directors of Coromed (the
"Coromed Board") for use at the special meeting of stockholders of Coromed to be
held at on , 1997, and any adjournments or postponements
thereof (the "Special Meeting").
At the Special Meeting, stockholders of Coromed will consider and vote on
the proposed merger described herein, by which Coromed Acquisition Corporation
("Merger Sub"), a Delaware corporation and wholly-owned subsidiary of Omnicare,
will merge (the "Merger") with and into Coromed and Coromed will become a
wholly-owned subsidiary of Omnicare, pursuant to the terms of an Amended and
Restated Agreement and Plan of Merger, dated as of August 19, 1997, by and among
Omnicare, Merger Sub, Coromed and certain stockholders of Coromed (the "Merger
Agreement"). The Merger Agreement amends and restates in its entirety an
Agreement and Plan of Merger dated as of January 27, 1997, by and among
Omnicare, Merger Sub, Coromed and certain stockholders of Coromed (the "Initial
Merger Agreement"). If the Merger is consummated, all holders of Coromed Common
Stock and of options to acquire Coromed Common Stock ("Coromed Options") will
receive shares of the common stock, par value $1.00 per share, of Omnicare
("Omnicare Common Stock"), in an amount determined pursuant to a formula based
upon the average of the closing price per share of Omnicare Common Stock on the
New York Stock Exchange Composite Tape for the five consecutive trading days
immediately preceding the second trading day prior to the closing of the Merger.
If such average closing price of Omnicare Common Stock is $21 1/8 or lower or
$37 1/8 or higher, then for purposes of calculating the number of shares to be
received by the holders of Coromed Common Stock, the average closing price will
be deemed to be $21 1/8 or $37 1/8, respectively. Assuming that the Merger had
been consummated on , 1997, and that each holder of a Coromed Option
exercises such option, each Coromed stockholder would have received shares
of Omnicare Common Stock in exchange for each share of Coromed Common Stock
surrendered in the Merger (the "Assumed Exchange Ratio"). See "THE MERGER." The
actual exchange ratio will be determined immediately prior to the Closing Date
(as defined herein) and, therefore, may not be known at the time of the Special
Meeting. See "Summary -- The Merger -- Terms of the Merger" for a toll free
number to call for current estimates of the Exchange Ratio.
FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF THE MERGER, INCLUDING A
DESCRIPTION OF THE CONSIDERATION TO BE RECEIVED BY COROMED STOCKHOLDERS, SEE
"THE MERGER."
Shares of Omnicare Common Stock are quoted on the New York Stock Exchange
(the "NYSE") under the symbol "OCR." There is no public trading market for
Coromed Common Stock.
This Proxy Statement also constitutes a Prospectus relating to the shares
of Omnicare Common Stock to be issued in connection with the proposed Merger.
<PAGE> 3
The information contained in this Proxy Statement/Prospectus relating to
Omnicare has been furnished by Omnicare for inclusion herein. Omnicare is
engaged directly and through subsidiaries, in providing professional pharmacy
and related consulting services for long-term care institutions such as nursing
homes, retirement centers and other institutional health care facilities. The
principal executive offices of Omnicare are located at 50 East RiverCenter
Blvd. -- Suite 1530, Covington, Kentucky 41011, telephone number (606) 655-1180.
The information contained in this Proxy Statement/ Prospectus relating to
Coromed has been furnished by Coromed for inclusion herein. Coromed's operations
consist principally of providing contract research services to pharmaceutical,
biotechnology and medical product companies. The principal executive offices of
Coromed are located at Rensselaer Technology Park, 185 Jordan Road, Troy, New
York 12180-7615, telephone number (518) 283-4000.
This Proxy Statement/Prospectus and the accompanying proxy cards are first
being mailed to Coromed stockholders on or about , 1997.
FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT STOCKHOLDERS SHOULD CONSIDER
BEFORE VOTING FOR OR AGAINST THE MERGER, SEE "RISK FACTORS" BEGINNING ON PAGE 7.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/ PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1997.
ii
<PAGE> 4
AVAILABLE INFORMATION
Omnicare is subject to the informational requirements of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy statements and other information
filed by Omnicare with the Commission can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices
at 7 World Trade Center, 13th Floor, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The SEC also maintains a site on the World Wide Web at http://www.sec.gov. that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC.
Omnicare has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Omnicare Common Stock to be issued pursuant to the proposed Merger.
This Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement, certain portions of which have been omitted as
permitted by the rules and regulations of the Commission. Such additional
information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Proxy Statement/Prospectus (or in
any document incorporated in this Proxy Statement/ Prospectus by reference) as
to the contents of any contract or other document referred to herein or therein
are not necessarily complete, and in each instance reference is made to the copy
of such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference.
Omnicare Common Stock is listed and traded on the NYSE. Reports, proxy
statements and other information concerning Omnicare can be inspected at the
NYSE, 20 Broad Street, New York, New York 10005.
No person is authorized to give any information or to make any
representation other than those contained in this Proxy Statement/Prospectus
and, if given or made, such information or representation must not be relied
upon as having been authorized by Omnicare or Coromed. Neither the delivery of
this Proxy Statement/Prospectus nor any distribution of securities registered
hereunder shall, under any circumstances, create any implication that there has
been no change in the affairs of Omnicare or Coromed since the date hereof.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents previously filed by Omnicare with the Commission
pursuant to the Exchange Act are hereby incorporated by reference in this Proxy
Statement/Prospectus:
1. Omnicare's Annual Report on Form 10-K for the fiscal year ended December
31, 1996, as amended on Form 10-K/A filed August 6, 1997 (which incorporates by
reference certain information from Omnicare's Proxy Statement relating to its
1997 Annual Meeting of Stockholders).
2. Omnicare's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1997, as amended on Form 10-Q/A filed August 6, 1997 and Omnicare's
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1997.
3. Omnicare's Current Report on Form 8-K dated January 31, 1997 and filed
February 21, 1997, Omnicare's Current Report on Form 8-K dated and filed
February 6, 1997, Omnicare's Current Report on Form 8-K dated May 31, 1997 and
filed June 19, 1997, Omnicare's Current Report on Form 8-K dated and filed
August 6, 1997, Omnicare's Current Report on Form 8-K dated and filed August 8,
1997 and Omnicare's Current Report on Form 8-K dated September 12, 1997, filed
September 19, 1997 and amended September 29, 1997.
iii
<PAGE> 5
4. The description of Omnicare Common Stock in Omnicare's Registration
Statement on Form 8-A under the Exchange Act (File No. 1-08269) filed September
14, 1993, including all amendments and reports filed for the purpose of updating
such description.
All documents subsequently filed by Omnicare pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the Special Meeting shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing thereof. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Proxy Statement/Prospectus.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE
UPON REQUEST FROM OMNICARE, INC., ATTENTION, CHERYL D. HODGES, C/O OMNICARE
MANAGEMENT COMPANY, 2800 CHEMED CENTER, 255 EAST FIFTH STREET, CINCINNATI, OHIO
45202-4728, TELEPHONE NUMBER (513) 762-6666. IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY , 1997.
iv
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION................................................................. iii
INCORPORATION OF DOCUMENTS BY REFERENCE............................................... iii
SUMMARY............................................................................... 1
The Companies....................................................................... 1
The Special Meeting................................................................. 1
The Merger.......................................................................... 2
RISK FACTORS.......................................................................... 7
COMPARATIVE PER SHARE DATA............................................................ 10
OMNICARE AND SUBSIDIARIES............................................................. 12
COROMED, INC. AND SUBSIDIARIES........................................................ 13
MARKET PRICES......................................................................... 14
DIVIDEND POLICY....................................................................... 14
COROMED SPECIAL MEETING............................................................... 15
The Special Meeting................................................................. 15
Record Date; Securities Entitled to Vote............................................ 15
Quorum.............................................................................. 15
Required Vote....................................................................... 15
Proxies and Revocation.............................................................. 15
THE MERGER............................................................................ 17
Background of the Merger............................................................ 17
Reasons for the Merger.............................................................. 18
Fairness Opinion.................................................................... 20
Terms of the Merger................................................................. 23
Exchange............................................................................ 24
Dividends........................................................................... 24
Interests of Certain Persons in the Merger; Possible Conflicts of Interest.......... 24
Support Agreement................................................................... 26
Exclusivity......................................................................... 27
Resales of Omnicare Common Stock.................................................... 27
Conditions to the Merger............................................................ 28
Termination of the Merger Agreement................................................. 29
Termination Fees; Expenses of the Merger............................................ 29
Representations and Warranties...................................................... 29
Survival of Representations and Warranties; Indemnification......................... 30
Governmental and Regulatory Approvals............................................... 30
Appraisal Rights.................................................................... 30
Accounting Treatment of the Merger.................................................. 32
Comparison of Stockholder Rights.................................................... 33
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER................................. 37
BUSINESS OF COROMED................................................................... 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF COROMED.......................................................................... 44
BENEFICIAL OWNERSHIP OF COROMED COMMON STOCK.......................................... 48
EXPERTS............................................................................... 49
LEGAL OPINIONS........................................................................ 49
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................................ F-1
</TABLE>
v
<PAGE> 7
APPENDICES
<TABLE>
<S> <C> <C> <C>
Appendix A -- Amended and Restated Agreement and Plan of Merger, dated as of August A-1
19, 1997, by and among Omnicare, Inc., Coromed Acquisition
Corporation, Coromed, Inc. and Certain Stockholders of Coromed, Inc.
Appendix B -- Support Agreement, dated as of January 27, 1997, by and among B-1
Omnicare, Inc., Coromed, Inc. and Certain Stockholders of Coromed,
Inc.
Appendix C -- Section 262 of the Delaware General Corporation Law -- Appraisal C-1
Rights
Appendix D -- Fairness Opinion of Wessels, Arnold & Henderson, L.L.C. D-1
</TABLE>
vi
<PAGE> 8
SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement/Prospectus. This summary is qualified in its entirety by
the more detailed information contained in this Proxy Statement/Prospectus, in
its Appendices and in the documents referred to herein, to which reference is
made for a more complete statement of the matters discussed below. The
information contained in this Proxy Statement/Prospectus relating to Omnicare
has been furnished by Omnicare for inclusion herein. The information contained
in this Proxy Statement/Prospectus relating to Coromed has been furnished by
Coromed for inclusion herein.
THE COMPANIES
Omnicare
Omnicare is a leading independent provider of pharmacy and related services
to long-term care institutions such as nursing homes, retirement centers and
other institutional health care facilities. Omnicare purchases, repackages and
dispenses pharmaceuticals, both prescription and non-prescription, and provides
computerized medical recordkeeping and third-party billing for patients in such
facilities. Omnicare also provides consultant pharmacist services, including
evaluating monthly patient drug therapy, monitoring the control, distribution
and administration of drugs within the nursing facility and assisting in
compliance with state and federal regulations. In addition, Omnicare provides
ancillary services, such as infusion therapy, distributes medical supplies and
offers clinical care plan and financial software information systems to its
client nursing facilities. Omnicare currently provides these services to
approximately 427,400 residents in approximately 5,300 nursing homes and other
long-term care facilities in 36 states.
Omnicare's executive offices are located at 50 East RiverCenter
Blvd. -- Suite 1530, Covington, Kentucky 41011, and its telephone number is
(606) 655-1180.
Coromed
Coromed is an international full-service contract research organization
("CRO") serving multinational pharmaceutical firms and biotechnology and medical
device companies. Coromed provides support for the preclinical and clinical
development of therapeutics by offering comprehensive and fully integrated
biological, pharmacological, and chemical research services, as well as
clinical, quality assurance, data management, medical writing, and regulatory
support for its clients' clinical development programs. In addition to North
America, Coromed conducts business in South America and Europe.
Coromed's principal executive offices are located at Rensselaer Technology
Park, 185 Jordan Road, Troy, New York 12180-7615 and its telephone number is
(518) 283-4000.
THE SPECIAL MEETING
Time, Date and Place
The Special Meeting of the Coromed stockholders will be held on
, 1997, at local time, at the located at
.
Purpose of the Meeting
At the Special Meeting, the Coromed stockholders will be asked to consider
and vote upon the proposed Merger of Merger Sub, a wholly-owned subsidiary of
Omnicare, with and into Coromed. The Merger will result in Coromed becoming a
wholly-owned subsidiary of Omnicare.
Record Date; Securities Entitled to Vote
Holders of record (the "Record Holders") of Coromed Common Stock at the
close of business on , 1997 (the "Record Date"), will be entitled to
vote at the Special Meeting. On the Record Date,
<PAGE> 9
there were shares of Coromed Common Stock issued and outstanding. Each
issued and outstanding share of Coromed Common Stock is entitled to one vote per
share with respect to the Merger.
Quorum
The presence, in person or by proxy, of the holders of a majority of the
outstanding Coromed Common Stock entitled to vote shall constitute a quorum. If
a meeting cannot be organized because of the absence of a quorum, those present
may, except as otherwise provided by law, adjourn the meeting to such time and
place as they may determine.
Required Vote
The approval of a majority of the outstanding shares of Coromed Common
Stock is required to approve the Merger.
As of the Record Date, the following officers of Coromed: Dr. Dale B.
Evans, Chairman, President and Chief Executive Officer; Alice G. Fedory,
Executive Vice President, Chief Operations Officer and Secretary; Thomas J.
Massey, Senior Vice President, Drug Development, and Dr. Ronald E. Weishaar,
Senior Vice President, Drug Research (each, a "Principal Stockholder") owned an
aggregate of 406,111 shares of Coromed Common Stock, representing approximately
62% of Coromed Common Stock entitled to vote on the Merger. The Principal
Stockholders and Coromed have entered into an agreement with Omnicare (the
"Support Agreement") pursuant to which the Principal Stockholders have agreed,
among other things, to vote the shares of Coromed Common Stock owned by them in
favor of the Merger. Thus, in the absence of breach of the Support Agreement,
approval of the Merger is assured. Attached as Appendix B is the full text of
the Support Agreement.
THE MERGER
Pursuant to the Merger Agreement, Merger Sub will be merged with and into
Coromed and Coromed will become a wholly owned subsidiary of Omnicare. See "THE
MERGER --Terms of the Merger." Coromed determined to engage in the Merger
following its strategic decision to seek an alliance with another company that
would offer additional resources and growth opportunities to Coromed through
complementary operations. Omnicare determined to engage in the Merger to advance
its clinical pharmaceutical capabilities and leverage its existing assets. See
"THE MERGER -- Background of the Merger."
Closing Date; Effective Time
The closing date shall be the first business day immediately following the
day on which the last to be fulfilled or waived of the conditions (see "THE
MERGER --Conditions to the Merger") to the Merger Agreement are fulfilled or
waived in accordance with the Merger Agreement or such other time, date or place
as Omnicare and Coromed may agree (the "Closing Date").
Subject to the terms and conditions of the Merger Agreement, the Merger
will be effective at the time of filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with the Delaware
General Corporation Law ("DGCL") or at such later time as Omnicare and Coromed
will have agreed upon and designated in such filing as the effective time of the
Merger (the "Effective Time"). Omnicare and Coromed presently anticipate that
the Effective Time will occur as soon as practicable after the Special Meeting.
Terms of the Merger
At the Effective Time, each share of Coromed Common Stock issued and
outstanding immediately prior to the Effective Time (other than treasury shares
and any Dissenting Shares (as defined in "THE MERGER -- Terms of the Merger")),
shall, by virtue of the Merger and without any action on the part of
2
<PAGE> 10
the holder thereof, be converted into the right to receive such number of shares
of Omnicare Common Stock that equals the result obtained by calculation pursuant
to the following formula:
<TABLE>
<S> <C>
15,000,000
-----------
Y
X = -------------
Z
</TABLE>
where X is the number of shares of Omnicare Common Stock to be issued in
exchange for each share of Coromed Common Stock (the "Exchange Ratio"); Y is the
average of the closing price per share of Omnicare Common Stock on the NYSE
Composite Tape (as reported in The Wall Street Journal) on each of the five
consecutive trading days immediately preceding the second trading day prior to
the Closing Date (the "Average Closing Price"); and Z is the total number of
shares of Coromed Common Stock to be exchanged in the Merger for shares of
Omnicare Common Stock, including the total number of shares of Coromed Common
Stock deemed to be outstanding immediately prior to the Effective Time in
respect of and in lieu of all Coromed Options outstanding immediately prior to
the Effective Time. The number of shares deemed to be outstanding in respect of
and in lieu of Coromed Options shall equal (x) the aggregate number of Coromed
shares subject to Coromed Options less (y) the number of Coromed shares which
could be purchased with the aggregate exercise prices of all Coromed Options
(valuing the Coromed shares for this purpose at the Exchange Ratio multiplied by
the Average Closing Price). The Company has been informed by the holders of
substantially all outstanding Company Options that such holders intend to
exercise their Company Options prior to the Effective Time, in which case the
number of shares of Company Common Stock would increase by the number of shares
currently subject to Company Options and there would not be any adjustments
pursuant to the immediately preceding sentence. Notwithstanding the foregoing,
in the event that the Average Closing Price per share of Omnicare Common Stock
is $21 1/8 or lower, or $37 1/8 or higher, then for purposes of calculating the
Exchange Ratio, the Average Closing Price will be deemed to be $21 1/8 or
$37 1/8, respectively (the "Collar Limitations").
The following chart sets forth calculations of the Exchange Ratio based on
certain assumed Average Closing Prices of Omnicare Common Stock and assuming (i)
no holder of a Company Option exercises such option prior to the Effective Time
and (ii) all Company Options are exercised prior to the Effective Time.
<TABLE>
<CAPTION>
EXCHANGE RATIO EXCHANGE RATIO
ASSUMING NO ASSUMING ALL
AVERAGE CLOSING PRICE OPTION EXERCISES OPTIONS EXERCISED
----------------------------------------------- ---------------- -----------------
<S> <C> <C>
$21 1/8 or lower............................... 0.899 0.873
$25............................................ 0.760 0.738
$30............................................ 0.633 0.615
$35............................................ 0.543 0.527
$37 1/8 or more................................ 0.512 0.497
</TABLE>
Assuming that the Merger had been consummated on , 1997, the Average
Closing Price would be $ and the Exchange Ratio would have been
shares of Omnicare Common Stock per share of Coromed Common Stock assuming no
Company Options are exercised and shares of Omnicare Common Stock per
share of Coromed Common Stock assuming all Company Options are exercised. The
actual Exchange Ratio will be determined immediately prior to the Closing Date
and, therefore, may not be known at the time of the Special Meeting and will
likely differ from the examples referred to above.
A toll-free phone number has been established to disclose the Exchange
Ratio as of the latest practicable date. Coromed stockholders may call
1-800- at any time prior to the closing of the polls at the Special
Meeting to listen to a recording disclosing the Exchange Rate, calculated as of
the latest practicable date.
At the Effective Time, each Coromed Option outstanding immediately prior to
the Effective Time, by virtue of the Merger, will be converted into the right to
receive a number of shares of Omnicare Common Stock equal to the Exchange Ratio
multiplied by the number of shares of Coromed Common Stock deemed to be
outstanding with respect to and in lieu of each such Coromed Option, based upon
the applicable exercise price associated therewith (which exercise prices range
from $2.00 to $15.00 with a weighted average exercise
3
<PAGE> 11
price of $3.03). As described above, the Exchange Ratio takes into account all
outstanding shares of Coromed Common Stock as well as all outstanding Coromed
Options. Therefore, upon consummation of the Merger, the holders of Coromed
Common Stock and Coromed Options will receive, in the aggregate, shares of
Omnicare Common Stock with an aggregate total value based upon the Average
Closing Price, subject to the Collar Limitations.
An aggregate of 100 shares of outstanding Coromed Common Stock, owned by
one non-management employee of Coromed, are unvested shares (each such share, a
"Restricted Share") which will vest on April 15, 1998. The shares of Omnicare
Common Stock given in exchange for the Restricted Shares pursuant to the Merger
will be subject to the same vesting periods as those periods presently imposed
upon the Restricted Shares.
No fractional shares of Omnicare Common Stock will be issued in the Merger.
In lieu of any fractional shares that would otherwise be issuable, holders will
be paid a cash adjustment equal to the applicable fractional proportion of the
Average Closing Price, subject to the Collar Limitations, of a share of Omnicare
Common Stock.
The Merger Agreement does not provide Coromed with a right to terminate if
Omnicare's stock price falls below a certain level.
Support Agreement
As a condition to Omnicare's willingness to enter into the Initial Merger
Agreement, the Principal Stockholders executed the Support Agreement, dated as
of January 27, 1997, pursuant to which the Principal Stockholders have agreed,
among other things, (i) to vote the shares of Coromed Common Stock held by them
(the "Principal Stockholder Shares") in favor of the Merger and against any
action that would interfere with the Merger; (ii) not to sell any Principal
Stockholder Shares or engage in discussions concerning any such sale; and (iii)
to grant to Omnicare an option (the "Principal Stockholder Option") to purchase
the Principal Stockholder Shares at a purchase price per share equal to the
Exchange Ratio (calculated using the exercise date of the Principal Stockholder
Option as the deemed date of the Effective Time for purposes of calculating the
Average Closing Price). The Principal Stockholder Option is exercisable for a
one-month period following (i) the termination of the Merger Agreement under
circumstances entitling Omnicare to the termination fee described below under
"THE MERGER-Termination Fees; Expenses of the Merger" or (ii) Coromed having
entered into an agreement to engage in an Acquisition Transaction (as defined
below). See "THE MERGER -- Support Agreement."
Fairness Opinion
Wessels, Arnold & Henderson, L.L.C. ("Wessels") has acted as financial
advisor to Coromed in connection with the Merger and has assisted the Coromed
Board in its examination of the fairness, from a financial point of view, of the
Merger consideration to be received by the Coromed stockholders.
On August 14, 1997, Wessels delivered its opinion (which was confirmed in
writing) to the Coromed Board to the effect that, as of the date of such opinion
and based upon and subject to certain matters stated therein, the consideration
to be received by the Coromed stockholders in the Merger is fair to such
stockholders from a financial point of view. A copy of Wessels' written opinion
dated August 14, 1997, which sets forth the assumptions made, procedures
followed, matters considered, limitations on and scope of the review by Wessels,
is attached as Appendix D to this Proxy Statement/Prospectus. Coromed
stockholders are encouraged to read such opinion in its entirety. See "THE
MERGER -- Fairness Opinion."
Exclusivity
Pursuant to the Merger Agreement, Coromed and its Subsidiaries have agreed
prior to the Effective Time, not to initiate, solicit or encourage an
Alternative Proposal (as defined below in "THE MERGER-Exclusivity") or, subject
to the fiduciary duties of the Coromed Board to the Coromed stockholders, engage
in any negotiations concerning, or provide any non-public information or data,
or have any discussions with any person relating to an Alternative Proposal. See
"THE MERGER -- Exclusivity."
4
<PAGE> 12
Conditions to the Merger
In addition to the required approval of the Coromed stockholders, the
Merger is subject to the satisfaction or waiver of certain other conditions,
including, without limitation: the absence of an order or injunction of a court
of competent jurisdiction which prohibits the consummation of the Merger; the
receipt of requisite governmental consents and approvals to consummate the
Merger; the accuracy of the representations and warranties of each of the
parties to the Merger Agreement; the performance of specified obligations of
each party to the Merger Agreement; the receipt of letters from the independent
public accountants of each of Coromed and Omnicare regarding the treatment of
the Merger as a "pooling of interests"; the receipt by Coromed of opinions of
counsel with respect to the treatment of the Merger as a reorganization for
federal income tax purposes; holders of no more than 5% of the outstanding
shares of Coromed Common Stock having exercised appraisal rights; and certain
other conditions. If the conditions relating to the receipt of assurances
regarding the accounting or tax treatment of the Merger are waived, this Proxy
Statement/Prospectus will be amended and Coromed will resolicit stockholder
votes to the extent required by law. See "THE MERGER -- Conditions to the
Merger."
Termination
The Merger Agreement is subject to termination: (a) by mutual consent of
Omnicare and Coromed; (b) by either Omnicare or Coromed if (i) the Merger is not
consummated by November 30, 1997, (ii) the approval of Coromed stockholders is
not obtained, or (iii) upon the existence of an order, decree or ruling by a
court or governmental agency prohibiting the Merger; (c) by the Coromed Board
(i) upon exercise of its good faith judgment as to its fiduciary duties to its
stockholders if required by reason of an Alternative Proposal or (ii) upon
breach by Omnicare or Merger Sub of their representations and warranties or
agreements in the Merger Agreement; (d) by the board of directors of Omnicare
("Omnicare Board") if (i) Coromed modifies or withdraws its approval or
recommendation of the Merger in a manner materially adverse to Omnicare or (ii)
upon breach by Coromed or the Principal Stockholders of their representations
and warranties or agreements contained in the Merger Agreement. See "THE MERGER
- -- Termination of the Merger Agreement."
Termination Fees; Expenses of the Merger
Under certain circumstances upon termination of the Merger Agreement
following the existence of an Alternative Proposal, Coromed would be required to
pay Omnicare a fee of $2,000,000.
All expenses incurred in connection with the Merger Agreement will be paid
by the party incurring such expenses; provided, that if the Merger is
consummated, the surviving corporation in the Merger will pay the reasonable
fees and expenses incurred by Coromed and the Principal Stockholders in an
amount up to $750,000 in the aggregate. See "THE MERGER -- Termination Fees;
Expenses of the Merger."
Interests of Certain Persons in the Merger; Possible Conflicts of Interest
In considering the approval by the Coromed Board of the Merger, Coromed
stockholders should be aware that the four Principal Stockholders comprise both
the Coromed Board and the senior management of Coromed and that the Principal
Stockholders have certain interests in, and will receive benefits from, the
Merger that are in addition to, and differ from, the interests of, and benefits
to, the stockholders of Coromed generally. These interests and benefits,
described below and elsewhere in this Proxy Statement/Prospectus, may constitute
potential conflicts of interest with the stockholders of Coromed in the
negotiation, approval and consummation of the Merger.
The Principal Stockholders (i) have entered into the Support Agreement with
Omnicare pursuant to which they have agreed, among other things, to vote their
shares of Coromed Common Stock in favor of the Merger and have granted to
Omnicare the Principal Stockholder Option; (ii) will enter into employment
agreements with Omnicare providing that the Principal Stockholders will maintain
their current positions with Coromed, and, in the case of Dr. Evans, providing
that Omnicare will use reasonable best efforts to nominate and elect Dr. Evans
to the Coromed Board for one term following the Merger, and providing that, as a
portion
5
<PAGE> 13
of their employment compensation, the Principal Stockholders will receive
warrants to purchase an aggregate of 280,000 shares of Omnicare Common Stock;
and (iii) will enter into non-competition agreements with Omnicare. See "THE
MERGER -- Interests of Certain Persons in the Merger."
Governmental and Regulatory Approvals
Omnicare and Coromed do not believe that any governmental filings in the
United States are required with respect to the Merger, other than the filing of
the Certificate of Merger required to be filed with the Secretary of State of
the State of Delaware in accordance with the DGCL and the filing of the
Registration Statement of which this Proxy Statement/Prospectus is a part with
the Commission.
Appraisal Rights
If the Merger is approved by the required vote of the Coromed stockholders
and is not abandoned or otherwise terminated, holders of Coromed Common Stock on
the Record Date who did not vote for the Merger may, by complying with the
procedures prescribed in the DGCL, be entitled to appraisal rights as described
therein. Failure to comply precisely with the requirements of the applicable
provision will result in the loss of appraisal rights. See "THE MERGER --
Appraisal Rights." The obligations of Omnicare and Merger Sub to effect the
Merger are conditioned upon, among other things, holders of no more than 5% of
the outstanding shares of Coromed Common Stock having taken the actions required
to exercise appraisal rights.
Accounting Treatment of the Merger
Omnicare and Coromed believe that the Merger will qualify as a "pooling of
interests" for accounting and financial reporting purposes, and have been so
advised by their respective independent public accountants. The consummation of
the Merger is subject to receipt of (i) an opinion from Price Waterhouse LLP,
independent public accountants for Omnicare, to the effect that the Merger will
be accounted for as a "pooling of interests" for purposes of generally accepted
accounting principles and the applicable accounting rules of the Commission and
(ii) a letter from Coopers & Lybrand, L.L.P., independent public accountants for
Coromed, stating their concurrence with the conclusion of Coromed's management
that no conditions exist with respect to Coromed that would preclude the Merger
from being treated as a "pooling of interests" under applicable United States
accounting standards. Coromed's historical financial condition and results of
operations are not material to Omnicare's historical consolidated financial
statements. Accordingly, (i) Coromed's results of operations will be included in
the consolidated financial statements of Omnicare from the date of consummation
of the Merger and (ii) pro forma financial statements are not included herein.
Certain Federal Income Tax Consequences of the Merger
Coromed has received an opinion from Morgan, Lewis & Bockius LLP, dated as
of the date of this Proxy Statement/Prospectus and based upon, among other
things, representation letters provided by Coromed and Omnicare, that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code and Coromed, Omnicare, and Merger Sub will each be a party to the
reorganization within the meaning of Section 368(b) of the Code. In addition,
such opinion states that (i) a Coromed stockholder will not recognize gain or
loss upon the exchange of Coromed Common Stock solely for Omnicare Common Stock;
(ii) the payment of cash to a Coromed stockholder in lieu of a fractional share
interest in Omnicare Common Stock will be treated as if the fractional share had
been distributed as part of the exchange and then redeemed by Omnicare; and
(iii) any such cash payment will be treated as having been received as a
distribution in payment for the Omnicare Common Stock hypothetically redeemed as
provided in Section 302 of the Code, and generally should result in the
recognition of capital gain or loss measured by the difference between the
amount of cash received and the portion of the tax basis of the Coromed Common
Stock allocable to such fractional share interest. It is a condition to the
obligations of each party to consummate the Merger that the opinion of Morgan,
Lewis & Bockius LLP referred to above be confirmed as of the Closing Date.
Holders of Coromed Common Stock are urged to consult their own tax advisors to
determine the particular consequences of the Merger to them under federal,
state, local and foreign tax laws. For a further discussion of certain federal
income tax consequences of the Merger, see "CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER."
6
<PAGE> 14
RISK FACTORS
Prospective investors should carefully consider the following matters,
together with the other information contained elsewhere in this Proxy
Statement/Prospectus, before making a decision with respect to the Merger.
Risks Relating to Acquisition Program. In accordance with its strategy for
growth, which is to build its institutional pharmacy business into a national
organization dedicated to serving the long-term care market, Omnicare is
presently engaged in a geographic expansion program which incorporates an active
acquisition program in the long-term care pharmacy industry. Since December
1988, Omnicare has made over 60 acquisitions of institutional pharmacy
businesses. The success of Omnicare's acquisition program and of its underlying
growth strategy will depend, among other things, on the continued availability
of suitable acquisition candidates. Although there presently are numerous
acquisition candidates nationwide and Omnicare to date has not had difficulty in
identifying suitable acquisition candidates, there can be no assurance that
Omnicare will consummate any additional acquisitions due to the potential for
increased competition for acquisitions from other firms seeking to enter this
market or to enhance their institutional pharmacy businesses.
Omnicare's strategy also contemplates the continued internal growth of the
acquired businesses. Any business acquisition, however, involves inherent
uncertainties, such as the effect on the acquired businesses of integration into
a larger organization and the availability of management resources to oversee
the operations of acquired businesses. Potential obstacles to the successful
integration of acquired businesses include, among others, consolidation of
financial and managerial functions and elimination of operational redundancies,
achievement of purchasing efficiencies and the addition and integration of key
personnel. Even though an acquired business may have enjoyed excellent growth as
an independent company prior to an acquisition, there can be no assurance that
such growth would continue after an acquisition. Over the past eight years,
Omnicare has experienced no materially adverse consequences arising from its
integration activities. There can be no assurance, however, that any acquisition
will be integrated successfully or will not have an adverse impact on Omnicare's
results of operations or financial condition.
Risks of Government Regulation. Omnicare's pharmacy business is subject to
federal, state and local regulations, and its pharmacies are required to be
licensed in the states in which they are located. The failure to obtain or renew
any required regulatory approvals or licenses could adversely affect the
continued operation of Omnicare's business. In addition, the long-term care
facilities that contract for Omnicare's services are also subject to federal,
state and local regulations and are required to be licensed in the states in
which they are located. The failure by these institutions to comply with such
regulations or to obtain or renew any required licenses could result in the loss
of Omnicare's ability to provide pharmacy services to their residents. Omnicare
is also subject to federal and state laws that prohibit certain direct and
indirect payments between health care providers that are intended, among other
things, to induce or encourage the referral of patients to, or the
recommendation of, a particular provider of items or services. Violation of
these laws can result in loss of licensure, civil and criminal penalties and
exclusion from the Medicare and Medicaid programs.
Dependence Upon Government-Sponsored and Third Party Reimbursement.
Approximately one-half of Omnicare's pharmacy services billings are reimbursed
by government sponsored programs, largely Medicaid and to a lesser extent
Medicare, and the remainder is paid or reimbursed by individual patients,
long-term care facilities and other third party payors, including private
insurers. Medicaid and Medicare are highly regulated. The failure, even if
inadvertent, of Omnicare and/or its client institutions to comply with
applicable reimbursement regulations could adversely affect Omnicare's business.
Omnicare's sales and profitability are, and will continue to be, affected
by the efforts of all payors to contain or reduce the cost of health care by
lowering reimbursement rates, limiting the scope of covered services, and
negotiating reduced or capitated pricing arrangements. Any changes which serve
to lower reimbursement levels under Medicare, Medicaid or private pay programs,
including managed care contracts, could adversely affect Omnicare. Furthermore,
other changes in such reimbursement programs or in regulations related thereto,
such as modifications in the timing or processing of payments and other changes
7
<PAGE> 15
intended to limit or decrease the growth of Medicaid, Medicare or third party
expenditures, could adversely affect Omnicare's business.
Uncertainties Associated with Health Care Reform and Federal Budget
Legislation. In recent years, a number of legislative proposals have been
introduced in Congress that would effect major changes in the health care
system, either nationally or at the state level. The Balanced Budget Act of 1997
("Balanced Budget Act") signed into law on August 5, 1997, seeks to achieve a
balanced federal budget by, among other things, reducing federal spending on the
Medicare and Medicaid programs. With respect to Medicare, the law mandates
establishment of a prospective payment system ("PPS") for Medicare skilled
nursing facilities ("SNFs") under which facilities will be paid a federal per
diem rate for virtually all covered nursing facility services. It is anticipated
that the PPS will be phased in over three cost reporting periods, starting with
cost reporting periods beginning on or after July 1, 1998. In the accompanying
Conference Report, the conferees specifically note that, to ensure that the
frail elderly residing in SNFs receive needed and appropriate medication
therapy, the Secretary of the Department of Health and Human Services is to
consider, as part of the PPS for SNFs, the results of studies conducted by
independent organizations, including those which examine appropriate payment
mechanism and payment rates for medication therapy, and develop case mix
adjustments that reflect the needs of such patients. The Balanced Budget Act
also imposes limits on annual updates in payments to Medicare SNFs for routine
services, and institutes consolidated billing for SNF services for all
non-physician Part B items and services for SNF residents, effective July 1,
1998. The law also imposes numerous other cost savings measures affecting
Medicare SNF services.
The Balanced Budget Act also repeals the "Boren Amendment" federal payment
standard for Medicaid payments to Medicaid nursing facilities effective October
1, 1997. There can be no assurance that budget constraints or other factors will
not cause states to reduce Medicaid reimbursement to nursing facilities or that
payments to nursing facilities will be made on a timely basis. The law also
grants greater flexibility to states to establish Medicaid managed care projects
without the need to obtain a federal waiver. Although these waiver projects
generally exempt institutional care, including nursing facility and
institutional pharmacy services, no assurances can be given that these projects
ultimately will not change the reimbursement system for long-term care,
including pharmacy services, from fee-for-service to managed care negotiated or
capitated rates. The Company anticipates that federal and state governments will
continue to review and assess alternative health care delivery systems and
payment methodologies. It is not possible to predict the effect of the recent
budget legislation or the interpretation or administration of such legislation
on Omnicare's business. Accordingly, there can be no assurance that these
changes or any future healthcare legislation will not adversely effect
Omnicare's business.
Competition. The long-term care pharmacy business is highly regionalized
and, within a given geographic region of operations, highly competitive. In the
geographic regions it serves, Omnicare competes with numerous local and regional
institutional pharmacies, as well as the pharmacy operations owned by other
long-term care facilities. In its program of acquiring institutional pharmacy
providers, Omnicare competes with other companies with similar acquisition
strategies. Certain of Omnicare's competitors have greater financial resources
than Omnicare. There can be no assurance that Omnicare will not encounter
increased competition which could adversely affects its business, results of
operations or financial conditions.
Interests of Certain Persons in the Merger; Possible Conflicts of Interest.
In considering the approval by the Coromed Board of the Merger, Coromed
stockholders should be aware that the members of the Coromed Board and senior
management of Coromed have certain interests in, and will receive benefits from,
the Merger that are in addition to, and differ from, the interests of, and
benefits to, Coromed stockholders generally. The Principal Stockholders, among
other things, (i) have entered into the Support Agreement with Omnicare pursuant
to which they have agreed, among other things, to vote their shares of Coromed
Common Stock in favor of the Merger and have granted to Omnicare the Principal
Stockholder Option; (ii) will enter into employment agreements with Omnicare
providing that the Principal Stockholders will maintain their current positions
with Coromed, and, in the case of Dr. Evans, providing that Omnicare will use
reasonable best efforts to nominate and elect Dr. Evans to the Coromed Board for
one term following the Merger, and providing that, as a portion of their
employment compensation, the Principal Stockholders will receive warrants to
purchase
8
<PAGE> 16
an aggregate of 280,000 shares of Omnicare Common Stock; and (iii) will enter
into non-competition agreements with Omnicare. These interests and benefits may
constitute potential conflicts of interest with the stockholders of Coromed in
the negotiation, approval and consummation of the Merger. See "THE
MERGER -- Interests of Certain Persons in the Merger; Possible Conflicts of
Interest."
Stock Price Fluctuations. The Average Closing Price, subject to the Collar
Limitations, of Omnicare Common Stock used to calculate the Exchange Ratio at
the Effective Time may vary significantly from the closing price of Omnicare
Common Stock as of the date of execution of the Merger Agreement, the date
hereof or the date on which Coromed stockholders vote on the Merger due to,
among other factors, changes in the business, operations and prospects of
Omnicare, market assessments of the likelihood that the Merger will be
consummated and the timing thereof and general market and economic conditions.
The Exchange Ratio is subject to adjustment based on changes in the market value
of Omnicare Common Stock. However, in the event that the Average Closing Price
per share of Omnicare Common Stock is $21 1/8 or lower, or $37 1/8 or higher,
then for purposes of calculating the Exchange Ratio, the Average Closing Price
will be deemed to be $21 1/8 or $37 1/8, respectively. Since the actual number
of shares of Omnicare Common Stock issuable to Coromed stockholders in the
Merger depends upon the Exchange Ratio, there is no guarantee as to the number
of shares of Omnicare Common Stock that Coromed stockholders will receive. In
considering whether to approve the Merger, Coromed stockholders should consider
the risks associated with a potential change in the price of Omnicare Common
Stock. Each Coromed stockholder is urged to obtain updated market information.
See "THE MERGER -- Terms of the Merger."
Differences Between Rights of Omnicare Stockholders and Coromed
Stockholders; Potential Anti-Takeover Effect of Certain Provisions. Upon
completion of the Merger, stockholders of Coromed will become stockholders of
Omnicare, and their rights as stockholders of Omnicare will be governed by
Delaware law, the Omnicare Restated Certificate of Incorporation ("Omnicare
Certificate") and the Omnicare Bylaws. Differences between the rights of
stockholders of Coromed and the rights of stockholders of Omnicare include the
following: (i) the Omnicare Certificate allows the Omnicare Board to issue one
or more series of Preferred Stock and to designate the number of shares to be
included in such series and the rights, qualifications and other terms thereof,
whereas the Coromed Certificate contains no such provision; and (ii) the
Omnicare Certificate provides that directors may be removed without cause only
by a vote of two-thirds of the outstanding shares then entitled to vote, whereas
the Coromed Bylaws provide for directors to be removed from office without cause
by a majority vote of the holders of outstanding shares entitled to vote. The
provisions in the Omnicare Certificate described above could have a potential
anti-takeover effect on Omnicare, by making it more difficult for a third party
to acquire control of Omnicare without the consent of the Omnicare Board. See
"THE MERGER -- Comparison of Stockholder Rights."
9
<PAGE> 17
OMNICARE, INC.
COROMED
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table presents historical and pro forma (including and
excluding American Medserve Corporation -- "AMC") per share data for Omnicare
and historical and equivalent pro forma (including and excluding AMC) per share
data for Coromed. The pro forma information has been prepared by Omnicare based
on the consolidated financial statements of Omnicare and AMC (included in their
respective 1996 Forms 10-K and June 30, 1997 Forms 10-Q) and of Coromed
(included in this Form S-4). The pro forma information is presented for
illustration purposes only and does not purport to be indicative of the combined
financial condition or results of operations that would have occurred if the
acquisition of AMC and Coromed had been effected at the dates indicated or to
project future financial condition or results of operations for any future
period.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------
6/30/97 1996 1995 1994
---------- ------ ----- -------
<S> <C> <C> <C> <C>
OMNICARE
Net Income:
Historical -- Fully Diluted........................ $ 0.36 $ 0.61 $0.43 $ 0.30
Pro Forma -- Fully Diluted (including
Coromed)(1)..................................... 0.35 0.62 0.43 0.29
Pro Forma -- Fully Diluted (including Coromed and
AMC)(1)(6)...................................... 0.30 0.43 -- --
Dividends:
Historical(5)...................................... 0.035 0.06 0.05 0.045
Book Value:
Historical......................................... 8.91 8.24 -- --
Pro Forma (including Coromed)(2)................... 8.83 8.16 -- --
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1997 1996 1995
------ ----- -----
<S> <C> <C> <C> <C>
COROMED
Net Income:
Historical -- Fully Diluted.................... $(2.30) $1.49 $0.88
Equivalent Pro Forma -- Fully Diluted(1)....... 0.20(7) 0.35 0.25
Equivalent Pro Forma -- Fully Diluted
(including AMC)(1)(6)....................... 0.17(7) 0.24 --
Dividends:
Historical..................................... -- -- --
Equivalent Pro Forma(1)........................ 0.02(7) 0.03 0.03
Book Value:
Historical..................................... (1.19) 1.07 --
Equivalent Pro Forma(2)........................ 5.03 4.65(3) --
</TABLE>
- ---------------
(1) Pro forma amounts for Omnicare have been multiplied by the conversion ratio
of 0.570 (the assumed Exchange Ratio) to arrive at Coromed's Equivalent Pro
Forma per share amounts. The assumed Exchange Ratio has been estimated based
on an assumed Average Closing Price of the Omnicare Common Stock of $32.375
per share, which represents the average closing price per share of Omnicare
Common Stock for the five trading days ended October 3, 1997. Assuming an
Average Closing Price of $21 1/8, (i) Coromed's Equivalent Pro Forma Net
Income (fully diluted) for the six months ended June 30, 1997 and the years
ended June 30, 1996 and 1995 would have been $0.30, $0.54 and $0.38,
10
<PAGE> 18
respectively; and (ii) Coromed's Equivalent Pro Forma Dividends for the six
months ended June 30, 1997 and the years ended June 30, 1996 and 1995 would
have been $0.03, $0.05 and $0.04, respectively. Assuming an Average Closing
Price of $37 1/8, (i) Coromed's Equivalent Pro forma Net Income (fully
diluted) for the six months ended June 30, 1997 and the years ended June 30,
1996 and 1995 would have been $0.17, $0.31 and $0.22, respectively; and (ii)
Coromed's Equivalent Pro Forma Dividends for the six months ended June 30,
1997 and the years ended June 30, 1996 and 1995 would have been $0.02, $0.03
and $0.02, respectively. Pro Forma Net Income (fully diluted) amounts for
Omnicare (including and excluding AMC) have not been presented using the
Collar Limitations of $21 1/8 and $37 1/8 because such amounts do not
materially differ from those already presented using the Average Closing
Price.(4)
Assuming an Average Closing Price of $21 1/8, Coromed's Equivalent Pro Forma
Net Income (fully diluted and including AMC) for the six months ended June
30, 1997 and the year ended June 30, 1996 would have been $0.26 and $0.37,
respectively. Assuming an Average Closing Price of $37 1/8, Coromed's
Equivalent Pro Forma Net Income (fully diluted and including AMC) for the
six months ended June 30, 1997 and the year ended June 30, 1996 would have
been $0.15 and $0.21, respectively.(4)
(2) Pro forma amounts for Omnicare have been multiplied by the conversion ratio
of 0.570 (the assumed Exchange Ratio) to arrive at Coromed's Equivalent Pro
Forma per share amounts. The assumed Exchange Ratio has been estimated based
on the assumed Average Closing Price of the Omnicare Common Stock of $32.375
per share described in footnote (1) above. Assuming an Average Closing Price
of $21 1/8, (i) Omnicare's Pro Forma Book Value as of June 30, 1997 and
December 31, 1996 would have been $8.80 and $8.14, respectively; and (ii)
Coromed's Equivalent Pro Forma Book Value as of June 30, 1997 and December
31, 1996 would have been $7.68 and $7.10, respectively. Assuming an Average
Closing Price of $37 1/8, (i) Omnicare's Pro Forma Book Value as of June 30,
1997 and December 31, 1996 would have been $8.83 and $8.17, respectively;
and (ii) Coromed's Equivalent Pro Forma Book Value as of June 30, 1997 and
December 31, 1996 would have been $4.39 and $4.06, respectively. Omnicare
Pro Forma Book Value (including AMC) and Coromed Equivalent Pro Forma Book
Value (including AMC) amounts have not been presented using the Average
Closing Price or the Collar Limitations of $21 1/8 and $37 1/8 because such
amounts do not materially differ from the Omnicare Pro Forma and Coromed
Equivalent Pro Forma Book Values already presented.(4)
(3) Equivalent Pro Forma Book Value is as of December 31, 1996.
(4) The actual Average Closing Price will likely vary from the assumptions set
forth above, which would result in a different actual Exchange Ratio. All
calculations assume that all Company Options are exercised prior to the
Effective Time.
(5) Omnicare's Historical and Pro Forma Dividends per share amounts (including
and excluding AMC) are the same.
(6) Omnicare completed the acquisition of AMC on September 12, 1997. The pro
forma information includes the results of Omnicare and AMC as if the AMC
acquisition had been completed as of January 1, 1996 and June 30, 1997 for
the income statement and balance sheet data, respectively. The primary pro
forma adjustments reflect amortization of goodwill acquired and interest
costs on debt incurred in conjunction with the AMC acquisition. The pro
forma information does not give effect to any synergies anticipated by the
Company's management as a result of the acquisition, in particular
improvements in gross margin attributable to the Company's purchasing
leverage associated with purchases of pharmaceuticals and the elimination of
duplicate payroll and other operating expenses.
(7) Equivalent Pro Forma Net Income & Dividends represent the Omnicare data for
the six months ended June 30, 1997 multiplied by the Assumed Exchange Ratio,
as described in footnote (1) above.
11
<PAGE> 19
OMNICARE, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED AND AT DECEMBER 31,
AND AT JUNE 30, 1997 ------------------------------------------------------------------------------
------------------------- 1996 1996 1995 1994 1993 1992
HISTORICAL PRO FORMA(m) HISTORICAL PRO FORMA(m) HISTORICAL HISTORICAL HISTORICAL HISTORICAL
----------- ------------ ---------- ------------ ---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED) (AUDITED) (UNAUDITED) (AUDITED) (AUDITED) (AUDITED) (AUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
(a)(b)
Sales.................. $ 384,668 $ 460,231 $536,604 $618,631 $399,636 $307,655 $223,129 $157,406
--------- ---------- -------- -------- -------- -------- -------- --------
Income from continuing
operations............ $ 28,581(c) $ 24,351 $ 43,450(d) $ 29,267 $ 24,760(e) $ 13,531(f) $ 10,970(g) $ 5,873
Discontinued operations
(a)................... -- -- -- -- -- -- -- 8,710(h)
Cumulative effect of
accounting change..... -- -- -- -- -- -- 280(i) --
--------- ---------- -------- -------- -------- -------- -------- --------
Net income............. $ 28,581(c) $ 24,351 $ 43,450(d) $ 29,267 $ 24,760(e) $ 13,531(f) $ 11,250(g) $ 14,583
========= ========== ======== ======== ======== ======== ======== ========
Earnings per share data
Primary:
Income from continuing
operations............ $ 0.36(c) $ 0.31 $ 0.64(d) $ 0.47 $ 0.47(e) $ 0.30(f) $ 0.26(g) $ 0.14
Discontinued operations
(a)................... -- -- -- -- -- -- -- 0.21(h)
Cumulative effect of
accounting change..... -- -- -- -- -- -- -- --
--------- ---------- -------- -------- -------- -------- -------- --------
Net income............. $ 0.36(c) $ 0.31 $ 0.64(d) $ 0.47 $ 0.47(e) $ 0.30(f) $ 0.26(g) $ 0.35
========= ========== ======== ======== ======== ======== ======== ========
Fully diluted:
Income from continuing
operations............ $ 0.36(c) $ 0.31 $ 0.61(d) $ 0.42 $ 0.43(e) $ 0.30(f) $ 0.26(g) $ 0.14
Discontinued
operations(a)......... -- -- -- -- -- -- -- 0.21(h)
Cumulative effect of
accounting change..... -- -- -- -- -- -- -- --
--------- ---------- -------- -------- -------- -------- -------- --------
Net income............. $ 0.36(c) $ 0.31 $ 0.61(d) $ 0.42 $ 0.43(e) $ 0.30(f) $ 0.26(g) $ 0.35
========= ========== ======== ======== ======== ======== ======== ========
Dividends per share.... $ 0.035 $ 0.035 $ 0.06 $ 0.06 $ 0.05 $ 0.05 $ 0.04 $ 0.035
========= ========== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA:
Working capital........ $ 271,191 $ 299,890 $329,002 N/A $106,384 $125,550 $ 80,570 $ 25,792
Total assets........... 817,166 1,095,051 721,697 N/A 360,836 317,205 241,318 151,403
Long-term debt(j)...... 1,211 254,944 1,992 N/A 82,692 85,323 86,477 7,087
Stockholders'
equity(k)(l).......... 715,674 735,556 634,378 N/A 214,761 180,104 102,750 94,333
</TABLE>
- ---------------
(a) As a result of the December 1992 sale of the Veratex Group of businesses
and the divestiture of Labtronics, Inc. which was completed in 1993,
results have been restated to include these entities' results of operations
as well as any gain or loss on dispositions as "discontinued operations."
(b) Omnicare has had an active acquisition program in effect since 1989. See
Note 2 of the Notes to Consolidated Financial Statements for information
concerning these acquisitions.
(c) Includes acquisition expenses related to the 1997 "pooling of interest"
transactions of $1,671,000. Such expenses, on an after tax basis, were
$1,429,000, or $.02 per primary and fully diluted share. Historical net
income, excluding these expenses, was $30,010,000, or $.38 per primary and
fully diluted share. Pro forma income from continuing operations, excluding
these expenses, was $25,780,000, or $.33 per primary and fully diluted
share.
(d) Includes acquisition expenses related to the 1996 "pooling of interests"
transaction of $690,000. Such expenses, on an after tax basis, were
$534,000, or $.01 per primary and fully diluted share. Historical net
income, excluding these expenses, was $43,984,000, or $.65 per primary share
($.61 fully diluted). Pro forma income from continuing operations, excluding
these expenses, was $29,801,000, or $.48 per primary share ($.42 fully
diluted).
(e) Includes acquisition expenses related to the 1995 Specialized "pooling of
interests" transaction of $1,292,000. Such expenses, on an after tax basis,
were $989,000, or $.02 per primary share ($.01 fully diluted). Net income,
excluding these expenses, was $25,749,000, or $.49 per primary share ($.44
fully diluted).
(f) Includes acquisition expenses related to the 1994 Evergreen "pooling of
interests" transaction of $2,380,000. Such expenses, on an after tax basis,
were $1,860,000, or $.04 per primary share ($.03 fully diluted). Net income,
excluding these expenses, was $15,391,000, or $.34 per primary share ($.33
fully diluted).
(g) Includes a one-time cumulative tax benefit of $450,000, or $.01 per share,
arising from a change in tax laws enacted in August of 1993 relating to
amortization of intangibles.
(h) Includes after tax gain of $5,198,000, or $.12 per share, related to the
sale of the Veratex Group and the divestiture of Labtronics.
(i) After tax gain representing the cumulative effect of a change in accounting
for income taxes.
(j) In 1993, Omnicare issued $80.5 million of Convertible Subordinated Notes due
2003 ("Notes"). In 1996, all of the remaining Notes were converted into
common stock. (See Note 6 of the Notes to Consolidated Financial
Statements).
(k) In 1994, Omnicare sold 6,494,964 shares of common stock, in a public
offering, resulting in net proceeds of $59,211,000.
(l) In 1996, Omnicare sold 5,750,000 (pre-1996 stock split) shares of its common
stock in a public offering, resulting in net proceeds of $279,159,000. (See
Note 7 of the Notes to Consolidated Financial Statements).
(m)The pro forma information has been prepared by Omnicare based on the
consolidated financial statements of Omnicare and AMC included in their
respective 1996 Forms 10-K and June 30, 1997 Forms 10-Q. The pro forma
information is presented for illustration purposes only and does not purport
to be indicative of the combined financial condition or results of operations
that actually would have occurred if the acquisition of AMC had been effected
at the dates indicated or to project future financial condition or results of
operations for any future period. Omnicare completed the acquisition of AMC
on September 12, 1997. The pro forma information includes the results of
Omnicare and AMC as if the AMC acquisition had been completed as of January
1, 1996 and June 30, 1997 for the income statement and balance sheet data,
respectively. The primary pro forma adjustments reflect amortization of
goodwill acquired and interest costs on debt incurred in conjunction with the
AMC acquisition. The pro forma information does not give effect to any
synergies anticipated by Omnicare's management as a result of the
acquisition, in particular improvements in gross margin attributable to
Omnicare's purchasing leverage associated with purchases of pharmaceuticals
and the elimination of duplicate payroll and other operating expenses.
12
<PAGE> 20
COROMED, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED JUNE 30,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net revenue.............................. $ 7,768,416 $8,455,191 $5,471,790 $ 3,734,011 $ 3,119,141
Costs and expenses:
Direct costs.......................... 6,141,850 4,907,541 3,199,317 2,407,862 *
Selling, general and administrative... 2,567,803 2,240,965 1,504,810 1,397,410 *
Acquisition and merger costs.......... 303,081
Depreciation and amortization......... 189,099 162,118 136,506 127,759 *
Total operating expenses................. 9,201,833 7,310,624 4,840,633 3,933,031 3,556,307
Income (loss) from operations............ (1,433,417) 1,144,567 631,157 (199,020) (437,166)
Net income (loss)................ (1,450,654) 1,007,332 524,598 (296,870) (477,550)
EARNINGS (LOSS) PER SHARE DATA
Primary.................................. $ (2.30) $ 1.49 $ 0.88 $ (0.59) $ (1.03)
Shares used in computing................. 631,806 675,673 594,000 502,254 464,500
Fully diluted............................ (2.30) 1.49 0.88 (0.59) (1.03)
Shares used in computing................. 631,806 675,673 594,000 502,254 464,500
BALANCE SHEET DATA
Working capital (deficit)................ $(1,501,317) $ 78,245 $ (848,188) $(1,441,553) $(1,149,580)
Total assets............................. 2,659,243 3,799,967 2,323,075 1,134,203 1,393,354
Noncurrent liabilities................... 8,191 54,781 155,616 272,005 372,787
Stockholders' equity (deficiency)........ (780,177) 649,663 (443,875) (1,146,417) (907,548)
</TABLE>
- ---------------
* Allocated amounts are not available
13
<PAGE> 21
MARKET PRICES
The shares of Omnicare Common Stock are listed and principally traded on
the NYSE. The shares of Coromed Common Stock are not traded in any established
market. The following table sets forth, as of the indicated dates, (i) the last
sale price of Omnicare Common Stock and (ii) the equivalent per share price (as
explained below) of Coromed Common Stock. The indicated dates of January 28,
1997, August 19, 1997, and , 1997 represent, respectively, the last
trading day immediately preceding public announcement of the proposed
acquisition by Omnicare of Coromed, the last trading day immediately preceding
public announcement of the revised terms of the Merger and the latest
practicable date prior to the mailing of this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
EQUIVALENT
PER SHARE
PRICE OF
OMNICARE COROMED
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK
- --------------------------------------------- ------------ ------------
<S> <C> <C>
January 28, 1997............................. $28.00 $19.02
August 19, 1997.............................. $27.81 $19.02
, 1997................... $ $
</TABLE>
The equivalent per share price of Coromed Common Stock at each specified
date represents the last sale price of a share of Omnicare Common Stock on such
date multiplied by the Exchange Ratio, determined using the dates listed above
as the deemed date of the Effective Time for purposes of calculating the Average
Closing Price, subject to the Collar Limitations.
The following table sets forth the high and low closing sales prices per
share of Omnicare Common Stock as reported on the NYSE for the quarterly periods
presented below, which periods correspond to Omnicare's quarterly fiscal periods
for financial reporting purposes.
<TABLE>
<CAPTION>
DIVIDEND
HIGH LOW DECLARED
------ ------ --------
<S> <C> <C> <C>
FISCAL YEAR ENDING DECEMBER 31, 1997
First Quarter.............................. $30.63 $23.50 $.0175
Second Quarter............................. 31.38 22.88 .0175
Third Quarter.............................. 32.50 26.56 .0175
Fourth Quarter (through October )........ 34.56 32.38 --
FISCAL YEAR ENDED DECEMBER 31, 1996
First Quarter.............................. $27.13 $19.69 $ .015
Second Quarter............................. 30.00 25.00 .015
Third Quarter.............................. 30.50 22.00 .015
Fourth Quarter............................. 32.13 26.13 .015
FISCAL YEAR ENDED DECEMBER 31, 1995
First Quarter.............................. $13.38 $10.31 $.0125
Second Quarter............................. 14.06 10.88 .0125
Third Quarter.............................. 19.50 13.44 .0125
Fourth Quarter............................. 22.38 17.06 .0125
</TABLE>
DIVIDEND POLICY
On February 7, 1996, the Omnicare Board elected to increase the quarterly
cash dividend to $.015 per share for an indicated annual rate of $.06. On
February 5, 1997, the quarterly cash dividend was increased to $.0175 per share,
for an indicated annual rate of $.07 per share in 1997. It is presently intended
that cash dividends will continue to be paid on a quarterly basis; however,
future dividends are necessarily dependent upon Omnicare's earnings and
financial condition and other factors not currently determinable.
Coromed has never paid a cash dividend and currently intends prior to the
Merger to use all of its earnings in its business to finance future growth.
14
<PAGE> 22
COROMED SPECIAL MEETING
THE SPECIAL MEETING
Time, Date and Place
The Special Meeting of Coromed stockholders will be held on ,
1997, at local time, at the located at .
Purpose of the Special Meeting
The purpose of the Special Meeting is to consider and vote upon the
approval and adoption of the Merger Agreement pursuant to which Merger Sub will
be merged with and into Coromed and Coromed will become a wholly-owned
subsidiary of Omnicare and to transact such other business as may properly come
before the Special Meeting or any adjournments thereof.
RECORD DATE; SECURITIES ENTITLED TO VOTE
Record Holders of Coromed Common Stock at the close of business on
, 1997, will be entitled to vote at the Special Meeting. On the
Record Date, there were approximately holders of shares of Coromed
Common Stock issued and outstanding. Each issued and outstanding share of
Coromed Common Stock is entitled to one vote per share with respect to the
Merger.
QUORUM
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Coromed Common Stock entitled to vote shall constitute a
quorum. If a meeting cannot be organized because of the absence of a quorum,
those present may, except as otherwise provided by law, adjourn the meeting to
such time and place as they may determine.
REQUIRED VOTE
The approval of a majority of the outstanding shares of Coromed Common
Stock is required to approve the Merger.
As of the Record Date, the Principal Stockholders owned an aggregate of
406,111 shares of Coromed Common Stock, representing approximately 62% of
Coromed Common Stock entitled to vote on the Merger. The Principal Stockholders
and Coromed have entered into the Support Agreement with Omnicare pursuant to
which, among other things, the Principal Stockholders have agreed to vote the
shares of Coromed Common Stock owned by them in favor of the Merger. Thus, in
the absence of breach of the Support Agreement, approval of the Merger is
assured. Attached as Appendix B is the full text of the Support Agreement.
PROXIES AND REVOCATION
All shares of Coromed Common Stock represented by properly executed proxies
received prior to or at the Special Meeting, and not revoked, will be voted in
accordance with the instructions indicated in such proxies. If no instructions
are indicated, such proxies will be voted FOR the Merger. Shares of a Coromed
stockholder who abstains from voting or whose shares are not voted by reason of
a broker non-vote (where a nominee holding shares for a beneficial owner has not
received voting instructions from the beneficial owner with respect to a
particular matter and such nominee does not possess or choose to exercise
discretionary authority with respect thereto) will be counted for purposes of
determining whether a quorum is present at the meeting so long as the
stockholder is present in person or represented by a proxy. An abstention from
voting or a broker non-vote on the Merger by a Coromed stockholder present in
person or represented by proxy at the meeting has the same legal effect as a
vote "against" the Merger. If any other business is properly brought before the
Special Meeting for consideration, the persons named in the enclosed proxy and
acting thereunder will have discretion to vote on such business in accordance
with their best judgment. Coromed will not use its
15
<PAGE> 23
discretionary authority to adjourn the meeting to solicit stockholders if the
stockholders vote against or abstain from voting for the Merger.
A holder of shares of Coromed Common Stock who executes and returns the
enclosed proxy may revoke his or her proxy at any time prior to its use by (i)
delivering to the Secretary of Coromed a signed notice of revocation or a later
dated signed proxy, (ii) attending the Special Meeting and voting in person, or
(iii) giving notice of revocation of the proxy at the Special Meeting.
Attendance at the Special Meeting will not in itself constitute the revocation
of a proxy. Prior to the Special Meeting, any written notice of revocation or
subsequent proxy should be sent in a manner to be received by Coromed at or
before the taking of the vote at the Special Meeting at: Rensselaer Technology
Park, 185 Jordan Road, Troy, New York 12180-7615, Attention: Secretary, or hand
delivered to the Secretary of Coromed at such address.
In addition to solicitation by use of the mails, proxies may be solicited
by directors, officers and employees of Coromed in person or by telephone,
telegram or other means of communication. Such directors, officers and employees
will not be additionally compensated, but may be reimbursed for reasonable
out-of-pocket expenses in connection with such solicitation.
COROMED STOCKHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. COROMED STOCKHOLDERS SHOULD
NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
16
<PAGE> 24
THE MERGER
This Proxy Statement/Prospectus contains a brief summary of the material
provisions of the Merger Agreement. Such summary is qualified in its entirety by
the copy of the Merger Agreement attached hereto as Appendix A, which is
incorporated herein by reference and to which reference is hereby made for the
terms thereof.
BACKGROUND OF THE MERGER
Beginning in July 1996, Coromed carefully evaluated its long-term strategic
plan for further growth in the contract research industry. Coromed believed that
it had succeeded in establishing a positive reputation in the industry; however,
as an independent, privately-held company, Coromed was faced with the challenge
of competing in an industry in which several large publicly-traded companies
were beginning to rapidly consolidate within the industry increasing their share
of the market. The outcome of Coromed's evaluation was to seek an alliance with
another company that would offer additional resources and growth opportunities
through complementary operations to build upon Coromed's strengths.
Coromed hired Wessels, Arnold & Henderson, L.L.C., an investment banking
firm, in November 1996 in order to evaluate Coromed's strategic alternatives to
maximize shareholder value, including a potential sale of Coromed. In late
November 1996, during its examination and analysis of various potential
candidates with whom Coromed could enter into a business combination, Wessels
initiated contact with Omnicare to discuss the possibility of a potential
transaction.
Although Omnicare is primarily a provider of institutional pharmacy
services for residents of long-term care facilities, it has pursued a strategy
of seeking additional growth opportunities by leveraging its capabilities and
advancing its clinical expertise in the management of pharmaceutical care. To
meet this objective, Omnicare identified the CRO market as an industry which
could advance Omnicare's clinical pharmaceutical capabilities as well as
leverage its existing assets, including its geriatric formulary, its extensive
database on the institutionalized geriatric population, its substantial customer
base and its relationships with the major pharmaceutical companies.
Following initial discussions with Wessels as to the possible acquisition
of Coromed, Omnicare expressed preliminary interest in pursuing a potential
transaction. On November 29, 1996, Omnicare and Wessels, on behalf of Coromed,
entered into a Confidentiality Agreement. On December 11, 1996, Joel F.
Gemunder, President of Omnicare, and several other Omnicare representatives, met
with the executive officers of Coromed and with a representative of Wessels in
Albany, New York, to discuss the possibility of a merger, and determined to
continue discussions. At such meeting, the parties discussed their respective
businesses and operations, and the potential benefits of a business combination.
Shortly after such meeting, a representative of Omnicare telephoned a Wessels
representative to indicate Omnicare's interest in a potential acquisition of
Coromed for stock consideration with an aggregate value of less than $40
million. After discussions with Coromed, Wessels indicated to Omnicare that such
consideration was inadequate, and the parties continued to discuss the terms of
a potential transaction. On December 20, 1996, a Letter of Intent was signed
between Omnicare, Coromed and the Principal Stockholders (the "Letter of
Intent") which provided for, among other things, the structure of, and
consideration payable in, the Merger (including stock consideration with an
aggregate value of $40 million), the execution of employment and non-competition
agreements with the Principal Stockholders, and the agreement of the Principal
Stockholders to vote in favor of the proposed transaction. Following execution
of the Letter of Intent, Omnicare retained Montgomery Securities to act as its
financial advisor in connection with the Merger. Shortly thereafter, Omnicare
and its financial and legal advisors began a due diligence investigation of
Coromed. During the next several weeks, the parties, together with their
respective legal counsel, negotiated the Initial Merger Agreement and the
Support Agreement, as well as the forms of employment agreement and
non-competition agreement to be executed by the Principal Stockholders. The
Initial Merger Agreement (which provided for stock consideration with an
aggregate value of $40 million) and the Support Agreement were executed on
January 27, 1997. On January 27, 1997, the Coromed Board unanimously approved
the adoption of the Initial Merger Agreement and the Support
17
<PAGE> 25
Agreement. On January 28, 1997, the Omnicare Board unanimously approved the
adoption of the Initial Merger Agreement and the Support Agreement.
During the course of Omnicare's continuing due diligence investigation of
Coromed, Coromed's independent accountants conducted an audit of the financial
statements of Coromed for the nine month period ended March 31, 1997 and
restated the financial statements of Coromed for the fiscal years ended June 30,
1995 and 1996. As a result of these audits and discussions with Omnicare's
independent accountants, revenue recognition and related expenses under certain
contracts were adjusted to more appropriately match revenues with expenses. As a
result, Coromed's net income for the fiscal year ended June 30, 1995 was reduced
by $184,097 to $524,598, or by $0.33 per share to $0.88 per share. For the
fiscal year ended June 30, 1996, Coromed's net income was reduced by $76,933 to
$1,007,332, or by $0.11 per share to $1.49 per share (net of a reduction in
income tax expense of $173,600). For the nine months ended March 31, 1997,
Coromed experienced a net loss of $950,766 or $1.52 per share excluding $270,631
in non-recurring expenses incurred as a part of the proposed Merger with
Omnicare. Including these expenses, the loss was $1,221,397 or $1.96 per share.
This loss was primarily a result of the completion of two large clinical studies
and coincident delays in anticipated new projects resulting in an
under-absorption of fixed labor costs during this period.
As a result of Omnicare's due diligence process and Coromed's recent
financial results, the parties agreed to amend the Initial Merger Agreement to
decrease the purchase price to be paid in the Merger from shares of Omnicare
Common Stock with an aggregate value of $40 million to shares of Omnicare Common
Stock with an aggregate value of $15 million based upon the Average Closing
Price. On August 14, 1997, the Coromed Board held a special meeting at which
Wessels delivered its opinion to the Coromed Board to the effect that, as of
such date and based upon and subject to certain matters stated therein, the
consideration to be received by the stockholders of Coromed in the Merger is
fair to such stockholders from a financial point of view. On August 14, 1997,
the Omnicare Board appointed a Special Committee comprised of the Chairman and
the President of Omnicare to approve the final terms of the Merger Agreement and
the adoption thereof. On August 19, 1997, the Special Committee unanimously
approved the adoption of the Merger Agreement. On August 19, 1997, the Coromed
Board unanimously approved the adoption of the Merger Agreement. On August 19,
1997, the Merger Agreement was executed by all parties thereto.
REASONS FOR THE MERGER
The Coromed Board believes that the Merger is fair to and in the best
interests of Coromed and its stockholders. The Coromed Board has approved and
recommends that all Coromed stockholders vote for the proposed Merger. In
approving the Merger Agreement and the transactions contemplated thereby, the
Coromed Board considered alternatives to the Merger, including, the possibility
of remaining independent, considering a sale to Omnicare at a future date and
soliciting proposals from other potential bidders. The reasons that the Coromed
Board rejected these alternatives and approved the Merger were based upon the
following material factors:
(i) the business, results of operations, properties and financial
condition of Coromed and Omnicare. Upon consummation of the Merger,
the Coromed Board believes that Coromed should benefit substantially
as part of a larger organization with greater financial resources.
Moreover, the Coromed Board believes that Omnicare's existing
relationships with pharmaceutical companies should enhance Coromed's
business opportunities;
(ii) the competitive nature of the CRO industry. The CRO industry consists
of several hundred small, limited service providers, several
medium-sized CROs, and a few full-service global drug development
companies. The CRO industry is consolidating and, in recent years,
several large, full-service competitors have emerged. Following the
Merger, Coromed will benefit from being part of a large organization
with greater resources, which the Coromed Board believes will improve
Coromed's competitive position;
(iii) the terms and conditions of the Merger, including the fact that
Coromed stockholders will receive shares of Omnicare Common Stock
which are listed on the NYSE, thereby providing liquidity for their
investment which is not currently afforded to Coromed stockholders;
18
<PAGE> 26
(iv) the expectation that the Merger will qualify as a tax-free
reorganization for federal income tax purposes, thereby generally not
requiring the Coromed stockholders to recognize gain on their
investment upon consummation of the Merger;
(v) the reduced Merger consideration in the context of the financial
results for the years ended June 30, 1995 and 1996 and for the
nine-month period ended March 31, 1997. In its evaluation of these
factors, the Board focused upon the opinion of Wessels stating that
the consideration to be received by Coromed's stockholders in the
Merger was fair, from a financial point of view, to such stockholders
(see Annex D hereof).
The Coromed Board also considered the fact that the members of the Coromed
Board as the Principal Stockholders and the senior management of Coromed have
certain other interests in the Merger which differ from, and are in addition to,
the interests of the Coromed stockholders generally. These interests arise in
connection with their Employment Agreements, non-competition agreements and the
Support Agreement with Omnicare. These interests generally provide potential
additional benefits to the Principal Stockholders through their Employment
Agreements and impose upon them additional burdens and responsibilities under
both their Employment Agreements and non-competition agreements. However, the
members of the Coromed Board in the aggregate own approximately 62% of the
outstanding Coromed Common Stock and believe that, as significant Coromed
stockholders, their interests are aligned with those of the Coromed Stockholders
generally. See "-- Interest of Certain Persons in the Merger; Possible Conflicts
of Interest" and "-- Support Agreements."
In view of the variety of factors considered in connection with its
evaluation of the Merger, the Coromed Board found it impractical to, and did
not, quantify or attempt to assign relative weight to the specific factors
considered in reaching its determination. No special committee of the Coromed
Board was appointed in connection with the consideration of the Merger.
The Omnicare Board believes that the acquisition of Coromed is fair to and
in the best interest of Omnicare and its stockholders. In reaching such
determination, the Omnicare Board considered the following material factors:
(i) Omnicare's due diligence review of Coromed, including its business,
operations, management, earnings and financial condition on a
historical and prospective basis;
(ii) the reduction in the consideration to be paid in the Merger reflected
in the Merger Agreement executed on August 19, 1997 resulting from
Omnicare's due diligence process and Coromed's recent audited
financial results;
(iii) the other terms and conditions of the Merger Agreement including,
without limitation, the Collar Limitations, the conditions to the
consummation of the Merger, and the fee payable to Omnicare if the
Merger Agreement is terminated under certain circumstances, and
discussions with Omnicare's financial advisor with respect to the
Merger;
(iv) the leveraging, through the Merger with Coromed, of Omnicare's
existing assets, including its geriatric pharmaceutical drug
formulary, its large geriatric patient base and its ability to
capture data for disease and outcomes management analysis;
(v) the level of increased interest in Coromed's services since the
announcement of the Initial Merger Agreement expressed by
pharmaceutical manufacturers and biotechnology companies in the last
six months as evidenced by a 46% increase in bid proposals
outstanding for potential contracts for Coromed, valued at $37.0
million at July 31, 1997, compared to bid proposals of $25.3 million
at December 31, 1996, although there can be no assurance that bid
proposals will convert to actual contracts;
(vi) the terms and conditions of the Support Agreement including, without
limitation, the agreement by the Principal Stockholders to vote in
favor of the Merger and the grant of the Principal Stockholder
Option, which make it more likely that the Merger will be
consummated;
19
<PAGE> 27
(vii) the business reputation and experience of Coromed's management and
the fact that such management will remain in place following the
Merger, and the non-competition agreements being entered into with
Coromed management in connection with the Merger; and
(viii) the expectation that the Merger will be tax-free for federal income
tax purposes to Omnicare.
After reviewing the factors described above in their totality, the Omnicare
Board determined that the Merger is in the best interests of Omnicare and its
stockholders. In view of the variety of factors considered in connection with
its evaluation of the Merger, the Omnicare Board found it impractical to, and
did not, quantify or attempt to assign relative weight to the specific factors
considered in reaching its determination.
FAIRNESS OPINION
Wessels has acted as financial advisor to Coromed in connection with the
Merger and has assisted the Coromed Board in its examination of the fairness,
from a financial point of view, of the Merger consideration to be received by
the Coromed stockholders.
On August 14, 1997, Wessels attended the special meeting of the Coromed
Board and delivered its opinion (which was confirmed in writing) to the Coromed
Board to the effect that, as of the date of such opinion and based upon and
subject to certain matters stated therein, the consideration to be received by
the stockholders of Coromed in the Merger is fair to such stockholders from a
financial point of view. Wessels' fairness opinion is not intended to be and
shall not be deemed to be a recommendation to any stockholder of Coromed as to
how to vote with respect to the Merger. A copy of Wessels' written opinion dated
August 14, 1997, which sets forth the assumptions made, procedures followed,
matters considered and limitations on and scope of the review by Wessels is
attached as Appendix D to this Proxy Statement/Prospectus. Coromed stockholders
are encouraged to read such opinion in its entirety. Wessels has consented to
the inclusion of such opinion in this Proxy Statement/Prospectus.
In connection with its review of the Merger, and in arriving at its
opinion, Wessels: (i) reviewed and analyzed the financial terms of the most
recent draft of the Merger Agreement; (ii) reviewed and analyzed certain
publicly available financial statements and other information of Omnicare; (iii)
reviewed and analyzed certain internal financial statements and other financial
and operating data concerning Coromed prepared by the management of Coromed;
(iv) reviewed and analyzed certain financial projections concerning Coromed
prepared by the management of Coromed; (v) reviewed and analyzed certain
publicly available financial projections concerning Omnicare prepared by
institutional equity research analysts; (vi) conducted discussions with members
of the senior management of Coromed with respect to the business and prospects
of Coromed; (vii) reviewed the historical and projected financial performance
and market valuation of certain comparable, publicly traded companies; and
(viii) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions. In addition, Wessels conducted such other
analyses and examinations and considered such other financial, economic and
market criteria as it deemed necessary in arriving at its opinion.
The following paragraphs summarize the material financial and comparative
analyses performed by Wessels in arriving at its opinion as to the fairness,
from a financial point of view, of the consideration to be received in the
Merger by Coromed's stockholders. Following the release of the audited financial
statements of Coromed for the nine-month period ended March 31, 1997 (see "The
Merger -- Background of the Merger"), Wessels revised the analyses that it
undertook prior to such release. Although the same methodologies were, in
general, used by Wessels, the substantial changes in financial results so
reported, as well as in management's underlying assumptions for the projected
financial performance of the Company previously delivered to Wessels, caused
Wessels significantly to revise downward its view as to range of prices that it
would deem to be fair to the shareholders of Coromed from a financial point of
view. The following does not purport to be a complete description of the
analyses performed, or the matters considered, by Wessels in arriving at its
opinion.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances
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<PAGE> 28
and, therefore, such an opinion is not readily susceptible to summary
description. Furthermore, in arriving at its fairness opinion, Wessels did not
attribute any particular weight to any analysis or factor considered by it, but
rather made qualitative judgments as to the significance and relevance of each
analysis and factor. Accordingly, Wessels believes that its analyses must be
considered as a whole and that considering any portions of such analyses and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying its fairness
opinion. In its analyses, Wessels made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond Coromed's or Omnicare's control. Any estimates
contained in these analyses are not necessarily indicative of actual values or
predictive of future results or value, which may be significantly more or less
favorable than as set forth therein. In addition, analyses relating to the value
of businesses do not purport to be appraisals or to reflect the prices at which
businesses actually may be sold.
Comparable Transactions Analysis. Using publicly available information,
Wessels reviewed certain terms and financial characteristics of fourteen
contract research organizations transactions announced since January 1, 1996,
which Wessels deemed to be comparable to the Merger (collectively, the
"Comparable Transactions"). The fourteen Comparable Transactions considered by
Wessels were: (i) Kendle International Inc. acquisition of GMI (announced July
2, 1997); (ii) Kendle International Inc. acquisition of U-Gene Research B.V.
(announced July 1, 1997); (iii) Quintiles Transnational Corp. acquisition of
Medical Action Communications (announced June 11, 1997); (iv) Quintiles
Transnational Corp. acquisition of Butler Clinical Recruitment (announced June
4, 1997); (v) Quintiles Transnational Corp. acquisition of Corebro Vascular
Advances, Inc. (announced May 8, 1997); (vi) Pharmaceutical Product Dvlp
acquisition of Belmont Research, Incorporated (announced February 12, 1997);
(vii) Quintiles Transnational Corp. acquisition of Innovex Ltd (announced
October 7, 1996); (viii) PARAXEL International acquisition of State and Federal
Associates (announced August 22, 1996); (ix) DNX Corp. acquisition of BioClin
International (announced August 19, 1996); (x) Quintiles Transnational Corp
acquisition of BRI International Inc. (announced July 31, 1996); (xi)
Pharmaceutical Product Dvlp acquisition of Applied Biosciences Int'l (announced
June 21, 1996); (xii) ClinTrials Research Inc. acquisition of Bio-Research
Laboratories Ltd. (announced May 24, 1996); (xiii) Quintiles Transnational Corp
acquisition of Lewin-VHI (announced April 17, 1996); and (xiv) Collaborative
Clinical Research acquisition of GPI Pharmaceutical Services (announced January
31, 1996). The multiples of "Enterprise Value" (as defined below) to latest
twelve months ("LTM") reported revenues for the Comparable Transactions ranged
from 1.0x to 4.4x, with a mean of 2.1x. The multiples of Enterprise Value to LTM
reported operating income for the Comparable Transactions ranged from 4.9x to
61.6x, with a mean of 27.6x.
Wessels then calculated the multiple of the Company's Enterprise Value to
its LTM revenues (for the 12-month period ended June 30, 1997), using an
Enterprise Value for the Company of approximately $13,078,775 (using an "Assumed
Equity Value" of $15,000,000). Wessels' calculation of the multiple of the
Company's Enterprise Value to its LTM operating income was not applicable
because Coromed reported an operating loss for the period. These calculations
were based upon the Company's LTM revenue and operating income/(loss) figures.
Coromed's multiple of Enterprise Value to LTM revenue was 1.7x. Of the fourteen
comparable transactions reviewed by Wessels, five reported multiples of
Enterprise Value to LTM revenue of less than 1.7x. No meaningful comparison
could be made between Coromed's LTM operating income multiple and the mean of
the Comparable Transactions multiples.
As used herein, "Enterprise Value" means the Equity Value of a company plus
the outstanding long-term debt appearing on its latest balance sheet, less cash
appearing on its latest balance sheet. As used herein, "Equity Value" means the
value determined by multiplying the number shares of outstanding capital stock
of a company by the price per share of such capital stock as of a recent date.
For purposes of its analyses, Wessels assumed that Coromed's Equity Value was
equal to the assumed Merger transaction value of $15,000,000 (the "Assumed
Equity Value").
Comparable Company Analysis. Using publicly available information, Wessels
analyzed Coromed's valuation relative to a group of ten publicly traded contract
research organization companies that Wessels deemed comparable to Coromed
(collectively, the "Comparable Companies"). Although Coromed is not a
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<PAGE> 29
publicly traded company, Wessels concluded that the Comparable Companies provide
a useful benchmark for comparison with the understanding that, under most
circumstances, the shares of a privately held company, such as Coromed, would be
valued at a discount to the shares of publicly held companies (including the
Comparable Companies). Of the ten Comparable Companies, Wessels focused its
analytical comparisons on the five Comparable Companies having an Enterprise
Value of less than $200 million (the "Small Cap Comparable Companies"), because
Wessels believed the size and scale of such Comparable Companies' businesses and
operations more closely approximated those of the Company.
Wessels calculated the price-to-earnings ("P/E") ratios of each of the
Comparable Companies based on the closing stock price on August 13, 1997, and
the publicly available LTM earnings-per-share figure (using LTM earnings as of
the most recent publicly available data) and the average of published
institutional equity research analysts' projected earnings-per-share estimates
for 1997 and 1998 for each of the Comparable Companies. The resulting P/E ratios
for the Small Cap Comparable Companies: (i) for the LTM period, ranged from
46.4x to 59.1x, with a mean of 51.3x, (ii) for the 1997 estimates, ranged from
43.1x to 43.8x, with a mean of 43.4x, and (iii) for the 1998 estimates, ranged
from 14.9x to 28.2x, with a mean of 22.8x. Wessels also calculated the multiple
of the Enterprise Value to LTM revenue, 1997 estimated revenue and 1998
estimated revenue, respectively, for each of the Comparable Companies. For the
Small Cap Companies, this analysis produced multiples: (i) ranging from 0.3x to
1.3x, with a mean of 1.0x, for the LTM period; (ii) ranging from 0.2x to 2.5x,
with a mean of 1.2x, for the 1997 estimated period; and (iii) ranging from 0.6x
to 1.9x, with a mean of 1.3x, for the 1998 estimated period.
Using the Assumed Equity Value and the Company's LTM earnings, and
financial projections for calendar years 1997 and 1998 supplied by Coromed's
management, Wessels calculated Coromed's corresponding implicit P/E ratios for
each of the LTM, 1997 estimated and 1998 estimated periods; because Coromed
generated losses in the LTM period and was estimated to be slightly profitable
in the 1997 estimated period, the multiples for such periods were not
meaningful. The multiple for the 1998 estimated period was 16.4x. The Company's
implicit multiples of Enterprise Value to LTM revenue, 1997 estimated revenue
and 1998 estimated revenue were 1.7x, 1.2x and 1.0x, respectively.
Discounted Cash Flow Analysis. Wessels also estimated present values of
Coromed using a discounted cash flow analysis. Wessels relied upon certain
assumptions and financial projections provided by Coromed's management. Wessels
calculated the present values of projected "Net Cash Flows" (as defined below)
over the period between December 31, 1996 and December 31, 2001, using discount
rates of 25.0%, 30.0% and 35.0%. Wessels calculated a range of terminal values
of Coromed as of December 31, 2001, of Coromed's projected calendar year 2001
operating income, using a range of terminal value multiples of between 10.0x and
15.0x. Each calculated terminal value was discounted to present value using the
same discount rate as was used in calculating the Net Cash Flows. Wessels
calculated implied valuations of Coromed by adding the present values of the Net
Cash Flows generated during the five-year period ending on December 31, 2001,
and the correspondingly calculated present value of the terminal values of
Coromed as of such date. The implied value of Coromed based on this analysis
ranged from $10.8 million to $22.4 million.
As used herein, "Net Cash Flows" means net income for a given period after
accounting for net changes in working capital for such period, plus depreciation
and amortization charges taken during such period, less capital expenditures
made and working capital increase occurring during such period.
Stock Trading History. Wessels reviewed and analyzed the history of the
trading price and volume for Omnicare Common Stock, and the relationship of the
movements of the price of Omnicare Common Stock and movements of the average
stock price for the stocks constituting the Dow Jones Industrial Average and the
Standard & Poor's 500, and of the stock prices of publicly traded companies
identified to Wessels by Omnicare as being comparable to Omnicare.
As set forth in its fairness opinion, in rendering its opinion, Wessels
assumed and relied upon the accuracy and completeness of the financial, legal,
tax and other information provided to it by Coromed and Omnicare, and has not
independently verified such information. Wessels has not performed an
independent evaluation or appraisal of any of the respective assets or
liabilities of Coromed or Omnicare and it has not been furnished
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<PAGE> 30
with any such valuations or appraisals. With respect to Coromed's financial
forecasts, Wessels assumed that they have been reasonably prepared on the bases
reflecting the best currently available estimates and judgments of the
management of Coromed as to the future financial performance of Coromed. Wessels
further assumed that the financial forecasts prepared by institutional equity
research analysts about Omnicare were reasonably prepared on the bases
reflecting the best currently available estimates and judgments of such analysts
as to the future financial performance of Omnicare. Wessels also assumed that
the Merger would qualify for "pooling of interests" accounting treatment and as
a tax-free transaction for the stockholders of Coromed.
The opinion of Wessels is necessarily based upon market, economic and other
conditions as they existed on, and can be evaluated as of, the date thereof.
Wessels was selected by the Coromed Board based on Wessels' financial
advisory experience in connection with mergers and acquisitions and its
expertise in the CRO industry. Wessels, as part of its investment banking
services, is regularly engaged in the valuation of businesses and their
securities in connection with mergers, corporate restructurings, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. Wessels
acted as financial advisor to the Coromed Board of Directors in connection with
the Merger and will receive fees for its services, including the rendering of
this opinion, equal to 2% of the aggregate transaction value paid to the
stockholders of Coromed. Receipt by Wessels of such fees is dependent upon the
consummation of the Merger.
TERMS OF THE MERGER
At the Effective Time, each share of Coromed Common Stock issued and
outstanding immediately prior to the Effective Time (other than treasury shares
and any Dissenting Shares (as defined below)), shall, by virtue of the Merger
and without any action on the part of the holder thereof, be converted into the
right to receive such number of shares of Omnicare Common Stock that equals the
result obtained by calculation pursuant to the following formula:
<TABLE>
<S> <C>
15,000,000
-----------
Y
X = -------------
Z
</TABLE>
where X constitutes the Exchange Ratio and represents the number of shares of
Omnicare Common Stock to be issued in exchange for each share of Coromed Common
Stock; Y is the Average Closing Price per share of Omnicare Common Stock on the
NYSE Composite Tape (as reported in The Wall Street Journal) on each of the five
consecutive trading days immediately preceding the second trading day prior to
the Closing Date; and Z is the total number of shares of Coromed Common Stock to
be exchanged in the Merger for shares of Omnicare Common Stock, including the
total number of shares of Coromed Common Stock deemed to be outstanding
immediately prior to the Effective Time in respect of and in lieu of all Coromed
Options outstanding immediately prior to the Effective Time. Notwithstanding the
foregoing, in the event that the Average Closing Price per share of Omnicare
Common Stock is $21 1/8 or lower, or $37 1/8 or higher, then for purposes of
calculating the Exchange Ratio, the Average Closing Price will be deemed to be
$21 1/8 or $37 1/8, as the case may be, respectively.
As of the date hereof, there are outstanding Coromed Options to purchase a
total of 155,517 shares of Coromed Common Stock, all of which are vested and
currently exercisable. At the Effective Time, each Coromed Option outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive such number of shares of Omnicare Common Stock that equals the
Exchange Ratio multiplied by the number of shares of Coromed Common Stock deemed
to be outstanding with respect to and in lieu of each such Coromed Option
outstanding immediately prior to the Effective Time based upon the applicable
exercise prices associated therewith (which exercise prices range from $2.00 to
$15.00 with a weighted average exercise price of $3.03).
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<PAGE> 31
As described above, the Exchange Ratio takes into account all outstanding
shares of Coromed Common Stock as well as all outstanding Coromed Options.
Therefore, upon consummation of the Merger, the holders of Coromed Common Stock
and Coromed Options will receive, in the aggregate, shares of Omnicare Common
Stock with an aggregate total value of $15 million based upon the Average
Closing Price, subject to the Collar Limitations.
An aggregate of 100 Restricted Shares of outstanding Coromed Common Stock
are owned by one non-management employee of Coromed. The shares of Omnicare
Common Stock given in exchange for the Restricted Shares pursuant to the Merger
will be subject to the same vesting periods as those periods presently imposed
upon the Restricted Shares.
No fractional shares of Omnicare Common Stock will be issued in the Merger.
In lieu of any fractional shares that would otherwise be issuable, holders will
be paid a cash adjustment equal to the applicable fractional proportion of the
Average Closing Price, subject to the Collar Limitations, of a share of Omnicare
Common Stock.
Each share of Coromed Common Stock issued and held in Coromed's treasury at
the Effective Time shall, by virtue of the Merger, cease to be outstanding and
shall be cancelled and retired without payment of any consideration thereof.
As of the Effective Time, Omnicare shall deposit with the Exchange Agent,
for the benefit of holders of shares of Coromed Common Stock and/or Coromed
Options, certificates representing the shares of Omnicare Common Stock and cash
in lieu of fractional shares.
The "Summary -- The Merger -- Terms of the Merger."
EXCHANGE
Promptly after the Effective Time, Omnicare shall cause the Exchange Agent
to mail to each Record Holder of Coromed Common Stock or Coromed Options (i) a
letter of transmittal for delivery of the certificates representing such shares
of Coromed Common Stock and/or for the delivery of forms of unexercised Coromed
Option grants (each, a "Certificate") for certificates of Omnicare Common Stock
and (ii) instructions pertaining to the above-referenced letter of transmittal.
Upon proper completion of such letter of transmittal, and upon delivery of
both the letter of transmittal and the Certificates to the Exchange Agent, such
holder shall be entitled to receive (i) a certificate representing that number
of whole shares of Omnicare Common Stock and (ii) a check representing the
amount of cash in lieu of fractional shares, if any, that the holder has the
right to receive.
DIVIDENDS
No dividends or other distributions declared after the Effective Time on
Omnicare Common Stock shall be paid with respect to any shares of Coromed Common
Stock represented by a Certificate until such Certificate is surrendered for
exchange as provided herein. Subject to the effect of applicable law, following
surrender of any such Certificate, there shall be paid to the holder, without
interest, the amount of dividends or other distributions payable to holders of
Omnicare Common Stock of record as of any date after the Effective Time with
respect to the number of whole shares of Omnicare Common Stock for which such
Certificate is exchanged. Dividends or other distributions with a payment date
after the Effective Time but prior to surrender of the Certificate will be paid
at the time of surrender, and dividends or other distributions with a payment
date subsequent to surrender will be payable on the applicable payment date, in
each case less the amount of any withholding taxes which may be required
thereon.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; POSSIBLE CONFLICTS OF INTEREST
In considering the approval by the Coromed Board of the Merger, Coromed
stockholders should be aware that the four Principal Stockholders comprise both
the Coromed Board and the senior management of Coromed and that the Principal
Stockholders have certain interests in, and will receive benefits from, the
Merger that are in addition to, and differ from, the interests of, and benefits
to, the stockholders of Coromed
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<PAGE> 32
generally. These interests and benefits, described below, may constitute
potential conflicts of interest with the stockholders of Coromed in the
negotiation, approval and consummation of the Merger.
In connection with the Merger Agreement, the Principal Stockholders will
enter into employment agreements (the "Employment Agreements") with Omnicare
effective upon consummation of the Merger. The Employment Agreements provide for
the continued employment of the Principal Stockholders in their current
positions at Coromed for a period of five years, subject to renewals thereafter
for one-year periods, at initial annual salaries of $185,709, $142,663,
$141,360, and $131,297 for Dr. Dale B. Evans, Alice G. Fedory, Thomas J. Massey
and Dr. Ronald E. Weishaar, respectively. These initial annual salaries are
equal to the current annual salaries of these executives. Dr. Evans' Employment
Agreement also provides that Omnicare will use reasonable best efforts to elect
Dr. Evans to the Coromed Board for a one year term. The Employment Agreements
provide that the employee will be entitled to such employee benefits as are
given to other similarly situated employees of Coromed. In addition, the
Employment Agreements provide that if the employee is terminated without cause,
he or she will be entitled to receive base compensation for the remainder of the
Employment Agreement term.
Pursuant to the Employment Agreements, the employees have agreed (i) during
the term of employment and for five years thereafter, not to disclose any
confidential information of Coromed, (ii) for five years after termination of
employment, not to solicit customers or employees of Coromed and (iii) during
the term of employment and for five years thereafter, not to develop, operate or
participate in any business which competes with Coromed in North America, South
America and Europe, subject to certain limited exceptions.
In addition, pursuant to the Employment Agreements, the Principal
Stockholders will receive warrants to purchase 100,000 shares (in the case of
Dr. Evans) and 60,000 shares (in the case of each other Principal Stockholder)
of Omnicare Common Stock as a portion of his or her employment compensation. The
warrants are exercisable at any time up to and including the third day following
the date on which the holder ceases to be employed by Coromed, unless such
holder is terminated for "Cause" (as defined in the Employment Agreements), in
which case the warrants are exercisable at any time up to and including the date
of employment termination. The warrant exercise price per share of Omnicare
Common Stock is the Average Closing Price calculated in accordance with the
Merger Agreement.
The Principal Stockholders will also enter into non-competition agreements
with Coromed upon consummation of the Merger which restrict the rights of such
persons to engage in businesses competitive with Coromed on terms substantially
similar to the non-competition provisions of the Employment Agreements, for a
period of fifteen years from the Effective Time. Omnicare views the involvement
of the Principal Stockholders of Coromed to be valuable to Coromed and required
the Principal Stockholders to enter into the non-competition agreements with
Coromed to provide protection to Coromed against these individuals engaging in
competitive activities with Coromed after the Merger.
The Principal Stockholders as a group beneficially owned, as of the Record
Date, 406,111 shares of Coromed Common Stock, representing approximately 62% of
the Coromed Common Stock entitled to vote on the Merger, plus Coromed Options to
acquire the following numbers of shares of Coromed Common Stock at the following
purchase prices: Dr. Evans: 10,000 shares at $3.30 per share, 2,000 shares at
$3.30 per share and 1,500 shares at $5.50 per share; Ms. Fedory: 9,000 shares at
$3.30 per share, 1,750 shares at $3.30 per share and 1,250 shares at $5.50 per
share; Mr. Massey: 8,000 shares at $3.30 per share, 1,500 shares at $3.30 per
share and $1,000 shares at $5.50 per share; and Dr. Weishaar: 18,034 shares at
$2.00 per share, 7,461 shares at $2.00 per share, 11,000 shares at $3.00 per
share, 3,250 shares at $3.00 per share and 5,000 shares at $5.00 per share. All
such Coromed Options which have not been exercised on or before the Closing Date
will be treated in the Merger in the same manner as Coromed Options held by
other holders on the Closing Date. See "THE MERGER -- Terms of the Merger."
Each Principal Stockholder has entered into the Support Agreement pursuant
to which such Principal Stockholder has agreed, among other things, (i) to vote
his or her Principal Stockholder Shares in favor of the Merger and against any
action that would interfere with the Merger, (ii) not to sell any Principal
Stockholder Shares or engage in discussions concerning any such sale, and (iii)
to grant to Omnicare the Principal Stockholder Option to purchase the Principal
Stockholder Shares in exchange for shares of Omnicare
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<PAGE> 33
Common Stock equal to the Exchange Ratio (calculated using the exercise date of
the Principal Stockholder Option as the deemed date of the Effective Time for
purposes of calculating the Average Closing Price, subject to the Collar
Limitations). Each Principal Stockholder would also have the right to payment in
cash for the shares of Omnicare Common Stock issuable under the Principal
Stockholder Option having a value equal to such Average Closing Price, subject
to the Collar Limitations. The Principal Stockholder Option is exercisable for a
one-month period following (i) the termination of the Merger Agreement under
circumstances entitling Omnicare to the termination fee described below under
"THE MERGER -- Termination Fees; Expenses of the Merger" or (ii) Coromed having
entered into an agreement to engage in an Acquisition Transaction (as defined
below). See "THE MERGER -- Support Agreement."
Pursuant to the Merger Agreement, all expenses incurred in connection with
the Merger Agreement will be paid by the party incurring such expenses;
provided, that if the Merger is consummated, the surviving corporation in the
Merger will pay the reasonable fees and expenses incurred by Coromed and the
Principal Stockholders in an amount up to $750,000 in the aggregate. See "THE
MERGER -- Termination Fees; Expenses of the Merger."
Omnicare has agreed with the Principal Stockholders to use reasonable best
efforts to register under the Securities Act any shares of Omnicare Common Stock
received by the Principal Stockholders pursuant to the Merger that have not
otherwise been so registered, and to keep such registration in effect until the
earlier of one year from the Effective Time and the date on which all such
shares are sold. It is not currently anticipated that any such registration will
be required.
Pursuant to the Merger Agreement, the Principal Stockholders have agreed to
indemnify Omnicare and its subsidiaries and their officers, directors and
employees from certain liabilities arising from the breach by Coromed or the
Principal Stockholders of their representations, warranties and agreements in
the Merger Agreement. See "THE MERGER -- Survival of Representations and
Warranties; Indemnification."
SUPPORT AGREEMENT
As a condition to Omnicare's willingness to enter into the Initial Merger
Agreement, Coromed and the Principal Stockholders entered into a Support
Agreement, dated as of January 27, 1997, with Omnicare.
Pursuant to the Support Agreement, each Principal Stockholder has granted
to Omnicare the Principal Stockholder Option to purchase, in whole but not in
part, at the election of Omnicare, all of the Principal Stockholder Shares in
exchange for the number of shares of Omnicare Common Stock equal to the number
of the Principal Stockholder Shares to be purchased by Omnicare multiplied by
the Exchange Ratio (calculated using the date the Stockholder Option is
exercised as the deemed date of the Effective Time for purposes of calculating
the Average Closing Price, subject to the Collar Limitations) (the "Purchase
Price"). Each Stockholder may elect to cause Omnicare to pay all or a portion of
the Purchase Price in cash. If Omnicare decides to exercise the Stockholder
Option with respect to one Principal Stockholder, Omnicare must exercise the
Principal Stockholder Option with respect to all Stockholders.
The Stockholder Option may only be exercised by Omnicare following the
occurrence of a Purchase Event (as defined below); provided, however, that the
Stockholder Option terminates upon the earlier of (i) the Effective Time, (ii)
the termination of the Merger Agreement in accordance with its terms (other than
upon or during the continuance of a Purchase Event) or (iii) one month following
any termination of the Merger Agreement upon or during the continuance of a
Purchase Event (or, if, at the expiration of such one month period the
Stockholder Option cannot be exercised by reason of any applicable, judgment,
decree or order, 20 business days after such impediment to exercise shall have
been removed or shall become final and not subject to appeal).
The term "Purchase Event" is defined in the Support Agreement as (i)
Coromed entering into an agreement to engage in an Acquisition Transaction (as
defined below) or (ii) the Merger Agreement being terminated by Omnicare or
Coromed under circumstances which would entitle Omnicare to a termination fee
under the Merger Agreement.
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<PAGE> 34
Pursuant to the Support Agreement, each Principal Stockholder has also
agreed that during the period from the signing of the Support Agreement and
continuing until the termination of the Principal Stockholder Option ("Principal
Stockholder Option Period"), he or she will vote all of the Stockholder Shares
which such Principal Stockholder is entitled to vote as follows: (i) in favor of
approval and adoption of the Merger Agreement; and (ii) against any actions or
agreement other than the Merger Agreement that would impede, interfere with,
delay, postpone or attempt to discourage the Merger, including, without
limitation: (a) any extraordinary corporate transactions, such as a merger,
acquisition, consolidation, reorganization, share exchange, tender offer,
exchange offer or similar transaction involving Coromed or any of its
Subsidiaries; or (b) a sale or transfer of a substantial equity interest in or a
substantial portion of the assets of Coromed or any of its Subsidiaries (each an
"Acquisition Transaction").
Each Principal Stockholder also has agreed that during the Stockholder
Option Period, such Principal Stockholder will not without the prior written
consent of Omnicare (i) sell, transfer, assign, pledge, hypothecate, cause to be
redeemed or otherwise dispose of any of the Principal Stockholder Shares
beneficially owned by him or her, (ii) grant any proxy or interest in the
Principal Stockholder Shares or deposit the Principal Stockholder Shares into a
voting trust or enter into a voting agreement or any arrangement with respect to
the Principal Stockholder Shares, or (iii) take any action that would make any
representation or warranty of the Principal Stockholder regarding the ownership
of his or her Principal Stockholder Shares made in the Support Agreement untrue
or incorrect or have the effect of preventing or disabling the Principal
Stockholder from performing his or her obligations under the Support Agreement.
In addition, each Principal Stockholder has agreed during the Principal
Stockholder Option Period not to initiate, solicit or engage in any negotiations
regarding an Acquisition Transaction and has agreed collectively to remain the
beneficial and record owners of a majority of the outstanding shares of Coromed
Common Stock during the Principal Stockholder Option Period.
EXCLUSIVITY
The Merger Agreement provides that prior to the Effective Time, neither
Coromed nor its Subsidiaries nor any of its officers, directors, employees,
agents or representatives will initiate, solicit or encourage any inquiries or
the making or implementation of any proposal or offer with respect to an
Alternative Proposal (as defined below) or engage in any negotiations
concerning, or provide any non-public information or data to, or have any
discussions with, any person relating to an Alternative Proposal, or otherwise
facilitate any effort or attempt to make or implement an Alternative Proposal;
provided, that the Coromed Board may furnish information or enter into
discussions or negotiations with any person related to an Alternative Proposal
if, and only to the extent, that the Coromed Board (i) determines in good faith
based upon the written opinion of outside counsel that such action is required
in order for the Coromed Board to comply with its fiduciary duties to its
stockholders, (ii) provides written notice to Omnicare of the identity of the
person inquiring and Coromed's intent to provide information to such person,
(iii) provides information to Omnicare on a timely basis as to the progress of
the inquiries and copies of any written inquiries and proposals thereto; and
(iv) in the event that Coromed decides to accept the Alternative Proposal,
Coromed provides Omnicare with at least five business days' prior written notice
thereof, during which time Omnicare may make a counteroffer and Coromed will in
good faith consider such counteroffer. The term "Alternative Proposal" as
defined in the Merger Agreement means any merger, acquisition, consolidation,
reorganization, share exchange, tender offer, exchange offer or similar
transaction involving Coromed or any of its Subsidiaries, or any proposal or
offer to acquire in any manner, directly or indirectly, a substantial equity
interest in or a substantial portion of the assets of Coromed or any Subsidiary
thereof.
RESALES OF OMNICARE COMMON STOCK
All shares of Omnicare Common Stock received by Coromed stockholders in the
Merger will be freely transferable pursuant to the Securities Act, except that
shares of Omnicare Common Stock received by persons who are deemed to be
"affiliates" (as such term is defined under the Securities Act) of Coromed prior
to the Merger may be resold by them only in transactions permitted by the resale
provisions of Rule 145 promulgated under the Securities Act or as otherwise
permitted under the Securities Act. Persons who may be
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deemed to be affiliates of Omnicare or Coromed generally include individuals or
entities that control, are controlled by, or are under common control with, such
party and may include certain officers and directors of such party as well as
principal stockholders of such party. The Merger Agreement requires Coromed to
cause each of its affiliates to execute a written agreement (the "Affiliate
Letter") to the effect that, among other things, such person will not offer to
sell, sell or otherwise dispose of Omnicare Common Stock except (i) pursuant to
an effective registration statement, (ii) pursuant to the provisions of Rule 145
under the Securities Act or (iii) pursuant to another exemption from
registration under the Securities Act, which in the opinion of counsel
reasonably acceptable in form and substance to Omnicare is available. Coromed
has identified the Principal Stockholders as the current affiliates of Coromed.
The Affiliate Letters provide that such affiliate not dispose of any shares
of Omnicare Common Stock (excluding an amount up to 10% of Omnicare Common Stock
received as a result of the Merger) until the financial results of at least 30
days of post-Merger combined operations of Coromed and Omnicare have been made
publicly available. In addition, in order for the Merger to be treated as a
"pooling of interests" under applicable United States accounting standards,
during such period, aggregate sales by all affiliates may not exceed 1% of all
shares of Omnicare Common Stock received by Coromed stockholders in the Merger.
Pursuant to the Merger Agreement, Omnicare has agreed to publish 30 days'
post-closing combined financial results of Omnicare and Coromed for the first
full monthly period following the Closing Date within 45 days after the end of
such monthly period in a form sufficient to satisfy pooling of interests
requirements.
CONDITIONS TO THE MERGER
Pursuant to the Merger Agreement, the respective obligations of Omnicare,
Merger Sub, Coromed and the Principal Stockholders to effect the Merger are
subject to the fulfillment at or prior to the Closing Date of the following
conditions, among others: i) the Merger Agreement having been approved by the
Coromed stockholders, ii) no order or injunction being in effect which prohibits
the consummation of the transactions contemplated by the Merger Agreement, iii)
all consents and approvals of governmental bodies required in connection with
the Merger Agreement having been obtained, iv) approval of the Omnicare Common
Stock to be issued to Coromed stockholders in connection with the Merger for
listing on the NYSE, and v) Coromed having received opinions of Morgan, Lewis &
Bockius LLP, special counsel to Coromed, on the date of the Proxy
Statement/Prospectus and on the Closing Date, stating that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that Coromed, Omnicare and Merger Sub will
each be a party to that reorganization within the meaning of Section 368(b) of
the Code.
The obligations of Coromed and the Principal Stockholders to effect the
Merger are subject to the fulfillment at or prior to the Closing Date of the
following conditions, among others: (a) Omnicare having performed in all
material respects its agreements contained in the Merger Agreement and the
representations and warranties of Omnicare and Merger Sub in the Merger
Agreement being true and correct as of the Closing Date, if the failure of any
of the representations or warranties to be so true and correct would be
reasonably likely to have a material adverse effect on Omnicare, (b) Coromed
having received from Coopers & Lybrand L.L.P. a letter stating their concurrence
with the conclusion of Coromed's management that no conditions exist with
respect to Coromed that would preclude the Merger from being treated as a
"pooling of interests" under applicable United States accounting standards, and
(c) Omnicare having entered into an Employment Agreement with each Principal
Stockholder.
The obligations of Omnicare and Merger Sub to effect the Merger is subject
to the fulfillment at or prior to the Closing Date of the following conditions,
among others: (a) Coromed having performed in all material respects its
agreements contained in the Merger Agreement and the representations and
warranties of Coromed in the Merger Agreement being true and correct as of the
Closing Date, if the failure of any of the representations or warranties to be
so true and correct would be reasonably likely to have a material adverse effect
on Coromed, (b) Omnicare having received from Price Waterhouse LLP an opinion
that the Merger will be treated as a "pooling of interests" under applicable
accounting standards, (c) from March 31, 1997 through the Effective Time, there
having not occurred any change in the business, earnings, assets, liabilities,
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financial or other condition or results of operations of Coromed and its
Subsidiaries, taken as a whole, that could have a material adverse effect on
Coromed (other than any previously disclosed matters), (d) each of the Principal
Stockholders having entered into an Employment Agreement and a Non-Competition
Agreement with Omnicare, (e) no more than 5% of the outstanding shares of
Coromed Common Stock being Dissenting Shares pursuant to Section 262 of the DGCL
and (f) Omnicare having received the audited financial statements of Coromed for
the fiscal year ended June 30, 1997.
If the conditions relating to the receipt of assurances regarding the
accounting or tax treatment of the Merger are waived, this Proxy
Statement/Prospectus will be amended and Coromed will resolicit stockholder
votes to the extent required by law.
TERMINATION OF THE MERGER AGREEMENT
The Merger may be abandoned at any time prior to the Effective Time as
follows:
(a) By mutual consent of Omnicare and Coromed.
(b) By either the Omnicare Board or Coromed Board, if, (i) the Merger
shall not have been consummated by November 30, 1997, (ii) the approval of
Coromed stockholders is not obtained, or (iii) upon the existence of an
order, decree or ruling by a court or governmental, regulatory or
administrative agency or commission prohibiting the Merger.
(c) By the Coromed Board (i) if upon exercise of its good faith
judgment as to fiduciary duties to its stockholders based on the written
opinion of outside counsel, the Coromed Board determines that termination
is required due to the existence of an Alternative Proposal; provided, that
Coromed must give Omnicare at least five business days' prior notice of its
intention to recommend such Alternative Proposal, (ii) if there has been a
breach by Omnicare or Merger Sub of any representation or warranty in the
Merger Agreement that would be reasonably likely to have a material adverse
effect on Omnicare or the Merger, or (iii) if there has been a material
breach by Omnicare of any covenant or agreement in the Merger Agreement
that is non-curable or, if curable, is not cured within 30 days after
written notice of such breach.
(d) By the Omnicare Board (i) if Coromed modifies or withdraws in a
manner materially adverse to Omnicare its approval or recommendation of the
Merger or recommends an Alternative Proposal to its stockholders, (ii) if
there has been a breach by Coromed of any representation or warranty in the
Merger Agreement that would be reasonably likely to have a material adverse
effect on Coromed or the Merger, or (iii) if there has been a material
breach by Coromed of any covenant or agreement in the Merger Agreement that
is non-curable or, if curable, is not cured within 30 days after written
notice of such breach.
TERMINATION FEES; EXPENSES OF THE MERGER
If any person or entity makes an Alternative Proposal more favorable to
Coromed stockholders than the Merger and thereafter the Merger Agreement is
terminated pursuant to clauses (b)(ii), (c)(i) or (d) under the heading "THE
MERGER -- Termination of the Merger Agreement" above, then, Coromed will on the
day of such termination, pay Omnicare a fee of $2,000,000 which amount will be
payable by wire transfer of same day funds.
All costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby shall be paid by the party incurring such
expenses; provided, however, that if the Merger is consummated, Coromed, the
surviving corporation in the Merger, shall pay the reasonable fees and expenses
incurred by Coromed and the Principal Stockholders in connection with the
transactions contemplated by the Merger Agreement in an amount not to exceed
$750,000 in the aggregate.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains representations and warranties of Coromed
regarding, among other things, Coromed's organization, capitalization, authority
to enter into the Merger Agreement, compliance with
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laws, litigation and liabilities, absence of changes since March 31, 1997, tax
matters, employee benefit matters and environmental matters. In addition, the
Merger Agreement contains representations and warranties of the Principal
Stockholders regarding, among other things, his or her ownership of shares of
Coromed Common Stock and authority to enter into the Merger Agreement.
The Merger Agreement contains representations and warranties of Omnicare
and Merger Sub regarding, among other things, its capitalization, authority and
the lack of material misstatements or omissions in certain Omnicare filings with
the Commission.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
The representations and warranties made by each of the parties in the
Merger Agreement will survive the Effective Time for a period ending at the
earlier of (i) one year from the Effective Time or (ii) the date upon which the
first Annual Report on Form 10-K reflecting the combined operations of Omnicare
and Coromed is filed with the Commission.
Pursuant to the Merger Agreement, the Principal Stockholders will jointly
and severally indemnify Omnicare and its subsidiaries and their officers,
directors and employees from and against any liabilities and expenses arising
out of or resulting from any breach of Coromed's representations and warranties
in the Merger Agreement and any material breach by Coromed or the Principal
Stockholders of the covenants and agreements in the Merger Agreement; provided,
that (i) the Principal Stockholders will not be liable for breaches of certain
environmental representations and warranties relating solely to the activities
of third parties unless and until all Omnicare losses (of any nature) on a
cumulative basis exceed $350,000, in which case the Principal Stockholders will
be liable only for losses in excess of $350,000, and (ii) the Principal
Stockholders will not be liable for any other breach by Coromed of its
representations and warranties unless and until all Omnicare losses (of any
nature) on a cumulative basis exceed $200,000, in which case the Principal
Stockholders will be liable only for losses in excess of $200,000. In addition,
each Principal Stockholder will severally and not jointly indemnify Omnicare and
its subsidiaries and their officers, directors and employees from and against
any liabilities and expenses arising out of or resulting from any breach of such
Principal Stockholder's representations and warranties in the Merger Agreement;
provided, that such Principal Stockholder will not be liable for any such breach
unless and until all Omnicare losses arising therefrom exceed $50,000, in which
case such Principal Stockholder will be liable only for losses in excess of
$50,000. Notwithstanding the foregoing, the Principal Stockholders' aggregate
liability pursuant to this paragraph (over and above any threshold amounts
described above) will not exceed $2,000,000.
GOVERNMENTAL AND REGULATORY APPROVALS
Omnicare and Coromed do not believe that any governmental filings in the
United States are required with respect to the Merger, other than the filing of
the Certificate of Merger required to be filed with the Secretary of State of
the State of Delaware in accordance with the DGCL and the filing of the
registration statement of which this Proxy Statement/Prospectus is a part with
the Commission.
APPRAISAL RIGHTS
If the Merger is consummated, dissenting holders of Coromed Common Stock
who follow the procedures specified in Section 262 of the DGCL are entitled to
have their shares of Coromed Common Stock appraised by the Delaware Court of
Chancery (the "Court") and to receive the "fair value" of such shares
("Dissenting Shares") in cash, as determined by the Court, in lieu of the
consideration that such stockholder would otherwise be entitled to receive
pursuant to the Merger Agreement.
The following is a brief summary of Section 262, which sets forth the
procedures for dissenting from the Merger and demanding statutory appraisal
rights, if such rights are available. This summary does not purport to be a
complete statement of the provisions of the DGCL relating to the rights of
Coromed stockholders to an appraisal of the value of their shares and is
qualified in its entirety by reference to Section 262, the full text of which is
attached as Appendix C hereto. Failure to follow these procedures exactly could
result in the loss of appraisal rights. This Proxy Statement/Prospectus
constitutes notice to holders of Coromed Common Stock
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concerning the availability of appraisal rights under Section 262. Under Section
262, a stockholder of record wishing to assert appraisal rights must hold his or
her Coromed Common Stock on the date of making a demand for appraisal rights
with respect to such stock and must continuously hold such stock through the
Effective Time of the Merger.
STOCKHOLDERS WHO DESIRE TO EXERCISE THEIR APPRAISAL RIGHTS MUST SATISFY ALL
OF THE CONDITIONS OF SECTION 262. A WRITTEN DEMAND FOR APPRAISAL OF SHARES MUST
BE FILED WITH COROMED BEFORE THE TAKING OF THE VOTE ON THE MERGER. THIS WRITTEN
DEMAND FOR APPRAISAL OF SHARES MUST BE IN ADDITION TO AND SEPARATE FROM ANY
PROXY VOTE ABSTAINING FROM OR VOTING AGAINST THE MERGER. ANY SUCH ABSTENTION OR
VOTE AGAINST THE MERGER WILL NOT CONSTITUTE A DEMAND FOR APPRAISAL WITHIN THE
MEANING OF SECTION 262.
STOCKHOLDERS ELECTING TO EXERCISE THEIR APPRAISAL RIGHTS UNDER SECTION 262
MUST NOT VOTE FOR APPROVAL OF THE MERGER. IF A STOCKHOLDER RETURNS A SIGNED
PROXY BUT DOES NOT SPECIFY A VOTE AGAINST APPROVAL OF THE MERGER OR A DIRECTION
TO ABSTAIN, THE PROXY WILL BE VOTED FOR APPROVAL OF THE MERGER, WHICH WILL HAVE
THE EFFECT OF WAIVING THAT STOCKHOLDER'S APPRAISAL RIGHTS.
A demand for appraisal must be executed by or for the stockholder of
record, fully and correctly, as such stockholder's name appears on the
certificates representing shares of Coromed Common Stock. If the stock is owned
of record in a fiduciary capacity, such as by a trustee, guardian or custodian,
such demand must be executed by or for the fiduciary. If the stock is owned of
record by or for more than one person, as in a joint tenancy or tenancy in
common, such demand must be executed by or for all joint owners. An authorized
agent, including an agent for two or more joint owners, may execute the demand
for appraisal for a stockholder of record; however, the agent must identify the
record owner and expressly disclose that, in exercising the demand, he is acting
as agent for the record owner. A person having a beneficial interest in Coromed
Common Stock held of record in the name of another person, such as a broker or
nominee, must act promptly to cause the record holder to follow the steps
summarized below and in a timely manner to perfect whatever appraisal rights the
beneficial owners may have.
A record owner, such as a broker, who holds stock as a nominee for others,
may exercise appraisal rights with respect to the stock held for all or less
than all beneficial owners of stock as to which the holder is the record owner.
In such case the written demand must set forth the number of stock covered by
such demand. Where the number of stock is not expressly stated, the demand will
be presumed to cover all stock outstanding in the name of such record owner.
A Coromed stockholder who elects to exercise appraisal rights will be
required to mail or deliver his or her written demand to: Coromed, Inc.,
Rensselaer Technology Park, 185 Jordan Road, Troy, New York 12180-7615,
Attention: Secretary. The written demand for appraisal should specify the
stockholder's name and mailing address, the number of shares owned, and that the
stockholder is thereby demanding appraisal of his or her stock. Within ten days
after the Effective Time of the Merger, Coromed must provide notice of the
Effective Time of the Merger to all of its stockholders who have complied with
Section 262 and have not voted for approval of the Merger.
Within 120 days after the Effective Time of the Merger, any stockholder who
has satisfied the requirements of Section 262 will be entitled, upon written
request, to receive from Coromed a statement setting forth the aggregate number
of shares not voted in favor of the Merger and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Within 120 days after the Effective Time of the Merger (but not
thereafter), either Coromed or any stockholder who has complied with the
required conditions of Section 262 may file a petition in the Delaware Court of
Chancery demanding a determination of the fair value of the Dissenting Shares.
Upon the filing of any petition by a stockholder in accordance with Section
262, service of a copy must be made upon Coromed, which must, within 20 days
after service, file in the office of the Register of Chancery in which the
petition was filed, a duly verified list containing the names and addresses of
all stockholders who
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have demanded payment for their shares and with whom agreements as to the value
of their shares have not been reached by Coromed. If a petition is filed by
Coromed, the petition must be accompanied by the verified list. The Register of
Chancery, if so ordered by the Court, will give notice of the time and place
fixed for the hearing of such petition by registered or certified mail to
Coromed and to the stockholders shown on the list at the addresses therein
stated, and notice will also be given by publishing a notice at least one week
before the day of the hearing in a newspaper of general circulation published in
the City of Wilmington, Delaware, or such publication as the Court deems
advisable. The forms of notices by mail and by publication must be approved by
the Court, and the costs thereof shall be borne by Coromed.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Court will determine which stockholders are entitled to appraisal
rights and thereafter will appraise the stock owned by such stockholders,
determining the fair value of such stock, exclusive of any element of value
arising from the accomplishment or expectation of the Merger, together with a
fair rate of interest to be paid, if any, upon the amount determined to be the
fair value. In determining fair value, the Court is to take into account all
relevant factors.
Coromed stockholders considering seeking appraisal should bear in mind that
the fair value of their stock determined under Section 262 could be more than,
the same as, or less than the applicable consideration they are entitled to
receive pursuant to the Merger Agreement if they do not seek appraisal of their
stock. The cost of the appraisal proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder seeking appraisal rights, the Court may order that
all or a portion of the expenses incurred by such stockholder in connection with
the appraisal proceeding, including, without limitation, reasonable attorneys'
fees and the fees and expenses of experts, be charged pro rata against the value
of all stock entitled to appraisal. In the absence of such a determination or
assessment, each party bears its own expenses.
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the Effective Time of the Merger, be entitled to
vote the shares subject to such demand for any purpose or be entitled to the
payment of dividends or other distributions on those shares (except dividends or
other distributions payable to stockholders of record at a date prior to the
Effective Time of the Merger).
At any time within 60 days after the Effective Time of the Merger, any
stockholder shall have the right to withdraw his or her demand for appraisal and
to accept the terms offered in the Merger Agreement. After this period, a
stockholder may withdraw his or her demand for appraisal only with the consent
of Coromed. If no petition for appraisal is filed with the Court within 120 days
after the Effective Time of the Merger, stockholders' rights to appraisal (if
available) shall cease and all stockholders shall be entitled to receive the
consideration as provided for in the Merger Agreement. Inasmuch as Coromed has
no obligation to file such a petition, and has no present intention to do so,
any stockholder who desires such a petition to be filed is advised to file it on
a timely basis. However, no petition timely filed in the Court demanding
appraisal shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
Pursuant to the Merger Agreement, the obligations of Omnicare and Merger
Sub to effect the Merger are conditioned upon, among other things, holders of no
more than 5% of the outstanding shares of Coromed Common Stock having taken the
actions required to exercise appraisal rights pursuant to Section 262 of the
DGCL. See "THE MERGER -- Conditions to the Merger."
ACCOUNTING TREATMENT OF THE MERGER
Omnicare and Coromed believe that the Merger will qualify as a "pooling of
interests" for accounting and financial reporting purposes, and have been so
advised by their respective independent public accountants. Coromed's historical
financial condition and results of operations are not material to Omnicare's
historical consolidated financial statements. Accordingly, (i) Coromed's results
of operations will be included in the consolidated financial statements of
Omnicare from the date of consummation of the Merger and (ii) pro forma
financial statements are not included herein.
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The obligations of Coromed to consummate the Merger are conditioned upon
receipt by Coromed of a letter from Coopers & Lybrand L.L.P. which states their
concurrence with the conclusion of Coromed's management that no conditions exist
with respect to Coromed that would preclude the Merger from being treated as a
"pooling of interests" under applicable United States accounting standards, and
the obligations of Omnicare and Merger Sub to consummate the Merger are
conditioned upon receipt by Omnicare of an opinion from Price Waterhouse LLP, to
the effect that the Merger will be accounted for as a "pooling of interests" for
the purposes of generally accepted accounting principles and applicable
accounting rules of the Commission.
COMPARISON OF STOCKHOLDER RIGHTS
Omnicare and Coromed are each incorporated under the laws of the State of
Delaware. Holders of shares of Coromed Common Stock, whose rights as
stockholders are currently governed by the DGCL, the Certificate of
Incorporation of Coromed ("Coromed Certificate") and the Bylaws of Coromed, as
amended ("Coromed Bylaws"), will, upon the exchange of their shares pursuant to
the Merger, become holders of shares of Omnicare Common Stock, and their rights
as such will be governed by the DGCL, the Restated Certificate of Incorporation
of Omnicare ("Omnicare Certificate"), and the Amended Bylaws of Omnicare
("Omnicare Bylaws"). The material differences between the rights of holders of
shares of Coromed Common Stock and of the rights of holders of shares of
Omnicare Common Stock result from differences in their governing corporate
documents and are summarized below. This summary is qualified in its entirety by
reference to the full text of the respective Certificates of Incorporation and
Bylaws of Omnicare and Coromed.
The provisions in the Omnicare Certificate described below that differ from
the Coromed Certificate, including (i) the ability of the Omnicare Board to
issue, and designate the terms of, one or more series of Preferred Stock and
(ii) the provision that directors may be removed without cause only by a vote of
two-thirds of all outstanding shares entitled to vote, could have a potential
anti-takeover effect on Omnicare, by making it more difficult for a third party
to acquire control of Omnicare without the consent of the Omnicare Board.
Authorized Capital
The Omnicare Certificate provides that Omnicare has authority to issue
110,000,000 Omnicare Common Stock, par value $1.00 per share, of which
approximately 79,497,512 were outstanding as of March 31, 1997, and 1,000,000
shares of Preferred Stock, without par value, of which no shares are currently
outstanding. The Coromed Certificate provides that Coromed has authority to
issue 2,000,000 Coromed Common Stock, par value $.01 per share, of which 657,706
were outstanding as of the Record Date.
As a consequence and following the Merger, Coromed stockholders will no
longer hold Coromed Common Stock, but will instead hold shares of Omnicare
Common Stock.
Board Approved Preferred Stock
The Omnicare Certificate allows the Omnicare Board to issue one or more
series of Preferred Stock and to designate the number of shares to be included
in such series; the dividend rate; the redemption price or prices if any; the
terms and conditions of the redemption of or purchase of the shares of such
series; the terms and conditions on which such shares are convertible into
common stock or any other securities, if they are convertible; and any and all
other designations, preferences and relative participating, option, voting or
other special rights and qualifications, limitations or restrictions thereof, of
such series. Pursuant to the Coromed Certificate, Coromed has no shares of
preferred stock authorized for issuance.
Although it has no present intention to do so, the Omnicare Board has the
ability to issue one or more series of Omnicare Preferred Stock that could,
depending on the terms of such series, impede the completion of a merger, tender
offer or other takeover attempt. The Omnicare Board will make any determination
to issue such shares based on its judgment as to the best interests of Omnicare
and its stockholders.
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Directors
Number. The Omnicare Bylaws provide for no fewer than three and no more
than thirty directors with the number of directors to be determined by board
resolution, or in the absence thereof, the number of directors shall be the
number of directors elected at the preceding annual meeting of stockholders.
Currently, the Omnicare Board has fixed the number of directors at fifteen.
The Coromed Bylaws has fixed the number of directors at four.
Election of Directors. The Omnicare Bylaws provide for the election of
directors at the annual meeting of stockholders or in the event of a vacancy, by
the directors (see "Vacancy" below). Directors are elected by a plurality of the
votes cast. No person may be nominated for election as a director unless written
notice of intention to nominate such person shall have been given to the
Chairman, the President or the Secretary of Omnicare by a stockholder entitled
to notice of and to attend a meeting of stockholders at which directors are to
be elected no later than 15 business days before the date of such meeting.
The Coromed Bylaws provide for the election of directors at the annual
meeting by the stockholders.
Removal. The Omnicare Certificate provides that the directors may be
removed without cause only by two-thirds of the shares then entitled to vote at
an election of directors.
The Coromed Bylaws provide for the entire board or any individual director
to be removed from office without cause by a majority vote of the holders of the
outstanding shares entitled to vote.
Vacancies. The Omnicare Bylaws state that vacancies in the Omnicare Board,
whether caused by resignation, removal, death or any other reason, and newly
created directorships resulting from any increase in the authorized number of
directors, may be filled either by majority vote of the directors then remaining
in office (whether or not sufficient in number to constitute a quorum), or by a
sole remaining director, or by a plurality of the votes cast at the meeting of
stockholders held for that purpose. In addition, the Omnicare Bylaws state that
in the event that one or more directors shall resign from the Omnicare Board,
effective at a future date, a majority of the directors then in office,
including those who have so resigned effective at a future date, shall have
power to fill the vacancy or vacancies which will result when such
resignation(s) become effective, the vote thereon to take effect when such
resignation(s) become effective.
The Coromed Bylaws state that any vacancies and newly created directorships
resulting from any increase in the authorized number of directors elected by all
of the stockholders having the right to vote as a single class may be filled by
a majority of the directors then in office, although less than a quorum, or by a
sole remaining director, and that each person so elected as director will remain
as director until his successor is elected and qualified or until his earlier
resignation and removal.
As a consequence of and following the Merger, the rights and obligations of
holders of Coromed Common Stock with respect to the Omnicare Board will be
governed by the provisions of the Omnicare Certificate and the Omnicare Bylaws
described in the foregoing paragraphs.
Stockholders' Meetings
Special Meeting of Stockholders. The Omnicare Bylaws state that special
stockholders' meetings may be called at any time by the Chairman, the President
or the Secretary and must be called by the aforementioned upon the written
request of the majority of the Omnicare Board or of the holders of record of a
majority of the stock then entitled to vote for the election of directors.
The Coromed Bylaws state that special stockholders' meetings may be called
by the Coromed Board, by the President or by the holders of record of not less
than a majority of the shares outstanding and entitled to vote.
Stockholder Action by Written Consent. The Omnicare Bylaws allow any
action required or permitted to be taken at a meeting of stockholders to be
taken without a meeting, without prior notice and without a vote, if consents in
writing, setting forth the action so taken, are signed by the holders of record
of shares
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having not less than the minimum voting power that would have been necessary to
take such action at a meeting at which all common stock entitled to vote thereon
were present and voted.
The Coromed Bylaws allow for stockholder action by written consent on
substantially the same terms as the Omnicare Bylaws.
Quorum. The Omnicare Bylaws provide that a quorum at any meeting is
constituted when holders of record of shares having a majority of the voting
power of the stock entitled to vote at any such meeting are present.
Pursuant to the Coromed Bylaws, the presence of holders of a majority of
the outstanding shares entitled to vote constitutes a quorum. The stockholders
present at a duly organized meeting may continue to do business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum. In the case of any meeting for the election of directors, those
stockholders who attend the second of such adjourned meetings, although less
than a quorum, will, nonetheless, constitute a quorum for the purpose of
electing directors.
Notice and Waiver of Notice of Meetings. The Omnicare Bylaws require,
unless otherwise provided by law, that notice of an annual or special
stockholders' meeting (specifying the time, place and purpose thereof) be given
not less than 10 nor more than 50 days before the meeting date and does not,
unless otherwise provided by law, require notice of any adjourned meeting of
stockholders.
The Coromed Bylaws follow the DGCL in requiring that notice of an annual or
special stockholders' meeting be given not less than 10 nor more than 60 days
before the day of the meeting and requiring that a notice of adjournment be
given if the adjournment is for more than 30 days or a new record date is fixed
for the adjourned meeting. The notice is to specify the place, day and hour of
the meeting and, in the case of a special meeting or where otherwise required by
law, the general nature of the business to be transacted at such meeting.
As a consequence of and following the Merger, the rights and obligations of
Coromed stockholders with respect to the calling and notice of Omnicare
stockholders' meetings will be governed by the provisions of the Omnicare Bylaws
discussed above.
Business Combinations.
Pursuant to the Omnicare Certificate, a merger or consolidation of Omnicare
with, a disposition of a substantial part of Omnicare's assets to or with, the
transfer of Omnicare securities in exchange for assets or securities with a fair
market value of $5 million or more to, or the transfer of Omnicare securities
for cash to, a person or entity beneficially owning 10% or more of the
outstanding shares of Omnicare capital stock entitled to vote in the election of
directors, requires the approval of the holders of a majority of the outstanding
shares of Omnicare capital stock not beneficially owned by such person or
entity. No such approval is required for a transaction: (i) with another
corporation of which Omnicare is the majority stockholder, (ii) with another
person or entity, if the Omnicare Board approved a memorandum of understanding
with such person or entity before such person or entity became a 10% stockholder
of Omnicare, or (iii) approved unanimously by the Omnicare Board prior to the
consummation thereof.
The Coromed Certificate contains no similar provision.
Amendment of Certificate of Incorporation.
The Omnicare Certificate provides that the provisions of the Omnicare
Certificate may be amended or repealed in the manner provided by law, except
that the approval of two-thirds of each class entitled to vote thereon is
required to amend or repeal the provisions of the Omnicare Certificate relating
to (i) the power of the Omnicare Board to amend or repeal the Omnicare Bylaws,
(ii) business combinations with interested stockholders described in "Business
Combinations" above, (iii) removal of directors without cause, (iv) directors'
liability; and (v) indemnification of directors, officers and employees.
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<PAGE> 43
The Coromed Certificate may be amended, altered or repealed in any manner
provided by law.
Amendment of Bylaws.
The Omnicare Certificate permits the Omnicare Board to make, alter or
repeal the Omnicare Bylaws. The Omnicare Bylaws permit the bylaws to be altered,
amended or repealed and new bylaws to be made and adopted by action of a
majority of the whole Omnicare Board or by the stockholders.
The Coromed Certificate allows the Coromed Board to make, alter or repeal
the Coromed Bylaws. The Coromed Bylaws also provide for the stockholders to
adopt, amend or repeal the Coromed Bylaws.
Limitation on Directors' Liability.
The Omnicare Certificate provides that a director will not be liable to
Omnicare or its stockholders for monetary damages for breach of fiduciary duty
as a director to the full extent permitted by the DGCL.
Similarly, the Coromed Certificate provides that a director shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director to the full extent permitted by the
DGCL.
Indemnification of Directors.
The Omnicare Certificate provides for indemnification of directors,
officers, employees and agents to the full extent permitted by the DGCL.
Similarly, the Coromed Bylaws provide for the indemnification of any
director, officer, employee or agent to the full extent permitted by the DGCL.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material federal income tax
consequences of the Merger to holders of Coromed Common Stock and is based upon
the Code, the applicable Treasury Department regulations thereunder, judicial
authority and current administrative rulings and practice, all as in effect as
of the date hereof. Future legislation, regulations, administrative rulings or
court decisions could significantly change such authorities either prospectively
or retroactively. The following discussion does not address the consequences of
the Merger under state, local or foreign law nor does the discussion address all
aspects of federal income taxation that may be important to a stockholder in
light of such stockholder's particular circumstances or to stockholders subject
to special rules, including, without limitation, financial institutions,
insurance companies, foreign individuals and entities, tax-exempt entities,
dealers in securities, persons who acquired Coromed Common Stock pursuant to the
exercise of an employee option (or otherwise as compensation) or persons holding
Coromed Common Stock as part of an integrated investment (including a
"straddle") comprised of shares of Coromed Common Stock and one or more other
positions. This discussion assumes that Coromed stockholders hold their
respective shares of Coromed Common Stock as capital assets within the meaning
of Section 1221 of the Code.
Coromed has received an opinion from Morgan, Lewis & Bockius LLP, dated as
of the date of this Proxy Statement/Prospectus and based upon, among other
things, representation letters provided by Coromed and Omnicare, that the Merger
will qualify as a reorganization within the meaning of Section 368(a) of the
Code and Coromed, Omnicare, and Merger Sub will each be a party to the
reorganization within the meaning of Section 368(b) of the Code. In addition,
such opinion states that (i) a Coromed stockholder will not recognize gain or
loss upon the exchange of Coromed Common Stock solely for Omnicare Common Stock;
(ii) the payment of cash to a Coromed stockholder in lieu of a fractional share
interest in Omnicare Common Stock will be treated as if the fractional share had
been distributed as part of the exchange and then redeemed by Omnicare; and
(iii) any such cash payment will be treated as having been received as a
distribution in payment for the Omnicare Common Stock hypothetically redeemed as
provided in Section 302 of the Code, and generally should result in the
recognition of capital gain or loss measured by the difference between the
amount of cash received and the portion of the tax basis of the Coromed Common
Stock allocable to such fractional share interest. It is a condition to the
obligations of each party to consummate the Merger that the opinion of Morgan,
Lewis & Bockius LLP referred to above be confirmed as of the Closing Date.
THE FOLLOWING SUMMARY OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER IS WITHOUT REFERENCE TO THE FACTS AND CIRCUMSTANCES OF ANY PARTICULAR
STOCKHOLDER. THIS DISCUSSION DOES NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN,
STATE OR LOCAL TAX CONSEQUENCES OF THE MERGER. MOREOVER, THIS DISCUSSION DOES
NOT ADDRESS THE TAX CONSEQUENCES OF ANY TRANSACTION OTHER THAN THE MERGER.
ACCORDINGLY, EACH STOCKHOLDER IS URGED TO CONSULT WITH SUCH STOCKHOLDER'S TAX
ADVISOR TO DETERMINE THE PARTICULAR UNITED STATES FEDERAL, STATE, LOCAL OR
FOREIGN INCOME OR OTHER TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER.
Exchange of Coromed Common Stock for Omnicare Common Stock. Except as
discussed below under "Cash Received in Lieu of Fractional Shares", no gain or
loss will be recognized for federal income tax purposes by holders of Coromed
Common Stock who exchange their Coromed Common Stock for Omnicare Common Stock
pursuant to the Merger. The aggregate tax basis of Omnicare Common Stock
received as a result of the Merger will be the same as the stockholder's
aggregate tax basis in the Coromed Common Stock surrendered in the exchange
(reduced by any tax basis allocable to fractional shares exchanged for cash) and
the holding period of the Omnicare Common Stock received will include the
holding period of the Coromed Common Stock surrendered therefor.
Cash Received in Lieu of Fractional Shares. No fractional shares of
Omnicare Common Stock will be issued upon the surrender for exchange of
certificates representing shares of Coromed Common Stock. The payment of cash to
a holder of Coromed Common Stock in lieu of a fractional share interest in
Omnicare Common Stock will be treated as if the fractional share had been
distributed as part of the exchange and then
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redeemed by Omnicare. The cash payment will be treated as having been received
as a distribution in payment for the Omnicare Common Stock hypothetically
redeemed as provided in Section 302 of the Code and generally should result in
the recognition of capital gain or loss measured by the difference between the
amount of cash received and the portion of the tax basis of the Coromed Common
Stock allocable to such fractional share interest. For individuals, such capital
gain or loss will be long-term capital gain or loss if such share of Coromed
Common Stock has been held for more than eighteen months at the Effective Time,
mid-term capital gain or loss if such share of Coromed Common Stock has been
held for more than twelve months but not more than eighteen months at the
Effective Time or short-term capital gain or loss if such Coromed Common Stock
has been held for twelve months or less. Long term capital gains are currently
taxed at a maximum rate of 20%, mid-term capital gains are currently taxed at a
maximum rate of 28% and short-term capital gains are currently taxed at ordinary
income rates.
Expenses of the Merger. Any Coromed stockholder whose expenses relating to
the Merger are paid on his or her behalf by Coromed will be deemed to receive
from Coromed ordinary income equal to the amount of such expenses.
Dissenters. The tax consequences to a Coromed stockholder who exercises
dissenters' rights with respect to a share of Coromed Common Stock and receives
payment for such share in cash will generally not depend on the qualification of
the Merger as a reorganization for federal income tax purposes. Such stockholder
will generally recognize capital gain or loss for federal income tax purposes,
measured by the difference between the holder's basis in such share and the
amount of cash received. For individuals, such capital gain or loss will be
long-term capital gain or loss if such share has been held for more than
eighteen months, mid-term capital gain or loss if such share of Coromed Common
Stock has been held for more than twelve months but not more than eighteen
months or short-term capital gain or loss if such Coromed Common Stock has been
held for twelve months or less. Long term capital gains are currently taxed at a
maximum rate of 20%, mid-term capital gains are currently taxed at a maximum
rate of 28% and short-term capital gains are currently taxed at ordinary income
rates.
Backup Withholding. Unless an exemption applies under the applicable law
and regulations, the Exchange Agent is required to withhold, and will withhold,
31% of any cash payments to a stockholder in the Merger unless the stockholder
provides the appropriate form as described below. Each Coromed stockholder
should complete and sign the Substitute Form W-9 included as part of the letter
of transmittal to be sent to each Coromed stockholder, so as to provide the
information (including the stockholder's taxpayer identification number) and
certification necessary to avoid backup withholding, unless an applicable
exemption exists and is proved in a manner satisfactory to Omnicare and the
Exchange Agent.
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BUSINESS OF COROMED
Coromed, founded in 1989 and headquartered in Albany, New York, is an
international contract service organization, providing preclinical research and
clinical development services worldwide to the pharmaceutical, biotechnology
and, to a lesser extent, medical device industries. These services are provided
under contract between the client company and Coromed. The services that Coromed
provides to its clients complement their research and development departments
and help to reduce their drug development time and cost.
Preclinical research services are comprised of research chemical synthesis
and pharmacological research services. Chemical synthesis services include the
syntheses of reference chemicals, metabolites of known chemical entities, and
novel chemicals for preclinical pharmacological assessment. Pharmacological
research services include efficacy and safety studies conducted in laboratory
research models comprising enzyme tests, receptor assays, isolated tissue and
whole organ assays as well as intact animal models.
Coromed's clinical development services are comprised of the management of
clinical trials and the management of clinical data. These services include the
design of clinical trials, recruitment of clinical investigational sites for the
conduct of the clinical trials, and management of the trials. These services
also include the collection and analysis of data from the clinical trials and
the generation of reports summarizing the outcomes of the clinical trials. The
clinical development services also include quality assurance audits of clinical
sites and of clinical data. In addition, as part of its clinical development
services, Coromed provides regulatory consulting to companies in support of
their submissions to government regulatory agencies.
Coromed has built its business through strategic internal expansion. In
1993, Coromed established a satellite office in San Diego, California, to
provide more effectively clinical trials monitoring and management services in
the west coast region. Coromed also initiated its international expansion in
1993, with the incorporation in Quebec, Canada of Coromed Canada, a wholly-owned
subsidiary that provides comprehensive clinical development services throughout
Canada. The expansion of Coromed's international capabilities and operations
continued with the incorporation of Coromed S.A. in Buenos Aires, Argentina in
1995.
In January 1997, Coromed signed a joint venture agreement with a leading
group of cardiologists in the New England area. The joint venture provides
Coromed access to clinical cardiology investigative sites for clinical trials.
The joint venture represents Coromed's initial entry into site management.
Initially, the cardiology sites will consist of approximately 35 investigative
sites. The investigative sites will conduct clinical research under a standard
procedure and agreement that will facilitate the implementation of new clinical
studies in a timely manner.
The size of contracts awarded to Coromed has increased over time as a
result of Coromed's ability to provide a full range of services to its clients.
This is exemplified by the commencement in October of 1996 of a clinical trials
management project which generated approximately $1.9 million of revenue in the
fiscal year ended June 30, 1997. As part of this project, Coromed is providing
clinical monitoring services, data management services, medical report writing
and quality assurance. Coromed seeks to secure even larger contracts as a result
of its continued development of capabilities in key areas of clinical trials
management and data management. There can be no assurance that Coromed will be
able to secure such contracts and even if such contracts are secured that they
will be profitable.
In November of 1996, Coromed executed a letter of intent with a European
contract research organization. The proposed operating alliance which is
currently being developed would enable Coromed to utilize the infrastructure of
this European organization in Coromed's international trials. The alliance would
also enable Coromed to provide pharmacoeconomic and quality of life studies to
its clients. The definitive form of the alliance remains under discussion, and
the outcome of these discussions cannot be predicted.
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SERVICES
General
Coromed offers a full range of services that encompass the preclinical drug
research and clinical drug development processes. Coromed believes that its
knowledge and experience in all stages of pharmaceutical research enhance its
credibility with prospective clients. Coromed's full range of services and
global experience complement the research and development departments of
pharmaceutical and biotechnology companies.
Drug Research
To assist clients in the identification and preclinical development of
novel therapeutics, the Biological Research Division provides a full range of
pharmacological testing systems, with particular expertise in cardiovascular and
respiratory/pulmonary pharmacology. Coromed works closely with clients to
identify the most appropriate design and procedures to serve the study
objective. Results are analyzed and summarized in comprehensive scientific
reports suitable for publication or regulatory submission. Complementing
Coromed's Chemistry Division, the Biological Research Division can assess
synthesized compounds for activity in a full range of pharmacological testing
systems.
Coromed's Chemistry Division offers extensive chemical synthesis and
analytical services to the pharmaceutical, biotechnology, and chemical
industries. Organic chemists employed by Coromed, who are experienced in
medicinal chemistry and drug development, are available to serve clients'
chemical research needs. Synthesized substances are prepared in a confidential,
economical and timely manner. All products are accompanied by complete
documentation which carefully details chemical processes and analytical results.
Drug Development
Coromed provides a full range of drug development services, including
clinical trials management, clinical data management, biostatistical analysis,
study design, medical writing, quality assurance and regulatory affairs
services. Coromed provides these services individually or as an integrated
package of services.
Coromed offers complete services for the design, initiation and management
of clinical trial programs, a critical element in obtaining regulatory approval
for drugs. Although Coromed specializes in cardiovascular, oncology/AIDS, and
pulmonary/respiratory areas, Coromed has also performed services in connection
with trials in most therapeutic areas, including central nervous system,
infectious disease, metabolic disorders, obstetrics and gynecology,
genitourinary, and rheumatology. Coromed's multi-disciplinary clinical trials
group can examine a product's existing preclinical and clinical data to design
clinical trials to establish the product's safety and efficacy profile.
Clinical trials are monitored to ensure strict adherence to Good Clinical
Practice guidelines and regulations. The design of efficient Case Report Forms
("CRFs"), detailed operations manuals and site visits by Coromed's clinical
research associates ensure that clinical investigators and their staffs follow
the established protocols of the studies. Coromed has adopted standard operating
procedures which are intended to satisfy regulatory requirements and serve as a
tool to promote the high quality of Coromed's clinical services worldwide.
Clinical trials represent one of the most expensive and time-consuming
parts of the overall drug development process. The information generated during
these trials is critical for gaining marketing approval from the United States
Food and Drug Administration (the "FDA") or other regulatory agencies. Coromed's
Clinical Affairs Division assists clients with one or more of the following
steps:
- Study Protocol Design. The protocol defines the medical issues the
study seeks to examine and the statistical tests that will be conducted.
Accordingly, the protocol defines the frequency and type of laboratory and
clinical measures that are to be tracked and analyzed. The protocol also
defines the number of patients required to produce a statistically valid
result, the period of time over which they must
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be tracked and the frequency and dosage of drug administration. The study's
success depends, in part, on the protocol's ability to predict correctly
the requirements of the regulatory authority.
- Case Report Forms Design. Once the study protocol has been
finalized, CRFs must be developed. The CRF may change at different stages
of a trial. The CRFs for one patient in a given study may consist of 100 or
more pages.
- Site and Investigator Recruitment. The drug is administered to
patients by physicians, referred to as investigators, at hospitals, clinics
or other locations, referred to as sites. Potential investigators may be
identified by the drug sponsor or by Coromed. Coromed generally solicits
the investigators' participation in the study. The trial's success depends
on the successful identification and recruitment of investigators with an
adequate base of patients who satisfy the requirements of the study
protocol. Coromed has access to and experience with several thousand
investigators who have conducted clinical trials.
- Patient Enrollment. The investigators find and enroll patients
suitable for the study. The speed with which trials can be completed is
significantly affected by the rate at which patients are enrolled.
Prospective patients are required to review information about the drug and
its possible side effects, and sign an informed consent form to record
their knowledge and acceptance of potential side effects. Patients also
undergo a medical examination to determine whether they meet the
requirements of the study protocol. Patients then receive the drug and are
examined by the investigator as specified by the study protocol.
- Study Monitoring and Data Collection. As patients are examined and
tests are conducted in accordance with the study protocol, data are
recorded on CRFs and laboratory reports. The data are collected from study
sites by specially trained persons known as monitors. Monitors visit sites
regularly to ensure that the CRFs are completed correctly and that all data
specified in the protocol are collected. The monitors take completed CRFs
to the study coordinating site, where the CRFs are reviewed for consistency
and accuracy before their data is entered into an electronic database.
Coromed's study monitoring and data collection services comply with the
FDA's adverse events reporting guidelines.
- Medical Services. Throughout the course of a clinical trial,
Coromed's physicians can provide a range of medical research and consulting
services, including medical monitoring of clinical trials.
Coromed's data management personnel assist in the design of CRFs, as well
as training manuals for investigators, to ensure that data are collected in an
organized and consistent format. Databases are designed according to the
analytical specifications of the project and the particular needs of the client.
Prior to data entry, Coromed personnel screen the data to detect errors,
omissions and other deficiencies in completed CRFs. Coromed provides clients
with data abstraction, data review and coding, data entry, database verification
and editing and problem data query resolution.
Coromed has extensive experience in the creation of scientific databases
for all phases of the drug development process, including the creation of
customized databases to meet client-specific formats, integrated databases to
support New Drug Application ("NDA") submissions and databases in strict
accordance with regulatory specifications. For example, Coromed is currently
preparing the design of a single database which will incorporate the safety data
for all clinical studies (including those developed by Coromed, as well as those
developed by other contractors) in order to perform the overall safety analysis,
listings, and tables required for NDA documentation.
Coromed's biostatistics personnel assist clients with all phases of drug
development, including biostatistical consulting, database design, data analysis
and statistical reporting. These individuals develop and review protocols,
design appropriate analysis plans and design report formats to address the
objectives of the study protocol as well as the client's individual objectives.
Working with the programming staff, biostatisticians perform appropriate
analyses and produce tables, graphs, listings and other applicable displays of
results according to the analysis plan.
Working closely with clinical, statistical, regulatory, and quality
assurance experts, Coromed's medical writers develop documents in accordance
with regulatory guidelines and industry standards. Such documents
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include clinical/statistical study reports, U.S. and international regulatory
submissions, safety and efficacy summaries, clinical investigator brochures,
protocols, and manuscripts and abstracts for publication.
Coromed provides complete inspection and auditing services to assure the
overall quality of research, as well as to ensure full compliance with U.S. and
international regulations and guidelines. These services support clients'
preclinical safety and efficacy studies, including those subject to Good
Laboratory Practice regulations and clinical studies under Good Clinical
Practice guidelines and regulations. Additionally, Coromed provides inspection
and auditing of facilities for compliance with Good Manufacturing Practice
regulations. Coromed's Quality Assurance and Compliance experts can audit
studies conducted by Coromed, the client or another organization.
Further supporting clients' clinical development projects, Coromed prepares
the specialized documents required for conducting clinical trials and submitting
regulatory applications, and also assists with U.S. and international regulatory
matters. Regulatory affairs services include compilation, filing and maintenance
of U.S. and international regulatory submissions for new drugs, medical devices,
and diagnostics, as well as development of regulatory strategies and
consultation on regulatory issues. Coromed's regulatory specialists interact
directly with regulatory authorities on the client's behalf.
INFORMATION SYSTEMS
Coromed has invested in information technology designed to help it provide
high quality services in a cost effective manner to clients and to manage its
internal resources. Coromed's wide area network and electronic communications
systems connect approximately 100 computers worldwide, exclusive of secure and
direct links to clients for communications and data-transfer activities.
Coromed's data management and biostatistics functions are performed with SAS(TM)
in an Axiant(TM)/Oracle client/server environment. Proprietary ClinTrace(TM) and
internally-developed Oracle(R) serious adverse event systems and computerized
project tracking/scheduling applications are used to effectively manage clients'
large-scale domestic and multinational clinical research projects. Coromed's
information systems are designed to work in support of and reinforce Coromed's
standard operating procedures. Coromed's information technology system is open
and flexible, thus allowing it to be adapted to the multiple needs of clients.
Coromed's experience with additional information systems and technologies, such
as remote data entry, fax technology, and cost-accounting systems, also provide
efficient and effective support to clients' clinical development and regulatory
activities. SAS(TM), Axiant(TM), ClinTrace(TM), and Oracle(TM) are service marks
or trade marks owned by The SAS Institute Incorporated, Cognos Incorporated,
Domain Solutions Corporation, and Oracle Corporation, respectively.
CLIENTS
Since its founding in 1989, Coromed has served approximately 115 clients in
the pharmaceutical and biotechnology industries including 15 of the top 20
pharmaceutical companies in North America and 10 of the top 15 pharmaceutical
companies worldwide. Coromed has provided research and development services to
major North American, European and Japanese pharmaceutical and biotechnology
companies. Coromed has expanded geographically primarily through internal
growth, supplemented by strategic business relationships, with a goal of serving
all major client markets worldwide and positioning Coromed to serve developing
markets. Among CROs, Coromed is distinctive in having recognized operations in
South America. Approximately 60% of Coromed's clients are pharmaceutical
companies and approximately 40% are biotechnology companies. To date, the number
of clients in the medical device industry has not been significant.
COMPETITION
Coromed primarily competes against in-house departments of pharmaceutical
companies, full service CROs, and, to a lesser extent, universities and teaching
hospitals. Some of these competitors have substantially greater capital,
technical and other resources than Coromed. CROs generally compete on the basis
of previous experience, medical and scientific expertise in specific therapeutic
areas, the quality of contract research, the ability to organize and manage
large-scale trials on a global basis, the ability to manage large and complex
medical databases, the ability to provide statistical and regulatory services,
the ability to
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recruit investigators, the ability to integrate information technology with
systems to improve the efficiency of contract research, an international
presence with strategically located facilities, financial viability and price.
Coromed believes that it competes favorably in these areas.
The CRO industry is highly fragmented, with participants ranging from
several hundred small, limited service providers to several large, full-service
CROs with global operations. Large CROs include ClinTrials Research, Inc.,
Covance Inc., Pharmaceutical Product Development, Inc. and Quintiles
Transnational Corporation. The trend toward CRO industry consolidation has
resulted in heightened competition among the larger CROs for clients and
acquisition candidates. In addition, consolidation within the pharmaceutical
industry as well as a trend toward the concentration by pharmaceutical companies
of outsourcing among fewer CROs has led to heightened competition for CRO
contracts. Coromed believes its specialization in particular therapeutic areas,
its complementary drug research (preclinical) and drug development (clinical)
services, and its international presence are significant competitive strengths.
EMPLOYEES
As of June 30, 1997, Coromed had approximately 140 employees, of which 11
hold Ph.D. or M.D. degrees. Approximately 76% of the full-time employees are
located at the corporate headquarters and 24% are located in Coromed's other
domestic or foreign offices. In addition, Coromed has consulting agreements with
8 M.D.s from different therapeutic areas which Coromed utilizes on an as-needed
basis to enhance its drug development services.
FACILITIES
Coromed generally leases all of its facilities. Coromed's corporate offices
are located in Albany, New York, where it leases approximately 23,500 square
feet under a lease that expires in 1999. Coromed also maintains U.S. offices in
San Diego, California; Harrison, Arkansas; and Shreveport, Louisiana. Coromed's
Canadian subsidiary is located in Montreal, Canada. Coromed's South American
subsidiary is located in Buenos Aires, Argentina. Coromed's European office is
in Ghent, Belgium.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS OF COROMED
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain financial
data as a percentage of net revenue and the percentage change in these items
compared to the prior comparable period. The trends illustrated in the following
table may not be indicative of future results.
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
PERCENTAGE OF NET REVENUE (DECREASE)
---------------------------------- -------------------------
FISCAL FISCAL FISCAL
FISCAL YEAR ENDED JUNE 30, 1996 1995 1994
---------------------------------- TO TO TO
1997 1996 1995 1994 1997 1996 1995
------ ---- ---- ----- ------ ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenue....................... 100% 100% 100% 100% (8.1)% 54.5% 46.5%
Costs and expenses:
Direct costs.................... 79.1 58.0 58.5 64.5 25.2 53.4 32.9
Selling, general and
administrative............... 33.1 26.5 27.5 37.4 14.6 48.9 7.7
Acquisition & Merger Costs...... 3.9
Depreciation and amortization... 2.4 1.9 2.5 3.4 16.6 18.8 6.8
----- ---- ---- ----- ------
Total operating expenses.......... 118.50 86.4 88.5 105.3 25.9 51.0 23.1
----- ---- ---- ----- ------
Income (loss) from operations..... (18.5)% 13.6% 11.5% (5.3)% (225.2)% 81.3% 417.1%
===== ==== ==== ===== ====== ==== =====
</TABLE>
Direct costs consist of compensation and related fringe benefits for
employees engaged on client projects, other project-related costs not reimbursed
and information systems costs. Selling, general and administrative expenses
consist of compensation and related fringe benefits for selling and
administrative employees, professional services (e.g., accounting and legal) and
advertising costs, as well as leasing and other costs related to facilities.
Net revenue from Coromed's foreign Subsidiaries for fiscal years 1997,
1996, 1995, 1994 constituted 9.3%, 11.0%, 6.7% and 7.2% of Coromed's net
revenues, respectively. (See footnote 11, Foreign Operations of the consolidated
financial statements).
Fiscal Year Ended June 30, 1997 Compared to Fiscal Year Ended June 30, 1996
Net revenue decreased by $687,000, or (8.1%), to $7.8 million for Fiscal
1997 from $8.5 million for Fiscal 1996. This net revenue decrease was primarily
attributable to completion of large clinical studies and the delays in securing
an equivalent volume of new clinical projects from prospective clients. Coromed
completed a large study in June 1996 which contributed approximately $1.9
million of net revenue for Fiscal 1996. Coromed completed two other clinical
studies in December 1996 for one client which contributed approximately $2.4
million of net revenue ($1.8 million for Fiscal 1996 and $.6 million for Fiscal
1997). Even though Coromed initiated one large clinical development project in
October 1996, which contributed approximately $1.9 million for Fiscal 1997,
Coromed has experienced delays in other pending clinical projects.
Direct costs increased by $1.2 million, or 25.2%, to $6.1 million for
Fiscal 1997 from $4.9 million for Fiscal 1996. This increase is primarily
attributable to the increase in clinical study personnel associated with the
growth in the business that occurred in fiscal year 1996. In addition, the staff
of the data management division increased by 54% to increase Coromed's data
management capacity and capabilities. Direct costs as a percentage of net
revenue increased to 79.1% for Fiscal 1997 from 58% for Fiscal 1996. This
increase is primarily due to the inability to allocate labor and overhead costs
(primarily clinical study and data management personnel) to client projects, due
to the completion of a large study in June 1996. With the commencement of a
large study in October 1996 and the potential for an additional large study in
the near future, project and data management personnel were not reduced during
Fiscal 1997. To mitigate the future potential of excess labor costs, Coromed has
implemented a program to utilize contingent staff on an as
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needed basis. Coromed has defined contingent staff as a pool of resources who
are knowledgeable and trained in data processing and data management and are
available for employment on an as needed basis. Thus, Coromed maintains a
reduced core staff that is supplemented by the contingent staff, effectively
reducing Coromed's labor costs during the periods between contracts and allowing
Coromed to maintain only the resources required at any given time. Coromed
believes this will allow the company to fulfill staff needs during peak periods
and to effectively reduce staff upon the completion of large studies, thereby
reducing fixed labor expenses.
Selling, general and administrative expenses increased by $326,800, or
14.6%, to $2.6 million for Fiscal 1997 from $2.2 million for Fiscal 1996. This
increase was primarily due to increased administrative personnel including
marketing personnel, hiring and facilities costs, in line with management's
objective of increasing infrastructure to accommodate Coromed's anticipated
growth. Selling, general and administrative expenses as a percentage of net
revenue increased to 33.1% for Fiscal 1997 from 26.5% for Fiscal 1996 primarily
due to increased marketing efforts.
Depreciation and amortization expense increased by $27,000, or 16.6% to
$189,100 for Fiscal 1997 from $162,100 for Fiscal 1996. The increase was
primarily due to increased capital spending on computer equipment to support the
increase in project related personnel. Depreciation and amortization as a
percentage of net revenue increased to 2.4% for Fiscal 1997 from 1.9% for Fiscal
1996.
Income from operations decreased from income of $1.14 million for Fiscal
1996 to a loss of $1.43 million for Fiscal 1997. Included in Fiscal 1997 were
one-time expenses associated with the Proposed Merger with Omnicare in the
amount of $303,100. In addition, this decrease was primarily the result of
underabsorption of labor and overhead costs during the period from July 1996
through June 1997 as a result of the completion of two large clinical studies
combined with the delay in commencing other anticipated projects. To mitigate
the future potential of excess labor costs, Coromed has implemented a program to
utilize contingent staff on an as needed basis, allowing Coromed to more
effectively manage labor requirements. In addition to the contingent pool of
resources established in the data management area, Coromed has reduced core
staff in the clinical management area and is establishing a pool of clinical
research associates who are available on an as needed basis.
Other income (expenses) increased by $24,400 to a net income of $28,400 for
Fiscal 1997 from a net income of $4,000 for Fiscal 1996. This increase is the
result of a $10,600 increase in other income and by a $13,700 decrease in
interest expense.
Coromed's effective income tax rate was 3.2% for Fiscal 1997 as compared to
12.3% for Fiscal 1996. The higher effective rate for Fiscal 1996 as compared
with Fiscal 1997 was primarily attributable to the elimination of the valuation
allowance against deferred tax assets at June 30, 1996 and the re-establishment
of the valuation allowance at June 30, 1997. (See Note 9 to the Coromed
Financial Statements.)
Fiscal Year Ended June 30, 1996 Compared To Fiscal Year June 30, 1995
Net revenue increased by $2.98 million, or 54.5%, to $8.46 million for
fiscal 1996 from $5.47 million for fiscal 1995. This net revenue growth was
primarily attributable to an increase in the number and average contract value
of clinical research projects serviced by Coromed.
Direct costs increased by $1.7 million, or 53.4%, to $4.9 million for
fiscal 1996 from $3.2 million for fiscal 1995. This increase in direct costs was
due to the increase in the number of project-related personnel, expansion of
facilities, and information system costs necessary to support the increased
level of operations. Direct costs as a percentage of net revenue remained
constant at 58.0% for fiscal 1996 compared to 58.5% for fiscal 1995.
Selling, general and administrative expenses increased by $736,200, or
48.9%, to $2.24 million for fiscal 1996 from $1.5 million for fiscal 1995. This
increase was primarily due to increased costs associated with additional
administrative personnel, greater hiring and selling costs, facilities expansion
to support Coromed's growth, principally in the U.S. and in South America.
Selling, general and administrative expenses as a
45
<PAGE> 53
percentage of net revenue decreased to 26.5% for fiscal 1996 from 27.5% for
fiscal 1995, primarily due to Coromed's expanded revenue base.
Depreciation and amortization expense increased by $25,600, or 18.8%, to
$162,100 for fiscal 1996 from $136,500 for fiscal 1995. The increase resulted
from an increase in depreciation associated with increased capital expenditures.
Depreciation and amortization as a percentage of net revenue decreased to 1.9%
for fiscal 1996 from 2.5% for fiscal 1995.
Income from operations increased by $513,400, or 81.3%, to $1.14 million
for fiscal 1996 from $631,200 for fiscal 1995. This increase was primarily
attributable to an increase in the number and average contract value of clinical
research projects with modest growth in operating expenses.
Other income (expenses) improved by $35,700, or 112.6%, to a net other
income of $4,000 for fiscal 1996 from a net other expense of $31,700 for fiscal
1995. This improvement was primarily due to interest income as a result of
higher average balances of cash.
Coromed's effective income tax rate was 12.3% for fiscal 1996 as compared
to 12.5% for fiscal 1995.
Fiscal Year Ended June 30, 1995 Compared to Fiscal Year Ended June 30, 1994
Net revenue increased by $1.7 million, or 46.5%, to $5.5 million for fiscal
1995 from $3.7 million for fiscal 1994. This increase was primarily due to an
increase in fiscal 1995 (over 1994) of the volume of clinical research projects
of $1.4 million, or 52.1%, and an increase in the volume of drug research
projects of $304,000, or 16%.
Direct costs increased by $791,500, or 32.9%, to $3.2 million for fiscal
1995 from $2.4 million for fiscal 1994. Substantially all of the increase in
direct costs was due to increased expenses associated with hiring of additional
project-related personnel and the expansion of facilities. Direct costs as a
percentage of net revenue decreased to 58.5% in fiscal 1995 from 64.5% in fiscal
1994. This decrease was primarily due to the increased work force utilization.
Selling, general and administrative expenses increased by $107,400, or
7.7%, to $1.5 million in fiscal 1995 from $1.4 million in fiscal 1994. The
increase in selling, general and administrative expenses was due to continued
development of infrastructure to support expanded operations. Due to the
comparative increase in the volume of projects and related revenue, selling,
general and administrative expenses as a percentage of net revenue decreased to
27.5% in fiscal 1995 from 37.4% for fiscal 1994.
Depreciation and amortization expenses increased by $8,700, or 6.8%, to
$136,500 in fiscal 1995 from $127,800 in fiscal 1994. This increase was
primarily due to increased capital spending in computer systems to support the
increase in projects. Depreciation and amortization as a percentage of net
revenue decreased to 2.5% in fiscal 1995 from 3.4% for fiscal 1994.
Income from operations increased by $830,200, or 417.1%, to income of
$631,200 for fiscal 1995 from a loss of $199,000 for fiscal 1994. This increase
was primarily attributable to an increase in the volume of clinical and drug
research projects with modest growth in operating expenses.
Other income (expenses) increased by $6,300, or 24.8%, to a net expense of
$31,700 in fiscal 1995 from a net expense of $25,400 in fiscal 1994. The change
was primarily due to the discontinuance of a state sponsored job incentive
program in fiscal 1994 which reduced other income.
The effective tax rate in fiscal 1995 was 12.5% as compared to (32.3)% in
fiscal 1994. The higher effective tax rate for fiscal 1994 as compared with
fiscal 1995 was primarily attributable to a higher proportion of taxable income
from foreign operations in fiscal 1994 and the use of net operating loss
carryovers in fiscal 1995.
Liquidity and Capital Resources
Since its inception, Coromed has primarily financed its operations and
growth from cash flow from operations and from the sale of company stock
primarily through its employee stock purchase plan and
46
<PAGE> 54
through private investment. These funds have been used for working capital and
capital expenditures primarily for information systems improvements and
facilities expansion.
Coromed's drug research and drug development contracts are generally fixed
in price with a small variable component, such as travel, which is billed
directly to the client. Coromed's drug research contracts range in duration from
a few days to a few months, while Coromed's drug development contracts range
from a few months to several years. Because Coromed's drug research and drug
development contracts are typically fixed in price, Coromed is at risk for any
potential cost overruns. Coromed generally minimizes its financial risk by
pre-determining costs of its services by estimating the resources required to
fulfill a contract based upon historical experience. As a result, Coromed has
generally stayed within the budget estimates of its fixed priced contracts. The
cash flows from contracts typically consists of a down payment required to be
paid at the time the contract is entered into and the balance in installments
over the contract's duration. Revenue from contracts is generally recognized on
a percentage of completion basis as the work is performed. Accordingly, cash
receipts do not necessarily correspond to costs incurred and revenue recognized
on contracts. Coromed's cash flow is influenced by the changes in levels of
billed and unbilled accounts receivable, net of amounts advance billed
representing unearned revenue. As a result, the number of days outstanding in
accounts receivable, net of advance billings, and the related dollar values of
these accounts can vary due to the achievement of contractual milestones and the
timing and size of cash receipts. The number of days revenue outstanding, net of
advance billings, averages generally 30 to 45 days.
Coromed has incurred a loss from operations for the year ended June 30,
1997, and has a working capital deficit and stockholders' deficiency at June 30,
1997. These factors raise substantial doubt about the Company's ability to
continue as a going concern, if Coromed is unable to obtain adequate financing
to support its operations or to achieve sufficient profitability to sustain its
operations. Despite a working capital deficit of approximately $1.5 million at
June 30, 1997, Coromed believes that it will be able to continue to meet its
cash flow requirements from operations. At July 31, 1997, Coromed had
approximately $700,000 in cash and cash equivalents, approximately $1.2 million
of accounts receivable (including accrued but unbilled amounts) and a backlog of
existing work of approximately $9.7 million. At July 31, 1997, Coromed also had
bid proposals outstanding for contracts valued at approximately $37.0 million,
the highest level in the history of Coromed. The execution of contracts is
typically accompanied by certain initial payments by the contracting clients to
assist in meeting cash flow requirements of Coromed in performing those
contracts. In addition to these revenue sources and opportunities, Coromed has
also undertaken certain actions to control expenses, including the
implementation of a program to shift a portion of its labor force in the
clinical and data management divisions from full time employees to contingent
staff who will be employed by the Company on an as needed basis. This action
should allow Coromed to meet staffing needs during peak periods and reduce
staffing during slower periods to control direct costs. Coromed believes that
the combination of its business prospects and its cost reduction measures will
enable Coromed to improve its cash flow, return to profitability and adequately
meet its foreseeable working capital needs. However, there can be no assurance
that these initiatives will be successful and that additional financing will not
be needed, or that such additional financing would be available if required.
The foregoing statements include forward-looking statements which involve
risks and uncertainties. Coromed's actual experience may differ materially from
that discussed above. Factors that might cause such a difference include, but
are not limited to those discussed elsewhere in this document, as well as future
events that may have the effect of reducing Coromed's available cash balances.
47
<PAGE> 55
BENEFICIAL OWNERSHIP OF COROMED COMMON STOCK
The following table sets forth, as of the date of this Proxy
Statement/Prospectus, the number of shares of Coromed Common Stock beneficially
owned by: (i) each person who is known by Coromed to beneficially own five
percent (5%) or more of the outstanding shares of Coromed Common Stock, (ii)
each director and executive officer of Coromed, and (iii) all of Coromed's
directors and executive officers as a group.
<TABLE>
<CAPTION>
AMOUNT AND PERCENTAGE
NATURE OF OF
NAME AND ADDRESS OF BENEFICIAL OUTSTANDING
BENEFICIAL OWNER(1) OWNERSHIP(5) SHARES OWNED
-------------------------------------------------- --------------------- ------------
<S> <C> <C>
Dale B. Evans(2).................................. 150,628 22.46%
Alice G. Fedory(3)................................ 148,886 22.23
Thomas J. Massey(4)............................... 130,347 19.51
Ronald E. Weishaar(5)............................. 56,995 8.11
Joan R. Dembinski(6).............................. 53,623 8.10
All executive officers and directors as a group (4
persons)(2)(3)(4)(5)............................ 486,856 65.93%
------- -----
</TABLE>
- ---------------
(1) Unless otherwise noted, Coromed believes that all persons named in the table
have sole voting and investment power with respect to all shares
beneficially owned by them. Each beneficial owner's percentage ownership is
determined by assuming that options that are held by such person (but not
those held by any other person) and which are exercisable within 60 days of
the date of this Proxy Statement/Prospectus have been exercised. The address
for Dale B. Evans, Alice G. Fedory, Thomas J. Massey, Ronald E. Weishaar and
Joan R. Dembinski is Coromed, Inc., Rensselaer Technology Park, 185 Jordan
Road, Troy, New York 12180-7615.
(2) Includes (a) 12,000 shares of common stock issuable upon the exercise of
options at a price of $3.30 and (b) 1,500 shares of common stock issuable
upon the exercise of options at a price of $5.50.
(3) Includes (a) 10,750 shares of common stock issuable upon the exercise of
options at a price of $3.30 per share and (b) 1,250 shares of common stock
issuable upon the exercise of options at a price of $5.50 per share.
(4) Includes (a) 9,500 shares of common stock issuable upon the exercise of
options at a price of $3.30 per share and (b) 1,000 shares of common stock
issuable upon the exercise of options at a price of $5.50 per share.
(5) The amount shown for Dr. Weishaar includes (a) 1,250 shares jointly owned by
Dr. Weishaar and his spouse, (b) 25,495 shares of common stock issuable upon
the exercise of options at a price of $2.00 per share, (c) 14,250 shares of
common stock issuable upon the exercise of options at a price of $3.00 per
share and (d) 5,000 shares of common stock issuable upon the exercise of
options at a price of $5.00 per share.
(6) Includes (a) 3,685 shares of common stock issuable upon the exercise of
options at a price of $2.00 per share and (b) 1,000 shares of common stock
issuable upon the exercise of options at a price of $3.00 per share.
48
<PAGE> 56
EXPERTS
The consolidated balance sheets of Coromed, Inc. and Subsidiaries as of
June 30, 1997 and 1996 and the related consolidated statements of operations,
stockholders equity (deficiency), and cash flows for each of the three years in
the period ended June 30, 1997, included in this Proxy Statement/Prospectus and
the related Registration Statement have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Omnicare incorporated in this
Proxy Statement/Prospectus by reference to the Annual Report on Form 10-K of
Omnicare for the year ended December 31, 1996 as amended on Form 10-K/A dated
August 6, 1997, have been so incorporated in reliance on the reports of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
LEGAL OPINIONS
The validity of the Omnicare Common Stock to be issued by Omnicare in
connection with the Merger will be passed upon by Dewey Ballantine, New York,
New York.
Certain tax matters relating to the Merger will be passed upon for Coromed
by Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania.
49
<PAGE> 57
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
REPORT OF INDEPENDENT ACCOUNTANTS..................................................... F-2
Consolidated Statements of Operations for the years ended June 30, 1997, 1996 and
1995................................................................................ F-3
Consolidated Balance Sheets at June 30, 1997 and 1996................................. F-4
Consolidated Statements of Stockholders' Equity (Deficiency) for the years ended June
30, 1997, 1996 and 1995............................................................. F-5
Consolidated Statements of Cash Flows for the years ended June 30, 1997, 1996 and
1995................................................................................ F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 58
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Coromed, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Coromed,
Inc. and Subsidiaries as of June 30, 1997 and 1996 and the related consolidated
statements of operations, stockholders' equity (deficiency) and cash flows for
each of the three years in the period ended June 30, 1997. These financial
statements are the responsibility of Coromed's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Coromed, Inc.
and Subsidiaries as of June 30, 1997 and 1996 and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1997, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared
assuming that Coromed will continue as a going concern. As described in Note 1
to the consolidated financial statements, Coromed has incurred a loss from
operations for the year ended June 30, 1997, and has a working capital deficit
and a stockholders' deficiency at June 30, 1997. These factors raise substantial
doubt about Coromed's ability to continue as a going concern if Coromed is
unable to obtain adequate financing to support its operations or to achieve
sufficient profitability to sustain its operations. Coromed and the holders of a
majority of its common stock have entered into agreements under which Coromed,
upon consummation of a merger, would become a wholly-owned subsidiary of
Omnicare, Inc. and part of an affiliated group with substantial financial
resources. Management has also implemented certain plans to address its cash
flow requirements. These matters are more fully described in Note 1. The
consolidated financial statements do not include any adjustments that might
result from any inability of Coromed to continue as a going concern.
As described in Note 16 to the consolidated financial statements, the
accompanying consolidated financial statements for 1996 and 1995 have been
restated to correct an error relating to revenue recognition under certain
contracts.
COOPERS & LYBRAND L.L.P.
Albany, New York
September 5, 1997
F-2
<PAGE> 59
COROMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Drug development (Clinical, Program Management and
Quality Assurance).................................. $ 6,274,019 $7,239,841 $4,183,518
Drug research (Chemistry and Biology)................. 1,494,397 1,215,350 1,288,272
----------- ---------- ----------
Net revenue...................................... 7,768,416 8,455,191 5,471,790
----------- ---------- ----------
Operating expenses:
Direct costs........................................ 6,141,850 4,907,541 3,199,317
Selling, general and administrative................. 2,567,803 2,240,965 1,504,810
Acquisition and merger costs........................ 303,081
Depreciation and amortization....................... 189,099 162,118 136,506
----------- ---------- ----------
Total operating expenses......................... 9,201,833 7,310,624 4,840,633
----------- ---------- ----------
Income (loss) from operations.................... (1,433,417) 1,144,567 631,157
Other income.......................................... 41,192 30,560 6,612
Interest expense...................................... (12,825) (26,571) (38,337)
----------- ---------- ----------
Income (loss) before income tax.................. (1,405,050) 1,148,556 599,432
Income tax expense.................................... 45,604 141,224 74,834
----------- ---------- ----------
Net income (loss)................................ $(1,450,654) $1,007,332 $ 524,598
=========== ========== ==========
Earnings (loss) per share:
Primary............................................. $ (2.30) $ 1.49 $ 0.88
Fully diluted....................................... (2.30) 1.49 0.88
Weighted average shares outstanding:
Primary............................................. 631,806 675,673 594,000
Fully Diluted....................................... 631,806 675,673 594,000
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE> 60
COROMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 166,069 $1,714,137
Accounts receivable, net of allowance for bad debts of $5,000 and
$33,000 at June 30, 1997 and 1996............................. 1,420,106 1,119,380
Prepaid expenses and other current assets........................ 22,062 39,662
Officer and employee loans and advances.......................... 36,962 22,250
Taxes receivable................................................. 284,713
Deferred tax asset............................................... 278,339
----------- ----------
Total current assets..................................... 1,929,912 3,173,768
Fixed assets, net.................................................. 694,785 620,149
Other assets....................................................... 34,546 6,050
----------- ----------
$ 2,659,243 $3,799,967
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Current maturities of long-term debt............................. $ 37,771 $ 102,198
Current obligations under capitalized leases..................... 36,986 22,986
Accounts payable................................................. 132,497 77,290
Accrued expenses................................................. 844,203 802,957
Deferred revenue................................................. 1,015,963 831,224
Clinical investigation advances.................................. 1,363,809 965,679
Income taxes payable............................................. 293,189
----------- ----------
Total current liabilities................................ 3,431,229 3,095,523
----------- ----------
Noncurrent liabilities:
Long-term debt, less current maturities.......................... 41,995
Obligation under capitalized leases, less current obligations.... 8,191 12,786
----------- ----------
Total noncurrent liabilities............................. 8,191 54,781
----------- ----------
Total liabilities........................................ 3,439,420 3,150,304
----------- ----------
Commitments
Stockholders' equity (deficiency):
Common stock; par value $.01; 2,000,000 shares authorized; June
30, 1997 -- 801,923 issued, 657,706 outstanding; June 1996 --
752,054 shares issued, 609,442 outstanding.................... 8,022 7,521
Additional paid-in capital....................................... 966,026 813,431
Accumulated deficit.............................................. (1,491,942) (36,639)
Common stock notes receivable.................................... (103,558)
Treasury stock, at cost (144,217 shares and 142,612 shares
at June 30, 1997 and 1996, respectively....................... (158,725) (134,650)
----------- ----------
Total stockholders' equity (deficiency)....................... (780,177) 649,663
----------- ----------
$ 2,659,243 $3,799,967
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 61
COROMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------- COMMON
SHARES ADDITIONAL STOCK
OUTSTANDING PAID-IN ACCUMULATED TREASURY NOTES
(000S) AMOUNT SUBSCRIBED CAPITAL DEFICIT STOCK RECEIVABLE TOTAL
----------- ------ ---------- ---------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1994....... 507 $6,252 $ 10,478 $431,433 $(1,568,569) $ (26,011) $ -0- $(1,146,417)
Treasury stock purchased..... (8) (22,864) (22,864)
Issuance of committed
stock...................... 4 36 (10,478) 10,442
Stock issued for consulting
services................... 7 70 20,825 20,895
Stock issued under employee
stock purchase plan........ 16 159 41,747 41,906
Net proceeds from sale of
common stock............... 15 150 44,902 45,052
Stock issued for repayment of
related party debt......... 7 70 20,930 21,000
Stock issued to employees in
lieu of cash
compensation............... 24 240 71,715 71,955
Net income................... 524,598 524,598
--- ------ -------- -------- ----------- --------- --------- -----------
Balance, June 30, 1995....... 572 6,977 -0- 641,994 (1,043,971) (48,875) -0- (443,875)
Treasury stock purchased..... (17) (85,775) (85,775)
Stock issued under employee
stock purchase plan........ 20 196 68,945 69,141
Net proceeds from sale of
common stock............... 33 335 98,755 99,090
Stock issued to employees in
lieu of cash
compensation............... 1 13 3,737 3,750
Net income................... 1,007,332 1,007,332
--- ------ -------- -------- ----------- --------- --------- -----------
Balance, June 30, 1996....... 609 7,521 -0- 813,431 (36,639) (134,650) -0- 649,663
Receipt of promissory note
from sale of common
stock...................... 46 458 99,918 (103,558) (3,182)
Treasury stock purchased..... (2) (24,075) (24,075)
Stock issued under employee
stock purchase plan........ 4 38 45,933 45,971
Stock issued to employees in
lieu of cash
compensation............... 1 5 6,744 6,749
Other........................ (4,649) (4,649)
Net loss..................... (1,450,654) (1,450,654)
--- ------ -------- -------- ----------- --------- --------- -----------
Balance, June 30, 1997....... 658 $8,022 $ -0- $966,026 $(1,491,942) $(158,725) $ (103,558) $ (780,177)
=== ====== ======== ======== =========== ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE> 62
COROMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1997, 1996 AND 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................... $(1,450,654) $1,007,332 $ 524,598
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization of fixed 189,099 162,118 133,091
assets.....................................
Amortization of deferred costs............... 3,415
Provision for bad debts...................... (28,000) 33,000
Gain on sale of fixed assets................. (1,931)
Services provided in exchange for common 6,749 3,750 92,850
stock......................................
Deferred tax asset........................... 278,339 (278,339)
Changes in operating assets and liabilities:
Accounts receivable........................ (272,726) (4,026) (652,208)
Prepaid expenses and other current 17,600 28,303 (26,454)
assets..................................
Officer and employee loans and advances.... (14,712) (12,500) 19,655
Taxes receivable........................... (284,713)
Accounts payable........................... 55,207 (88,511) (171,785)
Accrued expenses........................... 41,246 442,780 (278,106)
Deferred revenue........................... 184,739 (580,142) 1,020,599
Clinical investigation advances............ 398,130 519,905 72,372
Income taxes payable....................... (293,189) 220,464 300
Other, net................................. (36,327) 8,180 (14,230)
----------- ---------- ---------
Net cash provided by (used in) operating (1,209,212) 1,460,383 724,097
activities............................
----------- ---------- ---------
Cash flows from investing activities:
Proceeds from sale of fixed assets.............. 2,020
Purchase of fixed assets........................ (224,735) (216,357) (115,064)
----------- ---------- ---------
Net cash used in investing activities... (224,735) (214,337) (115,064)
----------- ---------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock.............. 45,971 168,231 86,958
Principal payments on debt...................... (106,422) (131,204) (121,286)
Principal payments on obligations under capital (29,595) (20,238) (14,764)
leases.......................................
Purchase of treasury stock...................... (24,075) (85,775) (22,864)
----------- ---------- ---------
Net cash used in financing activities... (114,121) (68,986) (71,956)
----------- ---------- ---------
Net increase (decrease) in cash and cash (1,548,068) 1,177,060 537,077
equivalents.....................................
Cash and cash equivalents, beginning of year...... 1,714,137 537,077 -0-
----------- ---------- ---------
Cash and cash equivalents, end of year............ $ 166,069 $1,714,137 $ 537,077
=========== ========== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 63
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
Coromed, a Delaware corporation, was incorporated in June 1989 and
initiated business on October 9, 1989. On December 15, 1993, Coromed formed
3103-3798 Quebec, Inc. (Coromed Canada), a wholly owned Canadian-based
subsidiary. As part of its strategy to become an international Contract Research
Organization (CRO), Coromed in June of 1994 proceeded to establish a presence in
Europe and in South America, with the opening of branch offices in Ghent,
Belgium, and Buenos Aires, Argentina. On July 15, 1995, Coromed formed Coromed
S.A. (Coromed South America), a majority-owned Argentina-based Subsidiary, which
was established from Coromed's branch office in Buenos Aires, Argentina. These
actions enhanced Coromed's opportunities for involvement in worldwide drug
development programs with its clients. With bases of operation in the U.S. (east
and west coasts), Canada, Argentina, and Belgium, Coromed offers clients the
requisite resources for executing and managing international clinical trials and
programs in multiple therapeutic areas with special emphasis in cardiovascular,
oncology and AIDS. In addition, Coromed provides support to its clients in the
pre-clinical areas of chemistry and biology.
Basis of presentation:
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company experienced
a net loss $1,450,654 for the year ended June 30, 1997 which resulted in a
working capital deficit and stockholders' deficiency at June 30, 1997 of
$1,501,317 and $780,177, respectively. These factors raise substantial doubt
about the Company's ability to continue as a going concern if the Company is
unable to obtain adequate financing to support its operations or achieve
sufficient profitability to sustain its operations. Upon consummation of the
Merger described in the accompanying proxy statement/prospectus, the Company
would become a wholly-owned subsidiary of Omnicare, Inc. and part of an
affiliated group with substantial financial resources. Additional plans of
management with regard to the cash flow requirements of the Company are more
fully described in the Liquidity Section of the "Management Discussion and
Analysis of Financial Condition and Results of Operations" of Coromed in the
accompanying proxy statement/prospectus. The consolidated financial statements
do not include any adjustments that might result from any inability of the
Company to continue as a going concern.
Principles of consolidation:
The consolidated financial statements include the accounts of Coromed,
Coromed Canada and Coromed S.A. Significant intercompany accounts and
transactions have been eliminated in the consolidation.
Joint venture:
The Company and Cardiology Investigators of New England, LLC ("CINE") each
have a 50% ownership in Cardiovascular Clinical Studies, LLC (the "Joint
Venture") a joint venture entity. The Joint Venture, which has a calendar year
end, was formed in January 1997, for the purpose of facilitating the development
of new cardiovascular therapy including drugs and devices. Under the Joint
Venture agreement, each shareholder contributed $20,000 and is not under any
obligation to make any additional capital contribution or loan to the Joint
Venture. Coromed's investment in the Joint Venture is accounted for under the
equity method and its financial exposure is limited to its capital contribution.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and
F-7
<PAGE> 64
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Management estimates and assumptions include
allowance for bad debts, revenue recognized on the percentage of completion
method, recoverability periods of long-lived assets and valuation allowance for
deferred tax assets. Actual results could differ from those estimates.
Concentration of credit risk:
Coromed maintains cash balances at one U.S. bank with a bank balance of
$397,165 at June 30, 1997. This balance is insured by the Federal Deposit
Insurance Corporation up to $100,000. In addition, at June 30, 1997, Coromed has
$65,068 of uninsured cash in foreign bank accounts.
In fiscal year June 30, 1997, Coromed had three clients which each
contributed 10% or greater of total revenue. The percentages were 25%, 23% and
10% of total revenue. In fiscal year June 30, 1996, Coromed had two clients
which each contributed 10% or greater of total revenue. The percentages were 26%
and 37% of total revenue.
Cash and cash equivalents:
For the purpose of the statements of cash flows, Coromed defines cash and
cash equivalents as cash and investments with original maturities of three
months or less.
Fixed assets:
Fixed assets are recorded at cost at the date of acquisition. Renewals and
betterments are capitalized. Repairs and maintenance are charged to earnings as
incurred. Upon retirement or disposal of assets, the applicable costs and
accumulated depreciation will be eliminated from the accounts and any resulting
gain or loss included in income.
Capitalized leased assets and leasehold improvements are amortized over the
shorter of their estimated useful life or lease term.
Depreciation is computed by the straight-line method for financial
reporting purposes over the following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Laboratory equipment............................... 3 - 15
Furniture, fixtures and office equipment........... 3 - 10
Capital leases..................................... 3 - 10
Leasehold improvements............................. 3 - 15
</TABLE>
Long-lived assets:
The Company adopted the provisions of SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," on
July 1, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be periodically reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. Pursuant to SFAS No. 121, the Company periodically reviews its
long-lived assets whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. When such
F-8
<PAGE> 65
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
circumstances occur, the Company evaluates the possible effects on the carrying
amount of such assets. The adoption of this statement did not have a significant
effect on the Company's consolidated financial position or consolidated results
of operations.
Revenue recognition:
The majority of the Company's revenues are generated by time and material
type contracts that recognize revenue as the services are provided. A limited
number of long-term contracts are fixed price and are recorded using the
percentage of completion method. Estimates to complete are periodically updated
by management. Losses on contracts are recorded in the period in which such
losses are determined.
Deferred revenue:
Deferred revenue represents advances received from clients to be applied to
future services.
Income taxes:
In accordance with Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109), deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred tax assets and liabilities
are measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect of changes in tax rates is recognized in income in the
period that includes the date of enactment. A valuation allowance is established
to reduce deferred tax assets if it is more likely than not that all, or some
portion, of such deferred tax asset will not be realized.
Foreign currency translation:
All balance sheet amounts have been translated using the exchange rates in
effect at the balance sheet dates. All income statement amounts have been
translated using the average rates in effect for each year. Gains and losses on
foreign currency transactions have been included in income.
Computation of earnings per share:
Earnings per share is computed using the weighted average number of common
and dilutive common equivalent shares outstanding during the period. Dilutive
common equivalent shares consist of stock options using the modified treasury
stock method.
2. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Billed receivables.................................. $ 927,535 $ 826,550
Unbilled receivables................................ 299,517 284,543
Unbilled reimbursable expenses...................... 198,054 41,287
---------- ----------
1,425,106 1,152,380
Allowance for bad debts............................. (5,000) (33,000)
---------- ----------
$1,420,106 $1,119,380
========== ==========
</TABLE>
F-9
<PAGE> 66
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term contracts are billed in accordance with the contract and are
generally based on the completion of established phases of the project.
Bad debt expense amounted to approximately $13,000, $33,000 and $0 for the
years ended June 30, 1997, 1996 and 1995, respectively.
3. FIXED ASSETS
Fixed assets consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
-------------------------
1997 1996
---------- ----------
<S> <C> <C>
Laboratory equipment................................ $ 613,131 $ 452,410
Office equipment.................................... 432,659 283,964
Furniture and fixtures.............................. 177,792 136,301
Leasehold improvements.............................. 315,239 286,230
Capital leases...................................... 59,300 193,505
---------- ----------
1,598,121 1,352,410
Accumulated depreciation............................ (893,103) (609,805)
Accumulated amortization under capital leases....... (10,233) (122,456)
---------- ----------
$ 694,785 $ 620,149
========== ==========
</TABLE>
Depreciation expense for the years ended June 30, 1997, 1996 and 1995 was
$181,139, $141,986 and $110,043, respectively. Amortization expense on capital
leases for the years ended June 30, 1997, 1996 and 1995 was $7,960, $20,132 and
$23,048, respectively.
4. ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
JUNE 30,
---------------------
1997 1996
-------- --------
<S> <C> <C>
Vacation............................................... $ 80,269 $ 57,438
Compensation........................................... 28,708 245,161
Payroll taxes.......................................... 162,894 26,462
Acquisition and merger costs........................... 194,274
Clinical investigation fees............................ 119,700 333,895
Other liabilities...................................... 258,358 140,001
-------- --------
$844,203 $802,957
======== ========
</TABLE>
5. CLINICAL INVESTIGATION ADVANCES
Coromed has entered into agreements with certain clients whereby Coromed is
retained for the purposes of identifying and recruiting clinical investigators
to conduct clinical studies under Coromed's supervision. Under the terms of
these agreements, the expenses associated with paying the clinical investigators
are to be funded by the client.
As of June 30, 1997 and 1996, Coromed had received advances and recorded a
current liability in the amounts of $1,363,809 and $965,679, respectively, for
these payments.
F-10
<PAGE> 67
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JUNE 30,
--------------------
1997 1996
------- --------
<S> <C> <C>
Bank loans(1)........................................... $37,771 $144,193
------- --------
37,771 144,193
Less current maturities................................. 37,771 102,198
------- --------
Long-term portion....................................... $ -0- $ 41,995
======= ========
</TABLE>
- ---------------
(1) Small Business Administration loan with a maximum authorized borrowing limit
of $500,000 bearing interest at prime plus 2%, payable in equal monthly
installments of $8,826, including interest, maturing in 1997 and
collateralized by accounts receivable and fixed assets and personally
guaranteed by certain of Coromed's officers/stockholders. At June 30, 1997
and 1996, the balance outstanding under this agreement was $24,676 and
$116,812, respectively.
Installment loan agreement with a bank, bearing interest at prime plus 2%
(10.5% at June 30, 1997). The loan, which matures in April 1998, is to be repaid
in equal monthly installment principal payments of approximately $1,190 plus
interest. At June 30, 1997 and 1996, the balance outstanding under this
agreement was $13,095 and $27,381, respectively.
7. LEASES
Coromed leases certain laboratory and office equipment under capital lease
obligations which expire in 2000. Future minimum lease payments at June 30, 1997
are as follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
---------------------------------------------------
<S> <C>
1998............................................. $14,312
1999............................................. 15,184
2000............................................. 9,851
2001............................................. 8,188
-------
Total minimum lease payments....................... 47,535
Amounts representing interest...................... (2,358)
-------
Present value of net minimum lease payments........ 45,177
Current obligations................................ 36,986
-------
Long-term portion.................................. $ 8,191
=======
</TABLE>
Coromed leases office and laboratory space and office equipment under
various noncancelable operating leases expiring in the year 2000. The following
is a schedule of future minimum rental payments required under these operating
leases as of June 30, 1996:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30,
--------------------------------------------------
<S> <C>
1998.............................................. $369,000
1999.............................................. 326,000
2000.............................................. 56,000
</TABLE>
Total rental expense incurred under noncancelable operating leases was
$395,349, $258,250 and $172,049 for the years ended June 30, 1997, 1996 and
1995, respectively.
F-11
<PAGE> 68
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMON STOCK
During fiscal 1997, certain officers of Coromed exercised their expiring
stock options in accordance with the Stock Option Plan. As consideration,
Coromed received promissory notes in the aggregate amount of $100,376. The
promissory note receivables, which are due March 31, 1998, bear interest at
8.25% per annum. The note receivable balances plus accrued interest ($3,182)
have been recorded as contra-equity in the accompanying consolidated balance
sheet as of June 30, 1997.
Coromed issued shares of common stock at board-approved prices of $3 to $5
per share in fiscal 1996 and $3 per share in fiscal 1995. Net proceeds from such
issuances were $99,090 and $45,052 for the years ended June 30, 1996 and 1995,
respectively.
During the year ended June 30, 1995, Coromed issued 6,965 shares of its
common stock at $3 per share (fair value as determined by the Board of
Directors) in lieu of $20,895 of cash compensation for consulting services
provided.
In lieu of $6,749 compensation for services performed by employees during
the year ended June 30, 1997, Coromed issued 650 shares of its common stock at
prices ranging from $3 to $15 per share (fair value as determined by the Board
of Directors). In lieu of $3,750 and $71,955 compensation for services performed
by employees during the years ended June 30, 1996 and 1995, respectively,
Coromed issued 1,250 and 23,985 shares of its common stock at $3 per share (fair
value as determined by the Board of Directors).
During the year ended June 30, 1995, Coromed issued 7,000 shares of common
stock at a board-approved price of $3 per share in lieu of a $21,000 payment to
an officer towards the repayment of a note payable.
9. INCOME TAXES
The provision for income taxes for the years ended June 30, 1997, 1996 and
1995 consists of:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------------------
1997 1996 1995
--------- --------- -------
<S> <C> <C> <C>
Current:
Federal................................. $(230,254) $ 269,291 $ 3,600
State................................... (2,481) 71,076 21,771
Foreign................................. 79,196 49,463
--------- --------- -------
(232,735) 419,563 74,834
--------- --------- -------
Deferred:
Federal................................. 215,712 (215,712)
State................................... 62,627 (62,627)
--------- --------- -------
278,339 (278,339) -0-
--------- --------- -------
Income tax expense........................ $ 45,604 $ 141,224 $74,834
========= ========= =======
</TABLE>
F-12
<PAGE> 69
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of the federal statutory rate to Coromed's effective tax
rate is as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Statutory tax rate.................................. (34.0)% 34.0% 34.0%
State taxes, net.................................... (6.3) 6.1 2.4
Change in valuation allowance....................... 36.4 (32.7) (28.0)
Foreign taxes....................................... 3.6 2.1
Nondeductible expenses.............................. 7.1 1.3 2.0
----- ----- -----
Effective tax rate.................................. 3.2% 12.3% 12.5%
===== ===== =====
</TABLE>
The sources of deferred income tax and the related tax effect for the years
ended June 30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
----------------------
1997 1996
--------- --------
<S> <C> <C>
Allowance for doubtful accounts....................... $ 2,166 $ 13,246
Accrued expenses...................................... 10,526 28,695
Deferred revenue...................................... 245,980 241,630
Valuation allowance................................... (258,672)
--------- --------
Current deferred income taxes.................... -0- 283,571
--------- --------
Fixed asset depreciation.............................. (5,224) (5,232)
Net operating loss carryforwards...................... 139,931
Tax credit carryforwards.............................. 120,840
Valuation allowance................................... (255,547)
--------- --------
Long-term deferred income taxes.................. -0- (5,232)
--------- --------
Total deferred income taxes, net................. $ -0- $278,339
========= ========
</TABLE>
The valuation allowance for deferred tax assets at June 30, 1997 and 1996
was $514,219 and $-0-, respectively. The valuation allowance was eliminated at
June 30, 1996 and was re-established in the amount of $514,219 at June 30, 1997.
Taxable income in the carryback period was sufficient to realize the benefit of
deferred tax assets at June 30, 1996; however, at June 30, 1997, the
realizability of the deferred tax assets was dependent on future taxable income
which could not be assured at such date.
10. EMPLOYEE BENEFIT PLANS
Stock plans:
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," in accounting for the stock option plans.
Accordingly, no compensation cost has been recognized in the accompanying
consolidated statements of operations. The pro forma disclosure information
required by Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," has not been presented since it is immaterial to the
consolidated financial statements taken as a whole.
F-13
<PAGE> 70
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Over the years, the board of directors has approved the adoption of various
stock option plans. Under these option plans, substantially all employees are
eligible to receive options to purchase up to an aggregate of 300,000 shares at
an exercise price which cannot be less than the fair value of the shares on the
date the options are granted. Activity with respect to these plans is as
follows:
<TABLE>
<CAPTION>
EXERCISE
OPTIONS PRICE
------- ------------
<S> <C> <C>
Options outstanding and exercisable at June 30, 1994........ 165,601 $
Options granted............................................. 15,227 3.00 - 3.30
Options exercised........................................... (722) 2.00
Options expired............................................. (947) 2.00
------- ------------
Options outstanding and exercisable at June 30, 1995........ 179,159
Options granted............................................. 23,760 3.00 - 5.50
Options exercised........................................... (1,545) 2.00
Options expired............................................. (250) 3.00
------- ------------
Options outstanding and exercisable at June 30, 1996........ 201,124
Options granted............................................. 65 15.00
Options exercised........................................... (45,672) 2.00 - 2.20
Options expired............................................. -0-
------- ------------
Options outstanding and exercisable at June 30, 1997........ 155,517
=======
</TABLE>
Effective October 1, 1990, the board of directors approved the adoption of
the employee stock purchase plan. The stock purchase plan expires September 30,
2001. Under the stock purchase plan, substantially all employees are eligible to
purchase annually up to an aggregate of 50,000 shares of Company common stock
(1,000,000 shares in the aggregate over the life of the plan) at a price equal
to the lesser of 85% of the fair value of a share on the date of grant or
purchase date. During the years ended June 30, 1997, 1996 and 1995, Coromed
issued 3,547 shares at purchase prices ranging from $12.75 to $15.00, 19,587
shares at purchase prices ranging from $2.55 to $5.00, and 15,873 shares at
purchase prices ranging from $2.55 to $3.00. As of June 30, 1997, there were
937,703 shares available to be issued under this plan.
Defined contribution plan:
Coromed's defined contribution 401(k) Savings Plan covers substantially all
employees who have met certain minimum age and service requirements. Employees
may contribute up to 15% of their annual salary (up to the maximum established
by the IRS each year) to the Plan. Coromed may, at its option, make a
discretionary contribution. No employer contributions were made to the Plan
during the years ended June 30, 1997, 1996 and 1995.
11. FOREIGN OPERATIONS
Summarized financial data of Coromed Canada and Coromed S.A. as of and for
the years ended June 30, 1997, 1996 and 1995.
F-14
<PAGE> 71
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-----------------------------------------
1997 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Net revenue:
United States............................... $ 7,049,724 $7,522,333 $5,106,842
Canada...................................... 216,662 500,103 364,948
Argentina................................... 502,030 432,755
----------- ---------- ----------
$ 7,768,416 $8,455,191 $5,471,790
=========== ========== ==========
Net income (loss):
United States............................... $(1,326,451) $ 980,295 $ 446,212
Canada...................................... 7,196 110,739 78,386
Argentina................................... (131,399) (83,702)
----------- ---------- ----------
$(1,450,654) $1,007,332 $ 524,598
=========== ========== ==========
Assets:
United States............................... $ 2,273,387 $3,423,340 $1,973,894
Canada...................................... 322,093 314,025 349,181
Argentina................................... 63,763 62,602
----------- ---------- ----------
$ 2,659,243 $3,799,967 $2,323,075
=========== ========== ==========
</TABLE>
12. SUPPLEMENTAL CASH FLOW DISCLOSURES
During fiscal 1997, 1996 and 1995, Coromed entered into the following
noncash transactions:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
--------------------------------
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Acquired equipment under capital leases.............. $ 39,000 $20,300 $ 2,149
Issued common stock in return for promissory notes
receivable......................................... 100,376
Converted common stock subscribed to common stock and
additional paid-in capital......................... 10,478
Common stock issued to pay debt...................... 21,000
</TABLE>
Also, Coromed paid $12,825, $26,569 and $46,857 in interest during the
years ended June 30, 1997, 1996 and 1995, respectively. In addition, Coromed
paid $16,000, $156,179 and $70,316 in income taxes for the years ended June 30,
1997, 1996 and 1995, respectively.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
Cash and cash equivalents:
The carrying amount of cash and cash equivalents ($166,069 at June 30, 1997
and $1,714,137 at June 30, 1996) approximates fair value because of the short
maturity of those instruments.
F-15
<PAGE> 72
COROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Debt:
The carrying amount of Coromed's long-term debt ($37,771 at June 30, 1997
and $144,193 at June 30, 1996) approximates fair value. Fair values were
estimated based on current interest rates offered to Coromed for debt with
similar terms and maturities.
Obligations under capital leases:
The carrying amount of Coromed's obligations under capital leases ($45,177
at June 30, 1997 and $35,772 at June 30, 1996) approximates fair value. Fair
value is based on current interest rates offered to Coromed for obligations
under capital leases with similar terms and maturities.
14. ACQUISITION AND MERGER AGREEMENT
Coromed and certain stockholders of Coromed entered into a Merger Agreement
with Omnicare, Inc. Pursuant to the agreement, Omnicare, Inc. will acquire all
of the equity of Coromed for $15 million in Omnicare common stock. The merger is
intended to be accounted for as a pooling of interests upon satisfaction of the
conditions for such accounting treatment, and is subject to the approval of the
stockholders of Coromed. All costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby shall be paid by the
party incurring such expenses; provided, however, that if the Merger is
consummated, Coromed, the surviving corporation in the Merger, shall pay the
reasonable fees and expenses incurred by Coromed and the Principal Stockholders
in connection with the transactions contemplated by the Merger Agreement in an
amount not to exceed $750,000 in the aggregate. The Company has recorded
$303,081 of costs directly related to the merger through June 30, 1997.
15. ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(EPS)(SFAS No. 128) is effective for financial statements for periods ending
after December 15, 1997. The following represents the basic and dilutive
earnings per share amounts had the Company been required to adopt this statement
for the years ended June 30, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
---------------------------------------
1997 1996 1995
----------- ---------- --------
<S> <C> <C> <C>
Net income (loss).............................. $(1,450,654) $1,007,332 $524,598
Weighted average shares for basic EPS.......... 631,806 596,438 529,284
Effect of dilutive stock options............... -- 73,899 31,540
----------- ---------- --------
Weighted average shares and assumed exercise of
stock options for dilutive EPS............... 631,806 670,337 560,824
Basic EPS...................................... $ (2.30) $ 1.69 $ 0.99
Dilutive EPS................................... (2.30) 1.50 0.94
</TABLE>
16. CORRECTION OF AN ERROR
The accompanying consolidated financial statements as of June 30, 1996 and
1995 and for the years then ended have been restated to correct an error
relating to revenue recognition under certain contracts. The effect of the
restatement was to decrease net income for the year ended June 30, 1996 by
$76,933 or $0.11 per share, net of a reduction in income tax expense of
$173,600. The decrease in net income for the year ended June 30, 1995 was
$184,097 or $0.33 per share, net of income tax expense of $0.
F-16
<PAGE> 73
APPENDIX A
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated
as of August 19, 1997, by and among Omnicare, Inc., a Delaware corporation
("Omnicare"), Coromed Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Omnicare ("Merger Sub"), COROMED, Inc., a Delaware
corporation ("Company"), and each of the stockholders of Company appearing as
signatories hereto (each a "Stockholder" and collectively, the "Stockholders").
RECITALS
A. The Boards of Directors of Omnicare and Company each have determined
that a business combination between Omnicare and Company is in the best
interests of their respective companies and stockholders and presents an
opportunity for their respective companies to achieve long-term strategic and
financial benefits, and accordingly have agreed to effect the merger provided
for herein upon the terms and subject to the conditions set forth herein.
B. This Agreement amends and restates the Agreement and Plan of Merger
dated as of January 27, 1997 by and among Omnicare, Merger Sub, Company and the
Stockholders (the "Initial Agreement").
C. Concurrently with the execution of the Initial Agreement, in order to
induce Omnicare and Merger Sub to enter into the Initial Agreement, Company and
the Stockholders entered into a support agreement (the "Support Agreement") with
Omnicare providing for certain arrangements with respect to the shares of
Company Common Stock (as defined in Section 4.2 below) beneficially owned by the
Stockholders upon the terms and conditions specified therein.
D. For federal income tax purposes, it is intended that the merger provided
for herein shall qualify as a reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "Code"), and for financial
accounting purposes shall be accounted for as a pooling of interests.
E. Merger Sub is a wholly owned subsidiary of Omnicare created for purposes
of effecting the acquisition contemplated herein and will be merged with and
into Company.
F. Omnicare, Merger Sub, Company and the Stockholders desire to make
certain representations, warranties and agreements in connection with the
merger.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with
and into Company in accordance with this Agreement, and the separate corporate
existence of Merger Sub shall thereupon cease (the "Merger"). Company shall be
the surviving corporation in the Merger (sometimes hereinafter referred to as
the "Surviving Corporation"). The Merger shall have the effects specified in the
Delaware General Corporation Law (the "DGCL").
1.2. The Closing. Subject to the terms and conditions of this Agreement,
the closing of the Merger (the "Closing") shall take place (a) at the offices of
Dewey Ballantine, 1301 Avenue of the Americas, New York, New York, at 10:00
a.m., local time, on the first business day immediately following the day on
which the last to be fulfilled or waived of the conditions set forth in Article
9 shall be fulfilled or waived in accordance herewith or (b) at such other time,
date or place as Omnicare and Company may agree. The date on which the Closing
occurs is hereinafter referred to as the "Closing Date."
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1.3. Effective Time. If all the conditions to the Merger set forth in
Article 9 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 11, the parties
hereto shall cause a Certificate of Merger meeting the requirements of Section
251 of the DGCL to be properly executed and filed in accordance with such
Section on the Closing Date. The Merger shall become effective at the time of
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with the DGCL or at such later time which the parties
hereto shall have agreed upon and designated in such filing as the effective
time of the Merger (the "Effective Time").
ARTICLE 2
CERTIFICATE OF INCORPORATION AND
BYLAWS OF THE SURVIVING CORPORATION
2.1. Certificate of Incorporation. The Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation, until duly amended in
accordance with applicable law.
2.2. Bylaws. The Bylaws of Merger Sub in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION
3.1. Directors. The directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
3.2. Officers. The officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation as of the
Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES OF
MERGER SUB AND COMPANY
4.1. Merger Sub Stock. At the Effective Time, each share of common stock,
par value $.01 per share, of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one validly issued,
fully paid and non-assessable share of common stock, par value $.01 per share,
of the Surviving Corporation.
4.2. Company Securities. (a) At the Effective Time, each share of common
stock, par value $.01 per share (the "Company Common Stock"), of Company issued
and outstanding immediately prior to the Effective Time (including Restricted
Shares as defined below, subject to the last sentence of this Section 4.2(a),
but excluding shares of Company Common Stock to be cancelled pursuant to Section
4.2(d) and any Dissenting Shares, as defined below) shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive such number of shares of common stock, par value $1.00
per share (the "Omnicare Common Stock"), of Omnicare that equals the result
obtained by calculation pursuant to the following formula:
<TABLE>
<S> <C>
15,000,000
-----------
Y
X = -------------
Z
</TABLE>
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where X is the number of shares of Omnicare Common Stock to be issued in
exchange for each share of Company Common Stock (the "Exchange Ratio"); Y is the
average of the closing price per share of Omnicare Common Stock on the New York
Stock Exchange Composite Tape (as reported in the Wall Street Journal) on each
of the five consecutive trading days immediately preceding the second trading
day prior to the Closing Date (the "Average Closing Price"); and Z is the total
number of shares of Company Common Stock to be exchanged in the Merger for
shares of Omnicare Common Stock, including the total number of shares of Company
Common Stock deemed to be outstanding immediately prior to the Effective Time
pursuant to Section 4.2(b) in respect of and in lieu of all options to acquire
Company Common Stock outstanding immediately prior to the Effective Time. Shares
of Omnicare Common Stock received pursuant to the Merger in exchange for shares
of Company Common Stock that are "Unvested Shares" as such term is defined in
the shareholders agreement to which such shares are subject (such shares,
"Restricted Shares") outstanding immediately prior to the Effective Time shall
be subject to the same restrictions as those restrictions imposed upon the
Restricted Shares.
(b) At the Effective Time, each option to acquire Company Common Stock
outstanding immediately prior to the Effective Time (each a "Company Option")
shall, by virtue of the Merger and without any action on the part of the holder
thereof, be converted into the right to receive such number of shares of
Omnicare Common Stock that equals the Exchange Ratio multiplied by the Deemed
Shares with respect to such Company Option; "Deemed Shares" shall mean the
number of shares of Company Common Stock deemed to be outstanding with respect
to and in lieu of all Company Options outstanding immediately prior to the
Effective Time, based upon the number of shares of Company Common Stock subject
to Company Options and the applicable exercise price associated therewith, as
calculated by Wessels, Arnold & Henderson, L.L.C. ("WAH") (or such other
financial advisory firm mutually agreed upon by the Company and Omnicare) and
agreed to by Coopers & Lybrand L.L.P. and Price Waterhouse LLP;
(c) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of Company Common Stock and all
Company Options shall cease to be outstanding and shall be cancelled and retired
and shall cease to exist, and each holder of shares of Company Common Stock
(other than shares of Company Common Stock to be cancelled pursuant to Section
4.2(d) and any Dissenting Shares) or Company Options shall thereafter cease to
have any rights with respect to such shares of Company Common Stock or Company
Options, except the right to receive, without interest, the Omnicare Common
Stock and cash for fractional shares of Omnicare Common Stock in accordance with
Sections 4.3(b) and 4.3(e) upon the surrender of a certificate or form of
unexercised option grant (each, a "Certificate") representing such shares of
Company Common Stock or Company Options.
(d) Each share of Company Common Stock issued and held in Company's
treasury at the Effective Time shall, by virtue of the Merger, cease to be
outstanding and shall be cancelled and retired without payment of any
consideration therefor.
(e) Notwithstanding anything to the contrary contained herein, in the event
that the Average Closing Price per share of Omnicare Common Stock is $21 1/8
(the "Minimum Price") or lower, then solely for purposes of calculating the
Exchange Ratio, the Average Closing Price per share of Omnicare Common Stock
will be deemed to be the Minimum Price, and in the event that the Average
Closing Price per share of Omnicare Common Stock is $37 1/8 (the "Maximum
Price") or higher, then solely for purposes of calculating the Exchange Ratio,
the Average Closing Price per share of Omnicare Common Stock will be deemed to
be the Maximum Price.
4.3. Exchange of Certificates Representing Company Common Stock. (a) As of
the Effective Time, Omnicare shall deposit, or shall cause to be deposited, with
an exchange agent selected by Omnicare, which shall be Omnicare's Transfer Agent
or such other party reasonably satisfactory to Company (the "Exchange Agent"),
for the benefit of the holders of shares of Company Common Stock (other than
shares of Company Common Stock to be cancelled pursuant to Section 4.2(c) and
any Dissenting Shares) and Company Options, for exchange in accordance with this
Article 4, certificates representing the shares of Omnicare Common Stock and the
cash in lieu of fractional shares (such cash and certificates for shares of
Omnicare Common Stock, together with any dividends or distributions with respect
thereto (relating to record dates for
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such dividends or distributions after the Effective Time), being hereinafter
referred to as the "Exchange Fund") to be issued pursuant to Section 4.2 and
paid pursuant to this Section 4.3 in exchange for outstanding shares of Company
Common Stock and Company Options.
(b) Promptly after the Effective Time, Omnicare shall cause the Exchange
Agent to mail to each holder of record of shares of Company Common Stock (other
than shares of Company Common Stock to be cancelled pursuant to Section 4.2(c)
and any Dissenting Shares) and each holder of a Company Option (i) a letter of
transmittal which shall specify that delivery shall be effected, and risk of
loss and title to such shares of Company Common Stock or Company Options shall
pass, only upon delivery of the Certificates representing such shares or Company
Options to the Exchange Agent and which shall be in such form and have such
other provisions as Omnicare may reasonably specify and (ii) instructions for
use in effecting the surrender of such Certificates in exchange for certificates
representing shares of Omnicare Common Stock and cash in lieu of fractional
shares. Upon surrender of a Certificate for cancellation to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder of the shares or Company
Options represented by such Certificate shall be entitled to receive in exchange
therefor (x) a certificate representing that number of whole shares of Omnicare
Common Stock and (y) a check representing the amount of cash in lieu of
fractional shares, if any, which such holder has the right to receive in respect
of the Certificate surrendered pursuant to the provisions of this Article 4,
after giving effect to any required withholding tax, and the shares represented
by the Certificate so surrendered shall forthwith be cancelled. No interest will
be paid or accrued on the cash in lieu of fractional shares, if any, payable to
holders of shares of Company Common Stock. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of Company, a certificate representing the proper number of shares of
Omnicare Common Stock, together with a check for the cash to be paid in lieu of
fractional shares, may be issued to such a transferee if the Certificate
representing such Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions declared after the Effective Time on Omnicare Common Stock
shall be paid with respect to any shares of Company Common Stock represented by
a Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following surrender of any
such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Omnicare Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of Omnicare Common Stock and not paid,
less the amount of any withholding taxes which may be required thereon, and (ii)
at the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole shares of
Omnicare Common Stock, less the amount of any withholding taxes which may be
required thereon.
(d) At or after the Effective Time, there shall be no transfers on the
stock transfer books of Company of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation, they shall be
cancelled and exchanged for certificates for shares of Omnicare Common Stock and
cash in lieu of fractional shares, if any, deliverable in respect thereof
pursuant to this Agreement in accordance with the procedures set forth in this
Article 4. Certificates surrendered for exchange by any person constituting an
"affiliate" of Company for purposes of Rule 145(c) under the Securities Act of
1933, as amended (the "Securities Act"), shall not be exchanged until Omnicare
has received a written agreement from such person as provided in Section 8.11.
(e) No fractional shares of Omnicare Common Stock shall be issued pursuant
hereto. In lieu of the issuance of any fractional share of Omnicare Common Stock
pursuant to Section 4.2(b), cash adjustments will be paid to holders in respect
of any fractional share of Omnicare Common Stock that would otherwise be
issuable, and the amount of such cash adjustment shall be equal to such
fractional proportion of the "Average Closing Price" of a share of Omnicare
Common Stock.
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(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of Omnicare Common Stock) that remains
unclaimed by the former stockholders or option holders of Company six months
after the Effective Time shall be delivered to Omnicare. Any former stockholder
or option holder of Company who have not theretofore complied with this Article
4 shall thereafter look only to Omnicare for payment of their shares of Omnicare
Common Stock, cash in lieu of fractional shares and unpaid dividends and
distributions on the Omnicare Common Stock deliverable in respect of each share
of Company Common Stock or Company Option such holder holds as determined
pursuant to this Agreement, in each case, without any interest thereon.
(g) None of Omnicare, Company, the Surviving Corporation, the Exchange
Agent or any other person shall be liable to any former holder of shares of
Company Common Stock or Company Options for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(h) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Corporation, the execution by such person of an agreement to indemnify the
Surviving Corporation against any claim that may be made against it with respect
to such Certificate or such other bond, security or indemnity as the Exchange
Agent may reasonably request, the Exchange Agent will issue in exchange for such
lost, stolen or destroyed Certificate the shares of Omnicare Common Stock and
cash in lieu of fractional shares, and unpaid dividends and distributions on
shares of Omnicare Common Stock as provided in Section 4.3(c), deliverable in
respect thereof pursuant to this Agreement.
4.4. Dissenting Shares. Notwithstanding anything in this Agreement to the
contrary, shares of Company Common Stock that are outstanding immediately prior
to the Effective Time and which are held by stockholders who shall have
perfected dissenters' rights in accordance with Section 262 of the DGCL (the
"Dissenting Shares") shall not be converted into or represent the right to
receive the Exchange Ratio, unless and until such holder shall have failed to
perfect or shall have effectively withdrawn or lost such holder's rights to
appraisal under the DGCL. Any payments to any holder who has exercised
dissenter's rights shall be made by Company out of its own funds. If any such
holder shall have failed to perfect or shall have effectively withdrawn or lost
such holder's rights to appraisal of such shares of Company Common Stock under
the DGCL, such holder's shares shall thereupon be deemed to have been converted
into and to have become exchangeable for, at the Effective Time, the right to
receive, upon surrender as provided above, the Exchange Ratio for the
certificate or certificates that formerly evidenced such shares of Company
Common Stock.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as disclosed by Company to Omnicare in writing in the disclosure
schedules being delivered to Omnicare by Company upon or before the execution
hereof (the "Company Schedules") and which Company Schedules shall identify the
specific Sections or subsections in this Agreement to which each such disclosure
relates, Company hereby represents and warrants to Omnicare and Merger Sub as of
January 27, 1997 (except for (i) the representations and warranties in Sections
5.1(a) and (b) and 5.4, which are made as of January 27, 1997 and as of the date
hereof and (ii) the representations and warranties in Sections 5.7, 5.8, 5.9 and
5.28, which are made as of the date hereof) as follows:
5.1. Corporate Organization and Disclosure. (a) Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware with all requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted.
Company is qualified to do business and is in good standing in each jurisdiction
(domestic, foreign or otherwise) in which the property owned, leased or operated
by it or the nature of the business conducted by it makes such qualification
necessary (except for jurisdictions in which such failure to be so qualified
would not be reasonably likely to have a Material Adverse Effect (as defined in
Section 12.14 below)). Schedule 5.1(a) contains a list of all jurisdictions
where Company is qualified to do business. Neither Company nor any Subsidiary
(as defined in
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Section 12.13 below) has received any written notice or assertion from the
Secretary of State or comparable official of any jurisdiction to the effect that
Company or any Subsidiary is required to be qualified or otherwise authorized to
do business therein, in which Company has not qualified or obtained such
authorization.
(b) Complete copies of the charter and all amendments thereto to the date
hereof and the Bylaws (or equivalent organizational documents) as presently in
effect of Company and each Subsidiary have been furnished to Omnicare. Neither
Company nor any Subsidiary is in default in the performance, observation or
fulfillment of its charter or Bylaws (or equivalent organizational documents).
(c) True and complete copies of the minute books of each of Company and its
Subsidiaries, which contain a complete and correct record in all material
respects of all meetings of the Board of Directors of each of Company and its
Subsidiaries and committees thereof and all meetings of its stockholders and all
actions by written consent without a meeting by such Boards of Directors and
committees thereof and its stockholders since the date of incorporation, have
been furnished to Omnicare. The stock certificate books and records of Company
accurately reflect on the date hereof the ownership of the shares of Company
Common Stock by the persons and in the amounts set forth therein.
5.2. Capitalization. The authorized capital stock of Company consists
solely of 2,000,000 shares of Company Common Stock, of which 636,122 are issued
and outstanding, 176,581 shares are reserved for issuance pursuant to
outstanding Company options issued pursuant to the Company's stock option plan
(the "Company Stock Option Plan") and 144,217 are treasury shares. All
outstanding shares of Company Common Stock have been validly issued and are
fully paid, non-assessable and are not subject to any of preemptive rights. The
issuance and sale of all of such shares of Company Common Stock have been in
full compliance with all applicable federal and state securities laws. Except
for the Company options described in the first sentence of this Section 5.2 and
except as set forth on Schedule 5.2 and as contemplated by the Support
Agreement, there are no subscriptions, options, warrants, calls, rights,
contracts, commitments, understandings, restrictions or arrangements relating to
the issuance, sale, transfer or voting of any shares of Company Common Stock or
any other equity security of Company, including any rights of conversion or
exchange under any outstanding securities or other instruments. Except as set
forth on Schedule 5.2 and as contemplated by the Support Agreement, there are no
voting rights or other agreements or understandings with respect to the shares
of Company Common Stock.
5.3. Subsidiaries, Affiliates, Affiliated Companies and Joint
Ventures. Except as set forth in Schedule 5.3, Company does not own any capital
stock or other equity securities of any corporation, has no direct or indirect
equity or ownership interest in, by way of stock ownership or otherwise, any
corporation, partnership, joint venture, association or business enterprise and
is not contemplating acquiring any such interest. Except as set forth on
Schedule 5.3, all entities listed on Schedule 5.3 are wholly owned Subsidiaries
of Company. Schedule 5.3 sets forth the authorized capital stock or other
interests of each such entity, the number of shares of such capital stock or
other interests validly issued and outstanding, the number of such shares or
other interests owned by Company and, in the case any such entity is not a
wholly owned Subsidiary, to the best knowledge of the Company, the names and
numbers of shares or other interests held by any third party in such entity.
Except as set forth on Schedule 5.3, each of the entities listed in Schedule 5.3
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, as listed in Schedule 5.3, has full
corporate power to own, lease and operate its properties and assets and to carry
on its business as and where it is now conducted, is duly qualified to do
business and is in good standing in each jurisdiction in which the character of
the properties owned or leased by it or the nature of the business transacted by
it make such qualification necessary (except for jurisdictions in which such
failure to be so qualified would not be reasonably likely to have a Material
Adverse Effect), and is qualified to do business in the jurisdictions listed in
Schedule 5.3. Company owns beneficially and of record all shares of capital
stock or other interests of any Subsidiary or entity and which shall be set
forth as owned by it in Schedule 5.3, free and clear of any mortgage, claim,
lien, pledge, option, security interest or other similar interest, encumbrance,
easement, judgment or imperfection of title of any nature whatsoever (each an
"Encumbrance"), and, except as set forth on Schedule 5.3, none of such shares or
interests is subject to any covenant or other contractual restriction preventing
or limiting the right to transfer such shares. Except as set forth on Schedule
5.3, there
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are not any agreements or understandings to which Company or any Subsidiary is a
party with respect to the voting of shares of capital stock of any Subsidiary;
and no Subsidiary has outstanding any options, calls, rights of conversion or
other commitments to purchase or sell any authorized or issued shares of capital
stock of any Subsidiary. There are no contracts, commitments, agreements,
undertakings or restrictions which require Company to issue, sell or deliver any
shares of the capital stock of any Subsidiary.
5.4. Authority. (a) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby by
Company have been duly authorized by all requisite corporate action, and no
other acts or proceedings on the part of Company (other than the approval and
adoption of this Agreement and the Merger by the affirmative vote of holders of
a majority of the outstanding shares of Company Common Stock in accordance with
the DGCL and Company's Certificate of Incorporation and Bylaws) are necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by Company and (assuming due
authorization, execution and delivery by the Stockholders, Omnicare and Merger
Sub) is the legal, valid and binding obligation of Company enforceable against
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights in general, or by general
principles of equity.
(b) Except as set forth in Schedule 5.4, neither the execution and delivery
by Company of this Agreement nor the consummation of the transactions
contemplated hereby nor compliance with any of the provisions hereof will (i)
conflict with or result in a breach of any provision of the charter or Bylaws
(or equivalent organizational documents) of Company or any Subsidiary, (ii)
violate, conflict with, or result in a breach of any provision of, or constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any Encumbrance upon any of the properties of Company
or any Subsidiary or result in being declared void, voidable, without further
binding effect or subject to amendment or modification any of the terms,
conditions or provision of, any note, bond, mortgage, indenture, deed of trust,
any license, franchise, permit, lease, contract, agreement or other instrument
or commitment or obligation to which Company, any Subsidiary or any of their
respective properties may be bound or affected, (iii) violate any order, writ,
injunction, decree, judgment, ruling, law, rule or regulation of any court or
governmental authority, federal, state or foreign, applicable to Company, any
Subsidiary, or to any Stockholder or any of their respective properties, or (iv)
except for (A) applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act"), (B) obtaining the requisite approval
and adoption of this Agreement by the holders of Company Common Stock in
accordance with the DGCL and Company's Certificate of Incorporation and Bylaws,
(C) obtaining the consents, approvals, authorizations and permits of, and making
filings or notifications to, any governmental authority pursuant to the
applicable requirements, if any, of the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder (the "Securities Act"), the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), state securities laws and the rules
and regulations promulgated thereunder (the "Blue Sky Laws"), the National
Association of Securities Dealers, Inc. (the "NASD") and the New York Stock
Exchange, Inc. (the "NYSE") and (D) the filing and recordation of the
Certificate of Merger as required by the DGCL, require any consent, approval or
authorization of, or notice to, or declaration, filing or registration with, any
person or entity except, in the case of clauses (ii), (iii) and (iv) above, as
could not have a Material Adverse Effect or as would not be reasonably likely to
have a material adverse effect on the Company's ability to consummate the
transactions contemplated hereby.
5.5. Compliance with Laws. (a) Each of Company and its Subsidiaries and,
to the best knowledge of Company, all of their respective officers, directors,
employees, consultants and agents (collectively, the "Personnel") have complied
in all material respects with all applicable statutes, regulations, rules,
orders, ordinances, judgments, decrees, permits, franchises, licenses and other
laws of the United States of America, all state, local and foreign governments
and other governmental bodies and authorities, and agencies of any of the
foregoing ("Governmental Authority") to which it is subject with respect to drug
or medical device investigation or development regulation or other healthcare
regulatory matters (including, without limitation,
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the Federal Food, Drug and Cosmetic Act, 21 U.S.C. sec.301 et seq.; the Animal
Welfare Act, 7 U.S.C. sec.2131 et seq.; the Controlled Substances Act, 21 U.S.C.
sec.801 et seq.; sec.1128B(b) and 1877 of the Social Security Act, 42 U.S.C.
sec.sec.1320a-7(b) and 1395nn (commonly referred to as the "Federal
Anti-Kickback Statute" and the "Stark Statute" respectively); and implementing
regulations related thereto ("Healthcare Laws"). Company and each Subsidiary has
maintained all records required to be maintained by the U.S. Food and Drug
Administration (the "FDA"), the Drug Enforcement Agency, the USDA, the ATF and
the State Board of Pharmacy and the Medicare and Medicaid programs as required
by applicable Healthcare Laws and there are no presently existing circumstances
which could result or could be likely to result in violations of any such
Healthcare Laws. Neither Company nor any Subsidiary has received any notice or
other communication to the effect that, or otherwise been advised or become
aware that, it or any activity conducted or monitored by it is not in compliance
with any Healthcare Laws.
(b) Except with respect to Healthcare Laws, Company is and, to the best
knowledge of Company, all Personnel are, in compliance with all applicable
statutes, laws, ordinances, rules, orders and regulations of any Governmental
Authority (including without limitation, Environmental Laws (as such term is
hereinafter defined in Section 5.18) applicable to Company or any Subsidiary),
except to the extent noncompliance could not have a Material Adverse Effect.
Except as set forth on Schedule 5.5(b), neither Company nor any Subsidiary has
received any notice or other communication to the effect that, or otherwise been
advised that, it is not in compliance with any of such statutes, regulations and
orders, ordinances, other laws or undertakings, and Company has no reason to
anticipate that any presently existing circumstances are likely to result in
violations of any such regulations which could have a Material Adverse Effect.
(c) There are no pharmaceutical or other products now being investigated by
Company or any Subsidiary which at the date hereof would require any approval or
clearance of any governmental or administrative body, whether federal, state,
local or foreign, prior to such investigation for which such clearance or
approval has not been obtained. The business of Company and its Subsidiaries
does not involve the sale, shipment or other distribution of pharmaceutical or
other products including, without limitation, investigational pharmaceuticals.
(d) Neither Company nor any Subsidiary participates in the Medicare and
Medicaid programs.
(e) Neither Company nor any Subsidiary has made, and, to the best knowledge
of Company, no Personnel or representative of Company or any Subsidiary or any
person acting on behalf of Company or any Subsidiary have made, directly or
indirectly, any bribes, kickbacks, or other illegal payments or illegal
political contributions, illegal payments from corporate funds to governmental
officials in their individual capacities, or illegal payments from corporate
funds to obtain or retain business either within the United States or abroad.
Neither Company nor any Subsidiary has, and, to the best knowledge of Company,
no Personnel have, been convicted of, or pled guilty or nolo contendere to any,
Medicare or Medicaid program related offense, and Company and its Subsidiaries
have not, and to the best knowledge of Company no Personnel have, committed any
offense which may reasonably serve as the basis for suspension or exclusion from
the Medicare and Medicaid programs.
(f) Neither Company nor any Subsidiary nor, to the best of Company's
knowledge, any of their Personnel have been debarred by the FDA or by an
analogous foreign governmental entity pursuant to the Generic Drug Enforcement
Act ("Drug Enforcement Act") or an analogous foreign law or regulation; and to
the best of Company's knowledge, neither Company nor any Subsidiary or any of
their Personnel are under investigation by the FDA or by an analogous foreign
governmental entity for debarment action pursuant to the Drug Enforcement Act or
an analogous foreign law or regulation.
(g) To the best of Company's knowledge, no subcontractor utilized by
Company or any Subsidiary, no investigator selected by Company or any Subsidiary
and no person employed by any such investigator selected by Company or any
Subsidiary to perform any study, project or other assignment is under
investigation by the FDA or by an analogous foreign governmental entity for
debarment action or has been debarred pursuant to the Drug Enforcement Act or an
analogous foreign law or regulation.
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(h) No study or investigation or data generated, supervised or monitored by
Company or any Subsidiary has been determined to be unreliable by the FDA or
other foreign or domestic regulatory agency for any reason, including failure to
comply with Good Manufacturing Practice, Good Clinical Practice or Good
Laboratory Practice regulations or guidance or an analogous foreign law or
regulation. No clinical investigator used by Company or any Subsidiary has, to
the best of Company's knowledge, been disqualified from conducting clinical
investigations by the FDA or other foreign or domestic regulatory agency.
5.6. Licenses. (a) Company and its Subsidiaries have all material
consents, permits, franchises, licenses, concessions, rights, authorizations and
approvals (collectively, "Licenses") of federal, state, local and foreign
governmental authorities and other persons or entities required in connection
with the operation of their respective businesses as now being conducted, all of
which are in full force and effect, not subject to any default and no suspension
or cancellation of any of which is threatened.
(b) No Personnel of Company or its Subsidiaries are engaged as practicing
physicians, nurses or pharmacists on behalf of Company or any Subsidiary.
Schedule 5.6(b) identifies the names of all physicians currently engaged by or
associated with the Company or any Subsidiary and the capacities in which those
physicians are engaged by or associated with the Company or any Subsidiary. To
the best of Company's knowledge, none of the physicians listed on Schedule
5.6(b) is or has been subject to any claim in connection with service in
capacities similar to the capacities in which such physicians serve or are
associated with the Company or any Subsidiary.
5.7. Financial Statements. Set forth on Schedule 5.7 are true, correct and
complete copies of the following: (i) the audited consolidated balance sheet of
Company and its Subsidiaries as of June 30, 1996, 1995, and 1994, including the
notes thereto, accompanied by the report of Coopers & Lybrand L.L.P. with
respect thereto; (ii) the audited statement of operations of Company and its
Subsidiaries for the years ended June 30, 1996, 1995, and 1994, including the
notes thereto, accompanied by the report of Coopers & Lybrand L.L.P. with
respect thereto; (iii) the audited consolidated balance sheet of Company and its
Subsidiaries as of March 31, 1997 (the "Balance Sheet Date"), including the
notes thereto, accompanied by the report of Coopers & Lybrand L.L.P. with
respect thereto and (iv) the audited statement of operations of Company and its
Subsidiaries for the nine-month period ended March 31, 1997, including the notes
thereto, accompanied by the report of Coopers & Lybrand L.L.P. with respect
thereto. (All of the financial statements referred to above in this Section 5.7
are hereinafter collectively referred to as the "Company Financial Statements").
The Company Financial Statements and the unaudited income statement of the
Company for the fiscal year ended June 30, 1997 which has been delivered by the
Company to Omnicare prior to the August 19, 1997 date of this Agreement and
which is set forth on Schedule 5.7 (the "June Income Statement") have been
prepared from and are in accordance with the books and records of Company which
are complete and accurate, and the Company Financial Statements and the June
Income Statement fairly present the financial position, results of operations
and changes in financial position of Company as of the dates and for the periods
indicated, in each case in accordance with United States generally accepted
accounting principles ("GAAP"). Company's unaudited financial statements
contained in the Company Financial Statements and the June Income Statement were
prepared on a basis consistent with Company's audited financial statements
contained in the Company Financial Statements, subject to normal, recurring
year-end adjustments.
5.8. Absence of Undisclosed Liabilities. Except (i) as and to the extent
specifically reserved against (which reserves are adequate in amount) in
Company's audited balance sheet as of March 31, 1997, and in the notes to such
balance sheet for the period then ended, (ii) liabilities which have been
incurred since March 31, 1997 in the ordinary course of business consistent with
past practice as a result of arm's length negotiations, which liabilities would
not be reasonably likely to have a Material Adverse Effect and (iii) liabilities
and obligations specifically disclosed on Schedule 5.8, neither Company nor any
Subsidiary has any material liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise and whether due or to become due).
5.9. Absence of Certain Changes. Since March 31, 1997, there has not been
any change in or effect on the business, earnings, assets, liabilities,
financial or other condition or results of operations of Company or any
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Subsidiary that has or would be reasonably likely to have a Material Adverse
Effect and no fact or condition exists or is reasonably contemplated or
threatened which Company believes has a reasonable probability of resulting in
any change in or effect on the business, earnings, assets, liabilities,
financial or other condition, results of operations of Company or any Subsidiary
that has or could have a Material Adverse Effect. Without limiting the
generality of the foregoing, since March 31, 1997, and except as set forth on
Schedule 5.9, there has not been, occurred or arisen with respect to Company or
any Subsidiary any:
(a) any amendment of its charter or Bylaws (or equivalent
organizational documents);
(b) change in the number of shares of capital stock issued and
outstanding or issuance of any warrants, options or other securities
convertible or exercisable into shares of capital stock;
(c) declaration, setting aside, payment or distribution with respect
to, or any split, combination or reclassification of, shares of capital
stock declared or made by Company or any Subsidiary;
(d) increase in the compensation or severance pay payable or to become
payable by Company or any Subsidiary to any Personnel or any increase of
general applicability in the compensation or severance pay payable to
Personnel (in each case, other than pursuant to existing corporate
policies, practices and procedures described in Schedule 5.9(d) hereto and
as in effect on the Balance Sheet Date), or employee welfare, pension,
retirement, profit-sharing or similar payment or arrangement made or agreed
to by Company or any Subsidiary for any present or former Personnel (except
pursuant to the existing plans and arrangements described in Schedule
5.9(d) hereto and as in effect on the Balance Sheet Date or as may be
required by applicable law);
(e) significant labor trouble or any material controversy or unsettled
grievance pending or, to the best of Company's knowledge, threatened
between Company or any Subsidiary and any Personnel or a collective
bargaining organization representing or seeking to represent Personnel;
(f) encumbrance of any asset, tangible or intangible, except a
Permitted Lien (as defined in Section 5.11);
(g) transfer, lease, guarantee, mortgage, pledge, disposal, sale,
assignment or transfer of any asset, tangible or intangible, or any
conducting of business, in each case, other than in the ordinary course of
business consistent with past practice;
(h) settlement or compromise of any material claims or litigations or
waiver, release or assignment of any material rights with respect to the
business of Company or any Subsidiary whether or not in the ordinary course
of business;
(i) cancellation, termination or entering into of, or material
modification to, any Contract (as defined in Section 5.14) except as has
occurred in the ordinary course of business consistent with past practice
without Material Adverse Effect;
(j) liability or loss incurred with respect to any of the assets or
the operations of the business of Company or any Subsidiary, except
liabilities incurred in the ordinary course of business consistent with
past practice without Material Adverse Effect;
(k) any capital expenditure or authorization of any capital
expenditure, acquisition of assets or execution of any lease, or any
incurring of liability therefor, requiring any payment or payments in
excess of $50,000 in the aggregate;
(l) borrowing or lending of money, issuing of debt securities or
pledging the credit of the business of Company or any Subsidiary or
guaranteeing of any indebtedness of others by Company or any Subsidiary
other than obligations under sec.3-415 of the Uniform Commercial Code for
indorsements of negotiable instruments in the ordinary course of business
consistent with past practice;
(m) failure to operate the business of Company or any Subsidiary in
the ordinary course so as to preserve the business of Company or any
Subsidiary intact, to keep available to Omnicare and its
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affiliates the services of the Personnel, and to preserve for Omnicare and
its affiliates the goodwill of Company's and its Subsidiaries' suppliers,
customers and others having business relations with them;
(n) loss of service of any Personnel that is or are material,
individually or in the aggregate, to the conduct of the business of Company
or any Subsidiary;
(o) change in accounting practice of Company or any Subsidiary, except
as required by GAAP;
(p) material cancellations by any supplier, customer or contractor;
(q) any material election with respect to Taxes; or
(r) any agreement, arrangement or understanding to do any of the
foregoing.
5.10. Legal Proceedings, etc. Except as disclosed on Schedule 5.10, there
is neither (a) any civil, criminal, arbitral or administrative action, suit,
claim, hearing, investigation or proceeding pending or, to the best of Company's
knowledge, threatened against, relating to or affecting (i) Company or any
Subsidiary, (ii) Personnel in reference to actions taken by them in such
capacities or (iii) the transactions contemplated by this Agreement, nor (b) any
valid basis known to Company for any such litigation, proceeding or
investigation, which if adversely determined could have a Material Adverse
Effect or adversely affect the ability of Company to consummate the transactions
contemplated hereby. There are no judgements, decrees, injunctions, rules or
orders of any court or governmental department or agency outstanding against
Company or any Subsidiary.
5.11. Title to Properties and Related Matters. (a) An asset register of
Company and its Subsidiaries as of a recent date along with a list of all leases
of real property and all other leased interests in real property (the "Leasehold
Interests") is set forth on Schedule 5.11 hereto. Company and its Subsidiaries
own no real property. The asset register identifies the laboratory equipment,
office equipment, furniture and fixtures, and leasehold improvements (in the
aggregate, the "Fixed Assets") of Company and its Subsidiaries, which Fixed
Assets constitute all material assets presently used in the conduct of the
business of Company and its Subsidiaries. Each of the Company and its
Subsidiaries, as the case may be, has good and marketable title to the Leasehold
Interests and Fixed Assets, free and clear of Encumbrances, except for (i) the
lien of current real and personal property taxes which are not yet due and
payable, (ii) such covenants, restrictions, encroachments, easements and
Encumbrances, if any, as do not materially detract from the value, or materially
interfere with the present occupancy or use, of any of the Leasehold Interests
or Fixed Assets or otherwise materially impair the operations of the business of
Company or any Subsidiary, (iii) encumbrances specifically disclosed in the
notes to the consolidated financial statements of Company and its Subsidiaries
for the years ended June 30, 1996 and 1995 and (iv) the items set forth on
Schedule 5.11 (collectively, "Permitted Liens"). Each of Company and its
Subsidiaries, as the case may be, possesses and quietly enjoys all premises
leased by it, and such premises are not subject to any Encumbrances, including
easements, rights-of-way, building use or occupancy restrictions, exceptions,
reservations or limitations that in any material respect interfere with or
impair the present and continued use thereof in the usual and normal conduct of
the business of Company or any Subsidiary. Neither Company nor any Subsidiary
has received notice of any pending or threatened condemnation proceedings
relating to Company's or any Subsidiary's leased properties and, to the best
knowledge of Company, there are no such pending or threatened proceedings.
(b) Except as set forth on Schedule 5.11, the Fixed Assets owned, operated
or leased by Company or any Subsidiary are in good operating condition and
repair (ordinary wear and tear, excepted), and are in conformity in all material
respects with all applicable laws, ordinances, orders, regulations and other
requirements (including applicable zoning, environmental, occupational safety
and health laws and regulations) presently in effect or, to the best of
Company's knowledge, presently scheduled to take effect.
5.12. Employee Benefit Plans. (a) All employee profit-sharing, incentive,
deferred compensation, welfare, pension, retirement, group insurance, bonus,
severance and other employee benefit plans (oral or written) and agreements
maintained or contributed to by Company or any Subsidiary for the benefit of
current or former Personnel or with respect to which the Company or any
Subsidiary has liability, which constitutes an
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"employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") identifying which
plans or arrangements (if any) provide benefits after termination of employment
("Plans") are set forth on Schedule 5.12(a).
(b) There are no current or former Personnel who are entitled to (i) any
pension benefit that is unfunded or (ii) any pension or other benefit to be paid
after termination of employment other than required by Section 4980B of the Code
(COBRA) or pursuant to plans intending to be qualified under Section 401(a) of
the Code and listed on Schedule 5.12(a), and no other benefits whatsoever are
payable to any Personnel after termination of employment (including retiree
medical and death benefits).
(c) Each Plan that is an employee welfare benefit plan under Section 3(1)
of ERISA is either (i) funded through an insurance company contract and is not a
"welfare benefit fund" within the meaning of Section 419 of the Code or (ii) is
unfunded. There is no liability in the nature of a retroactive rate adjustment
or loss-sharing or similar arrangement, with respect to any Plan which is an
employee welfare benefit plan.
(d) All contributions or payments owed with respect to any periods prior to
the Closing under any Plan have been made, or appropriate charges, to the extent
required, will be made on the Closing Date, and all other amounts which relate
to such periods have been accrued on the Company Financial Statements. Each Plan
by its terms and operation is in material compliance with all applicable laws
(including, but not limited to, ERISA, the Code and the Age Discrimination in
Employment Act of 1967, as amended).
(e) There are no actions, suits or claims pending or threatened (other than
routine noncontested claims for benefits) or, to the best of Company's
knowledge, no set of circumstances exist which may reasonably give rise to such
a claim against any Plan or administrator or fiduciary of any such Plan. As to
each Plan for which an annual report is required to be filed under ERISA or the
Code, all such filings, including schedules, have been made on a timely basis
except as disclosed on Schedule 5.12(e).
(f) Neither Company nor any Subsidiary (nor any entity that is or was at
any time treated as a single employer with Company or any Subsidiary under
Section 414(b), (c), (m) or (o) of the Code) has at any time (i) maintained,
contributed to or been required to contribute to any plan under which more than
one employer makes contributions (within the meaning of Section 4064(a) of
ERISA) or any plan that is a multiemployer plan (within the meaning of Section
3(37) of ERISA), (ii) incurred or expects to incur any liability to the Pension
Benefit Guaranty Corporation or otherwise under Title IV of ERISA or (iii)
incurred or expects to incur liability in connection with an "accumulated
funding deficiency" within the meaning of Section 412 of the Code whether or not
waived.
(g) Company has received a favorable determination letter from the Internal
Revenue Service, dated February 18, 1996, with respect to the Coromed, Inc.
401(k) Employee Retirement Savings Plan (the "401(k) Plan") to the effect that
the 401(k) Plan is qualified under Sections 401(a) and 401(k) of the Code and
the related trust is exempt from tax under Section 501(a) and, to the best of
Company's knowledge, nothing has occurred since the date of such letter to cause
the letter to be no longer valid or effective.
(h) Neither Company nor any Subsidiary nor any other person, including any
fiduciary, has engaged in any "prohibited transaction" (as defined in Section
4975 of the Code or Section 406 of ERISA), which could subject any of the Plans
(or their trusts), Company, any Subsidiary, or any person who Company or any
Subsidiary has an obligation to indemnify, to any tax or penalty imposed under
Section 4975 of the Code or Section 502 of ERISA.
(i) None of the assets of the Plans is invested in any property
constituting employer real property or an employer security within the meaning
of Section 407(d) of ERISA.
(j) Except as disclosed on Schedule 5.12(j), the events contemplated by
this Agreement, in and of themselves or together with a termination of
employment, will not (i) entitle any current or former Personnel to severance
pay, unemployment compensation, or other similar payments under any Plan or law,
(ii) accelerate the time of payment or vesting or increase the amount of
benefits due under any Plan or compensation to any current or former Personnel,
(iii) result in any payments (including parachute
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payments) under any Plan or law becoming due to any current or former Personnel,
or (iv) terminate or modify or give a third party a right to terminate or modify
the provisions or terms of any Plan.
(k) Company has complied with the Worker Adjustment and Retraining
Notification Act.
(l) The names and current annual rates of compensation of all Personnel
whose current aggregate annual rates of compensation are $50,000 or more,
together with a summary (containing estimates to the extent necessary) of
existing bonuses, additional incentive compensation (whether current or
deferred), if any, paid or payable to such persons as of November 30, 1996, are
set forth on Schedule 5.12(l).
(m) With respect to each Plan, the Company has delivered to Omnicare true
and complete copies of the following documents (1) current plan documents,
subsequent plan amendments, or any and all other documents that establish or
describe the existence of the plan, trust, arrangement, contract, policy or
commitment; (2) current summary plan descriptions and summaries of material
modifications; (3) the most recent tax qualified determination letters, if any,
received from or applications pending with the IRS; (4) the three most recent
Form 5500 Annual Reports, including related schedules and, if required, audited
financial statements and opinions of independent certified public accountants
and (5) with respect to each Section 401(k) Plan, nondiscrimination testing
results and the most recent annual and quarterly or monthly valuations.
5.13. Taxes and Tax Returns. (a) For purposes of this Agreement, the term
"Taxes" shall mean all taxes, charges, fees, levies or other assessments,
including, without limitation, income, gross receipts, employment, excise,
withholding, property, sales, use, transfer, license, payroll and franchise
taxes, together with any interest and any penalties, additions to tax or
additional amounts with respect thereto, imposed by the United States, or any
state, local or foreign government or subdivision or agency thereof. For
purposes of this Agreement, the term "Tax Return" shall mean any report, return
or other information required to be supplied to a taxing authority in connection
with Taxes. For purposes of this Agreement, the term "Code" shall mean the
Internal Revenue Code of 1986, as amended. All citations to provisions of the
Code, or to the Treasury Regulations promulgated thereunder, shall include any
amendments thereto and any substitute or successor provisions thereto.
(b) Company and its Subsidiaries have duly filed all Tax Returns required
to be filed as of the date hereof (and will file all Tax Returns required to be
filed on or before the Closing Date). All such Tax Returns are (and, as to Tax
Returns not filed as of the date hereof but filed on or before the Closing Date,
will be) true, correct and complete in all material respects and were (and, as
to Tax Returns not filed as of the date hereof but filed on or before the
Closing Date, will be) filed on a timely basis. Except as disclosed in Schedule
5.13(b), neither Company nor any Subsidiary has requested any extension of time
within which to file any Tax Return, which Tax Return has not since been filed.
True and complete copies of the federal, state and local income Tax Returns of
Company and its Subsidiaries for the last three years have been provided to
Omnicare prior to the date hereof. The reserves for Taxes reflected in the
Company Financial Statements are sufficient for the payment of all unpaid Taxes
(whether or not currently disputed) which are incurred or may be incurred with
respect to the period (or portion thereof) ended on the date of Company
Financial Statements and for all years and periods ended prior thereto, and the
reserve for Taxes that will be reflected in the Final Balance Sheet will be
sufficient for the payment of all unpaid Taxes (whether or not currently
disputed) which are incurred or may be incurred with respect to the period (or
portion thereof) ended on the Closing Date and for all years and periods ended
prior thereto. Since the date of Company Financial Statements, neither Company
nor any Subsidiary has incurred any liability for Taxes other than in the
ordinary course of business, which Taxes would result in a material decrease in
the net worth of Company or its Subsidiaries. No waiver or extension of any
statute of limitations relating to Taxes has been given to, or requested by, the
Internal Revenue Service, or any state or local taxing authority. No claim is
currently being made by any authority in a jurisdiction where neither Company
nor any Subsidiary files Tax Returns that they are or may be subject to Taxes in
that jurisdiction.
(c) Except as set forth on Schedule 5.13(c), Company and its Subsidiaries
have complied (and until the Closing Date will comply) in all material respects
with the provisions of the Code relating to the withholding
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and payment of Taxes, including, without limitation, the withholding and
reporting requirements under Code Sections 1441 through 1464, 3401 through 3406,
and 6041 through 6049, as well as similar provisions under any other laws, and
have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all amounts
required. Company and each of its Subsidiaries have undertaken in good faith to
appropriately classify all service providers as either employees or independent
contractors for all Tax purposes.
(d) Neither the consolidated federal income Tax Returns nor the state or
local income Tax Returns of Company and its Subsidiaries have been examined by
the Internal Revenue Service or relevant state taxing authorities, except as set
forth on Schedule 5.13(d). All deficiencies asserted as a result of the
examinations referred to on Schedule 5.13(d) have been paid, and no issue has
been raised by any federal, state, local or foreign income tax authority in any
such examination which, by application of the same or similar principles to
similar transactions, could reasonably be expected to result in a proposed
deficiency for any subsequent period which could have a Material Adverse Effect.
Further, to the best of Company's knowledge, no state of facts exists or has
existed which would constitute grounds for the assessment of any material
liability for Taxes with respect to the periods which have not been audited by
the Internal Revenue Service or other taxing authority. Except as described on
Schedule 5.13(d), there are no examinations or other administrative or court
proceedings relating to Taxes in progress or pending nor has Company or any
Subsidiary received a revenue agent's report asserting a tax deficiency. To the
best of Company's knowledge, there are no threatened actions, suits,
proceedings, investigations or claims relating to or asserted for Taxes of
Company or any Subsidiary and there is no basis for any such claim.
(e) All material elections with respect to Taxes affecting Company and its
Subsidiaries as of the date hereof are set forth on Schedule 5.13(e).
(f) Neither Company nor any Subsidiary has received a Tax Ruling (as
defined below) or entered into a Closing Agreement (as defined below) that would
have any continuing effect after the Closing Date. "Tax Ruling" shall mean a
written ruling of a taxing authority relating to Taxes. "Closing Agreement"
shall mean a written and legally binding agreement with a taxing authority
relating to Taxes.
(g) Neither Company nor any Subsidiary is a party to a contract or
agreement that, individually or in the aggregate, or when taken together with
any payment that may be made under this Agreement or any agreements contemplated
hereby including, without limitation, the Employment Agreements and Non-
Competition Agreements, could give rise to the payment of any "excess parachute
payment" within the meaning of Section 280G of the Code.
(h) Except for the group of which Company is presently the parent, Company
has never been a member of an affiliated group of corporations, within the
meaning of Section 1504 of the Code, and no Subsidiary has ever been a member of
an affiliated group of corporations, within the meaning of Section 1504 of the
Code, except where Company was the common parent corporation of such affiliated
group. Each Subsidiary has, since the date of its formation, been a member (and,
through the Closing Date, will continue to be a member) of an affiliated group
of corporations, within the meaning of Section 1504 of the Code, in which
Company is the parent.
(i) Company is not, and has not been within the last five years, a "United
States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(j) None of the assets of Company or any Subsidiary is property which is
required to be treated as being owned by any other person pursuant to the
so-called "safe harbor lease" provisions of former Section 168(f)(8) of the
Code.
(k) None of the assets of Company or any Subsidiary directly or indirectly
secures any debt the interest on which is tax exempt under Section 103(a) of the
Code.
(l) None of the assets of Company or any Subsidiary is "tax exempt use
property" within the meaning of Section 168(h) of the Code.
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(m) Neither Company nor any Subsidiary has agreed to make, or is required
to make, any adjustment under Section 481(a) of the Code by reason of a change
in accounting method or otherwise.
(n) Except as set forth on Schedule 5.13(n), neither Company nor any
Subsidiary is a party to any joint venture, partnership, or other arrangement or
contract that could be treated as a partnership for federal income tax purposes.
(o) There are no liens with respect to Taxes (except for liens with respect
to real property taxes not yet due) upon any of the properties or assets, real,
personal or mixed, tangible or intangible, of Company or any Subsidiary.
(p) Neither Company nor any Subsidiary has filed (or will file prior to the
Closing) a consent pursuant to Section 341(f) of the Code or has agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as that term is defined in Section 341(f)(4) of the Code) owned by Company or
any Subsidiary.
(q) All transactions that could give rise to an understatement of federal
income tax (within the meaning of Section 6661 of the Code for Tax Returns due
(without regard to extensions) on or before December 31, 1989, and within the
meaning of Section 6662 of the Code for Tax Returns due (without regard to
extensions) after December 31, 1989) have been adequately disclosed (or, with
respect to Tax Returns not yet filed, will be adequately disclosed) on the Tax
Returns of Company and its Subsidiaries in accordance with Section 6661(b)(2)(B)
of the Code for Tax Returns due (without regard to extensions) on or prior to
December 31, 1989, and in accordance with Section 6662(d)(2)(B) of the Code for
Tax Returns due (without regard to extensions) after December 31, 1989.
5.14. Agreements and Commitments. (a) Schedule 5.14 contains an accurate
list of all commitments, contracts, leases and agreements to which Company or
any Subsidiary is a party or by which any of them is bound which involves a
commitment or obligation in excess of $50,000 in the aggregate for each such
commitment, contract, lease or agreement or is otherwise material to the
business of Company or any Subsidiary (including, without limitation, joint
venture or partnership agreements, employment agreements, contracts, tenant
leases, equipment leases, equipment maintenance agreements, agreements with
municipalities and labor organizations, loan agreements, bonds, mortgages, liens
or other security agreements (the "Contracts"). Company has delivered true,
correct and complete copies of such agreements to Omnicare. Except as set forth
on Schedule 5.14, there are not:
(i) any contracts or commitments which involve a commitment or
obligation in excess of $50,000 in the aggregate for each such contract
or commitment which affect Company or any Subsidiary, the assets or the
operation thereof;
(ii) any contracts or commitments affecting ownership of, title to, use
of, or any interest in the real property of Company or any Subsidiary;
(iii) any patent licensing agreements or any other agreements, licenses
or commitments with respect to patents, patent applications, trademarks,
trade names, service marks, technical assistance, copyrights or other
like terms affecting Company or any Subsidiary (other than computer
software licenses obtained in the ordinary course of business);
(iv) any contracts, licenses or commitments which involve a commitment
or obligation in excess of $50,000 in the aggregate for each such
contract, license or commitment relating to data processing programs,
software or source codes utilized in connection with the business of
Company or any Subsidiary;
(v) any collective bargaining agreements or other contracts or
commitments to or with any labor unions or other employee
representatives or groups of employees;
(vi) any employment contracts or any other contracts, agreements or
commitments to or with individual employees or agents of Company or any
Subsidiary which involves a commitment or
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obligation in excess of $50,000 in the aggregate for each such contract,
agreement or commitment and any contracts, agreements or commitments
with consultants or other independent contractors;
(vii) any contracts or commitments providing for payments based in any
manner on the revenues or profits of Company or any Subsidiary;
(viii) any contracts or commitments limiting the freedom of Company or
any Subsidiary to engage in any line of business or operate in any
geographic area, or to compete with any person or entity;
(ix) any instruments relating to indebtedness for borrowed money,
including any note, bond, deed of trust, mortgage, indenture or
agreement to borrow money or any agreement of guarantee or
indemnification, whether written or oral, in favor of any person or
entity; or
(x) any other contract or commitment, whether in the ordinary course of
business or not, which involves future payments, performance of services
or delivery of goods or materials, to or by Company or any Subsidiary of
any amount or value in excess of $50,000 in the aggregate for each such
contract or commitment.
(b) The Contracts constitute valid and legally binding obligations of the
parties thereto and are enforceable in accordance with their terms, assuming due
authorization, execution and delivery by parties other than Company and its
Subsidiaries and except (i) as may be affected by bankruptcy, insolvency,
reorganization, moratorium or similar laws or by equitable principles relating
to or limiting creditors rights generally and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief is subject to the
discretion of the court before which any proceeding therefor may be brought.
(c) Each Contract constitutes the entire agreement by and between the
respective parties thereto with respect to the subject matter thereof.
(d) To the best of Company's knowledge, all obligations required to be
performed under the terms of the Contracts have been performed, no act or
omission has occurred or failed to occur which, with the giving of notice, the
lapse of time or both would constitute a default by Company or any Subsidiary
under the Contracts.
(e) Except as expressly set forth on Schedule 5.14(e), none of the
Contracts requires the consent of the other parties thereto in order for it to
be in full force and effect with respect to Company or a Subsidiary as
controlled by Omnicare after the Closing or would give rise to the other party's
right to terminate any Contract as a result of the Merger; and Company and its
Subsidiaries will used their best efforts to obtain any required consents prior
to the Closing.
5.15. Employee Relations. Except as set forth on Schedule 5.15 (i) there
are no pending claims by any current or former Personnel of Company or any
Subsidiary against Company or any Subsidiary other than for compensation and
benefits due in the ordinary course of employment; (ii) there are no pending
claims against Company or any Subsidiary arising out of any statute, ordinance
or regulation relating to employment practices or occupational or safety and
health standards; (iii) there are no pending or, to the best knowledge of
Company, threatened labor disputes, strikes or work stoppages against Company or
any Subsidiary; and (iv) to the best knowledge of Company, there are no union
organizing activities in process or contemplated with respect to the Company or
any Subsidiary. No collective bargaining units have been certified or recognized
by Company or any Subsidiary. Schedule 5.15 also identifies all employees on
leave of absence and all current or former employees and their dependents
receiving health benefits, or eligible to receive health benefits, as required
by COBRA. Notice of the availability of COBRA Coverage has been provided to all
persons entitled thereto since June 30, 1996, and all persons electing such
coverage are being (or have been, if applicable) provided such coverage.
5.16. Insurance. All policies of insurance in force with respect to
Company or any Subsidiary including policy numbers and names and addresses of
the issuers are set forth on Schedule 5.16 and are outstanding and duly in force
on the date hereof. Copies of all such policies of insurance have been furnished
to Omnicare. To the best knowledge of the Company, such policies, taking into
account the deductibles and exceptions set forth
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therein, insure in all material respects against losses and risks that are
typically covered by insurance in accordance with customary industry practice in
the industry in which the Company and its Subsidiaries operate. Neither Company
nor any Subsidiary has received notice from any insurer or agent of such insurer
that substantial capital improvements or other expenditures will have to be made
in order to continue such insurance and, to the best knowledge of Company, no
such improvements or expenditures are required.
5.17. Intellectual Property. Each of Company and its Subsidiaries,
directly or indirectly, possesses or has adequate rights to all licenses,
permits and all other franchises, trademarks, trade names, service marks,
inventions, patents, copyrights, and any applications therefor, trade secrets,
research and development, know-how, technical data, computer software programs
or applications and technology systems necessary to operate their respective
businesses and required by applicable law (the "Intellectual Property"). Except
as set forth on Schedule 5.17, all right, title and interest in and to each item
of Intellectual Property is owned by Company or a Subsidiary, is not subject to
any license, royalty arrangement or pending or threatened claim or dispute and
is valid and in full force and effect. None of the Intellectual Property owned
or, to the best of Company's knowledge, none of the Intellectual Property used
by Company or any Subsidiary, infringes any Intellectual Property right of any
other entity and no Intellectual Property owned by Company or any Subsidiary is
infringed upon by any other entity.
5.18. Environmental Matters. Except as disclosed on Schedule 5.18:
(a) Each of Company and its Subsidiaries has been and is in full compliance
with all Environmental Laws (as defined below) applicable to the operations of,
and the property owned, operated, occupied or otherwise used by, Company and its
Subsidiaries. To the best knowledge of Company, there are no circumstances that
may prevent or interfere with such full compliance in the future.
(b) Company and its Subsidiaries have obtained all Permits (as defined
below) necessary for the operation of their businesses and the ownership,
operation, occupation or other use of their properties, all such Permits are in
good standing and Company and its Subsidiaries are in compliance with all terms
and conditions of such Permits. There has been no material change in the facts
or circumstances reported or assumed in the applications for or the granting of
such Permits.
(c) There is no lawsuit, claim, action, cause of action, judicial or
administrative proceeding, investigation, summons, or written notice by any
person pending, or to Company's knowledge, threatened, against Company or any
Subsidiary alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resource damages, property damages, personal injuries or
penalties) arising out of or resulting from (i) the violation of any
Environmental Law or (ii) the presence or Release of any Hazardous Substance (as
defined below) at any location, whether or not owned, operated, occupied or
otherwise used by Company or any Subsidiary.
(d) Neither Company nor any Subsidiary is subject to any writ, injunction,
order, decree or settlement addressing (i) any alleged violation of any
Environmental Law or (ii) the alleged presence, or Release into the environment,
of any Hazardous Substance at any location, whether or not owned, operated,
occupied or otherwise used by Company or any Subsidiary.
(e) No Environmental Lien (as defined below) has attached to any of the
property owned, operated, occupied or otherwise used by Company or any
Subsidiary.
(f) There has been no Release of any Hazardous Substance at, to or from any
of the properties owned, operated, occupied or otherwise used by Company or any
Subsidiary.
(g) Neither Company nor any Subsidiary has transported or arranged for the
transport of any Hazardous Substance to any facility or site for the purpose of
treatment, storage, disposal or recycling which (i) is included on the National
Priorities List or the Comprehensive Environmental Response, Compensation and
Liability Information System under the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. sec.sec.9601 et. seq. ("CERCLA"), or
any similar state list which is required by any state Environmental Law to be
kept, or (ii) is presently subject to a governmental enforcement action under
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CERCLA or the Solid Waste Disposal Act, 42 U.S.C. sec.sec.6901 et. seq., or any
similar state Environmental Law.
(h) All of the third parties with which Company and its Subsidiaries
presently have arrangements, engagements or contracts to accept, treat,
transport, store, dispose, remove or recycle any Hazardous Substances generated
or present at any of the properties owned, operated, occupied or otherwise used
by Company or its Subsidiaries are properly permitted under Environmental Laws
to perform the foregoing activities or conduct.
(i) Neither Company nor any Subsidiary has any liability for the violation
of any Environmental Law or the Release of any Hazardous Substance in connection
with any business or property previously owned, operated, occupied or otherwise
used by Company or any Subsidiary or any of the predecessors of Company or any
Subsidiary.
(j) There are no past or present actions, activities, circumstances,
conditions, event or incidents, including, without limitation, the generation,
handling, transportation, treatment, storage, Release, presence, disposal or
arranging for disposal of any Hazardous Substance, that could form the basis of
any claim against Company or any Subsidiary under any Environmental Law.
(k) Without in any way limiting the generality of the foregoing, (i) all
underground storage tanks, and the capacity and contents of such tanks, located
on the real property owned or operated by Company or any Subsidiary are
identified in Schedule 5.18, (ii) except as identified in Schedule 5.18, there
is no asbestos contained in or forming part of any building, building component,
structure or office space owned or operated by Company or any Subsidiary, and
(iii) no polychlorinated biphenyls (PCBs) are used or stored at any part of the
property owned or operated by Company or any Subsidiary.
(l) The following terms shall have the following meanings:
(i) "Environmental Laws" means all federal, state, local and foreign
laws, statutes, codes, ordinances, rules, regulations, orders,
directives, binding policies, common law, or Permits as amended and in
effect on the date hereof and on the Closing Date relating to or
addressing the environment, health or safety, including, but not limited
to, any law, statute, code, ordinance, rule, regulation, order,
directive, binding policy, common law or Permit relating to the
generation, use, handling, treatment, removal, storage, production,
manufacture, transportation, remediation, disposal, arranging for
disposal, or Release of Hazardous Substances.
(ii) "Environmental Lien" means a lien in favor of any governmental
authority for any (a) liability under any Environmental Law or (b)
damages arising from, or costs incurred by, such governmental authority
in response to a release or threatened release of a Hazardous Substance
into the environment.
(iii) "Hazardous Substances" means any toxic or hazardous substances
(including, without limitation, wastes), pollutants, explosives,
radioactive materials or substances (including, without limitation,
wastes), or Medical Waste (as defined below), including, without
limitation, asbestos, PCBs, petroleum products and byproducts, and
substances (including, without limitation, wastes) defined in or
regulated under Environmental Law.
(iv) "Medical Waste" means any substance, pollutant, material, or
contaminant listed or regulated under the Medical Waste Tracking Act of
1988, 42 U.S.C. sec.6992, et seq. and implementing regulations and
similar applicable state law and regulations.
(v) "Permit" means any permit, license, consent or other approval or
authorization required under any Environmental Law.
(vi) "Release" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or
migrating of any Hazardous Substance through or in the air, soil,
surface water, or groundwater.
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5.19. No Conflict of Interest. Except as described on Schedule 5.19, no
present or former officer or director, no affiliate of Company or any Subsidiary
and no Stockholder has (i) any interest in the property, real or personal,
tangible or intangible, including without limitation, Intangibles, Licenses,
inventions, technology, processes, designs, computer programs, know-how and
formulae used in or pertaining to the business of Company, or (ii) any contract,
commitment, arrangement or understanding, including, without limitation, loan
arrangement, with Company or any Subsidiary. To the best knowledge of Company,
no present officer or director of Company or any Subsidiary, no affiliate
thereof and no Stockholder, has any ownership or stock interest in any other
enterprise, firm, corporation, trust or any other entity which is engaged in any
line or lines of business which are the same as, or similar to, or competitive
with, the line or lines of business of Company. For purposes of this
representation, ownership of not more than three percent of the voting stock of
any publicly held company whose stock is listed on any recognized securities
exchange or traded over the counter shall be disregarded.
5.20. Accounts Receivable; Equipment. (a) All accounts receivable of
Company or any Subsidiary as of the Balance Sheet Date represent transactions
actually made in the ordinary course of business, represent monies due or goods
sold and delivered or services performed. Such accounts receivable are
collectible, without setoff or similar right, except to the extent of reserves
on the Company Financial Statements, which reserves are adequate. To the best
knowledge of Company, such accounts receivable are free and clear of any
Encumbrance except as specifically disclosed in the notes to the consolidated
financial statements of Company and its Subsidiaries for the years ended June
30, 1996 and 1995 or as set forth on Schedule 5.20(a).
(b) The assets of Company and its Subsidiaries include, and as of the
Closing will include, all the equipment, inventory and other assets presently
used in the conduct of or related to the businesses of Company and its
Subsidiaries except those sold or otherwise consumed after the date hereof in
the ordinary course of business. All assets of Company and its Subsidiaries
consisting of equipment, whether reflected in the Company Financial Statements
or otherwise, are well maintained and in good operating condition, except for
reasonable wear and tear and except for items which have been written down in
the Company Financial Statements to a realizable market value or for which
adequate reserves have been provided in the Company Financial Statements. The
present quantity of all such equipment of Company and its Subsidiaries is
reasonable in the present course of the business conducted by Company and its
Subsidiaries. All of such equipment (except for leased equipment for which the
lessors have valid security interest) is free and clear of any Encumbrance
except as specifically disclosed in the notes to the consolidated financial
statements of Company and its Subsidiaries for the years ended June 30, 1996 and
1995 and as set forth on Schedule 5.20(b).
5.21. Independent Contractor Status. Schedule 5.21 sets forth a complete
list of all persons, including without limitation, all investigators and
monitors or clinical research associates and other study personnel, engaged by
Company or any Subsidiary at any time since June 30, 1995 to render management,
consulting, research, investigative or similar services to Company or any
Subsidiary as an independent contractor (collectively, the "Company
Contractors"). Company has provided to Omnicare true and complete copies of all
agreements entered into between Company or any Subsidiary and any Company
Contractor requested by Omnicare. To the best knowledge of the Company, each
Company Contractor is, and each person who at any prior time would have been
required to be included in a schedule listing the types of persons set forth on
Schedule 5.21 was, an independent contractor to, and not an employee of, Company
or the applicable Subsidiary for purposes of all applicable federal and state
income tax withholding requirements or otherwise.
5.22. Client Relations. Set forth on Schedule 5.22 is a list of clients of
Company and its Subsidiaries which accounted for 10% or more of the net revenue
of Company and its Subsidiaries, taken as a whole, for the fiscal year ended
June 30, 1996. None of the clients listed on Schedule 5.22 has registered any
material complaint regarding the services rendered by Company or any Subsidiary,
indicated any desire or intention to reduce the level of services under any
contract with Company or any Subsidiary, or stated verbally or in writing any
intention to terminate any contract with Company or any Subsidiary.
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5.23. Change in Control Payments. Except as set forth on Schedule 5.23,
neither Company nor any Subsidiary have any plans, programs, commitments or
arrangements to which they are parties, or to which they are subject, pursuant
to which payments may be required or acceleration of benefits may be required
upon change of control of Company.
5.24. Brokers and Finders. Other than WAH, whose fees are set forth in the
Engagement Letter, dated November 18, 1996, between Company and WAH attached
hereto as Exhibit 5.24 (the "WAH Engagement Letter"), Company and its officers,
directors or employees, and the Stockholders have not employed any broker or
finder or incurred any liability for any brokerage fees, commissions, finders'
fees or similar fees or expenses and no broker or finder has acted directly or
indirectly for Company or any Stockholder in connection with this Agreement or
the transactions contemplated hereby and no investment banking, financial
advisory or similar fees have been incurred or are or will be payable by Company
or any Stockholder in connection with this Agreement or the transactions
contemplated hereby.
5.25. Omnicare Stock Ownership. Neither Company nor any Subsidiary owns
any shares of Omnicare Common Stock or other securities convertible into
Omnicare Common Stock.
5.26. Pooling of Interests. Neither Company nor any Subsidiary nor any
Stockholder has taken or failed to take any action or has knowledge of any fact
or circumstance that would, or would be reasonably likely to, prevent the
accounting for the Merger as a pooling of interests in accordance with GAAP and
the pronouncements of the Commission.
5.27. Tax Reorganization. Neither Company nor any Subsidiary nor any
Stockholder has taken or failed to take any action, or has knowledge of any fact
or circumstance, that would, or would be reasonably likely to, adversely affect
the status of the Merger as a reorganization under Section 368(a) of the Code.
5.28. Performance and Compliance. From and after January 27, 1997 until
the date hereof, Company has performed and complied with in all material
respects its obligations, agreements and covenants under the Initial Agreement
which were required to be performed or complied with by it at or prior to the
date hereof.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Except as disclosed by the Stockholders to Omnicare in writing in the
disclosure schedules being delivered to Omnicare by the Stockholders upon or
before the execution hereof (the "Stockholders Schedules") and which Stockholder
Schedules shall identify the specific Sections or subsections in this Agreement
to which each such disclosure relates, the Stockholders hereby severally and not
jointly with any other Stockholder represent and warrant to Omnicare as of
January 27, 1997 and as of the date hereof (except for the representations and
warranties in Section 6.5, which are made as of the date hereof) as follows:
6.1. Ownership; Authority. (a) Such Stockholder owns beneficially and of
record the number of shares set forth opposite his or her name on Schedule 6.1,
free and clear of all Encumbrances (other than as imposed under this Agreement
or the Support Agreement) and such Stockholder has the authority to execute and
deliver this Agreement, and no other acts or other proceedings on the part of
the Stockholders are necessary to authorize this Agreement, the Support
Agreement or the transactions contemplated hereby or thereby, other than
obtaining the requisite approval and adoption by the holders of Company Common
Stock in accordance with the DGCL and Company's Certificate of Incorporation and
Bylaws. This Agreement and the Support Agreement have been duly and validly
executed and delivered by such Stockholder and (assuming the due authorization,
execution and delivery by Company, Omnicare and Merger Sub, in the case of this
Agreement, and Omnicare and Merger Sub, in the case of the Support Agreement)
constitute the legal, valid and binding obligation of such Stockholder,
enforceable against each Stockholder in accordance with their respective terms,
except as enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights in general, or by general principles or equity.
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(b) Neither the execution and delivery by such Stockholder of this
Agreement nor the Support Agreement nor the consummation of the transactions
contemplated hereby or thereby nor compliance by such Stockholder with any of
the provisions hereof or thereof will (i) violate or conflict with, or result in
a breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in the
creation of any Encumbrance upon any of the Company Common Stock owned by such
Stockholder under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, sublease, option (other than
options granted under the Company Stock Option Plan), agreement or other
instrument or obligation to which such Stockholder is a party, or by which he or
she or the Company Common Stock owned by such Stockholder may be bound or
affected, (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to such Stockholder or the Company Common Stock owned by
such Stockholder or (iii) require any consent, approval or authorization of, or
notice to, or declaration, filing or registration with, any person or entity
applicable to such Stockholder except, in the case of such clauses (i), (ii) and
(iii), as would not be reasonably likely to have a material adverse effect on
such Stockholder's ability to consummate the transactions contemplated hereby or
by the Support Agreement.
6.2. Brokers or Finders. Such Stockholder has not entered into and will
not enter into any agreement, arrangement or understanding with any broker,
finder or investment banker pertaining to the Merger.
6.3. No Other Agreements to Sell Shares. Except as disclosed on Schedule
6.3 and other than pursuant to this Agreement, no Stockholder has any legal
obligation, absolute or contingent, to any other person or firm to sell any of
the Company Common Stock or to enter into any agreement with respect thereto.
6.4. Preemptive Rights. Except as disclosed on Schedule 6.4, such
Stockholder has no preemptive or other right to acquire shares of Company Common
Stock, except pursuant to options granted under the Company Stock Option Plan.
6.5. Performance and Compliance. From and after January 27, 1997 until the
date hereof, such Stockholder has performed and complied with in all material
respects its obligations, agreements and covenants under the Initial Agreement
which were required to be performed or complied with by him or her at or prior
to the date hereof.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF
OMNICARE AND MERGER SUB
Except as disclosed by Omnicare and Merger Sub to Company and the
Stockholders in writing in the disclosure schedules being delivered to Company
and the Stockholders upon or before the execution hereof (the "Omnicare
Schedules") and which Omnicare Schedules shall identify the specific Sections or
subsections in this Agreement to which each such disclosure relates, Omnicare
and Merger Sub hereby jointly and severally represent and warrant to Company and
the Stockholders as of January 27, 1997 (except for (i) the representations and
warranties in Sections 7.1 and 7.2, which are made as of January 27, 1997 and as
of the date hereof and (ii) the representations and warranties in Sections 7.3,
7.4, 7.5 and 7.10, which are made as of the date hereof) as follows:
7.1. Organization of Omnicare and its Subsidiaries. Each of Omnicare and
its subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of Omnicare
and its subsidiaries has full corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted
therein, and each such entity is qualified to do business and is in good
standing in each jurisdiction (domestic, foreign or otherwise) in which property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification necessary (except for jurisdictions in which such
failure to be so qualified could not be reasonably likely to have a material
adverse effect on the business, earnings, assets, liabilities, financial or
other condition or results of operations of Omnicare and its subsidiaries taken
as a whole). Omnicare Schedule 7.1 contains a list of all jurisdictions where
either Omnicare or its subsidiaries are qualified to do business.
7.2. Authority. (a) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby by
Omnicare and Merger Sub have been duly authorized by all requisite corporate
action, and no other acts or other proceedings on the part of Omnicare or Merger
Sub are necessary to authorize this Agreement or the transactions contemplated
hereby. This Agreement has been duly and validly executed by Omnicare and Merger
Sub and (assuming the due authorization, execution and delivery hereof and
thereof by Company and the Stockholders) constitutes the legal, valid and
binding obligation of Omnicare and Merger Sub, enforceable against Omnicare and
Merger Sub in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights in general, or by general
principles of equity.
(b) Except as set forth in Omnicare Schedule 7.2(b), neither the execution
and delivery by Omnicare or Merger Sub of this Agreement nor the consummation of
the transactions contemplated hereby nor compliance with any of the provisions
hereof will (a) conflict with or result in a breach of any provision of the
charter or Bylaws of Omnicare or any of its subsidiaries, (b) violate, conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or cancellation
of, or accelerate the performance required by, or result in the creation of any
Encumbrance upon any of the properties of Omnicare or any of its subsidiaries or
result in being declared void, voidable, without further binding effect or
subject to amendment or modification any of the terms, conditions or provision
of, any note, bond, mortgage, indenture, deed of trust, any license, franchise,
permit, lease, contract, agreement or other instrument or commitment or
obligation to which Omnicare, any of its subsidiaries or any of their respective
properties may be bound or affected, (c) violate any order, writ, injunction,
decree, judgment, ruling, law, rule or regulation of any court or governmental
authority, federal, state or foreign, applicable to Omnicare or any of its
subsidiaries or any of their respective properties, or (d) except for (i)
applicable requirements of the HSR Act, (ii) obtaining the consents approvals
authorizations and permits of, and making filings or notifications to, any
governmental authority pursuant to the applicable requirements, if any, of the
Securities Act, the Exchange Act, Blue Sky Laws, the NASD and the NYSE and (iii)
the filing and recordation of the appropriate transaction documents as required
by the DGCL, require any consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any person or entity except, in the
case of clauses (ii), (iii) and (iv) as would not be reasonably likely to have a
material adverse effect on the business, earnings, assets, liabilities,
financial or
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other condition or results of operations of Omnicare and its subsidiaries taken
as a whole or on the ability of Omnicare or Merger Sub to consummate the
transactions contemplated hereby.
7.3. Capitalization. As of March 31, 1997, the authorized, issued and
outstanding capital stock of Omnicare is as set forth in the Quarterly Report of
Omnicare on Form 10-Q for the three months ended March 31, 1997. All of the
outstanding shares of capital stock of Omnicare and Merger Sub have been duly
authorized and are validly issued, fully paid and non-assessable and have not
been issued in violation of the preemptive or similar rights of any stockholder
of Omnicare or Merger Sub arising by operation of securities laws or the
Certificate of Incorporation or Bylaws of Omnicare or Merger Sub.
7.4. SEC Reports and Financial Statements. Omnicare has furnished to
Company copies of the Annual Report of Omnicare on Form 10-K for the fiscal year
ended December 31, 1996, any proxy statements and other reports (including
Quarterly Reports on Form 10-Q) under the Exchange Act, filed by Omnicare after
such date (collectively, the "SEC Reports"), each as filed with the Securities
and Exchange Commission (the "Commission"), and Omnicare's 1996 Annual Report to
Stockholders (the "1996 Annual Report"). As of their respective dates, each SEC
Report and any proxy statements and other reports filed by Omnicare with the
Commission after the date of this Agreement (i) complied, or will comply with on
the date of such filing, as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act, and (ii) did not, or
will not, on the date of filing or the date as of which information is set forth
therein, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. The representation in clause (ii) of the immediately preceding
sentence shall not apply to any misstatement or omission in any SEC Report filed
prior to the date hereof which was superseded by a subsequent SEC Report filed
prior to the date hereof. The financial statements (including any related
schedules and/or notes) included in the SEC Reports and the 1996 Annual Report
have been prepared in accordance with GAAP consistently applied (except as may
be indicated in the notes thereto) throughout the periods involved and fairly
present the financial position, results of operations and cash flows as of the
dates and for the periods indicated therein.
7.5. Absence of Undisclosed Liabilities. Except (i) as disclosed in, or
reflected in the financial statements included in, the SEC Reports, (ii)
liabilities which have been incurred since March 31, 1997 in the ordinary course
of business consistent with past practice as a result of arm's length
negotiations, which liabilities would not be reasonably likely to have a
material adverse effect on the business, earnings, assets, liabilities,
financial or other condition or results of operations of Omnicare and its
subsidiaries taken as a whole and (iii) liabilities and obligations specifically
disclosed on Omnicare Schedule 7.5, neither Omnicare nor any of its subsidiaries
has any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise and whether due or to become due).
7.6. Omnicare Common Stock. The issuance and delivery by Omnicare of
shares of Omnicare Common Stock in connection with the Merger and this Agreement
have been duly and validly authorized by all necessary corporate action on the
part of Omnicare. The shares of Omnicare Common Stock to be issued in connection
with the Merger and this Agreement, when issued in accordance with the terms of
this Agreement, will be validly issued, fully paid and nonassessable.
7.7. Pooling of Interests. Neither Omnicare nor any of its subsidiaries
has taken or failed to take any action or has knowledge of any fact or
circumstance that would, or would be reasonably likely to, prevent the
accounting for the Merger as a pooling of interests in accordance with GAAP and
the pronouncements of the Commission.
7.8. Tax Reorganization. Neither Omnicare nor any of its subsidiaries has
taken or failed to take any action, or has knowledge of any fact or
circumstance, that would, or would be reasonably likely to, adversely affect the
status of the Merger as a reorganization under Section 368(a) of the Code.
7.9. Ownership of Merger Sub; No Prior Activities. Merger Sub is a wholly
owned subsidiary of Omnicare created solely for the purpose of effecting the
Merger. As of the date hereof and the Effective Time,
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except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Merger Sub has not and will not have incurred,
directly or indirectly, through any subsidiary or affiliate, any material
obligations or liabilities or engaged in any material business activities of any
type or kind whatsoever or entered into any agreements or arrangements with any
person.
7.10. Performance and Compliance. From and after January 27, 1997 until
the date hereof, Omnicare has performed and complied with in all material
respects its obligations, agreements and covenants under the Initial Agreement
which were required to be performed or complied with by it at or prior to the
date hereof.
ARTICLE 8
COVENANTS
8.1. Alternative Proposals. Prior to the Effective Time, Company agrees
(a) that neither it nor any Subsidiary shall, and it shall direct and use best
efforts to cause its officers, directors, employees, agents and representatives
(including, without limitation, any investment banker, attorney or accountant
retained by it or any Subsidiary or any of the foregoing) not to initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its stockholders) with respect to an Alternative Proposal
(as defined below) or engage in any negotiations concerning, or provide any
non-public information or data to, or have any discussions with, any person
relating to an Alternative Proposal, or otherwise facilitate any effort or
attempt to make or implement an Alternative Proposal; (b) that it will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing, and it will take the necessary steps to inform the
individuals or entities referred to above of the obligations undertaken in this
Section 8.1; (c) that it will promptly request each person which has executed a
confidentiality agreement in connection with its consideration of acquiring
Company pursuant to the December 1996 Confidential Memorandum prepared by
Company and WAH to return all confidential information heretofore furnished to
such person by or on behalf of Company and (d) that it will notify Omnicare
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 8.1 shall prohibit the Board of Directors of Company
from (i) furnishing information (pursuant to a confidentiality letter deemed
appropriate by the Board of Directors of Company) to or entering into
discussions or negotiations with, any person or entity that makes an unsolicited
bona fide proposal or offer to the stockholders of Company, to acquire Company
pursuant to a merger, consolidation, share purchase, share exchange, purchase of
a substantial portion of assets, business combination or other similar
transaction, if, and only to the extent that, (A) the Board of Directors of
Company determines in good faith based upon the written opinion of outside
counsel that such action is required for the Board of Directors to comply with
its fiduciary duties to stockholders imposed by law, (B) prior to furnishing
such information to, or entering into discussions or negotiations with, such
person or entity, Company provides written notice to Omnicare of the identity of
the person or entity making the Alternative Proposal and that it intends to
furnish information to, or intends to enter into discussions or negotiations
with, such person or entity, and (C) Company keeps Omnicare informed on a timely
basis of the status of any such discussions or negotiations and all terms and
conditions thereof and promptly provides Omnicare with copies of any written
inquiries or proposals relating thereto, and (D) in the event that the Board of
Directors of Company determines to accept any such Alternative Proposal (in
accordance with subclause (A) above), Company provides Omnicare with at least
five business days' prior written notice thereof, during which time Omnicare may
make, and in such event, Company shall in good faith consider, a counterproposal
to such Alternative Proposal; and (ii) to the extent applicable, complying with
Rule 14e-2 promulgated under the Exchange Act with regard to an Alternative
Proposal. Nothing in this Section 8.1 shall (x) permit Company to terminate this
Agreement (except as specifically provided in Article 11 hereof), (y) permit
Company to enter into any agreement with respect to an Alternative Proposal
during the term of this Agreement (it being agreed that during the term of this
Agreement, Company shall not
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enter into any agreement with any person that provides for, or in any way
facilitates, an Alternative Proposal (other than a confidentiality agreement
deemed appropriate by the Board of Directors of Company)), or (z) affect any
other obligation of Company under this Agreement. "Alternative Proposal" shall
mean any merger, acquisition, consolidation, reorganization, share exchange,
tender offer, exchange offer or similar transaction involving Company or any
Subsidiary, or any proposal or offer to acquire in any manner, directly or
indirectly, a substantial equity interest in or a substantial portion of the
assets of Company or any Subsidiary.
8.2. Interim Operations. Company shall, and shall cause its Subsidiaries
to, from the date hereof up to and including the Effective Time, use reasonable
best efforts to conduct their respective businesses only in the ordinary course,
consistent with past practice, and will not do, or cause to be done, anything
which is represented and warranted not to have been done in this Agreement,
except as otherwise expressly contemplated hereby. In addition, Company will,
and will cause its Subsidiaries to, from and after the date hereof up to and
including the Closing Date: (a) maintain in full force and effect the insurance
policies set forth on Schedule 5.16 (or policies providing substantially the
same coverage, copies of which will be made available to Omnicare); (b) take
such action as may reasonably be necessary to preserve the assets and properties
wherever located, which are material to the business of Company and its
Subsidiaries; (c) maintain their books and records in accordance with accounting
principles and in the manner consistent with past practices and promptly advise
Omnicare in writing of any material change in the business, earnings, assets,
liabilities, financial or other condition or results of operations of Company or
any Subsidiary; (d) maintain the assets of Company and its Subsidiaries in the
same state of repair, order and condition as on the date hereof, reasonable wear
and tear or loss by insured casualty excepted; (e) maintain in full force and
effect all material Licenses and perform in all material respects all
obligations under any Contracts; (f) not permit to occur any of those events or
occurrences described in Section 5.9 (Absence of Certain Changes) of this
Agreement which are subject to the control of Company and its Subsidiaries, and
will use its best efforts not to permit to occur any of those events or
occurrences described in Section 5.9 (Absence of Certain Changes) of this
Agreement which are not subject to the control of Company and its Subsidiaries,
except in each case as expressly permitted or provided by this Agreement; or (g)
not take any action that would prevent Company from consummating the
transactions contemplated by this Agreement. The parties hereto acknowledge and
agree that all outstanding options to acquire Company Common Stock shall be
treated in the Merger as provided in Article 4.
8.3. Meeting of Stockholders. Company will take all action necessary in
accordance with applicable law and its Certificate of Incorporation and Bylaws
to convene a meeting of its stockholders as promptly as practicable to consider
and vote upon the approval of this Agreement and the transactions contemplated
hereby. The Board of Directors of Company shall recommend such approval and
Company shall take all lawful action to solicit such approval, including,
without limitation, timely mailing the Proxy Statement/Prospectus (as defined in
Section 8.8); provided, however, that such recommendation or solicitation is
subject to any action (including any withdrawal or change of its recommendation)
taken by, or upon authority of, the Board of Directors of Company in the
exercise of its good faith judgment based upon the written opinion of outside
counsel as to its fiduciary duties to its stockholder imposed by law.
8.4. Filings, Other Action. Subject to the terms and conditions herein
provided, Company and Omnicare shall: (a) promptly make their respective filings
and thereafter make any other required submissions under the HSR Act with
respect to the Merger; (b) use all reasonable efforts to cooperate with one
another in (i) determining which filings are required to be made prior to the
Effective Time with, and which consents, approvals, permits or authorizations
are required to be obtained prior to the Effective Time from, governmental or
regulatory authorities of the United States, the several states and foreign
jurisdictions in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby and (ii) timely
making all such filings and timely seeking all such consents, approvals, permits
or authorizations; and (c) use all reasonable efforts to take, or cause to be
taken, all other action and do, or cause to be done, all other things necessary,
proper or appropriate to consummate and make effective the transactions
contemplated by this Agreement.
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8.5. Inspection of Records. From the date hereof to the Effective Time,
each of Company and Omnicare shall (i) allow all designated officers, attorneys,
accountants and other representatives of the other reasonable access at all
reasonable times to the offices, records and files, correspondence, audits and
properties, as well as to all information relating to commitments, contracts,
titles and financial position, or otherwise pertaining to the business and
affairs, of Company and Omnicare and their respective subsidiaries, as the case
may be, (ii) furnish to the other, the other's counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information as such persons may reasonably request and (iii) instruct
the employees, counsel and financial advisors of Company or Omnicare, as the
case may be, to cooperate with the other in the other's investigation of the
business of it and its subsidiaries.
8.6. Publicity. The initial press release relating to this Agreement shall
be a joint press release and thereafter Company and Omnicare shall, subject to
their respective legal obligations (including requirements of stock exchanges
and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency.
8.7. Confidentiality Agreement. Notwithstanding the execution of this
Agreement, the confidentiality agreement, dated November 29, 1996, between WAH
and Omnicare (the "Confidentiality Agreement") shall remain in full force and
effect through the Effective Time, at which time the Confidentiality Agreement
shall terminate and be of no further force and effect. Each party further
acknowledges that the Confidentiality Agreement shall survive any termination of
this Agreement pursuant to Article 11 hereof. Company and its representatives
agree to maintain the confidentiality of the information provided by Omnicare or
its representatives pursuant to this Agreement in the same manner and to the
same extent that Omnicare is obligated to maintain the confidentiality of
information provided by Company or any of its representatives pursuant to the
Confidentiality Agreement.
8.8. Registration Statement. Omnicare and Company shall cooperate and
promptly prepare and Omnicare shall file with the Commission as soon as
practicable a Registration Statement on Form S-4 (the "Form S-4") under the
Securities Act, with respect to the Omnicare Common Stock issuable in the
Merger, a portion of which Registration Statement shall also serve as the proxy
statement with respect to the meeting of the stockholders of Company in
connection with the Merger (the "Proxy Statement/Prospectus"). The respective
parties will cause the Proxy Statement/Prospectus and the Form S-4 to comply as
to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder.
Omnicare shall use all reasonable efforts, and Company will cooperate with
Omnicare, to have the Form S-4 declared effective by the Commission as promptly
as practicable. Omnicare shall use its best efforts to obtain, prior to the
effective date of the Form S-4, all necessary state securities law or "Blue Sky"
permits or approvals required to carry out the transactions contemplated by this
Agreement and will pay all expenses incident thereto. Omnicare agrees that the
Form S-4 and each amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing shall not apply to
the extent that any such untrue statement of a material fact or omission to
state a material fact was made by Omnicare in reliance upon and in conformity
with information concerning Company furnished to Omnicare or its agents by
Company or its agents for use in the Form S-4. Company agrees that the Proxy
Statement/Prospectus and each amendment or supplement thereto, at the time of
mailing thereof and at the time of the meeting of the stockholders of Company,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the foregoing shall not apply to the extent
that any such untrue statement of a material fact or omission to state a
material fact was made by Company in reliance upon and in conformity with
information concerning Omnicare furnished to Company or its agents by Omnicare
or its agents for use in the Proxy Statement/Prospectus. Company agrees
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that the information concerning Company provided by it for inclusion in the Form
S-4 or any amendment or supplement thereto, at the time it is filed or becomes
effective, will not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. No amendment or supplement to the Proxy Statement/Prospectus
will be made by Omnicare or Company without the approval of the other party,
which approval shall not be unreasonably withheld. Omnicare and Company will
advise each other promptly after either party receives notice thereof, of the
time when the Form S-4 has become effective or any supplement or amendment has
been filed, the issuance of any stop order, the suspension of the qualification
of the Omnicare Common Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, or any request by the Commission for amendment of
the Proxy Statement/Prospectus or the Form S-4 or comments thereon and responses
thereto or requests by the Commission for additional information.
8.9. Listing Application. Omnicare shall promptly prepare and submit to
the NYSE a listing application covering the shares of Omnicare Common Stock
issuable in the Merger, and shall use its best efforts to obtain, prior to the
Effective Time, approval for the listing of such Omnicare Common Stock, subject
to official notice of issuance.
8.10. Further Action. Each party hereto shall, subject to the fulfillment
at or before the Effective Time of each of the conditions of performance set
forth herein or the waiver thereof, perform such further acts and execute such
documents as may be reasonably required to effect the Merger.
8.11. Affiliate Letters. (a) In the reasonable judgment of Company, the
Stockholders constitute all the "affiliates" of the Company (each such person an
"Affiliate") within the meaning of Rule 145 of the rules and regulations
promulgated under the Securities Act. At least 30 days prior to the Closing
Date, Company shall deliver to Omnicare a list of names and addresses of any
other persons who were, in Company's reasonable judgment, at the record date for
its stockholders' meeting to approve the Merger, Affiliates. Company shall
provide Omnicare such information and documents as Omnicare shall reasonably
request for purposes of reviewing such list. Company shall deliver or cause to
be delivered to Omnicare, prior to the Effective Time, from each of the
Affiliates of Company identified in the foregoing list, an Affiliate Letter in
the form attached hereto as Exhibit 8.11(a).Omnicare shall be entitled to place
legends as specified in such Affiliate Letters on the certificates evidencing
any Omnicare Common Stock to be received by such Affiliates pursuant to the
terms of this Agreement, and to issue appropriate stop transfer instructions to
the transfer agent for the Omnicare Common Stock, consistent with the terms of
such Affiliate Letters.
8.12. Taxes. Without the consent of Omnicare, Company shall not, and shall
cause its Subsidiaries not to, (i) make or rescind any express or deemed
election relating to Taxes, (ii) make a request for a Tax Ruling or enter into a
Closing Agreement with respect to any Tax matter or (iii) change any of its
methods of reporting income or deductions for federal income tax purposes from
those employed in the preparation of its federal income Tax Return for the
taxable year ending June 30, 1995, except as may be required by applicable law.
8.13. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses; provided, however, that if the Merger is consummated,
the Surviving Corporation shall pay the reasonable fees and expenses incurred by
the Company and the Stockholders in connection with the transactions
contemplated hereby including (a) the reasonable fees and expenses of Coopers &
Lybrand LLC and of not more than one counsel for all such parties (which counsel
may be Morgan, Lewis & Bockius LLC), (b) the filing fee in connection with the
HSR Act filing, (c) the expenses incurred in connection with printing and
mailing the Form S-4 and the Proxy Statement/Prospectus and (d) the fees of WAH
provided in the WAH Engagement Letter; provided, that the maximum amount to be
paid by the Surviving Corporation pursuant to this Section 8.13 shall be no more
than $750,000 in the aggregate.
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8.14. Pooling; Reorganization. From and after the date hereof and until
the Effective Time, neither Omnicare nor Company nor any of their respective
subsidiaries or other affiliates nor any Stockholder shall (i) knowingly take
any action, or knowingly fail to take any action, that could jeopardize the
treatment of the Merger as a "pooling of interests" for accounting purposes;
(ii) knowingly take any action, or knowingly fail to take any action, that could
jeopardize qualification of the Merger as a reorganization under Section 368(a)
of the Code; or (iii) enter into any contract, agreement, commitment or
arrangement with respect to either of the foregoing.
8.15. Support Agreement. On or prior to the date of this Agreement,
Omnicare, Company and the Stockholders shall execute and deliver a Support
Agreement in substantially the form attached as Exhibit 8.15 hereto.
8.16. Company Office. The parties hereto agree that after consummation of
the Merger, Company will continue to be based in the greater Albany, New York
area.
8.17. Stock Purchase Plan. Company shall terminate the Employee Stock
Purchase Plan effective as of the end of the Offering Period (as defined in the
Plan) immediately preceding or coincident with the Effective Time.
8.18. SEC Reports. Omnicare will use all reasonable efforts to deliver
copies of all SEC Reports to Company as promptly as practicable after the filing
of such SEC Reports with the Commission.
8.19. Release of Guarantees. The parties hereto shall take all actions
reasonably necessary to release the Stockholders and the other individual
guarantors identified on Schedule 8.19 from their guarantee obligations with
respect to those obligations of the Company or its Subsidiaries set forth on
Schedule 8.19.
8.20. Stockholder Tax Basis. The parties hereto will cooperate with each
other and will use all reasonable efforts to obtain prior to Closing the tax
basis of each stockholder of Company in shares of Company Common Stock.
8.21. Waiver of Rights. Company and each Stockholder hereby waive any and
all rights which any of them may have in connection with the transactions
contemplated by this Agreement pursuant to any Shareholders Agreement entered
into by the Company and any Stockholder.
8.22. Coromed, S.A. Each Stockholder owning shares of the capital stock of
Coromed, S.A. (Buenos Aires, Argentina) ("Coromed S.A.") shall, prior to
Closing, contribute all such capital stock to Company. Company and the
Stockholders shall use reasonable best efforts, in accordance with applicable
law, to cause each of the other persons or entities (other than Company) owning
shares of the capital stock of Coromed S.A. to contribute, prior to Closing, all
such capital stock to Company.
8.23. Loans. Company and the Stockholders will take all actions reasonably
necessary prior to Closing to cause each outstanding loan by the Company to a
Stockholder to be evidenced by written notes (copies of which will be delivered
to Omnicare prior to Closing) providing that (i) such loans shall bear interest
at a rate of 8.25% and (ii) all principal and interest on such loans shall be
due and payable on March 31, 1998.
8.24. Combined Financial Results. Omnicare will publish 30 days'
post-closing combined financial results of Omnicare and Company for the first
full monthly period following the Closing Date within 45 days after the end of
such monthly period in a form sufficient to satisfy pooling of interests
requirements. The Stockholders will cooperate with Omnicare in connection
therewith and will provide such information in their possession or reasonably
obtainable by them as may be necessary to publish such financial results.
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ARTICLE 9
CONDITIONS
9.1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved in the manner required by applicable law by the holders of
the issued and outstanding shares of capital stock of Company.
(b) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(c) No party hereto shall be subject to any order or injunction of a
court of competent jurisdiction which prohibits the consummation of the
transactions contemplated by this Agreement. In the event any such order or
injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.
(d) The Form S-4 shall have become effective and shall be effective at
the Effective Time, and no stop order suspending effectiveness of the Form
S-4 shall have been issued, no action, suit, proceeding or investigation by
the Commission to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state
securities laws relating to the issuance or trading of the Omnicare Common
Stock to be issued to Company stockholders in connection with the Merger
shall have been received.
(e) All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to
be filed after the Effective Time and except where the failure to have
obtained or made any such consent, authorization, order, approval, filing
or registration would not have a material adverse effect on the business,
earnings, assets, liabilities, financial or other condition or results of
operations of Omnicare and Company (and their respective subsidiaries),
taken as a whole, following the Effective Time.
(f) The Omnicare Common Stock to be issued to Company stockholders in
connection with the Merger shall have been approved for listing on the
NYSE, subject only to official notice of issuance.
(g) Company shall have received opinions of Morgan, Lewis & Bockius,
special counsel to Company, on the date of the Proxy Statement/Prospectus
and on the Closing Date, in each case dated as of such respective dates and
based upon reasonably requested representation letters, stating that the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and that Company,
Omnicare and Merger Sub will each be a party to that reorganization within
the meaning of Section 368(b) of the Code.
9.2. Conditions to Obligation of Company and the Stockholders to Effect the
Merger. The obligation of Company and the Stockholders to effect the Merger
shall be subject to the fulfillment at or prior to the Closing Date of the
following conditions:
(a) Omnicare shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, the representations and warranties of Omnicare and
Merger Sub contained in this Agreement and in any document delivered in
connection herewith shall be true and correct as of the Closing Date as if
made on the Closing Date, and Company shall have received a certificate of
the President or a Vice President of Omnicare, dated the Closing Date,
certifying to such effect; provided, however, that notwithstanding anything
herein to the contrary, this Section 9.2(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and
correct, unless the failure of any of the representations or warranties to
be so true and correct
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would or would be reasonably likely to have a material adverse effect on
the business, earnings, assets, liabilities, financial or other condition
or results of operations of Omnicare and its Subsidiaries taken as a whole.
(b) Company shall have received from Coopers & Lybrand L.L.P. a letter
stating their concurrence with the conclusion of Company's management that
no conditions exist with respect to Company that would preclude the Merger
from being treated as a "pooling of interests" under applicable United
States accounting standards.
(c) Omnicare shall have entered into an employment agreement with each
Stockholder substantially in the form attached hereto as Exhibit 9.2(c)
(the "Employment Agreement").
9.3. Conditions to Obligation of Omnicare and Merger Sub to Effect the
Merger. The obligations of Omnicare and Merger Sub to effect the Merger shall
be subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) Company shall have performed in all material respects its
agreements contained in this Agreement required to be performed on or prior
to the Closing Date, the representations and warranties of Company
contained in this Agreement and in any document delivered in connection
herewith shall be true and correct as of the Closing Date as if made on the
Closing Date, and Omnicare shall have received a certificate of the
President or a Vice President of Company, dated the Closing Date,
certifying to such effect; provided, however, that notwithstanding anything
herein to the contrary, this Section 9.3(a) shall be deemed to have been
satisfied even if such representations or warranties are not true and
correct, unless the failure of any of the representations or warranties to
be so true and correct would or would be reasonably likely to have a
Material Adverse Effect.
(b) Omnicare shall have received from Price Waterhouse LLP an opinion
that the Merger will be treated as a "pooling of interests" under
applicable accounting standards.
(c) From March 31, 1997 through the Effective Time, there shall not
have occurred any change in the business, earnings, assets, liabilities,
financial or other condition or results of operations of Company and its
Subsidiaries, taken as a whole, that could have a Material Adverse Effect.
(d) Each of the Stockholders shall have entered into an Employment
Agreement with Omnicare and a non-competition agreement with Omnicare
substantially in the form attached hereto as Exhibit 9.3(d) (the
"Non-Competition Agreement"), each such agreement shall be in full force
and effect as of the Effective Time, and each Stockholder shall be in the
employ of Company immediately prior to the Effective Time.
(e) Dissenting stockholders of Company shall have taken actions
required to exercise appraisal rights pursuant to Section 262 of the DGCL
with respect to no more than 5% of the outstanding shares of Company Common
Stock.
(f) Company shall have provided Omnicare with a certified statement,
pursuant to Section 1.1445-2(c)(3) of the Treasury Regulations, that it is
not, and has not been within the last five years, a "United States real
property holding corporation."
(g) Omnicare shall have received, at least one week in advance of the
Closing Date, the audited financial statements of the Company for the
fiscal year ended June 30, 1997, including the notes thereto, accompanied
by the report of Coopers & Lybrand L.L.P. thereon.
ARTICLE 10
NATURE AND SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION, ETC.
Section 10.1. Survival of Representations and Warranties; Indemnities. (a)
All covenants and agreements of the parties made in this Agreement or provided
herein shall survive the Closing Date to the extent
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expressly provided herein. All representations and warranties of the parties
made in this Agreement or as provided herein shall be made as of the date hereof
and shall survive the Effective Time for a period ending at the earlier of (i)
one year from the Effective Time and (ii) the date upon which the first Annual
Report on Form 10-K reflecting the combined operations of Omnicare and Company
is filed with the Commission (the "Survival Period").
(b) The Stockholders, jointly and severally, hereby agree to defend,
indemnify and hold Omnicare and its subsidiaries and their officers, directors
and employees (collectively, the "Omnicare Indemnitees") harmless from and
against any and all claims, liabilities, losses, damages, deficiencies,
penalties, fines, costs or expenses (including, without limitation, the fees and
expenses of investigation and counsel) (collectively, "Losses"), arising out of
or resulting from (i) any breach of the representations and warranties contained
in Article 5; (ii) any breach in any material respect by the Stockholder or
Company of any covenant or agreement of the Stockholder or Company contained in
or arising out of this Agreement or (iii) any and all actions, suits,
proceedings, claims, demands, assessments and judgments incidental to the
foregoing to the enforcement of such indemnification; provided, that (A) the
Stockholders shall not be liable to the Omnicare Indemnitees for breach of the
representations and warranties set forth at Section 5.18(g), Section 5.18(h), or
Section 5.18(j) of this Agreement to the extent that such breach relates solely
to (i) the activities or conduct of any third party engaged by the Company to
accept, treat, transport, store, dispose, recycle or remove Hazardous Substances
(other than activities or conduct occurring at properties owned, operated,
occupied, or otherwise used (other than solely by such third party as agent for
the Company or such Subsidiary) by Company or any Subsidiary) or (ii) the
facilities or sites selected by any such persons for the treatment or disposal
of any Hazardous Substances (other than facilities or sites owned, operated,
occupied or otherwise used (other than solely by such third party as agent for
the Company or such Subsidiary) by the Company or any Subsidiary), unless and
until any and all of the Omnicare Indemnitee Losses (of any nature) on a
cumulative basis exceed $350,000 in the aggregate (in which case the
Stockholders shall only be liable for the amount of such Losses in excess of
$350,000); provided further, however, that this Section 10.1(b)(A) shall not
limit or condition in any way the Stockholders' liability under this Agreement
arising from or related to any violation of Environmental Laws by the Company or
any Subsidiary; and (B) the Stockholders shall not be liable to the Omnicare
Indemnitees for breach of any other representation or warranty contained in
Article 5 not covered by the immediately preceding clause (A) unless and until
any and all of the Omnicare Indemnitee Losses (of any nature) on a cumulative
basis exceed $200,000 in the aggregate (in which case the Stockholders shall
only be liable for the full amount of such Losses in excess of $200,000). Each
Stockholder, severally and not jointly, hereby agrees to defend, indemnify and
hold the Omnicare Indemnitees harmless from and against any and all Losses
arising out of or resulting from any breach of any representation or warranty by
such Stockholder contained in Article 6; provided; that such Stockholder shall
not be liable to the Omnicare Indemnitees for any such breach unless and until
the Losses of such Omnicare Indemnitees on a cumulative basis arising out of
such breach exceed $50,000 in the aggregate (in which case such Stockholder
shall only be liable for the full amount of such Losses in excess of $50,000).
Notwithstanding the foregoing, in no event shall the Stockholders' aggregate
liability pursuant to this Article 10 (over and above any threshold amounts
described above) exceed two million dollars.
(c) Promptly after the receipt by the Omnicare Indemnitees of a notice of
any claim, action, suit or proceeding of any third party which is subject to
indemnification hereunder, such party or parties (the "Indemnified Party") shall
give written notice of such claim (a "Notice of Claim") to the party or parties
obligated to provide indemnification hereunder (collectively, the "Indemnifying
Party"), stating the nature and basis of such claim and the amount thereof, to
the extent known. The failure of the Indemnified Party to so notify the
Indemnifying Party shall not impair the Indemnified Party's ability to seek
indemnification from the Indemnifying Party, except to the extent that the
Indemnifying Party is materially prejudiced. The Indemnifying Party shall be
entitled to participate in the defense or settlement of such matter and the
parties agree to cooperate in any such defense or settlement and to give each
other full access to all information relevant thereto. The Indemnifying Party
shall not be obligated to indemnify an Indemnified Party hereunder for any
settlement entered into without the Indemnifying Party's prior written consent,
which consent shall not be unreasonably withheld, conditioned or delayed. If any
Notice of Claim relates to a claim by a person or persons other than any
federal, state, local or foreign Tax authority, and the amount of such claim is
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acknowledged by the Indemnifying Party to be fully covered by the foregoing
indemnity, as limited herein, the Indemnifying Party may elect to defend against
such claim at its own expense, in lieu of the Indemnified Party assuming such
defense; provided, that the Indemnified Party shall be entitled to participate
in or monitor such defense at its own expense and the Indemnifying Party will
fully cooperate with the Indemnified Party and its counsel with respect thereto.
If the Indemnifying Party elects to assume such defense, the Indemnifying Party
shall retain counsel reasonably satisfactory to the Indemnified Party. No
compromise or settlement of such claim may be effected by the Indemnifying Party
without the consent of the Indemnified Party (which shall not be unreasonably
withheld) unless (i) there is no finding or admission of any violation of law
and no effect on any other claims that may be made against such Indemnified
Party and (ii) the sole relief provided is monetary damages that are paid in
full by the Indemnifying Party. If a Notice of Claim relates to a claim by a
federal, state, local or foreign Tax authority and the Indemnifying Party
requests that the Indemnified Party accept a settlement offer (other than an
offer conditioned upon the Indemnified Party's agreement with respect to any
other issue not deemed a Loss hereunder) and agrees to pay the indemnity with
respect thereto, then the Indemnified Party shall either (i) accept such
settlement offer or (ii) not accept such settlement offer, in which case the
Indemnifying Party shall only be liable to the Indemnified Party for the amount
the Indemnifying Party would have been required to pay the Indemnified Party had
the Indemnified Party accepted the settlement offer.
(d) Notwithstanding any provision in this Article 10 to the contrary, any
claim for indemnification in respect of which notice is given in accordance with
the provisions of Section 10.1(a) hereof prior to the expiration of the Survival
Period shall survive with respect to such claim until final resolution thereof.
ARTICLE 11
TERMINATION
11.1. Termination by Mutual Consent. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, before or
after the approval of this Agreement by the stockholders of Company, by the
mutual consent of Omnicare and Company.
11.2. Termination by Either Omnicare or Company. This Agreement may be
terminated and the Merger may be abandoned by action of the Board of Directors
of either Omnicare or Company if (a) the Merger shall not have been consummated
by November 30, 1997, or (b) the approval of Company's stockholders required by
Section 9.1(a) shall not have been obtained at a meeting duly convened therefor
or at any adjournment thereof or (c) a United States federal or state court of
competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
order, decree, ruling or other action shall have become final and
non-appealable; provided, that the party seeking to terminate this Agreement
pursuant to this clause (c) shall have used all reasonable efforts to remove
such injunction, order or decree; and provided, in the case of a termination
pursuant to clause (a) above, that the terminating party shall not have breached
in any material respect its obligations under this Agreement in any manner that
shall have proximately contributed to the failure to consummate the Merger by
the date specified in that clause.
11.3. Termination by Company. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, if (a) before
the date on which approval by the stockholders of Company referred to in Section
9.1(a) is obtained, by action of the Board of Directors of Company in the
exercise of its good faith judgment as to fiduciary duties to its stockholders
imposed by law, based upon the written opinion of outside counsel, the Board of
Directors of Company determines that such termination is required by reason of
an Alternative Proposal being made; provided, however, that Company shall (i)
notify Omnicare promptly of such receipt of such Alternative Proposal and (ii)
notify Omnicare promptly of its intention to recommend such Alternative Proposal
to Company stockholders, but in no event shall the notice referred to in clause
(ii) be given less than five business days prior to the earlier of the public
announcement of such recommendation or Company's termination of this Agreement,
(b) there has been a breach by Omnicare
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or Merger Sub of any representation or warranty contained in this Agreement
which would have or would be reasonably likely to have a material adverse effect
on the transactions contemplated by this Agreement or on the business, earnings,
assets, liabilities, financial or other condition or results of operations of
Omnicare, or (c) there has been a material breach of any of the covenants or
agreements set forth in this Agreement on the part of Omnicare, which breach is
not curable or, if curable, is not cured within 30 days after written notice of
such breach is given by Company to Omnicare.
11.4. Termination by Omnicare. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time by action of the
Board of Directors of Omnicare, if (a) the Board of Directors of Company shall
have withdrawn or modified in a manner materially adverse to Omnicare its
approval or recommendation of this Agreement or the Merger or shall have
recommended an Alternative Proposal to Company stockholders, or (b) there has
been a breach by Company or the Stockholders of any representation or warranty
contained in this Agreement which would have or would be reasonably likely to
have a material adverse effect on the transactions contemplated by this
Agreement or a Material Adverse Effect, or (c) there has been a material breach
of any of the covenants or agreements set forth in this Agreement on the part of
Company or the Stockholders, which breach is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by Omnicare to
Company or the Stockholders, as the case may be.
11.5. Effect of Termination and Abandonment. (a) In the event that any
person or entity shall have made an Alternative Proposal more favorable to the
stockholders of Company than the Merger and thereafter this Agreement is
terminated pursuant to Sections 11.2(c), 11.3(a) or 11.4, then Company shall, on
the day of such termination, pay Omnicare a fee of $2,000,000, which amount
shall be payable by wire transfer of same day funds. Company acknowledges that
the agreement contained in this Section 11.5(a) is an integral part of the
transactions contemplated in this Agreement, and that, without this agreement,
Omnicare and Merger Sub would not enter into this Agreement.
(b) In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 11, all obligations of the parties hereto
shall terminate, except the obligations of the parties pursuant to this Section
11.5 and Sections 8.7 and 8.13. Moreover, in the event of termination of this
Agreement pursuant to clauses (b) or (c) of Section 11.3 or 11.4 (other than
termination pursuant to Section 11.4 which has resulted in payment of the amount
described in Section 11.5), nothing herein shall prejudice the ability of the
non-breaching party from seeking damages from any other party for any breach of
this Agreement, including without limitation, attorneys' fees and the right to
pursue any remedy at law or in equity.
11.6. Extension, Waiver. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
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ARTICLE 12
GENERAL PROVISIONS
12.1. Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:
<TABLE>
<S> <C>
If to Omnicare or Merger Sub: If to Company or the Stockholders:
Joel F. Gemunder Dr. Dale Evans, Ph.D.
President President and Chief Stockholder Officer
Omnicare, Inc. COROMED, Inc.
2800 Chemed Center Rensselaer Technology Park
255 East Fifth Street 185 Jordan Road
Cincinnati, Ohio 45202 Troy, New York 12180-8343
Facsimile: (513) 762-6905 Facsimile: (518) 283-1807
With copies to: With copies to:
Morton A. Pierce Stephen M. Goodman
Dewey Ballantine Morgan, Lewis & Bockius
1301 Avenue of the Americas 2000 One Logan Square
New York, New York 10019 Philadelphia, Pennsylvania 19103
Facsimile: (212) 259-6333 Facsimile: (215) 963-4663
</TABLE>
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
12.2. Assignment; Binding Effect. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Article 10 nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
12.3. Entire Agreement. This Agreement, the Exhibits, the Company
Schedules, the Stockholder Schedules, the Omnicare Schedules, the Support
Agreement and the Confidentiality Agreement and any documents delivered by the
parties in connection herewith constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto, including without
limitation the Initial Agreement. All references in the Support Agreement to the
"Merger Agreement" shall refer to this Agreement. No addition to or modification
of any provision of this Agreement shall be binding upon any party hereto unless
made in writing and signed by all parties hereto.
12.4. Amendment. This Agreement may be amended by the parties hereto, by
action for the corporate parties taken by their respective Boards of Directors,
at any time before or after approval of matters presented in connection with the
Merger by the stockholders of Company, but after any such stockholder approval,
no amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
12.5. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without regard to its rules of
conflict of laws.
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12.6. Counterparts. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all of the parties hereto.
12.7. Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.
12.8. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.
12.9. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.
12.10. Incorporation of Schedules and Exhibits. The Company Disclosure
Schedules, the Stockholder Schedules, the Omnicare Disclosure Schedules and all
other Schedules and Exhibits attached hereto and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
12.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
12.12. Enforcement of Agreement. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any Delaware Court, this being in addition to
any other remedy to which they are entitled at law or in equity.
12.13. Subsidiaries. As used in this Agreement, the word "Subsidiary" or
"Subsidiaries" means any corporation or other organization, whether incorporated
or unincorporated, of which Company directly or indirectly owns or controls at
least a majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization, or any organization of which Company is a general partner.
12.14. Material Adverse Effect. As used in this Agreement, the words
"Material Adverse Effect" means any event, circumstance or set of facts that has
or is reasonably likely to have a material adverse effect on the business,
earnings, assets, liabilities, financial or other condition or results of
operations of Company and its Subsidiaries taken as a whole. The words "Material
Adverse Effect" shall not include changes in the financial condition of the
Company from April 1, 1997 through June 30, 1997 disclosed on the June Income
Statement.
12.15. Knowledge. As used in this Agreement, the words "knowledge of
Company" or "best of Company's knowledge" or "known to Company" or similar
phrases shall mean the actual knowledge of the Stockholders and the executive
officers of Company and its Subsidiaries and the knowledge reasonably imputed to
such persons assuming prudent performance of their respective duties as officers
and directors of the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf as of the day and year first written
above.
<TABLE>
<S> <C>
OMNICARE, INC. STOCKHOLDERS:
By: /s/ JOEL F. GEMUNDER By: /s/ DALE B. EVANS, PH.D.
----------------------------------------- -----------------------------------------
Name: Joel F. Gemunder DALE B. EVANS, PH.D.
Title: President
By: /s/ ALICE G. FEDORY
COROMED ACQUISITION CORPORATION -----------------------------------------
ALICE G. FEDORY
By: /s/ JOEL F. GEMUNDER By: /s/ THOMAS J. MASSEY
----------------------------------------- -----------------------------------------
Name: Joel F. Gemunder THOMAS J. MASSEY
Title: President
By: /s/ RONALD E. WEISHAAR, PH.D.
COROMED, INC. -----------------------------------------
RONALD E. WEISHAAR, PH.D.
By: /s/ DALE B. EVANS
-----------------------------------------
Name: Dale B. Evans
Title: President and Chief Executive
Officer
</TABLE>
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<PAGE> 109
EXHIBIT A
TO MERGER
AGREEMENT
FORM OF AFFILIATE LETTER
Omnicare, Inc.
2800 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of COROMED, Inc., a Delaware corporation ("Company"), as the
term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of Rule
145 of the rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"), or (ii) used in and for purposes of Accounting Series,
Releases 130 and 135, as amended, of the Commission. Pursuant to the terms of
the Amended and Restated Agreement and Plan of Merger dated as of August 19,
1997 (the "Agreement"), by and among Omnicare, Inc., a Delaware corporation
("Omnicare"), Coromed Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of Omnicare ("Merger Sub"), Company and the Stockholders
who are signatories thereto, Merger Sub will be merged with and into Company
(the "Merger").
As a result of the Merger, I may receive shares of common stock, par value
$1.00 per share, of Omnicare (the "Omnicare Securities") in exchange for shares
owned by me of common stock, par value $.01 per share, of Company.
I represent, warrant and covenant to Omnicare that in the event I receive
any Omnicare Securities as a result of the Merger:
A. I shall not make any sale, transfer or other disposition of the Omnicare
Securities in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Agreement and discussed the
requirements of such documents and other applicable limitations upon my ability
to sell, transfer or otherwise dispose of the Omnicare Securities to the extent
I felt necessary, with my counsel or counsel for Company.
C. I have been advised that the issuance of Omnicare Securities to me
pursuant to the Merger has been registered with the Commission under the Act on
a Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Merger was submitted for a vote of the stockholders of
Company, I may be deemed to have been an affiliate of Company and the
distribution by me of the Omnicare Securities has not been registered under the
Act, I may not sell, transfer or otherwise dispose of the Omnicare Securities
issued to me in the Merger unless (i) such sale, transfer or other disposition
has been registered under the Act, (ii) such sale, transfer or other disposition
is made in conformity with Rule 145 promulgated by the Commission under the Act,
or (iii) in the opinion of counsel reasonably acceptable to Omnicare, or
pursuant to a "no action" letter obtained by the undersigned from the staff of
the Commission, such sale, transfer or other disposition is otherwise exempt
from registration under the Act.
D. I understand that Omnicare is under no obligation to register the sale,
transfer or other disposition of the Omnicare Securities by me or on my behalf
under the Act or to take any other action necessary in order to make compliance
with an exemption from such registration available.
E. I also understand that stop transfer instructions will be given to
Omnicare's transfer agents with respect to the Omnicare Securities and that
there will be placed on the certificates for the Omnicare Securities issued to
me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
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<PAGE> 110
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
, BETWEEN THE REGISTERED HOLDER HEREOF AND OMNICARE,
INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF
OMNICARE, INC."
F. I also understand that unless the transfer by me of my Omnicare
Securities has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, Omnicare reserves the right to put the
following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if (i) one year shall have elapsed from the date the
undersigned acquired the Omnicare Securities received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) two
years shall have elapsed from the date the undersigned acquired the Omnicare
Securities received in the Merger and the provisions of Rule 145(d)(3) are then
available to the undersigned, or (iii) Omnicare has received either an opinion
of counsel, which opinion and counsel shall be reasonably satisfactory to
Omnicare, or a "no action" letter obtained by the undersigned from the staff of
the Commission, to the effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
I further represent to and covenant with Omnicare that I will not sell,
transfer or otherwise dispose of any Omnicare Securities received by me in the
Merger or any other shares of the capital stock of Omnicare until after such
time as financial results covering at least 30 days of combined operations of
Company and Omnicare have been published by Omnicare, in the form of a quarterly
earnings report, an effective registration statement registered with the
Commission, a report to the Commission on Form 10-K, 10-Q or 8-K, or any other
public filing or announcement which includes such combined results of
operations. Omnicare shall notify the "affiliates" of the publication of such
results. Notwithstanding the foregoing, I understand that I will not be
prohibited from selling up to 10% of the Omnicare Securities received by me in
the Merger during the aforementioned period.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of Company as described in the first paragraph of this
letter or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
With a view to making available to me the benefits of Rule 145(d)(1) or any
successor rule thereto, Omnicare agrees to use its reasonable efforts to file
with the Commission in a timely manner all reports required to be filed by
Omnicare under Sections 13 and 15(d) of the Exchange Act of 1934, as amended
(the "Exchange Act") for as long as the Omnicare Securities are registered
pursuant to Section 12 of the Exchange Act or until such earlier time as any
other rule or regulation of the Commission is available which permits me to sell
Omnicare Securities to the public without registration under the Act.
If, upon consummation of the Merger, the Omnicare Securities which I
receive pursuant to the Merger have not been registered under the Act, Omnicare
agrees to use its reasonable best efforts to file with the Commission, as
promptly as practicable, a Registration Statement on Form S-3 for an offering to
be made on a continuous basis pursuant to Rule 415 of the Act registering the
resale by me of such Omnicare Securities.
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<PAGE> 111
Omnicare agrees to use its reasonable best efforts to keep such Registration
Statement effective under the Act until the earlier of one year from the
effective date of the Merger and the date on which all such Omnicare Securities
are sold. Notwithstanding the foregoing, the Company may, at its discretion in
good faith and for business reasons, suspend use of such Registration Statement,
in which case the one year period referenced in the previous sentence shall be
extended for the length of all such suspensions. I will cooperate with Omnicare
in connection with such registration and will provide to Omnicare such
information in connection therewith as it may reasonably request.
Very truly yours,
--------------------------------------
Name:
Agreed and Accepted this
day of , 1997
OMNICARE, INC.
By:
- ----------------------------------------------------
Name:
Title:
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<PAGE> 112
APPENDIX B
SUPPORT AGREEMENT
THIS SUPPORT AGREEMENT is made and entered into as of January 27, 1997, by
and among Omnicare, Inc., a Delaware corporation ("Omnicare"), COROMED, Inc., a
Delaware corporation (the "Company") and Dale B. Evans, Ph.D., Alice G. Fedory,
Thomas J. Massey and Ronald E. Weishaar, Ph.D., each being a stockholder (each,
a "Stockholder," and collectively, the "Stockholders") of the Company.
WHEREAS, concurrently with the execution and delivery of this Agreement,
Omnicare, Coromed Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Omnicare ("Merger Sub"), the Company and the
Stockholders are entering into an Agreement and Plan of Merger (the "Merger
Agreement"), providing for, among other things, the merger (the "Merger") of
Merger Sub with and into the Company, as a result of which the outstanding
shares of common stock, par value $.01 per share, of the Company (the "Company
Common Stock") will be converted into the right to receive shares of common
stock, par value $1.00 per share, of Omnicare (the "Omnicare Common Stock"), and
the Company will become a wholly-owned subsidiary of Omnicare;
WHEREAS, the Stockholders are collectively the owners beneficially and of
record of the number of shares of the Company Common Stock set forth on Schedule
A (collectively, the "Existing Shares," together with any shares of Company
Common Stock acquired after the date hereof, hereinafter collectively referred
to as the "Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Omnicare has requested that the Stockholders agree, and the
Stockholders have agreed, to support the Merger as provided herein. All
capitalized terms used but not otherwise defined herein shall have the meanings
ascribed to them in the Merger Agreement.
NOW, THEREFORE, to induce Omnicare to enter into the Merger Agreement and
in consideration of the aforesaid and the mutual representations, warranties,
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Option. (a) Grant of Option. Subject to the terms of this Section 1,
each Stockholder hereby grants to Omnicare an irrevocable option (the options
granted by the Stockholders being collectively referred to herein as the
"Option") to purchase, in whole but not in part, at the election of Omnicare,
all of such Stockholder's Shares in exchange for the number of shares of
Omnicare Common Stock equal to the number of Shares to be purchased by Omnicare
multiplied by the Exchange Ratio (calculated using the date the Option is
exercised as the deemed date of the Effective Time for purposes of calculating
the Average Closing Price) (the "Purchase Price"). Each Stockholder may elect,
in his or her sole discretion, to cause Omnicare to pay all or a portion of the
Purchase Price in cash, with each share of Omnicare Common Stock that would have
been issued hereunder being deemed to have a value equal to the Average Closing
Price calculated as set forth above. If Omnicare elects to exercise the Option
with respect to one Stockholder, then Omnicare must elect to exercise the Option
with respect to all Stockholders.
(b) Closing. Subject to the terms and conditions of this Agreement, if
Omnicare elects to exercise the Option in accordance with Section 1(c) hereof,
each Stockholder will, at the Closing (as defined in Section 1(c)), sell,
transfer, assign and deliver such Stockholder's Shares to Omnicare, and Omnicare
will acquire, accept, purchase and pay for such Stockholder's Shares.
(c) Exercise of Option. The Option may only be exercised by Omnicare, in
whole but not in part, following the occurrence of a Purchase Event (as defined
below); provided, that the Option shall terminate upon the earlier of (i) the
Effective Time, (ii) the termination of the Merger Agreement in accordance with
its terms (other than upon or during the continuance of a Purchase Event) or
(iii) one month following any termination of the Merger Agreement upon or during
the continuance of a Purchase Event (or, if, at the expiration of such one month
period the Option cannot be exercised by reason of any applicable judgment,
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<PAGE> 113
decree or order, 20 business days after such impediment to exercise shall have
been removed or shall become final and not subject to appeal).
The term "Purchase Event" shall mean any of the following events or
transactions occurring after the date hereof: (i) Coromed shall have entered
into an agreement to engage in an Acquisition Transaction (as defined below) or
(ii) the Merger Agreement shall have been terminated by Omnicare or the Company
under circumstances which would entitle Omnicare to termination fees under
Section 11.5 of the Merger Agreement.
The Stockholders shall notify Omnicare promptly in writing of the
occurrence of any Acquisition Transaction; provided, however, that the giving of
such notice by the Stockholders shall not be a condition to the right of
Omnicare to exercise the Option.
In the event Omnicare wishes to exercise the Option, Omnicare shall send a
written notice (a "Closing Notice") to the Stockholders specifying a place and
time (the "Closing Date") between one and ten business days inclusive from the
date of the Closing Notice for the closing of such purchase (the "Closing").
(d) Payment for Shares; Delivery of Shares. Subject to the terms and
conditions of this Agreement, in reliance on the representations, warranties and
covenants of each Stockholder contained herein and in full payment for the
Shares, at the Closing, Omnicare will deliver, or cause to be delivered, to each
Stockholder, certificates representing the shares of Omnicare Common Stock to be
paid pursuant to this Section 1 duly issued to each Stockholder, together with
any necessary stock transfer stamps properly affixed, or, at the election of
each Stockholder, cash in the amount of the Purchase Price. At the Closing, each
Stockholder will deliver, or cause to be delivered, to Omnicare certificates
representing such Stockholder's Shares duly endorsed to Omnicare or accompanied
by stock powers duly executed by such Stockholder in blank, together with any
necessary stock transfer stamps properly affixed.
(e) Adjustments. In the event of any change in the Company Common Stock by
reason of stock dividends, split-ups, mergers, recapitalizations, combinations,
conversions, exchanges of shares or the like, (i) the number and kind of Shares
subject to this Agreement and the purchase price per Share pursuant to the
Option shall be appropriately adjusted to reflect changes made in the Company
Common Stock so that Omnicare shall receive, upon exercise of the Option and
payment of the Purchase Price, the number and class of shares, other securities,
property or cash that Omnicare would have received in respect of the Shares if
the Option had been exercised and the Shares had been issued to Omnicare
immediately prior to such event or the record date therefor, as applicable, and
(ii) the term "Shares" shall be deemed to refer to and include the Shares as
well as all such stock dividends and distributions and any securities into which
or for which any or all of the Shares may be changed or exchanged and such
dividends, distributions and shares, as the case may be, shall be paid to
Omnicare at the Closing or promptly following the receipt of such dividend or
distribution, if the Closing theretofore shall have occurred.
2. Agreement to Vote Shares. Each Stockholder agrees that, during the
period commencing on the date hereof and continuing until the termination of the
Option, he or she will vote (or cause to be voted) all of the Shares which such
Stockholder is entitled to vote (or to provide his or her written consent
thereto) at any annual, special or other meeting of the stockholders of the
Company, and at any adjournment or adjournments thereof, or by written consent
without a meeting with respect to all Shares as follows: (i) in favor of
approval and adoption of the Merger Agreement, the terms thereof and each of the
other transactions contemplated by the Merger Agreement; and (ii) against any
action or agreement other than the Merger Agreement or the transactions
contemplated thereby that would impede, interfere with, delay, postpone or
attempt to discourage the Merger, including without limitation: (a) any
extraordinary corporate transaction, such as a merger, acquisition,
consolidation, reorganization, share exchange, tender offer, exchange offer or
similar transaction involving the Company or any Subsidiary; or (b) a sale or
transfer, directly or indirectly, of a substantial equity interest in or a
substantial portion of the assets of the Company or any Subsidiary (each an
"Acquisition Transaction").
3. Agreement to Retain Shares. Each Stockholder hereby covenants and
agrees that during the period commencing on the date hereof and continuing until
the termination of the Option, such Stockholder will not,
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and will not agree to, directly or indirectly, without the prior written consent
of Omnicare (i) sell, transfer, assign, pledge, hypothecate, cause to be
redeemed or otherwise dispose of any of the Shares beneficially owned by him or
her; (ii) grant any proxy or interest in or with respect to such Shares or
deposit such Shares into a voting trust or enter into a voting agreement or any
arrangement with respect to such Shares; or (iii) take any action that would
make any representation or warranty of the Stockholder contained herein untrue
or incorrect or have the effect of preventing or disabling the Stockholder from
performing his or her obligations under this Agreement. In addition, during the
period commencing on the date hereof and continuing until the termination of the
Option, each Stockholder covenants and agrees that such Stockholder will not
initiate or solicit, directly or indirectly, any inquiries or the making of any
proposal with respect to, or engage in negotiations concerning, provide any
confidential information or data to, or have any discussions with, any
individual, corporation, partnership or other person, entity or group relating
to, an Acquisition Transaction. The Stockholders further covenant and agree that
during the period commencing on the date hereof and continuing until the
termination of the Option, the Stockholders will collectively be the beneficial
and record owners of a majority of the outstanding shares of Company Common
Stock on a fully diluted basis (assuming all options to purchase shares of
Company Common Stock are exercised in full).
4. Representation and Warranties of the Stockholders. Each Stockholder
represents and warrants to Omnicare that (a) on the date hereof he or she is the
beneficial and record owner of the number of Existing Shares set forth opposite
his or her name on Schedule A hereto, which Existing Shares collectively
represent 60.33386% of all outstanding shares of Company Common Stock 59.75196%
of all outstanding shares of Company Common Stock on a fully diluted basis
assuming the exercise of all outstanding options; (b) such Existing Shares are
all of the securities of the Company owned of record or beneficially by such
Stockholder on the date hereof (other than shares representing less than 1.0% of
the outstanding shares of Company Common Stock held jointly with a spouse); (c)
each Stockholder has, and Omnicare will receive at the Closing, good and
marketable title to all of such Stockholder's Shares free and clear of all
claims, liens, pledges, options, charges, security interests or other similar
interests, encumbrances, judgments or imperfections of title of any nature
whatsoever (collectively, "Encumbrances") and with no restriction on the voting
rights pertaining thereto; (d) each Stockholder has not granted any proxy with
respect to Shares or deposited such Shares into a voting trust; (e) each
Stockholder is not a party to any agreement, contract, commitment or
understanding (other than this Agreement) which affects or relates to the voting
or giving of written consents with respect to the Shares or any Stockholder's
beneficial ownership of the Shares other than the Shareholders Agreement
referred to in Section 5 below; and (f) each Stockholder does not have any
rights to acquire additional shares of Company Common Stock except pursuant to
stock options granted under the Company Stock Option Plan.
5. Waiver of Rights. The Company and each Stockholder hereby waive any and
all rights which any of them may have in connection with the transactions
contemplated by this Agreement pursuant to any Shareholders Agreement entered
into by the Company and any Stockholder.
6. Legends. (i) Promptly after the execution of this Agreement, and upon
the acquisition of any additional Shares during the term of this Agreement, each
Stockholder agrees to cause the following legend to be set forth on all
certificates representing his or her Shares:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHTS OF OMNICARE, INC. AND COROMED
ACQUISITION CORPORATION AS SET FORTH IN THAT CERTAIN SUPPORT
AGREEMENT, DATED AS OF JANUARY 27, 1997, A COPY OF WHICH WILL BE
PROVIDED TO THE HOLDER OF THIS CERTIFICATE WITHOUT CHARGE UPON THE
RECEIPT BY OMNICARE OF A WRITTEN REQUEST THEREFOR, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED, CAUSED TO BE
REDEEMED OR OTHERWISE DISPOSED OF OR ENCUMBERED EXCEPT IN COMPLIANCE
WITH SAID SUPPORT AGREEMENT."
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(ii) Upon exercise of the Option, all certificates representing shares of
Company Common Stock issued to Omnicare shall be endorsed with a legend to
reflect the restrictions imposed by the Securities Act of 1933, as amended (the
"Securities Act").
(iii) Upon exercise of the Option, all certificates representing shares of
Omnicare Common Stock issued to such Stockholder, if any, shall be endorsed with
a legend to reflect the restrictions imposed by the Securities Act.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware without giving effect to the
provisions thereof relating to conflicts of law.
8. Binding Effect and Assignment. This agreement shall be binding upon,
inure to the benefit of, and be enforceable by the successors and permitted
assigns of the parties hereto. This Agreement and the rights hereunder may not
be assigned or transferred by Omnicare, except that Omnicare may assign its
rights hereunder to any direct or indirect subsidiary.
9. Certain Events. Each Stockholder agrees that this Agreement and the
obligations hereunder shall attach to such Stockholder's Shares and shall be
binding upon any individual, corporation, partnership or other person, entity or
group to which legal or beneficial ownership of such Shares shall pass, whether
by operation of law or otherwise, including, without limitation, such
Stockholder's heirs, guardians, administrators or successors. Notwithstanding
any transfer of Shares, the transferor shall remain liable for the performance
of all obligations under this Agreement of the transferor.
10. Specific Performance; Injunctive Relief; Revocation of Proxies. The
parties acknowledge and agree that performance of their respective obligations
hereunder will confer a unique benefit on the other and that a failure of
performance will not be compensable by money damages. The parties therefore
agree that this Agreement shall be specifically enforceable and that specific
enforcement and injunctive relief shall be available to Omnicare and the
Stockholders for any breach of any agreement, covenant or representation
hereunder. This Agreement shall revoke all prior proxies given by each
Stockholder at any time with respect to the Shares.
11. Additional Documents. Each Stockholder will, upon request, execute and
deliver any additional documents and take such actions as may reasonably be
deemed by Omnicare to be necessary to complete the Agreement granted herein or
to carry out the provisions hereof.
12. Notices. Any notice required to be given hereunder shall be sufficient
if in writing, and sent by facsimile transmission and by courier service (with
proof of service), hand delivery or certified or registered mail (return receipt
requested and first-class postage prepaid), addressed as follows:
If to Omnicare:
Joel F. Gemunder
President
Omnicare, Inc.
2800 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Facsimile: (513) 762-6905
with a copy to:
Morton A. Pierce
Dewey Ballantine
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 259-6333
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If to the Stockholders:
At the addresses set forth on
Schedule A hereto
with a copy to:
Stephen M. Goodman
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, Pennsylvania 19103
Facsimile: (215) 963-4663
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.
13. Severability. If any term, provision, covenants, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void
or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
not in any way be affected, impaired or invalidated.
14. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original for all purposes,
but such counterparts taken together shall constitute one and the same document.
IN WITNESS WHEREOF, Omnicare, the Company and the Stockholders have caused
this Agreement to be duly executed on the date first written above.
OMNICARE, INC.
By: /s/ JOEL F. GEMUNDER
------------------------------------
Name: Joel F. Gemunder
Title: President
COROMED, INC.
By: /s/ DALE B. EVANS
--------------------------------------------------------
Name: Dale B. Evans
Title: President and Chief Executive Officer
THE STOCKHOLDERS:
By: /s/ DALE B. EVANS, PH.D.
--------------------------------------------------------
Dale B. Evans, Ph.D.
By: /s/ ALICE G. FEDORY
--------------------------------------------------------
Alice G. Fedory
By: /s/ THOMAS J. MASSEY
--------------------------------------------------------
Thomas J. Massey
By: /s/ RONALD E. WEISHAAR, PH.D.
--------------------------------------------------------
Ronald E. Weishaar, Ph.D.
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SCHEDULE A
<TABLE>
<CAPTION>
NAME: NUMBER OF SHARES
----------------------------------------------------------------- ----------------
<S> <C>
Dale B. Evans, Ph.D.............................................. 127,885
16 Amity Pointe
Clifton Park, NY 12065
Alice G. Fedory.................................................. 129,231
78 Manix Road
East Greenbush, NY 12061
Thomas J. Massey................................................. 115,681
50 Galmoral Court
Valatie, NY 12184
Ronald E. Weishaar, Ph.D......................................... 11,000
6 Algonquin Road
Clifton Park, NY 12065
</TABLE>
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APPENDIX C
SECTION 262 OF THE
DELAWARE GENERAL CORPORATION LAW
262 APPRAISAL RIGHTS. -- (a) Any stockholder of a corporation of this State
who holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of his shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
subsection (g) of Section 251), 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the holders of the surviving corporation as
provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
Sections 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of his shares
shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within twenty days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first such second notice need
only be sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holder's shares in accordance with this
subsection. An affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent
corporation may fix, in advance, a record date that shall be not more than
10 days prior to the date the notice is given; provided that, if the notice
is given on or after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is fixed and
the
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notice is given prior to the effective date, the record date shall be the
close of business on the day next preceding the day on which the notice is
given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or
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compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(1) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving resulting corporation.
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APPENDIX D
[Letterhead Of Wessels, Arnold & Henderson, L.L.C.]
August 14, 1997
The Board of Directors
COROMED, Inc.
Rensselaer Technology Park
185 Jordan Road
Troy, NY 12180
Ladies and Gentlemen:
You have requested us to render an opinion as to the fairness, from a
financial point of view, to the stockholders of COROMED, Inc. ("COROMED" or the
"Company"), of the consideration to be received by COROMED's stockholders in the
proposed merger of COROMED (the "Merger") with COROMED Acquisition Corporation,
a wholly owned subsidiary of Omnicare, Inc. ("Omnicare"), pursuant to the terms
of the Amended and Restated Agreement and Plan of Merger, by and among COROMED,
COROMED Acquisition Corporation and Omnicare ("the Agreement'). Capitalized
terms used herein shall have the meaning used in the Agreement unless otherwise
defined herein.
Pursuant to the Agreement, Omnicare will acquire all of the outstanding
stock of COROMED in exchange for shares of Omnicare Common Stock having an
aggregate value of $15,000,000 as determined in accordance with, and subject to
the adjustments contemplated by, the exchange ratio formula set forth in Section
4.2 of the Agreement. Following the Merger, COROMED will be a wholly owned
subsidiary of Omnicare.
Wessels, Arnold & Henderson, L.L.C. ("Wessels, Arnold & Henderson"), as
part of its investment banking services, is regularly engaged in the valuation
of businesses and their securities in connection with mergers and acquisitions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for corporate
and other purposes. We have acted as financial advisor to the COROMED Board of
Directors in connection with the Merger and will receive fees for our services,
including the rendering of this opinion.
In connection with our review of the Merger, and in arriving at our
opinion, we have: (i) reviewed and analyzed the financial terms of the most
recent draft of the Agreement; (ii) reviewed and analyzed certain publicly
available financial statements and other publicly available information of
Omnicare; (iii) reviewed and analyzed certain internal financial statements and
other financial and operating data concerning the Company prepared by the
management of the Company; (iv) reviewed and analyzed certain financial
projections concerning the Company prepared by the management of the Company;
(v) reviewed and analyzed certain publicly available financial projections
concerning Omnicare prepared by institutional equity research analysts; (vi)
conducted discussions with members of the senior management of the Company with
respect to the business and prospects of the Company; (vii) reviewed the
historical and projected financial performance and market valuations of certain
comparable, publicly traded companies; and (viii) reviewed the financial terms,
to the extent publicly available, of certain comparable transactions. In
addition, we have conducted such other analyses and examinations and considered
such other financial, economic and market criteria as we have deemed necessary
in arriving at our opinion.
In rendering our opinion, we have assumed and relied upon the accuracy and
completeness of the financial, legal, tax and other information provided to us
by the Company and Omnicare, and have not independently verified such
information. We have not performed an independent evaluation or appraisal of any
D-1
<PAGE> 123
The Board of Directors, COROMED, Inc.
August 14, 1997
Page 2
of the respective assets or liabilities of the Company or Omnicare and we have
not been furnished with any such valuations or appraisals. With respect to the
Company's financial forecasts, we have assumed that they have been reasonably
prepared on the bases reflecting the best currently available estimates and
judgments of the management of the Company as to the future financial
performance of the Company. With respect to the financial forecasts prepared by
institutional equity research analysts about Omnicare, we have assumed that they
have been reasonably prepared on the bases reflecting the best currently
available estimates and judgments of such analysts as to the future financial
performance of Omnicare. We have also assumed that the Merger will qualify for
pooling-of-interests accounting treatment and be a tax-free transaction for the
stockholders of COROMED.
This letter is provided for the information of the Board of Directors of
the Company. This letter may not be published or otherwise used and no public
references to Wessels, Arnold & Henderson, L.L.C. may be made without our prior
consent. Further, our opinion speaks only as of the date hereof and is based on
conditions as they exist and information which we have been supplied as of the
date hereof. We specifically disclaim any obligation to update our opinion after
the date hereof. This opinion is not intended to be and shall not be deemed to
be a recommendation to any shareholder of the Company as to how to vote with
respect to the Merger.
Based on our experience as investment bankers and subject to the foregoing,
including the various assumptions and limitations set forth herein, it is our
opinion that, as of the date hereof, the consideration to be received by
COROMED's stockholders in the proposed Merger, as described in the Agreement, is
fair, from a financial point of view, to such stockholders.
Very truly yours,
Wessels, Arnold & Henderson, L.L.C.
By: /s/ BRYSON D. HOLLIMON
--------------------------------------------------------
Bryson D. Hollimon
Managing Director and
Head of Investment Banking
D-2
<PAGE> 124
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Omnicare Certificate provides that a director of Omnicare will not be
liable to Omnicare or its stockholders for monetary damages for breach of
fiduciary duty as a director, to the full extent permitted by the DGCL, as
amended or interpreted from time to time.
DGCL sec. 102(b)(7) allows a company to limit the personal liability of the
directors of the company for violations of their fiduciary duties. In effect, a
director will not be personally liable for monetary damages for actions
involving a breach of his fiduciary duty of care, including any such actions
involving gross negligence. However, a director's liability to the company or
its stockholders for monetary damages may not be eliminated or limited (i) for
any breach of the director's duty of loyalty to the company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of the law, (iii) for unlawful payment of
dividends or unlawful stock purchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit.
In addition, the Omnicare Certificate states that Omnicare shall, to the
full extent permitted by the DGCL, as amended or interpreted from time to time,
indemnify all directors, officers and employees whom it may indemnify pursuant
thereto and in addition, Omnicare may, to the extent permitted by the DGCL,
indemnify agents of Omnicare or other persons.
DGCL sec. 145 gives a corporation broad powers to indemnify officers,
directors and employees who were, are or are threatened to be made party to a
suit due to their roles as such or were serving at the request of the
corporation as a director, officer, or employee or agent of another entity at
the request of the corporation, against expenses (including attorneys' fees),
judgments, fines and settlement fees, if such person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interest of the corporation. The indemnification allowed under DGCL sec. 145 is
not deemed exclusive of any other rights that such person may be entitled to
under any bylaw, agreement, vote of stockholders or disinterested directors.
DGCL sec. 145 also allows a corporation to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another entity against any liability
asserted against such person whether or not the corporation would have the power
to indemnify him against such liability under this section.
Omnicare carries Liability Insurance for its directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S> <C>
2.1 -- Amended and Restated Agreement and Plan of Merger, dated as of August 19, 1997, by
and among Omnicare, Merger Sub, Coromed and certain Principal Stockholders of
Coromed. Attached as Appendix A to the Proxy Statement/Prospectus included in this
Registration Statement.
2.2 -- Support Agreement, dated as of January 27, 1997, by and among Omnicare and certain
Principal Stockholders of Coromed. Attached as Appendix B to the Proxy
3.1 -- Statement/Prospectus included in this Registration Statement. Restated Certificate
of Incorporation of Omnicare.(1)
3.2 -- Amended Bylaws of Omnicare.(2)
4.1 -- Indenture, dated as of October 1, 1993, between Omnicare and NBD Bank, N.A.,
Trustee, as amended October 20, 1993, for the 5 3/4% Convertible Subordinated Notes
due 2003. Incorporated by reference from Registrant's Form 8-K, filed October 20,
1993.
5.1 -- Opinion of Dewey Ballantine.*
</TABLE>
II-1
<PAGE> 125
<TABLE>
<C> <S> <C>
8.1 -- Opinion of Morgan, Lewis & Bockius LLP as to certain federal income tax matters.**
10.1 -- Executive Salary Protection Plan, as amended, May 22, 1981.(3)
10.2 -- 1981 Stock Incentive Plan, as amended. Incorporated by reference from Registrant's
Form 10-K, filed March 25, 1988.
10.3 -- 1989 Stock Incentive Plan. Incorporated by reference from Registrant's Proxy
Statement for 1989 Annual Meeting of Principal Stockholders dated April 10, 1989.
10.4 -- 1992 Long-Term Stock Incentive Plan. Incorporated by reference from Registrant's
Proxy Statement for 1992 Annual Meeting of Principal Stockholders dated April 6,
1992.
10.5 -- 1995 Premium-Priced Stock Option Plan. Incorporated by reference from Registrant's
Proxy Statement for 1995 Annual Meeting of Principal Stockholders dated April 10,
1995.
10.6 -- Excess Benefits Plan. Incorporated by reference from Registrant's Form 10-K, filed
March 25, 1988.
10.7 -- Asset Purchase Agreement, dated as of March 18, 1993, between Omnicare and Clar-Ron,
Inc. Incorporated by reference from Registrant's Form 8-K, filed April 7, 1993.
10.8 -- Asset Purchase Agreement, dated as of September 2, 1994, between Omnicare and
Evergreen Pharmaceutical, Inc. Incorporated by reference from Registrant's Form 8-K,
filed September 2, 1994.
10.9 -- Form of Indemnification Agreement with Directors and Officers. Incorporated by
reference from Registrant's Proxy Statement for 1987 Annual Meeting of Principal
Stockholders dated April 14, 1987.
10.10 -- Employment Agreements with J.F. Gemunder and C.D. Hodges dated August 4, 1988.
Incorporated by reference from Registrant's Form 10-K, filed March 29, 1989.
10.11 -- Amendment to Employment Agreements with J.F. Gemunder and C.D. Hodges dated May 17,
1993. Incorporated by reference from Registrant's Form 10-K, filed March 25, 1994.
10.12 -- Employment Agreement with T.R. Marsh dated August 4, 1988 and Amendment dated May
17, 1993. Incorporated by reference from Registrant's Form 10-K, filed March 25,
1994.
10.13 -- Employment Agreement with P.E. Keefe dated March 4, 1993. Incorporated by reference
from Registrant's Form 10-K, filed March 25, 1994.
10.14 -- Employment Agreement with K.W. Chesterman dated May 17, 1993. Incorporated by
reference from Registrant's Form 10-K, filed March 25, 1994.
10.15 -- Amendment to Employment Agreements with J.F. Gemunder, K.W. Chesterman, P.E. Keefe,
C.D. Hodges and T.R. Marsh dated May 16, 1994. Incorporated by reference from
Registrant's Form 10-K, filed March 25, 1995.
10.17 -- Split Dollar Agreement with E.L. Hutton dated June 1, 1995 (Agreement in the same
Form exists with J.F. Gemunder).(3)
10.18 -- Split Dollar Agreement with K.W. Chesterman dated June 1, 1995 (Agreements in the
same Form exists with the following Executive Officers: C.D. Hodges and P.E.
Keefe).(3)
10.19 -- Agreement and Plan of Merger by and among Omnicare, Omnicare Acquisition Corp. and
American Medserve Corporation dated as of August 7, 1997.(4)
11.1 -- Statement re computation of per share earnings of Omnicare.*
11.2 -- Statement re computation of per share earnings of Coromed.*
21.1 -- Subsidiaries of the Registrant.(3)
23.1 -- Consent of Dewey Ballantine (included as part of its opinion filed as Exhibit 5.1
hereto).
23.2 -- Consent of Morgan, Lewis & Bockius LLP (included as part of its opinion filed as
Exhibit 8.1 hereto).
23.3 -- Consent of Coopers & Lybrand L.L.P.**
23.4 -- Consent of Price Waterhouse LLP.**
</TABLE>
II-2
<PAGE> 126
<TABLE>
<C> <S> <C>
23.5 -- Consent of Wessels, Arnold & Henderson, L.L.C.**
24.1 -- Power of Attorney, included as part of the Signature page in this Registration
Statement.*
99.1 -- Form of Proxy for holders of Coromed Common Stock.**
99.2 -- Form of Letter to Coromed stockholders.**
99.3 -- Form of Notice to Coromed stockholders.**
99.4 -- Fairness Opinion of Wessels, Arnold & Henderson, L.L.C. Attached as Appendix D to
the Proxy Statement/Prospectus included in this Registration Statement.
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II -- Valuation & Qualifying Accounts*
- ---------------
* Filed previously
** Filed herewith
(1) Incorporated by reference from Registrant's Registration Statement on Form
S-3, Registration No. 33-59689.
(2) Incorporated by reference from Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992.
(3) Incorporated by reference from Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.
(4) Incorporated by reference from Item 11(c) of Registrant's Tender Offer
Statement on Schedule 14D-1 filed with the Commission on August 14, 1997.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by
II-3
<PAGE> 127
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph or (ii) that purports to meet the
requirements of section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expense incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 128
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this amendment to the Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Cincinnati, State
of Ohio, on this 20th day of October, 1997.
October 20, 1997
OMNICARE, INC.
/s/ JOEL F. GEMUNDER
--------------------------------------
Joel F. Gemunder, President
Pursuant to the requirements of the Securities Act, this amendment to the
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ ------------------
<S> <C> <C>
* Chairman and Director October 20, 1997
- ---------------------------------------- (Principal Executive Director)
Edward L. Hutton
* President and Director October 20, 1997
- ---------------------------------------- (Principal Executive Officer)
Joel F. Gemunder
* Senior Vice President and October 20, 1997
- ---------------------------------------- Chief Financial Office
David W. Froesel, Jr. (Principal Financial Officer
and Principal Accounting
Officer)
* Director October 20, 1997
- ----------------------------------------
Ronald K. Bauer
* Director October 20, 1997
- ----------------------------------------
Kenneth W. Chesterman
* Director October 20, 1997
- ----------------------------------------
Charles H. Erhart, Jr.
* Director October 20, 1997
- ----------------------------------------
Mary Lou Fox
/s/ CHERYL HODGES Director October 20, 1997
- ----------------------------------------
Cheryl Hodges
* Director October 20, 1997
- ----------------------------------------
Thomas C. Hutton
* Director October 20, 1997
- ----------------------------------------
Patrick E. Keefe
* Director October 20, 1997
- ----------------------------------------
Sandra E. Laney
* Director October 20, 1997
- ----------------------------------------
Andrea R. Lindell
* Director October 20, 1997
- ----------------------------------------
Sheldon Margen, M.D.
</TABLE>
<PAGE> 129
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------- ------------------------------ ------------------
<S> <C> <C>
* Director October 20, 1997
- ----------------------------------------
Kevin J. McNamara
* Director October 20, 1997
- ----------------------------------------
John M. Mount
* Director October 20, 1997
- ----------------------------------------
D. Walter Robbins, Jr.
/s/ Cheryl D. Hodges
- ----------------------------------------
* By Cheryl D. Hodges as
attorney-in-fact.
</TABLE>
<PAGE> 1
Exhibit 8.1
[Morgan, Lewis & Bockius LLP]
October 17, 1997
COROMED, Inc.
Rensselaer Technology Park
185 Jordan Road
Troy, NY 121180-8343
Re: Certain Federal Income Tax Consequences of the Triangular Merger of
COROMED with Omnicare
-------------------------------------------------------------------
Ladies and Gentlemen:
Pursuant to an agreement dated as of January 27, 1997, as amended and restated
as of August 19, 1997, among COROMED, Inc. ("Company"), Omnicare, Inc.
("Omnicare"), and Coromed Acquisition Corporation ("Merger Sub") (the "Merger
Agreement"), Merger Sub, a wholly-owned subsidiary of Omnicare, will merge with
and into Company (the "Merger"). Capitalized terms not otherwise defined in this
opinion have the meanings ascribed to such terms in the Merger Agreement or the
other documents referred to in the Merger Agreement.
We have acted as legal counsel to Company in connection with the Merger and you
have requested our opinion regarding certain federal income tax consequences of
the Merger. As such, and for the purpose of rendering this opinion, we have
examined and are relying upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times, of the statements,
covenants, representations and warranties contained in the following documents:
1. The Merger Agreement;
2. Such other instruments and documents related to the formation,
organization and operation of Company, Omnicare, and Merger
Sub and to the consummation of the Merger as we have deemed
necessary or appropriate.
<PAGE> 2
COROMED, Inc.
October 17, 1997
Page 2
In preparing our opinion, as set forth below, we have reviewed such other
documents relating to the Merger and such federal income tax authority as we
deemed relevant under the circumstances. For purposes of this opinion, we have
assumed, with your permission and without independent investigation, that (i)
original documents (including signatures) are authentic, documents submitted to
us as copies conform to the original documents, and there has been (or will be
by the date of the Merger) due execution and delivery of all documents where due
execution and delivery are prerequisites to the effectiveness of those documents
and (ii) the Merger will be effective under the laws of the State of Delaware.
Furthermore, as to certain facts material to our opinion that we did not
independently establish or verify, we have relied upon the accuracy of
statements and representations of officers of each of Company and Omnicare (the
"Certifications") contained in representation letters, each bearing today's
date, copies of which are attached hereto.
OPINIONS
--------
Based upon the foregoing, it is our opinion that for federal income tax purposes
the Merger will qualify as a reorganization within the meaning of Section 368(a)
of the Code and Company, Omnicare, and Merger Sub will each be a party to the
reorganization within the meaning of Section 368(b) of the Code. It is also our
opinion that (i) a Company shareholder will not recognize gain or loss upon the
exchange of Company Common Stock solely for Omnicare Common Stock; (ii) the
payment of cash to a Company shareholder in lieu of a fractional share interest
in Omnicare Common Stock will be treated as if the fractional share had been
distributed as part of the exchange and then redeemed by Omnicare; and (iii) any
such cash payment will be treated as having been received as a distribution in
payment for the Omnicare Common Stock hypothetically redeemed as provided in
Section 302 of the Code, and generally should result in the recognition of
capital gain or loss measured by the difference between the amount of cash
received and the portion of the tax basis of the Company Common Stock allocable
to such fractional share interest.
* * *
Our opinions set forth herein are based upon existing law, regulations,
administrative pronouncements and judicial decisions, all as in effect as of
today's date. All such authorities are subject to change, either prospectively
or retroactively. No assurance can be provided as to the effect of any such
change on our opinions. If any of the facts, assumptions or Certifications on
<PAGE> 3
COROMED, Inc.
October 17, 1997
Page 3
which our opinions are based is incorrect, please advise us so that we may
consider the effect, if any, on our opinions.
The opinions set forth herein have no binding effect on the United States
Internal Revenue Service or the courts. Accordingly, no assurance can be given
that, if the matter were contested, a court would agree with the opinions set
forth above.
We hereby consent to the use of this opinion as Exhibit 8.1 to the Registration
Statement and to the reference to this firm under the captions "LEGAL OPINIONS,"
"SUMMARY" and "CERTAIN FEDERAL INCOME CONSEQUENCES OF THE MERGER." In giving
such consent, we do not thereby admit that we are acting within the category of
persons whose consent is required under Section 7 of the Act or the rules or
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Proxy Statement/Prospectus and the related
Amendment No. 2 to the Registration Statement on Form S-4 (Registration No.
333-22765) of our report dated September 5, 1997, on our audits of the financial
statements of Coromed, Inc. We also consent to the reference to our firm under
the caption "Experts."
COOPERS & LYBRAND L.L.P.
Albany, New York
October 16, 1997
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of our report dated
January 29, 1997 appearing on page 27 of Omnicare, Inc.'s Annual Report on Form
10-K/A for the year ended December 31, 1996. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
Cincinnati, Ohio
October 17, 1997
<PAGE> 1
EXHIBIT 23.5
[Letterhead of Wessels, Arnold & Henderson, L.L.C.]
Consent of Wessels, Arnold & Henderson, L.L.C.
----------------------------------------------
We hereby consent to the use of our opinion letter dated August 14,
1997, to the Board of Directors of COROMED, Inc. included as Exhibit D to the
Proxy Statement/Prospectus which forms a part of the Registration Statement on
Form S-4 relating to the proposed merger of COROMED, Inc. with COROMED
Acquisition Corporation, a wholly owned subsidiary of Omnicare, Inc. and to the
references to such opinion in such Proxy Statement/Prospectus under the captions
"Summary--The Merger--Fairness Opinion," "The Merger--Background of the
Merger," "The Merger - Reasons for the Merger" and "The Merger--Fairness
Opinion."
WESSELS, ARNOLD & HENDERSON, L.L.C.
By: /s/ Bryson D. Hollimon
--------------------------------
Bryson D. Hollimon
Managing Director and
Head of Investment Banking
October 15, 1997
<PAGE> 1
Exhibit 99.1
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Coromed, Inc.
The undersigned hereby appoints as proxies, each with power of substitution,
Dale B. Evans and Alice G. Fedory, and each of them, to represent and vote the
stock of the undersigned at the Special Meeting of Stockholders of Coromed, Inc.
(the "Company") on _________, 1997, at ____ a.m., and any adjournment or
postponement thereof, with all the powers the undersigned would have if present
in person, with respect to the following matter as described in the Proxy
Statement and, in their discretion, upon such other business as may properly
come before the meeting or any adjournment thereof:
1. Approval and adoption of the Amended and Restated Agreement and Plan of
Merger, dated as of August 19, 1997 among Omnicare, Inc., Coromed
Acquisition Corporation, Inc., Coromed, Inc. and the Stockholders named
therein and the merger to be effected thereby and all related transactions.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
2. To transact such other business as may properly come before the meeting.
If no direction is made, this Proxy will be voted FOR the listed proposal.
(Continued and to be marked, dated and signed on the reverse side)
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
or trustee please give full title as such. If a corporation, please sign in
full corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
Dated ____________________, 1997
--------------------------------
(Signature)
--------------------------------
(Signature if held jointly)
PLEASE SIGN AND MAIL PROMPTLY. The Board of Directors recommends a vote FOR
the listed proposal.
<PAGE> 1
EXHIBIT 99.2
COROMED, INC.
__________, 1997
To Our Stockholders:
A Special Meeting (the "Special Meeting") of stockholders of Coromed, Inc.
("Coromed"), will be held on ________, 1997, at _____(A.M./P.M.) local time at
the _______________________ located at _______________.
The purpose of the Special Meeting is to consider and vote upon a proposal
to approve and adopt an Amended and Restated Agreement and Plan of Merger, dated
as of August 19,1997 (the "Merger Agreement"), pursuant to which Coromed
Acquisition Corporation ("Merger Sub"), a wholly-owned subsidiary of Omnicare,
Inc. ("Omnicare"), will be merged with and into Coromed and Coromed will become
a wholly-owned subsidiary of Omnicare (the "Merger"). If the Merger is
consummated, all holders of the common stock, par value $.01 per share of
Coromed ("Coromed Common Stock"), and of options to acquire Coromed Common Stock
("Coromed Options") will receive shares of the common stock, par value $1.00 per
share, of Omnicare ("Omnicare Common Stock"), with an aggregate total value
equivalent to $15,000,000, calculated as set forth in the Merger Agreement. The
number of shares of Omnicare Common Stock to be received for each share of
Coromed Common Stock and Coromed Option will be determined through an exchange
ratio calculated using the closing sale price of Omnicare Common Stock on each
of the five consecutive trading days immediately preceding the second trading
day prior to the closing date of the Merger ("Average Closing Price"), provided
that in the event that the Average Closing Price per share of Omnicare Common
Stock is $21-1/8 or lower, 37-1/8 or higher, then for purposes of calculating
the exchange ratio, the Average Closing Price will be deemed to be $21-1/8 or
$37-1/8, as the case may be.
The Board of Directors of Coromed has unanimously approved the proposed
Merger, and recommends that you vote FOR the proposal presented at the Special
Meeting. The directors and executive officers of Coromed, who hold, in the
aggregate, approximately 60% of the outstanding Coromed Common Stock, have
entered into an agreement with Omnicare pursuant to which they have agreed,
among other things, to vote their shares of Coromed Common Stock for approval
and adoption of the Merger Agreement.
Enclosed is a Notice of Special Meeting and a Proxy Statement/Prospectus
containing detailed information concerning the Merger. We urge you to review
carefully the Proxy Statement/Prospectus, including the discussion of "RISK
FACTORS" contained therein, and its accompanying Appendices. All stockholders
are encouraged to attend the Special Meeting. However, to assure your
representation at the Special Meeting, please sign, date and return the
accompanying proxy in the enclosed postage prepaid envelope. If you are able to
attend the Special Meeting, you may, if you wish, vote your shares in person.
Holders of shares of Coromed Common Stock have the right to dissent from
the Merger and demand appraisal of, and payment for, their shares of Coromed
Common Stock by following the procedures set forth in Section 262 of the
Delaware General Corporation Law, a
<PAGE> 2
copy of which is attached as Appendix C to,
and summarized under "THE MERGER - Appraisal Rights" in, the Proxy
Statement/Prospectus.
You should not return any certificate of Coromed Common Stock or form of
unexercised Coromed Option grant held by you at this time. Instructions and
documents for sending such certificates or forms will be forwarded as described
in the Proxy Statement/Prospectus.
Sincerely yours,
Dale B. Evans, Ph.D.
President and Chief Executive Officer
COROMED, INC.
Rensselaer Technology Park
185 Jordan Road
Troy, New York 12180-8343
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EXHIBIT 99.3
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ___________, 1997
To the Stockholders of Coromed, Inc.
A Special Meeting (the "Special Meeting") of stockholders of Coromed,
Inc. ("Coromed"), will be held on ______________, 1997 at _____________ local
time at the _______________ located at _________________ for the following
purposes:
1. To consider and vote upon the approval and adoption of an Amended and
Restated Agreement and Plan of Merger, dated as of August 19, 1997 (the
"Merger Agreement"), pursuant to which Coromed Acquisition Corporation
("Merger Sub"), a wholly owned subsidiary of Omnicare, Inc. ("Omnicare"),
will be merged with and into Coromed and Coromed will become a wholly owned
subsidiary of Omnicare (the "Merger"). If the Merger is consummated, all
holders of the common stock, par value $.01 per share, of Coromed ("Coromed
Common Stock"), and of options to acquire Coromed Common Stock will receive
shares of the common stock, par value $1.00 per share, of Omnicare, with an
aggregate total value equivalent to $15,000,000, calculated as set forth in
the Merger Agreement.
2. To transact such other business as may properly come before the Special
Meeting or any adjournments thereof.
Stockholders of record at the close of business on __________, 1997, are
entitled to receive notice of, and to vote at, the Special Meeting and any
adjournment thereof.
Holders of shares of Coromed Common Stock have the right to dissent from
the Merger and demand appraisal of, and payment for, their shares of Coromed
Common Stock by following the procedures set forth in Section 262 of the
Delaware General Corporation Law, a copy of which is attached as Appendix C to,
and summarized under "THE MERGER - Appraisal Rights" in, the accompanying Proxy
Statement/Prospectus.
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It is important that your shares be represented at the Special Meeting.
Whether or not you plan to attend the Special Meeting, please sign, date and
promptly mail the enclosed proxy in the envelope provided.
By Order of the
Board of Directors,
Alice G. Fedory
Secretary
Troy, New York
____________, 1997
