<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 27, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
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 5912 31-1001351
(State of or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</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 JOEL D. MAYERSOHN
RICHARD D. PRITZ ATLAS, PEARLMAN, TROP & BORKSON, P.A.
DEWEY BALLANTINE LLP 200 EAST LAS OLAS BOULEVARD
1301 AVENUE OF THE AMERICAS SUITE 1900
NEW YORK, NEW YORK 10019 FT. LAUDERDALE, FLORIDA 33301
(212) 259-8000 (954) 763-1200
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective and all other conditions to the merger (the "Merger") of a subsidiary
of the Registrant with an into CompScript, Inc. ("CompScript") pursuant to the
Agreement and Plan of Merger described in the enclosed Proxy
Statement/Prospectus have been satisfied or waived.
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 Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED(1) REGISTERED(2) SHARE PRICE(3) FEE(4)
<S> <C> <C> <C> <C>
Common Stock $1.00 par value 2,412,326 shares N/A $60,916,259 $17,970.29
</TABLE>
(1) This Registration Statement relates to Common Stock, par value $1.00 per
share ("Omnicare Shares"), of the Registrant issuable to holders of Common
Stock, par value $.0001 per share ("CompScript Shares"), of CompScript, Inc.
in connection with the Merger.
(2) The number of Omnicare Shares to be registered pursuant to this Registration
Statement is based on the maximum number of Omnicare Shares issuable to
holders of CompScript Shares in the Merger at an assumed maximum exchange
ratio of 0.1534527 of an Omnicare Share in exchange for each CompScript
Share (assuming that all CompScript Shares are exchanged only for Omnicare
Shares) and assuming the maximum number of CompScript Shares to be acquired
in the Merger for Omnicare Shares is 15,720,325.
(3) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(f)(1) of the Securities Act of 1933, based upon the estimated
market value of up to 15,720,325 CompScript Shares to be acquired by
Omnicare in the Merger (based upon the average of the high and low prices of
CompScript Shares on The Nasdaq SmallCap Market on May 21, 1998 of $3.875
per share).
(4) A fee of $11,790.24 was paid on April 14, 1998 pursuant to Section
14(g)(1)(A) of the Securities Exchange Act of 1934 and Rules 0-11 and 14a-
(6)(i) promulgated thereunder in connection with the filing of preliminary
proxy materials relating to the Merger as described herein, and pursuant to
Rule 457(b), such fee has been credited against the registration fee payable
in connection with this Registration Statement.
------------------------------
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>
SUBJECT TO COMPLETION
COMPSCRIPT, INC.
1225 BROKEN SOUND PARKWAY, N.W.
BOCA RATON, FLORIDA 33487
May , 1998
Dear Fellow Shareholder:
I am pleased to inform you that on February 23, 1998, CompScript, Inc. and
Omnicare, Inc. entered into a merger agreement under which each outstanding
CompScript common share will be converted into the right to receive $4.50 market
value (determined in accordance with, and subject to the terms of, the merger
agreement) of Omnicare common shares and CompScript will become a wholly-owned
subsidiary of Omnicare. The transaction is structured as a reorganization and a
pooling-of-interests.
At a Special Meeting of Shareholders of CompScript to be held at 9:00 a.m.
on June 26, 1998, you will be asked to vote upon the proposal to approve the
merger agreement. The merger is conditioned on the approval of this proposal by
CompScript shareholders holding a majority of the outstanding shares.
The Board of Directors has unanimously approved the merger agreement and has
determined the merger contemplated by the merger agreement is fair to, and in
the best interest of, CompScript and its shareholders. THE BOARD UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT.
NationsBanc Montgomery Securities LLC has acted as financial advisor to
CompScript in connection with the merger and has delivered its written opinion
dated February 23, 1998 to the CompScript Board to the effect that, based upon
and subject to certain matters stated therein, as of the date of such opinion,
the consideration to be received by the CompScript shareholders in the merger is
fair to such shareholders from a financial point of view. The full text of
NationsBanc Montgomery's written opinion, which sets forth a description of the
assumptions made, matters considered and limitations on the review undertaken,
is attached as Appendix E to the accompanying Proxy Statement/Prospectus and
should be read carefully in its entirety.
Details of the proposed merger and other important information concerning
CompScript and Omnicare are contained in the Proxy Statement/Prospectus. Please
give this material your careful attention.
Whether or not you plan to attend the Special Meeting, please complete, sign
and date the accompanying proxy card and return it in the enclosed prepaid
envelope. Your prompt cooperation will be greatly appreciated.
We are gratified by your continued support.
Sincerely yours,
BRIAN A. KAHAN
Chairman of the Board,
Chief Executive Officer and President
<PAGE>
COMPSCRIPT, INC.
1225 BROKEN SOUND PARKWAY, N.W.
BOCA RATON, FLORIDA 33487
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 26, 1998
To the Shareholders of
COMPSCRIPT, INC.:
NOTICE IS HEREBY GIVEN that CompScript, Inc. ("CompScript") will hold a
Special Meeting of its Shareholders on June 26, 1998 at 9:00 a.m., local time,
at The Auditorium, Sun Sentinel Building, 200 East Las Olas Boulevard, Ft.
Lauderdale, FL 33301 (including any adjournment or postponement thereof, the
"Special Meeting"), for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and
Plan of Merger, dated as of February 23, 1998, as amended (the "Merger
Agreement"), by and among CompScript, Omnicare, Inc., a Delaware corporation
("Omnicare"), and CSI Acquisition Corp., a Florida corporation and a
wholly-owned subsidiary of Omnicare ("Sub"), and the transactions
contemplated thereby. Upon the terms and subject to the conditions of the
Merger Agreement, Sub will be merged (the "Merger") with and into CompScript
and CompScript will become a wholly-owned subsidiary of Omnicare.
2. To transact such other business as may properly come before the
Special Meeting.
CompScript has fixed the close of business on May 18, 1998 (the "Record
Date") as the record date for the determination of the shareholders entitled to
notice of, and to vote at, the Special Meeting.
THE COMPSCRIPT BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE PROPOSAL TO APPROVE THE MERGER AGREEMENT. The affirmative vote of a
majority of the outstanding shares of common stock of CompScript, par value
$.0001 per share (the "CompScript Shares"), entitled to vote at the Special
Meeting is required to approve the Merger Agreement. FAILURE TO RETURN A
PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL GENERALLY
HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER. If the Merger is consummated,
holders of CompScript Shares on the Record Date who did not vote for the Merger
may, by complying with the procedures prescribed in the Florida Business
Corporation Act, be entitled to dissenter's rights as described therein. See
"DISSENTER'S RIGHTS."
Shareholders are invited to attend the Special Meeting. Whether or not you
expect to attend, WE URGE YOU TO SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED
PROXY CARD IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. If you attend the meeting,
you may vote your shares in person, which will revoke any previously executed
proxy.
If your shares are held of record by a broker, bank or other nominee, you
must instruct your broker, bank or other nominee on how to vote your shares, or
else your shares will not be voted. If you require assistance in completing your
proxy card or if you have questions about the voting procedure, please contact
D.F. King & Co., Inc., 77 Water Street, New York, NY 10005, (212) 269-5550
(collect), (800) 859-8511 (toll-free).
Regardless of how many shares you own, your vote is very important. Please
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD TODAY.
By Order of the Board of Directors
BRIAN A. KAHAN
Chairman of the Board,
Chief Executive Office and President
Boca Raton, Florida
May , 1998
<PAGE>
COMPSCRIPT, INC.
PROXY STATEMENT
------------------------
OMNICARE, INC.
PROSPECTUS
RELATING TO THE OFFERING OF UP TO 2,412,326 COMMON SHARES OF OMNICARE
This Proxy Statement/Prospectus is being furnished to the holders of common
stock, par value $.0001 per share (the "CompScript Shares"), of CompScript, Inc.
("CompScript") in connection with the solicitation of proxies by the Board of
Directors of CompScript (the "CompScript Board") for use at the special meeting
of shareholders of CompScript to be held at The Auditorium, Sun Sentinel
Building, 200 East Las Olas Boulevard, Ft. Lauderdale, FL 33301 on June 26,
1998, and any adjournments or postponements thereof (the "Special Meeting").
At the Special Meeting, shareholders of CompScript will consider and vote on
the proposed merger described in this Proxy Statement/Prospectus by which CSI
Acquisition Corp. ("Sub"), a wholly-owned subsidiary of Omnicare, Inc.
("Omnicare"), will merge (the "Merger") with and into CompScript and CompScript
will become a wholly-owned subsidiary of Omnicare, pursuant to the terms of the
Agreement and Plan of Merger, dated as of February 23, 1998, as amended, by and
among Omnicare, Sub and CompScript (the "Merger Agreement"). If the Merger is
consummated, all holders of outstanding CompScript Shares (other than shares as
to which dissenter's rights are properly exercised under Florida law) will
receive shares of the common stock, par value $1.00 per share, of Omnicare (the
"Omnicare Shares"), with a market value of $4.50 per CompScript Share,
determined pursuant to a formula based upon the average of the closing price per
Omnicare Share on the New York Stock Exchange for the ten consecutive trading
days immediately preceding the fifth trading day prior to the closing of the
Merger (the "Closing"). If such average closing price of the Omnicare Shares is
$29.325 or lower or $39.675 or higher, then for purposes of calculating the
number of shares to be received by the holders of CompScript Shares, the average
closing price will be deemed to be $29.325 or $39.675, as the case may be.
Assuming that the Merger had been consummated on May 26, 1998, the average
closing price would have been $35.65625 and each CompScript shareholder would
have received 0.12621 Omnicare Shares in exchange for each CompScript Share
surrendered in the Merger. The actual conversion ratio will be determined
immediately prior to the closing of the Merger and, therefore, may not be known
at the time of the Special Meeting.
FOR A MORE COMPLETE DESCRIPTION OF THE TERMS OF THE MERGER, INCLUDING A
DESCRIPTION OF THE CONSIDERATION TO BE RECEIVED BY COMPSCRIPT SHAREHOLDERS, SEE
"THE MERGER."
Omnicare Shares are quoted on the New York Stock Exchange (the "NYSE") under
the symbol "OCR." CompScript Shares are quoted on The Nasdaq SmallCap Market
under the symbol "CPRX."
This Proxy Statement also constitutes a Prospectus relating to the Omnicare
Shares to be issued in connection with the proposed Merger.
The information contained in this Proxy Statement/Prospectus relating to
Omnicare has been furnished by 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. The principal executive offices of Omnicare are located at 50 East
RiverCenter Blvd., Suite 1530, Covington, Kentucky 41011, telephone number (606)
291-6800.
The information contained in this Proxy Statement/Prospectus relating to
CompScript has been furnished by CompScript. CompScript is a provider of
comprehensive pharmacy management, infusion therapy and related consulting
services to the long-term care, alternate care and managed care markets. The
principal executive offices of CompScript are located at 1225 Broken Sound
Parkway, N.W., Boca Raton, Florida 33481, telephone number (561) 994-8585.
See "GLOSSARY" for a list of defined terms used in this Proxy
Statement/Prospectus.
This Proxy Statement/Prospectus and the accompanying proxy card are first
being mailed to CompScript shareholders on or about May , 1998.
FOR A DISCUSSION OF CERTAIN RISK FACTORS THAT SHAREHOLDERS SHOULD CONSIDER
BEFORE VOTING FOR OR AGAINST THE MERGER, SEE "RISK FACTORS" BEGINNING ON PAGE
11. SEE "DISSENTER'S RIGHTS" FOR A DESCRIPTION OF RIGHTS TO DISSENT. FAILURE TO
COMPLY WITH THE PROCEDURES LISTED IN "DISSENTER'S RIGHTS" WILL RESULT IN THE
LOSS OF RIGHTS TO DISSENT.
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 May , 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER..................................................................... 1
FORWARD LOOKING STATEMENTS................................................................................. 3
AVAILABLE INFORMATION...................................................................................... 3
INCORPORATION OF DOCUMENTS BY REFERENCE.................................................................... 3
SUMMARY.................................................................................................... 5
RISK FACTORS............................................................................................... 11
OMNICARE SUMMARY SELECTED FINANCIAL DATA................................................................... 15
COMPSCRIPT SUMMARY SELECTED FINANCIAL DATA................................................................. 17
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA....................................................... 18
MARKET PRICE INFORMATION................................................................................... 20
COMPARATIVE PER SHARE DATA................................................................................. 22
THE MERGER................................................................................................. 24
Background of the Merger................................................................................. 24
Reasons for the Merger................................................................................... 25
Opinion of CompScript's Financial Advisor................................................................ 27
Accounting Treatment of the Merger....................................................................... 32
Governmental and Regulatory Approvals.................................................................... 32
Interests of Certain Persons in the Merger; Possible Conflicts of Interest............................... 32
Certain Federal Income Tax Consequences Of The Merger.................................................... 34
THE MERGER AGREEMENT AND RELATED AGREEMENTS................................................................ 36
General.................................................................................................. 36
Consideration to be Received in the Merger............................................................... 36
Exchange of Shares....................................................................................... 37
Treatment of Options..................................................................................... 37
Representations and Warranties........................................................................... 37
Conduct of the Business of CompScript.................................................................... 38
Exclusivity.............................................................................................. 38
Indemnification.......................................................................................... 39
Resales of Omnicare Shares............................................................................... 39
Conditions to the Merger................................................................................. 40
Termination of the Merger Agreement...................................................................... 41
Termination Fees; Expenses of the Merger................................................................. 42
Stock Option Agreement................................................................................... 43
Voting Agreement......................................................................................... 46
DISSENTER'S RIGHTS......................................................................................... 47
COMPSCRIPT SPECIAL MEETING................................................................................. 49
Date, Time and Place..................................................................................... 49
Matters to be Considered................................................................................. 49
Record Date.............................................................................................. 49
Quorum................................................................................................... 49
Required Vote............................................................................................ 49
Proxies and Revocation................................................................................... 50
Solicitation of Proxies.................................................................................. 50
Independent Accountants.................................................................................. 50
DESCRIPTION OF OMNICARE CAPITAL STOCK...................................................................... 51
General.................................................................................................. 51
Common Stock............................................................................................. 51
Certain Antitakeover Provisions.......................................................................... 51
Transfer Agent........................................................................................... 51
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
COMPARISON OF SHAREHOLDER RIGHTS........................................................................... 52
Authorized Capital....................................................................................... 52
Election and Size of Board of Directors.................................................................. 52
Removal of Directors..................................................................................... 53
Vacancies on the Board of Directors...................................................................... 53
Action By Written Consent................................................................................ 54
Amendments to Charter.................................................................................... 54
Amendments to Bylaws..................................................................................... 54
Special Meetings of Shareholders......................................................................... 55
Inspection of Documents.................................................................................. 55
Dividends................................................................................................ 55
Indemnification of Directors and Officers................................................................ 56
Limitation of Liability.................................................................................. 57
Shareholder Suits........................................................................................ 57
Vote on Extraordinary Corporate Transactions; Business Combination Restrictions.......................... 57
RECENT DEVELOPMENTS........................................................................................ 60
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION......................................................... 61
BUSINESS OF COMPSCRIPT..................................................................................... 69
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.................................................. 81
BENEFICIAL OWNERSHIP OF COMPSCRIPT SHARES.................................................................. 86
EXPERTS.................................................................................................... 88
LEGAL OPINIONS............................................................................................. 88
SHAREHOLDER PROPOSALS FOR NEXT COMPSCRIPT ANNUAL MEETING................................................... 88
GLOSSARY................................................................................................... 89
</TABLE>
APPENDICES
<TABLE>
<S> <C> <C>
Appendix A -- Agreement and Plan of Merger, dated as of February 23, 1998, as amended,
by and among Omnicare, Inc., CSI Acquisition Corp. and CompScript, Inc.
Appendix B -- Stock Option Agreement, dated as of February 23, 1998, between Omnicare,
Inc. and CompScript, Inc.
Appendix C -- Voting Agreement, dated as of February 23, 1998, between Brian A. Kahan
and Omnicare, Inc.
Appendix D -- Sections 607.1301, 607.1302 and 607.1320 of the Florida Business
Corporation Act Regarding Dissenters' Rights
Appendix E -- Opinion of NationsBanc Montgomery Securities LLC
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
THE BOARD OF DIRECTORS OF COMPSCRIPT UNANIMOUSLY RECOMMENDS VOTING IN FAVOR
OF THE PROPOSED MERGER AND BELIEVES IT TO BE IN THE BEST INTERESTS OF COMPSCRIPT
AND THE COMPSCRIPT SHAREHOLDERS.
Q: WHAT WILL HAPPEN AS A RESULT OF THE PROPOSED MERGER?
A: If the Merger is approved and consummated, each CompScript Share will be
converted into the right to receive the merger consideration described below
and CompScript will become a wholly-owned subsidiary of Omnicare.
Q: WHAT DO I NEED TO DO NOW?
A. After you have carefully read this Proxy Statement/Prospectus, just indicate
on your proxy card how you want to vote, and sign and mail the proxy card in
the enclosed return envelope as soon as possible, so that your CompScript
Shares will be represented at the Special Meeting. If you sign and send in
your proxy and do not indicate how you want to vote, your proxy will be
counted as a vote in favor of the Merger. If you do not vote in favor of the
Merger or you abstain, it will have the effect of a vote against the Merger.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should instruct your broker to vote your shares, following the
directions provided by your broker. Without instructions, your shares will
not be voted, which for purposes of voting on the proposed Merger is the same
as voting against the proposed merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the Merger is completed, we will send former CompScript
shareholders written instructions for exchanging their share certificates.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the Merger is consummated, you will have the right to receive, in exchange
for each CompScript Share you own (other than shares as to which dissenters'
rights are properly exercised under Florida law), the number of Omnicare
Shares determined by dividing $4.50 by the average of the closing prices of
an Omnicare Share during the ten trading days immediately preceding the fifth
trading day preceding the Closing (the "Omnicare Average Market Price").
For these purposes, if the Omnicare Average Market Price during this period is
less than $29.325, then the Omnicare Average Market Price shall be deemed to
be $29.325 and if the Omnicare Average Market Price is greater than $39.675,
then the Omnicare Average Market Price shall be deemed to be $39.675. If the
Omnicare Average Market Price is less than $24.15, CompScript shall have the
right to terminate the Merger Agreement. If the Omnicare Average Market Price
is more than $44.85, Omnicare shall have the right to terminate the Merger
Agreement.
Omnicare will not issue fractional shares. Instead, CompScript shareholders
will receive cash for any fractional Omnicare Shares owed to them based on the
Omnicare Average Market Price.
1
<PAGE>
The following examples are based on the various prices of Omnicare Shares
(which are, of course, not assured):
<TABLE>
<CAPTION>
VALUE OF OMNICARE
SHARES RECEIVED PER
OMNICARE AVERAGE COMPSCRIPT SHARE IN
MARKET PRICE MERGER
- ----------------- -------------------
<S> <C>
$25 $ 3.836
$30 $ 4.50
$35 $ 4.50
$40 $ 4.537
$45 $ 5.10
</TABLE>
The value of Omnicare Shares received for each CompScript Share in the Merger
is calculated by multiplying the number of Omnicare Shares received per
CompScript Share by the Omnicare Average Market Price. The price of an
Omnicare Share may not equal the Omnicare Average Market Price because (i) the
Omnicare Average Market Price is calculated over the ten trading days
immediately preceding the fifth trading day preceding the Closing and (ii) the
price per Omnicare Share may fluctuate between the date the Omnicare Average
Market Price is determined and the date the Merger closes.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: We are working toward completing the Merger as quickly as possible. We hope
to complete the Merger promptly following the Special Meeting.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ME?
A: The exchange of shares by CompScript shareholders is generally intended to be
tax-free to CompScript shareholders for federal income tax purposes. However,
CompScript shareholders will be subject to taxation with respect to cash
received for fractional shares. To review certain federal income tax
consequences to shareholders in greater detail, see pages 34 and 35.
CompScript shareholders are urged to consult their own tax advisors as to the
specific tax consequences to them of the Merger, including the applicable
federal, state, local and foreign tax consequences.
Q: ARE THERE ANY RISKS ASSOCIATED WITH THE MERGER?
A: The Merger does involve risks. For a discussion of certain risk factors that
should be considered in evaluating the Merger, see "RISK FACTORS," beginning
on page 11.
WHO CAN HELP ANSWER YOUR QUESTIONS
If you have more questions about the Merger you should contact:
CompScript, Inc.
1225 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
Attention: Juan C. Cocuy
Phone Number: (561) 994-8585
If you would like additional copies of the Proxy Statement/Prospectus,
or have questions regarding the procedures for voting your shares, you
should contact:
D.F. King & Co., Inc.
Attention: Daniel M. Sullivan
Phone Number: (800) 859-8511
2
<PAGE>
FORWARD LOOKING STATEMENTS
This Proxy Statement/Prospectus contains and incorporates by reference
certain statements that constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. These
forward-looking statements include all statements regarding the intent, belief
or current expectations regarding the matters discussed or incorporated by
reference in this Proxy Statement/ Prospectus (including statements as to
"beliefs," "expectations," "anticipations," "intentions" or similar words) and
all statements which are not statements of historical fact. Such statements are
subject to risks, uncertainties and assumptions, including, but not limited to,
trends for the continued growth of the pharmacy businesses of Omnicare and
CompScript, the realization of anticipated revenues, profitability and cost
synergies of the combined companies, and other risks and uncertainties described
in "RISK FACTORS." Should one or more of these risks or uncertainties
materialize or should underlying assumptions prove incorrect, Omnicare's or
CompScript's actual results, performance or achievements in 1998 and beyond
could differ materially from those expressed in, or implied by, such
forward-looking statements.
AVAILABLE INFORMATION
Omnicare and CompScript file annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission" or the "SEC"). You may read and copy any reports, statements
or other information we file at the SEC's public reference rooms at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, 13th
Floor, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. Our SEC
filings are also available to the public from commercial document retrieval
services and at the SEC's site on the World Wide Web at http://www.sec.gov.
Omnicare has filed a Registration Statement on Form S-4 (together with any
amendments thereto, the "Registration Statement") under the Securities Act of
1933 (the "Securities Act"), to register with the SEC the Omnicare Shares to be
issued pursuant to the proposed Merger. As allowed by the SEC rules, this Proxy
Statement/Prospectus does not contain all the information you can find in the
Registration Statement, or the exhibits to the Registration Statement.
Omnicare Shares are 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. CompScript Shares are listed and traded on The
Nasdaq SmallCap Market. Reports, proxy statements and other information
concerning CompScript can be inspected at The Nasdaq SmallCap Market,
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
INCORPORATION OF DOCUMENTS BY REFERENCE
The SEC allows us to "incorporate by reference" information into this Proxy
Statement/Prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this Proxy
Statement/Prospectus, except for any information superseded by information in
this Proxy Statement/ Prospectus. This Proxy Statement/Prospectus incorporates
by reference the following documents previously filed with the SEC by Omnicare
(File No. 1-8269) pursuant to the Securities Exchange Act of 1934 (the "Exchange
Act"):
1. Omnicare's Annual Report on Form 10-K for the year ended December
31, 1997.
2. Omnicare's Current Reports on Form 8-K, dated February 18, 1998,
April 17, 1998 and May 19, 1998.
3. Omnicare's Quarterly Report on Form 10-Q for the quarter ended March
31, 1998.
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<PAGE>
4. The description of Omnicare Shares in Omnicare's Registration
Statement on Form 8-A under the Exchange Act filed September 14, 1993,
including all amendments and reports filed for the purpose of updating such
description.
We are also incorporating by reference additional documents that we file
with the SEC between the date of this Proxy Statement/Prospectus and the date of
the Special Meeting. Omnicare has supplied all information contained or
incorporated by reference in this Proxy Statement/Prospectus relating to
Omnicare, and CompScript has supplied all information contained in this Proxy
Statement/Prospectus relating to CompScript.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER. WE HAVE NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS
CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS
DATED ______, 1998. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROXY STATEMENT/ PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND
NEITHER THE MAILING OF THIS PROXY STATEMENT/ PROSPECTUS TO STOCKHOLDERS NOR THE
ISSUANCE OF ANY OMNICARE SECURITIES IN THE MERGER SHALL CREATE ANY IMPLICATION
TO THE CONTRARY.
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, 50 EAST
RIVERCENTER BLVD., SUITE 1530, COVINGTON, KENTUCKY 41011, TELEPHONE NUMBER (606)
291-6800. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY JUNE 19, 1998.
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<PAGE>
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 COMPANIES
OMNICARE
Omnicare is a leading independent provider of pharmacy and related services
to long-term care institutions such as nursing homes, retirement centers,
assisted living 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 residents 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 home facilities. Omnicare
currently provides these services to over 463,000 residents in more than 5,800
long-term care and other institutional health care facilities in 40 states.
Omnicare also provides comprehensive clinical research services for the
pharmaceutical and biotechnology industries.
On March 30, 1998, Omnicare entered into a definitive merger agreement
pursuant to which Omnicare is to acquire IBAH, Inc. ("IBAH"). See "RECENT
DEVELOPMENTS."
Omnicare's executive offices are located at 50 East RiverCenter Blvd., Suite
1530, Covington, Kentucky 41011, and its telephone number is (606) 291-6800.
COMPSCRIPT
CompScript is a comprehensive provider of pharmacy services equipped to both
lower costs and improve the quality of care to its customers. CompScript offers
a broad range of pharmacy, infusion therapy, consulting and mail order pharmacy
services to managed care networks and their patients, long-term and subacute
care facilities and home health patients. CompScript's proprietary pharmacy
management capabilities combine sophisticated clinical tools with the latest
technologies in databases and drug profiles.
CompScript presently operates seven institutional pharmacies that serve
long-term and subacute facilities in Florida, Alabama, Mississippi, Louisiana
and Ohio and one retail pharmacy in Ohio. In April 1996, Capital Brands, Inc.
("Capital Brands") and shareholders of CompScript-Boca, Inc. (formerly known as
AldenCare, Inc.)("Boca") owning approximately 93% of Boca's then outstanding
common stock, consummated a share exchange, as a result of which (i)
participating Boca shareholders became the owners of approximately 80% of
Capital Brands' common stock and (ii) Capital Brands changed its name to
CompScript, Inc. CompScript currently owns approximately 92% of Boca's
outstanding common stock. Capital Brands' predecessor, Capital Acquisitions,
Inc. was incorporated in March 1988 as a Delaware corporation. Prior to
September, 1991, Capital Brands was principally engaged in organizational
activities, raising capital through a public offering and searching for and
investigating business opportunities.
CompScript's principal executive offices are located at 1225 Broken Sound
Parkway, N.W., Boca Raton, Florida 33487, and its telephone number is (561)
994-8585.
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RECOMMENDATION OF THE COMPSCRIPT BOARD
The CompScript Board has unanimously approved the Merger Agreement and
unanimously recommends that CompScript shareholders vote FOR the proposal to
approve the Merger Agreement. This recommendation is based on a number of
factors described in this Proxy Statement/Prospectus. See "THE MERGER--Reasons
for the Merger."
OPINION OF FINANCIAL ADVISOR TO COMPSCRIPT
On February 23, 1998, NationsBanc Montgomery Securities LLC ("NationsBanc
Montgomery") delivered its written opinion to the CompScript 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 CompScript
shareholders in the Merger is fair to such shareholders from a financial point
of view. A copy of NationsBanc Montgomery's written opinion dated February 23,
1998, which sets forth the assumptions made, procedures followed, matters
considered, limitations on and scope of the review by NationsBanc Montgomery, is
attached as Appendix E to this Proxy Statement/Prospectus. THE OPINION OF
NATIONSBANC MONTGOMERY IS DIRECTED TO THE COMPSCRIPT BOARD OF DIRECTORS,
ADDRESSES ONLY THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS
OF COMPSCRIPT SHARES FROM A FINANCIAL POINT OF VIEW, AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY SHAREHOLDER AS TO HOW SUCH SHAREHOLDER SHOULD VOTE AT THE
SPECIAL MEETING. COMPSCRIPT SHAREHOLDERS ARE ENCOURAGED TO READ SUCH OPINION IN
ITS ENTIRETY. See "THE MERGER--Opinion of CompScript's Financial Advisor."
MERGER CONSIDERATION
As a result of the Merger, CompScript shareholders will receive Omnicare
Shares with a market value of $4.50 per share, determined in accordance with,
and subject to the terms of, the Merger Agreement. For these purposes, if the
Omnicare Average Market Price during this period is less than $29.325, then the
Omnicare Average Market Price shall be deemed to be $29.325 and if the Omnicare
Average Market Price is greater than $39.675, then the Omnicare Average Market
Price shall be deemed to be $39.675. If the Omnicare Average Market Price is
less than $24.15, CompScript shall have the right to terminate the Merger
Agreement. If the Omnicare Average Market Price is more than $44.85, Omnicare
shall have the right to terminate the Merger Agreement.
The following examples are based on the various prices of Omnicare Shares
(which are, of course, not assured):
<TABLE>
<CAPTION>
VALUE OF OMNICARE
SHARES RECEIVED
PER
OMNICARE AVERAGE COMPSCRIPT
MARKET PRICE SHARE IN MERGER
- ----------------- ------------------
<S> <C>
$25 $ 3.836
$30 $ 4.50
$35 $ 4.50
$40 $ 4.537
$45 $ 5.10
</TABLE>
The value of Omnicare Shares received for each CompScript Share in the
Merger is calculated by multiplying the number of Omnicare Shares received per
CompScript Share (the "Conversion Ratio") by the Omnicare Average Market Price.
The price of an Omnicare Share may not equal the Omnicare Average Market Price
because (i) the Omnicare Average Market Price is calculated over the ten trading
days immediately preceding the fifth trading day preceding the Closing and (ii)
the price per Omnicare Share may fluctuate between the date the Omnicare Average
Market Price is determined and the date the Merger closes (the "Closing Date").
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<PAGE>
Assuming that the Merger had been consummated on May 26, 1998, the Omnicare
Average Market Price would be $35.65625 and the Conversion Ratio would have been
0.12621. The actual Conversion 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 shown above.
A toll-free phone number has been established to disclose the Conversion
Ratio as of the latest practicable date. CompScript shareholders may call
1-800-878-6379 at any time prior to the closing of the polls at the Special
Meeting to listen to a recording disclosing the Conversion Ratio, calculated as
of the latest practicable date.
No fractional shares will be issued. Instead, CompScript shareholders will
receive a check in payment for any fractional shares based on the Omnicare
Average Market Price.
See "THE MERGER." See also "RISK FACTORS."
REQUIRED VOTE
The approval of a majority of the outstanding CompScript Shares is required
to approve the Merger.
As of May 18, 1998 (the "Record Date"), directors and executive officers of
CompScript and their affiliates were beneficial owners of approximately 35.2% of
the outstanding CompScript Shares. Each of the directors and executive officers
has indicated an intention to vote for the proposal to approve the Merger
Agreement. In order to induce Omnicare to enter into the Merger Agreement, Brian
A. Kahan (the "Principal Shareholder"), Chairman of the Board, Chief Executive
Officer and President of CompScript, and the holder of approximately 32% of the
outstanding shares, entered into an agreement with Omnicare (the "Voting
Agreement") pursuant to which the Principal Shareholder has agreed, in general,
to vote all of the CompScript Shares beneficially owned by him and all shares
subsequently acquired by him (i) in favor of the Merger, the adoption by
CompScript of the Merger Agreement and the approval of the other transactions
contemplated by the Merger Agreement at any meeting of shareholders of
CompScript at which such matters are considered and at every adjournment thereof
and (ii) against any action or proposal that would impede, frustrate, prevent or
nullify the Merger or the Merger Agreement. See "THE MERGER AGREEMENT AND
RELATED AGREEMENTS--Voting Agreement" and "BENEFICIAL OWNERSHIP OF COMPSCRIPT
SHARES." Attached as Appendix C is the full text of the Voting Agreement.
CONDITIONS TO THE MERGER
Each party's obligation to complete the Merger is subject to a number of
conditions, including the following:
(a) the approval of a majority of the outstanding CompScript Shares,
(b) the receipt of requisite governmental consents and approvals to
consummate the Merger,
(c) the receipt of letters from Omnicare's and CompScript's independent
accountants to the effect that the Merger will qualify for
pooling-of-interests accounting treatment,
(d) the receipt of opinions of counsel to the effect that the Merger
will be treated as a reorganization for federal income tax purposes,
(e) the accuracy of the representations and warranties of the other
party to the Merger Agreement and the performance of the obligations of the
other party to the Merger Agreement,
(f) the absence of an injunction or law prohibiting the Merger or any
legal action likely to have a material adverse effect, and
(g) the absence of a material adverse effect on the other party.
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<PAGE>
In addition, Omnicare's obligation to complete the Merger is also
conditioned on:
(a) the receipt of certain consents from third parties,
(b) holders of no more than 10% of the outstanding CompScript Shares
having exercised dissenter's rights, and
(c) certain employees of CompScript entering into employment, consulting
and non-competition agreements.
The parties' obligations are subject to certain other conditions set forth
in the Merger Agreement.
See "THE MERGER AGREEMENT AND RELATED AGREEMENTS--Conditions to the Merger."
TERMINATION
The Merger Agreement is subject to termination:
(a) by mutual consent of Omnicare and CompScript,
(b) by either Omnicare or CompScript if (i) there is a permanent
injunction prohibiting the Merger, (ii) the required approval of
CompScript's shareholders is not received, (iii) the Merger is not
consummated by January 15, 1999 or (iv) the other materially breaches its
representations, warranties or covenants set forth in the Merger Agreement,
(c) by Omnicare if the CompScript Board of Directors (the "CompScript
Board") modifies or withdraws its approval or recommendation of the Merger,
and
(d) by CompScript if the CompScript Board determines, under certain
circumstances, that its fiduciary duties require it to terminate the Merger
Agreement to execute a definitive agreement to implement another
transaction.
(e) by Omnicare if the Omnicare Average Market Price is more than
$44.85.
(f) by CompScript if the Omnicare Average Market Price is less than
$24.14.
See "THE MERGER AGREEMENT AND RELATED AGREEMENTS--Termination of the Merger
Agreement."
INTERESTS OF CERTAIN PERSONS IN THE MERGER; POSSIBLE CONFLICTS OF INTEREST
In considering the approval by the CompScript Board of the Merger,
CompScript shareholders should be aware that the members of the CompScript Board
and senior management of CompScript 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, CompScript shareholders generally. The Principal
Shareholder (who is the Chairman, Chief Executive Officer and President of
CompScript), among other things, (i) has entered into the Voting Agreement with
Omnicare pursuant to which he has agreed, among other things, to vote his
CompScript Shares in favor of the Merger, (ii) will enter into a consulting
agreement with Omnicare and (iii) will enter into a non-competition agreement
with Omnicare. Other executive officers of CompScript and its subsidiaries will
also enter into continuing employment agreements with CompScript. Omnicare has
agreed that following the Merger it will cause CompScript, as the corporation
surviving the Merger (the "Surviving Corporation"), to indemnify the officers
and directors of CompScript against liability for acts undertaken by such
persons during their tenure as officers and directors and to maintain the
current policies of directors and officers liability insurance. These interests
and benefits may constitute potential conflicts of interest with the
shareholders of CompScript in the negotiation, approval and consummation of the
Merger. See "THE MERGER--Interests of Certain Persons in the Merger; Possible
Conflicts of Interests."
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<PAGE>
TREATMENT OF COMPSCRIPT STOCK OPTIONS
At the date and time when the Merger shall become effective (the "Effective
Time"), each option to acquire CompScript Shares (each, a "CompScript Option")
outstanding immediately prior to the Effective Time shall be amended and
converted into an option to acquire, on the same terms and conditions as were
applicable under such CompScript Option, the number of Omnicare Shares (rounded
up to the nearest whole share) determined by multiplying the number of
CompScript Shares subject to such CompScript Option by the Conversion Ratio, at
an exercise price per Omnicare Share equal to the price per share specified in
such CompScript Option divided by the Conversion Ratio; provided that such
exercise price shall be rounded up to the nearest whole cent. See "THE MERGER
AGREEMENT AND RELATED AGREEMENTS--Treatment of Options."
GOVERNMENTAL AND REGULATORY APPROVALS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), prohibits CompScript and Omnicare from completing the Merger until
after CompScript and Omnicare have furnished certain information and materials
to the Antitrust Division of the Department of Justice (the "Antitrust
Division") and the Federal Trade Commission (the "FTC") and a required waiting
period has ended. The parties completed their required filings by March 26, 1998
and have received early termination of the waiting period. However, the
Antitrust Division and the FTC will continue to have authority to challenge the
Merger on antitrust grounds before or after the Merger is complete. See "THE
MERGER -- Governmental and Regulatory Approvals."
DISSENTER'S RIGHTS
If the Merger is consummated, holders of CompScript Shares on the Record
Date who did not vote for the Merger may, by complying with the procedures
prescribed in the Florida Business Corporation Act (the "FBCA"), be entitled to
dissenter's rights as described therein. See Appendix D. Failure to comply
precisely with the requirements of the applicable provision will result in the
loss of dissenter's rights. See "DISSENTER'S RIGHTS." The obligations of
Omnicare and Sub to effect the Merger are conditioned upon, among other things,
holders of no more than 10% of the outstanding CompScript Shares having
exercised dissenter's rights.
TERMINATION FEES; EXPENSES OF THE MERGER
Under certain circumstances, including a termination of the Merger Agreement
by Omnicare if the CompScript Board modifies or withdraws its approval or
recommendation of the Merger or a termination of the Merger Agreement by
CompScript to execute a definitive agreement to implement another transaction,
upon termination of the Merger Agreement, CompScript shall be required to pay
Omnicare a fee of $3.2 million. Under certain other circumstances, upon the
termination of the Merger Agreement Omnicare or CompScript will be required to
reimburse the other's expenses in connection with the Merger Agreement.
Otherwise, expenses incurred in connection with the Merger Agreement will be
paid by the party incurring such expenses. See "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Termination Fees; Expenses of the Merger."
STOCK OPTION AGREEMENT
In order to induce Omnicare to enter into the Merger Agreement, CompScript
entered into a stock option agreement with Omnicare (the "Stock Option
Agreement"). Pursuant to the Stock Option Agreement, Omnicare has the option
(the "Option"), under certain circumstances, including a third party making a
Transaction Proposal (as defined in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Exclusivity"), to purchase up to 2,800,000 shares of CompScript
Shares (the "Option Shares") (or approximately 19.9% of the outstanding
CompScript Shares as of February 23, 1998 prior to
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<PAGE>
giving effect to the exercise of the Option), at a cash price equal to $4.50 per
share (the "Option Price"). Subject to the terms and conditions of the Stock
Option Agreement, the combined value of the termination fee described above and
the Option is limited to $3.3 million. The Stock Option Agreement may make it
more difficult and expensive for a third party to consummate a business
combination with CompScript. See "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Stock Option Agreement."
EXCLUSIVITY
Pursuant to the Merger Agreement, CompScript has agreed not to initiate,
solicit or encourage any Transaction Proposal or, subject to the fiduciary
duties of the CompScript Board to the CompScript shareholders, engage in any
negotiations or discussions with, or provide any information to, any person
relating to a Transaction Proposal. See "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Exclusivity."
ACCOUNTING TREATMENT OF THE MERGER
Omnicare and CompScript 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 (i) receipt of a letter from Price
Waterhouse LLP, independent public accountants for Omnicare, to the effect that
Omnicare and the Merger and transactions contemplated thereby qualify for
pooling-of-interests accounting treatment and (ii) receipt of a letter from
Ernst & Young, LLP, independent public accountants for CompScript, to the effect
that CompScript will qualify as a "combining company" as required for
pooling-of-interests accounting treatment. See "THE MERGER -- Accounting
Treatment of the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Omnicare and CompScript have structured the Merger so that it will be
treated as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and the Merger is conditioned on
the receipt of legal opinions that such is the case. Assuming the Merger so
qualifies as a reorganization, in general, CompScript shareholders who exchange
their CompScript Shares for Omnicare Shares pursuant to the Merger will not
recognize any gain or loss for federal income tax purposes in the Merger (except
for such gain or loss as may be recognized with respect to cash received in lieu
of fractional shares).
Holders of CompScript Shares 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 "THE MERGER--Certain Federal Income
Tax Consequences Of The Merger."
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<PAGE>
RISK FACTORS
COMPSCRIPT SHAREHOLDERS 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. 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 Omnicare historically 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 nine 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.
The Merger would involve the integration of companies that have previously
operated independently. No assurances can be given that Omnicare will integrate
the operations of Omnicare and CompScript without encountering difficulties or
that the expected benefits of such integration will be realized. In addition,
there can be no assurance that anticipated synergies will be realized.
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, Medicaid and other federal health care 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.
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<PAGE>
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
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 services provided to
Medicare- qualified patients in Medicare skilled nursing facilities ("SNFs")
under which facilities will be paid a federal per diem rate for virtually all
covered SNF 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 mechanisms and payment rates for
medication therapy, and to develop case mix adjustments that reflect the needs
of such residents. The Balanced Budget Act also imposes limits on annual updates
in payments for routine Medicare SNF services, and institutes consolidated
billing for SNF services for most non-physician Medicare Part B items and
services for SNF residents, effective beginning July 1, 1998. (In April 1998,
the Health Care Financing Administration issued instructions on the SNF
consolidated billing rules, including a transition period until January 1,
1999.) The Balanced Budget Act also imposes numerous other cost savings measures
affecting Medicare SNF services. In addition, the law requires, as a condition
of issuance or renewal of a Medicare Part B supplier number, for the supplier to
obtain a surety bond. In January 1998, new rules were proposed to establish
additional supplier standards, including the requirement to obtain a surety
bond. A supplier must obtain a surety bond for each tax identification number
for which it has a Medicare supplier number.
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 Medicaid reimbursement system for long-term care,
including pharmacy services, from fee-for-service to managed care negotiated or
capitated rates. Omnicare 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 health care 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,
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<PAGE>
Omnicare competes with other companies with similar acquisition strategies.
Certain of Omnicare's competitors have substantial financial resources. There
can be no assurance that Omnicare will not encounter increased competition which
could adversely affects its business, results of operations or financial
condition.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; POSSIBLE CONFLICTS OF
INTEREST. In considering the approval by the CompScript Board of the Merger,
CompScript shareholders should be aware that the members of the CompScript Board
and senior management of CompScript 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, CompScript shareholders generally. The Principal
Shareholder, among other things, (i) has entered into the Voting Agreement with
Omnicare pursuant to which he has agreed, among other things, to vote his
CompScript Shares in favor of the Merger, (ii) will enter into a consulting
agreement with Omnicare and (iii) will enter into a non-competition agreement
with Omnicare. These interests and benefits may constitute potential conflicts
of interest with the shareholders of CompScript 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. If the Omnicare Average Market Price is below
$29.325, the Omnicare Shares that CompScript shareholders will receive in the
Merger would have a market value of less than $4.50 per CompScript Share.
CompScript will have the right (but not the obligation) to terminate the
Merger Agreement if the Omnicare Average Market Price is less than $24.15.
Omnicare will have the right (but not the obligation) to terminate the Merger
Agreement if the Omnicare Average Market Price is more than $44.85.
The Omnicare Average Market Price will be determined five NYSE trading days
prior to the closing of the Merger and will be based on the trading prices
during the preceding ten trading days. Accordingly, it is possible that the
market price of the Omnicare Shares at the closing of the Merger will be higher
or lower than the Omnicare Average Market Price and, if so, the value of the
consideration to be received by the CompScript shareholders will be more or less
than $4.50 per share of CompScript Shares depending on the direction of the
price movement. There can be no assurances that the price of the Omnicare Shares
will not vary significantly from the market prices used in the calculation of
the Omnicare Average Market Price.
Each CompScript shareholder is urged to obtain updated market information.
See "MARKET PRICE INFORMATION" and "THE MERGER AGREEMENT AND RELATED
AGREEMENTS-- Consideration to be Received in the Merger."
DIFFERENCES BETWEEN RIGHTS OF OMNICARE SHAREHOLDERS AND COMPSCRIPT
SHAREHOLDERS. Upon completion of the Merger, shareholders of CompScript will
become shareholders of Omnicare, and their rights as shareholders of Omnicare
will be governed by Delaware law, the Omnicare Restated Certificate of
Incorporation ("Omnicare Certificate") and the Omnicare Bylaws, rather than
Florida law, the CompScript Articles of Incorporation, as amended ("CompScript
Articles") and the CompScript Bylaws. There are certain significant differences
between the Omnicare Certificate and the CompScript Articles, including as to
removal of directors and mergers and other business combinations with holders of
a significant amount of stock. In addition, there are certain significant
differences between Delaware law and Florida law, including relating to the
acquisition of significant amounts of stock and the approval of mergers and
other business combinations with holders of a significant amount of stock. See
"COMPARISON OF SHAREHOLDER RIGHTS."
IMPACT OF THE YEAR 2000 ISSUE. Omnicare utilizes information systems
throughout its business to carry out its day to day operations effectively.
Further, Omnicare has and will continue to invest in financial and operational
systems to support its growth strategy. Omnicare is in the process of assuring
that its systems are capable of recognizing and processing information properly
as the year 2000 approaches. Omnicare has
13
<PAGE>
completed a preliminary assessment of its Year 2000 compliance and is currently
correcting, upgrading or replacing those systems that are not Year 2000
compliant. Omnicare believes it will be able to modify or replace its affected
systems in time to avoid any interruptions in its operations. Omnicare does not
anticipate that costs associated with this project will have a material impact
on its financial position or results of operations in future periods, although
there can be no assurances in this regard.
Omnicare is currently determining the extent to which it may be impacted by
any third parties' failure to remediate their own Year 2000 issues. Omnicare is
having, and will continue to have, formal communications with all of its
significant customers, payors, suppliers, and other third parties to determine
the extent, if any, to which Omnicare's interface systems could be impacted by
any third party Year 2000 issues and related remedies. There can be no assurance
that the systems of other companies with which Omnicare's systems interact will
be timely converted and would not have an adverse effect on Omnicare's business.
14
<PAGE>
OMNICARE SUMMARY SELECTED FINANCIAL DATA
OMNICARE AND SUBSIDIARIES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following selected consolidated financial data of Omnicare as of and for
the years ended December 31, 1997, 1996, 1995, 1994 and 1993 are derived from
consolidated financial statements of Omnicare which have been audited by Price
Waterhouse LLP, independent accountants. Such data is qualified in its entirety
by reference to historical financial information set forth in Omnicare's Annual
Report on Form 10-K for the year ended December 31, 1997. References in the
notes to this table to Notes to Consolidated Financial Statements are to the
notes to consolidated financial statements included in such Form 10-K. The
selected consolidated financial data as of and for the three months ended March
31, 1998 and 1997 are derived from unaudited consolidated financial statements
and are qualified in their entirety by reference to historical financial
information set forth in Omnicare's Quarterly Report on Form 10-Q for the period
ended March 31, 1998. Operating results for the three months ended March 31,
1998 are not necessarily indicative of the results that may be expected for the
entire year ending December 31, 1998.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED
MARCH 31, FOR THE YEARS ENDED AND AT DECEMBER 31,
-------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995 1994 1993
--------- --------- --------- --------- --------- --------- ---------
INCOME STATEMENT DATA: (a)
Sales....................... $ 299,752 $ 181,608 $ 895,702 $ 536,604 $ 399,636 $ 307,655 $ 223,129
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Income from continuing
operations................ $ 19,349(n) $ 13,443(o) $ 55,705 ,c) $ 43,450(d) $ 24,760(e) $ 13,531(f) $ 10,970(g)
Cumulative effect of
accounting change......... -- -- -- -- -- -- 280(h)
--------- --------- --------- --------- --------- --------- ---------
Net income.................. $ 19,349(n) $ 13,443(o) $ 55,705 ,c) $ 43,450(d) $ 24,760(e) $ 13,531(f) $ 11,250(g)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings per share data: (m)
Basic:
Income from continuing
operations................ $ .23(n) $ .17(o) $ .70 ,c) $ .67(d) $ .47(e) $ .30(f) $ .26(g)
Cumulative effect of
accounting change......... -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income.................. $ .23(n) $ .17(o) $ .70 ,c) $ .67(d) $ .47(e) $ .30(f) $ .26(g)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted:
Income from continuing
operations................ $ .23(n) $ .17(o) $ .69 ,c) $ .61(d) $ .43(e) $ .29(f) $ .26(g)
Cumulative effect of
accounting change......... -- -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income.................. $ .23(n) $ .17(o) $ .69 ,c) $ .61(d) $ .43(e) $ .29(f) $ .26(g)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Dividends per share......... $ .02 $ .0175 $ .07 $ .06 $ .05 $ .045 $ .04
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA:
Working capital............. $ 353,366 $ 279,732 $ 343,854 $ 329,002 $ 106,384 $ 125,550 $ 80,570
Total assets................ 1,338,234 796,617 1,289,629 721,697 360,836 317,205 241,318
Long-term debt (i)(j)....... 350,468 1,383 352,579 1,992 82,692 85,323 86,477
Stockholders' equity
(k)(l).................... 811,338 690,612 774,196 634,378 214,761 180,104 102,750
</TABLE>
- ------------------------
(a) 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.
15
<PAGE>
(b) Includes acquisition expenses related to 1997 pooling-of-interests
transactions of $3,456. Such expenses, on an after tax basis, were $3,070,
or $.04 per basic and diluted share. Net income, excluding these expenses as
well as the nonrecurring charge of $5,958 disclosed in (c) below, was
$64,733, or $.81 per basic and diluted share.
(c) A nonrecurring charge of $6,313 before taxes and $5,958 after taxes ($.07
per basic and diluted share) was recorded in the third quarter of 1997 for
the estimated costs and legal and other expenses associated with the
tentative settlement of the government investigation of Home Pharmacy
Services, Inc., a wholly-owned subsidiary of Omnicare. For the year ended
December 31, 1997, net income, excluding this charge as well as the
pooling-of-interests expenses of $3,070 disclosed in (b) above, was $64,733,
or $.81 per basic and diluted share.
(d) Includes acquisition expenses related to the 1996 pooling-of-interests
transaction of $690. Such expenses, on an after tax basis, were $534, or
$.01 per basic and diluted share. Net income, excluding these expenses, was
$43,984, or $.67 per basic share ($.61 diluted).
(e) Includes acquisition expenses related to the 1995 Specialized
pooling-of-interests transaction of $1,292. Such expenses, on an after tax
basis, were $989, or $.02 per basic and diluted share. Net income, excluding
these expenses, was $25,749, or $.49 per basic share ($.44 diluted).
(f) Includes acquisition expenses related to the 1994 Evergreen
pooling-of-interests transaction of $2,380. Such expenses, on an after tax
basis, were $1,860, or $.04 per basic share ($.03 diluted). Net income,
excluding these expenses, was $15,391, or $.34 per basic share ($.33
diluted).
(g) Includes a one-time cumulative tax benefit of $450, or $.01 per share (basic
and diluted), arising from a change in tax laws enacted in August of 1993
relating to the amortization of intangibles.
(h) After tax gain representing the cumulative effect of a change in accounting
for income taxes.
(i) In 1997, Omnicare issued $345 million of Convertible Subordinated Notes due
2007 (See Note 6 of the Notes to Consolidated Financial Statements).
(j) In 1993, Omnicare issued $80.5 million of Convertible Subordinated Notes due
2003 (See Note 6 of the Notes to Consolidated Financial Statements).
(k) In 1996, Omnicare sold 5,750 (pre-1996 stock split) shares of Omnicare
Common Stock in a public offering, resulting in net proceeds of $279,159.
(See Note 7 of the Notes to Consolidated Financial Statements.)
(l) In 1994, Omnicare sold approximately 6,495 shares of Omnicare Common Stock,
in a public offering, resulting in net proceeds of $59,211.
(m) The earnings per share data have been restated with Omnicare's required
adoption of Statement of Financial Accounting Standard No. 128, "Earnings
per Share."
(n) Includes acquisition expenses related to a 1998 first quarter
pooling-of-interests transaction of $491. Such expenses, on an after tax
basis, were $415, or $.01 per basic and diluted share. Net income, excluding
these expenses, was $19,764, or $.24 per basic and diluted share.
(o) Includes acquisition expenses related to a 1997 first quarter
pooling-of-interests transaction of $978. Such expenses, on an after tax
basis, were $854, or $.01 per basic and diluted share. Net income, excluding
these expenses, was $14,297, or $.18 per basic and diluted share.
16
<PAGE>
COMPSCRIPT SUMMARY SELECTED FINANCIAL DATA
COMPSCRIPT AND SUBSIDIARIES
The following selected consolidated financial data of CompScript as of and
for the two years ended December 31, 1997 are derived from consolidated
financial statements of CompScript which have been audited by Ernst & Young LLP,
independent certified public accountants. Such data are qualified in their
entirety by reference to historical financial information set forth in
CompScript's Annual Report on Form 10-KSB for the year ended December 31, 1997
included on pages F-2 through F-22. The selected consolidated financial data as
of and for the three months ended March 31, 1998 and 1997 are derived from
unaudited consolidated financial statements and are qualified in their entirety
by reference to historical financial information set forth in CompScript's
Quarterly Report on Form 10-QSB for the period ended March 31, 1998 included on
pages F-23 through F-28 hereof. Operating results for the three months ended
March 31, 1998 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 1998.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE YEARS ENDED AND AT
MARCH 31, DECEMBER 31,
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
1998 1997 1997 1996
------------- ------------- ------------- -------------
INCOME STATEMENT DATA:
Sales..................................................... $ 13,849,483 $ 11,498,619 $ 50,631,230 $ 42,716,356
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Income (loss) from continuing operations.................. $ 297,740 $ (1,616,102) $ (2,356,848) $ (1,155,756)
Net income (loss)......................................... $ 297,740 $ (1,616,102) $ (2,356,848) $ (1,155,756)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Earnings per share data:
Basic:
Income (loss) from continuing operations.................. $ .02 $ (.12) $ (0.17) $ (0.09)
Net income (loss)......................................... $ .02 $ (.12) $ (0.17) $ (0.09)
Diluted:
Income (loss) from continuing operations.................. $ .02 $ (.12) $ (0.17) $ (0.09)
Net income (loss)......................................... $ .02 $ (.12) $ (0.17) $ (0.09)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Dividends per share....................................... $ -- $ -- $ -- $ --
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
BALANCE SHEET DATA:
Working capital........................................... $ 2,940,781 $ 6,434,097 $ 2,461,370 $ 4,192,492
Total assets.............................................. 20,867,427 15,960,748 19,580,640 14,485,975
Long-term debt............................................ 718,165 5,274,140 707,281 1,878,588
Shareholders' equity...................................... 6,031,672 4,528,056 5,447,369 5,285,064
</TABLE>
17
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following tables set forth certain selected pro forma combined financial
data for (i) Omnicare and CompScript and (ii) Omnicare, CompScript and IBAH. See
"RECENT DEVELOPMENTS" for a brief summary of the merger transaction involving
IBAH. The pro forma amounts included in the table below relating to Omnicare and
CompScript assume the consummation of the Merger and are based on the
pooling-of-interests method of accounting. The pro forma amounts included in the
table below relating to Omnicare, CompScript and IBAH assume the consummation of
the Merger and the merger between a subsidiary of Omnicare and IBAH (the "IBAH
Merger") and are based on the pooling-of-interests method of accounting. There
can be no assurances that the IBAH Merger will be consummated. The following
tables should be read in conjunction with the historical financial statements of
Omnicare, CompScript and IBAH and the pro forma financial data included herein
under the caption "PRO FORMA COMBINED FINANCIAL INFORMATION." See the historical
financial statements of Omnicare and CompScript incorporated by reference or
included herein. See "RECENT DEVELOPMENTS" for information concerning IBAH and
the IBAH Merger.
The pro forma amounts below are presented for informational purposes only
and are not necessarily indicative of the results of operations of the combined
company that would have actually occurred had the Merger and the IBAH Merger
been consummated as of January 1, 1995 or of the financial condition of the
combined company had the Merger and the IBAH Merger been consummated as of March
31, 1998 or of the future results of operations or financial condition of the
combined company. The pro forma information does not reflect any synergies
anticipated as a result of (i) the Merger, in particular improvements in gross
margins attributable to Omnicare's purchasing leverage associated with purchases
of pharmaceuticals and other products and (ii) the Merger and the IBAH Merger,
and in particular the elimination of costs associated with CompScript's and
IBAH's status as public companies and other administrative savings. There can be
no assurances that such synergies will be realized. In addition, (a) the pro
forma income statement information does not reflect investment banking, legal
and miscellaneous transaction costs related to the Merger and the IBAH Merger
and (b) the pro froma income statement and balance sheet information does not
reflect costs associated with the combining of the companies, which costs
Omnicare and CompScript cannot presently estimate. See "RISK FACTORS."
18
<PAGE>
COMBINED OMNICARE AND COMPSCRIPT:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
---------------------- ----------------------------------
1998 1997 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales............................................ $ 313,601 $ 193,107 $ 946,333 $ 579,320 $ 434,493
Operating income................................. 35,820 20,430 96,028 63,515 39,923
Income from continuing operations................ 19,647 11,827 53,348 42,294 20,534
Earnings per share from continuing operations:
Basic.......................................... $ .23 $ .15 $ .65 $ .63 $ .38
Diluted........................................ .23 .15 .65 .58 .36
Weighted average shares outstanding:
Basic.......................................... 84,227 79,789 81,899 66,882 53,850
Diluted........................................ 84,483 79,942 82,058 76,962 66,528
BALANCE SHEET DATA (March 31, 1998):
Working capital.................................. $ 351,373 -- -- -- --
Total assets..................................... 1,359,101 -- -- -- --
Long-term debt................................... 351,186 -- -- -- --
Stockholders' equity............................. 812,436 -- -- -- --
</TABLE>
COMBINED OMNICARE, COMPSCRIPT AND IBAH:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE YEARS ENDED
ENDED MARCH 31, DECEMBER 31,
-------------------------- ------------------------------------
<S> <C> <C> <C> <C> <C>
1998 1997 1997 1996 1995
------------ ------------ ------------ ---------- ----------
INCOME STATEMENT DATA:
Sales........................................ $ 340,258 $ 212,424 $ 1,034,384 $ 641,440 $ 477,359
Operating income............................. 37,295 20,959 97,569 64,469 37,021
Income from continuing operations available
to common stockholders..................... 20,406 12,272 54,105 43,663 14,809
Earnings per share from continuing operations
available to common stockholders:
Basic...................................... $ .23 $ .15 $ .63 $ .63 $ .26
Diluted.................................... .23 .15 .62 .57 .26
Weighted average shares outstanding:
Basic...................................... 88,033 83,422 85,613 69,818 56,160
Diluted.................................... 88,995 84,559 86,621 81,008 69,344
BALANCE SHEET DATA (March 31, 1998):
Working capital.............................. $ 354,644 -- -- -- --
Total assets................................. 1,455,064 -- -- -- --
Long-term debt............................... 356,428 -- -- -- --
Stockholders' equity......................... 858,494 -- -- -- --
</TABLE>
19
<PAGE>
MARKET PRICE INFORMATION
OMNICARE. Omnicare Shares are listed on the NYSE under the symbol "OCR".
The following table shows the high and low sales prices of Omnicare Shares on
the NYSE and the cash dividends paid or declared per share for the periods
presented, based on published financial sources.
<TABLE>
<CAPTION>
PRICE PER OMNICARE SHARE
--------------------
<S> <C> <C> <C> <C>
HIGH LOW
-------- -------
1996
First Quarter.................................................................... 27 3/8 19 1/8
Second Quarter................................................................... 30 3/8 23 1/8
Third Quarter.................................................................... 30 3/4 21 1/2
Fourth Quarter................................................................... 32 1/2 26
1997
First Quarter.................................................................... 32 1/4 23 1/2
Second Quarter................................................................... 31 5/8 22 3/8
Third Quarter.................................................................... 32 1/2 26 9/16
Fourth Quarter................................................................... 34 9/16 26
1998
First Quarter.................................................................... 39 13/16 28 1/8
Second Quarter (through May 26).................................................. 39 11/16 34
<CAPTION>
<S> <C>
DIVIDENDS
-----------
1996
First Quarter.................................................................... .015
Second Quarter................................................................... .015
Third Quarter.................................................................... .015
Fourth Quarter................................................................... .015
1997
First Quarter.................................................................... .0175
Second Quarter................................................................... .0175
Third Quarter.................................................................... .0175
Fourth Quarter................................................................... .0175
1998
First Quarter.................................................................... .02
Second Quarter (through May 26).................................................. .02
</TABLE>
COMPSCRIPT. CompScript Shares are listed on The Nasdaq SmallCap Market
under the symbol "CPRX". The following sets forth the range of high and low
closing bid prices for CompScript Shares as reported on the NASDAQ during each
of the quarters presented, based on published financial sources. The quotations
set forth below are inter dealer quotations, without retail mark ups, mark downs
or commissions and may not necessarily represent actual transactions. The
quotations have been adjusted for CompScript's 1 to 8 reverse stock split on
April 26, 1996.
<TABLE>
<CAPTION>
PRICE PER
COMPSCRIPT SHARE
------------------
<S> <C> <C> <C> <C>
HIGH LOW
-------- --------
1996
First Quarter................................... 10 1/4 2 1/2
Second Quarter.................................. 9 6 3/4
Third Quarter................................... 7 1/4 4 1/8
Fourth Quarter.................................. 10 1/4 5 3/4
1997
First Quarter................................... 11 5/8 7 5/8
Second Quarter.................................. 8 3/8 6 5/8
Third Quarter................................... 7 3/16 2 7/8
Fourth Quarter.................................. 3 5/8 1 13/16
1998
First Quarter................................... 4 1/4 2 1/8
Second Quarter (through May 26)................. 4 1/16 3 5/8
</TABLE>
CompScript has never declared or paid any cash dividends on the CompScript
Shares. The Merger Agreement provides that CompScript may not pay any dividends
on the CompScript Shares.
The following table sets forth (i) the closing price of Omnicare Shares,
(ii) the closing price of CompScript Shares and (iii) the equivalent per share
price of CompScript Shares as of February 20, 1998,
20
<PAGE>
the last trading day prior to the announcement of the execution of the Merger
Agreement and May 26, 1998, the last trading day prior to the date of this Proxy
Statement/Prospectus. The equivalent per share price of CompScript Shares at
each specified date is determined by dividing $4.50 by the price of Omnicare
Shares and multiplying the resulting Conversion Ratio by the price of Omnicare
Shares. All historical prices are as reported by published financial sources.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET PRICES.
<TABLE>
<CAPTION>
OMNICARE COMPSCRIPT
SHARES SHARES
---------- ------------
<S> <C> <C> <C> <C>
February 20, 1998............................................................ 33 15/16 3 15/32
May 26, 1998................................................................. 35 3/16 4
<CAPTION>
EQUIVALENT
PER SHARE
-----------
<S> <C> <C>
February 20, 1998............................................................ 4 1/2
May 26, 1998................................................................. 4 1/2
</TABLE>
21
<PAGE>
COMPARATIVE PER SHARE DATA
(Unaudited)
The following table presents historical and pro forma per share data for
Omnicare and historical and equivalent pro forma per share data for CompScript.
Equivalent pro forma per share amounts for CompScript were calculated by
multiplying the relevant Omnicare amount by 0.1271, the Conversion Ratio
calculated using the average closing price of the Omnicare Shares over the ten
trading days ended May 8, 1998. The following tables should be read in
conjunction with the historical financial statements of Omnicare, CompScript and
IBAH and the pro forma financial data included herein under the caption "PRO
FORMA COMBINED FINANCIAL INFORMATION." See the historical financial statements
of Omnicare and CompScript incorporated by reference or included herein. See
"RECENT DEVELOPMENTS" for information concerning IBAH and the IBAH Merger.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -------------------------------
1998 1997 1996 1995
--------------- --------- --------- ---------
<S> <C> <C> <C> <C>
OMNICARE
Net Income:
Historical--Basic................................................... $ 0.23 $ 0.70 $ 0.67 $ 0.47
Historical--Diluted................................................. 0.23 0.69 0.61 0.43
Pro Forma--Basic (including CompScript)(1).......................... 0.23 0.65 0.63 0.38
Pro Forma--Diluted (including CompScript)(1)........................ 0.23 0.65 0.58 0.36
Pro Forma--Basic (including CompScript and IBAH)(1)................. 0.23 0.63 0.63 0.26
Pro Forma--Diluted (including CompScript and IBAH)(1)............... 0.23 0.62 0.57 0.26
Dividends
Historical (4)...................................................... 0.02 0.07 0.06 0.05
Book Value:
Historical.......................................................... 9.79 9.42 -- --
Pro Forma (including CompScript)(2)................................. 9.59 9.23 -- --
Pro Forma (including CompScript and IBAH)(2)........................ 9.66 9.31 -- --
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, -------------------------------
1998 1997 1996 1995
--------------- --------- --------- ---------
<S> <C> <C> <C> <C>
COMPSCRIPT
Net Income/(Loss):
Historical--Basic and Diluted....................................... $ 0.02 $ (0.17) $ (0.09) $ (0.37)
Equivalent Pro Forma (Omnicare and CompScript)-- Basic(1)........... 0.03 0.08 0.08 0.05
Equivalent Pro Forma (Omnicare and CompScript)-- Diluted(1)......... 0.03 0.08 0.07 0.05
Equivalent Pro Forma (Omnicare, CompScript and IBAH)-- Basic (1).... 0.03 0.08 0.08 0.03
Equivalent Pro Forma (Omnicare, CompScript and IBAH) - Diluted
(1)............................................................... 0.03 0.08 0.07 0.03
Dividends:
Historical.......................................................... -- -- -- --
Equivalent Pro Forma (1)............................................ -- 0.01 0.01 0.01
Book Value:
Historical.......................................................... 0.43 0.39 -- --
Equivalent Pro Forma (Omnicare and CompScript) (2).................. 1.22 1.17 -- --
Equivalent Pro Forma (Omnicare, CompScript and IBAH)(2)............. 1.23 1.18 -- --
</TABLE>
22
<PAGE>
- ------------------------
(1) Pro forma amounts for Omnicare have been multiplied by the conversion ratio
of 0.1271 (the assumed Conversion Ratio) to arrive at CompScript's
Equivalent Pro Forma per share amounts (including and excluding IBAH). The
assumed Conversion Ratio has been estimated based on an assumed Omnicare
Average Market Price of the Omnicare Common Stock of $35.413 per share,
which represents the Omnicare Average Market Price per share of Omnicare
Common Stock for the ten trading days ended May 8, 1998. Assuming an
Omnicare Average Market Price of $29.325, (i) CompScript's Equivalent Pro
Forma Net Income (basic) for the three months ended March 31, 1998 and the
years ended December 31, 1997, 1996 and 1995 would have been $0.04, $0.10,
$0.10 and $0.06, respectively, and CompScript's Equivalent Pro Forma Net
Income (basic and including IBAH) for the three months ended March 31, 1998
and the years ended December 31, 1997, 1996 and 1995 would have been $0.04,
$0.10, $0.10 and $0.04, respectively, and (ii) CompScript's Equivalent Pro
Forma Net Income (diluted) for the three months ended March 31, 1998 and the
years ended December 31, 1997, 1996, and 1995 would have been $0.04, $0.10,
$0.09 and $0.05, respectively, and CompScript's Equivalent Pro Forma Net
Income (diluted and including IBAH) for the three months ended March 31,
1998 and the years ended December 31, 1997, 1996 and 1995 would have been
$0.04, $0.10, $0.09 and $0.04, respectively. Assuming an Omnicare Average
Market Price of $39.675, (i) CompScript's Equivalent Pro Forma Net Income
(basic) for the three months ended March 31, 1998 and the years ended
December 31, 1997, 1996 and 1995 would have been $0.03, $0.07, $0.07 and
$0.04, respectively, and CompScript's Equivalent Pro Forma Net Income (basic
and including IBAH) for the three months ended March 31, 1998 and the years
ended December 31, 1997, 1996 and 1995 would have been $0.03, $0.07, $0.07
and $0.03, respectively; and (ii) CompScript's Equivalent Pro Forma Net
Income (diluted) for the three months ended March 31, 1998 and the years
ended December 31, 1997, 1996 and 1995 would have been $0.03, $0.07, $0.07
and $0.04, respectively; and CompScript's Equivalent Pro Forma Net Income
(diluted and including IBAH) for the three months ended March 31, 1998 and
the years ended December 31, 1997, 1996 and 1995 would have been $0.03,
$0.07, $0.06 and $0.03, respectively. Pro Forma Net Income (basic and
diluted) amounts for Omnicare (including CompScript, and including
CompScript and IBAH) and Equivalent Pro Forma Dividend amounts for
CompScript (including and excluding IBAH) have not been presented using the
Collar Limitations of $29.325 and $39.675 because such amounts do not
materially differ from those already presented using the Omnicare Average
Market Price(3).
(2) Pro forma amounts for Omnicare have been multiplied by the conversion ratio
of 0.1271 (the assumed Conversion Ratio) to arrive at CompScript's
Equivalent Pro Forma per share amounts (including and excluding IBAH). The
assumed Conversion Ratio has been estimated based on an assumed Omnicare
Average Market Price of the Omnicare Common Stock of $35.413 per share
described in footnote (1) above. Assuming an Omnicare Average Market Price
of $29.325, (i) Omnicare's Pro Forma Book Value (including CompScript) and
Omnicare's Pro Forma Book Value (including CompScript and IBAH) as of March
31, 1998 would have been $9.55 and $9.61 respectively; and (ii) CompScript's
Equivalent Pro Forma Book Value (excluding and including IBAH) as of March
31, 1998 would have been $1.47 and $1.48, respectively. Assuming an Omnicare
Average Market Price of $39.675 (i) Omnicare's Pro Forma Book Value
(including CompScript) and Omnicare's Pro Forma Book Value (including
CompScript and IBAH) as of March 31, 1998 would have been $9.62 and $9.72,
respectively; and (ii) CompScript's Equivalent Pro Forma Book Value
(excluding and including IBAH) as of March 31, 1998 would have been $1.09
and $1.10, respectively. Assuming an Omnicare Average Market Price of
$29.325, (i) Omnicare's Pro Forma Book Value (including CompScript) and
Omnicare's Pro Forma Book Value (including CompScript and IBAH) as of
December 31, 1997 would have been $9.19 and $9.26, respectively; and (ii)
CompScript's Equivalent Pro Forma Book Value (excluding and including IBAH)
as of December 31, 1997 would have been $1.41 and $1.42, respectively.
Assuming an Omnicare Average Market Price of $39.675, (i) Omnicare's Pro
Forma Book Value (including CompScript) and Omnicare's Pro Forma Book Value
(including CompScript and IBAH) as of December 31, 1997 would have been
$9.25 and $9.36, respectively; and (ii) CompScript's Equivalent Pro Forma
Book Value (excluding and including IBAH) as of December 31, 1997 would have
been $1.05 and $1.06 respectively(3).
(3) The actual Omnicare Average Market Price will likely vary from the
assumptions set forth above, which would result in a different actual
Conversion Ratio.
(4) Omnicare's Historical and Pro Forma Dividends per share amounts are the
same.
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THE MERGER
BACKGROUND OF THE MERGER
In December 1996, in light of the significant consolidation in the industry
in which CompScript operates, management of CompScript met with NationsBanc
Montgomery to discuss strategic issues, including possible business combinations
or strategic alliances involving CompScript. On January 7, 1997, the CompScript
Board met to discuss these strategies as a way to enhance shareholder value. The
CompScript Board determined to (a) engage NationsBanc Montgomery to act as its
financial advisor in examining alternatives for maximizing CompScript
shareholder value, and (b) authorize Brian Kahan and NationsBanc Montgomery to
identify and discuss potential business combinations with third parties, enter
into appropriate confidentiality agreements relating thereto, and to keep the
CompScript Board apprised of the status of prospective transactions. Over the
next several months, NationsBanc Montgomery, on behalf of CompScript, contacted
a broad group of parties, including Omnicare, to assess their interests in
consummating a business combination with CompScript. CompScript entered into
confidentiality agreements, provided confidential information and held
discussions with a number of these parties.
On February 17, 1997, Joel Gemunder, President of Omnicare, met with Brian
Kahan at CompScript's headquarters to discuss the possible acquisition of
CompScript by Omnicare. Subsequently, Omnicare conducted due diligence on
CompScript and held discussions with CompScript on a periodic basis. Discussions
continued with Omnicare through March 1997, although neither Omnicare nor
CompScript made a proposal at such time. Discussions also continued with other
interested parties through the end of the second quarter of 1997, although none
of these discussions resulted in a bona fide offer to consummate a business
combination with CompScript. On June 20, 1997, CompScript issued a press release
which announced that CompScript was evaluating opportunities for a sale or
merger involving CompScript, that discussions were taking place and that
NationsBanc Montgomery was assisting CompScript.
In mid-December 1997, CompScript was contacted by a party (the "Other
Party"), which was one of the interested parties referred to above. Preliminary
terms of an offer were discussed, subject to satisfactory completion of due
diligence and agreeing on the terms of a definitive agreement. Between the end
of December 1997 and late February 1998, CompScript held discussions with the
Other Party as it conducted due diligence on CompScript, and the parties
discussed the terms of a possible acquisition proposal.
In early January 1998, Tracy Finn, Vice President, Strategic Planning and
Development, of Omnicare, contacted representatives of CompScript to ascertain
whether CompScript would be interested in further discussions with Omnicare
regarding a possible transaction. In mid-January 1998, Mr. Gemunder inquired of
NationsBanc Montgomery about the availability of current financial information
for CompScript. Following consultation with Mr. Kahan, NationsBanc Montgomery
provided Mr. Gemunder with certain CompScript information.
On January 19, 1998, at a meeting of the CompScript Board, representatives
of NationsBanc Montgomery made a presentation regarding the status of the
process and the interest levels of various parties. NationsBanc Montgomery
reviewed with the Board matters relating to the industry in which CompScript
operates, as well as specific financial information about potential strategic
partners. The CompScript Board authorized NationsBanc Montgomery and management
to continue discussions with potential strategic partners, including Omnicare.
The Board also considered the possibility of remaining an independent entity.
Through the end of January and into late February, CompScript and NationsBanc
Montgomery held discussions with the Other Party and other interested parties,
including Omnicare.
On February 19, 1998, Omnicare submitted an oral proposal to acquire
CompScript in a stock-for-stock merger in which CompScript shareholders would
receive $4.50 market value of Omnicare stock for each CompScript Share,
contingent upon satisfactory completion of due diligence and certain other
conditions. This proposal was superior to the terms of the transaction being
discussed with the Other Party.
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Between February 20 and 22, 1998, representatives of Omnicare met with
CompScript and its advisors to conduct due diligence. During this period,
Omnicare and CompScript discussed the terms of a potential acquisition of
CompScript, including a potential merger agreement.
In the evening of February 22, 1998, the CompScript Board met to review the
terms of the proposed merger agreement with Omnicare and related stock option
agreement and voting agreement (the "Merger Documents"), as well as the status
of the proposal from the Other Party, which price and terms were inferior to
those offered by Omnicare. CompScript legal counsel and representatives from
NationsBanc Montgomery reviewed the terms and conditions of the Merger
Documents. The CompScript Board considered CompScript's alternatives to
proceeding with the Omnicare proposal, including remaining an independent
company, as well as the relative benefits and detriments of the Omnicare
proposal and the proposal received from the Other Party. The Board also
discussed its fiduciary obligations in connection with approving any strategic
alliance, including the proposed transaction with Omnicare. Following the
presentation of such information and after discussion among the CompScript Board
members, the CompScript Board unanimously approved the Merger Documents. At the
February 22 Board meeting, NationsBanc Montgomery delivered its oral opinion,
subsequently confirmed in writing on February 23, that, as of such date, and
based upon and subject to certain matters stated in such opinion, the
consideration to be received by the CompScript shareholders in the Merger was
fair to such shareholders from a financial point of view.
On February 22, 1998, the Omnicare Board met to consider the proposed
transaction. Following presentations regarding CompScript and the terms of the
Merger Documents, the Omnicare Board delegated authority to approve the
transaction to a committee of directors. Later that day, the committee approved
the Merger Documents.
On the morning of February 23, 1998, the parties executed the Merger
Documents and issued a joint press release announcing the Merger.
REASONS FOR THE MERGER
COMPSCRIPT. The CompScript Board believes that the Merger is fair to and in
the best interests of CompScript and its shareholders. THE COMPSCRIPT BOARD HAS
APPROVED AND RECOMMENDS THAT ALL COMPSCRIPT SHAREHOLDERS VOTE FOR THE PROPOSED
MERGER. In approving the Merger Agreement and the transactions contemplated
thereby, the CompScript Board considered the following material factors:
(i) the opinion of NationsBanc Montgomery to the CompScript Board, that
the consideration to be received by the CompScript shareholders is fair to
such shareholders from a financial point of view (a copy of the written
opinion dated February 23, 1998 of NationsBanc Montgomery setting forth the
assumptions, limitations and qualifications set forth in such opinion, is
attached hereto as Appendix E);
(ii) information concerning the business, assets, capital structure,
financial performance and condition, reputation and prospects of CompScript
and Omnicare, including the prospects for CompScript both as an independent
entity and as a subsidiary of Omnicare;
(iii) current industry, economic and market conditions, including in
particular, the recent and continuing consolidation within the health-care
services industry in general, and the institutional pharmacy industry in
particular;
(iv) the terms and structure of the transaction and the terms and
conditions of the Merger Agreement, including the Conversion Ratio and the
related Collar Limitations;
(v) that the consideration to be received in the Merger represented a
30% premium to the February 20, 1998 closing price of CompScript Shares, and
a 61% premium to the trailing thirty day average price of CompScript Shares;
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(vi) the potential for appreciation in the value of the Omnicare Shares
to be issued to CompScript shareholders in connection with the Merger;
(vii) the strategic fit between CompScript and Omnicare, the
opportunity for cost savings and synergies and the possibility that
CompScript on its own might be unable to achieve the level of cost savings,
operating efficiencies and synergies that may be available as a result of
the Merger;
(viii) the ability to consummate the Merger as a reorganization for
federal income tax purposes;
(ix) CompScript's Board investigation and consideration of strategic
alternatives to the Merger; and
(x) the provisions of the Merger Agreement that permit CompScript,
under certain circumstances, to furnish information to and participate in
substantive discussions and negotiations with third parties, and to
terminate the Merger Agreement and enter into a definitive agreement with a
third party in certain events, upon the payment of a termination fee of $3.2
million.
In view of the variety of factors considered in connection with its
evaluation of the Merger Agreement, the CompScript Board did not consider it
practicable to, nor did it attempt to, quantify, rank or otherwise assign
relative weights to the specific factors considered in reaching its
determination. The CompScript Board did rely on the experience and expertise of
its financial advisors for quantitative analysis of the financial terms of the
Merger. Further, the CompScript Board did not undertake to make any specific
determination as to whether any particular factor (or any aspect of any
particular factor) was favorable or unfavorable to its ultimate determination,
but rather conducted a discussion of the factors described above and reached a
general consensus that the Merger was in the best interests of CompScript and
its shareholders. In considering the foregoing factors, individual members of
the CompScript Board may have given different weight to different factors.
However, on balance, the discussions among the members of the CompScript Board
evidenced the general view that the factors enumerated were regarded favorably
in making its determination to approve the Merger Agreement and recommend to the
CompScript shareholders that they approve the same. There can be no assurances
that the expected benefits of the Merger will be realized. See "RISK FACTORS."
The CompScript Board of Directors believes that the terms of the Merger
Agreement and the transactions contemplated thereby are in the best interests of
CompScript and its shareholders. Accordingly, the CompScript Board has approved
the Merger Agreement and recommends approval thereof by the shareholders of
CompScript.
THE COMPSCRIPT BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
COMPSCRIPT SHARES VOTE FOR APPROVAL OF THE MERGER AGREEMENT.
OMNICARE. The Board of Directors of Omnicare (the "Omnicare Board")
believes that the acquisition of CompScript is fair to and in the best interest
of Omnicare and its shareholders. In reaching such determination, the Omnicare
Board considered the following material factors:
(i) Omnicare's review of CompScript, including its business,
operations, management, earnings and financial condition on a historical and
prospective basis;
(ii) the terms and conditions of the Merger Agreement including,
without limitation, provisions relating to the number of Omnicare Shares to
be issued in the Merger and the conditions to the consummation of the
Merger;
(iii) its belief that the Merger will significantly expand Omnicare's
core institutional pharmacy business and strengthen its foothold in the
southeastern markets;
(iv) its belief that by leveraging Omnicare's existing market position,
the Merger will create economies of scale that will allow both organizations
to operate more efficiently;
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(v) the business reputation and experience of CompScript's management,
and the employment, consulting and non-competition agreements to be entered
into with CompScript management in connection with the Merger; and
(vi) the expectation that the Merger will be treated as a
reorganization for federal income tax purposes and will be accounted for as
a pooling-of-interests.
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
shareholders. 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. There can be no assurances that the
expected benefits of the Merger will be realized. See "RISK FACTORS."
OPINION OF COMPSCRIPT'S FINANCIAL ADVISOR
CompScript engaged NationsBanc Montgomery to act as its financial advisor in
connection with the Merger. NationsBanc Montgomery is a nationally recognized
firm and, as part of its investment banking activities, is regularly engaged in
the valuation of businesses and their securities in connection with merger
transactions and other types of acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. CompScript selected NationsBanc
Montgomery as its financial advisor on the basis of its experience and expertise
in transactions similar to the Merger, its reputation in the health care and
investment communities and its existing investment banking relationship with
CompScript.
At the February 22, 1998 meeting of CompScript's Board of Directors,
NationsBanc Montgomery delivered its oral opinion, subsequently confirmed in
writing on February 23, 1998, that the consideration to be received by the
shareholders of CompScript in the Merger was fair to such shareholders from a
financial point of view, as of the date of such opinion. NationsBanc Montgomery
did not determine the form or amount of consideration to be received by
CompScript's shareholders in the Merger. The amount of such consideration was
agreed to as a result of negotiations between CompScript and Omnicare. No
limitations were imposed by CompScript on NationsBanc Montgomery with respect to
the investigations made or procedures followed in rendering its opinion.
THE FULL TEXT OF NATIONSBANC MONTGOMERY'S WRITTEN OPINION TO COMPSCRIPT'S
BOARD OF DIRECTORS, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS OF REVIEW BY NATIONSBANC MONTGOMERY, IS ATTACHED HERETO AS
APPENDIX E AND IS INCORPORATED HEREIN BY REFERENCE AND SHOULD BE READ CAREFULLY
AND IN ITS ENTIRETY IN CONNECTION WITH THIS PROXY STATEMENT/PROSPECTUS. THE
FOLLOWING SUMMARY OF NATIONSBANC MONTGOMERY'S OPINION IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. NATIONSBANC MONTGOMERY'S
OPINION IS ADDRESSED TO COMPSCRIPT'S BOARD OF DIRECTORS ONLY AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY COMPSCRIPT SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE SPECIAL MEETING. IN FURNISHING ITS OPINION,
NATIONSBANC MONTGOMERY DID NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF
THE TERM "EXPERT" AS USED IN THE SECURITIES ACT AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER, OR THAT ITS OPINION IS A REPORT OR VALUATION WITHIN THE
MEANING OF SECTION 11 OF THE SECURITIES ACT, AND STATEMENTS TO SUCH EFFECT ARE
INCLUDED IN NATIONSBANC MONTGOMERY'S OPINION.
In connection with its opinion, NationsBanc Montgomery, among other things:
(i) reviewed certain publicly available financial and other data with respect to
CompScript and Omnicare, including the consolidated financial statements for
recent years and interim periods to September 30, 1997 and certain other
relevant financial and operating data relating to CompScript made available to
NationsBanc Montgomery from published sources and from the internal records of
CompScript; (ii) reviewed the financial terms and conditions of the Merger
Agreement; (iii) reviewed certain publicly available information concerning the
trading of, and the trading market for, CompScript Shares and Omnicare Shares ;
(iv) compared CompScript and Omnicare from a financial point of view with
certain other companies in
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the institutional pharmacy industry which NationsBanc Montgomery deemed to be
relevant; (v) considered the financial terms, to the extent publicly available,
of selected recent business combinations of companies in the institutional
pharmacy industry which NationsBanc Montgomery deemed to be comparable, in whole
or in part, to the Merger; (vi) reviewed and discussed with representatives of
the management of CompScript and Omnicare certain information of a business and
financial nature regarding CompScript and Omnicare, furnished to NationsBanc
Montgomery by them, including financial forecasts and related assumptions of
CompScript; (vii) made inquiries regarding and discussed the Merger and the
Merger Agreement and other matters related thereto with CompScript's counsel;
and (viii) performed such other analyses and examinations as NationsBanc
Montgomery deemed appropriate.
In connection with its review, NationsBanc Montgomery did not assume any
obligation independently to verify the foregoing information and relied on such
information being accurate and complete in all material respects. With respect
to the financial forecasts for CompScript provided to NationsBanc Montgomery by
its management, upon their advice and with CompScript's consent, NationsBanc
Montgomery assumed for purposes of its opinion that the forecasts, including the
assumptions regarding synergies, were reasonably prepared on bases reflecting
the best available estimates and judgments of its management at the time of
preparation as to the future financial performance of CompScript and that they
provided a reasonable basis upon which NationsBanc Montgomery could form its
opinion. NationsBanc Montgomery also assumed that there were no material changes
in CompScript's or Omnicare's assets, financial condition, results of
operations, business or prospects since the respective dates of their last
financial statements made available to NationsBanc Montgomery. NationsBanc
Montgomery assumed that the Merger would be consummated in a manner that
complies in all respects with the applicable provisions of the Securities Act,
the Exchange Act and all other applicable federal and state statutes, rules and
regulations. In addition, NationsBanc Montgomery did not assume responsibility
for making an independent evaluation, appraisal or physical inspection of any of
the assets or liabilities (contingent or otherwise) of CompScript or Omnicare,
nor was NationsBanc Montgomery furnished with any such appraisals. CompScript
informed NationsBanc Montgomery, and NationsBanc Montgomery assumed, that the
Merger would be recorded as a pooling-of-interests under generally accepted
accounting principles. Finally, NationsBanc Montgomery's opinion was based on
economic, monetary and market and other conditions existing as of, and the
information made available to it as of, February 22, 1998. Accordingly, although
subsequent developments may affect NationsBanc Montgomery's opinion, NationsBanc
Montgomery has not assumed any obligation to update, revise or reaffirm its
opinion.
The following is a summary of the material analyses and factors considered
by NationsBanc Montgomery in connection with its oral opinion delivered to the
CompScript Board of Directors dated February 22, 1998.
SELECTED COMPARABLE PUBLIC COMPANY ANALYSIS. NationsBanc Montgomery
compared the value of the consideration to be received by the shareholders of
CompScript in the Merger to certain financial and stock market information of
four publicly-traded companies engaged in the institutional pharmacy business
that NationsBanc Montgomery believed were comparable in certain respects to
CompScript (the "Comparable Companies"). The Comparable Companies included: NCS
Healthcare, Inc., Omnicare, PharMerica, Inc. and Vitalink Pharmacy Services. The
Comparable Companies were chosen by NationsBanc Montgomery as companies that,
based on publicly available data, possess general business, operating and
financial characteristics representative of companies in the industry in which
CompScript operates, although NationsBanc Montgomery recognizes that each of the
Comparable Companies is distinguishable from CompScript in certain respects.
For each of the Comparable Companies and CompScript, NationsBanc Montgomery
obtained certain publicly available financial, operating and stock market data,
including last twelve months ("LTM") revenue, LTM earnings before interest and
taxes ("EBIT"), number of beds served, projected calendar year 1998 earnings per
share ("EPS"), recently reported total debt and cash and cash equivalents, and
closing stock price as of February 20, 1998. Calendar year 1998 EPS estimates
for the Comparable
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Companies were based on analysts' estimates as reported by First Call, a market
research database, and calendar year 1998 EPS estimates for CompScript were
based on CompScript management estimates.
NationsBanc Montgomery also compiled "aggregate value" for each of the
Comparable Companies and for CompScript implied in the Merger. Aggregate value
is the total current equity value plus total debt less cash and cash
equivalents.
Based on this data, NationsBanc Montgomery calculated the following ratios
for each of the Comparable Companies and for CompScript implied in the Merger:
aggregate value to LTM revenue; aggregate value to LTM EBIT; aggregate value to
the number of beds served; and current stock price to projected 1998 earnings
per share ("1998 price/earnings ratio").
The aggregate value to the LTM revenues for the Comparable Companies ranged
from 1.5x to 3.4x, with an average of 2.0x and a median of 1.6x, compared to
1.7x for CompScript implied in the Merger. The aggregate value to LTM EBIT for
the Comparable Companies ranged from 14.3x to 31.0x, with an average of 23.2x
and a median of 23.8x, compared to 33.2x for CompScript implied in the Merger.
The aggregate value to the number of beds ranged from $2,929 to $6,776, with an
average of $4,489 and a median of $4,125, compared to $3,436 for CompScript
implied in the Merger. The 1998 price/earnings ratio for the Comparable
Companies ranged from 19.2x to 32.6x, with an average of 25.3x and a median of
24.6x, compared to 21.4x for CompScript implied in the Merger.
NationsBanc Montgomery also reviewed the value of Omnicare Shares compared
to the four companies engaged in the institutional pharmacy industry business
("the Omnicare Comparable Companies"). The Omnicare Comparable Companies
included: CompScript, NCS Healthcare, Inc., PharMerica, Inc. and Vitalink
Pharmacy Services. For each of the Omnicare Comparable Companies and Omnicare,
NationsBanc Montgomery obtained certain publicly available financial, operating
and stock market data, including LTM revenue, LTM earnings before interest,
taxes, depreciation & amortization ("EBITDA"), LTM EBIT, number of beds served,
projected calendar year 1998 earnings per share, recently reported total debt
and cash and cash equivalents, closing stock price as of February 20, 1998, and
the projected secular growth rate of earnings. Calendar year 1998 EPS estimates
for the Omnicare Comparable Companies were based on analysts' estimates as
reported by First Call. Projected secular growth rates for the Omnicare
Comparable Companies and Omnicare were obtained from Zacks Investment Research,
Inc., a market research database.
Based on this data, NationsBanc Montgomery calculated the following ratios
for each of the Omnicare Comparable Companies and for Omnicare: aggregate value
to LTM revenue; aggregate value to LTM EBITDA; aggregate value to LTM EBIT; 1998
price/earnings ratio; 1998 price/earnings ratio to secular growth rate; and
aggregate value to the number of beds served. The aggregate value to LTM revenue
for Omnicare was 3.4x compared to the range of 1.2x to 1.6x, with an average of
1.4x and a median of 1.5x, for the Omnicare Comparable Companies. The aggregate
value to LTM EBITDA for Omnicare was 24.5x compared to the range of 10.6x to
16.2x, with an average of 13.7x and a median of 14.4x, for the Omnicare
Comparable Companies. The aggregate value to LTM EBIT for Omnicare was 31.0x
compared to the range of 14.3x to 24.3x, with an average of 20.7x and a median
of 23.3x, for the Omnicare Comparable Companies. The 1998 price/earnings ratio
for Omnicare was 32.6x compared to the range of 15.8x to 29.0x, with an average
of 21.1x and a median of 19.7x, for the Omnicare Comparable Companies. The 1998
price/earnings ratio to secular growth rate for Omnicare was 98.9% compared to
the range of 81.0% to 109.6%, with an average of 92.9% and a median of 88.0%,
for the Omnicare Comparable Companies. The aggregate value to the number of beds
for Omnicare was $6,776 compared to the $2,576 to $4,389, with an average of
$3,439 and a median of $3,395, for the Omnicare Comparable Companies.
SELECTED COMPARABLE MERGERS AND ACQUISITIONS ANALYSIS. NationsBanc
Montgomery reviewed certain financial data for recently announced mergers and
acquisitions in the institutional pharmacy industry that were deemed to be
comparable to the Merger and in which the consideration paid was less than $100
million (the "Comparable Acquisitions"). The Comparable Acquisitions included:
Capstone Pharmacy/
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Med-Tec Pharmaceutical, Capstone Pharmacy/Willowood Services, Capstone
Pharmacy/PharmaCare, Capstone Pharmacy/IMD Corporation--Healthcare Pharmacy,
Capstone Pharmacy/Algers Health Services, Capstone Pharmacy/Clinical Care,
Capstone Pharmacy/Institutional Pharmacy, Inc., Capstone Pharmacy/ Happy
Harry's, Vitalink/Medisco Pharmacies, Genesis Health Ventures/Neighborcare
Pharmacies, Capstone Pharmacy/Geri-Care Systems.
For each such transaction NationsBanc Montgomery calculated the ratio of
aggregate value to LTM revenues and the ratio of aggregate value to number of
beds. All multiples were based on publicly available information at the time of
announcement of the Comparable Acquisitions. In the transactions valued at less
than $100 million, these calculations yielded a range of aggregate values to LTM
revenues of 0.5x to 1.5x with an average of 1.1x and a median of 1.1x and a
range of aggregate values to the number of beds of $882 to $3881 with an average
of $2,166 and a median of $1,765. NationsBanc Montgomery then calculated the
same ratios implied in the Merger. The calculations yielded an aggregate value
to LTM revenues of 1.7x and an aggregate value to the number of beds of $3,436.
PREMIUMS PAID ANALYSIS. NationsBanc Montgomery reviewed the premiums paid
in nineteen transactions that were deemed to be comparable to the Merger with
transaction values between $25 million and $150 million involving health care
services companies in the past two years. NationsBanc Montgomery analyzed the
following transactions: Multicare Companies/Concord Health Group, Horizon CMS
Healthcare Group/Medical Innovations, Medical Resources/NMR of America Inc.,
Diagnostic Imaging Services Inc./Primedex, HealthSouth Corp./Professional Sports
Care, Zila Inc./Bio-Dental Technologies, Diagnostic Imaging Services/Medical
Imaging Centers, U.S. Diagnostics/Medical Imaging Centers, Concentra Managed
Care/ReadiCare Inc., U.S. Diagnostic Labs/Alliance Imaging Inc., HealthSouth
Corp./ReadiCare Inc., HealthPlan Services Corp./Health Risk Management, Horizon
CMS Healthcare Group/Pacific Rehabilitation & Sports Medicine, Inc., FPA Medical
Management, Inc./AHI Healthcare Systems, MEDIQ Inc./ Universal Hospital Svcs.,
Sun Healthcare Group Inc./Contour Medical, Medical Resources/U.S. Diagnostics
Inc., Integrated Health Services Inc./Community Care of America,
MedPartners/America Service Group.
In each of these transactions, NationsBanc Montgomery calculated the
premiums of the price paid by acquirors over the target company's stock price
one day, one week and four weeks prior to public announcement of the
transaction. These calculations yielded average premiums paid based on the
target company's stock price one day, one week and four weeks prior to public
announcement of the transaction of 35.1%, 40.9% and 44.8%, respectively.
NationsBanc Montgomery then calculated the premium to be paid in the Merger
based on the value of $4.50 per CompScript Share to CompScript's Share prices
one day, one week and four weeks prior to public announcement of the Merger.
These calculations yielded premiums paid of 29.7%, 71.1% and 56.3%,
respectively.
DISCOUNTED CASH FLOW ANALYSIS. NationsBanc Montgomery performed a
discounted cash flow analysis on certain projected financial statements that
were provided to NationsBanc Montgomery by the management of CompScript.
In performing this analysis, NationsBanc Montgomery calculated the projected
stand-alone unlevered after-tax cash flows for the calendar years 1998 through
2004. NationsBanc Montgomery calculated CompScript's terminal values in calendar
year 2004 based on aggregate value/EBITDA multiples ranging from 12.0x to 15.0x.
The unlevered after-tax cash flows and the terminal value were discounted to the
present using discount rates ranging from 10.0% to 12.0%. This analysis yielded
an equity value range for CompScript of $2.58 to $3.18 per fully diluted share.
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The summary set forth above does not purport to be a complete description of
the presentation by NationsBanc Montgomery to the CompScript Board of Directors
or the analyses performed by NationsBanc Montgomery. The preparation of a
fairness opinion is not necessarily susceptible to partial analysis or summary
description. NationsBanc Montgomery believes that its analyses and the summary
set forth above must be considered as a whole and that selecting portions of its
analyses and of the factors considered, without considering all analyses and
factors, would create an incomplete view of the process underlying the analyses
set forth in its presentation to the CompScript Board of Directors. In addition,
NationsBanc Montgomery may have given various analyses more or less weight than
other analyses, and may have deemed various assumptions more or less probable
than other assumptions so that the ranges of valuations resulting from any
particular analysis described above should not be taken to be NationsBanc
Montgomery's view of the actual value of CompScript. The fact that any specific
analysis has been referred to in the summary above is not meant to indicate that
such analysis was given greater weight than any other analysis. In arriving at
its opinion, NationsBanc Montgomery did not ascribe a specific range of values
to CompScript, but rather made its determination as to the fairness, from a
financial point of view, of the consideration to be received by the holders of
CompScript's Shares in the Merger on the basis of the financial and comparative
analyses described above.
In performing its analyses, NationsBanc Montgomery made numerous assumptions
with respect to industry performance, general business and economic conditions
and other matters, many of which are beyond the control of CompScript. The
analyses performed by NationsBanc Montgomery are not necessarily indicative of
actual values or actual future results, which may be significantly more or less
favorable than suggested by such analyses. Such analyses were prepared solely as
part of NationsBanc Montgomery's analysis of the fairness of the transaction
contemplated by the Merger Agreement to CompScript's shareholders and were
provided to CompScript's Board of Directors in connection with the delivery of
NationsBanc Montgomery's opinion. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold or the prices
at which any securities may trade at the present time or at any time in the
future. NationsBanc Montgomery used in its analyses various projections of
future performance prepared by the management of CompScript. The projections are
based on numerous variables and assumptions which are inherently unpredictable
and must be considered not certain of occurrence as projected. Accordingly,
actual results could vary significantly from those set forth in such
projections.
Pursuant to the terms of NationsBanc Montgomery's engagement, CompScript has
agreed to pay NationsBanc Montgomery a fee in cash equal to 1.25 percent of the
consideration involved in the Merger, $250,000 of which became payable upon
delivery of its opinion and the remainder of which is contingent upon closing of
the Merger. Accordingly, a significant portion of NationsBanc Montgomery's fee
is contingent upon the Closing of the Merger. In addition to the foregoing fees,
CompScript has agreed to reimburse NationsBanc Montgomery for all reasonable
out-of-pocket costs and expenses (including counsel fees), subject to a cap of
$50,000. Pursuant to a separate letter agreement, CompScript had agreed to
indemnify NationsBanc Montgomery, its affiliates, and their respective partners,
directors, officers, agents, consultants, employees and controlling persons
against certain liabilities, including liabilities under federal securities
laws.
In the ordinary course of business, NationsBanc Montgomery actively trades
Omnicare Shares for its own account and for the accounts of customers and
accordingly, may at any time hold a long or short position in such securities.
NationsBanc Montgomery also has in the past performed certain investment banking
services for Omnicare, which included participation as an underwriter in a debt
offering in October 1993, as an underwriter in Omnicare's equity offerings in
November 1994 and March 1996, as a financial advisor to Omnicare in its
acquisition of Coromed in December 1997 and as an initial purchaser in a private
placement of convertible, subordinated debt in December 1997.
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ACCOUNTING TREATMENT OF THE MERGER
Omnicare and CompScript 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
unaudited pro forma financial information contained in this Proxy
Statement/Prospectus has been prepared using the pooling-of-interests accounting
method to account for the Merger. See "UNAUDITED PRO FORMA COMBINED FINANCIAL
INFORMATION."
The obligations of CompScript and Omnicare to consummate the Merger are
subject to (i) receipt of a letter from Price Waterhouse LLP, independent public
accountants for Omnicare, to the effect that Omnicare and the Merger and
transactions contemplated thereby qualify for "pooling of interests" accounting
treatment and (ii) receipt of a letter from Ernst & Young, LLP, independent
public accountants for CompScript, to the effect that CompScript will qualify as
a "combining company" as required for "pooling of interests" accounting
treatment. In addition, both Omnicare and CompScript have agreed not to take any
action or fail to take any action that would jeopardize the treatment of the
Merger as a "pooling of interests".
GOVERNMENTAL AND REGULATORY APPROVALS
Under the HSR Act, and the rules promulgated thereunder by the FTC, the
Merger cannot be consummated until notifications have been given and certain
information has been furnished to the FTC and the Antitrust Division and
specified waiting period requirements have been satisfied. The parties completed
their required filings by March 26, 1998 and have received early termination of
the waiting period.
At any time before or after consummation of the Merger, the Antitrust
Division of the FTC or any state could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking divestiture of substantial
assets of Omnicare or CompScript. Private parties may also seek to take legal
action under the antitrust laws under certain circumstances.
INTERESTS OF CERTAIN PERSONS IN THE MERGER; POSSIBLE CONFLICTS OF INTEREST
In considering the recommendation of the CompScript Board of Directors with
respect to the Merger Agreement, shareholders of CompScript should be aware that
certain members of the management of CompScript have certain interests in the
Merger that are different from, or in addition to, the interests of shareholders
of CompScript generally.
COMPSCRIPT EMPLOYMENT AGREEMENTS
Pursuant to the Merger Agreement, at the Effective Time, the current
directors of CompScript will be replaced; however, the executive officers of
CompScript will continue to serve as executive officers of the Surviving
Corporation following the Effective Time. Brian A. Kahan and Robert Gardner,
each a director of CompScript, are employed as Chief Executive Officer and
President, and Vice President, respectively, of CompScript pursuant to written
employment agreements, which agreements will terminate at the Effective Time.
From and after the Effective Time, the executive officers of CompScript will
serve as executive officers of the Surviving Corporation, under the following
terms and conditions.
It is anticipated that Messrs. Kahan and Gardner will enter into employment
or consulting agreements with the Surviving Corporation, under which they will
provide services to CompScript following the Merger, and receive compensation
and options to purchase Omnicare Shares. The terms of these agreements have not
yet been determined.
CompScript is a party to a written employment agreement with Juan C. Cocuy,
pursuant to which Mr. Cocuy is employed as CompScript's Chief Financial Officer
at an annual salary of $135,000, increasing
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to $150,000 commencing July 1, 1998. Mr. Cocuy also receives an automobile
allowance in the amount of $600 per month, and is entitled to participate in
bonus, stock option and insurance plans established for the benefit of
CompScript employees. Mr. Cocuy is entitled to terminate his employment and
receive severance benefits equal to one year's salary, in the event of a merger,
consolidation or similar sale of CompScript.
Pursuant to the Merger Agreement, various executive officers of certain
subsidiaries of CompScript, none of whom are directors or executive officers of
CompScript, will enter into new or revised employment agreements for terms of
three to five years, containing five year non-compete provisions and without
provisions governing any future changes of control.
OWNERSHIP OF COMPSCRIPT SHARES
Directors and executive officers who are also shareholders of CompScript are
entitled to participate in the Merger on the same basis as other shareholders of
CompScript, and, except as otherwise provided herein, will receive no extra or
special benefit by reason of their service as a director and/or executive
officer. As of the Record Date, directors and executive officers of CompScript,
as a group, beneficially owned an aggregate of 5,227,838 shares, or
approximately 35.2% of the currently issued and outstanding CompScript Shares.
The number of CompScript Shares beneficially owned by each such director and/or
executive officer is more fully set forth herein under the caption "BENEFICIAL
OWNERSHIP OF COMPSCRIPT SHARES".
COMPSCRIPT STOCK OPTIONS
Certain directors and executive officers have previously been granted
options to purchase CompScript Shares. As of the Record Date, directors and
executive officers of CompScript held options to purchase an aggregate of
786,952 CompScript Shares, including options to purchase an aggregate of 155,935
CompScript Shares held by non-employee directors. Such options are exercisable
for various periods through November 2007, at prices ranging from $2.50 to $5.13
per share. The following sets forth specific information concerning such
options:
<TABLE>
<CAPTION>
DATE NUMBER OF EXERCISE EXPIRATION
NAME GRANTED SHARES PRICE DATE
- ------------------------------------------------ --------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Brian A. Kahan 8/27/96 121,017 8/27/06
11/14/97 200,000 5$.13 $2.75 11/14/07
Robert J. Gardner 8/27/96 140,000 8/27/06
11/14/97 100,000 5$.13 $2.50 11/14/07
Juan C. Cocuy 11/14/97 70,000 $ 2.50 11/14/07
Malcolm Leonard 8/27/96 19,492 $ 5.13 8/27/06
Robert Edelheit 8/27/96 58,476 $ 5.13 8/27/06
Paul E. Heimberg 8/27/96 77,967 $ 5.13 8/27/06
</TABLE>
At the Effective Time, each CompScript Option outstanding immediately prior
to the Effective Time shall be amended and converted into an option to acquire,
on the same terms and conditions as were applicable under such CompScript
Option, the number of Omnicare Shares (rounded up to the nearest whole share)
determined by multiplying the number of CompScript Shares subject to such
CompScript Option by the Conversion Ratio, at an exercise price per Omnicare
Share equal to the price per share specified in such CompScript Option divided
by the Conversion Ratio; provided that such exercise price shall be rounded up
to the nearest whole cent. CompScript will also promptly make such other changes
to any plan or arrangement providing for the grant of options to purchase
CompScript Shares as Omnicare and CompScript may agree as appropriate to give
effect to the Merger.
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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 generally applicable to holders of CompScript Shares.
It is a condition to the obligation of Omnicare to consummate the Merger that
Omnicare shall have received an opinion of Dewey Ballantine LLP, in form and
substance reasonably satisfactory to Omnicare, and it is a condition to the
obligation of CompScript to consummate the Merger that CompScript shall have
received an opinion of Atlas, Pearlman, Trop & Borkson, P.A., in form and
substance reasonably satisfactory to CompScript, in each case dated as of the
Closing Date and based on reasonably requested representations contained in
certificates of Omnicare, CompScript and Sub, to the effect that the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Code and
that CompScript, Omnicare, and Sub will each be a party to that reorganization
within the meaning of Section 368(b) of the Code. The discussion below under
"--Exchange of CompScript Shares for Omnicare Shares", "--Cash Received in Lieu
of Fractional Shares" and "-- Reporting Requirements" assumes that the Merger
will be treated in accordance with the opinions of Dewey Ballantine LLP and
Atlas, Pearlman, Trop & Borkson, P.A. described in the preceding sentence. There
can be no assurance that the Internal Revenue Service (the "IRS") will not take
a contrary view, and no ruling from the IRS has been or will be sought.
The discussion below 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
legislative, judicial or administrative changes or interpretations could alter
or modify the statements and conclusions set forth herein, and any such changes
or interpretations could have retroactive effect and could affect the federal
income tax consequences to holders of CompScript Shares.
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 shareholder in light of such
shareholder's particular circumstances or to shareholders subject to special
rules, including, without limitation, financial institutions, insurance
companies, foreign individuals and entities, tax-exempt entities, dealers in
securities, persons who acquired CompScript Shares pursuant to the exercise of
an employee option (or otherwise as compensation) or persons holding CompScript
Shares as part of an integrated investment (including a "straddle") comprised of
CompScript Shares and one or more other positions. This discussion assumes that
CompScript shareholders hold their respective CompScript Shares as capital
assets within the meaning of Section 1221 of the Code.
EXCHANGE OF COMPSCRIPT SHARES FOR OMNICARE SHARES. 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 CompScript Shares
who exchange their CompScript Shares for Omnicare Shares pursuant to the Merger.
The aggregate tax basis of Omnicare Shares received as a result of the Merger
will be the same as the shareholder's aggregate tax basis in the CompScript
Shares surrendered in the exchange (reduced by any tax basis allocable to
fractional shares exchanged for cash) and the holding period of the Omnicare
Shares received will include the holding period of the CompScript Shares
surrendered therefor.
CASH RECEIVED IN LIEU OF FRACTIONAL SHARES. The payment of cash to a holder
of CompScript Shares in lieu of a fractional share interest in Omnicare Shares
will be treated as if the fractional share had been distributed as part of the
exchange and then redeemed by Omnicare. The cash payment will be treated as
having been received as a distribution in payment for the Omnicare Shares
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 CompScript Shares allocable to such fractional share interest. Such
capital gain or loss will be long-term capital gain or loss if such CompScript
Shares have been held for more than one year at the Effective Time. In the case
of individuals, "net capital gain" (i.e., the excess of net long-term capital
gain over net short-term capital loss) is generally subject to a reduced rate of
federal income tax. Capital gains and losses
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<PAGE>
from property held for more than 18 months will be taken into account in
determining "adjusted net capital gain," which is subject to a further reduction
in the rate of federal income tax.
DISSENTERS. The tax consequences to a CompScript shareholder who exercises
dissenter's rights with respect to CompScript Shares and receives payment for
such CompScript Shares in cash generally will not depend on the qualification of
the Merger as a reorganization for federal income tax purposes. Such shareholder
generally will recognize capital gain or loss for federal income tax purposes,
measured by the difference between the holder's basis in such CompScript Shares
and the amount of cash received (other than the amount of cash received, if any,
that is or is deemed to be interest for federal income tax purposes (which
amount will be taxed as ordinary income)). Any capital gain or loss recognized
will be long-term capital gain or loss if such CompScript Shares have been held
for more than one year. In the case of individuals, "net capital gain" (i.e.,
the excess of net long-term capital gain over net short-term capital loss) is
generally subject to a reduced rate of federal income tax. Capital gains and
losses from property held for more than 18 months will be taken into account in
determining "adjusted net capital gain," which is subject to a further reduction
in the rate of federal income tax.
REPORTING REQUIREMENTS. Each holder of CompScript Shares that receives
Omnicare Shares in the Merger will be required to retain records and file with
such holder's federal income tax return a statement setting forth certain facts
relating to the Merger.
BACKUP WITHHOLDING. Unless an exemption applies under the applicable law
and regulations, the Exchange Agent (as defined in "THE MERGER AGREEMENT AND
RELATED AGREEMENTS-- Consideration to be Received in the Merger") is required to
withhold, and will withhold, 31% of any cash payments to a CompScript
shareholder in the Merger unless the shareholder provides the appropriate form
as described below. Each CompScript shareholder should complete and sign the
Substitute Form W-9 included as part of the letter of transmittal to be sent to
each CompScript shareholder, so as to provide the information (including the
shareholder'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.
THE FOREGOING GENERAL DISCUSSION OF THE MATERIAL FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER IS WITHOUT REFERENCE TO THE FACTS AND CIRCUMSTANCES
OF ANY PARTICULAR SHAREHOLDER AND IS NOT TAX ADVICE. THE DISCUSSION DOES NOT
ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF
THE MERGER. MOREOVER, THE DISCUSSION DOES NOT ADDRESS THE TAX CONSEQUENCES OF
ANY TRANSACTION OTHER THAN THE MERGER. ACCORDINGLY, EACH SHAREHOLDER IS URGED
AND EXPECTED TO CONSULT WITH SUCH SHAREHOLDER'S TAX ADVISOR TO DETERMINE THE
PARTICULAR UNITED STATES FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX
CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER.
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<PAGE>
THE MERGER AGREEMENT AND RELATED AGREEMENTS
THIS PROXY STATEMENT/PROSPECTUS CONTAINS A BRIEF SUMMARY OF THE MERGER
AGREEMENT, THE STOCK OPTION AGREEMENT AND THE VOTING AGREEMENT. THIS SUMMARY IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXTS OF SUCH AGREEMENTS,
WHICH ARE INCLUDED AS APPENDICES A, B AND C HERETO AND WHICH ARE INCORPORATED
HEREIN BY REFERENCE.
GENERAL
Pursuant to the Merger Agreement, Sub will be merged with and into
CompScript and CompScript will become a wholly-owned subsidiary of Omnicare. At
the Effective Time, each outstanding CompScript Share (other than shares held by
holders who properly exercise dissenter's rights under Florida law) will be
converted into Omnicare Shares (or cash in lieu of fractional shares) as
described herein.
CONSIDERATION TO BE RECEIVED IN THE MERGER
At the Effective Time, each CompScript Share issued and outstanding
immediately prior to the Effective Time (other than 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 Omnicare Shares equal to $4.50 divided by the Omnicare Average Market Price,
provided, however, that (i) if the Omnicare Average Market Price is less than
$29.325, the Omnicare Average Market Price shall be deemed to be $29.325 and
(ii) if the Omnicare Average Market Price is more than $39.675, the Omnicare
Average Market Price shall be deemed to be $39.675. "Omnicare Average Market
Price" means the average of the closing prices of the Omnicare Shares on the
NYSE for the 10 trading days immediately preceding the fifth trading day
preceding the Closing Date. In the event of any change in the CompScript Shares
or the Omnicare Shares by reason of any stock split, readjustment, stock
dividend, exchange or shares, reclassification, recapitalization or similar
event, the amounts set forth in clauses (i) and (ii) above shall be
appropriately adjusted. Notwithstanding the foregoing, in the event the Omnicare
Average Market Price is less than $24.15 or more than $44.85, Omnicare and
CompScript will seek to renegotiate a new acceptable Conversion Ratio which will
then replace the Conversion Ratio described above (the "Collar Limitations"). In
the event that Omnicare and CompScript are unable to establish a mutually
acceptable Conversion Ratio within two business days after the scheduled Closing
Date, then if the Omnicare Average Market Price is (i) less than $24.15,
CompScript shall have the right to terminate the Merger Agreement or (ii) more
than $44.85, Omnicare shall have the right to terminate the Merger Agreement.
Any such termination shall be deemed a termination by mutual consent in
accordance with termination provisions of the Merger Agreement.
No fractional Omnicare Shares will be issued in the Merger. Each holder of
CompScript Shares who upon surrender of certificates representing such
CompScript Shares (each, a "Certificate") therefor would be entitled to receive
a fraction of an Omnicare Share will receive, in lieu of such fractional
Omnicare Share, cash in an amount equal to such fraction multiplied by the
Omnicare Average Market Price, less the amount of any withholding taxes which
may be required thereon under any provision of federal, state, local or foreign
tax law.
Each CompScript Share issued and held in CompScript'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 promptly as practicable after the Effective Time, Omnicare shall deposit
with a bank or trust company designated by Omnicare to act as exchange agent
(the "Exchange Agent"), in trust for the holders of Certificates, certificates
representing the Omnicare Shares issuable to CompScript shareholders.
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<PAGE>
EXCHANGE OF SHARES
Promptly after the Effective Time, the Exchange Agent shall mail or cause to
be mailed to each record holder, as of the Effective Time, of CompScript Shares,
(i) a letter of transmittal for delivery of the Certificates and (ii)
instructions pertaining the above-referenced letter of transmittal.
Upon surrender to the Exchange Agent of a Certificate, together with the
letter of transmittal duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor that number of Omnicare Shares which
such holder has the right to receive (and any amount of cash payable in lieu of
fractional shares), less the amount of any withholding taxes which may be
required thereon under any provision of federal, state, local or foreign tax
law.
No dividends or other distributions declared after the Effective Time on
Omnicare Shares shall be paid with respect to any CompScript Shares represented
by a Certificate until such Certificate is surrendered for exchange as provided
herein. Subject to the effect of applicable laws, following such surrender,
there shall be paid, without interest, to the record holder of the Omnicare
certificates (i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time payable prior to or on
the date of such surrender with respect to such whole shares of Omnicare Shares,
and not paid, and the amount of cash payable in lieu of any fractional shares,
less the amount of any withholding taxes which may be required thereon under any
provision of federal, state, local or foreign tax law 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 the date of surrender and a
payment date subsequent to the date of surrender payable with respect to such
whole shares of Omnicare Shares, less the amount of any withholding taxes which
may be required thereon under any provision of federal, state, local or foreign
tax law.
COMPSCRIPT SHAREHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. COMPSCRIPT
SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
TREATMENT OF OPTIONS
As of February 23, 1998, there were outstanding CompScript Options to
purchase a total of 1,648,262 CompScript Shares. At the Effective Time, each
CompScript Option outstanding immediately prior to the Effective Time shall be
amended and converted into an option to acquire, on the same terms and
conditions as were applicable under such CompScript Option, the number of
Omnicare Shares (rounded up to the nearest whole share) determined by
multiplying the number of CompScript Shares subject to such CompScript Option by
the Conversion Ratio, at an exercise price per Omnicare Share equal to the price
per share specified in such CompScript Option divided by the Conversion Ratio;
provided that such exercise price shall be rounded up to the nearest whole cent.
CompScript will also promptly make such other changes to any plan or arrangement
providing for the grant of options to purchase CompScript Shares as Omnicare and
CompScript may agree as appropriate to give effect to the Merger.
REPRESENTATIONS AND WARRANTIES
CompScript and Omnicare have made representations in the Merger Agreement
relating to, among other things: (a) each of CompScript's and Omnicare's
capitalization and organization and similar corporate matters, (b)
authorization, execution, delivery and enforceability of the Merger Agreement,
(c) conflicts under governing documents, required consents or approvals, and
violations of any agreements or law, (d) documents filed with the Commission and
the accuracy of information contained therein, (e) absence of material adverse
events, changes or effects, (f) brokers and finders, and (g) tax and accounting
matters relating to the proposed Merger.
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CompScript has made additional representations, among others, relating to
(a) the applicability of state anti-takeover laws, (b) receipt of an opinion of
its financial advisor, (c) compliance with law, including compliance with
environmental, tax and healthcare laws and regulations, (d) retirement and other
employee plans and matters relating to the Employee Retirement Income Security
Act of 1974, as amended, (e) the disclosure and enforceability of certain
material contracts, (f) litigation and the absence of undisclosed liabilities,
(g) certain business matters relating to inventories, permits and licenses,
customers, insurance, product warranties and intellectual property, and (h) the
absence of contracts or disputes with labor unions or organizations.
The representations and warranties of each of CompScript and Omnicare shall
not survive the Closing.
CONDUCT OF THE BUSINESS OF COMPSCRIPT
CompScript has covenanted to Omnicare that from the date of the Merger
Agreement to the Effective Time, CompScript and its subsidiaries will conduct
their operations substantially as presently operated and only in the ordinary
course of business, consistent with past practice and will use commercially
reasonable efforts to preserve intact their business organization, to keep
available the services of their officers and employees and to maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it and will take no action which would
adversely affect its ability to consummate the transactions contemplated by the
Merger Agreement. The Merger Agreement contains specific restrictions on (i)
changes in capitalization, (ii) dividends and distributions, (iii) incurrence of
debt, (iv) changes in compensation and (v) acquisitions or dispositions of
assets or securities.
EXCLUSIVITY
CompScript agrees that, prior to the Effective Time, except as provided
below it shall not, and shall cause its subsidiaries and its and its
subsidiaries' directors, officers, employees, agents or representatives
(including, without limitation, any attorney, financial advisor, investment
banker or accountant) not to, directly or indirectly, solicit, initiate,
facilitate or encourage (including by way of furnishing or disclosing
information), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to any Transaction Proposal (as defined below), or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain a Transaction Proposal or agree to or endorse any
Transaction Proposal or authorize or permit any of its officers, directors or
employees or any of its subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to take any such action; provided, however, that nothing
contained in the Merger Agreement shall prohibit the CompScript Board of
Directors from (i) furnishing information to or entering into discussions or
negotiations with any person or entity that makes an unsolicited written, bona
fide Transaction Proposal which such person or entity has such funds or
commitments therefor and which in the reasonable judgment of the CompScript
Board of Directors is reasonably capable of consummation if, and only to the
extent that (A) the CompScript Board of Directors, after consultation with its
financial advisors and after consultation with and based upon advice of
independent legal counsel determines in good faith that such action is necessary
for the CompScript Board of Directors to comply with its fiduciary duties to
shareholders under applicable law and (B) prior to taking such action CompScript
receives from such person or entity an executed confidentiality agreement
containing reasonable and customary terms and provisions, at a minimum, at least
as favorable to CompScript as the covenant in the Merger Agreement whereby
Omnicare agrees to hold and cause its representatives to hold in confidence all
non-public documents and information furnished in connection with the Merger
Agreement, or (ii) withdrawing, modifying or changing its recommendation to
CompScript shareholders that they vote in favor of the Merger Agreement and the
consummation of the transactions contemplated thereby if there exists a
Transaction
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Proposal and the CompScript Board of Directors, after consultation with its
financial advisors and after consultation with, and based upon the advice of
independent legal counsel, determines in good faith that such action is
necessary for the CompScript Board of Directors to comply with its fiduciary
duties to shareholders under applicable law in connection with such Transaction
Proposal. CompScript shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any other party with
respect to any Transaction Proposal. CompScript shall immediately advise
Omnicare, orally and in writing, of any inquiries or proposals relating to any
Transaction Proposal known to it (including any amendments or modifications
thereto), the material terms and conditions of such inquiry or proposal, any
written materials submitted in connection therewith and the identity of the
person or entity making such inquiry or proposal. CompScript shall give Omnicare
at least one business day advance notice of any information to be supplied to,
any person or entity making such a proposal for a Transaction Proposal with
respect to CompScript or any subsidiary. CompScript shall not enter into any
agreements (other than a confidentiality agreement, as set forth above) with any
person or entity making such inquiry or proposal.
As used herein, "Transaction Proposal" means any of the following (other
than the transactions between CompScript and Sub contemplated by the Merger
Agreement) involving CompScript or any of its subsidiaries: (i) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of 20% or more of the assets of CompScript and its
subsidiaries, taken as a whole, in a single transaction or series of
transactions or any issuance of securities of CompScript or any subsidiary,
(iii) any tender offer or exchange offer for, or the acquisition (or right to
acquire) of "beneficial ownership" by any person, "group" or entity (as such
terms are defined under Section 13(d) of the Exchange Act), of 20% or more of
the outstanding shares of capital stock of CompScript or the filing of a
registration statement under the Securities Act in connection therewith or (iv)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
INDEMNIFICATION
The Merger Agreement provides that for all times after the Effective Time,
Omnicare shall cause the Surviving Corporation to indemnify present and former
officers and directors of CompScript. Further, Omnicare shall or shall cause the
Surviving Corporation to maintain in effect for a period of not less than three
years after the Effective Time, the current policies of directors and officers
liability insurance maintained by CompScript; provided that Omnicare or the
Surviving Corporation, as applicable, shall not be required to spend as an
annual premium for such insurance an amount in excess of 150% of the annual
premium paid for such insurance in effect prior to the date of the Merger
Agreement.
RESALES OF OMNICARE SHARES
All Omnicare Shares received by CompScript shareholders in the Merger will
be freely transferable pursuant to the Securities Act, except that Omnicare
Shares received by persons who are deemed to be "affiliates" (as such term is
defined under the Securities Act) of CompScript 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 deemed to be affiliates of a company
generally include individuals or entities that control, are controlled by, or
are under common control with, such company and may include certain officers and
directors of such company as well as principal shareholders of such company. The
Merger Agreement requires CompScript 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 Shares 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
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counsel reasonably acceptable to Omnicare is available. CompScript has
identified the Principal Shareholder as a current affiliate of CompScript.
The Affiliate Letters provide that such affiliate not dispose of any
Omnicare Shares until the financial results of at least 30 days of post-Merger
combined operations of CompScript and Omnicare have been made publicly
available. Omnicare agreed that, as promptly as practicable following the
Effective Time and in no event later than the earlier of (i) 90 days after the
end of the calendar month in which the Effective Time occurs and (ii) 120 days
after the Effective Time, Omnicare will publicly release the financial results
of Omnicare and CompScript for a 30 day period following the Effective Time.
CONDITIONS TO THE MERGER
The respective obligations of each party hereto to effect the Merger are
subject to the fulfillment at or prior to the Closing Date of the following
conditions:
(a) the Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order, and Omnicare shall have received all state securities laws
or "blue sky" permits and authorizations necessary to issue Omnicare Shares in
exchange for CompScript Shares in the Merger, (b) the Merger Agreement shall
have been approved by the requisite vote of the shareholders of CompScript, (c)
all necessary consents and approvals of any United States or any other
governmental authority required for the consummation of the transactions
contemplated by the Merger Agreement shall have been obtained, and any waiting
period applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated, (d) the Omnicare Shares issued in the Merger shall
have been authorized for listing on the NYSE, subject to official notice of
issuance, (e) each of Omnicare and CompScript shall have received letters from
Ernst & Young, LLP and Price Waterhouse LLP, reasonably satisfactory to each of
them in all respects, that the Merger will qualify for pooling-of-interests
accounting treatment, and (f) Omnicare shall have received an opinion of
Omnicare's counsel, in form and substance reasonably satisfactory to Omnicare,
and CompScript shall have received an opinion of CompScript's counsel, in form
and substance reasonably satisfactory to CompScript, in each case based on
reasonably requested representations contained in certificates of Omnicare,
CompScript and Sub, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and that
Omnicare, Sub and CompScript shall each be a party to that reorganization within
the meaning of Section 368(b) of the Code.
The obligations of CompScript to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of Omnicare and Sub contained in the
Merger Agreement shall be true and correct on the date of the Merger Agreement
and at and on the Closing Date as though such representations and warranties
were made at and on such date, except for such untruths or inaccuracies which
would not (without regard for any materiality qualifiers therein), individually
or in the aggregate, have a material adverse effect on Omnicare, (b) Omnicare
and Sub shall have complied, in all material respects, with all agreements,
obligations and conditions required by the Merger Agreement to be complied with
by them on or prior to the Closing Date, (c) CompScript shall have received a
certificate signed by an officer of each of Omnicare and Sub certifying as to
(i) compliance with the conditions set forth in (a) and (b) above, (ii) the
accuracy and completeness of the Bylaws of Sub and, as applicable, the director
and shareholder resolutions adopted of Omnicare and Sub approving the Merger
Agreement, the Merger and the transactions contemplated hereby, and (iii) the
identity and authority of the officers and other persons executing documents on
behalf of Omnicare and Sub, (d) no statute, rule, regulation, order, injunction,
writ or decree shall have been enacted, entered, ordered, promulgated or
enforced by any governmental entity which prohibits the consummation of the
Merger and no legal action shall be pending or threatened which is reasonably
likely to have a material adverse effect on Omnicare, (e) there shall have been
no material adverse change in the business, operations, assets, prospects,
financial condition or
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results of operations of Omnicare and its subsidiaries taken as a whole, and (f)
Sub shall have delivered to CompScript the Articles of Merger, executed by duly
authorized officers of Sub.
The obligations of Omnicare and Sub to effect the Merger are subject to the
satisfaction at or prior to the Effective Time of the following conditions:
(a) The representations and warranties of CompScript contained herein shall
be true and correct on the date of the Merger Agreement and at and on the
Closing Date as though such representations and warranties were made at and on
such date, except for such untruths or inaccuracies which would not (without
regard for any materiality qualifiers therein), individually or in the
aggregate, have a material adverse effect on CompScript, (b) CompScript shall
have complied, in all material respects, with all agreements, obligations and
conditions required by the Merger Agreement to be complied with by it on or
prior to the Closing Date, (c) Omnicare and Sub shall have received a duly
executed certificate signed by the President of CompScript certifying as to (i)
compliance with the conditions set forth in (a) and (b) above, (ii) the accuracy
and completeness of the CompScript Bylaws and the director and shareholder
resolutions of CompScript approving the Merger Agreement, the Merger and the
transactions contemplated hereby, and (iii) the identity and authority of the
officers and other persons executing documents on behalf of CompScript, (d)
Omnicare shall have received a certificate of the Secretary of State of the
State of Florida certifying the CompScript Articles, dated not more than ten
days prior to the Closing Date, (e) Omnicare shall have received a certificate
of good standing, or its equivalent, dated no more than ten (10) days prior to
the Closing Date, from the state of incorporation of CompScript and each
subsidiary and each other state in which CompScript and each subsidiary are
qualified to do business, (f) no statute, rule, regulation, order, injunction,
writ or decree shall have been enacted, entered, ordered, promulgated or
enforced by any governmental authority which prohibits the consummation of the
Merger and no legal action shall be pending or threatened which is reasonably
likely to have a material adverse effect on CompScript, (g) Omnicare and Sub
shall have received copies of consents of all third parties (x) necessary for
CompScript to execute, deliver and perform the Merger Agreement and consummate
the Merger and (y) where failure to obtain such consents in the aggregate would
have a material adverse effect on CompScript, (h) on the Closing Date, the
aggregate number of CompScript Shares with respect to which the holders shall be
dissenting shareholders entitled to relief under Section 607.1302 of the FBCA
shall not exceed 10% of all outstanding CompScript Shares, (i) there shall have
been no material adverse change in the business, operations, assets, prospects,
financial condition or results of operations of CompScript and its subsidiaries
taken as a whole, (j) Omnicare and Sub shall have received from each person who
is deemed an affiliate of CompScript for purposes of Rule 145 an executed copy
of the Affiliate Letter and such agreements shall be in full force and effect
and there shall be no breach, or in existence any facts which with passage of
time or otherwise could constitute a breach, thereof, (k) CompScript shall have
delivered to Omnicare the Articles of Merger as executed by duly authorized
officers of CompScript, (l) certain employees of CompScript and its subsidiaries
shall have entered into a valid and binding employment, consulting or
non-competition agreement containing the terms set forth therein and otherwise
on terms reasonably satisfactory to Omnicare, and (m) if requested by Omnicare,
CompScript 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."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the shareholders of CompScript or
Omnicare: (a) by mutual consent of Omnicare and CompScript, (b) by either
Omnicare or CompScript, if any court of competent jurisdiction in the United
States or other governmental body in the United States shall have issued an
order (other than a temporary restraining order), decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the Merger, and
such order, decree, ruling or other action shall have become final and
nonappealable,
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(c) by either Omnicare or CompScript, if the shareholder approval of the
shareholders of CompScript is not obtained at a meeting of shareholders duly
called and held therefor, or (d) by either Omnicare or CompScript if the Merger
shall not have been consummated by January 15, 1999, provided that a party in
material breach of the Merger Agreement may not terminate the Merger Agreement
in this manner.
The Merger Agreement may be terminated and the Merger may be abandoned, at
any time prior to the Effective Time, before or after the approval of the
shareholders of CompScript, by Omnicare if (a) CompScript shall have failed to
comply in any material respect with any of the covenants or agreements contained
in the Merger Agreement to be complied with by CompScript at or prior to such
date of termination, (b) there exists a breach of any representation or warranty
of CompScript contained in the Merger Agreement, provided, however, that, with
respect to either (a) or (b), if such failure or breach is capable of being
cured prior to the Effective Time, such failure or breach shall not have been
cured within fifteen (15) days of delivery to CompScript of written notice of
such failure or breach, or (c) the CompScript Board shall withdraw, modify or
change its recommendation of the Merger Agreement or the Merger in a manner
adverse to Omnicare or shall have failed to reaffirm its recommendation within
five business days of Omnicare's request that it do so or shall have recommended
or issued a neutral recommendation (or taken no position) with respect to any
proposal in respect of a Transaction Proposal (as defined earlier).
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by the
shareholders of CompScript, by CompScript, if (a) Omnicare or Sub shall have
failed to comply in any material respect with any of the covenants or agreements
contained in the Merger Agreement to be complied with by Omnicare or Sub at or
prior to such date of termination, (b) there exists a breach of any
representation or warranty of Omnicare or Sub contained in the Merger Agreement,
provided, however, that, with respect to either (a) or (b), if such failure or
breach is capable of being cured prior to the Effective Time, such failure or
breach shall not have been cured within fifteen (15) days of delivery to
Omnicare or Sub of written notice of such failure or breach, or (c) prior to the
CompScript shareholder meeting, if the CompScript Board, in the exercise of its
good faith judgment as to fiduciary duties to its shareholders imposed by law,
based upon the advice of outside counsel, determines that such termination is
required in order to execute an agreement providing for the implementation of
the transactions contemplated by a Transaction Proposal, PROVIDED, HOWEVER, that
(i) CompScript shall have complied with the provision of the Merger Agreement
prohibiting solicitation of Transaction Proposals, including providing notice of
the terms of the Transaction Proposal and (ii) at least ten business days shall
have elapsed after CompScript has notified Omnicare of the final terms of such
Transaction Proposal. No termination of the Merger Agreement by the CompScript
shall be effective unless and until CompScript has paid Omnicare any amounts
owed by it as a result of the termination (as described below).
In the event of termination and abandonment of the Merger by Omnicare or
CompScript pursuant to the means described above, written notice thereof shall
forthwith be given to the other.
TERMINATION FEES; EXPENSES OF THE MERGER
In the event the Merger Agreement is terminated or abandoned by any of the
means described above, neither Omnicare nor CompScript (or any of its directors
of officers) shall have any liability or further obligation to any other party
to the Merger Agreement, except as provided below. No party shall be relieved
from liability for willful breach of the Merger Agreement.
CompScript shall pay Omnicare a fee of $3.2 million in the event that:
(a) the Merger Agreement is terminated by either Omnicare or CompScript
following the making of a Transaction Proposal, if CompScript shareholders
do not approve the Merger at a meeting of shareholders duly called and held
therefor;
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(b) the Merger Agreement is terminated by Omnicare if (i) CompScript has failed
to comply in any material respect with any of the covenants or agreements
contained in the Merger Agreement to be complied with by CompScript at or
prior to such date of termination, or (ii) the Board of Directors of
CompScript shall withdraw, modify or change its recommendation of the Merger
Agreement or the Merger in a manner adverse to Omnicare or shall have failed
to reaffirm its recommendation within five business days of Omnicare's
request that it do so or shall have recommended or issued a neutral
recommendation (or taken no position) with respect to any proposal in
respect of a Transaction Proposal; or
(c) the Merger Agreement is terminated by CompScript prior to the CompScript
shareholder meeting, if the CompScript Board, in the exercise of its good
faith judgment as to fiduciary duties to its shareholders imposed by law,
based upon the advice of outside counsel, determines that such termination
is required in order to execute an agreement providing for the
implementation of the transactions contemplated by a Transaction Proposal,
PROVIDED, HOWEVER, that (i) CompScript shall have complied with the
provision of the Merger Agreement prohibiting solicitation of Transaction
Proposals, including providing notice of the terms of the Transaction
Proposal and (ii) at least ten business days shall have elapsed after
CompScript has notified Omnicare of the final terms of such Transaction
Proposal.
In the event that the Merger Agreement is terminated by Omnicare because
there exists a breach of any representation or warranty of CompScript contained
in the Merger Agreement, then CompScript shall reimburse Omnicare for its
reasonable out-of-pocket expenses incurred in connection with the Merger
Agreement and the transactions contemplated hereby.
In the event that the Merger Agreement is terminated by CompScript because
(a) Omnicare or Sub shall have failed to comply in any material respect with any
of the covenants or agreements contained in the Merger Agreement to be complied
with by Omnicare or Sub at or prior to such date of termination, or (b) there
exists a breach of any representation or warranty of Omnicare or Sub contained
in the Merger Agreement, then Omnicare shall reimburse CompScript for its
reasonable out-of-pocket expenses incurred in connection with the Merger
Agreement and the transactions contemplated hereby.
If CompScript fails to promptly pay the amount due in termination fees and
expenses, and, in order to obtain such payment, Omnicare commences a suit which
results in a judgment against CompScript for such termination fees and expenses,
CompScript shall pay to Omnicare its costs and expenses (including attorneys'
fees) in connection with such suit, together with interest on the amount of such
termination fees and expenses at the rate of 12% per annum from the date such
termination fees and expenses were required to be paid.
Except as provided above, Omnicare and Sub, on the one hand, and CompScript,
on the other hand, shall bear their respective expenses incurred in connection
with the Merger, including, without limitation, the preparation, execution and
performance of the Merger Agreement and the transactions contemplated thereby,
including all fees and expenses of its representatives, counsel and accountants,
except that (i) expenses incurred in printing, mailing and filing (including
without limitation, SEC filing fees) the Proxy Statement/Prospectus shall be
shared equally by CompScript and Omnicare, and (ii) the filing fee payable in
connection with the parties' compliance with the HSR Act shall be borne solely
by Omnicare.
STOCK OPTION AGREEMENT
THE OPTION
In order to induce Omnicare to enter into the Merger Agreement, CompScript
entered into the Stock Option Agreement. Pursuant to the Stock Option Agreement,
Omnicare has been granted an Option, under the circumstances described below, to
purchase the Option Shares (approximately 19.9% of the
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outstanding CompScript Shares as of February 23, 1998 prior to giving effect to
the exercise of such Option), at the Option Price equal to $4.50 per share. The
Stock Option Agreement could have the effect of making an acquisition of
CompScript by a third party more costly because of the need to acquire in any
such transaction the Option Shares issued under the Stock Option Agreement, and
could also jeopardize the ability of a third party to acquire CompScript in a
transaction accounted for as a pooling-of-interests.
The Option may be exercised by Omnicare, in whole or in part, at any time,
or from time to time, following the occurrence of one of the Triggering
Conditions described in the following paragraph. Omnicare may exercise the
Option by either (a) paying the Option Price in cash and receiving the Option
Shares (which exercise requires the satisfaction of certain additional
conditions) or (b) electing, in lieu of the payment of the Option Price and the
receipt of the Option Shares, to receive a cash payment (the "Cash Payment")
from CompScript (which Cash Payment shall not be payable unless and until
certain additional conditions have been satisfied). Such Cash Payment shall be
in the amount of the excess, if any, over the Option Price of the higher of (x)
if applicable, the highest price per CompScript Share (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid or proposed to be
paid by any person pursuant to one of the Triggering Conditions or (y) the
average of the closing prices (or the average of the closing bid and asked
prices if closing prices are unavailable) of the shares of CompScript Shares as
reported on Nasdaq on the last trading day immediately prior to the receipt by
CompScript of Omnicare's notice of its intention to receive the Cash Payment,
multiplied by all or such portion of the Option Shares as Omnicare specifies in
such notice.
TRIGGERING CONDITIONS
The Option may be exercised on satisfaction of certain conditions, including
the occurrence of at least one of the following "Triggering Conditions": (i) any
person (other than Omnicare or any of its subsidiaries) shall have commenced (as
such term is defined in Rule 14d-2 under the Exchange Act) a tender offer, or
shall have filed a registration statement under the Securities Act with respect
to an exchange offer, to purchase any shares of CompScript Shares such that,
upon consummation of such offer, such person or a "group" (as such term is
defined under the Exchange Act) of which such person is a member shall have
acquired beneficial ownership (as such term is defined in Rule 13d-3 of the
Exchange Act), or the right to acquire beneficial ownership, of 15% or more of
the then outstanding CompScript Shares, (ii) any person (other than Omnicare or
any of its subsidiaries) shall have publicly announced or delivered to
CompScript a proposal, or disclosed publicly or to CompScript an intention to
make a proposal, to purchase 15% or more of the assets or any equity securities
of, or to engage in a merger, reorganization, tender offer, share exchange,
consolidation or similar transaction involving CompScript or any of its
subsidiaries (an "Acquisition Transaction"), (iii) CompScript or any of its
subsidiaries shall have authorized, recommended, proposed or publicly announced
an intention to authorize, recommend or propose, or entered into, an agreement,
including without limitation, an agreement in principle, with any person (other
than Omnicare or any of its subsidiaries) to effect or provide for an
Acquisition Transition, (iv) any person shall solicit proxies or consents or
announce a bona fide intention to solicit proxies or consents from CompScript's
shareholders (x) relating to directors, (y) in opposition to the Merger, the
Merger Agreement or any related transactions or (z) relating to an Acquisition
Transaction (other than solicitations of shareholders seeking approval of the
Merger, the Merger Agreement or any related transactions), (v) any person shall
have made a Transaction Proposal, or (vi) any person (other than Omnicare or any
of its subsidiaries) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 under the Exchange Act) or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, shares of CompScript Shares (other than trust account
shares) aggregating 15% or more of the then outstanding CompScript Shares.
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SALE RIGHTS
The Stock Option Agreement provides that at any time prior to the first
anniversary of the termination of the Merger Agreement, Omnicare shall have the
right to sell (the "Sale Right") to CompScript all (but not less than all) of
the Option Shares previously purchased by Omnicare at a price equal to the
greater of (i) the Option Price or (ii) the average of the last sales prices for
shares of CompScript Shares on the five trading days ending five days prior to
the date Omnicare gives notice of its intention to exercise such right. The
Stock Option Agreement further provides that if Omnicare desires to sell any of
the Option Shares, CompScript will cooperate with Omnicare and any underwriters
in registering such Option Shares for resale, including, without limitation,
promptly filing a registration statement which complies with the requirements of
applicable federal and state securities laws. CompScript shall not be required
to have declared effective more than two such registration statements.
TERMINATION
The right to exercise the Option shall terminate at the earlier of (i) the
Effective Time of the Merger, (ii) 90 days after the termination of the Merger
Agreement (the "Option Termination Date"), unless the Merger Agreement was
terminated pursuant to certain of its terms, or (iii) 12 months after the date
of the Stock Option Agreement. If the Option cannot be exercised or the Option
Shares cannot be delivered to Omnicare upon such exercise because the conditions
set forth in the Stock Option Agreement (excluding the condition that one or
more of the Triggering Conditions shall have occurred) have not been satisfied,
the Option Termination Date shall be extended until thirty days after such
impediment to exercise or delivery has been removed.
PROFIT LIMITATION
Notwithstanding any other provision of the Stock Option Agreement, (i) in no
event shall Omnicare's Total Profit (as defined below) exceed $3.3 million and
(ii) the Option may not be exercised for a number of Option Shares that would
result in a Notional Total Profit (as defined below) of more than $3.3 million.
"Total Profit" means the aggregate amount (before taxes) of (i) any
termination fees received by Omnicare pursuant to the Merger Agreement and any
Cash Payments received by Omnicare pursuant to the Stock Option Agreement, (ii)
the amount received by Omnicare pursuant to CompScript's repurchase of Option
Shares less Omnicare's purchase price for such Option Shares, and (iii) the net
cash amounts received by Omnicare pursuant to the sale of the Option Shares to
any unaffiliated party less Omnicare's purchase price for such Option Shares.
"Notional Total Profit" with respect to any number of Option Shares as to which
Omnicare may propose to exercise the Option shall be the Total Profit determined
as of the date on which Omnicare gives notice of its intention to exercise the
Option, assuming that the Option was exercised on such date for the designated
number of Option Shares and assuming that such Option Shares, together with all
other Option Shares held by Omnicare and its affiliates as of such date, were
sold for cash at the closing market price for the CompScript Shares as of the
close of business on the preceding trading day (less customary brokerage
commissions).
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VOTING AGREEMENT
VOTING AND PROXIES
In order to induce Omnicare to enter into the Merger Agreement, the
Principal Shareholder entered into the Voting Agreement. Pursuant to and during
the term of the Voting Agreement, the Principal Shareholder has agreed, among
other things, to vote (or cause to be voted) all of the CompScript Shares
beneficially owned by him and all shares subsequently acquired by him (i) in
favor of the Merger, the adoption by CompScript of the Merger Agreement and the
approval of the other transactions contemplated by the Merger Agreement at any
meeting of shareholders of CompScript at which such matters are considered and
at every adjournment thereof and (ii) against (a) any merger agreement or merger
(other than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, recapitalization, dissolution,
liquidation or winding up of by CompScript or its subsidiaries or any other
Transaction Proposal (collectively, "Alternative Transactions") or (b) any
amendment of the CompScript Articles or the CompScript Bylaws or other proposal
or transaction involving CompScript or any of its subsidiaries, which would in
any manner impede, frustrate, prevent or nullify, the Merger, the Merger
Agreement or any of the other transactions contemplated by the Merger Agreement
(collectively, "Frustrating Transactions"). See "THE MERGER AGREEMENT AND
RELATED AGREEMENTS-- Exclusivity."
The Principal Shareholder has granted to any individual designated by
Omnicare a proxy which shall be coupled with an interest and irrevocable in
accordance with the FBCA to vote the Principal Shareholder's CompScript Shares
(i) in favor of the Merger, the adoption by CompScript of the Merger Agreement
and the approval of the other transactions contemplated by the Merger Agreement
and (ii) against any Alternative Transaction or Frustrating Transaction. The
Principal Shareholder also has agreed to take, or cause to be taken, all actions
necessary, proper or advisable to consummate and make effective the transactions
contemplated by the Voting Agreement.
PROHIBITED ACTIONS
The Principal Shareholder has agreed that he will not, (i) sell, transfer,
pledge, assign or otherwise dispose of, or enter into any contract, option or
other arrangement (including any profit sharing arrangement) or understanding
with respect to the sale, transfer, pledge, assignment or other disposition of,
the CompScript Shares to any person other than Omnicare or Omnicare's designee,
(ii) enter into any voting arrangement, whether by proxy, voting agreement,
voting trust, power-of-attorney or otherwise, with respect to the CompScript
Shares or (iii) take any other action that would in any way restrict, limit or
interfere with the performance of his obligations under the Voting Agreement or
the transactions contemplated thereby.
OTHER PROVISIONS
The Voting Agreement also contains provisions relating to, among other
things, representations and warranties by the Principal Shareholder and specific
enforcement of the Voting Agreement. The Voting Agreement terminates upon the
earliest to occur of (i) consummation of the Merger, (ii) the termination of the
Merger Agreement in accordance with its terms, unless prior to such termination
a person or entity shall have made a Transaction Proposal and (iii) February 23,
1999. Notwithstanding the previous sentence, the provisions of the Voting
Agreement requiring the Principal Shareholder to vote against any Alternative
Transactions or Frustrating Transactions shall terminate on the earlier of (x)
the date computed in accordance with the previous sentence and (y) six months
after the termination of the Merger Agreement in accordance with its terms.
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DISSENTER'S RIGHTS
Holders of CompScript Shares are entitled to dissenter's rights pursuant to
the FBCA. The following discussion is not a complete statement of the law in
connection with dissenters' rights under FBCA and is qualified in its entirety
by the full text of Sections 607.1301, 607.1302 and 607.1320 of the FBCA which
are reprinted in their entirety in Appendix D to this Proxy
Statement/Prospectus. All references in Sections 607.1301, 607.1302 and 607.1320
and in this summary to a "shareholder" are to the recordholders of the
CompScript Shares as to which dissenters' rights are asserted. A person having a
beneficial interest in CompScript Shares that are held of record in the name of
another person, such as a broker or nominee, must act promptly to cause the
recordholder to follow the steps summarized below properly and in a timely
manner to perfect whatever dissenters' rights the beneficial owner may have.
Holders of CompScript Shares who follow the procedure set forth in Section
607.1320 of the FBCA ("Section 607.1320") will be entitled to receive payment of
the "fair value" of such CompScript Shares. FBCA defines "fair value" to be the
value of the CompScript Shares as of the close of business on the date prior to
the date of shareholder approval of the Merger, excluding any appreciation or
depreciation in anticipation of the Merger, unless exclusion would be
inequitable.
Under Section 607.1320, where a merger is to be submitted for approval at a
meeting of shareholders, the corporation, not less than ten nor more than sixty
days prior to the meeting, must notify each of its shareholders of the proposed
shareholders' meeting. The notice shall also state that the purpose, or one of
the purposes, of the meeting is to consider the plan of merger and contain or be
accompanied by a copy or summary of the merger agreement. Furthermore, the
notice shall contain a clear and concise statement that, if the plan of merger
is effected the shareholders dissenting therefrom may be entitled, if they
comply with the provisions of the FBCA regarding the rights of dissenting
shareholders, to be paid the fair value of their shares, and shall be
accompanied by a copy of Sections 607.1301, 607.1302 and 607.1320 of the FBCA.
This Proxy Statement/Prospectus shall constitute such notice to the shareholders
of CompScript and the Merger Agreement and the applicable statutory provisions
of the FBCA are attached to this Proxy Statement/Prospectus as Appendix A and
Appendix D, respectively. Any shareholder who wishes to exercise such dissenters
rights, or who wishes to preserve his right to do so, should review the
following discussion and Appendix D carefully because failure to timely and
properly comply with the procedures specified will result in the loss of
dissenters' rights under the FBCA.
Each shareholder who wishes to assert dissenters' rights must (i) deliver to
CompScript, before the taking of the vote on the Merger, a written notice of his
intent to demand payment for his CompScript Shares if the proposed Merger is
effectuated, and (ii) not vote his CompScript Shares in favor of the proposed
Merger. Because an executed proxy which does not contain voting instructions
will, unless revoked, be voted for adoption of the Merger Agreement, a
shareholder who votes by proxy and who wishes to exercise his dissenters' rights
must (i) vote against adoption of the Merger Agreement, or (ii) abstain from
voting on adoption of the Merger Agreement. A vote against adoption of the
Merger Agreement, in person or by proxy, will not in and of itself constitute a
written notice of intent to demand payment for the CompScript Shares satisfying
the requirements of Section 607.1320.
Only a holder of record of CompScript Shares is entitled to assert
dissenters' rights for the CompScript Shares registered in that holder's name. A
notice of intent to demand payment for CompScript Shares shall be exercised by
or on behalf of the holder of record, fully and correctly, as his name appears
on his stock certificates. If the CompScript Shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the notice should be made in that capacity, and if the CompScript Shares are
owned of record by more than one person, as in a joint tenancy or tenancy in
common, the notice should be executed by or on behalf of all joint owners. An
authorized agent, including one or two or more joint owners, may execute a
notice on behalf of a holder of record, however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
notice, the agent is acting as agent for such owner or owners. A record holder,
such as a broker, who holds
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CompScript Shares as nominee for several beneficial owners may exercise
dissenters' rights with respect to the CompScript Shares held for one or more
beneficial owners while not exercising such rights with respect to the
CompScript Shares held for other beneficial owners. In such case, the notice
should set forth the number of CompScript Shares as to which dissenters' rights
are sought. Where no number of CompScript Shares is expressly mentioned, the
demand will be presumed to cover all CompScript Shares held in the name of the
record owner. Shareholders who hold their CompScript Shares in brokerage
accounts or other nominee forms and who wish to exercise dissenters' rights are
urged to consult with their brokers to determine the appropriate procedures for
the making of a notice of intent to demand payment for such nominee's CompScript
Shares.
Within ten days after the date of shareholder approval of the Merger,
CompScript must give written notice of adoption of the Merger Agreement to each
shareholder who filed a notice of intent to demand payment for his CompScript
Shares. Within twenty days after the giving of such notice by CompScript, any
shareholder who elects to dissent must file with CompScript a notice of such
election, stating his name and address, the number of CompScript Shares as to
which he dissents, and a demand for payment of the fair value of his CompScript
Shares. Any shareholder filing an election to dissent shall deposit his stock
certificates with CompScript simultaneously with the filing of the election to
dissent.
Within ten days after the expiration of the period in which shareholders may
file their notices of election to dissent, or within ten days after the
Effective Time, whichever is later (but in no case later than ninety days from
the date of shareholder approval of the Merger Agreement), CompScript shall make
a written offer to each dissenting shareholder who has made a demand as provided
in Section 607.1320 to pay an amount CompScript estimates to be the fair value
for such CompScript Shares. The fair value determined will reflect the value of
the CompScript Shares prior to the Merger. Such notice and offer shall be
accompanied by (i) a balance sheet of CompScript as of the latest available
date, and (ii) a profit and loss statement of CompScript for the 12-month period
ended on the date of such balance sheet.
Any shareholder who has duly filed a notice of election to dissent in
compliance with Section 607.1320 will thereafter be entitled only to payment of
the fair value for such CompScript Shares and will not be entitled to vote or to
exercise any other rights of a shareholder. A notice of election may be
withdrawn in writing by the shareholder at any time before an offer is made by
CompScript to pay for his CompScript Shares. After such offer, no such notice of
election may be withdrawn unless CompScript consents thereto.
If within thirty days after the making of such offer by CompScript, any
shareholder accepts the same, payment for his CompScript Shares will be made
within ninety days after the making of such offer or the Effective Time,
whichever is later. Upon payment of the agreed value, the dissenting shareholder
will cease to have any interest in such CompScript Shares.
If CompScript fails to make an offer for the fair value of the CompScript
Shares within the period specified above, or if it makes the offer and any
dissenting shareholder or shareholders fail to accept the same within the period
of thirty days thereafter, then CompScript, within thirty days after receipt of
written demand from any dissenting shareholder given within sixty days after the
Effective Time, shall, or at its election at any time within such period of
sixty days may, file an action in any court of competent jurisdiction in Dade
County, Florida requesting the fair value of such CompScript Shares to be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the CompScript requests the court to make such determination, is
entitled to receive payment for his CompScript Shares. If CompScript fails to
institute such a proceeding, any dissenting shareholder may do so in the name of
CompScript. All dissenting shareholders (whether or not residents of the State
of Florida), other than shareholders who have agreed with CompScript as to the
value of their CompScript Shares, shall be made parties to the proceeding.
CompScript must pay to each dissenting shareholder the amount found to be due
him within ten days after final determination of the proceedings. Upon payment
of the judgement, the dissenting shareholders will cease to have any interest in
such CompScript Shares.
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Shareholders considering seeking dissenters' rights should be aware that the
fair value of their CompScript Shares as determined under Section 607.1320 could
be more than, the same as, or less than the consideration they would receive
pursuant to the Merger Agreement if they did not seek to demand payment of their
CompScript Shares. Any judicial determination of the "fair value" of the
CompScript Shares can be based on numerous considerations, including, but not
limited to, the market value of the CompScript Shares prior to the Merger and
the net asset value and earnings value of the CompScript. The costs and expenses
of any judicial proceeding will be determined by the court and will be assessed
against CompScript, but all or any part of such costs and expenses may be
apportioned and assessed as the court deems equitable against any or all of the
dissenting shareholders who are parties to the proceeding, to whom CompScript
has made an offer to pay for the CompScript Shares, if the court finds that the
action of such shareholders in failing to accept such offer was arbitrary,
vexatious, or not in good faith.
Failure to follow the steps required by Section 607.1320 for perfecting
dissenters' rights may result in the loss of such rights, in which event a
shareholder will be entitled to receive the consideration to be paid to
shareholders who did not dissent in the Merger.
COMPSCRIPT SPECIAL MEETING
DATE, TIME AND PLACE
The Special Meeting of CompScript shareholders will be held on June 26,
1998, at 9:00 a.m. local time, at The Auditorium, Sun Sentinel Building located
at 200 East Las Olas Boulevard, Ft. Lauderdale, FL 33301.
MATTERS TO BE CONSIDERED
The purpose of the Special Meeting is to consider and vote upon the approval
of the Merger Agreement and to transact such other business as may properly come
before the Special Meeting or any adjournments thereof.
RECORD DATE
Record holders of CompScript Shares at the close of business on May 18,
1998, will be entitled to vote at the Special Meeting. On the Record Date, there
were approximately 233 record holders of 14,072,063 CompScript Shares issued and
outstanding. Each issued and outstanding CompScript Share 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 CompScript Shares 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 CompScript Shares is required
to approve the Merger.
As of the Record Date, directors and executive officers of CompScript and
their affiliates were beneficial owners of approximately 35.2% of the
outstanding CompScript Shares. The Principal Shareholder, who owns approximately
32% of the CompScript Shares, has entered into the Voting Agreement pursuant to
which the Principal Shareholder has agreed, among other things, to vote the
CompScript Shares owned by him in favor of the Merger. See "THE MERGER AGREEMENT
AND RELATED AGREEMENTS--Voting Agreement" and "BENEFICIAL OWNERSHIP OF
COMPSCRIPT SHARES." Attached as Appendix C is the full text of the Voting
Agreement.
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PROXIES AND REVOCATION
All CompScript Shares 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 CompScript
shareholder 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
shareholder is present in person or represented by a proxy. An abstention from
voting or a broker non-vote on the Merger by a CompScript shareholder 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. CompScript will not use its discretionary authority to
adjourn the meeting to solicit shareholders if the shareholders vote against or
abstain from voting for the Merger.
A holder of CompScript Shares 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 CompScript 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 CompScript at or before the
taking of the vote at the Special Meeting at: 1225 Broken Sound Parkway, N.W.,
Boca Raton, Florida 33487, Attention: Secretary, or hand delivered to the
Secretary of CompScript at such address.
SOLICITATION OF PROXIES
The expenses of this solicitation will be borne by CompScript. In addition
to solicitation by mail, arrangements will be made with brokers and other
custodians, nominees and fiduciaries to send proxy materials to their principals
and CompScript will, upon request, reimburse them for reasonable expenses of so
doing. Solicitation of proxies from some shareholders may be made by
CompScript's officers and regular employees by telephone, facsimile, or in
person after the initial solicitation. In addition, D.F. King & Co., Inc. ("D.F.
King") has been retained to assist in the solicitation of proxies. D.F. King may
contact holders of CompScript Shares by mail, telephone, facsimile, telegraph
and personal interviews and may request brokers, dealers and other nominee
shareholders to forward materials to beneficial owners of CompScript Shares.
D.F. King will receive reasonable and customary compensation for its services
(estimated at $3,500), will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
COMPSCRIPT SHAREHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE
EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. COMPSCRIPT
SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
INDEPENDENT ACCOUNTANTS
One or more representatives of Ernst & Young LLP, independent public
accountants for CompScript, are expected to be present at the Special Meeting
and will have an opportunity to make a statement if they desire to do so and
will be available to respond to questions.
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DESCRIPTION OF OMNICARE CAPITAL STOCK
GENERAL
The authorized capital stock of Omnicare consists of 200,000,000 shares of
Omnicare Shares, par value $1.00 per share, and 1,000,000 shares of preferred
stock, without par value. At March 31, 1998, 82,886,214 shares of Omnicare
Shares were issued and outstanding. The Omnicare Board, without further action
by the shareholders, is authorized to issue preferred stock in one or more
series and to designate as to any such series the dividend rate, redemption
prices, preferences on liquidation or dissolution, sinking fund terms,
conversion , voting rights and any other preferences or special rights and
qualifications. As of March 31, 1998, there was no preferred stock issued or
outstanding, and the Omnicare Board has not authorized the issuance of any
preferred stock.
COMMON STOCK
The Omnicare Shares have no preemptive rights and no redemption, sinking
fund or conversion provisions. All shares of Omnicare Shares have one vote on
any matter submitted to the vote of shareholders. The Omnicare Shares do not
have cumulative voting rights. Upon any liquidation of Omnicare, the holders of
Omnicare Shares are entitled to receive, on a pro rata basis, all assets then
legally available for distribution after payment of debts and liabilities and
preferences on preferred stock, if any. Holders of Omnicare Shares are entitled
to receive dividends when and as declared by the Omnicare Board out of funds
legally available therefor (subject to the prior rights of preferred stock, if
any). All outstanding shares of Omnicare Shares are fully paid and
nonassessable.
CERTAIN ANTITAKEOVER PROVISIONS
With certain exceptions, in the event a person owns 10% or more of
Omnicare's stock entitled to vote, a majority of the shares not so owned is
required to authorize (1) any merger of Omnicare with such person, (2) any sale,
lease or other disposition of all or substantially all of Omnicare's assets to
such person or (3) certain issuances and transfers of securities of Omnicare to
such person. Directors may be removed without cause only by the affirmative vote
of the holders of two-thirds of Omnicares's capital stock entitled to vote on
the election of directors. The sections of the Omnicare Certificate described
above may not be altered, amended or repealed without approval of two-thirds of
the outstanding shares of each class entitled to vote thereon as a class. The
Omnicare Board, when evaluating any offer of another person to make a tender or
exchange offer, merge or purchase or otherwise acquire all or substantially all
of the assets of Omnicare, shall, in connection with the exercise of its
judgment in determining what is in the best interests of Omnicare and its
shareholders, give due consideration to all relevant factors, including the
social and economic effects on employees, customers, suppliers and other
constituents of Omnicare and on the communities in which Omnicare operates or is
located. See "COMPARISON OF SHAREHOLDER RIGHTS."
TRANSFER AGENT
Omnicare's transfer agent for the Omnicare Shares is Chase Mellon
Shareholder Services, LLC, Ridgefield Park, New Jersey.
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COMPARISON OF SHAREHOLDER RIGHTS
Omnicare is incorporated under the laws of the State of Delaware. CompScript
is incorporated under the laws of the State of Florida. The holders of
CompScript Shares whose rights as shareholders are currently governed by Florida
law, the CompScript Articles, and the CompScript Bylaws, will, upon the exchange
of their shares pursuant to the Merger, become holders of Omnicare Shares, and
their rights as such will be governed by Delaware law, the Omnicare Certificate
and the Omnicare Bylaws. The material differences between the rights of holders
of CompScript Shares and the rights of holders of Omnicare Shares, which result
from differences in their governing corporate documents and differences in
Delaware and Florida corporate law, are summarized below.
The following summary is not intended to be complete and is qualified in its
entirety by reference to the FBCA, the Delaware General Corporation Law (the
"DGCL"), the CompScript Articles, the CompScript Bylaws, the Omnicare
Certificate and the Omnicare Bylaws, as appropriate. The identification of
specific differences is not meant to indicate that other equally or more
significant differences do not exist. Copies of the CompScript Articles, the
CompScript Bylaws, the Omnicare Certificate and the Omnicare Bylaws are
incorporated by reference herein and will be sent to holders of CompScript
Shares upon request. See "INCORPORATION OF DOCUMENTS BY REFERENCE" and
"AVAILABLE INFORMATION."
AUTHORIZED CAPITAL
The CompScript Articles provide for authorized stock consisting of
50,000,000 CompScript Shares, $.0001 par value and 1,000,000 shares of Preferred
Stock, $.0001 par value.
The Omnicare Certificate provides for authorized stock consisting of
200,000,000 Omnicare Shares, $1.00 par value, and 1,000,000 shares of Omnicare
Preferred Stock, without par value.
ELECTION AND SIZE OF BOARD OF DIRECTORS
The FBCA requires that a board of directors consist of one or more natural
persons who are at least 18 years of age, with the precise number specified in
or fixed by a corporation's articles of incorporation or bylaws. The FBCA
permits staggered boards of directors of up to three separate classes if
authorized in the articles of incorporation. Neither the CompScript Articles nor
the CompScript Bylaws provide for a classified board of directors.
The CompScript Bylaws fix the number of directors at not less than one nor
more than ten directors. Currently, there are 5 directors. The CompScript Bylaws
provide that the number of directors shall be fixed by resolution of the Board
of Directors.
Under Delaware law, directors, unless their terms are staggered, are elected
at each annual shareholder meeting. Vacancies on the board of directors may be
filled by the shareholders or directors, unless the certificate of incorporation
or a bylaw provides otherwise. The certificate of incorporation may authorize
the election of certain directors by one or more classes or series of shares,
and the certificate of incorporation, an initial bylaw or a bylaw adopted by a
vote of the shareholders may provide for staggered terms for the directors. The
certificate of incorporation or the bylaws also may allow the shareholders or
the board of directors to fix or change the number of directors, but a
corporation must have at least one director. Under Delaware law, shareholders do
not have cumulative voting rights unless the certificate of incorporation so
provides.
The Omnicare Bylaws provide that directors are elected by a vote of a
majority of the directors then 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 shareholders held for that purpose.
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The Omnicare Bylaws provide for a non-staggered Board of Directors which
shall consist of not less than 3 nor more than 30 directors, each serving one
year terms. The exact number shall be fixed by resolution of the Board of
Directors. The Omnicare Board is currently comprised of 15 directors each
serving until the next annual meeting of shareholders and until their respective
successors are elected or appointed. The Omnicare Bylaws provide that the size
of the Omnicare Board may be increased by the vote of a majority of directors
then in office, although less than a quorum, or by the affirmative vote of the
holders of a majority of the outstanding shares of all classes of stock entitled
to vote thereon.
REMOVAL OF DIRECTORS
The FBCA entitles shareholders to remove directors either for cause or
without cause, unless the articles of incorporation provide that removal may be
for cause only. Directors elected by a particular voting group may only be
removed by the shareholders of that voting group. The CompScript Articles
provide that any director may be removed, with or without cause at a special
shareholders meeting called for that purpose. No decrease in the number of
directors shall shorten the term of any incumbent director.
Under the DGCL, a director of a corporation that does not have a classified
board of directors or cumulative voting may be removed (with or without cause)
with the approval of a majority of the outstanding shares entitled to vote. The
Omnicare Certificate provides that a director may be removed without cause only
by the holders of two-thirds of the shares then entitled to vote at the election
of directors. The term "cause" means (a) negligence or misconduct in the
director's performance if he did not act in good faith and in a manner which he
reasonably believed to be in the best interests of Omnicare, or (b) the
commission of an unlawful act which he had reasonable cause to believe was
unlawful.
VACANCIES ON THE BOARD OF DIRECTORS
The FBCA provides that, unless the articles provide otherwise, vacancies
arising on the board of directors may be filled by a majority of the remaining
directors, even if no quorum remains, or by the shareholders. When directors are
divided into classes, vacancies may be filled by the shareholders or, if at
least one director remains in the class, by the remaining directors of that
class. Where a vacancy will be known to occur at some point in the future, it
may be filled in advance, although the new director will not take office until
the vacancy actually occurs. The CompScript Bylaws provide that any vacancies on
the CompScript Board may be filled by the affirmative vote of a majority of the
remaining directors though less than a quorum, or filled by an election at an
annual or special meeting of the shareholders called for that purpose. Directors
elected to fill a vacancy are elected for the unexpired term of his predecessor
in office, or until the next election of one or more directors by shareholders
if the vacancy is caused by an increase in the number of directors.
Under Delaware law, the board of directors of a corporation may fill any
vacancy on the board, including vacancies resulting from an increase in the
number of directors. The Omnicare Bylaws provide that any vacancy 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 a 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
shareholders held for that purpose. 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 or resignations become effective, the vote thereon
to take effect when such resignation or resignations become effective.
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ACTION BY WRITTEN CONSENT
The FBCA allows all of the directors to take action without a meeting
through the use of a written consent unless provided otherwise in the articles
of incorporation. Any action that could be taken by shareholders at a meeting
may be taken without a meeting if a consent (or consents) in writing, setting
forth the action so taken, is signed by the holders of record of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. The CompScript Bylaws provide that action
of shareholders may be taken without a meeting if signed written consents are
obtained from a majority of shareholders entitled to vote on the issue.
Delaware law provides that, unless limited by the certificate of
incorporation, any action that could be taken by shareholders at a meeting may
be taken without a meeting if a consent (or consents) in writing, setting forth
the action so taken, is signed by the holders of record of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted. The Omnicare Bylaws allow any action required or
permitted to be taken at a meeting of shareholders 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
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.
AMENDMENTS TO CHARTER
Amendments to all sections of the CompScript Articles are governed by the
FBCA, which generally requires approval by a majority of directors and by
holders of a majority of the shares entitled to vote thereon.
Under Delaware law, unless a higher vote is required in the certificate of
incorporation, an amendment to the certificate of incorporation of a corporation
may be approved by a majority of the outstanding shares entitled to vote upon
the proposed amendment. 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 (a) the power of the Omnicare Board to amend or repeal
the Omnicare Bylaws, (b) business combinations with interested shareholders
described in "Vote on Extraordinary Corporate Transactions; Business Combination
Restrictions" below, (c) removal of directors without cause, (d) directors'
liability, and (e) indemnification of directors, officers and employees.
AMENDMENTS TO BYLAWS
Under the FBCA, bylaws may be amended by the directors or the shareholders
unless the articles of incorporation expressly provide that only shareholders
may do so. Bylaws adopted by the shareholders may provide that they may not be
amended or repealed by the directors. The CompScript Bylaws may be repealed or
amended and new bylaws may be adopted at any meeting of the board of directors
at which a quorum is present, by the affirmative vote of a majority of the
directors present at such meeting (provided notice of the proposed alteration,
amendment or repeal is contained in the notice of the meeting), subject to
repeal or change at any meeting of the shareholders at which a quorum is
present, by the affirmative vote of holders of a majority of the shares present
at such meeting (provided notice of the proposed alteration, amendment or repeal
is contained in the notice of the meeting).
The DGCL provides that a corporation's bylaws may be amended by that
corporation's shareholders, or, if so provided in the corporation's certificate
of incorporation, the power to amend the corporation's bylaws may also be
conferred on the corporation's directors. The Omnicare Certificate permits the
Omnicare Board to make, alter or repeal the Omnicare Bylaws. The Omnicare Bylaws
permit the bylaws to
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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 shareholders.
SPECIAL MEETINGS OF SHAREHOLDERS
Under the FBCA, a special meeting of shareholders may be called by a
corporation's board of directors or any other person authorized to do so in the
articles of incorporation or bylaws. Special meetings may also be called on
demand of at least 10% of all shares eligible to vote on the matter to be
considered, although this percentage may be increased in the articles of
incorporation to a maximum of 50%. Only business within the purpose of the
special meeting notice may be conducted at such meeting. The CompScript Articles
provide that special meetings may be called by the holders of at least 50% of
the Voting Shares (as defined in the CompScript Articles) or by any other
persons designated in CompScript's Bylaws.
Delaware law provides that special meetings of the shareholders of a
corporation may be called by the corporation's board of directors or by such
other persons as may be authorized in the corporation's certificate of
incorporation or bylaws. The Omnicare Bylaws state that special shareholders'
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.
INSPECTION OF DOCUMENTS
Under the FBCA, a shareholder is entitled to inspect and copy the articles
of incorporation, bylaws, certain board and shareholder resolutions, certain
written communications to shareholders, a list of the names and business
addresses of the corporation's directors and officers, and the corporation's
most recent annual report, during regular business hours if the shareholder
gives at least five business days' prior written notice to the corporation. In
addition, a shareholder of a Florida corporation is entitled to inspect and copy
other books and records of the corporation during regular business hours if the
shareholder gives at least five business days' prior written notice to the
corporation and (a) the shareholder's demand is made in good faith and for a
proper purpose, (b) the demand describes with particularity its purpose and the
records to be inspected or copied and (c) the requested records are directly
connected with such purpose. The FBCA also provides that a corporation may deny
any demand for inspection if the demand was made for an improper purpose or if
the demanding shareholder has, within two years preceding such demand, sold or
offered for sale any list of shareholders of the corporation or any other
corporation, has aided or abetted any person in procuring a list of shareholders
for such purpose or has improperly used any information secured through any
prior examination of the records of the corporation or any other corporation.
The DGCL allows any shareholder, upon written demand under oath stating the
purpose thereof, the right during the usual hours for business to inspect for
any proper purpose the corporation's stock ledger, a list of its shareholders,
and its other books and records, and to make copies or extracts therefrom. A
proper purpose means a purpose reasonably related to such person's interest as a
shareholder.
DIVIDENDS
The FBCA permits a corporation's board of directors to make distributions to
its shareholders so long as the corporation is not left unable to pay its debts
as they become due in the ordinary course of business, or the corporation is not
left with total assets that are less than the sum of the corporation's total
liabilities plus its obligations upon dissolution to satisfy preferred
shareholders whose preferential rights are superior to those receiving the
distribution. Under the FBCA, a corporation's redemption of its own capital
stock is deemed to be a distribution.
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The CompScript Bylaws provide that the CompScript Board may from time to
time declare and pay dividends on its outstanding shares in cash, property, or
its own shares pursuant to law and subject to provisions of its certificate of
incorporation.
Subject to any restrictions contained in a corporation's certificate of
incorporation, Delaware law generally provides that a corporation may declare
and pay dividends out of "surplus" (defined as the excess, if any, of net assets
(total assets less total liabilities) over capital) or, when no surplus exists,
out of net profits for the fiscal year in which the dividend is declared and/or
the preceding fiscal year, except that dividends may not be paid out of net
profits if the capital of the corporation is less than the amount of capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In accordance with the DGCL,
"capital" is determined by the board of directors and shall not be less than the
aggregate par value of the outstanding capital stock of the corporation having
par value.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The FBCA permits a corporation to indemnify officers, directors, employees
and agents for actions taken in good faith and in a manner they reasonably
believed to be in, or not opposed to, the best interests of the corporation, and
with respect to any criminal action, which they had no reasonable cause to
believe was unlawful. The FBCA provides that a corporation may advance
reasonable expenses of defense (upon receipt of an undertaking to reimburse the
corporation if indemnification is ultimately determined not to be appropriate)
and must reimburse a successful defendant for expenses, including attorneys'
fees, actually and reasonably incurred. The FBCA also permits a corporation to
purchase liability insurance for its directors, officers, employees and agents.
The FBCA provides that indemnification may not be made for any claim, issue or
matter as to which a person has been adjudged by a court of competent
jurisdiction to be liable to the corporation, unless and only to the extent a
court determines that the person is entitled to indemnity for such expenses as
the court deems proper. The CompScript Articles provide for indemnification for
any present or former director or officer to the fullest extent permitted by the
law.
Under Delaware law, a corporation may indemnify any person made a party or
threatened to be made a party to any type of proceeding (other than an action by
or in the right of the corporation) because he is or was an officer, director,
employee or agent of the corporation or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
entity, against expenses, judgments, costs and amounts paid in settlement
actually and reasonably incurred in connection with such proceeding: (a) if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, or (b) in the case of a
criminal proceeding, he had no reasonable cause to believe that his conduct was
unlawful. A corporation may indemnify any person made a party or threatened to
be made a party to any threatened, pending or completed action or suit brought
by or in the right of the corporation because he was an officer, director,
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 corporation or
other entity, against expenses actually and reasonably incurred in connection
with such action or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation,
except that there may be no such indemnification if the person is found liable
to the corporation unless, in such a case, the court determines the person is
entitled thereto. A corporation must indemnify a director, officer, employee or
agent against expenses actually and reasonably incurred by him who successfully
defends himself in a proceeding to which he was a party because he was a
director, officer, employee or agent of the corporation. Expenses incurred by an
officer or director (or other employees or agents as deemed appropriate by the
board of directors) in defending a civil or criminal proceeding may be paid by
the corporation in advance of the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation. The Delaware law
56
<PAGE>
indemnification and expense advancement provisions are not exclusive of any
other rights which may be granted by the bylaws, a vote of shareholders or
disinterested directors, agreement or otherwise.
The Omnicare Certificate provides for the indemnification of its directors
to the fullest extent permitted by law.
LIMITATION OF LIABILITY
The FBCA provides that a director is not personally liable for monetary
damages to the corporation or any other person for any statement, vote,
decision, or failure to act, regarding corporate management or policy unless the
director breached or failed to perform his statutory duties as a director and
such breach or failure (a) constitutes a violation of criminal law, unless the
director had reasonable cause to believe his conduct was lawful or had no
reasonable cause to believe his conduct was unlawful, (b) constitutes a
transaction from which the director derived an improper personal benefit, (c)
results in an unlawful distribution, (d) in a derivative action or an action by
a shareholder, constitutes conscious disregard for the best interests of the
corporation or willful misconduct or (e) in a proceeding other than a derivative
action or an action by a shareholder, constitutes recklessness or an act or
omission which was committed in bad faith or with malicious purpose or in a
manner exhibiting wanton and willful disregard of human rights, safety or
property.
Delaware law permits a corporation to adopt a provision in its certificate
of incorporation eliminating or limiting the personal liability of a director to
the corporation or its shareholders for monetary damages for beach of fiduciary
duty as a director, except that such provision shall not limit the liability of
a director for (a) any breach of the director's duty of loyalty to the
corporation or its shareholders, (b) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c)
liability under Section 174 of the DGCL for unlawful payment of dividends or
stock purchases or redemptions, or (d) any transaction from which the director
derived an improper personal benefit. The Omnicare Certificate provides that no
director of Omnicare shall be liable to it or its shareholders for monetary
damages for breach of fiduciary duty as a director, except to the extent such an
exemption from liability or limitation thereof is not permitted under the DGCL.
SHAREHOLDER SUITS
Under the FBCA, a person may not bring a derivative action unless the person
was a shareholder of the corporation at the time of the challenged transaction
or unless the person acquired his shares by operation of law from a person who
was a shareholder at such time.
Under Delaware law, a shareholder may institute a lawsuit against one or
more directors, either on his own behalf, or derivatively on behalf of the
corporation. An individual shareholder may also commence a lawsuit on behalf of
himself and other similarly situated shareholders when the requirements for
maintaining a class action under Delaware law have been met.
VOTE ON EXTRAORDINARY CORPORATE TRANSACTIONS; BUSINESS COMBINATION RESTRICTIONS
Under the FBCA, and subject to the exceptions indicated herein, the approval
of a merger, plan of liquidation or sale of all or substantially all of a
corporation's assets other than in the regular course of business requires the
recommendation of the corporation's board of directors and an affirmative vote
of holders of a majority of the corporation's outstanding shares.
Section 607.0901 of the FBCA provides that the approval of the holder of
two-thirds of the voting shares of a company, other than the shares beneficially
owned by an Interested Shareholder (as defined below), would be required to
effectuate certain transactions, including without limitation a merger,
consolidation, certain sales of assets, certain sales of shares, liquidation or
dissolution of the corporation, and reclassification of securities involving a
corporation and an Interested Shareholder (an "Affiliated
57
<PAGE>
Transaction"). An "Interested Shareholder" is defined as the beneficial owner of
more than 10% of the voting shares outstanding. The foregoing special voting
requirement is in addition to the vote required by any other provision of the
FBCA or any other provisions of CompScript's Articles.
The special voting requirement does not apply in any of the following
circumstances: (a) the Affiliated Transaction is approved by a majority of the
corporation's disinterested directors, (b) the Interested Shareholder has owned
at least 80% of the corporation's voting stock for five years, (c) the
Interested Shareholder owns more than 90% of the corporation's voting shares,
(d) the corporation has not had more than 300 shareholders of record at any time
during the three years preceding the announcement of the event, (e) the
corporation is an investment company registered under the Investment Company Act
of 1940, (f) all of the following conditions are met: (i) the cash and fair
value of other consideration to be paid per share to all holders of voting
shares equals the highest per share price paid by the Interested Shareholder,
(ii) the consideration to be paid in the Affiliated Transaction is in the same
form as previously paid by the Interested Shareholder (or certain alternative
benchmarks if higher), (iii) during the portion of the three years proceeding
the announcement date that the Interested Shareholder has been an Interested
Shareholder, except as approved by a majority of the disinterested directors,
there shall have been no default in payment of any full periodic dividends, no
decrease in common stock dividends, no increase in the voting shares owned by
the Interested Shareholder, (iv) during such three year period no benefit to the
Interested Shareholder in the form of loans, guaranties or other financial
assistance or tax advantages provided by the corporation, and (v) unless
approved by a majority of the disinterested directors, a proxy shall have been
mailed to holders of voting shares at least 25 days prior to the consummation of
the Affiliated Transaction. Because the CompScript Board unanimously approved
the Merger Agreement, the Stock Option Agreement, the Voting Agreement and the
Merger, this provision will not be applicable thereto.
The DGCL generally provides that, unless otherwise specified in a
corporation's certificate of incorporation or unless the provisions of the DGCL
relating to business combinations indicated herein are applicable, a sale or
other disposition of all or substantially all of the corporation's assets, a
merger or consolidation of the corporation with another corporation or a
dissolution of the corporation requires the affirmative vote of the board of
directors plus the affirmative vote of a majority of the outstanding stock
entitled to vote thereon.
In general, Section 203 of the DGCL prevents an "Interested Stockholder"
(defined generally as a person with 15% or more of a corporation's outstanding
voting stock, with the exception of any person who owned and has continued to
own shares in excess of the 15% limitation since December 23, 1987) from
engaging in a Business Combination with a Delaware corporation for three years
following the date such person became an Interested Stockholder. The term
"Business Combination" includes mergers or consolidations with an Interested
Stockholder and certain other transactions with an Interested Stockholder,
including, without limitation: (a) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (except proportionately as a shareholder of such
corporation) to or with the Interested Stockholder of assets (except
proportionately as a shareholder of the corporation) having an aggregate market
value equal to 10% or more of the aggregate market value of all assets of the
corporation or of certain subsidiaries thereof determined on a consolidated
basis or the aggregate market value of all the outstanding stock of the
corporation, (b) any transaction which results in the issuance or transfer by
the corporation or by certain subsidiaries thereof of stock of the corporation
or such subsidiary to the Interested Stockholder, except pursuant to certain
transfers in a conversion or exchange or pro rata distribution to all
shareholders of the corporation or certain other transactions, none of which
increase the Interested Stockholder's proportionate ownership of any class or
series of the corporation's or such subsidiary's stock, (c) any transaction
involving the corporation or certain subsidiaries thereof which has the effect,
directly or indirectly, of increasing the proportionate share of the stock of
any class or series, or securities convertible into stock of the corporation or
any subsidiary which is owned by the Interested Stockholder (except as a result
of immaterial changes due to fractional share adjustments or as a result of any
purchase or
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<PAGE>
redemption of any shares of stock not caused directly or indirectly by the
Interested Stockholder), or (d) any receipt by the Interested Stockholder of the
benefit (except proportionately as a shareholder of such corporation) of any
loans, advances, guarantees, pledges, or other financial benefits provided by or
through the corporation or certain subsidiaries.
The three-year moratorium may be avoided if (a) before such person became an
Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction in which the Interested
Stockholder became an Interested Stockholder, or (b) upon consummation of the
transaction which resulted in the shareholder becoming an Interested
Stockholder, the shareholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced (excluding shares
held by directors who are also officers of the corporation and by employee stock
ownership plans that do not provide employees with the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer), or (c) on or following the date on which such person
became an Interested Stockholder, the Business Combination is approved by the
board of directors of the corporation and authorized at an annual or special
meeting of shareholders (not by written consent) by the affirmative vote of the
shareholders of at least 66 2/3% of the outstanding voting stock of the
corporation not owned by the Interested Stockholder.
The Business Combination restrictions described above do not apply if, among
other things: (a) the corporation's original certificate of incorporation
contains a provision expressly electing not to be governed by the statute, (b)
the corporation by action by the holders of a majority of the voting stock of
the corporation approves an amendment to its certificate of incorporation or
bylaws expressly electing not to be governed by the statute (effective twelve
(12) months after the amendment's adoption), which amendment shall not be
applicable to any business combination with a person who was an Interested
Stockholder at or prior to the time of the amendment, or (c) the corporation
does not have a class of voting stock that is (i) listed on a national
securities exchange, (ii) authorized for quotation on Nasdaq or a similar
quotation system, or (iii) held of record by more than 2,000 shareholders. The
statute also does not apply to certain Business Combinations with an Interested
Stockholder when such combination is proposed after the public announcement of,
and before the consummation or abandonment of, a merger or consolidation, a sale
of 50% or more of the aggregate market value of the assets of the corporation on
a consolidated basis or the aggregate market value of all outstanding shares of
the corporation, or a tender offer for 50% or more of the outstanding voting
shares of the corporation, if the triggering transaction is with or by a person
who either was not an Interested Stockholder during the previous three years or
who became an Interested Stockholder with Board of Director approval, and if the
transaction is approved or not opposed by a majority of the current directors
who were also directors prior to any person becoming an Interested Stockholder
during the previous three years.
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: (a) with another
corporation of which Omnicare is the majority shareholder, (b) 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% shareholder
of Omnicare, or (c) approved unanimously by the Omnicare Board prior to the
consummation thereof.
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<PAGE>
RECENT DEVELOPMENTS
On March 30, 1998 Omnicare and IBAH, Inc., a Delaware corporation ("IBAH")
entered in an Agreement and Plan of Merger (the "IBAH Merger Agreement"). The
IBAH Merger Agreement provides for a stock-for-stock merger (the "IBAH Merger"),
whereby each outstanding share of IBAH common stock is converted into the right
to receive a number (the "IBAH Conversion Number") of Omnicare Shares as set
forth below, plus cash in lieu of receipt of fractional Omnicare Shares:
(1) If the Omnicare Value (as defined below) is greater than $43.83, then
the IBAH Conversion Number is equal to $6.50 divided by the Omnicare Value;
(2) If the Omnicare Value is greater than $38.77 and less than or equal to
$43.83, then the IBAH Conversion Number is equal to 0.1483;
(3) If the Omnicare Value is greater than $34.85 and less than or equal to
$38.77, then the IBAH Conversion Number is equal to $5.75 divided by the
Omnicare Value;
(4) If the Omnicare Value is greater than or equal to $30.30 and less than
or equal to $34.85, then the IBAH Conversion Number is equal to 0.1650;
(5) If the Omnicare Value is less than $30.30, then, subject to certain
conditions, the IBAH Conversion Number is equal to $5.00 divided by the Omnicare
Value.
If the Omnicare Value is less than $30.30, then Omnicare shall have the
right to adjust the IBAH Conversion Number to 0.1650; provided, however, that,
in such event, IBAH shall have the right to elect to abandon the IBAH Merger.
"Omnicare Value" means the average of the closing prices of Omnicare Shares
on the New York Stock Exchange, as reported in the Wall Street Journal, for the
15 trading days immediately preceding the second trading day preceding the
closing date of the IBAH Merger.
In the IBAH Merger, each outstanding IBAH preferred share shall be converted
into the right to receive a number of Omnicare Shares equal to three times the
IBAH Conversion Number, subject to certain exceptions.
IBAH has represented to Omnicare that as of March 30, 1998, its issued and
outstanding stock consisted of 23,544,312 shares of common stock and 749,665
shares of preferred stock. Each share of preferred stock is convertible into
three common shares. As of such date, warrants to purchase 2,610,280 shares of
common stock and options to purchase 4,289,859 common stock were outstanding.
The transaction is structured as a pooling-of-interests and a
reorganization. IBAH is a worldwide leader in providing comprehensive product
development services to client companies in the pharmaceutical, biotechnology,
medical device and diagnostics industries. As the fifth largest contract
research organization, IBAH offers services for all stages of drug development,
helping client companies to accelerate products from discovery through
development and commercialization more rapidly and cost-effectively. Reports,
proxy statements and other information filed by IBAH can be inspected at the
Commission and at the Nasdaq National Market. See "AVAILABLE INFORMATION."
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<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial information combines
the historical consolidated statements of income of (i) Omnicare and CompScript
after giving effect to the Merger, as if the Merger had occurred on January 1,
1995, and the historical balance sheet of Omnicare and CompScript as if the
Merger had occurred on March 31, 1998, in each case using the
pooling-of-interests method of accounting; and (ii) Omnicare, CompScript and
IBAH after giving effect to the Merger and assuming the consummation of the IBAH
Merger, also based on the pooling-of-interests method of accounting. There can
be no assurances that the IBAH Merger will be consummated. The information shown
below should be read in conjunction with the historical financial statements of
Omnicare, CompScript and IBAH. See "AVAILABLE INFORMATION," "INCORPORATION OF
DOCUMENTS BY REFERENCE" and "CompScript, Inc. and Subsidiaries Index to
Consolidated Financial Statements." See "RECENT DEVELOPMENTS" for information
concerning IBAH and the IBAH Merger.
The pro forma amounts below are presented for informational purposes only
and are not necessarily indicative of the results of operations of the combined
company that would have actually occurred had the Merger and the IBAH Merger
been consummated as of January 1, 1995 or of the financial condition of the
combined company had the Merger and the IBAH Merger been consummated as of March
31, 1998 or of the future results of operations or financial condition of the
combined company. The pro forma information does not reflect any synergies
anticipated as a result of (i) the Merger, in particular improvements in gross
margins attributable to Omnicare's purchasing leverage associated with purchases
of pharmaceuticals and other products and (ii) the Merger and the IBAH Merger,
and in particular the elimination of costs associated with CompScript's and
IBAH's status as public companies and other administrative savings. In addition,
(a) the pro forma income statement information does not reflect investment
banking, legal and miscellaneous transaction costs related to the Merger and the
IBAH Merger and (b) the pro-forma income statement and balance sheet information
does not reflect costs associated with the combining of the companies, which
costs Omnicare and CompScript cannot presently estimate. See "RISK FACTORS."
61
<PAGE>
UNAUDITED PRO-FORMA INCOME STATEMENT
QUARTER ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMBINED COMBINED
COMPSCRIPT OMNICARE IBAH OMNICARE,
OMNICARE, COMPSCRIPT, PRO-FORMA AND IBAH, AS PRO-FORMA COMPSCRIPT
AS REPORTED AS REPORTED ADJUSTMENTS COMPSCRIPT REPORTED ADJUSTMENTS AND IBAH
----------- ------------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and service
revenues................. $ 299,752 $ 13,849 -- $ 313,601 $ 26,657 $ 340,258
Cost of sales and
services................. 212,734 8,033 $ 2,909(a) 223,676 15,260 238,936
----------- ------------- ----------- ----------- ----------- -----------
Gross profit............... 87,018 5,816 (2,909) 89,925 11,397 101,322
Selling, general and
administrative
expenses................. 51,347 5,176 (2,909)(a) 53,614 9,922 63,536
Acquisition expenses,
pooling-of-interests..... 491 -- -- 491 -- 491
----------- ------------- ----------- ----------- ----------- -----------
Operating income........... 35,180 640 -- 35,820 1,475 37,295
Investment income.......... 1,444 2 -- 1,446 -- 1,446
Interest expense........... (4,534) (166) -- (4,700) (71) (4,771)
----------- ------------- ----------- ----------- ----------- -----------
Income before income
taxes.................... 32,090 476 -- 32,566 1,404 33,970
Income taxes............... 12,741 178 -- 12,919 645 13,564
----------- ------------- ----------- ----------- ----------- -----------
Income from continuing
operations............... $ 19,349 $ 298 $ -- $ 19,647 $ 759 $ 20,406
----------- ------------- ----------- ----------- ----------- -----------
Earnings per share from
continuing operations:
Basic.................... $ .23 $ .23 $ .23
----------- ----------- -----------
Diluted.................. $ .23 $ .23 $ .23
----------- ----------- -----------
Weighted average number of
common shares
outstanding:
Basic.................... 82,439 1,788(b) 84,227 3,806(c) 88,033
----------- ----------- ----------- ------ -----------
Diluted.................. 82,695 1,788(b) 84,483 4,512(c) 88,995
----------- ----------- ----------- ------ -----------
</TABLE>
- ------------------------
(a) Represents reclassification to conform CompScript's cost of sales to
Omnicare's accounting policies.
(b) Represents the CompScript weighted average shares outstanding for the period
adjusted for the implied Conversion Ratio of 0.1271, assuming an Omnicare
Average Market Price of $35.4125.
(c) Represents the IBAH weighted average shares outstanding for the period
adjusted for the implied IBAH Conversion Ratio of 0.1618, assuming an
Omnicare Average Market Price of $35.5333.
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<PAGE>
UNAUDITED PRO-FORMA INCOME STATEMENT
QUARTER ENDED MARCH 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMBINED COMBINED
COMPSCRIPT OMNICARE IBAH OMNICARE,
OMNICARE, COMPSCRIPT, PRO-FORMA AND IBAH, AS PRO-FORMA COMPSCRIPT
AS REPORTED AS REPORTED ADJUSTMENTS COMPSCRIPT REPORTED ADJUSTMENTS AND IBAH
----------- ------------- ------------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and service
revenues................. $ 181,608 $ 11,499 -- $ 193,107 $ 19,317 $ 212,424
Cost of sales and
services................. 128,903 6,795 $ 2,771(a) 138,469 10,659 149,128
----------- ------------- ------------- ----------- ----------- -----------
Gross profit............... 52,705 4,704 (2,771) 54,638 8,658 63,296
Selling, general and
administrative
expenses................. 30,570 4,818 (2,771)(a) 32,617 8,129 40,746
Acquisition expenses,
pooling-of-interests..... 978 613 -- 1,591 -- 1,591
----------- ------------- ------------- ----------- ----------- -----------
Operating income........... 21,157 (727) -- 20,430 529 20,959
Investment income.......... 1,802 11 -- 1,813 152 1,965
Interest expense........... (290) (100) -- (390) -- (390)
Other expense.............. -- (800) -- (800) -- (800)
----------- ------------- ------------- ----------- ----------- -----------
Income before income
taxes.................... 22,669 (1,616) -- 21,053 681 21,734
Income taxes............... 9,226 -- -- 9,226 236 9,462
----------- ------------- ------------- ----------- ----------- -----------
Income/(loss) from
continuing operations.... $ 13,443 $ (1,616) $ -- $ 11,827 $ 445 $ 12,272
----------- ------------- ------------- ----------- ----------- -----------
Earnings per share from
continuing operations:
Basic.................... $ .17 $ .15 $ .15
----------- ----------- -----------
Diluted.................. $ .17 $ .15 $ .15
----------- ----------- -----------
Weighted average number of
common shares
outstanding:
Basic.................... 78,065 1,724(b) 79,789 3,633(c) 83,422
----------- ------------- ----------- ------ -----------
Diluted.................. 78,218 1,724(b) 79,942 4,617(c) 84,559
----------- ------------- ----------- ------ -----------
</TABLE>
- ------------------------
(a) Represents reclassification to conform CompScript's cost of sales to
Omnicare's accounting policies.
(b) Represents the CompScript weighted average shares outstanding for the period
adjusted for the implied Conversion Ratio of 0.1271, assuming an Omnicare
Average Market Price of $35.4125.
(c) Represents the IBAH weighted average shares outstanding for the period
adjusted for the implied IBAH Conversion Ratio of 0.1618, assuming an
Omnicare Average Market Price of $35.5333.
63
<PAGE>
UNAUDITED PRO-FORMA INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMBINED COMBINED
COMPSCRIPT OMNICARE IBAH OMNICARE,
OMNICARE, COMPSCRIPT, PRO-FORMA AND IBAH, AS PRO-FORMA COMPSCRIPT
AS REPORTED AS REPORTED ADJUSTMENTS COMPSCRIPT REPORTED ADJUSTMENTS AND IBAH
----------- ------------- ----------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and service
revenues................. $ 895,702 $ 50,631 -- $ 946,333 $ 88,051 $1,034,384
Cost of sales and
services................. 636,577 29,944 $ 11,296(a) 677,817 48,106 725,923
----------- ------------- ----------- ----------- ----------- -----------
Gross profit............... 259,125 20,687 (11,296) 268,516 39,945 308,461
Selling, general and
administrative
expenses................. 152,061 21,265 (11,296)(a) 162,030 37,020 199,050
Acquisition expenses,
pooling-of-interests..... 3,456 689 -- 4,145 176 4,321
Nonrecurring expenses...... 6,313 -- -- 6,313 1,208 7,521
----------- ------------- ----------- ----------- ----------- -----------
Operating income........... 97,295 (1,267) -- 96,028 1,541 97,569
Investment income.......... 5,059 45 -- 5,104 616 5,720
Interest expense........... (5,564) (575) -- (6,139) (417) (6,556)
Other expense.............. -- (800) -- (800) -- (800)
----------- ------------- ----------- ----------- ----------- -----------
Income before income
taxes.................... 96,790 (2,597) -- 94,193 1,740 95,933
Income taxes............... 41,085 (240) -- 40,845 983 41,828
----------- ------------- ----------- ----------- ----------- -----------
Income/(loss) from
continuing operations.... $ 55,705 $ (2,357) $ -- $ 53,348 $ 757 $ 54,105
----------- ------------- ----------- ----------- ----------- -----------
Earnings per share from
continuing operations:
Basic.................... $ .70 $ .65 $ .63
----------- ----------- -----------
Diluted.................. $ .69 $ .65 $ .62
----------- ----------- -----------
Weighted average number of
common shares
outstanding:
Basic.................... 80,144 1,755(b) 81,899 3,714(c) 85,613
----------- ----------- ----------- ----- -----------
Diluted.................. 80,303 1,755(b) 82,058 4,563(c) 86,621
----------- ----------- ----------- ----- -----------
</TABLE>
- ------------------------
(a) Represents reclassification to conform CompScript's cost of sales to
Omnicare's accounting policies.
(b) Represents the CompScript weighted average shares outstanding for the year
adjusted for the implied Conversion Ratio of 0.1271, assuming an Omnicare
Average Market Price of $35.4125.
(c) Represents the IBAH weighted average shares outstanding for the year
adjusted for the implied IBAH Conversion Ratio of 0.1618, assuming an
Omnicare Average Market Price of $35.5333.
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<PAGE>
UNAUDITED PRO-FORMA INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMBINED COMBINED
COMPSCRIPT OMNICARE IBAH OMNICARE,
OMNICARE, COMPSCRIPT, PRO-FORMA AND IBAH, AS PRO-FORMA COMPSCRIPT
AS REPORTED AS REPORTED ADJUSTMENTS COMPSCRIPT REPORTED ADJUSTMENTS AND IBAH
----------- ------------- ------------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and service
revenues............. $ 536,604 $ 42,716 -- $ 579,320 $ 62,120 $ 641,440
Cost of sales and
services............. 381,768 25,691 $ 9,996(a) 417,455 30,786 448,241
----------- ------------- ------------- ----------- ----------- ---------------
Gross profit........... 154,836 17,025 (9,996) 161,865 31,334 193,199
Selling, general and
administrative
expenses............. 89,636 17,086 (9,996)(a) 96,726 29,870 126,596
Acquisition expenses,
pooling-of-interests... 690 934 -- 1,624 -- 1,624
Nonrecurring
expenses............. -- -- -- -- 510 510
----------- ------------- ------------- ----------- ----------- ---------------
Operating income....... 64,510 (995) -- 63,515 954 64,469
Investment income...... 11,285 58 -- 11,343 796 12,139
Interest expense....... (3,652) (359) -- (4,011) (321) (4,332)
----------- ------------- ------------- ----------- ----------- ---------------
Income before income
taxes................ 72,143 (1,296) -- 70,847 1,429 72,276
Income taxes........... 28,693 (140) -- 28,553 60 28,613
----------- ------------- ------------- ----------- ----------- ---------------
Income/(loss) from
continuing
operations........... $ 43,450 $ (1,156) $ -- $ 42,294 $ 1,369 $ 43,663
----------- ------------- ------------- ----------- ----------- ---------------
Earnings per share from
continuing
operations:
Basic................ $ .67 $ .63 $ .63
----------- ----------- ---------------
Diluted................ $ .61 $ .58 $ .57
----------- ----------- ---------------
Weighted average number
of common shares
outstanding:
Basic................ 65,298 1,584(b) 66,882 2,936(c) 69,818
----------- ------------- ----------- ------ ---------------
Diluted.............. 75,322 1,640(b) 76,962 4,046(c) 81,008
----------- ------------- ----------- ------ ---------------
</TABLE>
- ------------------------
(a) Represents reclassification to conform CompScript's cost of sales to
Omnicare's accounting policies.
(b) Represents the CompScript weighted average shares outstanding for the year
adjusted for the implied Conversion Ratio of 0.1271, assuming an Omnicare
Average Market Price of $35.4125.
(c) Represents the IBAH weighted average shares outstanding for the year
adjusted for the implied IBAH Conversion Ratio of 0.1618, assuming an
Omnicare Average Market Price of $35.5333.
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<PAGE>
UNAUDITED PRO-FORMA INCOME STATEMENT
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMBINED COMBINED
COMPSCRIPT OMNICARE IBAH OMNICARE,
OMNICARE, COMPSCRIPT, PRO-FORMA AND IBAH, AS PRO-FORMA COMPSCRIPT
AS REPORTED AS REPORTED ADJUSTMENTS COMPSCRIPT REPORTED ADJSUTMENTS AND IBAH
----------- ------------- ------------- ----------- ----------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Sales and service revenues...... $ 399,636 $ 34,857 $ 434,493 $ 42,866 $ 477,359
Cost of sales and services...... 287,715 19,960 $ 8,157(a) 315,832 23,847 339,679
----------- ------------- ------------- ----------- ----------- -----------
Gross profit.................... 111,921 14,897 (8,157) 118,661 19,019 137,680
Selling, general and
administrative expenses....... 66,970 14,633 (8,157)(a) 73,446 21,921 95,367
Acquisition expenses,
pooling-of-interests.......... 1,292 -- -- 1,292 -- 1,292
Nonrecurring expenses........... -- 4,000 -- 4,000 -- 4,000
----------- ------------- ------------- ----------- ----------- -----------
Operating income................ 43,659 (3,736) -- 39,923 (2,902) 37,021
Investment income............... 3,475 75 -- 3,550 234 3,784
Interest expense................ (5,954) (313) -- (6,267) (345) (6,612)
----------- ------------- ------------- ----------- ----------- -----------
Income before income taxes...... 41,180 (3,974) -- 37,206 (3,013) 34,193
Income taxes.................... 16,420 252 -- 16,672 -- 16,672
----------- ------------- ------------- ----------- ----------- -----------
Income/(loss) from continuing
operations.................... 24,760 (4,226) -- 20,534 (3,013) 17,521
Deemed dividend on preferred
stock......................... -- -- -- -- (2,712) (2,712)
----------- ------------- ------------- ----------- ----------- -----------
Income/(loss) from continuing
operations available to common
stockholders.................. $ 24,760 $ (4,226) $ -- $ 20,534 $ (5,725) $ 14,809
----------- ------------- ------------- ----------- ----------- -----------
Earnings per share from
continuing operations
available to common
stockholders:
Basic......................... $ .47 $ .38 $ .26
----------- ----------- -----------
Diluted....................... $ .43 $ .36 $ .26
----------- ----------- -----------
Weighted average number of
common shares outstanding:
Basic......................... 52,396 1,454(b) 53,850 2,310(c) 56,160
----------- ------------- ----------- ----- -----------
Diluted....................... 65,074 1,454(b) 66,528 2,816(c) 69,344
----------- ------------- ----------- ----- -----------
</TABLE>
- ------------------------
(a) Represents reclassification to conform CompScript's cost of sales to
Omnicare's accounting policies.
(b) Represents the CompScript weighted average shares outstanding for the year
adjusted for the implied Conversion Ratio of 0.1271, assuming an Omnicare
Average Market Price of $35.4125.
(c) Represents the IBAH weighted average shares outstanding for the year
adjusted for the implied IBAH Conversion Ratio of 0.1618, assuming an
Omnicare Average Market Price of $35.5333.
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<PAGE>
UNAUDITED PRO-FORMA BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
COMBINED COMBINED
COMPSCRIPT OMNICARE IBAH OMNICARE,
OMNICARE, COMPSCRIPT, PRO-FORMA AND IBAH, AS PRO-FORMA COMPSCRIPT
AS REPORTED AS REPORTED ADJUSTMENTS COMPSCRIPT REPORTED ADJUSTMENTS AND IBAH
----------- ------------- ------------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash
equivalents........ $ 119,882 $ 1,213 -- $ 121,095 $ 10,010 -- $ 131,105
Short-term
investments........ -- -- -- -- 2,102 -- 2,102
Accounts receivable,
less allowances.... 238,659 10,169 -- 248,828 33,352 -- 282,180
Inventories.......... 98,018 3,298 -- 101,316 -- -- 101,316
Deferred income tax
benefits........... 15,267 260 -- 15,527 -- -- 15,527
Other current
assets............. 18,935 1,680 -- 20,615 1,956 -- 22,571
----------- ------------- ------ ----------- ----------- ------------- ---------------
Total current
assets........... 490,761 16,620 -- 507,381 47,420 -- 554,801
Properties & equipment,
at cost less
accumulated
depreciation......... 86,885 3,823 -- 90,708 14,226 -- 104,934
Goodwill, less
accumulated
amortization......... 720,270 92 -- 720,362 33,140 -- 753,502
Other assets........... 40,318 332 -- 40,650 1,177 -- 41,827
----------- ------------- ------ ----------- ----------- ------------- ---------------
Total assets........... $1,338,234 $ 20,867 -- $1,359,101 $ 95,963 -- $ 1,455,064
----------- ------------- ------ ----------- ----------- ------------- ---------------
LIABILITIES &
STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable..... $ 60,432 $ 5,694 -- $ 66,126 $ 2,389 -- $ 68,515
Amounts payable
pursuant to
acquisition
agreements......... 6,000 -- -- 6,000 -- -- 6,000
Current portion of
long-term debt..... 2,810 7,451 -- 10,261 2,964 -- 13,225
Income taxes
payable............ 8,676 -- -- 8,676 -- -- 8,676
Accrued employee
compensation....... 19,974 349 -- 20,323 -- -- 20,323
Deferred revenue..... -- -- -- -- 17,060 -- 17,060
Other current
liabilities........ 39,503 185 4,934(c) 44,622 16,513 5,223(c) 66,358
----------- ------------- ------ ----------- ----------- ------------- ---------------
Total current
liabilities.......... 137,395 13,679 4,934 156,008 38,926 5,223 200,157
----------- ------------- ------ ----------- ----------- ------------- ---------------
Long-term debt......... 350,468 718 -- 351,186 5,242 -- 356,428
Deferred income
taxes................ 9,168 215 -- 9,383 -- -- 9,383
Amounts payable
pursuant to
acquisition
agreements........... 10,769 -- -- 10,769 -- -- 10,769
Other noncurrent
liabilities.......... 19,096 223 -- 19,319 514 -- 19,833
----------- ------------- ------ ----------- ----------- ------------- ---------------
Total liabilities...... 526,896 14,835 4,934 546,665 44,682 5,223 596,570
</TABLE>
67
<PAGE>
UNAUDITED PRO-FORMA BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) (CONTINUED)
<TABLE>
<CAPTION>
COMBINED COMBINED
COMPSCRIPT OMNICARE IBAH OMNICARE,
OMNICARE, COMPSCRIPT, PRO-FORMA AND IBAH, AS PRO-FORMA COMPSCRIPT
AS REPORTED AS REPORTED ADJUSTMENTS COMPSCRIPT REPORTED ADJUSTMENTS AND IBAH
----------- ------------- ------------- ----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Stockholders' equity:
Preferred stock........ -- -- -- -- 7 (7)(b) --
Common stock........... 82,919 1 1,787(a) 84,707 235 3,939(b) 88,881
Paid-in-capital........ 542,045 12,364 (1,787)(a) 552,622 76,368 (3,932)(b) 625,058
Retained earnings
(deficit)............ 202,432 (6,333) (4,934)(c) 191,165 (25,302) (5,223)(c) 160,640
Treasury stock, at
cost................. (1,223) -- -- (1,223) -- -- (1,223)
Deferred compensation.. (14,421) -- -- (14,421) -- -- (14,421)
Unallocated stock of
ESOP................. (414) -- -- (414) -- -- (414)
Cumulative translation
adjustment........... -- -- -- -- (27) -- (27)
----------- ------------- ------ ----------- ----------- ------------- ---------------
Total stockholders'
equity........... 811,338 6,032 (4,934) 812,436 51,281 (5,223) 858,494
----------- ------------- ------ ----------- ----------- ------------- ---------------
Contingencies
Total liabilities
and stockholders'
equity........... $1,338,234 $ 20,867 -- $1,359,101 $ 95,963 -- $ 1,455,064
----------- ------------- ------ ----------- ----------- ------------- ---------------
</TABLE>
- ------------------------
(a) Represents the actual CompScript shares outstanding at March 31, 1998
adjusted for the implied Conversion Ratio of 0.1271, assuming an Omnicare
Average Market Price of $35.4125 and the elimination of the CompScript
common stock.
(b) Represents the actual IBAH shares outstanding at March 31, 1998 adjusted for
the implied IBAH Conversion Ratio of 0.1618, assuming an Omnicare Average
Market Price of $35.5333 and the elimination of the IBAH common and
preferred stock.
(c) To record accrued liabilities associated with the Mergers relating to the
estimated merger and transaction costs. The pro-forma information does not
reflect other cost associated with combining of the companies, which
Omnicare, CompScript and IBAH cannot currently estimate.
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<PAGE>
BUSINESS OF COMPSCRIPT
COMPANY OVERVIEW
CompScript is a comprehensive provider of pharmacy management services
equipped to both lower costs and improve the quality of care to its customers.
CompScript offers a broad range of pharmacy, infusion therapy, consulting
services and mail order to managed care networks and their patients, long-term
and subacute care facilities and home health patients. CompScript's proprietary
pharmacy management capabilities combine sophisticated clinical tools with the
latest technologies in databases and drug profiles.
Since May 1996, CompScript has consummated four acquisitions of
institutional pharmacy providers located in Mobile, Alabama (May 1996), Miami,
Florida (January 1997), Metarie, Louisiana (February 1997) and Mentor, Ohio
(March 1997), and one acquisition of a mail service dispensing pharmacy with its
principal operations in Cleveland, Ohio (August 1996).
CompScript presently operates 7 institutional pharmacies that serve
long-term and subacute facilities in Florida, Alabama, Mississippi, Louisiana
and Ohio and one retail pharmacy in Ohio.
During late 1995, representatives of Capital Brands, Inc. ("Capital"), were
introduced to the management of AldenCare, Inc. (now known as CompScript-Boca,
Inc. ("CompScript-Boca")), to discuss their respective needs. At the time,
Capital's business operations consisted of its direct ownership of equity
investments and its indirect ownership and operation of various fast food
operations located in Poland. These investments and operations had historically
generated losses for Capital. CompScript-Boca was seeking to expand its
operations, and believed that such expansion would be most effective through a
public company that could provide not only operating capital, but the
opportunity to grow through acquisitions and the existence of a liquid market
for its securities.
In furtherance of the desires of Capital and CompScript-Boca, the principal
shareholders and directors of both parties met to discuss a possible business
combination. Among the matters discussed were: (i) consummation of a tax free
reorganization under the Internal Revenue Code and the rules and regulations
thereunder, (ii) compliance with applicable securities laws for a private
offering by Capital; (iii) concluding the business combination as expeditiously
as was practicable in light of Capital's continuing losses and CompScript-Boca's
need for expansion; (iv) providing the surviving entity to the business
combination with operating capital; and (v) the prospects for future
profitability of the surviving entity. These discussions led to the execution of
a letter of intent on January 2, 1996, followed by the execution of a definitive
agreement on February 29, 1996 (the "Definitive Agreement").
The transactions contemplated by the Definitive Agreement (the
"Acquisition") were consummated on April 26, 1996, by the issuance of shares of
Capital's common stock (amounting to approximately 80% of its issued and
outstanding common stock) to approximately 41 shareholders of CompScript-Boca
(who owned approximately 93% of CompScript-Boca's outstanding common stock). The
CompScript-Boca shareholders who were parties to the Acquisition were selected
based upon (i) their ownership of a sufficient percentage of CompScript-Boca so
that the Acquisition could be consummated as a tax-free exchange, and (ii) their
status as "accredited investors" (within the meaning of Rule 501 under the Act)
so that the Acquisition could be accomplished within the time frames established
by the parties. In anticipation of consummating the Acquisition, Capital
divested itself of its interests in International Fast Foods Corporation, Family
Chicken, Inc. and International Hotel Corporation. The Acquisition has been
accounted for as a "reverse acquisition", and the Company recorded, at the time
of the Acquisition, a minority interest in CompScript-Boca of $222,628,
representing approximately 7% of the net assets of CompScript-Boca on the date
of the Acquisition.
Effective December 31, 1997, CompScript cancelled its contracts to provide
pharmacy benefit management ("PBM") services due to lack of profitability and
cash flow constraints.
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<PAGE>
PRODUCTS AND SERVICES
INSTITUTIONAL PHARMACY. CompScript purchases, repackages and dispenses
prescription and non-prescription medication in accordance with physician orders
and delivers such prescriptions at least daily to the nursing facilities for
administration to individual patients by the facility's nursing staff.
CompScript typically services nursing homes within a 150-mile radius of its
pharmacy locations. CompScript maintains a 24-hour, on-call pharmacist service
365 days per year for emergency dispensing and delivery or for consultation with
the facility's staff or attending physician.
Compscript has received accreditation under the Joint Commission on
Accreditation of Health Care Organizations ("JCAHO") in connection with
CompScript's long-term care institutional pharmacy services. This accreditation
was received in October 1996 for CompScript's Boca Raton facility, in October
1997 for its Ohio facility, and in January 1998 for its Miami facility.
CompScript intends to attain such accreditation for its other institutional
pharmacy locations. CompScript believes this accreditation distinguishes
CompScript from many of its competitors.
Upon receipt of a prescription, the relevant patient information is entered
into CompScript's computerized proprietary dispensing and billing systems. At
that time, the dispensing system will check the prescription for any potentially
adverse drug interactions or patient sensitivity. When required and/or
specifically requested by the physician or patient, branded drugs are dispensed;
generic drugs are substituted in accordance with applicable state and federal
laws and as requested by the physician or patient. CompScript also provides
therapeutic interchange, with physician approval, in accordance with
pharmaceutical care guidelines.
CompScript provides a "modified unit-dose" distribution system. Most of its
prescriptions are filled utilizing specialized unit-of-use packaging and
delivery systems. Maintenance medications are typically provided in 30-day
supplies utilizing either a box unit-dose system or unit-dose punch card system.
The unit doses system, preferred over the bulk delivery systems employed by
retail pharmacies, improves control over drugs in the nursing facility and
improves patient compliance with drug therapy by increasing the accuracy and
timeliness of drug administration.
Integral to CompScript's drug distribution system is its proprietary
computerized medical records and documentation system. CompScript provides to
the facility computerized medication administration records and physician's
order sheets and treatment records for each patient. Data extracted from these
computerized records are also formulated into monthly management reports on
patient care and quality assurance. The computerized documentation system in
combination with the modified unit-dose drug delivery system results in greater
efficiency in nursing time, improved control, reduced drug waste in the facility
and lower error rates in both dispensing and administration. These benefits
improve drug efficacy and result in fewer drug-related failures and
hospitalizations.
CONSULTANT PHARMACIST SERVICES. Federal and state regulations mandate that
nursing facilities, in addition to providing a source of pharmaceuticals, retain
consultant pharmacist services to monitor and report on prescription drug
therapy in order to maintain and improve the quality of patient care. The
Omnibus Budget Reconciliation Act ("OBRA") implemented in 1990 seeks to further
upgrade and standardize care by setting forth more stringent standards relating
to planning, monitoring and reporting on the progress of prescription drug
therapy as well as facility-wide drug usage.
CompScript provides consultant pharmacist services which help clients comply
with such federal and state regulations applicable to nursing homes. Consultant
pharmacists work on a proprietary laptop program to offer institutions patient
specific clinical data. The services offered by CompScript's consultant
pharmacists include: (i) comprehensive, monthly drug regimen reviews for each
patient in the facility to assess the appropriateness and efficacy of drug
therapies, including a review of the patient's medical records, monitoring drug
reactions to other drugs or food, monitoring lab results and recommending
70
<PAGE>
alternate therapies or discontinuing unnecessary drugs; (ii) participation on
the Pharmacy and Therapeutics, Quality Assurance and other committees of client
nursing facilities as well as periodic involvement in staff meetings; (iii)
monthly inspection of medication carts and storage rooms; (iv) monitoring and
monthly reporting on facility-wide drug usage and drug administration systems
and practices; (v) development and maintenance of pharmaceutical policy and
procedures manuals; and (vi) assistance to the nursing facility in complying
with state and federal regulations as they pertain to patient care.
Additionally, CompScript offers a specialized line of consulting services
which help nursing facilities enhance care and reduce and contain costs as well
as to comply with state and federal regulations. Under this service line,
CompScript provides: (i) data required for OBRA and other regulatory purposes,
including reports on psychotropic drug usage (chemical restraints), antibiotic
usage (infection control) and other drug usage; (ii) Plan of Care programs which
assess each patient's state of health upon admission and monitor progress and
outcomes using data on drug usage as well as dietary, physical therapy and
social service inputs; (iii) counseling related to appropriate drug usage and
implementation of drug protocols; (iv) on-site educational seminars for the
nursing facility staff on topics such as drug information relating to clinical
indications, adverse drug reactions, drug protocols and special geriatric
considerations in drug therapy, and information and training on intravenous drug
therapy and updates on OBRA and other regulatory compliance issues; (v) mock
regulatory reviews for nursing staffs; and (vi) nurse consultant services and
consulting for dietary, social services and medical records.
ANCILLARY SERVICES. CompScript provides the following ancillary products
and services to nursing facilities:
Infusion Therapy Products and Services. With cost containment pressures in
the health care industry, nursing facilities are increasingly providing subacute
care as a means of treating moderately acute but stabilized patients more
cost-effectively than hospitals, provided that the nursing staff and pharmacy
are capable of supporting higher degrees of acuity. CompScript provides infusion
therapy support services for such residents in its client nursing facilities
and, to a lesser extent, hospice and home care patients. Infusion therapy
consists of the product (a nutrient, antibiotic, chemotherapy or other drugs in
solution) and the intravenous ("IV") administration of the product.
CompScript prepares the product to be administered using proper equipment in
a sterile environment and then delivers the product to the nursing home for
administration by the nursing staff. Proper administration of IV drug therapy
requires a highly trained nursing staff. CompScript's consultant pharmacists and
nurse consultants operate an education and certification program on IV therapy
to assure proper staff training and compliance with regulatory requirements in
client facilities offering an IV program.
By providing an infusion therapy program, CompScript enables its client
nursing facilities to admit and retain patients who otherwise would need to be
cared for in an acute-care facility. CompScript's proprietary computer system
and specialization in the subacute arena have been instrumental in new business
development and the reason over 65% of the facilities are considered subacute or
competent in IV therapy. CompScript believes that by providing these high acuity
pharmacy services it has a competitive advantage over other pharmacy providers.
The most common infusion therapies CompScript provides in the nursing home
environment are total parenteral nutrition, antibiotic therapy, chemotherapy,
pain management and hydration.
HOME INFUSION THERAPY SERVICES. CompScript has established a Joint
Commission on Accreditation of Healthcare Organization ("JCAHO") accredited home
infusion company to serve homebound patients. CompScript offers outcomes
management with an emphasis on diagnosis of level of severity, specialized
management reporting, and statewide coverage, which makes CompScript
particularly attractive to managed care companies. CompScript offers managed
care companies a full continuum of coverage for their clients, from hospitals to
subacute units to long-term care facilities to the patient's homes.
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<PAGE>
Infusion therapy services involve the administration of prescription drugs
and other products that are prescribed by a physician to a patient by catheter,
feeding tube or intravenously. CompScript's managed care clients benefit from
outpatient infusion therapy services because the length of hospital stays can be
reduced. Rather than receiving infusion therapy in a hospital, CompScript can
provide infusion therapy services to patients at home, in a physician's office
or in a free-standing center operated by a health maintenance organization
("HMO") or other entity. CompScript provides antimicrobial, cardiovascular,
hematological, nutritional, pain management, chemotherapeutic, hydration,
endocrine, respiratory and AIDS management treatments to patients.
MAIL SERVICE PHARMACY BENEFITS. CompScript operates a mail service pharmacy
in Florida that provides members with convenient access to maintenance
medications, and enables CompScript and its clients to control drug costs
through purchasing efficiencies and other economies of scale. In addition,
through its mail service pharmacy, CompScript is able to be directly involved
with the prescriber and member, and is generally able to achieve a higher level
of generic and therapeutic substitution than can be achieved through the retail
pharmacy network, which further reduces the client's costs.
RECENT EVENTS. Effective December 31, 1997, CompScript cancelled its
contracts to provide pharmacy benefit management ("PBM") services due to lack of
profitability and cash flow constraints. Prior to that, PBM consisted of retail
pharmacy network administration, except in the Long-Term Care Pharmacy Network;
formulary administration; electronic point-of-sale claims processing, drug
utilization review ("DUR"); and benefit plan design consultation. Advanced PBM
services included the development of advanced formulary compliance and
therapeutic substitution programs; therapy management services such as prior
authorization, therapy guidelines, step therapy protocols, and disease
management interventions, and sophisticated management information reporting and
analytic services.
In connection with the growth and expansion of CompScript's mail service
operations, on January 1, 1998, CompScript entered into an Independent
Consulting Agreement ("Consulting Agreement") with Gerard Altieri ("Altieri"), a
former director of CompScript, and Ronald J. Reith ("Reith"), a former officer
of CompScript (the "Consultants"). The Consultants assist CompScript in securing
new mail order and related business. The Consulting Agreement provides that for
a five year period through December 31, 2002, the Consultants shall receive
commissions attributable to all new business obtained by Consultants in excess
of certain established base-line pricing. Additionally, the Consultants received
a total of 115,000 shares of CompScript's common stock in January 1998 as
compensation for these services. The Consultants shall devote such time as
reasonably necessary to perform services under the Consulting Agreement. This
Consulting Agreement supersedes a January 1997 agreement which provided for the
payment of $50,000 per month through January 1998, and was renewable for an
additional 12 month period if gross revenues (less adjustments) attributable to
all mail order business exceeded certain targeted amounts.
ACQUISITION STRATEGY
CompScript has targeted acquisition candidates with strong management, a
demonstrated capacity for growth and opportunities to realize efficiencies
through consolidation and integration. CompScript has identified acquisition
candidates with management who intend to continue to participate in the
operation of the business but believe that there are more substantial
opportunities in being involved in a larger, stronger organization. CompScript
has historically issued equity in CompScript as the purchase price for an
acquired company in order to align the interests of the acquired company's
management with those of CompScript.
On May 31, 1996, in a transaction accounted for as a pooling-of-interests,
CompScript acquired Delta Pharmacy Services, Inc. ("Delta"). In connection with
the transaction, CompScript exchanged 666,350 shares of CompScript's Common
Stock for all of the outstanding common stock of Delta. Delta is in the
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business of supplying prescription pharmaceuticals, consulting and enteral and
parental therapies to long-term and alternate care providers in Alabama and
Northern Florida.
On August 19, 1996, in a transaction accounted for as a
pooling-of-interests, CompScript acquired Secure, Inc. ("SECURx"). In connection
with the transaction, CompScript exchanged 187,500 shares of CompScript's Common
Stock for all of the outstanding common stock, of SECURx. SECURx is in the
business of selling and distributing prescription drugs through mail order
distribution to the general public through corporate sponsored benefit plans of
employers located in the Northeastern United States.
On January 10, 1997, in a transaction accounted for as a
pooling-of-interests, CompScript acquired Medical Services Consortium, Inc.
("MSC"). In connection with the transaction, CompScript exchanged 1,400,000
shares of CompScript's Common Stock for all of the outstanding common stock of
MSC. MSC is in the business of supplying prescription pharmaceuticals,
consulting and enteral and parental therapies to long-term and alternate care
providers in South Florida.
On February 28, 1997, in a transaction accounted for as a
pooling-of-interests, CompScript acquired Campo Medical Pharmacy, Inc.
("Campo"). In connection with the transaction, CompScript exchanged 375,000
shares of CompScript's Common Stock for all of the outstanding common stock of
Campo. Campo is in the business of supplying prescription pharmaceuticals, and
consulting services to long-term and alternate care providers in Louisiana.
On March 26, 1997, in a transaction accounted for as a pooling-of-interests,
CompScript acquired Hytree Pharmacy, Inc. ("Hytree"). In connection with the
transaction, CompScript exchanged 850,000 shares of CompScript's Common Stock
for all of the outstanding common stock of Hytree. Hytree is in the business of
providing institutional pharmacy services, home care, distribution of durable
medical equipment and supplies in Ohio.
In connection with CompScript's acquisition strategy, on October 1, 1996,
CompScript entered into a five year Consulting and Acquisition Management
Agreement with Shulman & Associates Inc. ("Shulman"), pursuant to which Shulman
would assist CompScript in identifying, evaluating, structuring, negotiating,
and closing business acquisitions, including, but not limited to, asset
purchases, consolidations, mergers, joint ventures and strategic alliances. In
connection with such agreement (the "Shulman Agreement"), Shulman will receive a
fee of 15,000 shares of CompScript's Common Stock if the "aggregate market
value" (defined in such agreement) of the acquisition transaction is up to
$5,000,000, 30,000 shares if the aggregate market value of the acquisition
transaction is between $5,000,000, but less than $10,000,000, and 45,000 shares
if the aggregate market value of the acquisition transaction is in excess of
$10,000,000. In the event CompScript consummates a merger or consolidation
involving itself or 50% or more of its voting stock or a substantial portion of
its assets is acquired in any one transaction by way of tender or exchange
offer, negotiated purchase or otherwise, Shulman shall be paid a fee of 3% of
the aggregate market value of the business combination with a minimum of
$1,000,000 and a maximum of $3,000,000, provided, that if Shulman introduces the
transaction to CompScript there shall be no maximum fee limitation.
SUPPLIERS
CompScript's inventory in its pharmacies includes over 3,000 brand and
generic pharmaceuticals. If a pharmaceutical is not in its inventory, CompScript
can generally obtain it from a supplier within one to two business days.
CompScript purchases its pharmaceuticals primarily through wholesale
distributors. Generic pharmaceuticals are generally purchased directly from
manufacturers or through wholesale distributors. CompScript believes that
alternative sources of supply for most generic and brand name pharmaceuticals
are readily available.
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COMPETITION
The long term-care industry is highly fragmented but experiencing
significant consolidation. By its nature, 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, CompScript competes
with numerous local retail pharmacies, local and regional institutional
pharmacies and pharmacies owned by long-term care facilities. CompScript
competes in this market on the basis of quality, cost-effectiveness and the
increasingly comprehensive and specialized nature of its services along with the
clinical expertise, pharmaceutical technology and professional support it
offers. In its program of acquiring institutional pharmacy providers, CompScript
competes with several other companies with similar acquisition strategies, some
of which have greater resources than CompScript. No individual customer or
market group is critical to the total sales of CompScript's long-term care
pharmacy business. CompScript considers its principal competitive advantages to
be independence from nursing home owner/operators, strong managed care knowledge
and experience which supports the development of advanced services, and its
commitment to providing flexible and distinctive service to its customers.
Consolidation is a critical factor in the pharmaceutical industry generally.
Horizontal and vertical merger and acquisition activity in the manufacturing
segment has been robust, with significant resultant movements in market share.
Competitors that are owned by nursing home owners/operators and drug
manufacturers may have pricing advantages that are unavailable to CompScript and
other independent companies.
With respect to infusion therapy services, CompScript competes with a number
of regional and large national companies. Many of these larger companies have
greater financial and marketing resources than CompScript.
GOVERNMENT REGULATION
LONG-TERM CARE PHARMACY
Institutional pharmacies, as well as the long-term care facilities they
serve, are subject to extensive federal, state and local regulation. These
regulations cover required qualifications, day-to-day operations, reimbursement
and the documentation of activities. CompScript continuously monitors the
effects of regulatory activity on its operations.
LICENSURE, CERTIFICATION AND REGULATION. States generally require that
companies operating a pharmacy within the state be licensed by the state board
of pharmacy. CompScript currently has pharmacy licenses in each state in which
it operates a pharmacy. In addition, CompScript's pharmacies are registered with
the appropriate state and federal authorities pursuant to statutes governing the
regulation of controlled substances.
Client nursing facilities are also separately required to be licensed in the
states in which they operate and, if serving Medicare or Medicaid patients, must
be certified to be in compliance with applicable program participation
requirements. Client nursing facilities are also subject to the nursing home
reforms of the Omnibus Budget Reconciliation Act of 1987, which imposed strict
compliance standards relating to quality of care for nursing home operations,
including vastly increased documentation and reporting requirements. In
addition, pharmacists, nurses and other health care professionals who provide
services on CompScript's behalf are, in most cases, required to obtain and
maintain professional licenses and are subject to state regulations regarding
professional standards of conduct.
MEDICARE AND MEDICAID. The nursing home pharmacy business has long operated
under regulatory and cost containment pressures from state and federal
legislation primarily affecting Medicaid and, to a lesser extent, Medicare.
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As is the case for nursing home services generally, CompScript receives
reimbursement from the Medicaid programs, directly from individual residents
(private pay), and from other payors such as third-party insurers. CompScript
believes that its reimbursement mix is in line with nursing home expenditures
nationally. For the year ended December 31, 1997, CompScript's payor mix was
approximately as follows: 35% private pay and nursing homes, 27% Medicaid, 20%
Medicare (of which, 19% was attributable to Part A and 1% to Part B) and 18%
insurance and other private sources.
For those patients who are not covered by government-sponsored programs or
private insurance, CompScript generally directly bills the patient or the
patient's responsible party on a monthly basis. Depending upon local market
practices, CompScript may alternatively bill private patients through the
nursing facility. Pricing for private pay patients is based on prevailing
regional market rates or "usual and customary" charges.
The Medicaid program is a cooperative federal-state program designed to
enable states to provide medical assistance to aged, blind, or disabled
individuals, or members of families with dependent children whose income and
resources are insufficient to meet the costs of necessary medical services.
State participation in the Medicaid program is voluntary. To become eligible to
receive federal funds, a state must submit a Medicaid "state plan" to the
Secretary of the Department of Health and Human Services ("HHS") for approval.
The federal Medicaid statute specifies a variety of requirements which the state
plan must meet, including requirements relating to eligibility, coverage of
services, payment and administration.
Federal law and regulations contain a variety of requirements relating to
the furnishing of prescription drugs under Medicaid. States are given broad
authority, subject to certain standards, to limit or specify conditions to the
coverage of particular drugs. Federal Medicaid law establishes standards
affecting pharmacy practice. These standards include general requirements
relating to patient counseling and drug utilization review and more specific
requirements for nursing facilities relating to drug regimen reviews for
Medicaid patients in such facilities. Recent regulations clarify that, under
federal law, a pharmacy is not required to meet the general standards for drugs
dispensed to nursing facility residents if the nursing facility complies with
the drug regimen review requirements. However, the regulations indicate that
states may nevertheless require pharmacies to comply with the general standards,
regardless of whether the nursing facility satisfies the drug regimen review
requirement, and the states in which CompScript operates currently do require
its pharmacies to comply therewith.
Federal regulations impose certain requirements relating to reimbursement
for prescription drugs furnished to Medicaid patients. In addition to
requirements imposed by federal law, states have substantial discretion to
determine administrative, coverage, eligibility and payment policies under their
state Medicaid programs which may affect CompScript's operations. For example,
some states have enacted "freedom of choice" requirements which may prohibit a
nursing facility from requiring its residents to purchase pharmacy or other
ancillary medical services or supplies from particular providers that deal with
the nursing home. Such limitations may increase the competition which CompScript
faces in providing services to nursing facility patients.
The Medicare program is a federally funded and administered health insurance
program for individuals age 65 and over or who are disabled. The Medicare
program consists of two parts: Part A, which covers, among other things,
inpatient hospital, skilled nursing facility, home health care and certain other
types of health care services; and Medicare Part B, which covers physicians'
services, outpatient services, and certain items and services provided by
medical suppliers. Medicare Part B also covers a limited number of specifically
designated prescription drugs. The Medicare program establishes certain
requirements for participation of providers and suppliers in the Medicare
program. Pharmacies are not subject to such certification requirements. Skilled
nursing facilities and suppliers of medical equipment and supplies, however, are
subject to specified standards. Failure to comply with these requirements and
standards may
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adversely affect an entity's ability to participate in the Medicare program and
receive reimbursement for services provided to Medicare beneficiaries.
The Medicare and Medicaid programs are subject to statutory and regulatory
changes, retroactive and prospective rate adjustments, administrative rulings,
and freezes and funding reductions, all of which may adversely affect
CompScript's business. There can be no assurance that payments for
pharmaceutical supplies and services under governmental reimbursement programs
will continue to be based on the current methodology or remain comparable to
present levels. In this regard, CompScript may be subject to rate reductions as
a result of federal budgetary legislation related to the Medicare and Medicaid
programs. In addition, various state Medicaid programs periodically experience
budgetary shortfalls which may result in Medicaid payment delays to CompScript.
To date, CompScript has not experienced any material adverse effect due to any
such budgetary shortfall. In addition, the failure, even if inadvertent, of
CompScript and/ or its client institutions to comply with applicable
reimbursement regulations could adversely affect CompScript's business.
Additionally, changes in such reimbursement programs or in regulations related
thereto, such as reductions in the allowable reimbursement levels, modifications
in the timing or processing of payments and other changes intended to limit or
decrease the growth of Medicaid and Medicare expenditures, could adversely
affect CompScript's business.
REFERRAL RESTRICTIONS. CompScript is subject to federal and state laws,
which govern financial and other arrangements between health care providers.
These laws include the federal anti-kickback statute, which prohibits, among
other things, knowingly and willfully soliciting, receiving, offering or paying
any remuneration directly or indirectly in return for or to induce the referral
of an individual to a person for the furnishing of any item or service for which
payment may be made in whole or in part under Medicare or Medicaid. Many states
have enacted similar statutes, which are not necessarily limited to items, and
services for which Medicare or Medicaid makes payment. Violations of these laws
may result in fines, imprisonment, and exclusion from the Medicare and Medicaid
programs or other state-funded programs. Federal and state court decisions
interpreting these statutes are limited, but have generally construed the
statutes to apply if "one purpose" of remuneration is to induce referrals or
other conduct within the statute.
Federal regulations establish "safe harbors," which give immunity from
criminal or civil penalties to parties in compliance with applicable
regulations. While the failure to satisfy all criteria for a safe harbor does
not mean that an arrangement violates the statute, it may subject the
arrangement to review by the Office of Inspector General ("OIG"), which is
charged with administering the federal anti-kickback statute. Until recently,
there were no procedures for obtaining binding interpretations or advisory
opinions from the OIG on the application of the federal anti-kickback statute to
an arrangement or its qualification for a safe harbor upon which CompScript can
rely. However, the Health Insurance Portability and Accountability Act of 1996,
signed into law on August 21, 1996, now requires the Secretary of HHS to issue
written advisory opinions, which are binding on the Secretary and the party
requesting the opinion, regarding the applicability of certain aspects of the
anti-kickback statute to specific or proposed arrangements.
The OIG issues "Fraud Alerts" identifying certain questionable arrangements
and practices which it believes may implicate the federal anti-kickback statute.
The OIG has issued a Fraud Alert providing its views on certain joint venture
and contractual arrangements between health care providers. The OIG also issued
a Fraud Alert concerning prescription drug marketing practices that could
potentially violate the federal statute. Pharmaceutical marketing activities may
implicate the federal anti-kickback statute because drugs are often reimbursed
under the Medicaid program. According to the Fraud Alert, examples of practices
that may implicate the statute include certain arrangements under which
remuneration is made to pharmacists to recommend the use of a particular
pharmaceutical product.
In addition, a number of states have recently undertaken enforcement actions
against pharmaceutical manufacturers involving pharmaceutical marketing
programs, including programs containing incentives to
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pharmacists to dispense one particular product rather than another. These
enforcement actions arose under state consumer protection laws, which generally
prohibit false advertising, deceptive trade practices, and the like.
CompScript believes its contractual arrangements with other health care
providers, its pharmaceutical suppliers and its pharmacy practices are in
compliance with these laws. There can be no assurance that such laws will not,
however, be interpreted in the future in a manner inconsistent with CompScript's
interpretation and application.
HEALTH CARE REFORM AND FEDERAL BUDGET LEGISLATION. In recent years, the
Clinton administration and Congress have considered various proposals to reform
the health care system. On August 5, 1997, the Balanced Budget Act of 1997 (the
"Balanced Budget Act") was enacted. The Balanced Budget Act, among other things,
mandates the 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 SNF 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 order to ensure
that the frail elderly residing in SNFs receive needed and appropriate
medication therapy, the results of studies conducted by independent
organizations, including those which examine appropriate payment mechanism and
payment rates for medication therapy, must be considered as part of the PPS for
SNFs. The Balanced Budget Act provides for the imposition of cost savings
measures affecting Medicare SNF services, imposes limits on annual updates in
payments to Medicare SNFs for routine services, and institutes consolidated
billing for SNF residents, effective July 1, 1998. The Balanced Budget Act also
imposes numerous other cost savings measures affecting Medicare SNF services.
The Balanced Budget Act also repeals the 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 managed care or
capitated rates will not replace fee-for-service reimbursement for long-term
care, including pharmacy services. CompScript 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 CompScript's business. There can be no assurance that future
health care or budget legislation or other changes will not have an adverse
effect on the business of CompScript.
Several state Medicaid programs have established mandatory statewide managed
care programs for Medicaid beneficiaries to control costs through negotiated or
capitated rates, rather than traditional cost-based reimbursement. These
programs propose to use savings achieved to expand coverage to include those not
previously eligible for Medicaid. HHS has approved waivers for statewide managed
care demonstration projects in several states, and similar waivers are pending
in several other states. To date, CompScript's operations have not been
adversely affected by these demonstration projects. There is no assurance that
future Medicaid managed care systems will not have an adverse effect on
CompScript's business.
Federal and state laws and regulations govern various aspects of
CompScript's businesses. Since sanctions may be imposed for violations of these
laws, compliance is a significant operational requirement for CompScript.
CompScript believes that it is in substantial compliance with all existing legal
requirements material to the operation of its businesses.
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OTHER REGULATION
MAIL PHARMACY REGULATION. CompScript's mail service pharmacy is located in
Florida and CompScript is licensed to do business as a pharmacy in that state.
Many of the states into which CompScript delivers pharmaceuticals have laws and
regulations that require out-of-state mail service pharmacies to register with,
or be licensed by, the board of pharmacy or similar regulatory body in the
state. These states generally permit the mail service pharmacy to follow the
laws of the state within which the mail service pharmacy is located, although
one state also requires that CompScript employ a pharmacist licensed in that
state. CompScript has registered in every state in which, to CompScript's
knowledge, such registration is required.
Other statutes and regulations impact CompScript's mail service operations.
Federal statutes and regulations govern the labeling, packaging, advertising and
adulteration of prescription drugs and the dispensing of controlled substances.
The Federal Trade Commission requires mail order sellers of goods generally to
engage in truthful advertising, to stock a reasonable supply of the product to
be sold, to fill mail orders within thirty days, and to provide customers with
refunds when appropriate. CompScript believes it is in compliance with all
requirements of the Federal Trade Commission.
REGULATION OF INFUSION THERAPY SERVICES. CompScript's infusion therapy
services business is subject to many of the same or similar state laws and
regulations affecting CompScript's pharmacy management business. In addition,
some states require that providers of infusion therapy services be licensed.
CompScript is licensed as a home health agency, infusion pharmacy and pharmacy
in Florida. CompScript is licensed as a pharmacy only, in Alabama. CompScript
believes that it is in substantial compliance with such licensing requirements.
JCAHO, a non-profit, private organization, has established written standards
for health care organizations and home care services, including standards for
services provided by home infusion therapy companies. CompScript's Miami and
Boca Raton, Florida, and Mentor, Ohio facilities have received JCAHO
accreditation. When accredited by JCAHO, CompScript can market infusion therapy
services to Medicare and Medicaid programs. If CompScript expands its home
infusion therapy services to other states or to Medicaid programs, it may be
required to comply with other applicable laws and regulations.
FUTURE REGULATION. CompScript is unable to predict accurately what
additional federal or state legislation or regulatory initiatives may be enacted
in the future relating to the businesses of CompScript or the health care
industry in general, or what effect any such legislation or regulations might
have on CompScript. There can be no assurance that federal or state governments
will not impose additional restrictions or adopt interpretations of existing
laws that could have a material adverse effect on CompScript's business or
financial position.
SERVICEMARKS AND TRADEMARKS
CompScript has registered the servicemark "CompScript" with the United
States Patent and Trademark Office. CompScript's rights to this servicemark will
continue so long as CompScript complies with the usage, renewal filing and other
legal requirements relating to the renewal of service marks. CompScript is in
the process of applying for registration of several other trademarks and
servicemarks. If CompScript is unable to obtain any additional registrations,
CompScript believes there would be no material adverse effect on CompScript.
INSURANCE
The dispensing of pharmaceutical products by CompScript's pharmacies, and
the products and services provided in connection with CompScript's infusion
therapy programs (including the associated nursing services) may subject
CompScript to litigation and liability for damages. CompScript believes that its
insurance protection is adequate for its present business operations, but there
can be no assurance that
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CompScript will be able to maintain its professional and general liability
insurance coverage in the future or that such insurance coverage will be
available on acceptable terms or be adequate to cover any or all potential
product or professional liability claims. A successful product or professional
liability claim in excess of CompScript's insurance coverage could have a
material adverse effect upon CompScript.
EMPLOYEES
As of February 28, 1998, CompScript and its subsidiaries employed a total of
365 employees.
PRODUCT AND MARKET DEVELOPMENT
CompScript's pharmacy business engages in a continuing program for the
development of new services and the marketing thereof. While new service and new
market development are important factors for the growth of this business,
CompScript does not expect that any new service or marketing effort, including
those in the developmental stage, will require the investment of a material
portion of CompScript's assets.
MATERIALS/SUPPLIES
CompScript purchases pharmaceuticals through a wholesale distributor and, on
an increasing basis, under contracts negotiated directly with pharmaceutical
manufacturers. CompScript also is a member of industry buying groups which
contract with manufacturers for discounted prices. CompScript has numerous
sources of supply available to it and has not experienced any difficulty in
obtaining pharmaceuticals or other products and supplies used in the conduct of
its business.
INVENTORIES
CompScript's pharmacies maintain adequate on-site inventories of
pharmaceuticals and supplies to ensure prompt delivery service to its customers.
Inventories on hand are not considered to be high, beyond industry standards.
CompScript's primary wholesale distributor also maintains local warehousing in
most major geographic markets in which CompScript operates.
ENVIRONMENTAL MATTERS
In operating its facilities, CompScript makes every effort to comply with
pollution control laws. No major difficulties have been encountered in effecting
compliance. No material capital expenditures for environmental control
facilities are expected. While CompScript cannot predict the effect which any
future legislation, regulations, or interpretations may have upon its
operations, it does not anticipate any changes that would have a material
adverse impact on its operations.
DESCRIPTION OF PROPERTIES
CompScript's principal offices, mail order pharmacy operations and largest
institutional pharmacy are located in leased facilities in Boca Raton, Florida.
CompScript has leased 20,000 square feet in Boca Raton under a lease that
expires in December 2002 and has an annual average rental of $147,000 plus
common area charges. The chart listed below sets forth the approximate square
footage, annual lease cost (exclusive of common area charges) and the lease
termination date for each institutional pharmacy maintained by CompScript,
exclusive of the institutional pharmacy at CompScript's principal offices.
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<TABLE>
<CAPTION>
SQUARE TERMINATION
LOCATION FOOTAGE ANNUAL COST DATE
- --------------------------------------------------------------- ----------- --------------- ------------------
<S> <C> <C> <C>
Mobile, Alabama................................................ 4,200 $ 26,000 August 2000
Tampa, Florida................................................. 2,520 28,000 December 1999
Miami, Florida................................................. 17,000 130,000 November 2001
Metarie, Louisiana............................................. 4,400 45,600 July 2001
Jackson, Mississippi........................................... 2,831 23,300 November 1999
Mentor, Ohio................................................... 20,000 120,000 August 2000
Mentor, Ohio................................................... 1,684 28,320 May 2001
</TABLE>
LEGAL PROCEEDINGS
CompScript is not a party to any material legal proceeding.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
CompScript is a comprehensive provider of pharmacy management services
including institutional pharmacy, infusion therapy, mail order and consultant
pharmacist services to managed care networks, long-term and subacute care
facilities, home health patients and recipients of managed care. CompScript is
the successor to CompScript-Boca, Inc. ("Boca", f/k/a CompScript, Inc. which was
f/k/a Aldencare, Inc.), which was incorporated under the laws of the State of
Florida on October 3, 1991.
On April 26, 1996, shareholders who previously owned approximately 93% of
Boca exchanged their shares of Boca's Common Stock for 7,394,982 common shares
(representing an 80% interest) of Capital Brands, Inc. ("Capital"), a
publicly-held company involved in the development of consumer-based businesses
in the Republic of Poland (the "Acquisition"). This exchange was structured as a
tax-free reorganization. The Acquisition was accounted for as a reverse
acquisition of Capital by Boca, for an aggregate purchase price of approximately
$2,125,000, pursuant to which Boca was recapitalized to include the assets and
liabilities of Capital revalued to reflect the market value of Capital's net
tangible assets at the date of the Acquisition. The net tangible assets
consisted of cash of $1,000,000 and marketable securities, consisting of
1,125,000 shares of the Common Stock of QPQ Corporation (currently 18,750
shares, following reverse stock splits effected by QPQ), valued at $1,125,000.
CompScript incurred acquisition costs of approximately $1,889,000, all of which
were charged to additional paid-in capital. As Capital had no operations as of
the Acquisition date, no pro forma financial information is presented related to
this transaction.
Immediately prior to the Acquisition, Capital's assets included equity
interests it held in various entities. Capital agreed that, at or prior to
closing, it would divest itself of certain of the equity interests, and deliver
its remaining assets consisting of cash and marketable equity securities. In
anticipation of consummating the Acquisition, Capital divested itself of (i) its
interest in international Fast Foods Corporation to Mitchell Rubinson, the
former president of Capital, in exchange for 1,300,000 shares of Capital owned
by Mr. Rubinson and valued at $325,000 (consistent with Capital's accounting
treatment of those shares), (ii) its interest in Family Chicken, Inc. to Mr.
Rubinson, in exchange for 18,750 shares of Capital owned by Mr. Rubinson, valued
at $37,500 (consistent with Capital's accounting treatment of those shares) and
(iii) its interest in International Hotel Corporation to Mr. Rubinson, for
nominal ($100) consideration. Effective July 5, 1996, Capital changed its name
to CompScript, Inc. On October 3, 1996, Boca issued an additional 27,000 shares
of its common stock to a shareholder of CompScript, increasing the minority
interest's aggregate ownership in Boca to approximately 8%. The remaining 8% of
Boca is accounted for as a minority interest in a consolidated subsidiary on
CompScript's December 31, 1997 consolidated balance sheet.
On May 31, 1996, CompScript issued 666,350 shares of its Common Stock,
having an aggregate value of $5,497,388 (or $8.25 per share), for all the
outstanding common stock of Delta Pharmacy Services, Inc. ("Delta"). In
connection with this transaction, CompScript also issued (i) 22,500 shares,
having an aggregate market value of $135,000 (or $6.00 per share), pursuant to
the Shulman Agreement, and (ii) 3,666 shares, having an aggregate market value
of $21,996 (or $6.00 per share) to CompScript's counsel as consideration for
legal services rendered. The acquisition of Delta enhanced CompScript's
institutional pharmacy services for long-term care into Alabama, Mississippi,
and Northern Florida.
On August 19, 1996, CompScript issued 187,500 shares of its Common Stock,
having an aggregate value of $984,375 (or $5.25 per share), for all the
outstanding stock of SECURx, Inc. ("Securx"). In connection with this
transaction, CompScript also issued (i) 67,500 shares, having an aggregate
market value of $405,000 (or $6.00 per share), to Shulman and (ii) 3,667 shares,
having an aggregate market value of $22,002 (or $6.00 per share) to CompScript's
counsel as consideration for legal services rendered. In addition to identifying
Securx and assisting in the structuring, negotiating and closing of the Securx
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transaction, Shulman provided other services including assisting shareholders of
a corporate owner of Securx to structure the transaction to meet their needs,
reviewing the claims involved in a litigation between Securx and a predecessor
of Securx and evaluating the consequences of the litigation on CompScript's
proposed acquisition, and negotiating the terms of a resolution to an
outstanding judgment against Securx by one of its suppliers, including a lien
filed against the inventory of Securx. The acquisition of Securx enabled
CompScript to strengthen its overall pharmacy benefit management program and
become a nationally recognized full service, on line adjudicated mail order
dispensing pharmacy.
During the first quarter of 1997, CompScript also completed three
acquisitions that enabled CompScript to continue to expand its existing
institutional pharmacy and long term care business.
On January 10, 1997, CompScript acquired Medical Services Consortium, Inc.
("MSC") by issuing an aggregate of 1,400,000 shares of CompScript's Common
Stock, having an aggregate market value of $12,600,000 (or $9.00 per share), for
all of the outstanding Common Stock of MSC. In connection with this transaction,
CompScript also issued, in December 1996, (i) 45,000 shares, having an aggregate
market value of $414,855 (or $9.219 per share), pursuant to the Shulman
Agreement and (ii) 3,667 shares, having an aggregate market value of $22,002 (or
$6.00 per share) to CompScript's counsel as consideration for legal services
rendered.
On February 28, 1997, CompScript issued an aggregate of 375,000 shares of
Common Stock, having an aggregate market value of $3,984,375 (or $10.625 per
share), for all of the outstanding common stock of Campo Medical Pharmacy, Inc.
("Campo"). In connection with this transaction, CompScript also issued 15,000
shares, having an aggregate market value of $90,000 (or $6.00 per share),
pursuant to the Shulman Agreement.
On March 26, 1997, the company acquired Hytree Pharmacy, Inc. ("Hytree") by
issuing an aggregate of 850,000 shares of CompScript's Common Stock, having an
aggregate market value of $7,384,375, (or $8.69 per share) for all of the
outstanding shares of Hytree. In connection with this transaction, CompScript
also issued 30,000 shares, having an aggregate market value of $150,000 (or
$5.00 per share), pursuant to the Shulman Agreement.
The per share value of the shares issued to Shulman and CompScript's
counsel, respectively, in connection with the foregoing acquisitions is
different from the per share value of the shares issued in exchange for the
outstanding shares of the acquired companies, as a result of arms' length
negotiations between CompScript, on the one hand, and Shulman and CompScript's
counsel, respectively, on the other hand.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Sales for the three-month period ended March 31, 1998 (the "1998 Quarter")
were $13,849,483 compared to $11,498,619 for the three-month period ended March
31, 1997 (the "1997 Quarter"). The $2,350,864 or 20% increase was primarily
attributed to the Company's marketing efforts directed towards new clients.
Gross profit increased $1,112,793 to $5,816,694 for the 1998 Quarter from
$4,703,901 in the 1997 Quarter as a result of the increased revenue. Gross
profit margins as a percentage of sales increased to 42% for the 1998 Quarter in
comparison to 41% for the 1997 Quarter.
Selling general and administrative expenses ("SG&A") were $4,818,511 for the
1998 Quarter compared to $4,696,093 for the 1997 Quarter. The increase of
$122,418, or 3%, was attributable to normal inflationary increases, primarily in
salaries.
Provision for doubtful accounts increased by $236,065 to $357,970 in the
1998 Quarter compared to $121,905 in the 1997 Quarter due to the increase in
accounts receivable and sales.
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The 1997 Quarter included $613,457 of one-time charges related to merger and
acquisition costs associated with the three acquisitions completed during that
period. There were no such costs during the 1998 Quarter.
Interest expense increased by $67,009 to $166,572, or 67%, for the 1998
Quarter in comparison to $99,563 in the 1997 Quarter. This increase is
attributable to the increase in the Company's debt, primarily the line-of-credit
facility.
Income tax provision for the 1998 Quarter was $178,000 which is estimated at
the Company's statutory tax rate of 37.5% of income before income taxes. No
income tax benefit was recorded during the 1997 Quarter because it was too early
in the fiscal year to determine if the entire year would result in a loss.
As a result of the events previously discussed, the Company reported a net
income of $297,740 or $.02 per share for the 1998 Quarter compared to a net loss
of $1,616,102, or $.12 per share, for the 1997 Quarter.
FISCAL YEARS ENDED DECEMBER 31, 1997 AND 1996
All acquisitions discussed above were accounted for as pooling-of-interests
and, accordingly, CompScript's consolidated financial statements have been
restated for all periods presented. (See Note 1 to the Consolidated Financial
Statements.) In accordance with accounting rules for pooling-of-interests
transactions, charges to operating income for acquisition-related expenses of
approximately $689,000 and $934,000 were recorded during 1997 and 1996,
respectively.
In March 1997, CompScript recorded an $800,000 charge against the $1,125,000
note receivable included in the consolidated balance sheet at December 31, 1996.
CompScript deemed it appropriate to evaluate the collateral underlying the note,
as the value of the collateral (marketable equity securities) declined
significantly subsequent to December 31, 1996. In May 1997, the note receivable
was rescinded by CompScript and the collateral of 1,125,000 shares of QPQ
Corporation Common Stock (18,750 after a reverse split of 20:1 and another of
3:1) reverted back to CompScript. During 1997, QPQ Corporation changed its name
to Regenesis Holding Corp. The shares, which have been classified as "available
for sale," are valued at $53,906, resulting in the recognition of an unrealized
loss of $271,094, and are included in marketable securities in the consolidated
balance sheet at December 31, 1997.
CompScript also incurred significant costs (which CompScript believes are
nonrecurring) associated with the start up and reorganization of its mail order
pharmacy ("Mail Order") operations during 1996. As a result of CompScript
incurring dual operating costs while moving the operations from Ohio to Florida;
installing an entirely new proprietary order entry, customer service, dispensing
and on-line adjudication software system; incurring ramp up costs in the area of
customer service and dispensing personnel to handle new contracts which began in
January 1997, CompScript incurred losses of approximately $1,100,000 related to
Mail Order operations during the fourth quarter of 1996 and approximately
$1,200,000 during the year ended December 31, 1997.
CompScript believes that as a result of the Mail Order operations
nonrecurring costs incurred during the fourth quarter of 1996, it has put into
place the infrastructure to support anticipated future growth associated with
further development of its Mail Order operations. While the results of the Mail
Order operations cannot be predicted and is dependent, in large part, on
CompScript's success in implementing its marketing and business strategy,
management believes the additional personnel and increased administrative and
operational expenses will be partially offset by increased growth in the Mail
Order operations. However, management estimates that CompScript's Mail Order
revenues will need to at least double its current levels to cover its costs.
There is no assurance that CompScript's Mail Order revenues will increase to
levels permitting profitable Mail Order operations.
CompScript entered into the workers' compensation, pharmacy benefits
management ("PBM") line of business with its 1994 acquisition of CompScript,
Inc., which became the Ohio Division. During the
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years ended December 31, 1997 and 1996, the contracts attributed to the Ohio
Division generated minimal revenue due in part to the nonexclusive nature of the
contracts. In addition, the inability of the Ohio Division to convert existing
relationships with prospective clients into new PBM contracts or to secure new
prospective clients contributed to significant operating losses and negative
cash flows relative to the Ohio Division in 1997 and 1996. As a result,
management decided to cancel all PBM contracts by December 31, 1997.
Revenues for the year ended December 31, 1997 increased 18.5% to $50,631,230
from $42,716,356 for the year ended December 31, 1996. Approximately 15% of the
growth is attributable to marketing efforts to new clients, and approximately
3.5% is attributable to growth in sales made to existing clients.
Gross profits increased to $20,687,323 in 1997 from $17,025,573 in 1996, an
increase of $3,661,750 or 21.5%. Gross profit margins increased to 40.9% in 1997
from 39.9% in 1996 primarily as a result of more favorable purchasing discounts
based on the increase in volumes and centralization of the purchasing function
for some of CompScript's locations.
Selling general and administration expenses as a percentage of revenues for
1997 and 1996 were 39.2% and 37.4% respectively. This increase is attributable
to the increases in payroll costs from the addition of new executives, as well
as legal and professional fees related to CompScript's acquired entities along
with costs associated with being a public entity.
CompScript's provision for doubtful accounts increased approximately 26.1%
or $295,743 in the year ended December 31, 1997, primarily due to the increase
in reserves attributable to the increase in revenues.
Interest and other income decreased $13,431 to $44,900 during 1997, compared
to 1996, as interest from temporary cash investments declined.
Interest expense for the year ended December 31, 1997 increased to $575,124
from $359,298 during 1996, primarily due to higher levels of borrowings
outstanding.
As a result of the items previously discussed, net loss for the year ended
December 31, 1997 was $2,356,848 compared to net loss of $1,155,756 in 1996. Net
loss per share was $.17 in 1997 compared to $.09 in 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its operating requirements to date primarily through
operations, the private sale of equity securities (prior to the reverse
acquisition on April 26, 1996), and borrowings under its existing line of credit
agreement. As of March 31, 1998, the Company had cash and cash equivalents of
$1,117,443, accounts receivable of $10,168,893, working capital of $2,940,781
and a current ratio of 1.21 to 1.00.
Net cash provided by operating activities for the 1998 Quarter was $793,918
compared to net cash used in operating activities of $3,195,016 during the 1997
Quarter. Cash provided by operating activities during the 1998 Quarter was
primarily attributable to net income, adjusted for non-cash expenses, such as
provision for doubtful accounts and depreciation expenses. During the 1997
Quarter, cash used in operating activities was primarily attributable to the
operating loss and the increase in accounts receivable and inventory.
Net cash used in investing activities was $304,444 for the 1998 Quarter,
which was a direct result of net purchases of computer equipment and software
for the continued development of the pharmacy operating and communications
systems in the Company's corporate office and its offsite pharmacies. During the
1997 Quarter, the Company made $552,916 in expenditures for its Boca Raton
office and new mail order facility which was completed in February 1997, and
leasehold improvements pertaining to the new office and institutional pharmacy
location that MSC moved into during September of 1997.
84
<PAGE>
Financing activities provided $98,626 in cash during the 1998 Quarter,
compared to $3,697,396 during the 1997 Quarter and is comprised of the
following:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
-------------------------
1998 1997
----------- ------------
<S> <C> <C>
Exercise of options and warrants.................................................. $ -- $ 649,996
Net proceeds from line of credit.................................................. 215,801 3,990,773
Net repayment of other debt....................................................... (117,175) (943,373)
----------- ------------
$ 98,626 $ 3,697,396
----------- ------------
----------- ------------
</TABLE>
The Company's future capital requirements for operations include financing
the growth of working capital items such as accounts receivable and inventory,
purchasing equipment and upgrading management information and inventory control
systems.
Based upon the continuation of the Company's business development, the
Company believes the cash flow from operations and borrowings under an expanded
credit facility will provide sufficient cash to fund its operations and meet
current obligations for the year ended December 31, 1998. The Company is
attempting to improve cash flows from operations and maintain flexibility in
financing both interim and long-term working capital requirements by increasing
its collection efforts of its accounts receivable. Additionally, management's
decision to terminate the PBM contracts effective December 31, 1997 is expected
to result in a material reduction in selling, general and administrative
expenses.
In the event the Company dramatically expands its operations or makes
acquisitions that would require funds in addition to its existing liquid assets
and cash flows, it would have to seek additional debt or equity financing. There
can be no assurance that the Company could obtain such financing or that such
financing would be available on terms acceptable to the Company.
IMPACT OF THE YEAR 2000
The Securities and Exchange Commission, in Staff Legal Bulletin No. 5
(CF/IM), has stated that public operating companies should consider whether they
will be affected by any material expenditures, problems or uncertainties
associated with the Year 2000 issue, which affects many existing computer
systems that use only two digits to identify a year in the date field.
CompScript believes that the matters raised by Staff Legal Bulletin No. 5 are
not applicable in any material way to its own computer systems, and CompScript
intends to confirm that any computer systems that CompScript may purchase or
lease in the future will have addressed the Year 2000 issue.
CompScript is currently determining the extent to which it may be impacted
by third parties' failure to remedy their own Year 2000 issues. CompScript is
having, and will continue to have, formal communications with all of its
significant customers, payers, suppliers, and other third parties to determine
the extent, if any, to which CompScript's interface systems could be impacted by
any third party Year 2000 issues and related remedies. There can be no assurance
that the systems of other companies with which CompScript's systems interact
will be timely converted and would not have an adverse effect on CompScript's
business.
85
<PAGE>
BENEFICIAL OWNERSHIP OF COMPSCRIPT SHARES
As of the date of this Proxy Statement/Prospectus, there were 14,072,063
CompScript Shares issued and outstanding. The following table sets forth, as of
the date hereof, information with respect to the beneficial ownership of
CompScript Shares by (i) each person who is known by CompScript to own
beneficially more than 5% of CompScript Shares, (ii) each director, (iii) each
executive officer, and (iv) all directors and executive officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(2) OUTSTANDING SHARES OWNED
- --------------------------------------------------------------- ---------------------- ---------------------------
<S> <C> <C>
Brian A. Kahan................................................. 4,656,670(3) 32.3%
Robert J. Gardner.............................................. 241,025(4) 1.7%
Malcolm Leonard................................................ 35,086(5) *
Robert Edelheit................................................ 107,206(6) *
Paul E. Heimberg............................................... 115,351(7) *
Juan C. Cocuy.................................................. 72,500(8) *
Omnicare, Inc.
50 E. RiverCenter Blvd.
Covington, Kentucky 41011.................................... 4,335,653(9) 30.8%
All directors and executive officers
as a group (6 persons)....................................... 5,227,838(10) 35.2%
</TABLE>
- ------------------------
* Less than 1%.
(1) Unless otherwise indicated, the address of each of the listed beneficial
owners identified is 1225 Broken Sound Parkway, N.W., Suite A, Boca Raton,
Florida 33451. Unless otherwise noted, the CompScript believes that all
persons named in the table have sole voting and investment power with
respect to all CompScript Shares beneficially owned by them.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Proxy
Statement/Prospectus upon the exercise of warrants or options. Each
beneficial owner's percentage ownership is determined by assuming that
warrants or options that are held by such person (but not those held by any
other person) and that are exercisable within 60 days from the date of this
Proxy Statement/Prospectus have been exercised.
(3) Includes 4,207,453 CompScript Shares held in AldenCare Limited Partnership,
of which Mr. Kahan is the general partner and 125,000 held by Mr. Kahan's
wife. Includes 3,200 CompScript Shares held in a retirement account for the
benefit of Mr. Kahan and options to purchase 321,017 CompScript Shares.
(4) Includes options to purchase 240,000 CompScript Shares.
(5) Includes 3,898 CompScript Shares held by Mr. Leonard in a Joint Tenancy with
a Right of Survivorship ("JTWROS") with his sister Corinne Leonard, 5,848
CompScript Shares held by Mr. Leonard in a JTWROS with his daughter Jennifer
Gottlieb and 5,848 CompScript Shares held by Mr. Leonard in a JTWROS with
his daughter Shari Leonard and options to purchase 19,492 CompScript Shares.
(6) Includes options to purchase 58,476 CompScript Shares.
(7) Includes options to purchase 77,967 CompScript Shares.
(8) Includes options to purchase 70,000 CompScript Shares.
(9) Represents the CompScript Shares which are subject to the Voting Agreement.
As a result of the provisions of the Voting Agreement, the Principal
Shareholder and Omnicare may be deemed to share voting and dispositive power
with respect to the CompScript Shares subject to the Voting
86
<PAGE>
Agreement. Pursuant to the Stock Option Agreement, Omnicare would have the
right to acquire 2,800,000 Shares (representing approximately 19.9% of the
outstanding CompScript Shares) under the circumstances set forth therein.
Omnicare disclaims beneficial ownership of the CompScript Shares underlying
the Stock Option Agreement. The Voting Agreement and the Stock Option
Agreement were entered into in connection with the Merger Agreement. See
"THE MERGER AGREEMENT AND RELATED AGREEMENTS--Stock Option Agreement," and
"--Voting Agreement."
(10) See notes 3--8 above.
87
<PAGE>
EXPERTS
The consolidated balance sheet of CompScript, Inc. and subsidiaries as of
December 31, 1997 and the related consolidated statements of operations,
shareholders equity, and cash flows for the years ended December 31, 1996 and
1997 included in this Proxy Statement/Prospectus and the related Registration
Statement have been included herein in reliance on the report of Ernst & Young,
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, 1997 have been so incorporated in reliance on
the report 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 Shares to be issued by Omnicare in connection
with the Merger will be passed upon by Dewey Ballantine LLP, New York, New York.
Certain tax matters relating to the Merger will be passed upon for
CompScript by Atlas, Pearlman, Trop & Borkson, P.A., Ft. Lauderdale, Florida.
SHAREHOLDER PROPOSALS FOR NEXT
COMPSCRIPT ANNUAL MEETING
The deadline has passed for shareholder proposals intended to be considered
for inclusion in CompScript's proxy statement for presentation at the 1998
annual meeting of the shareholders of CompScript. Such shareholder proposals
must have been received by CompScript by December 31, 1997. If the Merger is
consummated, no 1998 annual meeting will be held.
88
<PAGE>
GLOSSARY
The following terms used in this Proxy Statement/Prospectus have the
meanings set forth below:
<TABLE>
<CAPTION>
TERM DEFINITION OR SECTION IN WHICH DEFINED
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Acquisition Transaction................ Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Stock Option Agreement."
Affiliate Letter....................... Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Resale of Omnicare Shares."
Affiliate Transaction.................. Has the meaning set forth in "COMPARISON OF SHAREHOLDER RIGHTS."
Alternative Transactions............... Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Voting Agreement."
Antitrust Division..................... The Antitrust Division of the Department of Justice.
Business Combination................... Has the meaning set forth in "COMPARISON OF SHAREHOLDER RIGHTS."
Cash Payment........................... Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Stock Option Agreement."
Certificate............................ Certificate representing CompScript Shares.
Closing................................ The closing of the Merger.
Closing Date........................... The date the Merger closes.
Code................................... The Internal Revenue Code of 1986, as amended.
Collar Limitations..................... Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Consideration to be Received in the Merger."
Commission............................. The Securities and Exchange Commission.
CompScript............................. Compscript, Inc., a Florida corporation.
Compscript Articles.................... The CompScript Articles of Incorporation, as amended.
CompScript Board....................... The Board of Directors of CompScript.
CompScript Option...................... Each option to acquire CompScript Shares.
CompScript Shares...................... CompScript common stock, par value $.0001 per share.
Conversion Ratio....................... The number of Omnicare Shares received per CompScript Share.
D.F. King.............................. D.F. King & Co., Inc.
DGCL................................... The Delaware General Corporation Law.
Dissenting Shares...................... Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Consideration to be Received in the Merger."
Effective Time......................... The date and time when the Merger shall become effective.
Exchange Act........................... The Securities Exchange Act of 1934.
</TABLE>
89
<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION OR SECTION IN WHICH DEFINED
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Exchange Agent......................... A bank or trust company designated by Omnicare to act as exchange agent.
FBCA................................... Florida Business Corporation Act.
Frustrating Transactions............... Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Voting Agreement."
FTC.................................... Federal Trade Commission.
HSR Act................................ The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
IBAH................................... IBAH, Inc., a Delaware corporation. See "RECENT DEVELOPMENTS."
Interested Stockholder................. Has the meaning set forth in "COMPARISON OF SHAREHOLDER RIGHTS."
Merger................................. The merger of Sub with and into CompScript.
Merger Agreement....................... The Agreement and Plan of Merger, dated February 23, 1998, as amended,
by and among Omnicare, CSI Acquisition Corp. and CompScript.
NationsBanc Montgomery................. NationsBanc Montgomery Securities LLC.
Notional Total Profit.................. Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Stock Option Agreement."
NYSE................................... New York Stock Exchange.
Omnicare............................... Omnicare, Inc., a Delaware corporation.
Omnicare Board......................... The Board of Directors of Omnicare.
Omnicare Certificate................... The Omnicare Restated Certificate of Incorporation.
Omnicare Average Market Price.......... Has the meaning set forth in "QUESTIONS AND ANSWERS."
Omnicare Shares........................ Shares of Omnicare common stock, par value $1.00 per share.
Option................................. Has the meaning set forth under "SUMMARY."
Option Price........................... A cash price equal to $4.50 per share.
Option Shares.......................... Has the meaning set forth under "SUMMARY."
Option Termination Date................ 90 days after the termination of the Merger Agreement.
Principal Shareholder.................. Brian A. Kahan.
Record Date............................ May 18, 1998.
Registration Statement................. Registration Statement on Form S-4.
Sale Right............................. Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Stock Option Agreement."
SEC.................................... The Securities and Exchange Commission.
Securities Act......................... The Securities Act of 1933.
</TABLE>
90
<PAGE>
<TABLE>
<CAPTION>
TERM DEFINITION OR SECTION IN WHICH DEFINED
- --------------------------------------- ------------------------------------------------------------------------
<S> <C>
Service................................ The Internal Revenue Service.
Special Meeting........................ The special meeting of shareholders of CompScript at which the Merger
will be considered.
Stock Option Agreement................. The stock option agreement between CompScript and Omnicare.
Sub.................................... CSI Acquisition Corp., a wholly-owned subsidiary of Omnicare.
Surviving Corporation.................. CompScript, the corporation surviving the Merger.
Total Profit........................... Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Stock Option Agreement."
Transaction Proposal................... Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Exclusivity."
Triggering Conditions.................. Has the meaning set forth in "THE MERGER AGREEMENT AND RELATED
AGREEMENTS--Stock Option Agreement."
Voting Agreement....................... Has the meaning set forth under "SUMMARY."
</TABLE>
91
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
INDEX TO FINANCIAL INFORMATION
<TABLE>
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Balance Sheet--December 31, 1997......................................... F-3
Consolidated Statements of Operations--Years ended December 31, 1997 and 1996......... F-4
Consolidated Statements of Shareholders' Equity-- Years ended December 31, 1997 and
1996................................................................................ F-5
Consolidated Statements of Cash Flows--Years ended December 31, 1997 and 1996......... F-6
Notes to Consolidated Financial Statements--December 31, 1997......................... F-8
Consolidated Balance Sheet as of March 31, 1998 (Unaudited) and December 31, 1997..... F-23
Consolidated Statements of Operations--Three months ended March 31, 1998 and 1997
(Unaudited)......................................................................... F-24
Consolidated Statements of Cash Flows--Three months ended March 31, 1998 and 1997
(Unaudited)......................................................................... F-25
Notes to Consolidated Financial Statements-March 31, 1998............................. F-26
</TABLE>
F-1
<PAGE>
Report of Independent Certified Public Accountants
The Board of Directors
and Shareholders
CompScript, Inc.
We have audited the accompanying consolidated balance sheet of CompScript, Inc.
and Subsidiaries (the Company) as of December 31, 1997, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the two years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company'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 consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
CompScript, Inc. and Subsidiaries at December 31, 1997, and the consolidated
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
Ernst & Young, LLP
West Palm Beach, Florida
March 6, 1998
F-2
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................................ $ 529,343
Accounts receivable, net of allowance of $1,510,690.................................................. 9,900,717
Inventory............................................................................................ 3,180,397
Marketable securities................................................................................ 53,906
Income tax refund receivable......................................................................... 575,075
Deferred tax asset................................................................................... 260,168
Prepaid expenses and other current assets............................................................ 950,059
-----------
Total current assets................................................................................. 15,449,665
Property and equipment, net.......................................................................... 3,542,866
Other assets:
Costs in excess of net assets acquired, less accumulated amortization of $102,267.................... 102,263
Other................................................................................................ 485,846
-----------
Total other assets................................................................................... 588,109
-----------
Total assets......................................................................................... $19,580,640
-----------
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................................................................... $ 4,694,341
Accrued salaries and benefits........................................................................ 355,393
Accrued expenses..................................................................................... 693,888
Accrued pharmaceuticals dispensed by third parties................................................... 49,413
Line of credit....................................................................................... 6,715,467
Current portion of notes payable to shareholders..................................................... 75,000
Current portion of notes payable..................................................................... 185,354
Current portion of capital lease obligations......................................................... 219,439
-----------
Total current liabilities............................................................................ 12,988,295
Deferred tax liability............................................................................... 215,067
Long-term debt:
Notes payable........................................................................................ 495,781
Capital lease obligations............................................................................ 211,500
-----------
Total long-term debt................................................................................. 707,281
-----------
Total liabilities.................................................................................... 13,910,643
Minority interest.................................................................................... 222,628
Shareholders' equity:
Common stock, $.0001 par value--50,000,000 shares authorized, 13,957,063 shares issued and
outstanding........................................................................................ 1,396
Preferred stock; $.0001 par value--1,000,000 shares authorized; no shares issued and outstanding..... --
Additional paid-in capital........................................................................... 12,119,195
Accumulated deficit.................................................................................. (6,402,128)
Unrealized loss on marketable securities............................................................. (271,094)
-----------
Total shareholders' equity........................................................................... 5,447,369
-----------
Total liabilities and shareholders' equity........................................................... $19,580,640
-----------
-----------
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
Sales.............................................................................. $ 50,631,230 $ 42,716,356
Cost of sales...................................................................... 29,943,907 25,690,783
------------- -------------
Gross profit....................................................................... 20,687,323 17,025,573
Selling, general and administrative expenses....................................... 19,838,020 15,953,914
Provision for doubtful accounts.................................................... 1,427,684 1,131,941
Merger costs....................................................................... 688,706 934,223
------------- -------------
Total operating expenses........................................................... 21,954,410 18,020,078
------------- -------------
Operating loss..................................................................... (1,267,087) (994,505)
Other:
Interest and other income.......................................................... 44,900 58,331
Interest expense................................................................... (575,124) (359,298)
Loss on note receivable............................................................ (800,000) --
------------- -------------
Loss before provision for income taxes............................................. (2,597,311) (1,295,472)
Income tax benefit................................................................. (240,463) (139,716)
------------- -------------
Net loss........................................................................... $ (2,356,848) $ (1,155,756)
------------- -------------
------------- -------------
Net loss per share................................................................. $ (0.17) $ (0.09)
------------- -------------
------------- -------------
Weighted average shares outstanding................................................ 13,812,080 12,466,648
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
LOSS ON
AVAILABLE
COMMON STOCK ADDITIONAL FOR TOTAL
---------------------- PAID-IN ACCUMULATED SALE SHAREHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT SECURITIES EQUITY
--------- ----------- ----------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996.......... 11,536,206 $ 1,154 $ 6,056,859 $(3,107,476) $ -- $ 2,950,537
Reverse acquisition of Capital
Brands, Inc.:
Acquisition of Capital Brands,
Inc.'s common shares, net of
acquisition costs of $1,888,807... 1,806,750 181 261,012 -- -- 261,193
Recording of minority interest in
CompScript-Boca, Inc.............. (662,341) (66) (384,875) 162,313 -- (222,628)
Transfer of acquired entity's
(Delta) accumulated deficit to
additional paid-in capital upon
conversion from an S to a C
corporation....................... -- -- (101,687) 101,687 -- --
Adjustment for Hytree Pharmacy,
Inc., pooling-of- interests from
year-end change (see Note 1)...... -- -- -- 39,512 -- 39,512
Distributions to shareholders....... -- -- -- (85,560) -- (85,560)
Exercise of warrants................ 102,550 10 538,366 -- -- 538,376
Exercise of stock options........... 625,000 62 624,938 -- -- 625,000
Fair market value of stock options
issued to nonemployees............ -- -- 1,411,250 -- -- 1,411,250
Common shares issued to
consultants....................... 125,000 13 923,127 -- -- 923,140
Net loss............................ -- -- -- (1,155,756) -- (1,155,756)
--------- ----------- ----------- ------------ ------------ -------------
Balance at December 31, 1996........ 13,533,165 1,354 9,328,990 (4,045,280) -- 5,285,064
Exercise of warrants................ 378,898 38 1,969,959 -- -- 1,969,997
Fair market value of stock options
issued to nonemployees............ -- -- 580,250 -- -- 580,250
Common shares issued to
consultants....................... 45,000 4 239,996 -- -- 240,000
Unrealized loss on marketable
securities........................ -- -- -- -- (271,094) (271,094)
Net loss............................ -- -- -- (2,356,848) -- (2,356,848)
--------- ----------- ----------- ------------ ------------ -------------
Balance at December 31, 1997........ 13,957,063 $ 1,396 $12,119,195 $(6,402,128) $ (271,094) $ 5,447,369
--------- ----------- ----------- ------------ ------------ -------------
--------- ----------- ----------- ------------ ------------ -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss............................................................................ $ (2,356,848) $ (1,155,756)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization of leasehold improvements............................. 701,958 515,460
Loss on note receivable............................................................. 800,000 --
Adjustment for Hytree Pharmacy, Inc. pooling-of-interests from year-end change...... -- 39,512
Noncash merger costs................................................................ 240,000 739,492
Deferred taxes...................................................................... -- (22,901)
Amortization........................................................................ 40,908 43,815
Provision for doubtful accounts..................................................... 1,427,684 842,779
Changes in operating assets and liabilities:
Accounts receivable................................................................. (4,958,681) (1,961,725)
Inventory........................................................................... (712,758) (616,371)
Prepaid and other receivables....................................................... (257,322) 80,830
Other assets........................................................................ 394,164 (10,878)
Income tax refund receivable........................................................ (356,563) (440,903)
Accounts payable and accrued expenses............................................... 601,538 866,013
------------- -------------
Net cash used in operating activities............................................... (4,435,920) (1,080,633)
INVESTING ACTIVITIES
Purchase of property and equipment.................................................. (1,571,678) (943,422)
Proceeds from sale of equipment..................................................... -- 71,216
Payments received on notes receivable............................................... -- 21,225
Payments received on loans to shareholders.......................................... -- 12,982
Acquisitions, net of cash acquired.................................................. -- 403,808
------------- -------------
Net cash used in investing activities............................................... (1,571,678) (434,191)
</TABLE>
F-6
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
FINANCING ACTIVITIES
Exercise of options and warrants.................................................... $ 1,969,997 $ 1,163,376
Proceeds from lines of credit....................................................... 6,185,774 800,000
Repayment of lines of credit........................................................ (145,000) (330,054)
Proceeds from notes payable to shareholder.......................................... 300,000 450,414
Repayments of notes payable to shareholder.......................................... (1,568,737) (355,801)
Proceeds from notes payable......................................................... 2,622,110 2,647,113
Repayment of notes and leases payable............................................... (3,631,383) (2,520,332)
Distribution to shareholders........................................................ (53,560) (32,000)
------------- -------------
Net cash provided by financing activities........................................... 5,679,201 1,822,716
------------- -------------
Net (decrease) increase in cash and cash equivalents................................ (328,397) 307,892
Cash and cash equivalents at beginning of year...................................... 857,740 549,848
------------- -------------
Cash and cash equivalents at end of year............................................ $ 529,343 $ 857,740
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes.......................................................... $ 103,256 $ 141,349
------------- -------------
------------- -------------
Cash paid for interest.............................................................. $ 575,124 $ 298,329
------------- -------------
------------- -------------
SCHEDULE OF NONCASH INVESTING ACTIVITIES
Stock options issued in exchange for prepaid consulting fees........................ $ 580,250 $ 302,285
------------- -------------
------------- -------------
Conversion of accounts receivable to a note receivable.............................. $ -- $ 239,441
------------- -------------
------------- -------------
Distribution payable................................................................ $ -- $ 53,560
------------- -------------
------------- -------------
Fixed assets acquired pursuant to capital lease obligations and notes payable....... $ 441,651 $ 63,916
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-7
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. THE COMPANY
CompScript, Inc. and Subsidiaries (CompScript or the Company), f/k/a Capital
Brands, Inc., is a comprehensive provider of pharmacy management services
including institutional pharmacy, infusion therapy, mail order and consultant
pharmacist services. The Company is the successor to CompScript-Boca, Inc.
(Boca), f/k/a CompScript, Inc. which was f/k/a Aldencare, Inc., which was
incorporated under the laws of the State of Florida on October 3, 1991.
On April 26, 1996, shareholders who previously owned approximately 93% of
Boca exchanged their shares of Boca's Common Stock for 7,394,982 common shares
(representing an 80% interest) of Capital Brands, Inc. (Capital), a
publicly-held company (the Acquisition). This exchange was structured as a tax-
free reorganization. The Acquisition was accounted for as a reverse purchase of
Capital by Boca pursuant to which Boca was recapitalized to include the assets
and liabilities of Capital revalued to reflect the market value of Capital's net
tangible assets at the date of the Acquisition, consisting of cash and
marketable equity securities. The Company incurred acquisition costs of
approximately $1,888,807, all of which was charged to additional paid-in
capital. As Capital had no operations as of the Acquisition date, no pro forma
financial information is presented. On July 5, 1996, Capital changed its name to
CompScript, Inc. The remaining 7% of Boca is accounted for as a minority
interest in a consolidated subsidiary on the Company's December 31, 1997 and
1996 consolidated balance sheet. On October 3, 1996, Boca issued an additional
27,000 shares of its Common Stock to a shareholder of the Company, increasing
the minority interest's aggregate ownership interest in Boca to approximately
8%. Boca was recapitalized to reflect Capital's capital structure for all
periods presented.
The following table reconciles the common shares issued in the reverse
acquisition to the beginning balance (January 1, 1996) of common shares
presented in the Consolidated Statements of Shareholders' Equity:
<TABLE>
<S> <C>
Issuance of Capital Brands, Inc. common stock to
CompScript-Boca, Inc. shareholders............................ 7,394,982
Common shares issued to entities acquired through
poolings-of-interests to reflect recapitalization of
CompScript-Boca, Inc. as a result of the reverse acquisition
of Capital Brands, Inc........................................ 3,478,883
Shares of CompScript-Boca related to minority interest converted
into Capital Brands shares.................................... 662,341
---------
11,536,206
---------
---------
</TABLE>
On May 31, 1996, in a transaction accounted for as a pooling-of-interests,
the Company acquired Delta Pharmacy Services, Inc. (Delta). As a result, the
accompanying consolidated financial statements include the accounts and results
of operations of Delta for all periods presented. In connection with the
transaction, the Company exchanged 666,350 shares of the Company's Common Stock
for all of the outstanding common stock of Delta. Delta is in the business of
supplying prescription pharmaceuticals, consulting services and enteral and
parental therapies to long-term and alternate care providers in Alabama and
Northern Florida.
On August 19, 1996, in a transaction accounted for as a
pooling-of-interests, the Company acquired SECURx, Inc. (SECURx). As a result,
the accompanying consolidated financial statements include the accounts and
results of operations of SECURx for all periods presented. In connection with
the transaction, the Company exchanged 187,500 shares of the Company's Common
Stock for all of the outstanding
F-8
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
1. THE COMPANY (CONTINUED)
common stock of SECURx. SECURx is in the business of selling and distributing
prescription drugs to the general public through corporate sponsored benefit
plans of employers located in the northeastern United States.
On January 10, 1997, in a transaction accounted for as a
pooling-of-interests, the Company acquired Medical Services Consortium, Inc.
(MSC). As a result, the accompanying consolidated financial statements include
the accounts and results of operations of MSC for all periods presented. In
connection with the transaction, the Company exchanged 1,400,000 shares of the
Company's Common Stock for all of the outstanding common stock of MSC. MSC is in
the business of supplying prescription pharmaceuticals, consulting services and
enteral and parental therapies to long-term and alternate care providers in
South Florida.
On February 28, 1997, in a transaction accounted for as a
pooling-of-interests, the Company acquired Campo Medical Pharmacy, Inc. (Campo).
As a result, the accompanying consolidated financial statements include the
accounts and results of operations of Campo for all periods presented. In
connection with the transaction, the Company exchanged 375,000 shares of the
Company's Common Stock for all of the outstanding common stock of Campo. Campo
is in the business of supplying prescription pharmaceuticals and consulting
services to long-term and alternate care providers in Louisiana.
On March 26, 1997, in a transaction accounted for as a pooling-of-interests,
the Company acquired Hytree Pharmacy, Inc. (Hytree). As a result, the
accompanying consolidated financial statements include the accounts and results
of operations of Hytree for all periods presented. In connection with the
transaction, the Company exchanged 850,000 shares of the Company's Common Stock
for all of the outstanding common stock of Hytree. Hytree is in the business of
supplying prescription pharmaceuticals, respiratory and consulting services to
long-term and alternate care providers along with home care and sales and
rentals of durable medical equipment and supplies within the Ohio market.
Years ended December 31, 1997 and 1996 represent the results of CompScript,
Delta, SECURx, MSC, Campo, and Hytree assuming that all of their operations had
been combined since January 1, 1996.
The following unaudited financial information represents revenue and net
(loss) income for each of the pooled companies from the beginning of the
respective periods to the dates of the combinations.
<TABLE>
<CAPTION>
COMPSCRIPT DELTA SECURX MSC CAMPO HYTREE CONSOLIDATED
----------- --------- --------- --------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1997
Total revenue........... 4$6,837,412 $ -- $ -- $ 316,175(2) $ 480,842(2) $2,996,801(2) $50,631,230
----------- --------- --------- --------- --------- ---------- ------------
----------- --------- --------- --------- --------- ---------- ------------
Net (loss) income....... ($2,454,317) $ -- $ -- $ 35,692(2) $ 20,153(2) $ 41,624(2) $(2,356,848)
----------- --------- --------- --------- --------- ---------- ------------
----------- --------- --------- --------- --------- ---------- ------------
YEAR ENDED DECEMBER 31,
1996
Total revenue........... 1$5,469,263 $1,173,945(1) $3,406,563(1) $8,577,551 $3,181,263 $10,907,771 $42,716,356
----------- --------- --------- --------- --------- ---------- ------------
----------- --------- --------- --------- --------- ---------- ------------
Net (loss) income....... ($1,937,123) $ 165,479(1) $(226,698 (1) $ 477,874 $ 131,876 $ 232,836 $(1,155,756)
----------- --------- --------- --------- --------- ---------- ------------
----------- --------- --------- --------- --------- ---------- ------------
</TABLE>
- ------------------------
1. Represents results of operations for Delta and SECURx from January 1, 1996
to the date of their acquisitions.
2. Represents results of operations for MSC, Campo and Hytree from January 1,
1997 to the date of their acquisitions.
F-9
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL YEAR
Effective June 29, 1996, the Company elected to change its year end from
September 30 to December 31. The Company's 1996 consolidated statement of
operations have been restated to conform with this change in year end.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries, and Boca, of which the Company owns
approximately 92%. All significant intercompany balances and transactions have
been eliminated.
CASH AND CASH EQUIVALENTS
The Company considers all investments with an original maturity of less than
three months, when acquired, to be cash equivalents.
CONCENTRATION OF CREDIT RISK
The Company's customers are primarily long-term and alternate care providers
in Florida, Ohio, Louisiana, Mississippi and Alabama and corporate sponsored
benefit plans of employers in the northeastern United States. The Company
directly bills its customers or third-party payers, which are primarily
Medicaid, Medicare and private insurers. Credit is extended based on an
evaluation of the customer's financial condition, and collateral is not
required. Credit losses are provided for in the consolidated financial
statements and consistently have been within management's expectations.
INVENTORY
Inventory is stated at the lower of cost or market. Cost is determined by
the first-in, first-out method, and market represents the lower of replacement
cost or estimated net realizable value.
OTHER ASSETS
At December 31, 1996, the Company had a note receivable from the former
chief executive officer of Capital which was collateralized by 1,125,000 shares
of QPQ Corporation Common Stock. In March 1997, the Company recorded an $800,000
charge against the $1,125,000 note receivable. The Company deemed it appropriate
to evaluate the collateral underlying the note, as the value of the collateral
(marketable equity securities) declined significantly subsequent to December 31,
1996 and the collectability of the note was uncertain. On May 16, 1997, the note
receivable was rescinded by the Company and the collateral of 1,125,000 shares
of QPQ Corporation Common Stock reverted back to the Company.
In accordance with FASB Statement No. 115, ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES, the Company, as of December 31, 1997,
has valued its investment in QPQ Corporation at fair value of $53,906, resulting
in the recognition of unrealized loss of $271,094. These securities are
classified as "available for sale."
F-10
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and depreciated using the
straight-line and declining balance methods over the estimated useful lives of
the related assets. Furniture and equipment and vehicles are depreciated over a
five to seven year period. Leasehold improvements and assets under capital lease
are amortized over the useful lives of the underlying assets or the term of the
lease, whichever is shorter. Expenditures for maintenance and repairs are
charged to expense as incurred.
COSTS IN EXCESS OF NET ASSETS ACQUIRED
In July 1995, SECURx recorded approximately $205,000 of costs in excess of
net assets acquired in connection with the acquisition of substantially all of
the assets and liabilities of a predecessor company of the same name. Costs in
excess of net assets acquired are amortized on a straight-line basis over five
years.
The Company periodically evaluates the recovery of the carrying amount of
costs in excess of net assets acquired by determining if any impairment
indicators are present. These indicators include duplication of resources
resulting from acquisitions, income derived from businesses acquired, the
estimated undiscounted cash flows of the entity over the remaining amortization
period and other factors.
REVENUE RECOGNITION
Revenue and the related cost of sales are recognized when services are
provided or products are delivered. For some pharmaceuticals that are located at
the customers' facilities, revenues are recognized when the product is dispensed
to the patient. Revenues are recorded net of adjustments and allowances
resulting from the difference between established rates for the products and
services and amounts reimbursable by government-sponsored health care programs
(primarily Medicaid) and private insurance carriers.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation. The Company believes that it is in
compliance with all applicable laws and regulations and is not aware of any
pending or threatened investigations involving allegations of potential
wrongdoing. While no such regulatory inquiries have been made, compliance with
such laws and regulations can be subject to future government review and
interpretation as well as significant regulatory action including fines,
penalties, and exclusion from the Medicare and Medicaid programs.
STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board (APB) Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related Interpretations in
accounting for its employee stock options because the alternative fair value
accounting provided for under Financial Accounting Standards Board (FASB)
Statement No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, requires the use of
option valuation models that were not developed for use in valuing employee
stock options. No compensation expense is recognized under APB Opinion No. 25
when the exercise price of the Company's employee stock options equals or
exceeds the market price of the underlying stock on the date of grant.
The Company accounts for equity awards issued to nonemployee consultants,
attorneys and other vendors at fair market value based on the fair value of the
consideration received or the fair value of the
F-11
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
equity instruments issued, whichever is more reliably measurable on the date of
grant. The fair value of equity instruments issued to a nonemployee is measured
as of the date that the parties come to a mutual understanding of the terms of
the arrangement and agree to a binding contract.
ADVERTISING COSTS
In accordance with the Statement of Position (SOP) 93-7, REPORTING ON
ADVERTISING COSTS, the Company expenses advertising costs as incurred. The
Company recognized advertising expenses of $100,374 and $57,372 during the years
ended December 31, 1997 and 1996, respectively. These amounts are included in
the selling, general and administrative expenses. The Company did not incur any
direct response advertising costs, as defined by SOP 93-7 during 1997 and 1996.
INCOME TAXES
The Company accounts for income taxes in accordance with FASB No. 109,
ACCOUNTING FOR INCOME TAXES. Under this method, deferred income taxes at the end
of each period are determined based on the differences between the financial
statement and tax basis of assets and liabilities using the enacted tax rates
for the years in which the taxes are expected to be paid or recovered.
The Company files a consolidated income tax return with its majority-owned
subsidiaries which includes the taxable income or loss of each subsidiary from
its acquisition date through the end of the Company's tax year. Each entity was
required to file a separate income tax return prior to becoming a member of the
Company's consolidated income tax return.
Prior to the acquisition of MSC by the Company on January 10, 1997, MSC was
taxed under the provisions of Subchapter S of the Internal Revenue Code (IRC).
Concurrent with the acquisition of MSC, this entity was converted to C
corporation status with respect to federal income taxes and, for those states
that recognize such tax election, state income taxes. As a result, the
accompanying consolidated financial statements include no provision (benefit)
for income taxes related to MSC's income (loss) prior to its acquisition by the
Company. Accordingly, the consolidated statements of operations for the years
ended December 31, 1997 and 1996 include adjustments for income tax expense
which would have been recorded MSC been a taxable corporations and had the
Company been able to file a consolidated income tax return with the entities
acquired during 1997 and 1996 based on the tax laws in effect during the years
presented.
NET LOSS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
EARNINGS PER SHARE. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to the Statement 128 requirements.
Net loss per share is calculated using the weighted average number of common
shares outstanding as the effect of the Company's outstanding Common Stock
equivalents was antidilutive for all periods presented.
F-12
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LONG-LIVED ASSETS
FASB No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF, requires impairment losses to be recorded
on long-lived assets used in operations when indicators of impairment are
present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. The Company adopted FASB No.
121 during 1996 and, based on current circumstances, does not believe that any
impairment indicators are present relative to its long-lived assets at December
31, 1997.
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 liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those estimates.
3. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Furniture and equipment......................................... $4,716,357
Vehicles........................................................ 279,400
Leasehold improvements.......................................... 584,971
Assets under capital leases..................................... 636,570
----------
6,217,298
Less accumulated depreciation................................... (2,674,432)
----------
$3,542,866
----------
----------
</TABLE>
4. LINE OF CREDIT
In May 1995, the Company entered into a line of credit agreement which
permitted borrowings up to $750,000. On January 3, 1997, the Company amended its
financing agreement with its primary lender to increase its revolving line of
credit agreement to allow for borrowings up to $5,000,000 from the $750,000
previously in effect. On August 25, 1997, the Company further amended the
financing agreement to allow for borrowings up to $7,000,000. The primary reason
for these increases was to provide additional working capital for operations and
fund the Company's acquisition activity. The line of credit is due upon demand
and, in any event, expires April 30, 1998, and is collateralized by all of the
Company's accounts receivable, inventory, fixed assets and other assets. The
Company is in the process of obtaining an extension or renewal of this line of
credit at comparable terms. Interest is payable monthly 8.50% with a .125% per
annum fee on the unused portion of the line. Under the agreement, $6,715,467 is
outstanding at December 31, 1997, with an available balance of $284,533.
F-13
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
4. LINE OF CREDIT (CONTINUED)
The line-of-credit requires the Company to maintain at all times, certain
net worth, debt coverage and working capital levels, and restricts acquisitions
and dispositions of property and limits additional borrowings from other
lenders. As of December 31, 1997, the Company was not in compliance with
covenants relating to the $7,000,000 revolving credit agreement. A waiver has
been obtained from the financial institution, effective for the fiscal year
ended December 31, 1997.
5. NOTES PAYABLE
Notes payable consist of the following at December 31, 1997:
<TABLE>
<S> <C>
$500,000 promissory note collateralized by all of the Company's accounts
receivable, inventory, fixed assets and other assets. Terms are discussed
below. ........................................................................ $ 400,000
$50,000 promissory note collateralized by computer equipment, interest at 9%.
Monthly principal payments of $833 plus accrued interest from November 1997
through October 2002. ......................................................... 47,500
$200,000 promissory note with a financial institution, interest at 9% fixed,
collateralized by substantially all of the Company's assets. Monthly payments
of $3,333 plus accrued interest are payable monthly from March 1997 through
February 2002. ................................................................ 163,333
Various notes payable to financing companies bearing interest at rates ranging
from 8.75% to 10.15% and expiring at various dates through 2000, collateralized
by vehicles with an aggregate carrying value of approximately $118,000. ....... 70,302
---------
681,135
Less current portion............................................................. (185,354)
---------
Long-term portion................................................................ $ 495,781
---------
---------
</TABLE>
At December 31, 1997, annual payments on notes payable are as follows:
<TABLE>
<S> <C>
1998.............................................................................. $ 185,354
1999.............................................................................. 184,247
2000.............................................................................. 150,700
2001.............................................................................. 150,000
2002.............................................................................. 10,834
---------
$ 681,135
---------
---------
</TABLE>
In connection with the January 3, 1997 amended line of credit agreement, the
Company entered into a $500,000 promissory note with the same financial
institution. The proceeds from the debt were to be used
F-14
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
5. NOTES PAYABLE (CONTINUED)
to fund the Company's office and mail order space expansion, which was completed
in the first quarter of 1997. The principle sum of the promissory note is being
paid in monthly installments of $8,333 plus interest at 9.0% for 60 months
through January 2002. Collateral and debt covenants are the same as those of the
line-of-credit. A waiver for debt covenant violations has been obtained from the
financial institution, effective for the fiscal year ended December 31, 1997.
On March 19, 1997, the Company entered into a $750,000 promissory note,
which bore interest at prime, with a financial institution, primarily for
working capital purposes which was repaid in August 1997.
6. NOTES PAYABLE TO SHAREHOLDERS
In March 1997, the Company entered into three $100,000 demand notes payable
to the former shareholders of Hytree, bearing interest at 8.25%. Under these
agreements, $75,000 is outstanding at December 31, 1997. These notes were paid
in full in February 1998.
7. CAPITAL LEASES
The Company leases certain equipment under long-term capital leases. Future
obligations are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -----------------------------------------------------------------------------------------------------
<S> <C>
1998............................................................................................... $ 271,628
1999............................................................................................... 158,310
2000............................................................................................... 66,833
2001............................................................................................... 25,622
2002............................................................................................... 10,791
-----------
533,184
Less interest........................................................................................ (102,245)
-----------
$ 430,939
-----------
-----------
</TABLE>
8. MINORITY INTEREST
The Company has filed with the Securities and Exchange Commission a
registration statement (Form S-4) to exchange the shares held by the minority
interest shareholders for the Company's Common Stock, which will be accounted
for as a purchase business combination. The minority interest's share of Boca's
1997 and 1996 results of operations is not significant.
F-15
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
9. SHAREHOLDERS' EQUITY
EQUITY INSTRUMENTS ISSUED TO NONEMPLOYEES
During 1996, the Company granted 625,000 stock options at an exercise price
of $1 per share to certain consultants, 100,000 stock options at $6 per share to
an investment banking firm and 75,000 stock options at an exercise price of $6
and 9,000 shares of Common Stock to a law firm as consideration for services
rendered in connection with the Acquisition. The stock options were fully vested
on the date of grant. Included in the costs of the Acquisition, all of which
were charged against additional paid-in capital attributed to the Acquisition,
is an aggregate $1,292,000 related to the issuance of these equity instruments.
The consultants exercised the 625,000 stock options prior to December 31, 1996.
The 75,000 stock options referred to above were exercised in March 1997; while
the 100,000 stock options were exercised in 50,000 increments during April and
May 1997, respectively.
During 1996, the Company issued 90,000 shares of Common Stock to certain
consultants and 11,000 shares of Common Stock to a law firm as consideration for
services rendered in connection with the Company's acquisitions of Delta, SECURx
and MSC. The Company recorded an aggregate $740,000 related to the issuance of
these common shares, all of which is included in merger costs in the 1996
consolidated statement of operations.
On May 1, 1996, the Company granted 200,000 stock options (100,000 options
at an exercise price of $8 and 100,000 options an exercise price of $10) to an
investment banking firm as consideration for a two-year consulting agreement
commencing on December 31, 1996. The stock options were fully vested on the date
of grant. In connection with the stock options granted, the Company recorded a
prepaid consulting fee of $144,000 as of December 31, 1996. In May 1997, the
investment banking firm agreed to perform additional consulting services and in
exchange, the Company reduced the exercise price for 100,000 options from $8 to
$4. As a result of this reduction in exercise price, the Company recorded an
additional $262,000 in prepaid consulting fees which will be amortized over the
term of the consulting agreement. The investment banking firm exercised the
100,000 options at $4 during May 1997.
On June 12, 1997, an additional 100,000 stock options with an exercise price
of $5 were awarded to two executives of the investment banking firm as
consideration for a 12 month agreement to provide additional marketing,
strategic planning and investor relation services. An additional $303,000 in
prepaid consulting fees was recorded during 1997 relative to these options. The
100,000 options were exercised during July 1997.
On July 2, 1996, the Company granted 75,000 stock options exercisable at $7
per share to a public relations firm in connection with a two-year contract. The
stock options were fully vested on the date of grant. In addition, the Company
agreed to issue an additional 75,000 options on July 2, 1997 and pay $30,000 per
year in connection with this contract. The contract was cancelled at the end of
the first year so the additional 75,000 options were not issued. In connection
with the stock options granted, the Company recorded a prepaid expense of
$20,000 for these fees, which was expensed and included in selling, general and
administrative expenses in the consolidated statement of operations for the year
ended December 31, 1997. These stock options expire five years from their
respective dates of grant. On November 14, 1997, the Company issued 25,000
options exercisable at the market price of $2.50 in consideration of services
rendered after the cancellation of the original contract, and in anticipation of
entering into a new contract commencing in 1998. In connection with the stock
options granted, the Company recorded a prepaid expense of $15,250.
F-16
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
9. SHAREHOLDERS' EQUITY (CONTINUED)
During the year ended December 31, 1997, approximately $390,000 of all of
the above-mentioned prepaid consulting fees was amortized and is included in
selling, general and administrative expenses in the consolidated statement of
operations. Approximately $356,000 is unamortized and included in prepaid
expenses and other current assets in the December 31, 1997 consolidated balance
sheet.
On December 27, 1996, the Company issued 15,000 of its common shares to
certain consultants as consideration for consulting services rendered in
connection with the Company obtaining a five-year agreement to provide mail
order pharmacy services to an insurer. The Company recorded a prepaid expense of
approximately $138,000 for these fees, of which approximately $115,000 is
included in prepaid expenses and other current assets on the December 31, 1997
consolidated balance sheet. The Company intends to amortize these costs over the
life of the agreement.
COMMON STOCK WARRANTS
During 1996, the Company issued 102,550 common shares in connection with the
exercise of the Company's Class A and Class B warrants at a weighted average
exercise price of $5.25. On December 31, 1996, the remaining 96,950 outstanding
warrants expired unexercised.
STOCK OPTION PLANS
In May 1996, the Company adopted a stock option plan (the 1996 Plan). The
1996 Plan provides for the granting of both incentive stock options and
nonqualified stock options for the purchase of up to 900,000 shares of the
Company's Common Stock. During 1997, shareholders approved an additional
1,000,000 shares of the Company's Common Stock to be added to the 1996 Plan. On
May 28, 1997, the Company awarded a total of 8,500 options to employees at the
then market price of $7.13. In addition, on November 14, 1997, the Company
awarded a total of 629,750 options to employees and consultants at the then
market price of $2.50. The exercise price and vesting schedule of each stock
option is determined by the Compensation Committee of the Company. Stock options
granted under the 1996 Plan expire after ten years from the date of grant.
In October 1995, the FASB issued FASB No. 123, which provides an alternative
to APB Opinion No. 25. FASB No. 123 allows for a fair value based method of
accounting for stock options. However, for companies that continue to account
for stock-based compensation arrangements under APB Opinion No. 25, such as the
Company, FASB No. 123 requires disclosure of the pro forma effect on net loss
and loss per share of its fair value based accounting for those arrangements.
The fair value for these options was estimated at the date of grant using 9.
Shareholders' Equity (continued) the Black-Scholes option pricing model with the
following weighted-average assumptions for 1997 and 1996: risk free interest
rate of 6.49%, dividend yield of 0%, volatility factor of the expected market
price of the Company's Common Stock of .47 and a weighted-average expected life
of the options of 4.09 years. As of December 31, 1997, the weighted average
remaining contractual life of all options outstanding was 9.2 years.
F-17
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
9. SHAREHOLDERS' EQUITY (CONTINUED)
The following unaudited pro forma summary presents the Company's net loss
and loss per share as if the estimated fair value of the options were amortized
to expense over the options' vesting period.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------
<S> <C> <C>
1997 1996
------------- -------------
Pro forma net loss.................................................................. $ (2,661,888) $ (2,777,053)
------------- -------------
------------- -------------
Pro forma net loss per share........................................................ $ (0.19) $ (0.22)
------------- -------------
------------- -------------
</TABLE>
The pro forma effect of compensation expense from stock option awards on pro
forma net income reflects the vesting of 1996 option awards in 1997 and 1996, in
accordance with FASB No. 123. Because pro forma compensation expense associated
with a stock option award is recognized over the vesting period, the initial
impact of applying FASB No. 123 may not be indicative of pro forma compensation
expense in future years, when the effect of multiple awards will be reflected in
pro forma net loss.
A summary of the Company's stock option activity and related information for
the year ended December 31, 1997 relative to the Company's employee/director and
nonemployee stock options is as follows:
<TABLE>
<CAPTION>
EMPLOYEE/DIRECTOR NONEMPLOYEE
STOCK OPTIONS STOCK OPTIONS
--------------------- ----------------------
<S> <C> <C> <C> <C>
WEIGHTED WEIGHTED
OPTIONS AVERAGE OPTIONS AVERAGE
FOR EXERCISE FOR EXERCISE
SHARES PRICE SHARES PRICE
---------- --------- --------- -----------
Outstanding at December 31, 1996.................................... 882,500 $ 5.17 450,000 $ 7.50
Granted............................................................. 613,250 2.65 125,000 4.50
Exercised........................................................... 3,898 5.13 375,000 5.20
Forfeited........................................................... 43,590 5.17 -- --
---------- ---------
Outstanding at December 31, 1997.................................... 1,448,262 4.10 200,000 7.94
---------- ---------
---------- ---------
Exercisable at end of year.......................................... 1,256,839 200,000
---------- ---------
---------- ---------
Weighted-average fair value of options granted during the year...... $ 1.03 $ 2.55
---------- ---------
---------- ---------
</TABLE>
The exercise prices of the employee stock options granted during 1997 were
at or below the Company's stock prices on the dates of grant.
F-18
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
9. SHAREHOLDERS' EQUITY (CONTINUED)
Options outstanding and exercisable at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------ -----------------------
<S> <C> <C> <C> <C> <C> <C>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF OPTIONS CONTRACTUAL EXERCISE OPTIONS EXERCISE
OPTION PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
------------- ----------- ----------- ----------- ---------- -----------
Employees..................................... $ 2.5--$7.13 1,448,262 9.2 years $ 4.10 1,256,839 $ 4.12
----------- ----------
----------- ----------
Nonemployees.................................. $ 2.50 25,000 9.9 years $ 2.50 25,000 $ 2.50
$ 7.00 75,000 0.5 years $ 7.00 75,000 $ 7.00
$ 10.00 100,000 1.3 years $ 10.00 100,000 $ 10.00
----------- ----------
200,000 200,000
----------- ----------
----------- ----------
</TABLE>
At December 31, 1997, there are 251,738 options available for grant under
the 1996 Plan.
COMMON STOCK
The following shares of Common Stock have been reserved for future issuance
as of December 31, 1997:
<TABLE>
<S> <C>
Upon the conversion of the minority interest..................................... 662,375
Upon the exercise of stock options outstanding or available for grant............ 1,900,000
---------
2,562,375
---------
---------
</TABLE>
PREFERRED STOCK
The Company is authorized to issue 1,000,000 shares of preferred stock, par
value $.0001. No shares of preferred stock have been issued as of December 31,
1997.
DISTRIBUTIONS TO SHAREHOLDERS
During 1996, the Board of Directors of MSC declared a $85,560 distribution
to the shareholders of MSC, of which $32,000 was paid prior to December 31, 1996
and the remaining balance of $53,560 was paid during the year ended December 31,
1997.
10. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in the consolidated
balance sheet for cash and cash equivalents approximates its fair value.
MARKETABLE SECURITIES: The fair values of marketable securities are
estimated based on quoted market prices.
F-19
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
10. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
LINE OF CREDIT, NOTES PAYABLE, AND NOTES PAYABLE TO SHAREHOLDERS: The fair
values of the Company's line of credit, notes payable and notes payable to
shareholders are estimated using discounted cash flow analysis, based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements.
The carrying and fair values of the Company's financial instruments at
December 31, 1997 approximate their carrying values.
11. INCOME TAXES
The components of the income tax provision (benefit) are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
<S> <C> <C>
1997 1996
----------- -----------
Current:
Federal............................................................................... $ (240,463) $ (154,995)
State................................................................................. --......... 34,044
----------- -----------
(240,463) (120,951)
Deferred.............................................................................. --......... (18,765)
----------- -----------
Total................................................................................... $ (240,463) $ (139,716)
----------- -----------
----------- -----------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's net deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
Deferred tax liability:
Tax over book depreciation.................................................... $ (57,283)
Internally developed software................................................. (157,784)
------------
(215,067)
Deferred tax assets:
Allowance for uncollectible accounts.......................................... 529,511
Net operating loss carryforwards.............................................. 691,373
Accrued stock bonus........................................................... 27,000
Tax credits................................................................... 25,377
Costs in excess of net assets acquired........................................ 25,655
Other......................................................................... 8,227
------------
Total deferred tax assets..................................................... 1,307,143
Less valuation allowance...................................................... (1,046,975)
------------
Net deferred tax assets....................................................... 260,168
------------
Net deferred income taxes..................................................... $ 45,101
------------
------------
</TABLE>
F-20
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
11. INCOME TAXES (CONTINUED)
FASB No. 109 requires a valuation allowance to reduce the deferred tax
assets reported if, based on the weight of the evidence, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
After consideration of all the evidence, both positive and negative, management
has determined that a $1,046,975 valuation allowance is necessary at December
31, 1997. The change in valuation allowance for the current year is $797,212. At
December 31, 1997, the Company has available net operating loss carryforwards of
$2,527,292 which expire in 2012. In addition, the Company has tax credits of
$25,377 that have no expiration date.
The differences between the provision for income taxes and the amount which
results from applying the federal and state statutory tax rates to income before
income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
------------------------
<S> <C> <C>
1997 1996
----------- -----------
Income tax benefit at statutory rate.................................................... $ (909,059) $ (440,660)
State income tax benefit, net........................................................... (89,943) (36,621)
Non-deducting items..................................................................... 255,166 352,650
Taxes on Delta's and MSC's losses incurred (income earned) prior to revocation of
Subchapter S election................................................................. -- (274,335)
Reduction in prior year payable......................................................... (200,000) --
Reduction in net operating loss carryback benefit....................................... -- 52,105
Change in valuation allowance........................................................... 797,212 171,973
Other................................................................................... (93,839) 35,172
----------- -----------
$ (240,463) $ (139,716)
----------- -----------
----------- -----------
</TABLE>
12. LEASE COMMITMENTS
The Company has various operating leases, primarily relating to branch
offices and warehouse facilities. The leases have various renewal options and
escalation clauses and often require the Company to make additional payments for
maintenance costs. Total rent expense for the years ended December 31, 1997 and
1996 amounted to $616,856 and $738,258, respectively.
Approximate future minimum annual rentals under noncancelable operating
leases with initial or remaining terms in excess of one year are:
<TABLE>
<S> <C>
1998............................................................ $ 679,205
1999............................................................ 690,339
2000............................................................ 693,276
2001............................................................ 668,630
2002............................................................ 502,538
---------
$3,233,988
---------
---------
</TABLE>
The Company rents two of its facilities from entities controlled by
shareholders under long-term leases expiring in 2001 and 2002, respectively.
Included in rent expense is approximately $212,000 and $0
F-21
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
12. LEASE COMMITMENTS (CONTINUED)
paid in 1997 and 1996, respectively, to these related parties. Future minimum
annual payments on these two related party rentals, which are included in the
above-mentioned total future annual rentals are $210,266 in 1998, $210,266 in
1999, $210,266 in 2000, $191,266 in 2001, and $164,666 in 2002.
13. PROFIT SHARING PLANS
In 1993, the Company established a profit sharing savings plan (the Plan)
that covers substantially all of its employees and that qualifies as a cash or
deferred arrangement under Section 401(k) of the IRC. Under the Plan,
participating employees may defer up to 20% of their pre-tax salary before
reduction, but not more than approximately $9,500 per plan year. The Company may
make matching or other contributions to the Plan. There were no Company
contributions to the Plan for the fiscal years ended December 31, 1997 and 1996.
Effective January 1, 1995, MSC established the Medical Services Consortium,
Inc. 401(k) Plan (the MSC Plan), a deferred profit sharing savings plan that
covers all employees of MSC that are at least 21 years old and who have been
employed by MSC at least 6 months. Under the MSC Plan, participating employees
may defer up to 15% of their pre-tax salary before reduction each year. MSC may
make contributions to the MSC Plan at MSC's discretion. Contributions vest over
a six-year period. MSC did not make any contributions to the MSC Plan for the
fiscal years ended December 31, 1997 and 1996.
Effective March 1, 1996, Hytree established the Hytree Pharmacy, Inc. 401(k)
Retirement Plan (the Hytree Plan), a deferred profit sharing savings plan that
covers all employees of Hytree that are at least 18 years old and who have been
employed by MSC at least 90 days. Under the Hytree Plan, participating employees
may defer up to 15% of their pre-tax salary before reduction each year. Hytree
will match employee contributions up to 6% of each employee's pre-tax salary
before reduction each year. Hytree may make profit-sharing contributions to the
Hytree Plan at Hytree's discretion. Contributions vest over a six-year period.
Hytree's contributions to the Hytree Plan for the fiscal years ended December
31, 1997 and 1996 were not significant.
14. SUBSEQUENT EVENT
On January 1, 1998, the Company entered into a five-year agreement with two
shareholders (each of which has less than a 5% beneficial ownership interest in
the Company) of the Company pursuant to which the shareholders will assist the
Company secure new contracts for the Company's mail order division. The Company
agreed to issue the shareholders 115,000 shares of common stock, as well as
commissions of 1% of net revenues generated by new contacts obtained by the
shareholders. The Company may cancel the contract at any time with a thirty day
written notice. This contract replaces a previous contract entered into on
January 9, 1997, which was canceled on October 31, 1997.
On February 23, 1998, the Company entered into a definitive merger agreement
pursuant to which it will be acquired through a merger with a wholly-owned
subsidiary of Omnicare, Inc. Upon completion of the merger, each outstanding
common share of CompScript will be converted into a $4.50 market value of
Omnicare common shares, subject to certain terms of the agreement. Omnicare will
issue approximately $63.3 million in its stock and assume CompScript's debt. The
transaction is structured as a pooling-of-interests and a tax-free
reorganization. As a condition to entering into this Agreement and Plan of
Merger, the two companies executed a separate Stock Option Agreement whereby the
Company granted an option to Omnicare to purchase up to 19.9% of CompScript's
common shares. Omnicare can exercise this option if certain events occur prior
to the closing of the merger.
F-22
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents........................................................ $ 1,117,443 $ 529,343
Accounts receivable, net......................................................... 10,168,893 9,900,717
Inventory........................................................................ 3,297,952 3,180,397
Marketable securities............................................................ 96,094 53,906
Income tax refund receivable..................................................... 371,805 575,075
Deferred tax asset............................................................... 260,168 260,168
Prepaid and other receivables.................................................... 1,308,321 950,059
------------- -------------
Total current assets............................................................. 16,620,676 15,449,665
Property and equipment, net...................................................... 3,822,836 3,542,866
Other assets:
Costs in excess of net assets acquired, less accumulated amortization............ 92,037 102,263
Other............................................................................ 331,878 485,846
------------- -------------
Total other assets................................................................. 423,915 588,109
------------- -------------
Total assets....................................................................... $ 20,867,427 $ 19,580,640
------------- -------------
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................................. 5,693,925 $ 4,694,341
Accrued salaries and benefits.................................................... 348,601 355,393
Accrued expenses................................................................. 167,293 693,888
Accrued pharmaceuticals dispensed by third parties............................... 18,133 49,413
Line of credit................................................................... 6,931,268 6,715,467
Current portion of notes payable to shareholders................................. -- 75,000
Current portion of notes payable................................................. 191,180 185,354
Current portion of capital lease obligations..................................... 329,495 219,439
------------- -------------
Total current liabilities.......................................................... 13,679,895 12,988,295
Deferred tax liabilities........................................................... 215,067 215,067
Long-term debt:
Notes payable.................................................................... 457,434 495,781
Capital lease obligations........................................................ 260,731 211,500
------------- -------------
Total long-term debt............................................................... 718,165 707,281
------------- -------------
Total liabilities.................................................................. 14,613,127 13,910,643
Minority interest.................................................................. 222,628 222,628
Shareholders' equity:
Common stock, $.0001 par value--50,000,000 shares authorized, 14,072,063 and
13,957,063 shares issued and outstanding at March 31, 1998 and December 31,
1997, respectively............................................................. 1,407 1,396
Additional paid-in capital....................................................... 12,363,559 12,119,195
Accumulated deficit.............................................................. (6,104,388) (6,402,128)
Unrealized loss on marketable securities....................................... (228,906) (271,094)
------------- -------------
Total shareholders' equity......................................................... 6,031,672 5,447,369
------------- -------------
Total liabilities and shareholders' equity......................................... $ 20,867,427 $ 19,580,640
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-23
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS
OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------------
1998 1997
------------- -------------
<S> <C> <C>
Sales.............................................................................. $ 13,849,483 $ 11,498,619
Cost of sales...................................................................... 8,032,789 6,794,718
------------- -------------
Gross profit....................................................................... 5,816,694 4,703,901
Selling, general and administrative expenses....................................... 4,818,511 4,696,093
Provision for doubtful accounts.................................................... 357,970 121,905
Merger costs....................................................................... -- 613,457
------------- -------------
Total operating expenses........................................................... 5,176,481 5,431,455
------------- -------------
Operating income (loss)............................................................ 640,213 (727,554)
Other income (expense):
Interest and other income........................................................ 2,099 11,015
Interest expense................................................................. (166,572) (99,563)
Loss on realization of note receivable........................................... -- (800,000)
(164,473) (888,548)
------------- -------------
Income (loss) before provision for income taxes.................................... 475,740 (1,616,102)
Income tax provision............................................................... 178,000 --
------------- -------------
Net income (loss).................................................................. $ 297,740 $ (1,616,102)
------------- -------------
------------- -------------
Net income (loss) per share........................................................ $ .02 $ (.12)
------------- -------------
------------- -------------
Weighted average shares outstanding................................................ 14,072,063 13,563,897
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-24
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS
OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
----------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................................................................... $ 297,740 $ (1,616,102)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization of leasehold improvements............................. 193,415 129,959
Provision for doubtful accounts..................................................... 357,970 121,905
Amortization of goodwill............................................................ 10,226 10,227
Noncash merger costs................................................................ -- 240,000
Loss on realization of note receivable.............................................. -- 800,000
Changes in operating assets and liabilities:
Accounts receivable, net............................................................ (626,146) (1,709,819)
Inventory........................................................................... (117,555) (312,209)
Income tax refund receivable........................................................ 203,270 (87,845)
Prepaid and other receivables....................................................... (113,887) (6,403)
Other assets........................................................................ 153,968 50,891
Accounts payable and accrued expenses............................................... 434,917 (815,620)
------------- -------------
Net cash provided by (used in) operating activities................................. 793,918 (3,195,016)
INVESTING ACTIVITY
Purchases of property and equipment................................................. (304,444) (552,916)
------------- -------------
Net cash used in investing activity................................................. (304,444) (552,916)
FINANCING ACTIVITIES
Exercise of options and warrants.................................................... -- 649,996
Net proceeds from line of credit.................................................... 215,801 3,990,773
Net repayments of notes payable..................................................... (32,521) (536,809)
Net repayments of notes payable to shareholders..................................... (75,000) (393,987)
Repayment of leases payable......................................................... (9,654) (12,577)
------------- -------------
Net cash provided by financing activities........................................... 98,626 3,697,396
------------- -------------
Net increase (decrease) in cash and cash equivalents................................ 588,100 (50,536)
Cash and cash equivalents at beginning of period.................................... 529,343 857,740
------------- -------------
Cash and cash equivalents at end of period.......................................... $ 1,117,443 $ 807,204
------------- -------------
------------- -------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes.......................................................... $ 10,000 $ 57,500
------------- -------------
------------- -------------
Cash paid for interest.............................................................. $ 166,572 $ 99,563
------------- -------------
------------- -------------
</TABLE>
SEE ACCOMPANYING NOTES.
F-25
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include the
accounts of the Company and all of its subsidiaries, which are majority-owned.
All significant intercompany transactions and balances have been eliminated in
consolidation.
The accompanying consolidated condensed financial statements as of March 31,
1998 and for the three months ended March 31, 1998 and 1997 are unaudited. These
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and in accordance with
the rules and regulations of the Securities and Exchange Commission (the "SEC").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
Company believes it has made sufficient disclosures such that the information
presented is not misleading. In the opinion of management, the financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to state fairly the financial position and results of
operations as of and for the periods presented. Results for the three-month
period ended March 31, 1998 are not necessarily indicative of the results to be
achieved for the year ended December 31, 1998.
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 liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates.
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings Per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants, and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to the Statement 128 requirements.
Net income (loss) per share for the three-month periods ended March 31, 1998
and 1997, have been calculated based upon the weighted average number of common
shares outstanding after giving effect to outstanding options and warrants
during the periods in which their inclusion was dilutive.
2. MARKETABLE SECURITIES
At December 31, 1996, the Company had a note receivable from a former
officer and shareholder of the Company which was collateralized by 1,125,000
shares of Regenesis Holdings Corp. (formerly known as QPQ Corporation)
("Regenesis") Common Stock. In March 1997, the Company recorded an $800,000
charge against the $1,125,000 note receivable. The Company deemed it appropriate
to evaluate the collateral underlying the note, as the value of the collateral
(marketable equity securities) declined significantly subsequent to December 31,
1996 and the collectibility of the note was uncertain. On May 16, 1997, the note
receivable was rescinded by the Company and the collateral of 1,125,00 shares
(18,750 shares after two reverse splits of 20 for 1 and 3 for 1) of Regenesis
Common Stock reverted back to the Company.
F-26
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
(UNAUDITED)
2. MARKETABLE SECURITIES (CONTINUED)
In accordance with FASB Statement No. 115, Accounting For Certain
Investments In Debt And Equity Securities, the Company, as of March 31, 1997,
has valued its investment in Regenesis at its fair value of $96,094, resulting
in the recognition of unrealized loss of $228,906. These securities are
classified as "available for sale."
3. INCOME TAXES
The income tax provisions for the three-month period ended March 31, 1998
and 1997, have been calculated by applying the Company's estimated effective tax
rate for the years 1998 and 1997.
For the three-month period ended March 31, 1997, the relationship of the
provision for income taxes to pre-tax income reflects the exclusion of the
Subchapter S earnings of MSC from the tax provision computation. Concurrent with
the acquisition of Medical Services Consortium, Inc. (MSC) on January 10, 1997,
MSC converted to C corporation status and its earnings from that date forward
were included in the tax provision computation. The consolidated condensed
statement of operations for the three months ended March 31, 1997, do not
include pro forma adjustments for income tax expense which would have been
recorded had MSC been a taxable corporation, as the impact would not have been
significant.
4. LINE OF CREDIT
In May 1995, the Company entered into a line of credit agreement which
permitted borrowings of up to $750,000. On January 3, 1997, the Company amended
its financing agreement with its primary lender to increase its revolving line
of credit agreement to allow for borrowings up to $5,000,000 from the $750,000
previously in effect. On August 25, 1997, the Company further amended the
financing agreement to allow for borrowings of up to $7,000,000. The line of
credit is due upon demand and, in any event, expires July 30, 1998, and is
collateralized by all of the Company's accounts receivable, inventory, fixed
assets and other assets. Interest is payable monthly at 8.5% with a .125% per
annum fee on the unused portion of the line. Under the agreement, $6,931,268 is
outstanding at March 31, 1998, with an available balance of $68,732.
The line-of-credit requires that the Company maintain at all times, certain
net worth, debt coverage and working capital levels, and restricts acquisitions
and dispositions of property and limits additional borrowings from other
lenders. At March 31, 1998, the Company was in compliance with all financial
covenants.
5. NOTES PAYABLE
In connection with the line-of-credit, on January 3, 1997, the Company also
entered into a $500,000 promissory note with the same lender, the proceeds of
which were used to fund the Company's office and mail order space expansion,
which was completed in the first quarter of 1997. The principal sum of the
promissory note is payable in monthly installments of approximately $8,333 plus
interest at 9.0% for 60 months which began on February 1, 1997. Collateral and
debt covenants are the same as those of the line of credit discussed above.
F-27
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
MARCH 31, 1998
(UNAUDITED)
5. NOTES PAYABLE (CONTINUED)
On March 19, 1997, the Company entered into an additional $750,000
promissory note, bearing interest at prime, with its existing lender, primarily
for working capital purposes. This loan matured on July 26, 1997, and was repaid
in August 1997.
6. SHAREHOLDERS' EQUITY
On January 1, 1998, the Company entered into a five-year agreement with two
shareholders (each of which has less than a 5% beneficial ownership interest in
the Company) of the Company pursuant to which the shareholders will assist the
Company secure new contracts for the Company's mail order division. The Company
agreed to issue the shareholders 115,000 shares of common stock, as well as
commissions of 1% of net revenues generated by new contracts obtained by the
shareholders. The Company may cancel the contract at any time with a thirty day
written notice.
This contract replaces a previous contract entered into on January 9, 1997,
which was canceled on October 31, 1997. In connection with the stock issued, the
Company recorded a prepaid expense of $224,375. During the three months ended
March 31, 1998, approximately $12,000 was amortized and included in selling,
general and administrative expenses in the condensed consolidated statement of
operations. At March 31, 1998, approximately $46,000 is included in prepaid
expenses and other current assets and $186,000 is included in other assets in
the balance sheet.
7. MERGER
On February 23, 1998, the Company entered into a definitive merger agreement
pursuant to which it will be acquired through a merger with a wholly-owned
subsidiary of Omnicare, Inc. Upon completion of the merger, each outstanding
common share of CompScript will be converted into a $4.50 market value of
Omnicare common shares, subject to certain terms of the agreement. Omnicare will
issue approximately $63.3 million in its stock and assume CompScript's debt. The
transaction is structured as a pooling of interests and a tax-free
reorganization. As a condition to entering into this Agreement and Plan of
Merger, the two companies executed a separate Stock Option Agreement whereby the
Company granted an option to Omnicare to purchase up to 19.9% of CompScript's
common shares. Omnicare can exercise this option if certain events occur prior
to the closing of the merger.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and between
COMPSCRIPT, INC.
and
OMNICARE, INC.
Dated as of February 23, 1998
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AGREEMENT AND PLAN OF MERGER*
AGREEMENT AND PLAN OF MERGER, dated as of February 23, 1998 (the
"Agreement"), by and between COMPSCRIPT, INC., a Florida corporation ("CSI" or
the "Company"), and OMNICARE, INC., a Delaware corporation ("Omni").
RECITALS
A. The Boards of Directors of CSI and Omni deem it advisable and in the best
interests of each corporation and its respective stockholders that CSI and Omni
combine in order to advance their long-term business interests, all upon the
terms and subject to the conditions of this Agreement.
B. It is intended that the combination of CSI and Omni be effected by a
Merger (as defined below) of a direct wholly owned subsidiary of Omnicare to be
formed solely for the purpose of effecting such merger ("SUB") with and into CSI
with CSI surviving, which shall be recorded for accounting purposes as a
pooling-of-interests and shall be treated for Federal income tax purposes as a
reorganization described in Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "Code"). CSI and SUB are hereinafter sometimes collectively
referred to as the "Constituent Corporations."
C. Simultaneously with the execution of this Agreement, and as an
inducement to Omni to enter into this Agreement, (i) Omni and a stockholder of
CSI are entering into a Voting Agreement (the "Voting Agreement") pursuant to
which such stockholder has, among other things, agreed, upon the terms and
subject to the conditions thereof, to vote his CSI Shares (as defined below) in
favor of the Merger and (ii) Omni and CSI are entering into a Stock Option
Agreement (the "Stock Option Agreement") pursuant to which CSI has granted Omni
an option to purchase CSI Shares under certain circumstances.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. (a) In accordance with the provisions of this
Agreement and the Florida Business Corporation Act ("FBCA"), at the Effective
Time (as defined below), SUB shall be merged (the "Merger") with and into CSI,
and CSI shall be the surviving corporation (hereinafter sometimes called the
"Surviving Corporation") and shall continue its corporate existence under the
laws of the State of Florida. The name of the Surviving Corporation shall be
CompScript, Inc. At the Effective Time, the separate existence of SUB shall
cease.
(b) The Merger shall have the effects on CSI and SUB, as Constituent
Corporations of the Merger, provided for under the FBCA.
Section 1.2 EFFECTIVE TIME. The Merger shall become effective at the time
of filing of, or at such later time as is agreed to by the parties and specified
in, the articles of merger, in the form required by and executed in accordance
with the FBCA, with the Secretary of State of the State of Florida in accordance
with the provisions of Section 607.1105 of the FBCA (the "Articles of Merger").
The date and time when the Merger shall become effective is herein referred to
as the "Effective Time."
Section 1.3 ARTICLES OF INCORPORATION AND BYLAWS OF SURVIVING
CORPORATION. The Articles of Incorporation and Bylaws of SUB as in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation until thereafter amended as provided by
law.
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* On March 25, 1998 the Agreement was amended to add CSI Acquisition
Corporation as a party.
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Section 1.4 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. (a) The
directors of SUB immediately prior to the Effective Time shall be the directors
of the Surviving Corporation and will hold office from and after the Effective
Time until their respective successors are duly elected or appointed and qualify
in the manner provided in the Articles of Incorporation and Bylaws of the
Surviving Corporation or as otherwise provided by law or their earlier
resignation or removal.
(b) The officers of CSI immediately prior to the Effective Time shall be the
officers of the Surviving Corporation and each will hold office from and after
the Effective Time until their respective successors are duly appointed and
qualify in the manner provided in the Bylaws of the Surviving Corporation or as
otherwise provided by law or their earlier resignation or removal.
Section 1.5 FURTHER ASSURANCES. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of the Constituent Corporations acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with, the
Merger or otherwise to carry out this Agreement, the officers and directors of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of each of the Constituent Corporations or otherwise, all
such other actions and things as may be necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 EFFECT ON CSI SHARES. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holders thereof:
(a) (x) Each share of CSI's common stock, $.0001 par value (the "CSI
Shares"), issued and outstanding immediately prior to the Effective Time (except
for shares referred to in Sections 2.1(b) and (d) hereof) shall be converted
into the right to receive a number of shares (the "Conversion Ratio") of Common
Stock, par value $1.00 per share, of Omni ("Omni Stock") equal to $4.50 divided
by the Omni Market Value, provided, however, that (i) if the Omni Market Value
is less than $29.325, the Omni Market Value shall be deemed to be $29.325 for
purposes of this Section 2.1(a)(x) and (ii) if the Omni Market Value is more
than $39.675, the Omni Market Value shall be deemed to be $39.675 for purposes
of this Section 2.1(a)(x).
(y) Notwithstanding the foregoing, in the event the Omni Market Value is
less than $24.15 or more than $44.85, Omni and CSI will seek to renegotiate a
new acceptable Conversion Ratio which will then replace the Conversion Ratio
provided for in this Section 2.1(a). In the event that Omni and CSI are unable
to establish a mutually acceptable Conversion Ratio within two business days
after the scheduled Closing Date (as defined below), then if the Omni Market
Value is (i) less than $24.15, CSI shall have the right to terminate this
Agreement or (ii) more than $44.85, Omni shall have the right to terminate this
Agreement. Any such termination shall be deemed a termination by mutual consent
in accordance with Section 10.1(a) hereof.
(z) For purposes of this Section 2.1(a), the term "Omni Market Value" shall
mean the average of the closing prices of the Omni Stock on the New York Stock
Exchange (the "NYSE") for the 10 trading days immediately preceding the fifth
trading day preceding the Closing Date. In the event of any change in the CSI
Shares or the Omni Stock by reason of any stock split, readjustment, stock
dividend, exchange or
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shares, reclassification, recapitalization or similar event, the amounts set
forth in clauses (x) and (y) above shall be appropriately adjusted.
(b) Each CSI Share held by CSI as treasury stock or owned by any Subsidiary
(as defined below) of CSI shall be canceled.
(c) All CSI Shares shall be canceled and retired, and each certificate
representing any such CSI Shares (except for shares referred to in Sections
2.1(b) and (d) hereof) shall thereafter (i) represent only the right to receive
the Omni Stock issuable in exchange for such CSI Shares upon the surrender of
such certificate in accordance with Section 2.4 (and any cash payable in respect
of fractional shares) and (ii) entitle the holder thereof to receive dividends
on such number of whole shares of Omni Stock which such holder is entitled to
receive in exchange for such certificates, provided that dividends shall be paid
to such holder, without interest, only upon surrender of certificates in
accordance with Section 2.4.
(d) Notwithstanding anything to the contrary in this Agreement, any holder
of CSI Shares who shall exercise the rights of a dissenting stockholder pursuant
to and strictly in accordance with the provisions of Section 607.1302 of the
FBCA shall be entitled to receive only the payment therein provided for and
shall not be entitled to receive Omni Stock. Such payment shall be made directly
by the Surviving Corporation from its own funds.
Section 2.2 EFFECT ON CSI OPTIONS. (a) CSI has taken all actions as may be
required to adjust the terms of all outstanding options to purchase CSI shares
(the "CSI Stock Options") granted under any plan or arrangement providing for
the grant of options to purchase CSI Shares to current or former officers,
directors, employees or consultants of CSI (the "CSI Stock Option Plans"),
whether vested or unvested, as necessary to provide that, at the Effective Time,
each CSI Stock Option outstanding immediately prior to the Effective Time shall
be amended and converted into an option to acquire, on the same terms and
conditions as were applicable under such CSI Stock Option, the number of shares
of Omni Stock (rounded up to the nearest whole share) determined by multiplying
the number of CSI Shares subject to such CSI Stock Option by the Conversion
Ratio, at an exercise price per share of Omni Stock equal to the price per share
specified in such CSI Stock Option divided by the Conversion Ratio; provided
that such exercise price shall be rounded up to the nearest whole cent. CSI
shall promptly make such other changes to the CSI Stock Option Plans as Omni and
CSI may agree as appropriate to give effect to the Merger.
(b) The adjustments provided herein with respect to any CSI Stock Options
that are "incentive stock options" as defined in Section 422 of the Code shall
be and are intended to be effected in a manner which is consistent with Section
424 of the Code.
(c) Except as otherwise contemplated by this Section 2.2 and except to the
extent required under the respective terms of the CSI Stock Options or other
applicable agreements, all restrictions or limitations on transfer and vesting
with respect to CSI Stock Options awarded under the CSI Stock Option Plans or
any other plan, program or arrangement of CSI, to the extent that such
restrictions or limitations shall not have already lapsed, shall remain in full
force and effect with respect to such options after giving effect to the Merger
and the assumption by Omni as set forth above.
(d) Omni shall take such actions as are reasonably necessary for the
assumption of the CSI Stock Options, including the reservation, issuance and
listing of the Omni Stock as is necessary to effectuate the transactions
contemplated by this Section 2.2. The adjustments contemplated by this Section
2.2 do not require the consent of any holder of CSI Stock Options.
Section 2.3 SUB COMMON STOCK. Each share of common stock of SUB issued and
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 one fully paid and nonassessable share of common stock of the Surviving
Corporation.
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Section 2.4 EXCHANGE PROCEDURES. (a) Omni shall authorize a bank or trust
company to act as exchange agent hereunder (the "Exchange Agent") for the
purposes of exchanging certificates representing CSI Shares and shares of Omni
Stock. As promptly as practicable after the Effective Time, Omni shall deposit
with the Exchange Agent, in trust for the holders of Certificates (as defined in
Section 2.4(b) below), certificates representing the shares of Omni Stock
issuable pursuant to Section 2.1(a) in exchange for CSI Shares (the "Omni
Certificates").
(b) Promptly after the Effective Time, the Exchange Agent shall mail or
cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented CSI Shares (the "Certificates"), a letter of transmittal in
customary and reasonable form (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
receipt of the Certificates by the Exchange Agent) and instructions for use in
effecting the surrender of the Certificates for exchange therefor. Upon
surrender to the Exchange Agent of a Certificate, together with such letter of
transmittal duly executed, the holder of such Certificate shall be entitled to
receive in exchange therefor that number of shares of Omni Stock which such
holder has the right to receive under Section 2.1(a) (and any amount of cash
payable in lieu of fractional shares), less the amount of any withholding taxes
which may be required thereon under any provision of federal, state, local or
foreign tax Law, and such Certificate shall forthwith be canceled. If any shares
of Omni Stock are to be issued to a person other than the person in whose name
the Certificate surrendered in exchange therefor is registered, it shall be a
condition of exchange that the Certificate so surrendered shall be properly
endorsed or otherwise in proper form for transfer and that the person requesting
such exchange shall pay any transfer or other taxes required by reason of the
exchange to a person other than the registered holder of the Certificate
surrendered or such person shall establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not applicable.
(c) No dividends or other distributions with respect to the Omni Stock
constituting all or a portion of the consideration payable to the holders of CSI
Shares shall be paid to the holder of any unsurrendered Certificate until such
Certificate is surrendered as provided for in this Section 2.4. Subject to the
effect of applicable Laws (as defined in Section 4.4 below), following such
surrender, there shall be paid, without interest, to the record holder of the
Omni Certificates (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time payable prior to
or on the date of such surrender with respect to such whole shares of Omni
Stock, and not paid, and the amount of cash payable in lieu of any fractional
shares, less the amount of any withholding taxes which may be required thereon
under any provision of federal, state, local or foreign tax Law, 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 the date of surrender and a
payment date subsequent to the date of surrender payable with respect to such
whole shares of Omni Stock, less the amount of any withholding taxes which may
be required thereon under any provision of federal, state, local or foreign tax
Law. Omni shall make available to the Exchange Agent cash for these purposes.
(d) Any portion of the Omni Stock made available to the Exchange Agent
pursuant to Section 2.4(a) that remains unclaimed by the holders of CSI Shares
twelve (12) months after the Effective Time shall be returned to Omni, upon
demand, and any such holder who has not exchanged his, her or its CSI Shares for
Omni Stock in accordance with this Section 2.4 prior to that time shall
thereafter look only to Omni for his, her or its claim for Omni Stock, any cash
in lieu of fractional shares and certain dividends or other distributions.
Neither Omni nor SUB shall be liable to any holder of CSI Shares with respect to
any Omni Stock (or cash in lieu of fractional shares) delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(e) If 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 Omni, the posting by such
person of a bond in such reasonable amount as Omni may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent shall issue in
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exchange for such lost, stolen or destroyed Certificate the consideration
payable under Section 2.1(a) and, if applicable, any unpaid dividends and
distributions on shares of Omni Stock deliverable with respect thereof and any
cash in lieu of fractional shares, in each case pursuant to this Agreement.
Section 2.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of CSI Shares who upon surrender of Certificates therefor
would be entitled to receive a fraction of a share of Omni Stock shall receive,
in lieu of such fractional share of Omni Stock, cash in an amount equal to such
fraction multiplied by Omni Market Value, less the amount of any withholding
taxes which may be required thereon under any provision of federal, state, local
or foreign tax law.
Section 2.6 TRANSFERS. From and after the Effective Time, there shall be
no transfers on the stock transfer books of CSI or the Surviving Corporation of
CSI Shares. If, after the Effective Time, Certificates are presented to the
Surviving Corporation, they shall be canceled and exchanged as provided in this
Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF OMNI
Omni represents and warrants to CSI as follows:
Section 3.1 ORGANIZATION. Omni is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Omni will
promptly cause SUB to be duly organized as a corporation under the laws of the
State of Florida and a wholly owned subsidiary of Omni. Omni has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. Omni is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualifications necessary, except in such jurisdictions where the
failure to be so duly qualified or licensed and in good standing would not,
individually or in the aggregate, have a material adverse effect on the
business, operations, assets, prospects, financial condition or results of
operations of Omni and its subsidiaries taken as a whole and would not prevent
or delay the consummation of the transactions contemplated hereby (an "Omni
Material Adverse Effect"). Omni has made available to CSI complete and accurate
copies of Omni's Certificate of Incorporation and Bylaws, each as currently in
effect.
Section 3.2 CAPITALIZATION. The authorized capital stock of Omni consists
of 110,000,000 shares of Omni Stock and 1,000,000 shares of preferred stock
("Omni Preferred Stock"). As of December 31, 1997, there were 82,152,665 shares
of Omni Stock issued and outstanding and no shares of Omni Preferred Stock
outstanding. All shares of Omni Stock to be issued at the Effective Time shall
be, when issued, duly authorized and validly issued, fully paid, and
non-assessable.
Section 3.3 AUTHORITY. Omni has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized and approved by the Board of Directors of Omni and no other corporate
proceedings on the part of Omni are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby, provided that Omni shall
promptly cause SUB to be duly organized as a Florida corporation and a wholly
owned subsidiary of Omni. This Agreement has been duly and validly executed and
delivered by Omni and, assuming this Agreement constitutes a legal, valid and
binding agreement of CSI, constitutes a legal, valid and binding agreement of
Omni, enforceable against Omni in accordance with its terms, except as the
enforceability may be affected by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws effecting the enforcement of
creditors' rights generally and the possible unavailability of certain equitable
remedies, including the remedy of specific performance.
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Section 3.4 NO VIOLATIONS; CONSENTS AND APPROVALS. (a) Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by Omni or SUB with any of the
provisions hereof conflicts with, violates or results in any breach of (i) any
provision of the Certificate of Incorporation or Bylaws (or similar
organizational documents) of either of Omni or SUB, (ii) any contract,
agreement, instrument or understanding to which Omni or SUB is a party or by
which Omni or SUB is bound, or (iii) any judgment, decree, order, statute, rule
or regulation applicable to Omni or SUB, excluding from the foregoing clauses
(ii) and (iii) conflicts, violations or breaches which, individually or in the
aggregate, would not have an Omni Material Adverse Effect or materially impair
Omni's or SUB's ability to consummate the transactions contemplated hereby or
for which Omni or SUB have received or, prior to the Merger, shall have received
appropriate consents or waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any governmental entity is required by Omni or SUB in
connection with the execution and delivery of the Agreement or the consummation
by Omni or SUB of the transactions contemplated hereby, except (i) in connection
with the applicable requirements of the Hart-Scott-Rodino Anti-trust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) in connection, or in
compliance, with the provisions of the Securities Act of 1933 (the "Securities
Act") and the Securities Exchange Act of 1934 (the "Exchange Act"), (iii) the
filing of the Articles of Merger with the Secretary of State of the State of
Florida, (iv) filings with, and approval of, the NYSE in connection with
obligations of Omni under Section 5.12, (v) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the corporation, takeover or blue sky laws of various states and (vi) such other
consents, orders, authorizations, registrations, declarations and filings,
including under any pharmacy license, the failure of which to be obtained or
made would, individually or in the aggregate, have an Omni Material Adverse
Effect, or materially impair the ability of Omni or SUB to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 3.5 SEC DOCUMENTS; OMNI FINANCIAL STATEMENTS. (a) Omni has filed
with the Securities and Exchange Commission ("SEC") all documents required to be
filed under the Securities Act and the Exchange Act since December 31, 1996 (the
"Omni SEC Documents"). As of their respective dates, the Omni SEC Documents
complied in all material respects with the requirements of the Securities Act
and the Exchange Act, as the case may be, and none of the Omni SEC Documents
contained any untrue statement of a material fact or omitted 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.
(b) As of their respective dates, the consolidated financial statements of
Omni included in the Omni SEC Documents were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) and present fairly the consolidated financial position of Omni and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and statements of cash-flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
Section 3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in filings
with the SEC, there has not been any change in the financial condition, results
of operations or business of Omni and its subsidiaries, taken as a whole, since
September 30, 1997, except for changes which, individually or in the aggregate,
would not have an Omni Material Adverse Effect.
Section 3.7 PROXY STATEMENT/PROSPECTUS, REGISTRATION STATEMENT. None of
the information regarding Omni and SUB to be supplied by Omni and SUB for
inclusion or incorporation by reference in (i) the registration statement on
Form S-4 (as it may be amended or supplemented from time to time, the
"Registration Statement") relating to Omni Stock to be issued in connection with
the Merger or (ii) the proxy statement to be distributed in connection with the
stockholder meeting of CSI contemplated by Section 5.5 (as it may be amended or
supplemented from time to time, the "Proxy Statement" and together
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with the prospectus to be included in the Registration Statement, the "Proxy
Statement/Prospectus") will, in the case of the Registration Statement, at the
time it becomes effective and at the Effective Time, and, in the case of the
Proxy Statement, at the time of its mailing to stockholders of CSI and at the
time of their stockholder meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading in light of the
circumstances when made. If at any time prior to the Effective Time any event
with respect to Omni shall occur which is required to be described in the Proxy
Statement/Prospectus or Registration Statement, such event shall be so
described, and an amendment or supplement shall be promptly filed with the SEC
and, as required by law, disseminated to the stockholders of Omni and CSI. The
Proxy Statement/ Prospectus and the Registration Statement will (with respect to
Omni and SUB) comply in all material respects with the provisions of the
Securities Act and the Exchange Act.
Section 3.8 BROKER'S FEES. Neither Omni nor SUB nor any of Omni's other
subsidiaries or affiliates has employed any broker, finder or financial advisor
or incurred any liability for any broker's fees, commissions, or financial
advisory or finder's fees in connection with any of the transactions
contemplated by this Agreement.
Section 3.9 POOLING OF INTERESTS; REORGANIZATION. Neither Omni nor SUB has
or, as of the Closing Date, will have (i) taken any action or failed to take any
action which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes or (ii) taken any action or failed
to take any action which action or failure would result in the failure of the
Merger to qualify as a reorganization within the meaning of Code Section 368(a).
Omni has no knowledge of any fact or circumstance that is reasonably likely to
prevent the Merger from qualifying as a pooling of interests for accounting
purposes or a reorganization within the meaning of Code Section 368(a).
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF CSI
CSI represents and warrants to Omni and SUB as follows:
Section 4.1 ORGANIZATION. (a) Each of CSI and its subsidiaries
("Subsidiaries") is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation as indicated on
Schedule 4.1, and each has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted. Each of CSI and its Subsidiaries is duly qualified or licensed and in
good standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, as indicated on Schedule 4.1, except in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a material adverse
effect on the business, operations, assets, prospects, financial condition or
results of operations of CSI and its Subsidiaries taken as a whole and would not
prevent or delay the consummation of the transactions contemplated hereby (a
"CSI Material Adverse Effect"). Set forth on SCHEDULE 4.1 is an accurate and
complete list of all of the Subsidiaries.
(b) CSI previously has delivered to Omni accurate and complete copies of the
Articles of Incorporation and Bylaws (or similar organizational documents) as
currently in effect of CSI and each of the Subsidiaries.
Section 4.2 CAPITALIZATION. (a) The authorized capital stock of CSI
consists of 50,000,000 CSI Shares and 1,000,000 shares of preferred stock, par
value $.0001 per share ("CSI Preferred Stock"). As of the date hereof, there are
14,072,063 CSI Shares issued and outstanding, no shares of CSI Preferred Stock
issued and outstanding and no CSI Shares or shares of CSI Preferred Stock held
in CSI's treasury or by any Subsidiary of CSI. As of the date hereof, there were
outstanding under the CSI Stock Option Plans, all of which are listed on
SCHEDULE 4.2, CSI Stock Options entitling the holders thereof to purchase, in
the aggregate, up to 1,548,262 CSI Shares. Schedule 4.2 lists, as to each CSI
Stock Option, the holder, date of grant, exercise price and number of shares
subject thereto. Except for the CSI Stock Option Plans, there are not now, and
at the Effective Time there will not be, any existing options, warrants, calls,
subscriptions, or other rights or other agreements or commitments obligating CSI
to issue, transfer or sell any shares of capital stock of CSI or any other
securities convertible into or evidencing the right to subscribe for any such
shares. All issued and outstanding CSI Shares are, and all CSI Shares issued and
outstanding at the Effective Time shall be, duly authorized and validly issued,
fully paid and non-assessable.
(b) The authorized capital stock of each Subsidiary as well as the number of
such shares issued and outstanding are set forth on Schedule 4.2. All of the
issued and outstanding shares of each Subsidiary have been duly authorized and
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.2, CSI holds of record and owns beneficially all of the outstanding
shares of the capital stock of each Subsidiary, free and clear of any charges,
liens, encumbrances or security interests and no shares of the capital stock of
any Subsidiary are held in treasury. There are not now, and at the Effective
Time there will not be, any existing options, warrants, calls, subscriptions or
other rights or other agreements or commitments obligating CSI or any Subsidiary
to issue, transfer or sell any of the shares of capital stock of any Subsidiary
or any other securities convertible into or evidencing the right to subscribe
for any such shares. Except as set forth on Schedule 4.2(b) and except for
interests in the Subsidiaries, neither CSI nor any Subsidiary has any investment
or interest in any entity.
Section 4.3 AUTHORITY. CSI has full corporate power and authority to
execute and deliver this Agreement and the Stock Option Agreement and, subject
to the requisite approval of the Merger and the adoption of this Agreement by
CSI's stockholders, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the Stock Option Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
and validly authorized by CSI's Board of
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Directors and, except for (in the case of this Agreement) the requisite approval
of the Merger and the adoption of this Agreement by CSI's stockholders, no other
corporate proceedings on the part of CSI are necessary to authorize this
Agreement or the Stock Option Agreement or to consummate the transactions
contemplated hereby or thereby. CSI's Board of Directors has determined that the
transactions contemplated by this Agreement, including the Merger, and the Stock
Option Agreement are in the best interests of CSI and its stockholders and,
except as provided in Section 5.2 below, have determined to recommend to such
stockholders that they vote in favor of this Agreement and the consummation of
the transactions contemplated hereby, including the Merger. Each of this
Agreement and the Stock Option Agreement has been duly and validly executed and
delivered by CSI, and assuming this Agreement constitutes a legal, valid and
binding agreement of Omni, constitutes a legal, valid and binding agreement of
CSI, enforceable against CSI in accordance with its terms, except as the
enforceability may be affected by applicable bankruptcy, reorganization,
insolvency, moratorium or other similar laws effecting the enforcement of
creditors' rights generally and the possible unavailability of certain equitable
remedies, including the remedy of specific performance.
Section 4.4 NO VIOLATIONS; CONSENTS AND APPROVALS. (a) Neither the
execution and delivery of this Agreement or the Stock Option Agreement nor the
consummation of the transactions contemplated hereby or thereby nor compliance
by CSI with any of the provisions hereof or thereof, except as set forth in
Schedule 4.4, conflicts with, violates or results in any breach of or default or
triggers any payment or obligations under (or an event which, with or without
notice or the lapse of time would constitute a violation, breach or default
under) (i) any provision of the Articles of Incorporation or Bylaws (or similar
organizational documents) of CSI or any of its Subsidiaries, (ii) any contract,
agreement, instrument or understanding to which CSI or any Subsidiary is a
party, or by which CSI, any Subsidiary or any of their respective assets or
properties is bound, or (iii) any law, judgment, decree, order, statute, rule or
regulation of any jurisdiction or governmental authority (a "Law") applicable to
CSI, any of its Subsidiaries or any of their respective assets or properties,
excluding from the foregoing clauses (ii) and (iii) conflicts, violations or
breaches which, individually or in the aggregate, would not have a CSI Material
Adverse Effect or materially impair CSI's ability to consummate the transactions
contemplated hereby or for which CSI has received appropriate consents or
waivers.
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any governmental entity is required by CSI in connection
with the execution and delivery of this Agreement or the Stock Option Agreement
or the consummation by CSI of the transactions contemplated hereby or thereby,
except (i) in connection with the applicable requirements of the HSR Act, (ii)
in connection or in compliance, with the Securities Act and the Exchange Act,
(iii) the filing of the Articles of Merger with the Secretary of State of the
State of Florida, (iv) filing with, and approval of, the NASDAQ with respect to
the delisting of CSI Shares, (v) such consents, approvals, orders,
authorizations, registrations, declaration and filings as may be required under
the corporation, takeover or blue sky laws of various states and (vi) as set
forth in Schedule 4.4, such other consents, orders, authorizations,
registrations, declarations and filings, the failure of which to be obtained or
made would, individually or in the aggregate, have a CSI Material Adverse Effect
or materially impair CSI's ability to consummate the transactions contemplated
hereby.
Section 4.5 SEC DOCUMENTS; CSI FINANCIAL STATEMENTS. (a) CSI has filed
with the SEC all documents required to be filed under the Securities Act and the
Exchange Act since April 26, 1996 (the "CSI SEC Documents"). As of their
respective dates, the CSI SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act, as the case may be,
and none of the CSI SEC Documents contained any untrue statement of a material
fact or omitted 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.
(b) As of their respective dates, the consolidated financial statements of
CSI included in the CSI SEC Documents complied in all material respects with
then applicable accounting requirements and the published rules and regulations
of the SEC with respect thereto, were prepared in accordance with
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generally accepted accounting principles applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) and present fairly the consolidated financial position of CSI and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and statements of cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein).
(c) Set forth as Schedule 4.5 are (i) consolidated audited balance sheets of
CSI and its Subsidiaries as of December 31, 1996 and (ii) consolidated unaudited
statements of income of CSI and its Subsidiaries for the three-month period
ending, and balance sheets as of, September 30, 1997. Each of the balance sheets
set forth on Schedule 4.5 are accurate and complete in all material respects,
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and present fairly the consolidated
financial position of CSI and its consolidated Subsidiaries at the date thereof
and the consolidated results of their operations and statements of cash flows
for the period then ended (subject, in the case of interim statements, to
year-end audit adjustments of a normal, recurring type which would not, in the
aggregate, have a CSI Material Adverse Effect). The balance sheet as of
September 30, 1997 is sometimes referred to as the "CSI Interim Balance Sheet."
(d) Neither CSI nor any of its Subsidiaries have any material liability or
material obligation of any kind (whether contingent or otherwise and whether due
or to become due) except (i) as set forth on Schedule 4.5, (ii) as set forth on
the CSI Interim Balance Sheet, or (iii) as incurred in the ordinary course of
business, consistent with past practice since the date of the CSI Interim
Balance Sheet.
(e) Schedule 4.5(e) sets forth, to CSI's knowledge, reasonable best
estimates of certain financial information for the mail order business and
pharmacy benefits management services businesses of CSI and its Subsidiaries.
The information set forth in such schedule was prepared on a basis consistent
with the other financial information described in Section 4.5(b) and fairly
presents the information set forth therein.
Section 4.6 ABSENCE OF CERTAIN CHANGES. Since the date of the CSI Interim
Balance Sheet, CSI and each of its Subsidiaries have been operated only in the
ordinary course, consistent with past practice, and there has not been any
adverse change, or any event, fact or circumstance which might reasonably be
expected to result in an adverse change, in either event that would have a CSI
Material Adverse Effect. Without limiting the generality of the foregoing,
except as set forth on Schedule 4.6, since September 30, 1997, there has not
been with respect to CSI or any Subsidiary any:
(a) sale or disposition of any material asset other than inventory in the
ordinary course;
(b) payment of any dividend, distribution or other payment to any
stockholder of CSI or to any relative of any such stockholder other than
payments of salary and expense reimbursements made in the ordinary course of
business, consistent with past practice, for employment services actually
rendered or expenses actually incurred;
(c) incurrence or commitment to incur any liability, individually or in the
aggregate, material to CSI and its Subsidiaries taken as a whole, except such
liabilities under CSI's existing credit facilities and liabilities incurred in
connection with the Merger;
(d) waiver, release, cancellation or compromise of any indebtedness owed to
CSI or claims or rights against others, exceeding $100,000 in the aggregate;
(e) any change in any accounting method, principal or practice except as
required or permitted by generally accepted accounting principles;
(f) unusual or novel method of transacting business engaged in by CSI or any
of its Subsidiaries or any change in CSI's accounting procedures or practices or
its financial or equity structure; or
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(g) taking of any action contemplated by Section 5.1 hereof.
Section 4.7 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT. None of
the information regarding CSI to be supplied by CSI for inclusion or
incorporation by reference in the Registration Statement or the Proxy Statement
will, in the case of the Registration Statement, at the time it becomes
effective and at the Effective Time, and, in the case of the Proxy Statement, at
the time of its mailing to stockholders of CSI and at the time of the
stockholder meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein not misleading in light of the circumstances when
made. If at any time prior to the Effective Time any event with respect to CSI
shall occur which is required to be described in the Proxy Statement or
Registration Statement, such event shall be so described, and an amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of Omni and CSI. The Proxy Statement and the
Registration Statement will (with respect to CSI) comply in all material
respects with the provisions of the Securities Act and the Exchange Act.
Section 4.8 STATE ANTI-TAKEOVER STATUTES. The CSI Board of Directors has
approved this Agreement and the transactions contemplated hereby and such
approval constitutes approval of the Merger and the other transactions
contemplated hereby, including approval of the Voting Agreement and the Stock
Option Agreement, by the CSI Board of Directors as required by the FBCA. No
"business combination," "moratorium," "control share," "fair price," "interested
shareholder," "affiliated transaction" or other anti-takeover statute or
regulation (including Sections 607.0901 and 607.0902 of the FBCA) (i) prohibits
or restricts CSI's ability to perform its obligations under this Agreement or
the Stock Option Agreement (or any party's ability to perform its obligations
under the Voting Agreement) or either party's ability to consummate the Merger
or the other transactions contemplated hereby or thereby, or (ii) would have the
effect of invalidating or voiding this Agreement, the Voting Agreement or the
Stock Option Agreement or any provision hereof or thereof. CSI does not have a
"shareholder rights plan" or other arrangement of similar effect. CSI is subject
to (and has not opted out of) Section 607.0902 of the FBCA, which regulates
"control-share acquisitions."
Section 4.9 BROKER'S FEES. Except for the engagement of NationsBanc
Montgomery Securities LLC and Shulman & Associates by CSI, neither CSI nor any
of its Subsidiaries or affiliates or their respective officers or directors has
employed any broker, finder or financial advisor or incurred any liability for
any broker's fees, commissions, financial advisory or finders' fees in
connection with any of the transactions contemplated by this Agreement. CSI has
delivered to Omni true and complete copies of the agreements evidencing such
engagements and has fully disclosed to Omni the fees payable to such entities.
Section 4.10 FAIRNESS OPINION. CSI has received the opinion of NationsBanc
Montgomery Securities LLC to the effect that as of the date hereof the financial
terms of the Merger are fair to CSI's stockholders from a financial point of
view. A copy of such fairness opinion has been or will be delivered to Omni as
soon as practicable after the date of this Agreement.
Section 4.11 ENVIRONMENTAL MATTERS. Except as disclosed on Schedule 4.11,
which disclosed items could not, individually or in the aggregate, reasonably be
expected to have a CSI Material Adverse Effect:
(a) CSI and its Subsidiaries hold and are in material compliance with, all
Environmental Permits (as defined below), and CSI and its Subsidiaries are, and
CSI and its Subsidiaries (including any predecessors) have been, in material
compliance with all applicable Environmental Laws (as defined below).
(b) Neither CSI or its Subsidiaries have received any Environmental Claim
(as defined below), and neither CSI or its Subsidiaries are aware of any
threatened Environmental Claim against CSI or any of its Subsidiaries.
(c) There are no (i) underground storage tanks, (ii) polychlorinated
biphenyls, (iii) asbestos or asbestos-containing materials, (iv)
urea-formaldehyde insulation, (v) surface impoundments, (vi) landfills, or (vii)
Hazardous Materials (as defined below) present at any facility currently owned,
leased, operated or
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otherwise used or, to CSI's knowledge, formerly owned, leased, operated or
otherwise used, by CSI or any of its Subsidiaries (including any predecessors)
that could give rise to liability of CSI or any of its Subsidiaries under any
Environmental Laws which liability could reasonably be expected to have a CSI
Material Adverse Effect.
(d) No modification, revocation, reissuance, alteration, transfer, or
amendment of the Environmental Permits, or any review by, or approval of, any
third party of the Environmental Permits is required in connection with the
execution or delivery of this Agreement or the consummation of the transactions
contemplated hereby or the continuation of the business of CSI or its
Subsidiaries following such consummation.
(e) Hazardous Materials have not been used, generated, transported, treated,
stored, disposed of, released or threatened to be released at, on, from or under
any of the properties or facilities currently owned, leased, operated or
otherwise used or, to CSI's knowledge, formerly owned, leased, operated or
otherwise used, including without limitation for receipt of the CSI's wastes, by
CSI or any of its Subsidiaries (including any predecessors), in violation of or
in a manner or to a location that could give rise to liability under any
Environmental Laws which liability could reasonably be expected to have a CSI
Material Adverse Effect.
(f) For purposes of this Section 4.11, the following terms shall have the
meanings given to them below:
(1) "Environmental Claim" means any written notice, claim, demand, action,
complaint, investigation or proceeding arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location, whether or not owned, leased
or operated by CSI or any of its Subsidiaries or (ii) circumstances forming the
basis of any violation or alleged violation of any Environmental Law or
Environmental Permit.
(2) "Environmental Permits" means all permits, licenses, registrations and
other governmental authorizations required for CSI and its Subsidiaries and the
operations of CSI's and its Subsidiaries' facilities and otherwise to conduct
the business of CSI and its Subsidiaries under Environmental Laws.
(3) "Environmental Laws" means all domestic and foreign federal, state and
local laws, statutes, rules, regulations, ordinances, orders, decrees and common
law relating in any manner to contamination, pollution or protection of human
health or the environment, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act, the Solid Waste Disposal
Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act,
the Occupational Safety and Health Act, the Emergency Planning and
Community-Right-to-Know Act, the Safe Drinking Water Act, all as amended, and
similar state and local laws.
(4) "Hazardous Materials" means all hazardous or toxic substances, wastes or
chemicals, petroleum (including crude oil or any fraction thereof) and petroleum
products, asbestos and asbestos-containing materials, pollutants, contaminants,
substances and forces, including but not limited to electromagnetic fields,
regulated pursuant to, or that could reasonably be expected to form the basis of
liability under, any Environmental Law.
Section 4.12 CONTRACTS. Schedule 4.12 sets forth a complete and accurate
list of:
(a) All contracts to which CSI or any Subsidiary is a party or by which
either is bound which (i) involve amounts in excess of $100,000, or payments
based on profits or sales, (ii) are not cancelable by CSI or such Subsidiary
upon less than 30 days' notice, or (iii) involve terms or quantities exceeding
normal commitments in the ordinary course of business.
(b) All contracts which involve amounts in excess of $100,000 and pursuant
to which CSI or any Subsidiary provides pharmaceuticals, medical supplies,
therapies, intravenous infusion services, or any other products, services or
therapies related to any of the foregoing.
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(c) All contracts with wholesalers, distributors, dealers, sales
representatives, or cooperative associations to which CSI or any Subsidiary is a
party or by which either is bound and which involve amounts in excess of
$100,000.
(d) All contracts with any federal, state or local governmental authorities,
agencies or subdivisions to which CSI or any Subsidiary is a party or by which
either is bound and which involve amounts in excess of $100,000.
(e) All contracts for the past or present disposal of Hazardous Materials or
infectious waste or other materials to which CSI or any Subsidiary is or was a
party or by which either is or was bound.
(f) All employment, consulting, management, or agency contracts,
understandings or agreements (including any "severance" or "change in control"
plans, contracts, understandings or agreements) to which CSI or any Subsidiary
is a party or by which either is bound.
(g) All contracts containing an obligation of confidentiality with respect
to information furnished by CSI or any Subsidiary to a third party, or received
by either from a third party.
(h) All contracts limiting the freedom of CSI or any Subsidiary to compete
in any line of business, or with any person, or in any geographic area or
market.
(i) All contracts providing for the present or future lease (whether as
lessee or lessor), purchase or sale of any real property by CSI or any
Subsidiary and which involve amounts in excess of $100,000.
With respect to each contract set forth on Schedule 4.12, (i) each is legal,
valid, binding and enforceable against CSI or the applicable Subsidiary, and to
CSI's knowledge, against each other party thereto, and is in full force and
effect; (ii) each will continue to be legal, valid, binding and enforceable
against CSI or the applicable Subsidiary, and to CSI's knowledge, against each
other party thereto, and will continue to be in full force and effect
immediately following the Effective Time in accordance with the terms thereof as
in effect prior to the Effective Time; and (iii) neither CSI nor the applicable
Subsidiary, nor to CSI's knowledge, any other party, is in breach or default,
and no event has occurred which, with notice or lapse of time, or both, would
constitute a material breach or default or permit termination, modification or
acceleration under any such contract. Neither CSI nor any Subsidiary has been
party to any discussions or received any correspondence concerning breach or
termination of any of the foregoing contracts and, to CSI's knowledge, there is
no default under, or any violation of, any of the foregoing contracts by any
other party thereto. CSI or the applicable Subsidiary has performed, in all
material respects, all obligations required to be performed by it to date and is
not in default in any material respect under any of the contracts, agreements,
leases or other documents to which it is a party. CSI has delivered or will
cause to be delivered to, or make available for review by, Omni copies of each
such contract listed on Schedule 4.12. Since the date of the CSI Interim Balance
Sheet, there has been no material modification or termination of any such
contract nor, to CSI's knowledge, is any such modification or termination
contemplated.
Section 4.13 COMPLIANCE WITH LAWS. Except as set forth on Schedule 4.13,
CSI and each Subsidiary is not, and has not been, in violation of any Law,
including, without limitation, any Law pertaining to Medicare, Medicaid,
reimbursement, environmental protection, infectious or biomedical waste,
occupational health or safety, or employment practices, the violation of which
has or can reasonably be expected to have a CSI Material Adverse Effect.
Section 4.14 NO LITIGATION. Except as set forth in the CSI SEC Documents
filed prior to the date of this Agreement or on Schedule 4.14, there is no
claim, litigation, investigation or proceeding by any person or governmental
authority pending or, to CSI's knowledge, threatened against CSI or any
Subsidiary. Except as set forth on Schedule 4.14, there are no pending or, to
CSI's knowledge, threatened controversies or disputes with, or grievances or
claims by, any employees or former employees of CSI, any Subsidiary or any of
their respective predecessors of any nature whatsoever, including, without
limitation, any
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controversies, disputes, grievances or claims with respect to their employment,
compensation, benefits or working conditions, which, if adversely determined,
would have a CSI Material Adverse Effect.
Section 4.15 INVENTORIES. The inventories reflected on the CSI Interim
Balance Sheet are sufficient to cover the immediate needs of CSI and its
Subsidiaries in the ordinary course of business as conducted by CSI and its
Subsidiaries prior to the execution hereof. All of the pharmaceuticals, drugs
and biologicals included in inventory are in date and are properly labeled and
packaged.
Section 4.16 PERMITS AND LICENSES. Schedule 4.16 lists all permits,
licenses, approvals or authorizations of any government authority required to
conduct the business of CSI and its Subsidiaries as currently conducted the
absence of which would have a CSI Material Adverse Effect (the "Permits"). All
such Permits have been legally obtained and maintained by CSI and its
Subsidiaries and are in full force and effect. CSI and its Subsidiaries are duly
licensed to provide pharmacy services in all states in which they do business
and are in substantial compliance with the terms of such licenses. All such
licenses to provide pharmacy services are included in the Permits listed on
Schedule 4.16.
Section 4.17 EMPLOYEE BENEFITS. (a) All employee welfare benefit plans as
defined in Section 3(1) of the Employee Retirement Income Security Act of 1974
("ERISA"), employee pension benefit plans as defined in Section 3(2) of ERISA,
and all other employee benefit programs or arrangements of any type, written or
unwritten maintained by CSI or to which CSI contributes are listed on Schedule
4.17 and Schedule 4.17 separately sets forth any Plans which CSI, or any
affiliate or predecessor of CSI, maintained or contributed to within the six
years preceding the date hereof (collectively, the "Plans"). CSI has delivered
to Omni true and complete copies of each Plan.
(b) Except as disclosed on Schedule 4.17, the Plans comply, in all material
respects, with all applicable provisions of all Laws, including, without
limitation, the Code and ERISA, and have so complied during all prior periods
during which any such provisions were applicable. Without limiting the
foregoing, each of the Plans, and any related trust, intended to meet the
requirements for tax-favored treatment under the Code (including, without
limitation, Sections 401 and 501 and Subchapter B of the Chapter 1 of the Code)
meets and for all prior periods has met, such requirements in all material
respects.
(c) Except as disclosed on Schedule 4.17, CSI and any other party involved
in the administration of any of the Plans (i) has complied in all material
respects with the provisions of ERISA, the Code and other Laws, applicable to
such party, whether as an employer, plan sponsor, plan administrator, or
fiduciary of any of the Plans or otherwise, (including without limitation the
provisions of ERISA and the Code concerning prohibited transactions), and (ii)
has administered the Plans in accordance with their terms. CSI has made all
contributions required of it by any Law (including, without limitation, ERISA)
or contract under any of the Plans and no unfunded liability exists with respect
to any of the Plans.
(d) Except as disclosed on Schedule 4.17, CSI has no responsibility or
liability, contingent or otherwise, with respect to any Plans or any employee
benefits other than under the Plans listed on Schedule 4.17. CSI has the right
to amend or terminate, without the consent of any other person, any of the
Plans, except as prohibited by law and any applicable collective bargaining
agreement. Neither CSI, nor any affiliate or predecessor of CSI, maintains or
has ever maintained or been obligated to contribute to (i) any defined benefit
pension plan (as such term is defined in Section 3(35) of ERISA), (ii) any
multiemployer plan (as such term is defined in Section 3(37) of ERISA), (iii)
any severance plan or policy, or (iv) any arrangement providing medical or other
welfare benefits to retirees or other former employees or their beneficiaries,
except as required under part 6 of Subtitle B of Title I of ERISA or Section
4980B(f) of the Code (hereinafter collectively referred to as "COBRA").
(e) Except as disclosed on Schedule 4.17, there are no actions, suits or
claims pending (other than routine claims for benefits) or, to CSI's knowledge,
any actions, suits, or claims (other than routine claims for benefits) which
could reasonably be expected to be asserted, against any of the Plans, or the
assets thereof, or against CSI or any other party with respect to any of the
Plans.
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Section 4.18 TAXES. (a) Except as set forth on Schedule 4.18, each member
of the Group (as defined below) has duly filed, or had CSI file on its behalf
(and with respect to Tax Returns (as defined below) due after the date hereof
and prior to the Closing Date will duly file or have CSI file on its behalf),
with the appropriate federal, state, local and foreign taxing authorities all
Tax Returns required to be filed by or with respect to each member of the Group.
All such Tax Returns were (and, as to Tax Returns not filed as of the date
hereof, will be) true, correct and complete in all material respects as of the
time of filing. CSI has included each Subsidiary in its consolidated federal
income Tax Returns for all periods ended on or before December 31, 1996. CSI,
with respect to the consolidated federal income Tax Returns, and each member of
the Group, with respect to any other Tax Return, has paid (and until the Closing
Date will pay) in full on a timely basis all Taxes (as defined below) due with
respect to such Tax Returns and such Taxes that are otherwise due, except to the
extent such Tax is being contested in good faith through appropriate proceedings
and for which adequate reserves have been established on the CSI Interim Balance
Sheet. Except as set forth on Schedule 4.18, the balance for accrued Taxes on
the CSI Interim Balance Sheet for the payment of accrued but unpaid Taxes
through the date thereof is correct and the amount of the Group's and CSI's
liability for unpaid Taxes shall not exceed such balance for accrued but unpaid
Taxes of the Group and CSI, respectively. The balance of accrued Taxes on a
consolidated and separate company basis have been determined in accordance with
generally accepted accounting principles, applied on a consistent basis. All
monies which each member of the Group was required by Law to withhold from
employees have been withheld (and until the Closing Date will be withheld) and
either timely paid to the proper governmental authority or set aside in accounts
for such purposes and accrued on the books of the Group or member, as the case
may be. CSI and each Subsidiary has undertaken in good faith to appropriately
classify all service providers as either employees or independent contractors
for all Tax purposes.
(b) Except as set forth on Schedule 4.18, neither CSI nor any Subsidiary has
ever been a member of an affiliated group filing consolidated returns other than
the Group of which CSI and the Subsidiaries were the only members.
(c) Except as set forth on Schedule 4.18, (i) none of the members of the
Group has received any notice of a deficiency or assessment with respect to
Taxes of the Group or any member from any taxing authority which has not been
fully paid or finally settled, except to the extent any such deficiency or
assessment is being contested in good faith through appropriate proceedings and
for which adequate reserves have been established on the CSI Interim Balance
Sheet; (ii) there are no ongoing audits or examinations of any Tax Return
relating to the Group or any member thereof and no notice (oral or written) of
audit or examination of any such Tax Return has been received by any member of
the Group; (iii) neither CSI nor any member of the Group has given nor has there
been given on its behalf a waiver or extension of any statute of limitations
relating to the payment of Taxes for any year in which CSI or any Subsidiary was
a member of the Group; (iv) neither CSI nor any of its Subsidiaries has ever
been audited by the Internal Revenue Service; and (v) no issue has been raised
(either in writing or orally, formally or informally) on audit or in any other
proceeding (and is currently pending) with respect to Taxes of the Group or any
member thereof by any taxing authority which, if resolved against the Group or
any member, would have a CSI Material Adverse Effect. CSI and each member of the
Group has disclosed on its federal income tax returns all positions taken
therein that could give rise to a substantial understatement penalty within the
meaning of Code Section 6662.
(d) Except as set forth on Schedule 4.18, neither CSI nor any Subsidiary is
(nor has either ever been) a party to any tax sharing agreement and neither has
assumed the liability of any other person under law or contract. CSI and each
Subsidiary shall, as of the Closing Date, terminate all tax allocation or tax
sharing agreements with respect to CSI or such Subsidiary, and neither CSI nor
any Subsidiary shall have any further liability under any such agreements.
(e) Except as set forth on Schedule 4.18, neither CSI nor any member of the
Group (i) has filed a consent pursuant to Code Section 341(f) nor agreed to have
Code Section 341(f)(2) apply to any
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disposition of a subsection (f) asset (as such term is defined in Code Section
341(f)) owned by a member of the Group; (ii) has agreed, or is required, to make
any adjustment under Code Section 481(a) by reason of a change in accounting
method or otherwise that will affect the liability of the Group or any member
for Taxes; (iii) has made an election, or is required, to treat any asset of the
Group or any member as owned by another person pursuant to the provisions of
former Code Section 168(f)(8); (iv) is now, has ever been or on or before the
Closing Date will be a party to any agreement, contract, arrangement, or plan
(including, without limitation, the agreements contemplated by Section 5.14
hereof) that would result, separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of Code Section 280G; (v) has
participated in an international boycott as defined in Code Section 999; (vi) is
now or has ever been a "foreign person" within the meaning of Code Section
1445(b)(2); (vii) is now or has ever been a United States real property holding
corporation within the meaning of Code Section 897(c)(1)(A)(ii); or (viii) has
made any of the foregoing elections or is required to apply any of the foregoing
rules under any comparable state or local tax provision.
(f) No member of the Group is required to report or pay any Taxes from any
joint venture, partnership or other arrangement or contract that could be
treated as a partnership for federal income tax purposes.
(g) Neither CSI nor any of its Subsidiaries has distributed the stock of any
corporation in a transaction satisfying the requirements of Code Section 355
since April 16, 1997.
(h) For purposes of this Section 4.18, the following terms shall have the
meaning given to them below:
(1) 'Group" means, individually and collectively, (i) CSI, (ii) the
Subsidiaries, and (iii) any individual, trust, corporation, partnership or
any other entity as to which CSI is liable for Taxes incurred by such
individual or entity either as transferee, or pursuant to Treasury
Regulation 1.1502-6, or pursuant to any other Law.
(2) 'Tax" means any of the Taxes, and "Taxes" means, with respect to the
Group, (i) all income taxes (including any tax on or based upon net income,
or gross income, or income as specially defined, or earnings, or profits, or
selected items of income, earnings, or profits) and all gross receipts,
estimated, sales, use, ad valorem, transfer, franchise, license,
withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, windfall profits, environmental (including taxes under
Code Section 59A), alternative, add-on minimum, custom duties, capital
stock, social security (or similar), unemployment, disability, or other
taxes, fees, assessments, or charges of any kind whatsoever, together with
any interest, penalty, or addition thereto, whether disputed or not, imposed
by any taxing authority on the Group or any member thereof, and (ii) any
liability for payment of any amount of the Tax described in the immediately
preceding clause (i) as a result of being a "transferee" (within the meaning
of Code Section 6901 or any other applicable law) of another person or
successor, by contract, or otherwise, or a member of an affiliated,
consolidated, or combined group.
(3) 'Tax Return" means any return, declaration, report, claim or refund,
or information return or statement or other document (including any related
or supporting information) filed or required to be filed with any
appropriate federal, state, local or foreign governmental entity or
authority (individually or collectively, "taxing authority") or other
authority in connection with the determination, assessment or collection of
any Tax paid or payable by the Group or the administration of any Laws,
regulations, or administrative requirements relating to any such Tax.
Section 4.19 CUSTOMERS. No nursing home or other facility or institution
served by CSI or any Subsidiary has, since September 30, 1997, canceled or
otherwise terminated, or to CSI's knowledge, made any threat to cancel or
otherwise terminate, its relationship with CSI or any Subsidiary.
Section 4.20 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither CSI, nor any
Subsidiary, nor any director, officer, employee or agent of the foregoing, nor
any other person acting on its behalf, directly or indirectly, has to CSI's
knowledge given or agreed to give any gift or similar benefit to any customer,
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supplier, governmental employee or other person which (i) could reasonably be
expected to subject CSI or any Subsidiary to any damage or penalty in any civil,
criminal or governmental litigation or proceeding, which damage or penalty may
result in a CSI Material Adverse Effect, (ii) if not given in the past, might
have had a CSI Material Adverse Effect, or (iii) if not continued in the future,
might have a CSI Material Adverse Effect or which might subject CSI or any
Subsidiary to suit or penalty in any private or governmental litigation or
proceeding.
Section 4.21 INTELLECTUAL PROPERTY. Neither CSI nor any of its
Subsidiaries own or license for use any patents, trademarks, trade names,
service marks, mask works or copyrights, other than the common law trade names
listed on Schedule 4.21 and variations thereof. There has not been any actual or
alleged infringement or misuse by (i) any party of any of CSI's or any
Subsidiary's trade secrets, confidential information or other intellectual
property rights, to CSI's knowledge, and (ii) CSI or any Subsidiary of any third
party's trade secrets, confidential information or other intellectual property
rights.
Section 4.22 POOLING OF INTERESTS; REORGANIZATION. Neither CSI nor any of
its Subsidiaries has or, as of the Closing Date, will have (i) taken any action
or failed to take any action which action or failure would jeopardize the
treatment of the Merger as a pooling of interest for accounting purposes or (ii)
taken any action or failed to take any action which action or failure would
result in the failure of the Merger to qualify as a reorganization within the
meaning of Code Section 368(a). Neither CSI nor any Subsidiary has any knowledge
of any fact or circumstance that is reasonably likely to prevent the Merger from
qualifying as a pooling of interests for accounting purposes or a reorganization
within the meaning of Code Section 368(a).
Section 4.23 INSURANCE. CSI carries insurance covering it and its
Subsidiary's assets, business, equipment, properties, operations, employees,
officers and directors of the type and in amounts customarily carried by persons
conducting business similar to that of CSI and such Subsidiaries. All such
policies are in full force and effect and all premiums have been paid to the
extent they are due.
Section 4.24 REQUIRED VOTE OF CSI STOCKHOLDERS. The affirmative vote of
the holders of a majority of the outstanding CSI Shares is required to approve
the Merger. No other vote of the stockholders of CSI is required by Law, the
Articles of Incorporation or Bylaws of CSI or otherwise in order for CSI to
consummate the Merger and the transactions contemplated hereby.
Section 4.25. EMPLOYMENT MATTERS. Neither CSI nor any of its Subsidiaries
has experienced any strikes, collective labor grievances, other collective
bargaining disputes or claims of unfair labor practices in the last five years.
To CSI's knowledge, there is no organizational effort presently being made or
threatened by or on behalf of any labor union with respect to employees of CSI
or its Subsidiaries.
Section 4.26. CERTAIN HEALTHCARE LEGAL MATTERS. (a) CSI and its
Subsidiaries and all of their respective officers, directors, employees,
consultants or agents (collectively, the "Personnel") have complied in all
material respects with all applicable statutes, regulations, rules, orders,
ordinances 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 healthcare regulatory matters (including, without limitation, The
Social Security Act, as amended, Sections 1128, 1128A and 1128B, 42 U.S.C.
Sections 1320a-7, 7(a) and 7(b) including Criminal Penalties Involving Medicare
or State Health Care Programs, commonly referred to as the "Federal
Anti-Kickback Statute" and The Social Security Act, as amended, Section 1877, 42
U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly referred
to as the "Stark Statute", the statute commonly referred to as the "Federal
False Claims Act" and all statutes and regulations related to the possession,
distribution, maintenance and documentation of controlled substances)
("Healthcare Laws"). CSI and its Subsidiaries have maintained all records
required to be maintained by the FDA, DEA and State Board of Pharmacy and the
Medicare and Medicaid programs as required by applicable Healthcare Laws. There
are no presently existing circumstances which would result or would be likely to
result in
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violations of any such Healthcare Laws, except to the extent such violations
would not have a CSI Material Adverse Effect.
(b) CSI and its Subsidiaries hold all permits necessary for the lawful
conduct of their business under and pursuant to all applicable statutes, laws,
ordinances, rules and regulations of all Governmental Authorities having,
asserting or claiming jurisdiction over it or any part of their operations. CSI
and its Subsidiaries have correctly maintained in all respects all records
required to be maintained by the FDA, DEA and State Boards of Pharmacy and
pursuant to the requirements of the Medicare and Medicaid programs.
(c) CSI and its Subsidiaries are qualified for participation in the Medicare
and Medicaid programs. Neither CSI or any of its Subsidiaries have received any
notice indicating that such qualification may be terminated or withdrawn and
have no reason to believe that such qualification may be terminated or
withdrawn. CSI and its Subsidiaries have timely filed all claims or other
reports required to be filed with respect to the purchase of products or
services by third-party payors (including Medicare and Medicaid), and all such
claims or reports are complete and accurate in all material respects except
where the failure to file such claims and reports would not result in a CSI
Material Adverse Effect. CSI and its Subsidiaries have no liability to any payor
with respect thereto, except for liabilities incurred in the ordinary course of
business. There are no pending appeals, overpayment determinations, adjustments,
challenges, audit, litigation or notices of intent to open Medicare or Medicaid
claim determinations or other reports required to be filed by CSI or its
Subsidiaries. To CSI's knowledge, no Personnel have been convicted of, or pled
guilty or nolo contendere to any Medicare, Medicaid or any other federal
healthcare program related offense or committed any offense which may reasonably
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs.
(d) There are no pharmaceutical or other products now being sold or
distributed by CSI or its Subsidiaries which, at the date hereof, would require
any approval of any governmental or administrative body, whether federal, state,
local or foreign, prior to commercial distribution of such products, for which
approval has not been obtained. All pharmaceutical or other products now being
distributed by CSI or its Subsidiaries and all products included in the
inventories of CSI or its Subsidiaries on the date hereof comply with applicable
legal requirements of all jurisdictions in which such pharmaceutical or other
products are now being distributed.
Section 4.27. PRODUCT WARRANTIES. Except as set forth in Schedule 4.27,
neither CSI nor any of its Subsidiaries has made any express warranties with
respect to products sold or distributed by CSI and its Subsidiaries (other than
passing on warranties made by the manufacturers thereof) and, to the best of
CSI's knowledge, no other warranties have been made by Personnel. CSI has no
knowledge of any presently existing circumstances that would constitute a valid
basis for any voluntary or governmental recall of any pharmaceutical or other
product sold or distributed by CSI or any Subsidiary.
Section 4.28. CERTAIN BUSINESS PRACTICES. To CSI's knowledge, none of CSI
or any of its Subsidiaries has made, and, no Personnel or representative of CSI
or its Subsidiaries (in their capacities as such) has made, directly or
indirectly with respect to the business of CSI or its Subsidiaries, 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.
Section 4.29 CUSTOMERS. Schedule 4.29 contains a true and correct summary
of all skilled nursing homes and other facilities, including assisted living or
independent living, and the number of licensed beds in those facilities which
are provided products and services by CSI under contract and are serviced by CSI
or its Subsidiaries, and, except as set forth in Schedule 4.29, during the
quarter ended December 31, 1997, not more than 5% of the revenues of CSI during
such period was attributable to patients serviced in a single nursing home
company or other company or, to the best knowledge of CSI, any group of
affiliated companies. Schedule 4.29 sets forth a complete list of all nursing
home companies (including affiliated
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companies) that own or control more than 5% of the beds serviced by CSI and its
Subsidiaries and all nursing home companies, other companies and related groups
or entities from which CSI derives directly or indirectly more than 5% of its
revenues. Except as set forth on Schedule 4.29, neither CSI nor any Subsidiary
has received any notice that any party intends to cancel any of the contracts
listed on Schedule 4.29.
Section 4.30 PURCHASING CONTRACTS. No provision, including of any
contract, arrangement, understanding, law, rule, regulation or any other item
which may bind CSI or any of its Subsidiaries, prevents or will prevent CSI and
its Subsidiaries from using Omni purchasing contracts and arrangements with
wholesalers in the conduct of their business, including in lieu of any existing
purchasing contracts or arrangements with wholesalers.
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ARTICLE V
COVENANTS
Section 5.1 CONDUCT OF BUSINESS OF CSI. Except as contemplated by this
Agreement or as expressly agreed to in writing by Omni, during the period from
the date of this Agreement to the Effective Time, CSI and its Subsidiaries will
conduct their operations substantially as presently operated and only in the
ordinary course of business, consistent with past practice and will use
commercially reasonable efforts to preserve intact their business organization,
to keep available the services of their officers and employees and to maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it and will take no action which would
adversely affect its ability to consummate the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement, prior to the Effective Time neither CSI
nor any of its Subsidiaries will, without the prior written consent of Omni;
(a) amend its Articles of Incorporation or Bylaws (or similar organizational
documents);
(b) authorize for issuance, issue, sell, deliver, grant any options for, or
otherwise agree or commit to issue, sell or deliver any shares of its capital
stock or any other securities, other than pursuant to and in accordance with the
terms of the Stock Option Agreement and as set forth in Schedule 5.1;
(c) recapitalize, split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock; or purchase, redeem or otherwise acquire any shares of its own capital
stock or of any of its Subsidiaries;
(d) (i) create, incur, assume, maintain or permit to exist any long-term
debt or any short-term debt for borrowed money other than under existing lines
of credit, relating to purchase money security interests or obligations as a
lessee under leases recorded as capital leases, each as incurred in the ordinary
course of business; (ii) assume, guarantee, endorse or otherwise become liable
or responsible (whether directly, contingently or otherwise) for the obligations
of any other person except its wholly owned subsidiaries in the ordinary course
of business and consistent with past practices; or (iii) make any loans,
advances or capital contributions to, or investments in, any other person;
(e) (i) increase in any manner the rate of compensation of any of its
directors, officers or other employees, except in the ordinary course of
business and in accordance with its customary past practices or as otherwise may
be contractually required and disclosed on Schedule 5.1 attached hereto; or (ii)
pay or agree to pay any bonus, pension, retirement allowance, severance or other
employee benefit except as required under currently existing Plans disclosed in
Schedule 4.17;
(f) except as set forth on Schedule 5.1, sell or otherwise dispose of, or
encumber, or agree to sell or otherwise dispose of or encumber, any assets
(including securities of Subsidiaries) other than inventory in the ordinary
course of business;
(g) enter into any other agreement, commitment or contract, except
agreements, commitments or contracts for the purchase, sale or lease of goods or
services in the ordinary course of business consistent with past practice, but
in no event in excess of $25,000 in the aggregate;
(h) authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into any agreement in principle or an agreement
with respect to, any (i) plan of liquidation or dissolution, (ii) acquisition of
a material amount of assets or securities, (iii) disposition of a material
amount of assets or securities or (iv) material change in its capitalization, or
enter into a material contract or any amendment or modification of any material
contract or release or relinquish any material contract right;
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(i) engage in any unusual or novel method of transacting business, change
any accounting or Tax procedure or practice or its financial structure or make
any Tax Election;
(j) take any action the taking of which, or omit to take any action the
omission of which, would cause any of the representations and warranties herein
to fail to be true and correct in all respects as of the date of such action or
omission as though made at and as of the date of such action or omission or
which would frustrate any condition to the consummation of the Merger; or
(k) commit or agree to do any of the foregoing.
Section 5.2 NO SOLICITATION. CSI agrees that, prior to the Effective Time,
except as provided below it shall not, and shall cause its Subsidiaries and its
and its Subsidiaries' directors, officers, employees, agents or representatives
(including, without limitation, any attorney, financial advisor, investment
banker or accountant) not to, directly or indirectly, solicit, initiate,
facilitate or encourage (including by way of furnishing or disclosing
information), or take any other action to facilitate, any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to any Transaction Proposal (as defined below), or enter into or maintain or
continue discussions or negotiate with any person or entity in furtherance of
such inquiries or to obtain a Transaction Proposal or agree to or endorse any
Transaction Proposal or authorize or permit any of its officers, directors or
employees or any of its Subsidiaries or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its Subsidiaries to take any such action; provided, however, that nothing
contained in this Agreement shall prohibit the CSI Board of Directors from, (i)
furnishing information to or entering into discussions or negotiations with any
person or entity that makes an unsolicited written, bona fide Transaction
Proposal which such person or entity has such funds or commitments therefor and
which in the reasonable judgment of the CSI Board of Directors is reasonably
capable of consummation if, and only to the extent that (A) the CSI Board of
Directors, after consultation with its financial advisors and after consultation
with and based upon advice of independent legal counsel determines in good faith
that such action is necessary for the CSI Board of Directors to comply with its
fiduciary duties to stockholders under applicable law and (B) prior to taking
such action CSI receives from such person or entity an executed confidentiality
agreement containing reasonable and customary terms and provisions, at a
minimum, at least as favorable to CSI as those terms and conditions contained in
Section 5.3(b) below, or (ii) withdrawing, modifying or changing its
recommendation referred to in Section 4.3 if there exists a Transaction Proposal
and the CSI Board of Directors, after consultation with its financial advisors
and after consultation with, and based upon the advice of independent legal
counsel, determines in good faith that such action is necessary for the CSI
Board of Directors to comply with its fiduciary duties to stockholders under
applicable law in connection with such Transaction Proposal. CSI shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any other party with respect to any Transaction
Proposal. CSI shall immediately advise Omni, orally and in writing, of any
inquiries or proposals relating to any Transaction Proposal known to it
(including any amendments or modifications thereto), the material terms and
conditions of such inquiry or proposal, any written materials submitted in
connection therewith and the identity of the person or entity making such
inquiry or proposal. CSI shall give Omni at least one business day advance
notice of any information to be supplied to, any person or entity making such a
proposal for a Transaction Proposal with respect to CSI or any Subsidiary. CSI
shall not enter into any agreements (other than a confidentiality agreement, as
set forth above) with any person or entity making such inquiry or proposal. For
purposes of this Agreement, "Transaction Proposal" shall mean any of the
following (other than the transactions between CSI and SUB contemplated by this
Agreement) involving CSI or any of its Subsidiaries: (i) any merger,
consolidation, share exchange, recapitalization, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of twenty percent (20%) or more of the assets of CSI and
its Subsidiaries, taken as a whole, in a single transaction or series of
transactions or any issuance of securities of CSI or any Subsidiary; (iii) any
tender offer or exchange offer for, or the acquisition (or right to acquire) of
"beneficial ownership" by any person, "group" or entity (as such terms are
defined under Section 13(d) of the Securities Exchange Act of
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1934), of twenty percent (20%) or more of the outstanding shares of capital
stock of CSI or the filing of a registration statement under the Securities Act
in connection therewith or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing or any agreement to engage in any of the
foregoing.
Section 5.3 ACCESS TO INFORMATION. (a) From the date of this Agreement until
the Effective Time, CSI will provide to Omni, its lenders and authorized
representatives (including counsel, environmental and other consultants,
accountants and auditors) full access during reasonable hours to all facilities,
personnel and operations and to all books and records of CSI and its
Subsidiaries, will permit Omni to make such inspections as it may reasonably
require (including without limitation any air, water or soil testing or sampling
deemed necessary) and will cause its officers and those of its Subsidiaries to
furnish Omni with such financial and operating data and other information with
respect to its business and properties as Omni may from time to time reasonably
request.
(b) Omni will hold and will cause its representatives to hold in confidence
all documents and information furnished in connection with this Agreement, other
than documents or information (i) available to the public, (ii) which are or
become known by Omni from a source other than CSI or (iii) required by law to be
disclosed.
Section 5.4 REGISTRATION STATEMENT AND PROXY STATEMENT. CSI shall file with
the SEC as soon as is reasonably practicable after the date hereof the Proxy
Statement. Such filing shall be made on a confidential basis unless Omni shall
request otherwise. Promptly following the clearance by the SEC of the Proxy
Statement, Omni shall file the Registration Statement with the SEC. Omni and CSI
shall use all commercially reasonable efforts to have the Proxy Statement
cleared, and Registration Statement declared effective, by the SEC as promptly
as practicable. Omni shall also use all commercially reasonable efforts to take
any action required to be taken under applicable state blue sky or securities
laws in connection with the issuance of the Omni Stock. Omni and CSI shall
promptly furnish to each other all information, and take such other actions, as
may reasonably be requested in connection with any action by any of them in
connection with the preceding sentence.
Section 5.5 STOCKHOLDER'S MEETING. CSI shall call a meeting of its
stockholders to be held as promptly as practicable (and in no event more than 45
days after the Registration Statement is declared effective) for the purpose of
voting upon this Agreement and the Merger. CSI shall, through its Board of
Directors, recommend to its stockholders approval of such matters and shall use
all commercially reasonable efforts to hold such meeting as soon as practicable
after the date hereof. Subject to the provisions of clause (ii) of Section 5.2
above, CSI shall use all commercially reasonable efforts to solicit from its
stockholders proxies in favor of such matters. Without limiting the generality
of the foregoing, in the event the Board of Directors of CSI withdraws or
modifies its recommendation, CSI nonetheless shall cause the meeting of the
stockholders to be convened and a vote taken with respect to the Merger and the
Board of Directors shall communicate to CSI's stockholders its basis for such
withdrawal or modification as contemplated by Section 607.1103(2)(a) the FBCA.
Section 5.6 REASONABLE EFFORTS; OTHER ACTIONS. CSI, Omni and SUB each shall
use all commercially reasonable efforts promptly to take, or cause to be taken,
all other actions and do, or cause to be done, all other things necessary,
proper or appropriate under applicable Law to consummate and make effective the
transactions contemplated by this Agreement as promptly as practicable,
including, without limitation, (i) the filing of Notification and Report Forms
under the HSR Act with the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
using their reasonable best efforts to respond as promptly as practicable to all
inquiries received from the FTC or the Antitrust Division for additional
information or documentation, (ii) the taking of any actions required to qualify
the Merger for pooling-of-interests accounting treatment and as a reorganization
within the meaning of Code Section 368(a), and (iii) the obtaining of all
necessary consents, approvals or waivers under its material contracts.
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Section 5.7 PUBLIC ANNOUNCEMENTS. Before issuing any press release or
otherwise making any public statements with respect to the Merger, Omni, SUB and
CSI will consult with each other as to its form and substance and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law (it being agreed that the parties
hereto are entitled to disclose all requisite information concerning the
transaction and any filings required with the SEC or pursuant to the HSR Act) or
the rules and regulations of Nasdaq or the NYSE, as applicable.
Section 5.8 NOTIFICATION OF CERTAIN MATTERS. Each of CSI and Omni shall give
prompt notice to the other party of (i) any notice of, or other communication
relating to, a default or event which, with notice or lapse of time or both,
would become a default, received by it or any of its subsidiaries subsequent to
the date of this Agreement and prior to the Effective Time, under any contract
material to the financial condition, properties, businesses or results of
operations of CSI or Omni, as the case may be, and their respective subsidiaries
taken as a whole to which it or any of its subsidiaries is a party or is
subject, (ii) any notice or other communication from any third party alleging
that the consent of such third party is or may be requited in connection with
the transactions contemplated by this Agreement, (iii) any material adverse
change in their respective financial condition, properties, businesses or
results of operations or the occurrence of any event which is reasonably likely
to result in any such change, or (iv) the occurrence or existence of any event
which would, or could with the passage of time or otherwise, make any
representation or warranty contained herein untrue; provided, however, that the
delivery of notice pursuant to this Section 5.8 shall not limit or otherwise
affect the remedies available hereunder to the party receiving such notice. Each
party shall use all commercially reasonable efforts to prevent or promptly
remedy the same.
Section 5.9 INDEMNIFICATION. Omni agrees that at all times after the
Effective Time, it shall cause the Surviving Corporation and its subsidiaries to
indemnify each person who is now, or has been at any time prior to the date
hereof, a director or officer of CSI or any of its Subsidiaries, or their
respective successors or assigns (individually, an "Indemnified Party" and
collectively the "Indemnified Parties"), to the fullest extent permitted by law,
with respect to any claim, liability, loss, damage, judgment, fine, penalty,
amount paid in settlement or compromise, costs or expense (including reasonable
fees and expenses of legal counsel), whenever asserted or claim, based in whole
or in part on, or arising in whole or in part out of, any facts or circumstances
occurring at or prior to the Effective Time whether commenced, asserted or
claimed before or after the Effective Time, to the fullest extent as would have
been permitted in their respective Articles or Certificate of Incorporation, as
appropriate, or Bylaws consistent with applicable law. Omni shall or shall cause
the Surviving Corporation to, maintain in effect for not less than three years
after the Effective Time, the current policies of directors and officers
liability insurance maintained by CSI and its Subsidiaries as of the date hereof
to the extent that it provides coverage for events occurring prior to the
Effective Time of the Merger (the "D&O Insurance") for all persons who are
directors and officers of CSI or any of its Subsidiaries on the date hereof;
provided that Omni or the Surviving Corporation, as applicable, shall not be
required to spend as an annual premium for such D&O Insurance an amount in
excess of 150% of the annual premium paid for D&O Insurance in effect prior to
the date hereof, which amount has previously been disclosed to Omni, but
provided Omni or the Surviving Corporation, as applicable, shall nevertheless be
obligated to provide such coverage as may be obtained for such amount. Omni may
substitute for such D&O Insurance, policies with reputable and financially sound
carriers having, except as provided in the previous sentence, at least the same
coverage and amounts thereof and continuing terms and conditions with respect to
facts and circumstances occurring at or prior to the Effective Time. The rights
under this Section 5.9 are in addition to the rights that any Indemnified Party
may have under the Articles of Incorporation, Bylaws or other similar
organizational documents of CSI or any Subsidiary or under applicable law. The
rights under this Section 5.9 shall survive the Merger and are expressly
intended to benefit each Indemnified Party.
Section 5.10 EXPENSES. Except as provided in Section 10.5 below, Omni and
SUB, on the one hand, and CSI, on the other hand, shall bear their respective
expenses incurred in connection with the Merger, including, without limitation,
the preparation, execution and performance of this Agreement and the
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transactions contemplated hereby, including all fees and expenses of its
representatives, counsel and accountants, except that (i) expenses incurred in
printing, mailing and filing (including without limitation, SEC filing fees) the
Proxy Statement/Prospectus shall be shared equally by CSI and Omni; and (ii) the
filing fee payable in connection with the parties' compliance with the HSR Act
shall be borne solely by Omni.
Section 5.11 AFFILIATES. CSI shall deliver to Omni a letter identifying all
persons who, as of the date hereof, may be deemed to be "affiliates" of CSI for
purposes of Rule 145 under the Securities Act (the "Affiliates") and shall
advise Omni in writing of any persons who become Affiliates prior to the
Effective Time. CSI shall cause each person who is so identified as an Affiliate
to deliver to Omni, no later than the earlier of the thirtieth (30th) day prior
to the Effective Time or the date such person becomes an Affiliate, a written
agreement substantially in the form of Exhibit A hereto.
Section 5.12 STOCK EXCHANGE LISTINGS. Omni shall use its commercially
reasonable efforts to list on the NYSE, upon official notice, the Omni Stock to
be issued pursuant to the Merger.
Section 5.13 STATE ANTI-TAKEOVER LAWS. If any "fair price" or "control share
acquisition" statute or any other statute described in Section 4.8 hereof or
other similar anti-takeover regulation shall become applicable to the
transactions contemplated hereby, Omni and CSI and their respective Boards of
Directors shall use their reasonable best efforts to grant such approvals and to
take such other actions as are necessary so that the transactions contemplated
hereby may be consummated as promptly as practicable on the terms contemplated
hereby and shall otherwise use their reasonable best efforts to eliminate the
effects of any such statute or regulation on the transactions contemplated
hereby.
Section 5.14 VOTING AGREEMENT AND CONSULTING AGREEMENTS. Simultaneously with
the execution and delivery of this Agreement, Brian A. Kahan is executing the
Voting Agreement. CSI will use all commercially reasonable efforts to cause the
persons listed on Schedule 5.14 to enter into consulting, employment and/or
non-competition agreements containing the terms set forth on Schedule 5.14 and
otherwise reasonably acceptable to Omni.
Section 5.15 COMBINED FINANCIAL RESULTS. Omni covenants and agrees for the
benefit of each Affiliate that, as promptly as practicable following the
Effective Time and in no event later than the earlier of (i) ninety (90) days
after the end of the calendar month in which the Effective Time occurs, and (ii)
one hundred twenty (120) days after the Effective Time, Omni will publicly
release the financial results of Omni and CSI for a thirty (30) day period
following the Effective Time.
Section 5.16 SATISFACTION OF CONDITIONS. CSI agrees to use all commercially
reasonable efforts to cause each of the conditions set forth in Article VII to
Omni and SUB proceeding with the Closing to be satisfied on or before the
Closing Date. Omni and SUB agree to use their respective commercially reasonable
efforts to cause each of the conditions set forth in Article VIII to CSI
proceeding with the Closing to be satisfied on or before the Closing Date.
Section 5.17 SUB. Promptly following the formation of SUB, the parties will
execute an amendment to this Agreement to make SUB a party hereto.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF OMNI, SUB AND CSI
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the closing of each of the following
conditions:
Section 6.1 REGISTRATION STATEMENT. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall have
been issued by the SEC and remain in effect and no proceeding to that
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effect shall have been commenced or threatened. All necessary state securities
or blue sky authorizations shall have been received.
Section 6.2 STOCKHOLDER APPROVAL. The requisite vote of the stockholders of
CSI necessary to consummate the transactions contemplated by this Agreement
shall have been obtained.
Section 6.3 CONSENTS AND APPROVALS. All necessary consents and approvals of
any United States or any other governmental authority required for the
consummation of the transactions contemplated by this Agreement shall have been
obtained, and any waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
Section 6.4 LISTINGS. The Omni Stock issued in the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
Section 6.5 ACCOUNTING TREATMENT. Each of Omni and CSI shall have received
letters from Ernst & Young, LLP and Omni's auditors, reasonably satisfactory to
each of them in all respects, that the Merger will qualify for
pooling-of-interests accounting treatment.
Section 6.7 TAX MATTERS. Omni shall have received an opinion of Omni's
counsel, in form and substance reasonably satisfactory to Omni, and CSI shall
have received an opinion of CSI's counsel, in form and substance reasonably
satisfactory to CSI, each dated as of the Closing Date, to the effect that the
Merger will constitute a reorganization within the meaning of Code Section
368(a) and that Omni, SUB and CSI shall each be a party to that reorganization
within the meaning of Code Section 368(b). In rendering such tax opinions, such
counsel may require and rely upon reasonably requested representations contained
in certificates of Omni, CSI and SUB.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF OMNI AND SUB
The obligation of Omni and SUB to effect the Merger and to perform under
this Agreement is subject to the fulfillment on or before the Closing Date of
the following additional conditions, any one or more of which may be waived, in
writing, by Omni:
Section 7.1 REPRESENTATIONS ACCURATE. The representations and warranties of
CSI contained herein shall be true and correct on the date of this Agreement and
at and on the Closing Date as though such representations and warranties were
made at and on such date, except for such untruths or inaccuracies which would
not (without regard for any materiality qualifiers therein), individually or in
the aggregate, have a CSI Material Adverse Effect.
Section 7.2 PERFORMANCE. CSI shall have complied, in all material respects,
with all agreements, obligations and conditions required by this Agreement to be
complied with by it on or prior to the Closing Date.
Section 7.3 OFFICER'S CERTIFICATE. Omni and SUB shall have received a duly
executed certificate signed by the President of CSI certifying as to (i)
compliance with the conditions set forth in Sections 7.1 and 7.2; (ii) the
accuracy and completeness of the Bylaws of CSI and the director and stockholder
resolutions of CSI approving this Agreement, the Merger and the transactions
contemplated hereby; and (iii) the identity and authority of the officers and
other persons executing documents on behalf of CSI.
Section 7.4 CERTIFIED ARTICLES OF INCORPORATION. Omni shall have received a
certificate of the Secretary of State of the State of Florida certifying the
Articles of Incorporation of CSI and all amendments thereof, dated not more than
ten (10) days prior to the Closing Date.
Section 7.5 GOOD STANDING. Omni shall have received a certificate of good
standing, or its equivalent, dated no more than ten (10) days prior to the
Closing Date, from the state of incorporation of CSI and
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each Subsidiary and each other state in which CSI and each Subsidiary are
qualified to do business as set forth on Schedule 4.1.
Section 7.6 LEGAL ACTION. No statute, rule, regulation, order, injunction,
writ or decree shall have been enacted, entered, ordered, promulgated or
enforced by any Governmental Authority which prohibits the consummation of the
Merger and no legal action shall be pending or threatened which is reasonably
likely to have a CSI Material Adverse Effect.
Section 7.7 CONSENTS. Omni and SUB shall have received copies of consents of
all third parties (x) necessary for CSI to execute, deliver and perform this
Agreement and consummate the Merger and (y) where failure to obtain such
consents in the aggregate would have a CSI Material Adverse Effect.
Section 7.8 DISSENTING SHARES. On the Closing Date, the aggregate number of
CSI Shares with respect to which the holders shall be dissenting shareholders
entitled to relief under Section 607.1302 of the FBCA shall not exceed ten
percent (10%) of all outstanding CSI Shares.
Section 7.9 MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, operations, assets, prospects, financial
condition or results of operations of CSI and its Subsidiaries taken as a whole.
Section 7.10 AGREEMENTS WITH AFFILIATES. Omni and SUB shall have received
from each person who is an Affiliate under Section 5.11 an executed copy of the
written agreement referred to in Section 5.11 and such agreements shall be in
full force and effect and there shall be no breach, or in existence any facts
which with passage of time or otherwise could constitute a breach, thereof.
Section 7.11 ARTICLES OF MERGER. CSI shall have delivered to Omni the
Articles of Merger as executed by duly authorized officers of CSI.
Section 7.12 EMPLOYMENT, CONSULTING AND NON-COMPETITION AGREEMENTS. Each
person set forth in Schedule 5.14 shall have entered into a valid and binding
employment, consulting or non-competition agreement containing the terms set
forth in Schedule 5.14 and otherwise on terms reasonably satisfactory to Omni.
Section 7.13 FIRPTA CERTIFICATE. If requested by Omni, CSI shall have
provided Omni 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."
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF CSI
The obligations of CSI to effect the Merger and to perform under this
Agreement is subject to the fulfillment on or before the Closing Date of the
following additional conditions, any one or more of which may be waived, in
writing, by CSI:
Section 8.1 REPRESENTATIONS ACCURATE. The representations and warranties of
Omni and SUB contained herein shall be true and correct on the date of this
Agreement and at and on the Closing Date as though such representations and
warranties were made at and on such date, except for such untruths or
inaccuracies which would not (without regard for any materiality qualifiers
therein), individually or in the aggregate, have an Omni Material Adverse
Effect.
Section 8.2 PERFORMANCE. Omni and SUB shall have complied, in all material
respects, with all agreements, obligations and conditions required by this
Agreement to be complied with by them on or prior to the Closing Date.
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Section 8.3 COMPLIANCE CERTIFICATE. CSI shall have received a certificate
signed by an officer of each of Omni and SUB certifying as to (i) compliance
with the conditions set forth in Sections 8.1 and 8.2; (ii) the accuracy and
completeness of the Bylaws of SUB and, as applicable, the director and
stockholder resolutions adopted of Omni and SUB approving this Agreement, the
Merger and the transactions contemplated hereby; and (iii) the identity and
authority of the officers and other persons executing documents on behalf of
Omni and SUB.
Section 8.4 LEGAL ACTION. No statute, rule, regulation, order, injunction,
writ or decree shall have been enacted, entered, ordered, promulgated or
enforced by any governmental entity which prohibits the consummation of the
Merger and no legal action shall be pending or threatened which is reasonably
likely to have an Omni Material Adverse Effect.
Section 8.5 MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the business, operations, assets, prospects, financial
condition or results of operations of Omni and its subsidiaries taken as a
whole.
Section 8.6 ARTICLES OF MERGER. SUB shall have delivered to CSI the Articles
of Merger, executed by duly authorized officers of SUB.
ARTICLE IX
CLOSING
Section 9.1 TIME AND PLACE. Upon the terms and subject to the conditions
hereof, the closing of the Merger (the "Closing") shall take place at the
offices of Atlas, Pearlman, Trop & Borkson, P.A., as soon as practicable, but in
no event later than 10:00 a.m., local time, on the first business day after the
date on which each of the conditions set forth in Articles VI, VII and VIII
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to such conditions) have been satisfied or waived, in
writing, by the party or parties entitled to the benefit of such conditions; or
at such other place, at such other time, or on such other date as Omni, SUB and
CSI may, in writing, mutually agree. The date on which the Closing actually
occurs is herein referred to as the "Closing Date."
Section 9.2 FILINGS AT THE CLOSING. Upon the terms and subject to the
conditions hereof, CSI, Omni and SUB shall cause to be executed and filed at the
Closing the Articles of Merger and shall cause the Articles of Merger to be
recorded in accordance with the applicable provisions of the FBCA and shall take
any and all other lawful actions and do any and all other lawful things
necessary to cause the Merger to become effective.
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ARTICLE X
TERMINATION AND ABANDONMENT
Section 10.1 TERMINATION. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval by the stockholders of
CSI or Omni:
(a) by mutual consent of Omni and CSI;
(b) by either Omni or CSI, if any court of competent jurisdiction in the
United States or other governmental body in the United States shall have issued
an order (other than a temporary restraining order), decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the Merger, and
such order, decree, ruling or other action shall have become final and
nonappealable; or
(c) by either Omni or CSI, if the stockholder approval of the stockholders
of CSI is not obtained at a meeting of stockholders duly called and held
therefor.
(d) by either Omni or CSI if the Merger shall not have been consummated by
January 15, 1999, provided that a party in material breach of this Agreement may
not terminate this Agreement pursuant to this Section 10.1(d).
Section 10.2 TERMINATION BY OMNI. 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 the stockholders of CSI, by Omni if (a) CSI shall have
failed to comply in any material respect with any of the covenants or agreements
contained in this Agreement to be complied with by CSI at or prior to such date
of termination, (b) there exists a breach of any representation or warranty of
CSI contained in this Agreement such that the closing condition set forth in
Section 7.1 would not be satisfied, provided, however, that, with respect to
either (a) or (b), if such failure or breach is capable of being cured prior to
the Effective Time, such failure or breach shall not have been cured within
fifteen (15) days of delivery to CSI of written notice of such failure or
breach, or (c) the Board of Directors of CSI shall withdraw, modify or change
its recommendation of this Agreement or the Merger in a manner adverse to Omni
or shall have failed to reaffirm its recommendation within five business days of
Omni's request that it do so or shall have recommended or issued a neutral
recommendation (or taken no position) with respect to any proposal in respect of
a Transaction Proposal (as defined in Section 5.2 above).
Section 10.3 TERMINATION BY CSI. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, before or after
the approval by the stockholders of Omni or CSI, by CSI, if (a) Omni or SUB
shall have failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with by Omni or SUB at or
prior to such date of termination, (b) there exists a breach of any
representation or warranty of Omni or SUB contained in this Agreement such that
the closing condition set forth in Section 8.1 would not be satisfied, provided,
however, that, with respect to either (a) or (b), if such failure or breach is
capable of being cured prior to the Effective Time, such failure or breach shall
not have been cured within fifteen (15) days of delivery to Omni or Sub of
written notice of such failure or breach, or (c) prior to the CSI stockholder
meeting, if the CSI Board of Directors, in the exercise of its good faith
judgment as to fiduciary duties to its stockholders imposed by law, based upon
the advice of outside counsel, determines that such termination is required in
order to execute an agreement providing for the implementation of the
transactions contemplated by a Transaction Proposal, PROVIDED, HOWEVER, that (i)
the Company shall have complied with the provisions of Section 5.2 hereof,
including providing notice of the terms of the Transaction Proposal and (ii) at
least ten business days shall have elapsed after the Company has notified Omni
of the final terms of such Transaction Proposal. No termination of this
Agreement by the Company shall be effective unless and until the Company has
paid Omni any amounts owed by it pursuant to Section 10.5.
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Section 10.4 PROCEDURE FOR TERMINATION. In the event of termination and
abandonment of the Merger by Omni or CSI pursuant to this Article X, written
notice thereof shall forthwith be given to the other.
Section 10.5 EFFECT OF TERMINATION AND ABANDONMENT. (a) In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article X, no party hereto (or any of its directors of officers) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in this Section 10.5 and in Sections 5.3(b) and 5.10 hereof, and except
as provided in the Stock Option Agreement. Nothing in this Section 10.5(a) shall
relieve any party from liability for willful breach of this Agreement.
(b) In the event that this Agreement is terminated by either party pursuant
to (w) Section 10.1(c) following the making of a Transaction Proposal, (x)
Section 10.2(a) or (c) or (y) Section 10.3(c), then CSI shall pay Omni a fee of
$3.2 million. Any monies owed by CSI to Omni in accordance with the preceding
sentence shall be payable by wire transfer of same day funds either on the date
contemplated in the last sentence of Section 10.3 if applicable or, otherwise,
within two business days after such amount becomes due.
In the event that this Agreement is terminated by Omni pursuant to Section
10.2(b), then CSI shall reimburse Omni for its reasonable out-of-pocket expenses
incurred in connection with this Agreement and the transactions contemplated
hereby.
In the event that this Agreement is terminated by CSI pursuant to Section
10.3(a) or (b), then Omni shall reimburse CSI for its reasonable out-of-pocket
expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
CSI acknowledges that the agreements contained in this Section 10.5(b) are
an integral part of the transactions contemplated in this Agreement, and that,
without these agreements, Omni would not enter into this Agreement; accordingly,
if CSI fails to promptly pay the amount due pursuant to this Section 10.5(b),
and, in order to obtain such payment, Omni commences a suit which results in a
judgment against CSI for the fee set forth in this Section 10.5(b), CSI shall
pay to Omni its costs and expenses (including attorneys' fees) in connection
with such suit, together with interest on the amount of the fee at the rate of
12% per annum from the date such fee was required to be paid.
ARTICLE XI
SURVIVABILITY
Section 11.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of CSI contained herein or in any certificate or other document
delivered prior to Closing shall not survive the Closing. The representations
and warranties of Omni and SUB contained herein or in any certificate or other
document delivered prior to Closing shall not survive the Closing.
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ARTICLE XII
MISCELLANEOUS
Section 12.1 NOTICES. All notices shall be in writing delivered as follows:
<TABLE>
<S> <C>
(a) If to Omni or SUB, to:
Omnicare, Inc.
2800 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45203
Attention: Cheryl D. Hodges
Telecopy: 513-762-6678
With a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attn: Morton A. Pierce and Richard D. Pritz
Telecopy: 212-259-6333
(b) If to CSI, to:
CompScript, Inc.
1225 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
Attn: Brian A. Kahan, President
Telecopy: 561-994-6104
With a copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Ft. Lauderdale, Florida 33301
Attn: Joel D. Mayersohn, Esq.
Telecopy: 954-766-7800
</TABLE>
or to such other address as may have been designated in a prior notice pursuant
to this Section. Notices shall be deemed to be effectively served and delivered
upon receipt.
Section 12.2 BINDING EFFECT. Except as may be otherwise provided herein,
this Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties. Except as otherwise specifically provided in this Agreement, nothing in
this Agreement is intended or will be construed to confer on any person other
than the parties hereto any rights or benefits hereunder.
Section 12.3 HEADINGS. The headings in this Agreement are intended solely
for convenience of reference and will be given no effect in the construction or
interpretation of this Agreement.
Section 12.4 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to
in this Agreement will be deemed to be a part of this Agreement.
Section 12.5 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same document.
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Section 12.6 GOVERNING LAW. This Agreement will be governed by and construed
under Delaware law, without regard to conflict of laws principles thereof,
except that matters relating to the validity and effects of the Merger and the
fiduciary obligations of the directors of CSI shall be governed by the
applicable provisions of the FBCA.
Section 12.7 WAIVERS. Compliance with the provisions of this Agreement may
be waived only by a written instrument specifically referring to this Agreement
and signed by the party waiving compliance. No course of dealing, nor any
failure or delay in exercising any right, will be construed as a waiver, and no
single or partial exercise of a right will preclude any other or further
exercise of that or any other right.
Section 12.8 PRONOUNS. The use of a particular pronoun herein will not be
restrictive as to gender or number but will be interpreted in all cases as the
context may require.
Section 12.9 TIME PERIODS. Any action required hereunder to be taken within
a certain number of days will be taken within that number of calendar days;
provided, however, that if the last day for taking such action falls on a
weekend or a holiday, the period during which such action may be taken will be
automatically extended to the next business day.
Section 12.10 MODIFICATION. No supplement, modification or amendment of this
Agreement will be binding unless made in a written instrument that is signed by
all of the parties hereto and that specifically refers to this Agreement.
Section 12.11 ENTIRE AGREEMENT. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement among the parties concerning the subject matter
hereof. All negotiations among the parties are merged into this Agreement, and
there are no representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation thereto among the parties other than
those incorporated herein and to be delivered hereunder.
Section 12.12 SEVERABILITY. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby. To the extent permitted by applicable law, each party
waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.
Section 12.13 INTERPRETATION. As used herein, a subsidiary of an entity
shall mean any corporation or other organization, whether incorporated or
unincorporated, of which such entity 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 such entity is a general partner. As
used in this Agreement, "includes," "including" or words of similar import shall
be deemed to be followed by "without limitation." The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
COMPSCRIPT, INC.
By: /s/ BRIAN A. KAHAN
-----------------------------------
Name: Brian A. Kahan
Title: Chief Executive Officer
OMNICARE, INC.
By: /s/ JOEL F. GEMUNDER
-----------------------------------
Name: Joel F. Gemunder
Title: President
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APPENDIX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of February 23, 1998 (the "Agreement"),
between OMNICARE, INC., a Delaware corporation ("Grantee"), and COMPSCRIPT,
INC., a Florida corporation ("Grantor").
WHEREAS, Grantee and Grantor are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, for the merger of Grantor with and into a wholly owned
subsidiary of Grantee (the "Merger");
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Grantee has requested that Grantor grant to Grantee an option to
purchase up to 2,800,000 (the "Option Number") shares of Common Stock, par value
$.0001 per share, of Grantor (the "Common Stock"), upon the terms and subject to
the conditions hereof; and
WHEREAS, in order to induce Grantee to enter into the Merger Agreement,
Grantor is willing to grant Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. THE OPTION; EXERCISE; ADJUSTMENTS; PAYMENT OF SPREAD.
(a) Subject to the other terms and conditions set forth herein, Grantor
hereby grants to Grantee an irrevocable option (the "Option") to purchase up to
the Option Number shares of Common Stock (the "Shares") at a cash purchase price
equal to $4.50 per share (the "Purchase Price"). The Option may be exercised by
Grantee, in whole or in part, at any time, or from time to time, following the
occurrence of one of the events set forth in Section 2(c) hereof, and prior to
the termination of the Option in accordance with the terms of this Agreement.
(b) In the event Grantee wishes to exercise the Option, Grantee shall send a
written notice to Grantor (the "Stock Exercise Notice") specifying a date
(subject to the HSR Act, as defined below) not later than 10 business days and
not earlier than three business days following the date such notice is given for
the closing of such purchase. In the event of any change in the number of issued
and outstanding shares of Common Stock by reason of any stock dividend, stock
split, split-up, recapitalization, merger or other change in the corporate or
capital structure of Grantor, the number of Shares subject to this Option and
the purchase price per Share shall be appropriately adjusted to restore Grantee
to its rights hereunder, including its right to purchase Shares representing
19.9% of the capital stock of Grantor entitled to vote generally for the
election of the directors of Grantor which is issued and outstanding immediately
prior to the exercise of the Option at an aggregate purchase price equal to the
Purchase Price multiplied by the Option Number.
(c) If at any time the Option is then exercisable pursuant to the terms of
Section 1(a) hereof, Grantee may elect, in lieu of exercising the Option to
purchase Shares provided in Section 1(a) hereof, to send a written notice to
Grantor (the "Cash Exercise Notice") specifying a date not later than 20
business days and not earlier than 10 business days following the date such
notice is given on which date Grantor shall pay to Grantee an amount in cash
equal to the Spread (as hereinafter defined) multiplied by all or such portion
of the Shares subject to the Option as Grantee shall specify. As used herein
"Spread" shall mean the excess, if any, over the Purchase Price of the higher of
(x) if applicable, the highest price per share of Common Stock (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid or
proposed to be paid by any person pursuant to one of the transactions enumerated
in Section 2(c) hereof (the "Alternative Purchase Price") or (y) the average of
the closing prices (or the average of the closing bid and asked prices if
closing prices are unavailable) of the shares of Common Stock as reported on
Nasdaq
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on the last trading day immediately prior to the date of the Cash Exercise
Notice (the "Closing Price"). If the Alternative Purchase Price includes any
property other than cash, the Alternative Purchase Price shall be the sum of (i)
the fixed cash amount, if any, included in the Alternative Purchase Price plus
(ii) the fair market value of such other property. If such other property
consists of securities with an existing public trading market, the average of
the closing prices (or the average of the closing bid and asked prices if
closing prices are unavailable) for such securities in their principal public
trading market on the five trading days ending five days prior to the date of
the Cash Exercise Notice shall be deemed to equal the fair market value of such
property. If such other property consists of something other than cash or
securities with an existing public trading market and, as of the payment date
for the Spread, agreement on the value of such other property has not been
reached, the Alternative Purchase Price shall be deemed to equal the Closing
Price. Upon exercise of its right to receive cash pursuant to this Section 1(c),
the obligations of Grantor to deliver Shares pursuant to Section 3 shall be
terminated with respect to such number of Shares for which Grantee shall have
elected to be paid the Spread. Notwithstanding the foregoing, the Spread shall
not be payable unless and until (i) the Board of Directors of the Company shall
have recommended a transaction contemplated by Section 2(c) hereof ("Another
Transaction") or shall have failed to reject (including by taking no position
with respect to) Another Transaction, (ii) the Company shall have entered into
an agreement in respect of Another Transaction, (iii) an event set forth in
Section 2(c)(vi) shall have occurred, (iv) the Company shall have materially
breached its covenants herein or in the Merger Agreement or (v) Another
Transaction shall have been consummated.
2. CONDITIONS TO DELIVERY OF SHARES. The Grantor's obligation to deliver
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by any
federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") shall have expired or been
terminated; and
(c) (i) any person (other than Grantee or any of its subsidiaries) shall
have commenced (as such term is defined in Rule 14d-2 under the Securities
Exchange Act of 1934 (the "Exchange Act")) a tender offer, or shall have
filed a registration statement under the Securities Act of 1933 (the
"Securities Act") with respect to an exchange offer, to purchase any shares
of Common Stock such that, upon consummation of such offer, such person or a
"group" (as such term is defined under the Exchange Act) of which such
person is a member shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 of the Exchange Act), or the right to acquire
beneficial ownership, of 15 percent or more of the then outstanding Common
Stock; (ii) any person (other than Grantee or any of its subsidiaries) shall
have publicly announced or delivered to Grantor a proposal, or disclosed
publicly or to Grantor an intention to make a proposal, to purchase 15% or
more of the assets or any equity securities of, or to engage in a merger,
reorganization, tender offer, share exchange, consolidation or similar
transaction involving the Grantor or any of its subsidiaries (an
"Acquisition Transaction"); (iii) Grantor or any of its subsidiaries shall
have authorized, recommended, proposed or publicly announced an intention to
authorize, recommend or propose, or entered into, an agreement, including
without limitation, an agreement in principle, with any person (other than
Grantee or any of its subsidiaries) to effect or provide for an Acquisition
Transition; (iv) any person shall solicit proxies or consents or announce a
bona fide intention to solicit proxies or consents from Grantor's
stockholders (x) relating to directors, (y) in opposition to the Merger, the
Merger Agreement or any related transactions or (z) relating to an
Acquisition Transaction (other than solicitations of stockholders seeking
approval of the Merger, the Merger Agreement or any related transactions);
(v) any person shall have made a Transaction Proposal (as defined in the
Merger Agreement); or (vi) any person (other than Grantee or any of its
subsidiaries) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 under the Exchange Act) or the right to acquire
beneficial ownership of, or
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any "group" (as such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, shares of Common Stock (other than trust account shares)
aggregating 15 percent or more of the then outstanding Common Stock. As used
in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the Exchange Act.
3. THE CLOSING. (a) Any closing hereunder shall take place on the date
specified by Grantee in its Stock Exercise Notice or Cash Exercise Notice, as
the case may be, at 9:00 a.m., local time, at the offices of Dewey Ballantine
LLP, 1301 Avenue of the Americas, New York, New York, or, if the conditions set
forth in Section 2(a) or (b) have not then been satisfied, on the second
business day following the satisfaction of such conditions, or at such other
time and place as the parties hereto may agree (the "Closing Date"). On the
Closing Date, (i) in the event of a closing pursuant to Section 1(b) hereof,
Grantor will deliver to Grantee a certificate or certificates, representing the
Shares in the denominations designated by Grantee in its Stock Exercise Notice
and Grantee will purchase such Shares from Grantor at the price per Share equal
to the Purchase Price or (ii) in the event of a closing pursuant to Section 1(c)
hereof, Grantor will deliver to Grantee cash in an amount determined pursuant to
Section 1(c) hereof. Any payment made by Grantee to Grantor, or by Grantor to
Grantee, pursuant to this Agreement shall be made by certified or official bank
check or by wire transfer of immediately available funds to a bank designated by
the party receiving such funds.
(b) The certificates representing the Shares shall bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF GRANTOR. The Grantor represents and
warrants to Grantee that (a) Grantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida and has the
requisite corporate power and authority to enter into and perform this
Agreement; (b) the execution and delivery of this Agreement by Grantor and the
consummation by it of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Grantor and this Agreement has been duly
executed and delivered by a duly authorized officer of Grantor and constitutes a
valid and binding obligation of Grantor, enforceable in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles; (c) Grantor has taken all
necessary corporate action to authorize and reserve the Shares issuable upon
exercise of the Option and the Shares, when issued and delivered by Grantor upon
exercise of the Option and paid for by Grantee as contemplated hereby, will be
duly authorized, validly issued, fully paid and non-assessable and free of
preemptive rights; (d) except as otherwise required by the HSR Act, the
execution and delivery of this Agreement by Grantor and the consummation by it
of the transactions contemplated hereby do not require the consent, waiver,
approval or authorization of or any filing with any person or public authority
and will not violate, result in a breach of or the acceleration of any
obligation under, or constitute a default under, any provision of Grantor's
charter or by-laws, or any material indenture, mortgage, lien, lease, agreement,
contract, instrument, order, law, rule, regulation, judgment, ordinance, or
decree, or restriction by which Grantor or any of its subsidiaries or any of
their respective properties or assets is bound; (e) Grantor (i) will not, by
charter amendment or through reorganization, consolidation, merger, dissolution
or sale of assets, or by any other voluntary act, avoid or seek to avoid the
observance or performance of any of the covenants, stipulations or conditions to
be observed or performed hereunder by Grantor and (ii) will promptly take all
action provided herein to protects the rights of Grantee against dilution as set
forth in Section 1(b) hereof and (f) no "fair price", "moratorium", "control
share acquisition," "interested shareholder" or other form of antitakeover
statute or regulation, including without limitation, Sections 607.0901 or
607.0902 of the Florida Business Corporation Act, or similar provision contained
in the charter or by-laws of Grantor, is or shall be applicable to the
acquisition of Shares pursuant to this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF GRANTEE. The Grantee represents and
warrants to Grantor that (a) the execution and delivery of this Agreement by
Grantee and the consummation by it of the
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transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee and this Agreement has been duly
executed and delivered by a duly authorized officer of Grantee and constitutes a
valid and binding obligation of Grantee; and (b) Grantee is acquiring the Option
and, if and when it exercises the Option, will be acquiring the Shares issuable
upon the exercise thereof for its own account and not with a view to
distribution or resale in any manner which would be in violation of the
Securities Act.
6. LISTING OF SHARES; FILINGS; GOVERNMENTAL CONSENTS. Grantor will promptly
file an application to list the Shares on Nasdaq and will use its reasonable
best efforts to obtain approval of such listing and to effect all necessary
filings by Grantor under the HSR Act; provided, however, that if Grantor is
unable to effect such listing on Nasdaq by the Closing Date, Grantor will
nevertheless be obligated to deliver the Shares upon the Closing Date. Each of
the parties hereto will use its reasonable best efforts to obtain consents of
all third parties and governmental authorities, if any, necessary to the
consummation of the transactions contemplated.
7. SALE OF SHARES. At any time prior to the first anniversary of the
termination of the Merger Agreement in accordance with its terms (the "Merger
Termination Date"), Grantee shall have the right to sell (the "Sale Right") to
Grantor all, but not less than all, of the Shares at the greater of (i) the
Purchase Price, or (ii) the average of the last sales prices for shares of
Common Stock on the five trading days ending five days prior to the date Grantee
gives written notice of its intention to exercise the Sale Right. If Grantee
does not exercise the Sale Right prior to the first anniversary of the Merger
Termination Date, the Sale Right terminates. In the event Grantee wishes to
exercise the Sale Right, Grantee shall send a written notice to Grantor
specifying a date not later than 20 business days and not earlier than 10
business days following the date such notice is given for the closing of such
sale. The Sale Right will not be available if the Merger Agreement is terminated
pursuant to Section 10.1 (other than Section 10.1(c) thereof) or Section
10.2(b), 10.3(a) or (b) thereof.
8. REGISTRATION RIGHTS. (a) In the event that Grantee shall desire to sell
any of the Shares, Grantor will cooperate with Grantee and any underwriters in
registering such Shares for resale, including, without limitation, promptly
filing a registration statement which complies with the requirements of
applicable federal and state securities laws, and entering into an underwriting
agreement with such underwriters upon such terms and conditions as are
customarily contained in underwriting agreements with respect to secondary
distributions; provided that Grantor shall not be required to have declared
effective more than two registration statements hereunder and shall be entitled
to delay the filing or effectiveness of any registration statement for up to 60
days if the offering would, in the judgment of the Board of Directors of
Grantor, require premature disclosure of any material corporate development or
material transaction involving Grantor or interfere with any previously planned
securities offering by the Company.
(b) If the Common Stock is registered pursuant to the provisions of this
Section 8, Grantor agrees (i) to furnish copies of the registration statement
and the prospectus relating to the Shares covered thereby in such numbers as
Grantee may from time to time reasonably request and (ii) if any event shall
occur as a result of which it becomes necessary to amend or supplement any
registration statement or prospectus, to prepare and file under the applicable
securities laws such amendments and supplements as may be necessary to keep
available for at least 45 days a prospectus covering the Common Stock meeting
the requirements of such securities laws, and to furnish Grantee such numbers of
copies of the registration statement and prospectus as amended or supplemented
as may reasonably be requested. The Grantor shall bear the cost of the
registration, including, but not limited to, all registration and filing fees,
printing expenses, and fees and disbursements of counsel and accountants for
Grantor, except that Grantee shall pay the fees and disbursements of its
counsel, and the underwriting fees and selling commissions applicable to the
shares of Common Stock sold by Grantee. The Grantor shall indemnify and hold
harmless (i) Grantee, its affiliates and its officers and directors and (ii)
each underwriter and each person who controls any underwriter within the meaning
of the Securities Act or the Securities Exchange Act of 1934 (collectively, the
"Underwriters") ((i) and (ii) being referred to as "Indemnified Parties")
against any
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losses, claims, damages, liabilities or expenses, to which the Indemnified
Parties may become subject, insofar as such losses, claims, damages, liabilities
(or actions in respect thereof) and expenses arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained or
incorporated by reference in any registration statement filed pursuant to this
paragraph, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that Grantor will not
be liable in any such case to the extent that any such loss, liability, claim,
damage or expense arises out of or is based upon an untrue statement or alleged
untrue statement in or omission or alleged omission from any such documents in
reliance upon and in conformity with written information furnished to Grantor by
the Indemnified Parties expressly for use or incorporation by reference therein.
(c) The Grantee and the Underwriters shall indemnify and hold harmless
Grantor, its affiliates and its officers and directors against any losses,
claims, damages, liabilities or expenses to which Grantor, its affiliates and
its officers and directors may become subject, insofar as such losses, claims,
damages, liabilities (or actions in respect thereof) and expenses arise out of
or are based upon any untrue statement of any material fact contained or
incorporated by reference in any registration statement filed pursuant to this
paragraph, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with written
information furnished to Grantor by Grantee or the Underwriters, as applicable,
specifically for use or incorporation by reference therein.
9. EXPENSES. Each party hereto shall pay its own expenses incurred in
connection with this Agreement, except as otherwise specifically provided
herein.
10. SPECIFIC PERFORMANCE. The Grantor acknowledges that if Grantor fails to
perform any of its obligations under this Agreement immediate and irreparable
harm or injury would be caused to Grantee for which money damages would not be
an adequate remedy. In such event, Grantor agrees that Grantee shall have the
right, in addition to any other rights it may have, to specific performance of
this Agreement.
11. NOTICE. All notices, requests, demands and other communications
hereunder shall be in writing deemed to have been duly given upon receipt by the
person at the address set forth below, or such other address as may be
designated in writing hereafter, in the same manner, by such person:
If to Grantee:
Omnicare, Inc.
2800 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45203
Attention: Cheryl D. Hodges
Telecopy: 513-762-6678
With a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Attn: Morton A. Pierce and Richard D. Pritz
Telecopy: (212) 259-6333
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<PAGE>
If to Grantor:
CompScript, Inc.
1225 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
Attn: Brian A. Kahan, President
Telecopy: 561-994-6104
With a copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Ft. Lauderdale, Florida 33301
Attn: Joel D. Mayersohn
Telecopy: 954-766-7800
12. PARTIES IN INTEREST. This Agreement shall inure to the benefit of and be
binding upon the parties named herein and their respective successors and
assigns; provided, however, that such successor in interest or as signs shall
agree to be bound by the provisions of this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any person other than
Grantor or Grantee, or their successors or assigns, any rights or remedies under
or by reason of this Agreement.
13. ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with the Merger
Agreement and the other documents referred to therein, contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings, oral
or written, with respect to such transactions. This Agreement may not be
changed, amended or modified orally, but may be changed only by an agreement in
writing signed by the party against whom any waiver, change, amendment,
modification or discharge may be sought.
14. ASSIGNMENT. No party to this Agreement may assign any of its rights or
obligations under this Agreement without the prior written consent of the other
party hereto, except that Grantee may assign its rights and obligations
hereunder to any of its direct or indirect wholly owned subsidiaries, but no
such transfer shall relieve Grantee of its obligations hereunder if such
transferee does not perform such obligations.
15. HEADINGS. The section headings herein are for convenience only and shall
not affect the construction of this Agreement.
16. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
17. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (regardless of the laws that
might other wise govern under applicable Delaware principles of conflicts of
law).
THE GRANTOR AGREES THAT, IN CONNECTION WITH ANY LEGAL SUIT OR PROCEEDING
ARISING WITH RESPECT TO THIS AGREEMENT, IT SHALL SUBMIT TO THE JURISDICTION OF
THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE AND AGREES TO
VENUE IN SUCH COURTS. THE GRANTOR HEREBY APPOINTS THE SECRETARY OF THE GRANTOR
AS ITS AGENT FOR SERVICE OF PROCESS FOR PURPOSES OF THE FOREGOING SENTENCE ONLY.
18. TERMINATION. The right to exercise the Option granted pursuant to this
Agreement shall terminate at the earlier of (i) the Effective Time (as defined
in the Merger Agreement); (ii) 90 days after the Merger Termination Date (the
date referred to in this clause (ii) being hereinafter referred to as the
"Option
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Termination Date"), unless the Merger Agreement was terminated pursuant to
Sections 10.3(a) or (b) or, if no Takeover Proposal was made, Sections 10.1 or
10.2(b) thereof and, (iii) 12 months after the date hereof; provided that, if
the Option cannot be exercised or the Shares cannot be delivered to Grantee upon
such exercise because the conditions set forth in Section 2(a) or (b) hereof
have not yet been satisfied, the Option Termination Date shall be extended until
thirty days after such impediment to exercise or delivery has been removed.
All representations and warranties contained in this Agreement shall survive
delivery of and payment for the Shares.
19. PROFIT LIMITATION. (a) Notwithstanding any other provision of this
Agreement, in no event shall Grantee's Total Profit (as hereinafter defined)
exceed $3.3 million and, if it otherwise would exceed such amount, Grantee, at
its sole election, shall either (a) deliver to Grantor for cancellation Shares
previously purchased by Grantee, (b) pay cash or other consideration to Grantor
or (c) undertake any combination thereof, so that Grantee's Total Profit shall
not exceed $3.3 million after taking into account the foregoing actions.
Notwithstanding any other provision of this Agreement, this Option may not
be exercised for a number of Shares as would, as of the date of the Stock
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than $3.3 million and, if exercise of the Option otherwise would exceed such
amount, Grantee, at its discretion, may increase the Purchase Price for that
number of Shares set forth in the Stock Exercise Notice so that the Notional
Total Profit shall not exceed $3.3 million; provided, that nothing in this
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date at the Purchase Price set forth in Section 1(a) hereof.
As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount of cash received by Grantee
pursuant to Section 10.5 of the Merger Agreement and Section 1(c) hereof, (ii)
(x) the amount received by Grantee pursuant to Grantor's repurchase of Shares
pursuant to Section 7 hereof, less (y) Grantee's purchase price for such Shares,
and (iii) (x) the net cash amounts received by Grantee pursuant to the sale of
Shares (or any other securities into which such Shares are converted or
exchanged) to any unaffiliated party, less (y) Grantee's purchase price for such
Shares.
As used herein, the term "Notional Total Profit" with respect to any number
of Shares as to which Grantee may propose to exercise this Option shall be the
Total Profit determined as of the date of the Stock Exercise Notice assuming
that this Option were exercised on such date for such number of Shares and
assuming that such Shares, together with all other Shares held by Grantee and
its affiliates as of such date, were sold for cash at the closing market price
for the Common Stock as of the close of business on the preceding trading day
(less customary brokerage commissions).
20. SEVERABILITY. If any term, provision, covenant 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
in no way be affected, impaired or invalidated.
21. PUBLIC ANNOUNCEMENT. The Grantee will consult with Grantor and Grantor
will consult with Grantee before issuing any press release with respect to the
initial announcement of this Agreement, the Option or the transactions
contemplated hereby and neither party shall issue any such press release prior
to such consultation except as may be required by law or the applicable rules
and regulations of Nasdaq or the NYSE.
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IN WITNESS WHEREOF, Grantee and Grantor have caused this Agreement to be
duly executed and delivered on the day and year first above written.
<TABLE>
<S> <C>
OMNICARE, INC.
By: /s/ JOEL F. GEMUNDER
-----------------------------------------
Name: Joel F. Gemunder
Title: President
COMPSCRIPT, INC.
By: /s/ BRIAN A. KAHAN
-----------------------------------------
Name: Brian A. Kahan
Title: Chief Executive Officer
</TABLE>
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<PAGE>
APPENDIX C
VOTING AGREEMENT
VOTING AGREEMENT, dated as of February 23, 1998, between Brian A. Kahan (the
"Shareholder") and Omnicare, Inc., a Delaware corporation ("Omni").
A. The Shareholder is the record and beneficial owner of 4,332,453 issued
and outstanding shares (together with any shares acquired after the date hereof,
the "Shares") of common stock, $.0001 par value, of CompScript, Inc., a Florida
corporation ("CSI" or the "Company"), which Shares represent approximately 31%
of the currently issued and outstanding shares of CSI's common stock.
B. In order to induce Omni to enter into the Agreement and Plan of Merger,
dated as of the date hereof (the "Merger Agreement"), by and between CSI and
Omni, Omni has requested that the Shareholder enter into this Agreement with
respect to the Shares.
C. Unless otherwise defined herein, all capitalized terms used in this
Agreement shall have the meanings given to them in the Merger Agreement.
For good and valuable consideration, the adequacy and receipt of which are
hereby acknowledged, and in order to induce Omni to enter into the Merger
Agreement, Omni and the Shareholder hereby agree as follows:
1. COVENANTS.
(a) At any meeting of shareholders of the Company called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) with respect to the Merger and the Merger Agreement is sought, the
Shareholder shall, including by initiating a written consent solicitation if
requested by Omni, vote (or cause to be voted) the Shareholder's Shares in favor
of the Merger, the adoption by the Company of the Merger Agreement and the
approval of the other transactions contemplated by the Merger Agreement.
(b) At any meeting of shareholders of the Company or at any adjournment
thereof or in any other circumstances upon which the Shareholder's vote, consent
or other approval is sought, the Shareholder shall vote (or cause to be voted)
such Shareholder's Shares against (i) any merger agreement or merger (other than
the Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by the Company or its Subsidiaries or any other Transaction
Proposal (as defined in the Merger Agreement) (collectively, "Alternative
Transactions") or (ii) any amendment of the Company's Amended and Restated
Articles of Incorporation or by-laws or other proposal or transaction involving
the Company or any of its subsidiaries, which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify, the
Merger, the Merger Agreement or any of the other transactions contemplated by
the Merger Agreement (collectively, "Frustrating Transactions").
(c) The Shareholder shall not, (i) sell, transfer, pledge, assign or
otherwise dispose of, or enter into any contract, option or other arrangement
(including any profit sharing arrangement) or understanding with respect to the
sale, transfer, pledge, assignment or other disposition of, the Shares to any
person other than Omni or Omni's designee, (ii) enter into any voting
arrangement, whether by proxy, voting agreement, voting trust, power-of-attorney
or otherwise, with respect to the Shares or (iii) take any other action that
would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby.
2. GRANT OF IRREVOCABLE PROXY COUPLED WITH AN INTEREST; APPOINTMENT OF
PROXY.
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(a) The Shareholder hereby irrevocably grants to and appoints any individual
who shall hereafter be designated by Omni, and each of them, such Shareholder's
proxy and attorney-in-fact (with full power of substitution), for and in the
name, place and stead of such Shareholder, to vote such Shareholder's Shares, or
grant a consent or approval in respect of such Shares, at any meeting of
shareholders of the Company or at any adjournment thereof or in any other
circumstances upon which their vote, consent or other approval is sought, (i) in
favor of the Merger, the adoption by the Company of the Merger Agreement and the
approval of the other transactions contemplated by the Merger Agreement and (ii)
against any Alternative Transaction or Frustrating Transaction.
(b) The Shareholder represents that any proxies heretofore given in respect
of such Shareholder's Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) THE SHAREHOLDER HEREBY AFFIRMS THAT THE PROXY SET FORTH IN THIS SECTION
2 IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE UNTIL SUCH TIME AS THIS
AGREEMENT TERMINATES IN ACCORDANCE WITH ITS TERMS. The Shareholder hereby
further affirms that the irrevocable proxy is given in connection with the
execution of the Merger Agreement, and that such irrevocable proxy is given to
secure the performance of the duties of such Shareholder under this Agreement.
Such Shareholder hereby ratifies and confirms all that such irrevocable proxy
may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 607.0722 of the FBCA.
3. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. THE SHAREHOLDER HEREBY
REPRESENTS AND WARRANTS TO OMNI AS FOLLOWS:
(a) AUTHORIZATION. The Shareholder has the legal capacity to execute,
deliver and perform this Agreement. This Agreement constitutes a valid and
binding obligation of the Shareholder enforceable against him in accordance with
its terms. If the Shareholder is married and the Shares constitute community
property under applicable law, this Agreement has been duly authorized, executed
and delivered by, and constitutes the valid and binding agreement of, the
Shareholder's spouse enforceable against such spouse in accordance with its
terms.
(b) NO CONFLICT. The execution, delivery and performance by the Shareholder
of this Agreement and the consummation of the transactions contemplated hereby
do not and will not (i) result in any breach or violation of or be in conflict
with or constitute a default under term of any law or agreement or arrangement
to which the Shareholder is a party or by which the Shareholder is bound, (ii)
require any filing with or authorization by any governmental entity or (iii)
require any consent or other action by any person under, constitute a default
under, or give rise to any right of termination, cancellation or acceleration or
to a loss of any benefit to which the Shareholder is entitled under any
provision of any agreement or other instrument binding on the Shareholder.
(c) OWNERSHIP OF SHARES. The Shareholder is the record and beneficial owner
of the Shares free and clear of any and all liens, pledges, restrictions,
charges or other adverse claims of any kind or nature. The Shareholder has the
sole voting power, sole power of disposition, sole power of conversion, sole
power to demand appraisal rights and sole power to agree to all the matters set
forth in this Agreement, in each case with respect to all of the Shares with no
limitations, qualifications or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement. None of the Shares
are subject to any voting trust or other agreement or arrangement with respect
to the voting of such Shares. The Shareholder's Shares and the certificates
representing such Shares are now, and at all times during the term hereof will
be, held by the Shareholder, or by a nominee or custodian for the benefit of the
Shareholder. The Shareholder owns of record or beneficially no shares of CSI
Common Stock other than such Shareholder's Shares.
(d) MERGER AGREEMENT. The Shareholder understands and acknowledges that Omni
is entering into the Merger Agreement in reliance upon the Shareholder's
execution and delivery of this Agreement.
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4. BOARD APPROVAL. The Board of Directors of the Company has, to the extent
required by applicable law, duly and validly authorized and approved by all
necessary corporate action, this Agreement, the Merger Agreement and the
transactions contemplated hereby and thereby, so that by the execution and
delivery hereof no restrictive provision of any "fair price," "moratorium,"
"control-share acquisition," "interested shareholders" or other similar
anti-takeover statute or regulation (including, without limitation, Sections
607.0901 and 607.0902 of the FBCA) or restrictive provision of any applicable
anti-takeover provision in the Articles of Incorporation or by-laws of the
Company is, or will be, applicable to the Company, Omni, the Shares, the Merger
or any other transaction contemplated by this Agreement.
5. MISCELLANEOUS.
(a) NOTICES. All notices shall be in writing and shall be given as follows:
<TABLE>
<CAPTION>
if to the Shareholder to:
<S><C>
Brian A. Kahan
CompScript, Inc.
1225 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
Telecopy: 561-994-6104
with a copy to:
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard, Suite 1900
Fort Lauderdale, Florida 33301
Telecopy: 954-766-7800
Attention: Joel D. Mayersohn, Esq.
if to Omni to:
Omnicare, Inc.
2800 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45203
Attention: Cheryl D. Hodges
Telecopy: 513-762-6678
with a copy to:
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Telecopy: 212-259-6333
Attention: Morton A. Pierce, Esq.
Richard D. Pritz, Esq.
</TABLE>
or to such other address as may have been designated in a prior notice pursuant
to this Section. Notices shall be deemed effectively served and delivered upon
receipt.
(b) BINDING EFFECT. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the rights or obligations
hereunder shall be assigned by the Shareholder without the prior written consent
of Omni. Except as otherwise specifically provided in this Agreement, nothing in
this Agreement is intended or will be construed to confer on any person other
than the parties hereto any rights or benefits hereunder.
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(c) GOVERNING LAW. This Agreement will be governed by and construed under
Florida law, without regard to conflict of laws principles thereof.
(d) WAIVERS. Compliance with the provisions of this Agreement may be waived
only by a written instrument specifically referring to this Agreement and signed
by the party waiving compliance. No course of dealing, nor any failure or delay
in exercising any right, will be construed as a waiver, and no single or partial
exercise of a right will preclude any other or further exercise of that or any
other right.
(e) MODIFICATION. No supplement, modification or amendment of this Agreement
will be binding unless made in a written instrument that is signed by all the
parties hereto and that specifically refers to this Agreement.
(f) ENTIRE AGREEMENT. This Agreement and the Merger Agreement are the
exclusive statement of the agreement among the parties hereto concerning the
subject matter hereof.
(g) SEVERABILITY. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not be
affected thereby. To the extent permitted by applicable law, each party waives
any provision of law which renders any provision of this Agreement invalid,
illegal or unenforceable in any respect.
(h) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(i) ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were 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 of this Agreement in a court of the United States. This
being in addition to any other remedy to which they are entitled at law or in
equity. In addition, each of the parties hereto waives any right to trial by
jury with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
(j) FURTHER ASSURANCES. Omni and the Shareholder will execute and deliver,
or cause to be executed and delivered, all further documents and instruments and
use their reasonable best efforts to take, or cause to be taken, all actions
necessary, proper or advisable under applicable Law to consummate and make
effective the transactions contemplated by this Agreement and to vest the power
to vote the Shareholder's Shares as contemplated by Sections 1 and 2.
(k) TERMINATION. This Agreement, and all rights and obligations of the
parties hereunder, shall terminate upon the earliest to occur of (i)
consummation of the Merger, (ii) the termination of the Merger Agreement in
accordance with its terms, unless prior to such termination a person or entity
shall have made a Transaction Proposal and (iii) one year from the date hereof.
Sections 1(b) and 2(a)(ii) shall terminate on the earlier of (x) the date
computed in accordance with the preceding sentence and (y) six months after the
termination of the Merger Agreement in accordance with its terms. Nothing in
this Section 5(k) shall relieve the Shareholder from liability for breach of
this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
<TABLE>
<S> <C> <C>
OMNICARE, INC.
By: /s/ JOEL F. GEMUNDER
-----------------------------------------
Name:Joel F. Gemunder
Title:President
By: /s/ BRIAN A. KAHAN
-----------------------------------------
Brian A. Kahan, the Shareholder
</TABLE>
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APPENDIX D
607.1301 DISSENTER'S RIGHTS; DEFINITIONS.--The following definitions apply
to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the value of
the shares as of the close of business on the day prior to the shareholders'
authorization date, excluding any appreciation or depreciation in anticipation
of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT. --
(1) Any shareholder has the right to dissent from, and obtain payment of the
fair value of his shares in the event of, any of the following corporate
actions:
(a) Consummation of a plan of merger to which the corporation is a party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its parent under
s. 607.1104, and the shareholders would have been entitled to vote on action
taken, except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially all, of the
property of the corporation, other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange
pursuant to s. 607.1202, including a sale in dissolution but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to the
shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation is a
party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder is
entitled to vote on the amendment and if such amendment would adversely affect
such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of his
shares;
2. Altering or abolishing the voting rights pertaining to any of his shares,
except as such rights may be affected by the voting rights of new shares then
being authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification of any of his
shares, when such exchange, cancellation, or reclassification would alter or
abolish his voting rights or alter his percentage of equity in the corporation,
or effecting a reduction or cancellation of accrued dividends or other
arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his redeemable shares,
altering or abolishing any provision relating to any sinking fund for the
redemption or purchase of any of his shares, or making any of his shares subject
to redemption when they are not otherwise redeemable;
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5. Making noncumulative, in whole or in part, dividends of any of his
preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of his preferred shares;
or
7. Reducing any stated preferential amount payable on any of his preferred
shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of incorporation
provide that a voting or nonvoting shareholder is entitled to dissent and obtain
payment for his shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered in
his name. In that event, his rights shall be determined as if the shares as to
which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this section
does not apply with respect to a plan of merger or share exchange or a proposed
sale or exchange of property, to the holders of shares of any class or series
which, on the record date fixed to determine the shareholders entitled to vote
at the meeting of shareholders at which such action is to be acted upon or to
consent to any such action without a meeting, were either registered 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 not fewer than 2,000 shareholders.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS.--
(1)(a) If a proposed corporate action creating dissenters' rights under s.
607.1320 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights and be accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A
shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written notice of his
intent to demand payment for his shares if the proposed action is effectuated,
and
2. Not vote his shares in favor of the proposed action. A proxy or vote
against the proposed action does not constitute such a notice of intent to
demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the corporation
shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to each shareholder
simultaneously with any request for his written consent or, if such a request is
not made, within 10 days after the date the corporation received written
consents without a meeting from the requisite number of shareholders necessary
to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to paragraph
(1)(a) or, in the case of action authorized by written consent, to each
shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder who
elects to dissent shall file
with the corporation a notice of such election, stating his name and address,
the number, classes, and series of shares as to which he dissents, and a demand
for payment of the fair value of his shares. Any
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shareholder failing to file such election to dissent within the period set forth
shall be bound by the terms of the proposed corporate action. Any shareholder
filing an election to dissent shall deposit his certificates for certificated
shares with the corporation simultaneously with the filing of the election to
dissent. The corporation may restrict the transfer of uncertificated shares from
the date the shareholder's election to dissent is filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to be paid
the fair value of his shares shall cease, and he shall be reinstated to have all
his rights as a shareholder as of the filing of his notice of election,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a court has
been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder is
not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the dissenting
shareholder holds, as of the latest available date and not more than 12 months
prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month period
ended on the date of such balance sheet or, if the corporation was not in
existence throughout such 12-month period, for the portion thereof during which
it was in existence.
(6) If within 30 days after the making of such offer any shareholder accepts
the same, payment for his shares shall be made within 90 days after the making
of such offer or the consummation of the proposed action, whichever is later.
Upon payment of the agreed value, the dissenting shareholder shall cease to have
any interest in such shares.
(7) If the corporation fails to make such offer within the period specified
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of
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competent jurisdiction in the country in this state where the registered office
of the corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a copy
of the initial pleading in such proceeding upon each dissenting shareholder who
is a resident of this state in the manner provided by law for the service of a
summons and complaint and upon each nonresident dissenting shareholder either by
registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate of
interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by the
court and shall be assessed against the corporation, but all or any part of such
costs and expenses may be apportioned and assessed as the court deems equitable
against any or all of the dissenting shareholders who are parties to the
proceeding, to whom the corporation has made an offer to pay for the shares, if
the court finds that the action of such shareholders in failing to accept such
offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of a
merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
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APPENDIX E
February 23, 1998
Board of Directors
CompScript, Inc.
1225 Broken Sound Parkway, N.W.
Boca Raton, FL 33487
Gentlemen:
We understand that CompScript, Inc., a Florida corporation ("CompScript"),
and Omnicare, Inc., a Delaware corporation ("Omni"), have entered into an
Agreement and Plan of Merger dated February 23, 1998 (the "Merger Agreement"),
pursuant to which a wholly owned subsidiary of Omni ("Sub") shall be merged with
and into CompScript, with CompScript continuing its existence as the surviving
entity (the "Merger"). Pursuant to the Merger, as more fully described in the
Merger Agreement, we understand that each outstanding share of the common stock,
$.0001 par value per share of CompScript ("CompScript Stock"), will be converted
into the right to receive a number of shares of common stock, $1.00 par value
per share, of Omni ("Omni Stock"), equal to $4.50 divided by the Omni Market
Value (as defined in the Merger Agreement), subject to possible adjustment
should the Omni Market Value fall below or rise above specified levels (the
"Consideration"). The terms and conditions of the Merger are set forth in more
detail in the Merger Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the shareholders of CompScript pursuant to the
Merger is fair to such shareholders from a financial point of view, as of the
date hereof.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to CompScript
and Omni, including the consolidated financial statements for recent years and
interim periods to September 30, 1997 and certain other relevant financial and
operating data relating to CompScript made available to us from published
sources and from the internal records of CompScript; (ii) reviewed the financial
terms and conditions of the Merger Agreement; (iii) reviewed certain publicly
available information concerning the trading of, and the trading market for,
CompScript Stock and Omni Stock; (iv) compared CompScript and Omni from a
financial point of view with certain other companies in the institutional
pharmacy industry which we deemed to be relevant; (v) considered the financial
terms, to the extent publicly available, of selected recent business
combinations of companies in the institutional pharmacy industry which we deemed
to be comparable, in whole or in part, to the Merger; (vi) reviewed and
discussed with representatives of the management of CompScript and Omni certain
information of a business and financial nature regarding CompScript and Omni,
furnished to us by them, including financial forecasts and related assumptions
of CompScript; (vii) made inquiries regarding and discussed the Merger and the
Merger Agreement and other matters related thereto with CompScript's counsel;
and (viii) performed such other analyses and examinations as we have deemed
appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for CompScript provided to us by its management, upon its advice and
with your consent we have assumed for purposes of our opinion that the
forecasts, including the assumptions regarding synergies, have been reasonably
prepared on bases reflecting the best available estimates and judgments of the
management of CompScript at the time of preparation as to the future financial
performance of CompScript and that they provide a reasonable basis upon which we
can form our opinion. We have also assumed that there have been no material
changes in CompScript's or Omni's assets, financial condition, results of
operations, business or prospects since the respective dates of their last
financial statements made available to us.
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We have assumed that the Merger will be consummated in a manner that
complies in all respects with the applicable provisions of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934 and
all other applicable federal and state statutes, rules and regulations. In
addition, we have not assumed responsibility for making an independent
evaluation, appraisal or physical inspection of any of the assets or liabilities
(contingent or otherwise) of CompScript or Omni, nor have we been furnished with
any such appraisals. You have informed us, and we have assumed, that the Merger
will be recorded as a pooling-of-interests under generally accepted accounting
principles. Finally, our opinion is based on economic, monetary and market and
other conditions as in effect on, and the information made available to us as
of, the date hereof. Accordingly, although subsequent developments may affect
this opinion, we have not assumed any obligation to update, revise or reaffirm
this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the Merger Agreement,
without any further amendments thereto, and without waiver by CompScript of any
of the conditions to its obligations thereunder.
We have acted as financial advisor to CompScript in connection with the
Merger and will receive a fee for our services, including rendering this
opinion, a substantial portion of which is contingent upon the closing of the
Merger. In the ordinary course of our business, we actively trade the equity
securities of Omni for our own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
We have also acted as an underwriter in connection with offerings of securities
of Omni and as a financial advisor in connection with an acquisition. We acted
as a co-manager in the $345 million convertible subordinated debt offering in
December, 1997, as a financial advisor in the $15 million acquisition of Coromed
in December, 1997, as a co-manager in the $260 million follow-on equity offering
in March, 1996, as a co-manager in the $142 million follow-on equity offering in
November, 1994 and as a co-manager in the $70 million convertible notes offering
in October, 1993.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
CompScript pursuant to the Merger is fair to such shareholders from a financial
point of view, as of the date hereof.
This opinion is directed to the Board of Directors of CompScript in its
consideration of the Merger and is not a recommendation to any shareholder as to
how such shareholder should vote with respect to the Merger. Further, this
opinion addresses only the financial fairness of the Consideration to be
received by the shareholders and does not address the relative merits of the
Merger and any alternatives to the Merger, CompScript's underlying decision to
proceed with or effect the Merger, or any other aspect of the Merger. We are not
expressing an opinion regarding the price at which the Omni Stock may trade at
any future time. This opinion may not be used or referred to by CompScript, or
quoted or disclosed to any person in any manner, without our prior written
consent, which consent is hereby given to the inclusion of this opinion in any
proxy statement or prospectus or registration statement to be filed with the
Securities and Exchange Commission in connection with the Merger. In furnishing
this opinion, we do not admit that we are experts within the meaning of the term
"experts" as used in the Securities Act and the rules and regulations
promulgated thereunder, nor do we admit that this opinion constitutes a report
or valuation within the meaning of Section 11 of the Securities Act.
Very truly yours,
/s/ NationsBanc Montgomery Securities LLC
NATIONSBANC MONTGOMERY SECURITIES LLC
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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 Delaware
General Corporation Law (the "DGCL"), as amended or interpreted from time to
time.
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.
Section 145 of the DGCL permits indemnification against expenses, fines,
judgments and settlements incurred by any director, officer or employee of a
company in the event of pending or threatened civil, criminal, administrative or
investigative proceedings, if such person was, or was threatened to be made, a
party by reason of the fact that he or she is or was a director, officer, or
employee of the company. Section 145 also provides that the indemnification
provided for therein shall not be deemed exclusive of any other rights to which
those seeking indemnification may otherwise be entitled. In addition, Omnicare
maintains a directors' and officers' liability insurance policy.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
See Exhibit Index.
(B) FINANCIAL STATEMENTS SCHEDULES
All financial statement schedules of the Registrant which are required
to be included herein are incorporated herein by reference to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1997.
(C) OPINIONS
The opinion of NationsBanc Montgomery Securities LLC is included as
Appendix E to the Proxy Statement/Prospectus.
ITEM 22. UNDERTAKINGS.
1. The undersigned registrant hereby undertakes:
(a) 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
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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;
(b) 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.
(c) 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.
2. 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 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.
3. 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.
4. The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (3) immediately preceding, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act of 1933 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.
5. 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 expenses
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 Securities Act of 1933 and will be governed by the
final adjudication of such issue.
6. 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.
7. 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-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Cincinnati, State of
Ohio, on this 26th day of May, 1998.
<TABLE>
<S> <C> <C>
May 26, 1998. OMNICARE, INC.
By: /s/ JOEL F. GEMUNDER
-----------------------------------------
Joel F. Gemunder, President
</TABLE>
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby severally constitutes and appoints Edward L. Hutton, Joel F.
Gemunder and Cheryl D. Hodges, and each of them, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to the Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorney-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that each said
attorneys-in-fact and agents or any of them or their or his or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
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>
/s/ EDWARD L. HUTTON Chairman and Director May 26, 1998
- ------------------------------ (Principal Executive
Edward L. Hutton Director)
/s/ JOEL F. GEMUNDER President and Director May 26, 1998
- ------------------------------ (Principal Executive
Joel F. Gemunder Officer)
Senior Vice President and May 26, 1998
Chief Financial Officer
/s/ DAVID W. FROESEL, JR. (Principal Executive
- ------------------------------ Officer and
David W. Froesel, Jr. Principal Accounting
Officer)
/s/ RONALD K. BAUR Director May 26, 1998
- ------------------------------
Ronald K. Baur
/s/ KENNETH W. CHESTERMAN Director May 26, 1998
- ------------------------------
Kenneth W. Chesterman
/s/ CHARLES H. ERHART, JR. Director May 26, 1998
- ------------------------------
Charles H. Erhart, Jr.
/s/ MARY LOU FOX Director May 26, 1998
- ------------------------------
Mary Lou Fox
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
<S> <C> <C>
/s/ CHERYL D. HODGES Director May 26, 1998
- ------------------------------
Cheryl D. Hodges
/s/ THOMAS C. HUTTON Director May 26, 1998
- ------------------------------
Thomas C. Hutton
/s/ PATRICK E. KEEFE Director May 26, 1998
- ------------------------------
Patrick E. Keefe
/s/ SANDRA E. LANEY Director May 26, 1998
- ------------------------------
Sandra E. Laney
/s/ ANDREA R. LINDELL Director May 26, 1998
- ------------------------------
Andrea R. Lindell
/s/ SHELDON MARGEN, M.D. Director May 26, 1998
- ------------------------------
Sheldon Margen, M.D.
/s/ KEVIN J. MCNAMARA Director May 26, 1998
- ------------------------------
Kevin J. McNamara
/s/ JOHN M. MOUNT Director May 26, 1998
- ------------------------------
John M. Mount
/s/ D. WALTER ROBBINS, JR. Director May 26, 1998
- ------------------------------
D. Walter Robbins, Jr.
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
2.1 -- Agreement and Plan of Merger, dated as of February 23, 1998, by and among Omnicare, CSI Acquisition
Corp. and CompScript (attached as Appendix A to the Proxy Statement/ Prospectus included in this
Registration Statement).
3.1 -- Restated Certificate of Incorporation of Omnicare (incorporated herein by reference to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1996).
3.2 -- Certificate of Amendment of Registrant's Restated Certificate of Incorporation.*
3.3 -- Amended Bylaws of Omnicare (incorporated herein by reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992).
4.1 -- Credit Agreement among Omnicare, First National Bank of Chicago, agent, and certain banks, dated as
of October 22, 1996 (incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996).
4.2 -- Indenture, dated as of December 10, 1997, between Omnicare and First National Bank of Chicago, as
trustee (incorporated herein by reference to Registrant's Registration Statement on Form S-3, dated
February 6, 1998).
5.1 -- Opinion of Dewey Ballantine LLP.*
8.1 -- Opinion of Atlas, Pearlman, Trop & Borkson, P.A. as to certain federal income tax matters.*
10.1 -- Executive Salary Protection Plan, as amended, May 22, 1981 (incorporated herein by reference to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
10.2 -- 1981 Stock Incentive Plan, as amended (incorporated herein by reference to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1987).
10.3 -- 1989 Stock Incentive Plan (incorporated herein by reference to Registrant's Proxy Statement dated
April 10, 1989 for Registrant's 1989 Annual Meeting of Stockholders).
10.4 -- 1992 Long-Term Stock Incentive Plan (incorporated herein by reference to Registrant's Proxy
Statement dated March 31, 1997 for Registrant's 1997 Annual Meeting of Stockholders).
10.5 -- 1995 Premium-Priced Stock Option Plan (incorporated herein by reference to Registrant's Proxy
Statement dated April 10, 1995 for Registrant's 1995 Annual Meeting of Stockholders).
10.6 -- Excess Benefits Plan (incorporated herein by reference to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1987).
10.7 -- Form of Indemnification Agreement with Directors and Officers (incorporated herein by reference to
Registrant's Proxy Statement dated April 14, 1987 for Registrant's 1987 Annual Meeting of
Stockholders).
10.8 -- Employment Agreements with J.F. Gemunder and C.D. Hodges, dated August 4, 1988 (incorporated herein
by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1988).
10.9 -- Amendment to Employment Agreements with J.F. Gemunder and C.D. Hodges, dated May 17, 1993
(incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993).
10.10 -- Employment Agreement with T.R. Marsh dated August 4, 1988 and Amendment, dated May 17, 1993
(incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1993).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
10.11 -- Employment Agreement with P.E. Keefe, dated March 4, 1993 (incorporated herein by reference to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993).
10.12 -- Amendment to Employment Agreements with J.F. Gemunder, P.E. Keefe, C.D. Hodges and T.R. Marsh,
dated May 16, 1994 (incorporated herein by reference to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994).
10.13 -- Amendment to Employment Agreements with J.F. Gemunder, P.E. Keefe and C.D. Hodges, dated May 15,
1995 (incorporated herein by reference to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995).
10.14 -- Split Dollar Agreement with E.L. Hutton, dated June 1, 1995 (Agreement in the same form exists with
J.F. Gemunder) (incorporated herein by reference to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.15 -- Split Dollar Agreement, dated June 1, 1995 (Agreements in the same form exists with the following
Executive Officers: C.D. Hodges, P.E. Keefe and T.E. Bien) (incorporated herein by reference to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995).
10.16 -- Annual Incentive Plan for Senior Executive Officers (incorporated herein by reference to
Registrant's Proxy Statement dated May 20, 1996 for Registrant's 1996 Annual Meeting of
Stockholders).
10.17 -- Employment Agreement with T.E. Bien, dated January 1, 1994 (incorporated herein by reference to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1996).
10.18 -- Employment Agreement with D.W. Froesel, dated February 17, 1996 (incorporated herein by reference
to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996).
10.19 -- Employment Agreement with M.L. Fox, dated April 4, 1996 (incorporated herein by reference to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1996).
10.20 -- Consulting Agreement with MLF Co., dated April 4, 1996 (incorporated herein by reference to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1996).
10.21 -- Amendment to Employment Agreement with J.F. Gemunder, dated May 20, 1996 (Amendments in the same
form exist with the following Executive Officers: P.E. Keefe and C.D. Hodges) (incorporated herein
by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996).
10.22 -- Amendment to Employment Agreement with J.F. Gemunder, dated May 19, 1997 (Amendments in the same
form exist with the following Executive Officers: P.E. Keefe and C.D. Hodges) (incorporated herein
by reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997).
11.1 -- Statement of Computation of Earnings per common shares of Omnicare (incorporated herein by
reference to Registrant's Annual Report on Form 10-K for the year ended December 31, 1997).
12.1 -- Statement of Computation of Ratio of Earnings to Fixed Charges (incorporated herein by reference to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1997).
21.1 -- Subsidiaries of Omnicare (incorporated herein by reference to Registrant's Annual Report on Form
10-K for the year ended December 31, 1997).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
23.1 -- Consent of Dewey Ballantine LLP (included as part of its opinion filed as Exhibit 5.1 hereto).
23.2 -- Consent of Atlas, Pearlman, Trop & Borkson, P.A. (included as part of its opinion filed as Exhibit
8.1 hereto).
23.3 -- Consent of Ernst & Young L.L.P.*
23.4 -- Consent of Price Waterhouse LLP.*
24.1 -- Power of Attorney, included as part of the Signature page in this Registration Statement.
99.1 -- Form of Proxy for holders of CompScript Shares.*
99.2 -- Fairness Opinion of NationsBanc Montgomery Securities LLC (attached as Appendix E to the Proxy
Statement/Prospectus included in this Registration Statement).
99.3 -- Consent of NationsBanc Montgomery Securities LLC.*
</TABLE>
- ------------------------
* Filed herewith
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
OMNICARE, INC.
OMNICARE, INC. ("Omnicare"), a corporation organized on January 15,
1981 and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "General Corporation Law"),
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of Omnicare duly adopted
resolutions setting forth the following proposed amendment to the
Restated Certificate of Incorporation of Omnicare, declaring the
proposed amendment to be advisable and directing the the proposed
amendment be considered at the next Annual Meeting of Stockholders
of Omnicare. The resolution setting forth the proposed amendment is
as follows:
RESOLVED, that the first sentence of Article 4 of the
Restated Certificate of Incorporation of Omnicare, Inc. be, and it is
hereby, amended to read as follows:
4. The total number of shares of
stock which the Corporation shall have
authority to issue is Two Hundred One
Million (201,000,000), of which Two
Hundred Million (200,000,000) shares of
the par value of One Dollar ($1.00) each,
amounting in the aggregate to Two Hundred
Million Dollars ($200,000,000), shall be
common stock and of which One Million
(1,000,000) shares, without par value,
shall be preferred stock.
SECOND: That at the Annual Meeting of the Stockholders of Omnicare
held on May 18, 1998, the holders of a majority of the outstanding
shares of Common Stock of Omnicare did approve and adopt the proposed
amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, Omnicare, Inc. has caused this certificate to be
signed by Joel F. Gemunder, its President, and Cheryl D. Hodges, its
Secretary, this 18th date of May, 1998.
BY: /s/ Joel F. Gemunder
----------------------
President
ATTEST: /s/ Cheryl D. Hodges
----------------------
Secretary
<PAGE>
EXHIBIT 5.1
[Letterhead of Dewey Ballantine LLP]
May 26, 1998
Omnicare, Inc.
50 East RiverCenter Blvd., Suite 1530
Covington, Kentucky 41011
Ladies and Gentlemen:
We have acted as special counsel for Omnicare, Inc., a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-4 (the "Registration Statement") filed by the Company under the
Securities Act of 1933 (the "Act"), for the purpose of registering under the
Act of up to 2,412,326 shares (the "Shares") of the Company's common stock,
par value $1.00 per share, proposed to be issued in connection with the
merger between CompScript, Inc., a Florida corporation ("CompScript"), and CSI
Acquisition Corp., a Florida corporation and a wholly owned subsidiary of the
Company ("Merger Sub"), contemplated by the Agreement and Plan of Merger,
dated as of February 23, 1998, as amended as of March 25, 1998 (the "Merger
Agreement") among CompScript, the Company and Merger Sub.
In connection with this opinion, we have examined originals or
copies, certified or otherwise identified to our satisfaction, of such
certificates and other documents as we deemed necessary or advisable for the
purpose of expressing the opinion contained herein, including, without
limitation, the following: the Restated Certificate of Incorporation, as
amended, of the Company, the Amended Bylaws of the Company, the Registration
Statement and resolutions adopted by the Board of Directors of the Company and
a committee thereof. With respect to all of the documents reviewed, we have
assumed, without investigation, the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the conformity
to originals of all documents submitted to us as certified or reproduced
copies.
We are admitted to the Bar of the State of New York and express no
opinion as to the laws of any other jurisdiction other than the General
Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that
the Shares, when issued in accordance with the terms and conditions
<PAGE>
of the Merger Agreement, will be validly issued, fully paid and nonassessable.
This opinion is rendered solely to you in connection with the above
matter, and may not be relied upon by you for any other purpose or relied
upon by or furnished to any other person without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this Firm under the captions
"The Merger -- Certain Federal Income Tax Consequences" and "Legal Opinions"
in the Proxy Statement/Prospectus constituting a part of the Registration
Statement. In giving this consent, we do not thereby admit that we come within
the category of persons whose consent is required under Section 7 of the Act or
the rules and regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
Dewey Ballantine LLP
<PAGE>
Exhibit 8.1
[Letterhead of Atlas Pearlman Trop & Borkson, P.A.]
May 26, 1998
CompScript, Inc.
1225 NW Broken Sound Parkway
Boca Raton, FL 33481
Ladies and Gentlemen:
We have acted as counsel to CompScript, Inc. ("CompScript"), a Florida
corporation, in connection with its Proxy Statement/Prospectus (the "Proxy
Statement") forming a part of the Registration Statement on Form S-4 (the
"Registration Statement") of Omnicare, Inc. ("Omnicare").
For purposes of this opinion, we have reviewed the discussion set forth
in the Proxy Statement under the caption "Certain Federal Income Tax
Consequences of the Merger" (the "Tax Discussion"). We have also reviewed a
copy of the Agreement and Plan of Merger between CompScript, Omnicare and CSI
Acquisition Corp. dated February 23, 1998, as amended, as filed as Appendix A
to the Proxy Statement (the "Merger Agreement"), the exhibits and schedules
to the Merger Agreement, and such certificates and other documents we have
deemed necessary or advisable for the purpose of expressing the opinion
contained herein.
With respect to the documents which we have reviewed, we have assumed,
without investigation, the genuineness of all signatures, the authenticity of
all documents submitted to us as originals and the conformity to originals of
all documents submitted to us as certified or reproduced copies. We have also
assumed that the transactions described in the Merger Agreement will be
consummated in the manner contemplated thereby.
Based upon and subject to the accuracy of the foregoing, we are of the
opinion that the Tax Discussion is true and accurate in all material respects.
<PAGE>
CompScript, Inc.
May 21, 1998
Page 2
We are admitted to the Bar of the State of Florida and express no
opinion as to the laws of any other jurisdiction, other than the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to our firm under the captions
"The Merger -- Certain Federal Income Tax Consequences" and "Legal Opinions"
in the Proxy Statement. In providing our consent, we do not thereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Act or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
/s/ Atlas, Pearlman, Trop & Borkson, P.A.
-----------------------------------------
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated March 6, 1998, with respect to the financial statements
of CompScript, Inc., included in the Proxy Statement/Prospectus that is made a
part of this Registration Statement (Form S-4) of Omnicare, Inc. for the
registration of 2,412,326 shares of Omnicare, Inc.'s common stock.
Ernst & Young LLP
West Palm Beach
May 22, 1998
<PAGE>
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 30, 1998 appearing on page 34 of Omnicare, Inc.'s Annual Report on Form
10-K for the year ended December 31, 1997. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Cincinnati, Ohio
May 26, 1998
<PAGE>
FOR USE BY HOLDERS OF COMMON STOCK OF
COMPSCRIPT, INC.
CompScript, Inc.
1225 Broken Sound Parkway, N.W.
Boca Raton, Florida 33487
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COMPSCRIPT, INC.
The undersigned hereby appoints Brian A. Kahan, Gary Splain and Juan C.
Cocuy as Proxies, each with the power to appoint his substitute, and hereby
authorizes each of them to represent and to vote, as designated below, all the
shares of the common stock, par value $.0001 per share ("CompScript Shares"), of
CompScript, Inc. (the "CompScript") held of record by the undersigned on May 18,
1998 at the special meeting of shareholders of CompScript to be held on June 26,
1998 and any adjournment or postponement thereof (the "Special Meeting").
The Board of Directors of Compscript has unanimously approved the Merger
Agreement and the Merger (each as defined in the accompanying Proxy
Statement/Prospectus) and recommends that holders of CompScript Shares vote FOR
approval of the Merger Agreement and the Merger.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is given, this proxy will
be voted for proposal 1.
Please mark, sign, date and promptly return this proxy card using the
enclosed envelope. If your address is incorrectly shown, please print changes.
PLEASE MARK VOTE IN BOX IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Approval of the Agreement and Plan of Merger, as amended, by and among
CompScript, Inc., Omnicare, Inc. and CSI Acquisition Corp., and the Merger
contemplated thereby, as described in the accompanying Proxy
Statement/Prospectus.
FOR / / AGAINST / / ABSTAIN / /
<PAGE>
CompScript, Inc.
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting.
All other proxies heretofore given by the undersigned to vote CompScript
Shares which the undersigned would be entitled to vote if personally present at
the Special Meeting, are hereby expressly revoked.
Dated: _____________________, 1998
__________________________________
Signature(s)
__________________________________
Signature(s)
Please date this proxy and sign it exactly as your name or name(s) appear
above. When shares are held jointly, both must sign. When signing as an
attorney, executor, administrator, trustee or guardian, please give full title
as such. If shares are held by a corporation, please sign in full corporate name
by the President or other authorized officer. If shares are held by a
partnership, please sign in partnership name by an authorized person.
<PAGE>
EXHIBIT 99.3
[Letterhead of NationsBanc Montgomery Securities LLC]
May 26, 1998
Members of the Board of Directors
CompScript, Inc.
1225 Broken Sound Parkway, N.W.
Boca Raton, FL 33487
Gentlemen:
We hereby consent to the inclusion of our opinion letter dated February
23, 1998 to the Board of Directors of CompScript, Inc. (the "Company")
regarding the sale of the Company to Omnicare, Inc. ("Omnicare"), in the
Proxy Statement/Prospectus forming part of Omnicare's Registration Statement
on Form S-4 (the "Registration Statement") and to the references therein to
our firm and to our opinion under the headings "Summary-Opinion of Financial
Advisor to CompScript," "The Merger-Background of the Merger," "The
Merger-Reasons for the Merger," "The Merger-Opinion of CompScript's Financial
Advisor," "Appendix E-Opinion of NationsBanc Montgomery Securities LLC". In
giving the foregoing consent, we do not admit (i) that we come within the
category of persons whose consent is required under Section 7 of the
Securities Act of the 1933, as amended (the "Securities Act"), or the rules
and regulations of the Securities and Exchange Commission promulgated
thereunder, and (ii) that we are experts with respect to any part of the
Registration Statement within the meaning of the term "experts" as used in
the Securities Act and the rules and regulations of the Securities and
Exchange Commission promulgated thereunder.
Very truly yours,
NATIONSBANC MONTGOMERY SECURITIES LLC
