Exhibit (a)(5)(B)
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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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CRANDON CAPITAL PARTNERS, :
Plaintiff, :
v. : C.A. No. 18422NC
:
COMPLAINT
ARTHUR KONTOS, JAMES H. LYNCH, DENNIS MARINO, THOMAS W. : ---------
NEUMANN, KEVIN PARKER, CHARLES KIRKLAND KELLOGG, JOHN :
P. DUFFY, RALPH N. DELDEO, RUSSELL C. HOROWITZ, and :
NATIONAL DISCOUNT BROKERS GROUP, INC., :
Defendants. :
:
:
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Plaintiff alleges upon personal knowledge as to its own acts and upon
information and belief as to all other matters, as follows:
NATURE OF THE ACTION
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1. Plaintiff brings this action individually and as a class action on
behalf of all persons, other than defendants and their affiliates (including
Deutsche Bank AG), who own the securities of National Discount Brokers Group,
Inc. ("NDB" or the "Company") for injunctive and other appropriate relief in
connection with a proposed transaction whereby Deutsche Bank AG would buy all of
the outstanding shares of NDB that it does not already own. Alternatively, in
the event that the proposed transaction is implemented, plaintiff seeks to
recover damages caused by the breach of fiduciary duties owed by defendants to
NDB's public shareholders.
THE PARTIES
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2. Plaintiff is and, at all relevant times, has been the owner of
shares of NDB common stock.
3. NDB is a corporation organized under the laws of Delaware with its
principal executive offices located at 10 Exchange Place Centre, Jersey City,
New Jersey. NDB is in the securities business providing financial services to
customers and serving as a market maker in selected securities.
4. Defendant Arthur Kontos is NDB's President, Chief Executive
Officer and Vice-Chairman of the Board of Directors. Kontos individually holds
approximately 13% of the outstanding stock in NDB and has executed an agreement
pledging to vote his shares in favor of the transaction proposed by Deutsche
Bank. Kontos is also a general partner of Spear, Leeds & Kellogg, LP ("SLK").
5. Defendant James H. Lynch is the Chairman of NDB's Board of
Directors. Lynch is also a general partner and member of the executive committee
of SLK.
6. Defendant Dennis Marino is a Director and Chief Administrative
Officer of NDB. Marino is also the President and Chairman of subsidiary
companies held by NDB, including NDB Capital Markets ("NDBC") and NDB.com.
7. Defendant Thomas W. Neumann is a Director and Executive Vice
President of NDB. Neumann is also a former employee of SLK.
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8. Defendant Charles Kirkland Kellogg is a Director of NDB and a
former employee of NDB.com and NDBC. Kellogg is the son of Paul Kellogg, who is
one of the principals of SLK.
9. Defendant John P. Duffy is a Director of NDB and previously served
as a former managing director of SLK.
10. Defendant Kevin Parker is a Director of NDB. Parker is also the
Managing Director and Global Head of Cash Equity Sales and Trading and Equity
Research at Deutsche Bank.
11. Defendant Ralph DelDeo is a Director of NDB. Mr. DelDeo is also a
senior partner of Gibbons, DelDeo, Dolan, Griffinger & Vecchione, P.C., a law
firm that provides substantial legal services to NDB.
12. Defendant Russell C. Horowitz is a Director of NDB.
13. Because of their positions as officers/directors, the Individual
Defendants owe fiduciary duties of loyalty, good faith and due care to plaintiff
and the other members of the class.
CLASS ACTION ALLEGATIONS
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14. Plaintiff brings this action individually and as a class action,
on behalf of all stockholders of the Company (except defendants herein and any
person, firm, trust, corporation, or other entity related to or affiliated with
any of the defendants, or any of the
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Company's principal stockholders), who are threatened with injury arising from
defendants' actions as is described more fully below.
15. This action is properly maintainable as a class action.
16. The Class is so numerous that joinder of all members is
impracticable. The Company has approximately 21 million shares of common stock.
There are hundreds of record and beneficial stockholders.
17. There are questions of law and fact common to the Class
including, inter alia, whether:
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a. defendants have breached and will continue to breach their
fiduciary and other common law duties owed by them to plaintiff and the members
of the Class; and
b. plaintiff and the other members of the Class would be irreparably
damaged by the wrongs complained of herein.
18. Plaintiff is committed to prosecuting the action and has retained
competent counsel experienced in litigation of this nature. Plaintiff's claims
are typical of the claims of the other members of the Class and plaintiff has
the same interests as the other members of the Class. Accordingly, plaintiff is
an adequate representative of the Class.
19. The prosecution of separate actions by individual members of the
Class would create the risk of inconsistent or varying adjudications with
respect to individual members of the Class which would establish incompatible
standards of conduct for defendants, or adjudications with respect to individual
members of the Class which would as a practical matter
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be dispositive of the interests of the other members not parties to the
adjudications or substantially impair or impede their ability to protect their
interests.
20. The defendants have acted, or refused to act, on grounds
generally applicable to, and causing injury to, the Class and, therefore,
preliminary and final injunctive relief on behalf of the Class as a whole is
appropriate,
SUBSTANTIVE ALLEGATIONS
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21. On October 10, 2000, NDB reported it had received a proposal from
Deutsche Bank to acquire the 84% of NDB stock that it did not already own for
$49.00 per share in a transaction valued at approximately $1 billion. The
Company further reported that it had also received inquiries from other parties
proposing a strategic merger or acquisition.
22. NDB publicly stated that it would consider all of its strategic
alternatives.
23. On October 12, 2000, just two days later, the Company announced
that Deutsche Bank would proceed with an agreed-upon tender offer and second-
step merger to acquire NDB for $49.00 per share in cash.
24. As part of the transaction, it was agreed that NDB management
would continue to hold their positions and that NDB would be operated as a
separate subsidiary of Deutsche Bank.
25. In exchange, Kontos and certain other shareholders of NDB, who
hold a total of 29.1% of NDB's stock, entered into agreements with Deutsche Bank
to tender their shares.
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26. NDB made no subsequent announcement about what consideration, if
any, was given to the other expressions of interest in a strategic transaction
proffered to NDB.
27. Because eight of the nine NDB directors constitute NDB management
or owe loyalty to NDB management through interlocking positions with SLK, the
individual defendants have endorsed a transaction that favors management's
interests over the interests of the public shareholders.
28. The individual defendants agreed to the transaction without
exploring other bona fide proposals in violation of their duty to maximize
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shareholder value in a sale of the Company. The transaction will provide the
majority of defendants with continuing positions of employment from which they
derive a substantial portion of their livelihoods.
29. The proposed transaction is unfair, inadequate and provides value
to NDB stockholders substantially below the fair or inherent value of the
Company. Taking into account NDB's asset value, liquidation value, its expected
growth, the strength of its business, revenues, cash flow, earnings power, and,
in particular, NDB's transactional value, the intrinsic value of NDB is
materially greater than the consideration contemplated in the proposed
transaction.
30. The proposed transaction is wrongful, unfair, and harmful to
NDB's public stockholders, and will deny them their right to share
proportionately in the true value of NDB's valuable assets, profitable business,
and future growth in profits and earnings, while usurping the same for the
benefit of management and Deutsche Bank.
31. Unless enjoined by this Court, defendants will continue to breach
their fiduciary duties owed to plaintiff and the Class, and will succeed in
their plan to exclude plaintiff
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and the Class from the fair proportionate share of NDB's valuable assets and
businesses, to the irreparable harm of the Class.
32. Plaintiff and the Class have no adequate remedy of law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
(a) declaring that this lawsuit is properly maintainable as a
class action and certifying plaintiff as representative of the Class;
(b) preliminarily and permanently enjoining defendants and their
counsel, agents, employees, and all persons acting under, in concert with, or
for them, from proceeding with or implementing the transaction;
(c) in the event the proposed transaction is consummated,
rescinding it and setting it aside;
(d) awarding compensatory damages against defendants, jointly and
severally, in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
(e) awarding plaintiff the costs and disbursements of this
action, including reasonable allowances for plaintiff's counsel and experts',
fees; and
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(f) granting such other and further relief as may be just and
proper.
ROSENTHAL, MONHAIT GROSS & GODDESS, P.A.
By:
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Joseph Rosenthal
Mellon Bank Center
919 Market Street
Wilmington, Delaware 19899
(302) 656-4433
Attorneys for Plaintiff
Of Counsel:
WECHSLER HARWOOD
HALEBIAN & FEFFER LLP
488 Madison Avenue
New York, New York 10022
(212) 935-7400
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