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Omnicare Issues Notice Of Pendency And Proposed Settlement Regarding Shareholder Derivative Litigation

Stocks in this article: OCR

Omnicare, Inc. announced today the issuance of the following notice of pendency and proposed settlement relating to a shareholder derivative action pending against certain current and former directors and officers of Omnicare:

COMMONWEALTH OF KENTUCKY KENTON CIRCUIT COURT FOURTH DIVISION CASE NO. 10-CI-01212

 
MANVILLE PERSONAL INJURY
SETTLEMENT TRUST, derivatively on
behalf of OMNICARE, INC.,
 
Plaintiff,
 
v.
 
JOEL F. GEMUNDER, JOHN T. CROTTY, SANDRA E.
LANEY, ANDREA R. LINDELL, JOHN H. TIMONEY, AMY
WALLMAN, JAMES D. SHELTON, STEVEN J. HEYER,
DAVID W. FROESEL, JR., PATRICK E. KEEFE, CHERYL
D. HODGES, and T. E. BIEN,
 
Defendants,
 
-and-
 
OMNICARE, INC., a Delaware corporation,
 
Nominal Defendant.

NOTICE OF PENDENCY AND PROPOSED SETTLEMENT OF SHAREHOLDER DERIVATIVE LITIGATION

The purpose of this Notice is to inform you about: (i) the pendency of the above-captioned shareholder derivative litigation (the “ Action”), which was brought by a shareholder of Omnicare, Inc. (“ Omnicare” or the “ Company”) on behalf of the Company in Kentucky Circuit Court (the “ Court”); (ii) a proposed settlement of the Action (the “ Settlement”), subject to Court approval, on the terms set forth in a Stipulation of Settlement (“ Stipulation”) that was filed with the Court and is available for review on Omnicare’s corporate website ( www.omnicare.com); (iii) the hearing that the Court will hold on October 28, 2013 (“ Settlement Fairness Hearing”) to determine whether to approve the Settlement and to consider Plaintiff’s Counsel’s application for an award of attorneys’ fees and for reimbursement of litigation expenses incurred in the prosecution of the Action; and (iv) the rights of current Omnicare shareholders with respect to the proposed Settlement and Plaintiff’s Counsel’s application for attorneys’ fees and reimbursement of expenses. 1

NATURE OF THE ACTION

On April 14, 2010, Plaintiff Manville Personal Injury Settlement Trust commenced the Action derivatively on behalf of Omnicare against Joel F. Gemunder, John T. Crotty, Sandra E. Laney, Andrea R. Lindell, John H. Timoney, Amy Wallman, James D. Shelton, Steven J. Heyer, David W. Froesel, Jr., Patrick E. Keefe, Cheryl D. Hodges, and T. E. Bien (“ Individual Defendants”), all of whom are present or former officers and/or directors of the Company. Plaintiff’s Verified Shareholder Derivative Complaint (“ Complaint”) alleges, among other things, that the Individual Defendants (or a subset thereof) engaged in mismanagement and breached their fiduciary duties to the Company by approving, authorizing, acquiescing in, or failing to detect and/or prevent purported violations of the federal Anti-Kickback Statute and False Claims Act in connection with (i) certain corporate acquisitions in 2004, 2005 and 2008, (ii) Omnicare’s relationships with certain pharmaceutical manufacturers during the years 1999-2004, and (iii) Omnicare’s provision of consultant pharmacist services to long-term care facilities during the years 2005-2008. The Complaint also asserts claims for waste and unjust enrichment based on the compensation paid to defendant Joel F. Gemunder, Omnicare’s former President and Chief Executive Officer, from 2004 through 2008. The Individual Defendants deny that they breached their fiduciary duties or otherwise engaged in mismanagement or wrongdoing and assert that, at all times, they acted in good faith, with reasonable business judgment, and in the best interests of the Company and its shareholders.

THE PROPOSED SETTLEMENT

Following, and as a result of, extensive arm’s-length negotiations and a mediation before former United States District Court Judge Joseph Farnan (the “ Mediator”), the Parties have reached an agreement to settle all of the claims brought by Plaintiff against the Individual Defendants in the Action on terms that have been recommended by the Mediator. Because the Action was brought as a derivative action on behalf and for the benefit of Omnicare, the benefits from the Settlement will go directly to Omnicare. Individual Omnicare shareholders will not receive any direct payment from the Settlement.

The terms of the Proposed Settlement and relevant background are set forth in the Stipulation. This Notice should be read in conjunction with, and is qualified in its entirety by reference to, the text of the Stipulation. Briefly summarized, under the terms of the Settlement, the Individual Defendants have agreed to cause a Settlement Fund to be created in the amount of $16.7 million, which will be funded as set forth in paragraph 2(c) of the Stipulation. The Settlement Fund shall be used (after payment of Plaintiff’s attorneys’ fees and expenses) by Omnicare, as directed by its Board of Directors, over the next four years, to fund the additional corporate governance measures set forth in Exhibit B to the Stipulation that Omnicare has agreed to implement as part of the Settlement and to provide funding for the Board’s Compliance Committee in connection with the performance of its duties under its Charter. In addition, under the terms of the Stipulation: (i) Omnicare has agreed to implement certain corporate governance measures and to acknowledge that the pendency of the Action and the allegations contained in Plaintiff’s Complaint were significant factors in Omnicare’s agreement to adopt such measures; (ii) the Parties have identified certain additional governance initiatives and enhancements that Omnicare has implemented since the commencement of the Action (a list of which is contained in Exhibit A to the Stipulation), and Omnicare has agreed to acknowledge that it was aware of the specific allegations and claims for relief contained in Plaintiff’s Complaint, and considered the litigation matters, regulatory inquiries and governmental investigations of the type referenced in the Complaint (and the need to minimize the risk of such occurrences in the future), at the time it entered into such previously-implemented governance initiatives and enhancements; and (iii) Plaintiff and Omnicare have agreed to provide the Individual Defendants with releases of all claims and causes of action that have or could have been asserted in the Action based upon, arising from or relating to the facts, events, transactions, acts, occurrences, governmental inquiries, investigations and/or settlements, lawsuits, statements, representations, misrepresentations, omissions, or failures to act which were or could have been alleged in the Complaint.

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