Exhibit (a)(5)(H)
IN THE COURT OF CHANCERY IN THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
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:
JOSEPH HUGHES, :
:
Plaintiff, :
:
v. :
:
STEVEN C. HALSTEDT, JUSTIN L. JASCHKE, :
JAMES C. ALLEN, TRYGVE E. MYHREN, :
PAUL J. SALEM, YUKIMASA ITO, ARTHUR L. : C.A. No. 18055NC
CAHOON, VERIO INC., and NIPPON :
TELEGRAPH AND TELEPHONE CORPORATION, :
:
Defendants. :
:
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CLASS ACTION COMPLAINT
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Plaintiff alleges upon information and belief, except for paragraph 1
hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of the common stock of Verio Inc.
("Verio" or the "Company") since prior to the wrongs herein complained of and
continuously to date.
2. Verio is a corporation duly organized and existing under the laws
of the State of Delaware. The Company is the largest provider of websites for
businesses and is a leading provider of comprehensive internet services.
3. 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.
4. Defendant Steven C. Halstedt is Chairman of the Board of the
Company.
5. Defendant Justin L. Jaschke is Chief Executive Officer and a
Director of the Company.
6. Defendant Yukimasa Ito is a Director of the Company and a Vice
President of NTT Communications Corp.
7. Defendants James C. Allen, Trygve E. Myhren and Paul J. Salem and
Arthur L. Cahoon are Directors of Verio.
8. The Individual Defendants 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
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9. 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
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be threatened with injury arising from defendants' actions as more fully
described herein (the "Class").
10. This action is properly maintainable as a class action because:
(a) The Class is so numerous that joinder of all members is
impracticable. As of March 14, 2000, there were approximately 78,724,424 shares
of Verio common stock outstanding owned by hundreds, if not thousands, of record
and beneficial, holders;
(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 members of the Class; and (ii) whether the Class is entitled to
injunctive relief or damages as a result of the wrongful conduct committed by
defendants.
(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.
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(d) Defendants have acted in a manner which affects plaintiff
and all members of the Class alike, 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
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11. On May 7, 2000, Reuters reported that Verio and NTT announced
that they had entered into a definitive merger agreement whereby NTT will
acquire the Verio shares it does not already own for $60 per share in cash in a
transaction valued at $5.5 billion. Under the terms of the transaction as
presently proposed, a U.S. subsidiary of NTT will commence a cash tender offer
for all of Verio's outstanding common shares at a price of $60 per share no
later than May 17, 2000.
12. Although the $60 per share offer represents a premium to Verio's
closing stock price on Friday, May 4, 2000, the
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offer is significantly below Verio's recent high of $84 per share,
reached in March 2000. Additionally, given NTT's basis of $11 per
share in the shares of Verio that it already owns, the cost of the proposed
acquisition to NTT will be approximately $55 per share.
13. By entering into the agreement with NTT, the Verio Board has
initiated a process to sell the Company which imposes heightened fiduciary
responsibilities 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.
14. The Individual Defendants failed to make an informed decision, as
no market check of the Company's value was obtained. In agreeing to the merger,
the Individual Defendants failed to properly inform themselves of Verio's
highest transactional value.
15. 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."
16. The Individual Defendants have violated the fiduciary duties owed
to the public shareholders of Verio. The
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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 demonstrate a clear absence of the exercise of
due care and of loyalty to Verio's public shareholders.
17. 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.
18. 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.
19. Plaintiff and other members of the Class have been and will be
damaged in that they have not and will not receive their fair proportion of the
value of Verio's assets and business, and will be prevented from obtaining fair
and adequate consideration for their shares of Verio common stock.
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20. The consideration to be paid to Class members in the proposed
merger is unfair and inadequate because, among other things:
(a) The intrinsic value of Verio's common stock is materially in
excess of the amount offered for those securities in the merger giving due
consideration to the anticipated operating results, net asset value, cash flow,
and profitability of the Company;
(b) The merger price is not the result of an appropriate
consideration of the value of Verio because the Verio Board approved the
proposed merger without undertaking steps to accurately ascertain Verio's value
through open bidding or at least a "market check mechanism"; and
(c) By entering into the agreement with NTT, the Individual
Defendants have allowed the price of Verio stock to be capped, thereby depriving
plaintiff and the Class of the opportunity to realize any increase in the value
of Verio stock.
21. By reason of the foregoing, each member of the Class will suffer
irreparable injury and damages absent injunctive relief by this Court.
22. NTT, because of its stock ownership and representation on Verio's
Board has access to information about the Company that gives it an unfair
advantage over other potential
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bidders. NTT used this information to negotiate a transaction favorable to
itself and unfair to Verio's public shareholders. Additionally, NTT knowingly
aided and abetted the breaches of fiduciary duty committed by the Individual
Defendants in order to buy Verio at the lowest possible price.
23. Plaintiff and other members of the Class have no adequate remedy
at law.
WHEREFORE, plaintiff and members of the Class demand judgment against
defendants as follows:
a. Declaring that this action is properly maintainable as a class action
and certifying plaintiff as the 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, consummating, or closing the proposed
transaction;
c. In the event that the proposed transaction is consummated, rescinding
it and setting it aside, or awarding rescissory damages to the Class;
d. Awarding compensatory damages against defendants, individual and
severally, in an amount to be determined at trial, together with pre-
judgment and
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post-judgment interest at the maximum rate allowable by law, arising
from the proposed transaction;
e. Awarding plaintiff his costs and disbursements, including a reasonable
allowances for plaintiff's counsel and expert fees and expenses; and
f. Granting plaintiff and the Class such other and further relief as the
Court may deem just and proper.
ROSENTHAL, MONRAIT, GROSS
& GODDESS, P.A.
By: Carmella P. Keener
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Suite 1401, Mellon Bank Center
P.O. Box 1070
Wilmington, DE 19899-1070
(302) 656-4433
Attorneys for Plaintiff
OF COUNSEL:
STULL, STULL & BRODY
6 East 45th Street
New York, NY 10017
(212) 687-7230
WEISS & YOURMAN
551 Fifth Ave., #1600
New York, NY 10176
(212) 682-3025
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