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The ranks of New York Stock Exchange Inc. seatholders opposing a merger with trading platform Archipelago Holdings Inc. is swelling. Seven more seatholders have joined a class action seeking to block the Big Board’s proposed merger with Archipelago Holdings, bringing the total number of members suing the exchange to 11. William Higgins in May filed a lawsuit in New York State Supreme Court seeking to block the deal. He claims the deal favors Archipelago, investment bank Goldman, Sachs & Co. and certain exchange executives to the detriment of the exchange’s 1,366 seatholders. Opponents of the deal still have a long way to go before they can claim to represent the views of most NYSE members. More than 400, by contrast, have petitioned the court to let the deal proceed. Higgins’ lawsuit alleges breaches of fiduciary duty by the exchange’s board of directors for approving the deal terms. Ray Pellichia, a spokesman for the NYSE said the suit is “without merit.” New revelations that NYSE chief executive John Thain dismissed a rival bid for the Big Board without consulting them have particularly incensed the disgruntled shareholders. Private equity firms Blackstone Group and Bain Capital Partners are understood to have approached the NYSE in June about making a bid for the exchange for $3.3 million in cash or $4.4 million in stock and cash to each of the exchange’s 1,366 seat holders for a 30 percent stake. The NYSE at the time engaged in a formal merger proposal with Chicago-based Archipelago. “This is very troublesome,” said James Sabella, a partner at law firm Grant & Eisenhofer PA in New York, one of the two law firms representing Higgins. The other firm is Raynes McCarty of Philadelphia. “The merger agreement allows for consideration of superior proposals and it appears that the NYSE dismissed this one out of hand,” Sabella said. “Thain purports to be justified in doing so but the board has fiduciary obligations to the seatholders.” However, sources familiar with exchange and the private equity firm’s approach said there was no formal offer and the PE firms never followed up their preliminary inquiry. Thain has said publicly the exchange was not interested in private-equity proposals. Sabella, nevertheless, said the amended complaint includes an account of the rejected offer and his firm intends to depose the involved parties as well as Thain on the details. NYSE members will have their regular meeting on Thursday and many are expected to demand more details about the abortive private equity deal. The proposed merger between the NYSE and Archipelago could go before the NYSE’s seatholders for a vote as early as November. The deal would give each seatholder $300,000 in cash and $3.3 million in stock that could be sold in thirds over the first three years after the merger. While the private-equity proposal would give seatholders more money per seat upfront, the big advantage of a deal with Archipelago — which is listed on the Pacific Stock Exchange — would be allowing NYSE to immediately become a public company. Copyright �2005 TDD, LLC. All rights reserved.

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