Ex (a)(5)(C)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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ARI ROSNER, :
:
Plaintiff, :
:
v. : Case No. 18043NC
:
VERIO INC., STEVEN C. HALSTEDT, YUKIMASA ITO, :
JUSTIN L. JASCHKE, JAMES C. ALLEN, TRYGVE E. :
MYHREN, PAUL J. SALEM, ARTHUR L. CAHOON, and :
NIPPON TELEGRAPH AND TELEPHONE CORP., :
:
:
:
Defendants. :
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CLASS ACTION COMPLAINT
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Plaintiff, by his attorneys, for his class action complaint against
defendants, alleges upon information and belief, except for paragraph 2 hereof,
which is alleged upon knowledge as follows:
1. Plaintiff brings this action pursuant to Rule 23 of the Rules of the
Court of Chancery on his behalf and as a class action on behalf of all persons,
other than defendants and those in privity with them, who own the common stock
of Verio Inc. ("Verio" or the "Company").
2. Plaintiff has been the owner of the common stock of the Company since
prior to the wrongs herein complained of and continuously to date.
3. Defendant Verio is a corporation duly organized and existing under the
laws of the State of Delaware with principal executive offices at 8005 South
Chester Street, Englewood, Colorado. The Company is one of the world's largest
operators of Web sites for businesses and a leading provider of comprehensive
Internet services with an emphasis on serving the small and medium sized
business market. The Company has over 78 million shares
of common stock issued and outstanding on a fully diluted basis, held by
thousands of shareholders of record, which shares trade on the NASDAQ.
4. Defendant Nippon Telegraph and Telephone Corporation ("NTT") is a
Japanese corporation and is the national telephone company of Japan. NTT owns or
controls approximately 11.4% of Verio. NTT acquired its Verio shares for
approximately $11 per share.
5. Defendant Steven C. Halstedt ("Halstedt") is and was at all relevant
times Verio's Chairman of the Board.
6. Defendant Yukimasa Ito is a director of the Company and an officer of
NTT Communications Corp.
7. Defendant Justin L. Jaschke ("Jaschke") is and was at all relevant
times Chief Executive Officer, and Director of the Company.
8. Defendants James C. Allen, Trygve E. Myhren, Paul J. Salem and Arthur
L. Cahoon are and were at all relevant times directors of the Company.
9. The Individual Defendants named in paragraphs 5 through 8 constitute
the Board of Directors of Verio (the "Board") and are in a fiduciary
relationship with plaintiff and the other public stockholders of Verio and owe
them the highest obligations of good faith and fair dealing.
CLASS ACTION ALLEGATIONS
10. Plaintiff brings this action on his own behalf and as a class action,
pursuant to Rule 23 of the Rules of the Court of Chancery, on behalf of all
common stockholders of the Company (except the defendants herein and any person,
firm, trust, corporation, or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or will be threatened
with injury arising from defendants' actions as more fully described herein (the
"Class").
11. This action is properly maintainable as a class action:
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a. The Class is so numerous that joinder of all members is
impracticable. There were in excess of 78 million shares of Verio common stock
outstanding, owned by thousands of shareholders located throughout the country.
b. There are questions of law and fact which are common to the Class
including, inter alia, the following: (i) whether defendants have breached their
fiduciary and other common law duties owed by them to plaintiff and the Class;
and (ii) whether the Class is entitled to injunctive relief or damages as a
result of defendants' wrongful conduct.
c. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of the
plaintiff are typical of the claims of other members of the Class and plaintiff
has the same interests as the other members of the Class. Plaintiff will fairly
and adequately represent the Class.
d. Defendants have acted in a manner which similarly affects plaintiff
and all members of the Class, thereby making appropriate injunctive relief
and/or corresponding declaratory relief with respect to the Class as a whole.
e. The prosecution of separate actions by individual members of the
Class would create a 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, be dispositive of the interests
of other members or substantially impair or impede their ability to protect
their interests.
SUBSTANTIVE ALLEGATIONS
12. In September 1999, Verio announced that it had entered into an
agreement with NTT Communications, part of the Nippon Telegraph and Telephone
group of telecommunications companies, to provide Verio's Web hosting services
to the Japanese market. NTT currently holds approximately 9 million shares of
Verio's common stock, representing approximately 10% of its outstanding stock.
Under the agreement, the entire NTT group of companies will be able to market
Verio's Web hosting services to businesses in Japan on a co-branded, "Powered by
Verio" basis.
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13. On or about May 7, 2000, Reuters reported that NTT Communications, a
unit of Nippon Telegraph and Telephone Corp. would buy the 90 percent of Verio
not already owned by NTT for about $60 per share or $5.5 billion. Pursuant to
the terms of the transaction, NTT will commence a cash tender offer for Verio no
later than May 17, 2000.
14. The transaction represents a change in control and imposes heightened
fiduciary duties on the Individual Defendants to maximize shareholder value and
requires enhanced scrutiny by the Court. However, the terms of the proposed
transaction were not the result of an auction process or active market check;
they were arrived at without a full and thorough investigation by the Individual
Defendants; and they are intrinsically unfair and inadequate from the standpoint
of the Verio shareholders.
15. The Individual Defendants failed to make an informed decision, as no
market check of the Company's value was obtained. In agreeing to the
transaction, the Individual Defendants failed to properly inform themselves of
Verio's highest transactional value.
16. According to a May 8, 2000 Bloomberg's article, "[b]oth companies said
there was at least one rival suitor for Verio, though they declined to provide
details."
17. The Individual Defendants have violated the fiduciary duties owed to
the public shareholders of Verio. The Individual Defendants' agreement to the
terms of the transaction, its timing, and the failure to auction the Company and
invite other bidders, and defendants' failure to provide a market check
demonstrates a clear absence of the exercise of due care and loyalty to Verio's
public shareholders.
18. The Individual Defendants' fiduciary obligations under these
circumstances require them to:
(a) Undertake an appropriate evaluation of Verio's net worth as a
merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an attempt
to obtain the best value for Verio's public shareholders.
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19. The Individual Defendants have breached their fiduciary duties by
reason of the acts and transactions complained of herein, including their
decision to merge with NTT without making the requisite effort to obtain the
best offer possible.
20. In light of the foregoing, the Individual Defendants must, as their
fiduciary obligations require:
(a) Undertake an appropriate evaluation of Verio's net worth as a
merger/acquisition candidate; and
(b) Engage in a meaningful auction with third parties in an attempt
to obtain the best value for Verio's public shareholders.
21. As a result of the Individual Defendants' failure to take such steps
to date, plaintiff and the other members of the Class have been and will be
irreparably damaged in that they have not and will not receive their
proportionate share of the value of the Company's assets and business, and have
been and will be prevented from obtaining a fair price for their common stock.
22. NTT has knowingly aided and abetted the breaches of fiduciary duty
committed by Verio and the Individual Defendants.
23. Unless the proposed transaction is enjoined by the Court, defendants
will continue to breach their fiduciary duties owed to plaintiff and the members
of the Class, to the irreparable harm of the members of the Class.
24. Plaintiff and the other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiff prays for judgment and relief as follows:
A. Ordering that this action may be maintained as a class action and
certifying plaintiff as the Class representative.
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,
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consummating, or closing the proposed transaction or any business combination
with a third party, unless and until the Company adopts and implements a
procedure or process, such as an auction, to obtain the highest possible price
for the Company;
C. In the event the proposed transaction is consummated, rescinding it and
setting it aside, or awarding the Class rescissory damages;
D. Awarding compensatory damages against defendants individually and
severally in an amount to be determined at trial, together with prejudgment
interest at the maximum rate allowable by law;
E. Awarding plaintiff and the Class their costs and disbursements,
including plaintiff's counsel and experts' fees and expenses; and
F. Granting such other and further relief as the Court may deem just and
proper.
ROSENTHAL, MONHAIT, GROSS
& GODDESS, P.A.
By:__________________________
Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
OF COUNSEL
BULL & LIFSHITZ, LLP
246 West 38th Street
New York, New York 10018
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