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                       Securities and Exchange Commission
                             Washington, D.C. 20549
                                    Form 10-K
       FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                [X] Annual Report Pursuant To Section 13 or 15(d)
                     Of The Securities Exchange Act Of 1934
                     For the fiscal year ended May 31, 2000
                                       Or
              [ ] Transition Report Pursuant To Section 13 or 15(d)
                     Of The Securities Exchange Act Of 1934
                        For the Transition Period from to

                           Commission File No. 1-9480
                      National Discount Brokers Group, Inc.
             (Exact name of registrant as specified in its charter)

                Delaware                               22-2394480
   (State or other jurisdiction of                 (I.R.S. Employer
    incorporation or organization)               Identification Number)

10 Exchange Place Centre, Jersey City, New Jersey       07302
   (Address of principal executive offices)           (Zip Code)

        Registrant's telephone number, including area code (201) 946-2200

           Securities registered pursuant to Section 12(b) of the Act:

                                                 Name of each exchange
       Title of each class                        On which registered
    Common Stock, $.01 par value                New York Stock Exchange

           Securities registered pursuant to Section 12(g) of the Act:

                                      None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
Yes [ X ] No [   ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of  June  30,  2000,  20,998,782  common  shares  were  outstanding,  and the
aggregate market value of the common shares of National  Discount Brokers Group,
Inc. held by non-affiliates was approximately $338,000,000(1).

                       Documents Incorporated By Reference

       Document Incorporated                             Part of Report
            By Reference                            Into Which Incorporated
 Proxy Statement for Annual Meeting
      to be held October 25, 2000                            Part III
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(1) For purposes of this  calculation,  the  outstanding  shares of common stock
beneficially  owned by directors and executive  officers of the  registrant  and
both  Peter  R.  Kellogg  and  his  affiliates  and  Deutsche  Bank  AG and  its
affiliates,  as reported in their  respective  most  recent  filing  pursuant to
Section 13 (d) of the Securities  Exchange Act of 1934, as amended,  were deemed
owned by affiliates.  The  registrant  does not admit that any such person is an
affiliate of the registrant.



<PAGE>






                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                       Page
<S>              <C>        <C>                                                                        <C>
PART I

Item 1.           Business............................................................................. 1
                       Introduction.................................................................... 1
                       Recent Developments............................................................. 2
                       Financial Information About Segments............................................ 3
                       Description of Business......................................................... 3
                            Revenue by Source.......................................................... 3
                            Retail Discount Brokerage Services - NDB.com............................... 4
                            Nasdaq Market Making - NDB Capital Markets.................................14
                            Proposed Self-Clearing Operations - Millennium Clearing
                            Company....................................................................16
                            Investments................................................................17
                  Personnel............................................................................18
                  Competition..........................................................................18
                  Regulation...........................................................................19
                  Customer Protection and Insurance....................................................20
                  Net Capital and Customer Reserve Requirements........................................21

Item 2.           Properties...........................................................................22

Item 3.           Legal Proceedings and Contingencies..................................................22

Item 4.           Submission of Matters to a Vote of Security Holders..................................23


PART II

Item 5.           Market for NDB Group's Common Stock and Related Security Holder
                  Matters..............................................................................23
                  Unregistered Sales of Securities.....................................................24

Item 6.           Selected Consolidated Financial Data.................................................24

Item 7.           Management's Discussion and Analysis of Financial Condition and Results of
                  Operations.......................................................................... 26
                       Results of Operations...........................................................26
                       Liquidity and Capital Resources.................................................35
                       Effects of Inflation............................................................37
                       Impact of the Year 2000 Issue...................................................37
                       Looking Ahead...................................................................37

<PAGE>

Item 7a.          Quantitative and Qualitative Disclosures About Market Risk...........................38

Item 8.           Financial Statements and Supplementary Data..........................................40

Item 9.           Changes in and Disagreements with Accountants on Accounting and Financial
                  Disclosure...........................................................................40


PART III

Item 10.          Directors and Executive Officers of the Company......................................41

Item 11.          Executive Compensation...............................................................41

Item 12.          Security Ownership of Certain Beneficial Owners and Management.......................41

Item 13.          Certain Relationships and Related Transactions.......................................41


PART IV

Item 14.          Exhibits, Financial Statement Schedules and Reports on Form 8-K......................41

</TABLE>


Forward Looking Statements

         Statements  regarding the Company's  expectations and beliefs as to its
future  operations,  plans or financial  condition and certain other information
contained in the Form 10-K,  including,  but not limited to, the material  under
the headings "Impact of Year 2000 Issue", "Looking Ahead" and "Legal Proceedings
and Contingencies",  or in documents incorporated herein by reference constitute
forward  looking  statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act  of  1995.   Although  the  Company  believes  that  its
expectations and beliefs are based on reasonable  assumptions  within the bounds
of its knowledge of its business and  operation,  there can be no assurance that
actual  results will not differ  materially  from its  expectations  or beliefs.
Factors which could cause actual results to differ from  expectations or beliefs
include a general  downturn of the economy,  changes in the level of activity or
structure of securities  markets in which the Company  participates,  changes in
customer  growth,  unplanned  expense  increases,  inability  of the  Company to
attract or retain key employees,  changes in government policy or regulation and
unforeseen costs and other effects related to legal proceedings or investigation
of governmental and self-regulatory organizations.

                                      -ii-
<PAGE>



                                     PART I

Item 1.     Business

Introduction

         National  Discount  Brokers  Group,  Inc.  ("NDB  Group")  is a holding
company whose principal wholly owned  subsidiaries are National Discount Brokers
Corporation,  doing  business as NDB.com  ("NDB.com"),  and NDB Capital  Markets
Corporation  ("NDBC"),  formerly  Sherwood  Securities  Corp.  NDB Group and its
subsidiaries,  collectively referred to as the "Company",  are primarily engaged
in the securities business and in providing related financial services.

         NDB.com,  a registered  broker-dealer,  is a deep  discount  securities
brokerage firm  specializing  in trade  execution for individual  investors with
offices in Jersey City, New Jersey.  Customers are offered automated  securities
order  placement and  information  services  through the  Internet,  as well as,
through touch-tone telephone and registered representatives.

NDBC was formed in 1968 and specializes in the market making of Nasdaq and other
over-the-counter  securities and provides trade execution  services primarily to
broker-dealer  and  institutional  customers.  As a national  trading  firm with
offices in Jersey City, New Jersey;  Chicago,  Illinois;  Denver,  Colorado; Los
Angeles, California; and Boston, Massachusetts,  NDBC traded approximately 4,300
Nasdaq and other over-the-counter  securities,  as of June 30, 2000, as a market
maker and principal for its own account.

         NDB Group and another of its wholly owned subsidiaries, SHD Corporation
("SHD"),  also owned  membership  interests in  Equitrade  Partners,  L.L.C.,  a
Delaware limited  liability  company  ("Equitrade").  Equitrade was a registered
specialist  on the New York  Stock  Exchange  ("NYSE").  On June 18,  1999,  the
Company sold its 46.845%  membership  interest in  Equitrade to a subsidiary  of
Spear Leeds & Kellogg,  L.P. ("SLK"), for cash. The operations of Equitrade have
been reflected in discontinued  operations in the accompanying audited financial
statements.

         In July 1999,  NDB Group formed  Millennium  Clearing  Company,  L.L.C.
("Millennium")  as a  wholly  owned  subsidiary  for the  purpose  of  providing
clearing  services  initially  for NDBC and  NDB.com  and  eventually  for other
correspondents.  Management  of the  Company  anticipates  the  commencement  of
clearing for NDB.com and NDBC by Millennium during early-calendar year 2001.

         NDB Group was incorporated  under the laws of Delaware in December 1981
under  the name The  Sherwood  Equity  Group  Ltd.  It  changed  its name to The
Sherwood Capital Group, Inc. in 1983 and to The Sherwood Group, Inc. in 1987. In
December  1997,  NDB Group adopted its present name. NDB Group's common stock is
listed on the NYSE under the symbol "NDB".

         NDB  Group's  principal  executive  offices  are located at 10 Exchange
Place  Centre,  Jersey  City,  New  Jersey  and its  telephone  number  is (201)
946-2200.

                                       1
<PAGE>



Recent Developments


         On June 18, 1999,  the Company sold its 46.845%  interest in Equitrade,
to a subsidiary of SLK. The Company received  approximately $85 million in cash,
comprised of a net pre-tax book gain of approximately $36 million and the return
of capital and other cash payments.  The $85 million cash payment was net of the
repayment  of a $15  million  loan made by SLK to NDB Group.  The gain from this
transaction has been recognized in the financial  statements for the fiscal year
ending May 31, 2000.

         On June 25, 1999, NDB Group received  approximately $91.6 million,  net
of  underwriting  discounts and  commissions  and estimated  expenses,  from the
underwritten public offering of 2,990,000 shares of its common stock.

         On February 7, 2000,  NDB Group sold an aggregate of 500,000  shares of
its common stock and warrants  convertible into an additional  500,000 shares of
its common stock in a private  placement to Go2Net,  Inc.  ("Go2Net") and Vulcan
Ventures  Incorporated  ("Vulcan") for $13,500,000.  The warrants were exercised
during  March and  April  2000 with NDB  Group  receiving  additional  aggregate
proceeds of $16,500,000. Russell C. Horowitz, Chairman, Chief Executive Officer,
Chief  Financial  Officer and co-founder of Go2Net,  was elected to the Board of
Directors of NDB Group effective  Monday,  February 7, 2000. Mr. Horowitz joined
the board as part of the Company's agreement with Go2Net and Vulcan.

         On March 28,  2000,  NDB Group  announced  that it had  entered  into a
non-binding  letter of intent (the "Letter") with Deutsche Bank Americas Holding
Corporation ("DBA"), an affiliate of Deutsche Bank AG ("DB"),  pursuant to which
NDB Group would sell  3,000,000  shares of its common stock to DBA or one of its
designated  affiliates  for $45.31 per share or  $135,930,000  in gross proceeds
(the  "Investment").  On May 15, 2000, NDB Group and DB U.S.  Financial  Markets
Holding  Corporation  ("DBUS"),  an affiliate  of DB,  entered into a definitive
agreement (the "Securities  Purchase Agreement")  respecting the Investment.  On
June 15, 2000, the transaction was consummated.

         In  connection  with the  Investment,  on June 15, 2000,  Kevin Parker,
Managing  Director  and Global Head of Cash Equity Sales and Trading for DB, was
elected to the board of directors of NDB Group.

         In connection  with the  Investment  (i) NDB Group and DBUS and certain
other parties entered into a Registration  Rights  Agreement (the  "Registration
Rights Agreement") covering the right of DBUS to have its shares of common stock
of NDB Group registered  under the Securities Act of 1933, as amended;  (ii) NDB
Group and Deutsche  Bank AG ("DB")  entered into a  Stockholder  Agreement  (the
"Stockholder  Agreement")  providing for (A) the prohibition of certain sales by
NDB Group of Voting Capital Stock (as defined) or Common Stock  Equivalents  (as
defined) of NDB Group  without  the  consent of DB, (B) certain  rights of DB to
acquire  Common  Stock of NDB Group from NDB Group in the event of  issuances or
sales of  Common  Stock of NDB  Group by NDB  Group,  (C) the  appointment  of a
representative of DB to the Board of Directors of NDB Group, (D) restrictions on
the voting of Voting Capital Stock of NDB Group held by DB, (E)  restrictions on
DB  acquiring  shares  of  Voting  Capital  Stock of NDB  Group in excess of the
Standstill  Percentage (as defined),  (F) the obligation of DB to sell shares of
Common  Stock  of NDB  Group  to NDB  Group in  certain  circumstances,  and (G)
restrictions on DB conducting  proxy  contests,  or taking certain other actions
with regard to NDB Group;  (iii) DB entered into an agreement  with NDB.com (the
"Securities  Research  Agreement")  regarding the providing of certain  research
materials  prepared by DB or certain of its affiliates to customers of NDB Group
or its subsidiaries in the United States,  and (iv) DB entered into an agreement
with NDB Group  (the "IPO  Agreement")  with  respect to NDB Group or one of its
affiliates being a distributor of initial public offerings of equity  securities
in the United  States if DB or one of its  affiliates is an  underwriter  of the
securities and the internet is a distribution channel.

                                       2
<PAGE>

         DB and NDB Group also  executed  term  sheets (the "Term  Sheets")  for
joint ventures  between DB or one of and more of its affiliates and NDB Group or
one or  more  of its  affiliates  regarding  the  offering  of  online  discount
brokerage in Western  Europe and the rest of the world other than Western Europe
and the United  States.  There can be no  assurance  the parties will enter into
definitive agreements regarding these joint ventures.

         The  foregoing  is  a  summary  of  the   Investment  and  the  related
transactions  and  is not  complete.  The  Securities  Purchase  Agreement,  the
Securities  Research  Agreement,  the  Registration  Rights  Agreement,  the IPO
Agreement,  the  Stockholders  Agreement  and the Term  Sheets are  incorporated
herein by  reference.  Such  agreements  were  filed as  exhibits  to either NDB
Group's Forms 8-K dated May 18, 2000 and June 15, 2000 or this Form 10-K.



Financial Information About Segments

         The Company provides financial services to individuals,  broker-dealers
and institutional  customers through two segments:  NDB.com, which provides deep
discount brokerage  services to individuals,  and NDBC, which provides brokerage
services as a market maker to institutions and other  broker-dealers.  Financial
information  by segment  for the three  years ended May 31, 2000 is set forth in
Note 15 in the Notes to Consolidated  Financial  Statements and does not include
the financial results of discontinued operations, primarily those of Equitrade.



Description of Business

Revenue by Source

         The following  table sets forth sources of the Company's  revenues from
continuing operations on a comparative basis for the periods indicated.
<TABLE>
<CAPTION>

                                                           Fiscal Year Ended May 31,
                                            2000                          1999                          1998
                                            ----                          ----                          ----
                                      Amount          %            Amount           %            Amount           %
                                      ------          -            ------           -            ------           -
<S>                             <C>                <C>         <C>               <C>         <C>               <C>
Firm securities
   transactions (net)           $286,956,912        74.39      $145,319,935       69.91       $90,256,181       65.02

Commission income                 68,576,731        17.78        45,250,436       21.77        37,052,201       26.69
Investment securities
     gain                                  -            -         2,370,242        1.14            63,625        0.05

Interest and dividend
     income                       23,856,633         6.18        10,022,013        4.82         7,599,179        5.47

Fee income                         6,094,867         1.58         4,308,393        2.07         3,567,837        2.57
Other income                         273,336         0.07           594,153        0.29           272,921        0.20
                                  ----------       ------      ------------       -----      ------------       -----

Total revenue                   $385,758,479       100.00      $207,865,172      100.00      $138,811,944      100.00
                                ============       ======      ============      ======      ============      ======

</TABLE>
                                       3
<PAGE>

Certain prior year amounts have been  reclassified to conform to the fiscal year
ended May 31, 2000  presentation.  This table should be read in connection  with
the Company's consolidated financial statements.



Retail Discount Brokerage Services -- NDB.com

Introduction

         NDB.com  offers its customers a wide variety of financial  products and
services and investment tools designed to appeal to all self-directed investors,
from active  traders and life goal  planners to serious  investors.  NDB.com has
designed  its  products  and  services to allow  investors  to create  their own
diversified, manageable portfolios.

Execution Services

         NDB.com's customers can place orders with NDB.com to buy or sell:

o        any  stock  listed on  Nasdaq,  the NYSE or AMEX.  Customers  can place
         market  orders,  limit orders (good until  canceled or day),  stop loss
         orders, stop limit orders (on listed securities) and most short sales;

o        more than 10,000 load, no load and no transaction fee mutual funds.
         Customers can search NDB.com's website mutual fund center for funds
         meeting their investment needs.  NDB.com also offers monthly
         investments in any of these mutual funds through automatic account
         debit;

o        equity and index options listed on the NYSE, AMEX, Chicago Board
         Options Exchange or the Philadelphia Stock Exchange; and

o        fixed income securities, such as U.S. Treasury obligations, municipal
         bonds and corporate bonds.

         NDB.com  offers its  customers  the ability to place  orders  after the
securities markets close. These orders are automatically  submitted prior to the
next  day's  market   opening.   NDB.com  also  provides   customers   real-time
notification  of trade  execution  by  automated  call  back,  fax or e-mail and
arranges  for  the  transmittal  of  shareholder  information,   such  as  proxy
statements, annual reports and tender offer materials.

         Through its Flat Fee Trading(R)  program,  NDB.com  executes all retail
orders  for  execution  during  regular  market  hours at the  following  prices
regardless of the number of Nasdaq shares involved  (limited to 5,000 shares for
exchange listed securities):

                                       4
<PAGE>




         Market Orders                           Limit Orders

         $14.75 for orders placed online         $19.75 for orders placed online
         $19.95 for orders placed by             $22.95 for orders placed by
         PowerBroker                             PowerBroker
         $24.95 for orders placed with our       $27.95 for orders placed with
         registered representatives              our registered representatives


         NDB.com recently developed an interactive application capability on its
website.  This allows new  customers  to start  trading  within one business day
after electronically submitting an application.  The entire process takes just a
few minutes to complete.  First,  a new  customer  selects the type of brokerage
account he or she wishes to open,  such as an  individual,  joint or  custodial.
Next,  the  customer   completes  a  simple,   user-friendly   application   and
electronically submits the application. NDB.com conducts a compliance and credit
review for each  application  and then notifies the customer via e-mail  whether
his or her  application  has been  accepted.  When  combined  with an electronic
transfer of funds from the new  customer,  trading  can begin the next  business
day.

         NDB.com believes  individual  investors gain many advantages from their
NDB.com accounts, including:

o        flat fee commission rates for all Nasdaq trades regardless of the
         number of shares or dollar amount involved;

o        flat-fee commission rates for all listed trades up to 5,000 shares of a
         given security per day;

o        full commission refund of up to $27.95 if, for any reason, a customer
         is not legitimately satisfied with its service;

o        real-time account balances and a list of pending orders;

o        no minimum account balance requirement to open or maintain an account;

o        unlimited insurance protection provided through NDB.com's clearing
         broker for securities;

o        NDB.com's  "Active Trader's  Advantage"  program so customers can place
         multiple  orders  for the same  stock,  on the same side of the  market
         (i.e.,  all buys or all  sells),  on the same day for a single flat fee
         commission;

o        NDB.com's  Buy for Free  program  that  allows for the  commission-free
         purchase of the stock of the  company  for which the  NDB.com  customer
         works;

o        NDB.com's free dividend  reinvestment  program that allows customers to
         purchase additional shares by automatically  reinvesting cash dividends
         and capital gains; and

o        educational programs through NDB University, its joint venture with
         Time Inc. New Media's money.com.

                                       5

<PAGE>

Market Data and Financial Information

         During trading hours,  NDB.com continually  receives and posts detailed
real-time  stock  quotes,  market  information  and  financial  news to  provide
investors with the  information  needed to make  investment  decisions.  NDB.com
believes that real-time  information  services facilitate and encourage customer
investment ideas and increase transaction volume.  NDB.com has arrangements with
leading  content  providers to supply  NDB.com with  information  that customers
desire in connection with their  investment  decisions.  Unless otherwise noted,
all  information  is  available  free of charge to both  visitors  to  NDB.com's
website and NDB.com's customers.

         NDB.com  has  engaged  eLogic  Communications   ("eLogic")  to  gather,
integrate and manage the data supplied by NDB.com's  content  providers.  eLogic
presents  this data to  NDB.com  in a format  that is easy to use and  navigate.
Real-time quotes,  newsletters and some research reports from unaffiliated third
parties are fed directly to NDB.com by individual content providers.

         Quotes.  Real-time  quotes,  only available to NDB.com's  customers,
are provided by Reuters.  Delayed quotes are provided by S&P Comstock.

         News.  NDB.com  receives  news and  press  releases  from  Reuters,  PR
Newswire and Business Wire. The latest business stories and earnings reports are
posted  throughout  the day, and users can search for  information on particular
companies or topics.

         Charts.  eLogic has  developed  charting  tools that use  historical
information provided by Inverson  Financial to compare companies and industries.

         Analyst Reports.  Zacks Investment Research provides research analysts'
recommendations and earnings forecasts.

         Insider  Trading.  Vicker's Stock Research  provides  detailed  insider
trading data.  This  information is available only to NDB.com's customers.

         Research Reports. Market Guide provides fundamental research reports on
over 11,000 public companies,  including price performance  history, key ratios,
sales and earnings and historical financial statements. This information is only
available to NDB.com's customers.

         Market  Commentary.  Briefing.com and TheStreet.com provide live market
commentary and continual market analysis  throughout the day.  This information
is available only to NDB.com's customers.

         Market Information. NDB.com offers a complete market summary, including
current market indices, most active stocks,  intraday market graphics and 90 day
market graphics.  NDB.com customers can access more  comprehensive  information,
such as international market indices and treasury bond, yen and euro quotes.

         SEC Filings.  NDB.com provides a link to full-text SEC filings by every
public company.

                                       6

<PAGE>

Portfolio Tracking and Records Management

         Customers can access a list of all portfolio  assets they hold in their
NDB.com  accounts  online,  by  telephone  and  through   NDB.com's   registered
representatives. Customers also receive:

o        real-time listing of all their portfolio assets, including current
         prices and current market values;

o        detailed  account balance and transaction  information,  including cash
         and money fund balances, net market value, dividends received, interest
         income, deposits and withdrawals;

o        quarterly account statements;

o        annual tax statements;

o        daily profit and loss statements; and

o        monthly account  statements for active customers,  summarizing  account
         activity,  including asset  valuation,  transaction  history,  interest
         income and distribution summary.

NDB.com is using the Open Financial  Exchange (OFX) format to provide  customers
the  ability to view their  portfolio  holdings  on Yahoo!  Finance.  NDB.com is
currently  evaluating  the  extension  of this  service  so that  customers  can
download  their online  account  information  directly into  personal  financial
software  programs  such  as  Intuit's  Quicken,  Microsoft's  MSN  MoneyCentral
Investor Portfolio and Microsoft's Money.

Cash Management Services

         NDB.com offers several cash management options to its customers.  These
include ProCash Plus accounts which feature unlimited check writing  privileges,
telephone  bill  payment and access to a  Mastercard  debit card.  NDB.com  also
offers  customers  access to a no fee First USA Visa credit card and  electronic
funds  transfer by touch-tone  telephone.  Customers earn interest on uninvested
funds or by investing in several Alliance money market funds.

NDB University

         NDB.com  offers all website  users  lessons in finance,  investing  and
money  management  through NDB University,  its joint venture with Time Inc. New
Media's money.com.  These programs are designed to help customers invest,  save,
borrow and spend more  wisely.  New  lessons  are  introduced  periodically  and
include topics such as the fundamentals of investing in the stock market, issues
to consider when setting  investment  priorities and tips for saving for college
and planning for retirement. Interactive programs allow investors to personalize
the lessons to fit their individual objectives.

Specialized Services

         NDB.com offers  specialized  services  designed to appeal to registered
investment  advisors,  institutional  investors and high net worth  individuals.
NDB.com  provides   custodial,   trading  and  support  services  to  registered
investment  advisors  ("RIAs") who manage their customers'  portfolios.  NDB.com
assigns  each RIA to an account  manager  who assists in opening the account and
acts as a liaison  with the  execution  services  department.  NDB.com  also has
customer  service  representatives  and a preferred  execution desk dedicated to
RIAs.

                                       7
<PAGE>

         NDB.com has established an institutional trading desk to meet the needs
of  institutional  investors  and  hedge  funds,  which  tend to be more  active
traders. They frequently place block trades,  usually trades of 10,000 shares or
more. NDB.com charges negotiated fees rather than flat fees for these trades.

         Through its Concierge  Desk,  NDB.com has registered  customer  service
representatives  dedicated  to meeting the needs of active  traders and high net
worth individuals who maintain large account balances at NDB.com.

Investment Tools

         NDB.com offers several investment tools designed to assist customers in
making investment decisions. These investment tools include:

         Stock  Screening.  Stockpoint  provides two stock  screening tools that
permit  investors  to search for stocks that fit their  particular  needs on the
NYSE,  Nasdaq  and AMEX.  Customers  can search  fundamental  data on over 8,900
companies  based on a variety of parameters,  including  market  capitalization,
price, return on equity and percentage of institutional ownership.

         Mutual Fund  Screening.  Stockpoint  provides two mutual fund screening
tools that  permit  investors  to screen over  10,000  mutual  funds on up to 27
parameters such as performance,  risk,  expenses/fees and statistics.  Customers
can quickly add, sort, and reorder data fields in their results.

         Mutual Fund Center.  eLogic has developed a searchable database of more
than 9,000 mutual funds based upon information provided by Value Line. Customers
can use  research  and  analysis  tools to screen  funds  based on a variety  of
defined  parameters.  They can also obtain a list of the top performing funds in
over 75 categories.

         Newsletters.  Customers can subscribe to over 100 investment
newsletters provided by newsletters.com.

         IPOinfo.  IPO.com  provides  customers  with  Initial  Public  Offering
up-to-date pricing,  filings,  calendar, news, and underwriters.  Customers also
have the ability to search current IPO information.

         Research on Demand.  NDB.com  offers access to other premium investment
research and analysis for a fee.  Available  reports include S&P Stock and
Industry Reports and First Call Earnings Estimates.

         NDB's  StockPulse.  A free,  proprietary,  real-time  streaming tool
that tracks securities and displays trade activity in dynamic graphs.

         NDB-Silicon  Investor  Message  Boards.  NDB.com  offers  a  co-branded
version  of  the  Silicon  Investor  financial  discussion  boards  on  ndb.com.
Customers have the ability to read and post messages at no charge.

                                       8
<PAGE>

         Fully  Interactive  Charts.  Advanced  Java  charting with 11 technical
indicators.  Customers  have the ability to customize charts and plot historical
activity.

         Tax Center.  An online  resource  destination  that provides  customers
with:   Schedule   D-efense,   a  download  of  their  account  history  into  a
user-friendly  "Schedule D"  Microsoft  Excel  spreadsheet,  a 1099 and Original
Issue Discounts Help Guide, Tax FAQ's, Tables, Forms and Withholding Calculator.

         Smart  Alerts.  NDB Price  Alerts "pop up" on a customer  screen when a
user-defined  parameter is met. NDB News Alerts notify  customers  when news has
been released on a position in their portfolio, and are summarized in a Snapshot
E-mail at market close. SEC Filing Alerts notify customers when positions have a
recent SEC Filing.  These filings are also  summarized  in a Snapshot  E-mail at
market close.

         Pop Up Trade  Notifications.  National  Discount  Brokers Trade Monitor
automatically  checks for trade execution reports every 5 seconds. If activated,
it will "pop up" to the front of the  users'  screen  whenever  there is a trade
execution to report.

         Second  Opinion.  Customers have access to Market Edge's Second Opinion
Weekly,  The Idea Generator,  and the monthly  newsletter "ON the EDGE".  Second
Opinion  provides  investors with a Buy/Hold/Sell  opinion as well as a complete
technical  picture of the nearly 5,000 stocks  followed by Market Edge. The Idea
Generator is a simple, easy to use filtering system,  which searches for today's
buy/short  candidates  selected  by  Market  Edge.  On  the  Edge  is a  monthly
commentary,  which provides  detailed,  technically  based market analysis and a
forecast of the market.

Looking Forward

NDB Mobility.  NDB.com intends to offer, by Fall 2000, wireless trading via PDAs
(e.g., Palm Pilots) using Aether Systems' technology, which is now being tested.
NDB.com also plans to develop WAP (Wireless Application  Protocol)  applications
to enable customers to access ndb.com via cell phones.

         Deutsche  Bank IPOs and Research.  NDB.com has recently  entered into a
strategic  alliance with Deutsche  Bank,  one of the world's  largest  financial
institutions.  As a result of this alliance,  NDB.com customers will have access
to Deutsche  Bank's world class U.S.  equity  research and certain U.S.  initial
public offerings.

         NDB Select. Select customers (active traders who maintain a set minimum
amount of commissions each month with NDB.com) will be able to access streaming,
real-time  Nasdaq Level II quotes.  Additional NDB Select  features  include:  a
quote  grid  display,  top  ten  most  active  (winners,  losers,  etc.)  equity
information,  time  and  sales of  executions,  quick  snap  quote,  news  (from
providers such as Dow Jones and Comtex),  real-time charts,  real-time  tickers,
and advanced option quotes and analysis.

                                       9

<PAGE>

New Product and Service Development/Business Development

         NDB.com  constantly  evaluates  new  ideas to  expand  or  improve  the
products and services  NDB.com offers to its customers.  Its Strategic  Planning
and Business  Development  group is responsible for researching and implementing
projects,  including those initiated by our executive management.  As of May 31,
2000, the group consisted of two executive vice presidents,  a director,  a vice
president  and three senior  analysts  with  expertise in  accounting,  finance,
management and project management. The group performs competitive analyses, cost
benefit   analyses,   trend  projections  and  due  diligence  and  manages  the
development  of new  products  and  services  within  specified  timeframes  and
budgets.  The group also seeks qualified companies with whom NDB.com may develop
affinity  relationships and other partnerships to provide these new products and
services.


Delivery of NDB.com Services

         NDB.com  provides  its  customers  with three points of access to trade
securities,  obtain research and monitor account balances: its Internet website,
its  interactive  telephone  system  and  its  registered  representatives.   In
addition, a wireless trading application,  currently being tested, is planned to
be available by Fall 2000.

         Online Services.  NDB.com's  website allows customers to electronically
place orders to buy or sell securities from their personal  computers 24 hours a
day, seven days a week for execution during regular market hours. NDB.com is the
only  online  broker to have  received  in 1999 the  highest  ratings  from both
Barron's and Money  magazine.  Similarly,  Money magazine  ranked NDB.com as the
number  two  online  broker  in its 1999  study  testing  ease of use,  customer
service,  system responsiveness,  products and tools, and costs, and also ranked
the website the number one online broker for new online investors.  In the March
13, 2000 edition of Barron's, NDB was ranked number one against twenty-six other
online  brokers and again  received the highest  rating of four stars.  Barron's
noted NDB.com's superior trade execution,  a well designed site, ease of use and
tax reporting as some of the reasons for the superior ranking. NDB.com's website
is designed to be  user-friendly  with easily  accessed  help pages and messages
that repeat orders for accuracy and  confirmation.  Online  investors can access
real-time  quotes and news as well as a broad array of free investment  research
and tools to help them make more informed investment decisions. During the month
of May 2000, approximately 80% of NDB.com's executed trades originated online.

         Interactive   Telephone  System.   PowerBroker,   NDB.com's  touch-tone
telephone interactive response system, is available 24 hours a day, seven days a
week.  With  PowerBroker,  customers can check  account  positions and balances,
perform  account  administration  and place orders for execution  during regular
market hours.  PowerBroker  is available in four  languages:  English,  Spanish,
Mandarin  and  Cantonese.  During  the month of May 2000,  approximately  10% of
NDB.com's executed trades originated through PowerBroker.

         Registered  Representatives.  As of  May  31,  2000,  NDB.com  had  176
registered representatives to answer questions,  accept orders and provide quote
and account  information.  These  representatives  are available  Monday through
Friday,  from 7:00 am to 8:30 pm (other  than  holidays)  and place  orders  for
execution  during  regular  market  hours and  NDB.com-extended  trading  hours.
NDB.com is committed to offering its  customers the ability to place trades with
registered  representatives.  During the month of May 2000, approximately 10% of
NDB.com's executed trades originated through its registered representatives.

                                       10

<PAGE>

NDB.com Affinity Relationships

     NDB.com   pursues   affinity    partnerships    and    business-to-business
relationships  to increase its access to potential  customers,  build brand name
recognition  and expand  the  products  and  services  NDB.com  can offer to its
customers.  NDB.com is actively  pursuing  alliances with a variety of companies
whose  customers  are likely to use its products and  services.  During the year
ended May 31, 2000, several new relationships were established. Among these were
Go2Net, Inc., Yahoo! Inc. and Sandbox.com.

         Another important partnering arrangement was the development of our B2B
Financial   Solutions  program.   B2B  Financial  Solutions  provides  financial
institutions  with  NDB.com's  award-winning  website  as  a  co-branded  online
brokerage  solution.  This alternative  customer  acquisition  strategy can also
enable  NDB.com  to  establish  a  "bricks  and  clicks"  presence  without  the
associated  overhead  costs.  Our initial  partners in this program include Bank
United,  Pentagon  Federal  Financial  Services,  Somerset  Valley  Bank and 1st
Constitution Bank.

         NDB.com  believes  that its focus on affinity and  business-to-business
relationships is likely to result in lower account  acquisition  costs.  NDB.com
intends  to expand  its  affinity  and  business-to-business  programs  and will
evaluate  potential  relationships  with new affinity  and  business-to-business
partners in the future as opportunities arise.


NDB.com Marketing and Advertising

     During  fiscal  year 2000,  NDB.com  used a variety of media forms to reach
individual investors who may use its services,  including broadcast media, print
advertisements,  online  advertisements  and direct mail. In March 2000, NDB.com
launched a new multi-media  advertising campaign featuring the tagline, "We Take
You Under Our Wing".  In addition,  NDB.com  signed  marketing  agreements  with
Yahoo!  Inc. and Go2Net,  Inc. wherein NDB.com would be featured  throughout the
Yahoo!, Yahoo! Finance, Silicon Investor and the Go2Net network websites.

         During the fiscal year ending May 31, 2001, NDB.com intends to continue
advertising to build awareness of its brand,  quality customer service and depth
and breadth of its products and services.  NDB.com intends to continue to market
its  online  investing  services  to  individual  investors  as a better  way of
handling  securities  transactions,  accessing  financial  and  market  data and
managing portfolios.


NDB.com Customer Service

         NDB.com believes that providing  excellent customer service is critical
to  its  success.  As  of  May  31,  2000,  NDB.com  had  100  customer  service
representatives and supervisors trained to promptly handle all types of customer
inquiries.  Customer  service  representatives  answer  inquiries  about account
status, such as balances,  portfolio holdings and trade executions,  and address
more complex issues such as margin  requirements  and research  questions.  They
also act as a liaison with the execution  services  department.  Representatives
are available 24 hours a day on weekdays and from 8:00 am to 6:30 pm on weekends
(other than  holidays).  NDB.com  expects to implement full 24 hour a day, seven
days a week coverage  (other than  holidays)  during the first quarter of fiscal
year  2001.  NDB.com  is in the  process of  increasing  the number of  customer
service representatives to approximately 130.

                                       11
<PAGE>

         Telephone and E-mail Support and Technology. NDB.com's customer service
telephone system is designed along "open  architecture"  lines to permit regular
hardware and software upgrades with minimal disruption and expense. New releases
of both  programs and equipment are only  integrated  into the customer  service
system after adequate equipment testing and training of personnel.  PowerBroker,
our automated interactive voice response system, currently handles approximately
27,000  incoming  calls  daily,  greatly  reducing  the  volume  of calls  which
NDB.com's  representatives  must  handle.  This  reduces  wait times during high
volume trading hours and helps reduce overall customer service costs.

         NDB.com also provides customer support via e-mail and live on-line chat
sessions using NDB's iAnswer service.  All customer service  representatives are
trained to respond to electronic  requests using both  pre-composed and original
e-mails.  NDB.com  requires  that all e-mail  responses  are to be reviewed by a
customer service manager before being sent to a customer.

         Personnel  and  Training.  NDB.com  believes  that  training  is key to
creating an efficient and motivated  customer service team. NDB.com is committed
to providing the best available training to its customer service representatives
in an ongoing manner.

         NDB.com  strives  to  maintain a ratio of one  supervisor  for each six
customer  service  representatives.  NDB.com  believes that this promotes higher
quality customer service. Supervisors monitor customer service calls and e-mails
to  improve   training  and   customer   satisfaction.   All  customer   service
representatives  undergo both monthly and annual performance  reviews to measure
their  knowledge of NDB.com's  products and  services,  their level of teamwork,
their work ethic and personal  objectives and their ability to deliver NDB.com's
expected level of customer satisfaction.

         New customer  service  representatives  take a two month initial course
that covers NDB.com's  products,  services and policies.  Topics include trading
over the Internet,  equity and option  trading,  margin  accounts and individual
retirement  accounts.  Customer  service  representatives  also receive  ongoing
training as new products and services are  developed  and  NDB.com's  technology
infrastructure is modified or upgraded.

NDB.com Customer Accounts

         NDB.com  had  approximately  245,600  accounts  as  of  May  31,  2000.
NDB.com's customers include individual investors, businesses,  investment clubs,
registered  investment  advisors and institutions.  During the fiscal year ended
May 31, 2000, NDB.com averaged  approximately 16 executed  commissionable trades
per account.  At May 31, 2000,  NDB.com's customer assets totaled  approximately
$9.9 billion, an average per account of over $40,000,  which NDB.com believes to
be among the highest in the industry.


NDB.com Technology

         NDB.com's technology department develops and maintains a combination of
proprietary and vendor software to support its online brokerage  business and to
automate traditionally  labor-intensive  transactions.  The department's primary
goal is to ensure uninterrupted  customer access to NDB.com's system through the
Internet and the telephone,  full  availability of its products and services and
rapid transmission of trades.

                                       12
<PAGE>

         NDB.com's  technology is designed  along "open  architecture"  lines to
permit  regular  hardware and software  upgrades  with  minimal  disruption  and
reduced expense. This design allows NDB.com to respond quickly to growth in both
trading  volumes and number of accounts by adding new  computers  and  improving
software.

         NDB.com   believes   there  are  many   advantages  to  its  technology
infrastructure. NDB.com's system is designed to be:

o        highly scalable, which allows it to change its size or configuration to
         adapt to increased volume and numbers of users;

o        highly fault tolerant, which allows its customers continued access in
         the event of certain hardware or software failures;

o        highly integrated, which allows it to communicate with any customer's
         personal computer;

o        load balanced, which allows it to respond to surges in trading volume;
         and

o        secure.  NDB.com uses encryption,  authentication  technology and
         firewalls to secure the  confidentiality of the information transmitted
         to and from its customers.

NDB.com's Website

         The primary  components of NDB.com's  new website are the  presentation
layer, the application servers and the databases.

         Presentation  Layer.  The  presentation  layer is the display screen of
NDB.com's website accessed by its customers over the Internet. It allows NDB.com
to offer its services on many platforms without the need to specifically  modify
its  technology  for each  platform.  The  presentation  layer uses the computer
languages  HTML,  Java and Java Script and is designed to be  user-friendly  and
easy to navigate.

         Application  Servers.  NDB.com's Netscape  application  servers use the
computer languages C++ and Java to permit the interaction between its customers'
computers and its  databases.  NDB.com's  proprietary  technology  establishes a
common language among these  components and allows them to function on different
platforms and in different protocols.  The servers also automatically distribute
traffic throughout the system to maintain reliability.

         Databases.  NDB.com's Oracle databases store all information  necessary
to allow customers to execute trades and monitor their  accounts.  The databases
contain a complete history of each customer's account, including past trades and
current  portfolio  positions.  In addition,  the databases  allow  customers to
personalize  their  trading  experience  by  customizing  quote lists and screen
graphics and alerting them to current news on their stocks.



                                       13
<PAGE>

NDB.com's Execution System

         All  customer  orders,  whether  received  through  the  Internet or by
telephone, pass through NDB.com's Unix-based automated processor. This processor
is  designed  to  provide  all  customers  with  the  same  real-time  portfolio
information no matter how it is accessed.  The automated  processor was designed
to rapidly read data, process  transactions and transmit information to multiple
locations,  which provides a high degree of automation for all transactions.  It
applies  preprogrammed  rules to each  order to  determine  whether it should be
routed to a market maker for  execution,  reviewed  internally or  automatically
rejected  for a number  of  reasons,  such as  inadequate  margin  availability.
NDB.com has direct  connections  to multiple  points of execution.  If the first
market  center  the  order is  routed  to  experiences  technical  difficulties,
NDB.com's  order  management  system reroutes the customer order to an alternate
market center for execution.


Nasdaq Market Making -- NDB Capital Markets

Introduction

         At June 30, 2000, NDBC was a market maker in approximately 4,300 Nasdaq
and other over-the-counter securities, approximately 85% of which were listed on
the Nasdaq  National  Market  System.  At May 31, 2000, it was the sixth largest
market  maker in the  United  States  based on the  number of stocks in which it
makes  markets.  For the year  ended  May 31,  2000,  NDBC was also the  seventh
largest  market maker in the United  States based on the volume of shares traded
according to a report  prepared by Autex.  NDBC  believes it has  attained  this
leadership  position by providing better execution services to its broker-dealer
and   institutional   investor   customers  due  to  its  trading   systems  and
technologies,  as well as its skilled  and  experienced  traders.  NDBC has also
developed  proprietary  trading methods and a risk management system designed to
protect its capital and maximize its trading profits.  During the year ended May
31, 2000,  NDBC had a trading  volume of  approximately  16.7 billion shares and
averaged approximately 61,700 batched trades per trading day.


Technology and Operations

         NDBC's  technology  platform  and systems are  designed to enable it to
process  a  large  volume  of  order  flow  reliably  and  efficiently   without
diminishing  speed of  execution.  During the fourth  quarter of the fiscal year
ended May 31,  2000,  NDBC  processed  an average of 89,000  batched  trades per
trading day, and its systems are capable of processing up to 500,000  executions
per day. On the average,  NDBC can process  approximately 150 trades per second.
NDBC  processes a  significant  portion of its  trading  volume over a dedicated
electronic  communications network, which connects its trading operations to the
order entry departments of its broker-dealer and institutional  customers.  This
private  communications  network provides its customers with immediate access to
NDBC's trading  operations and facilitates the handling of customers' orders. As
part of this system, NDBC maintains direct  communication lines with 40 regional
brokerage  firms across the country,  as well as with its branch  offices in Los
Angeles,  California;  Chicago,  Illinois;  Boston,  Massachusetts  and  Denver,
Colorado.  Other brokerage  firms in the same  geographic  regions can use these
dedicated  private lines to directly  access  NDBC's  trading  operations.  NDBC
intends  to  continue  to invest in  technology  to  further  enhance  its order
processing  capabilities  in the  coming  year,  with a goal to  enable  NDBC to
process up to 1,000,000 trades a day at a rate of 250 trades per second.

                                       14
<PAGE>

Risk Management

         NDBC's  trading  profits  depend on its  ability  to  evaluate  and act
rapidly  on market  trends  and  manage  risk  successfully.  To  achieve  these
objectives,  NDBC has  developed a trading  methodology  designed to monitor and
analyze market  activity,  price movements and risk on a real-time  basis.  NDBC
continually analyzes its trading positions in individual securities and monitors
its overall  short and long  positions  and  aggregate  profits and losses.  Its
trading systems provide real-time,  online risk management and inventory control
functions,  including a 10-minute on-screen scroll that shows all losses greater
than $5,000.  Its trading  systems also identify all positions held by different
traders  in the same  security.  As part of its  risk  management  policies  and
procedures,  it allocates  each of its traders a limited  amount of risk capital
with which to trade and requires that a trader seek  permission  from his or her
supervisor  prior to exceeding  that amount.  It also  requires that its traders
maintain positions meeting a specified  potential  long/short ratio. NDBC has 15
trading team captains who are responsible for continually  monitoring their team
members'  positions and profits and losses.  Each of these team  captains  meets
with all members of his or her trading team weekly to assess new developments.

         During  fiscal  year  2000,  there  was a sharp  increase  in the price
volatility  and record  trading  volume of many  stocks,  particularly  those of
companies that sell products or services over the Internet.  Customers  eager to
trade  Internet  and other stocks have  flooded  brokers with larger  numbers of
orders, periodically leading to large order imbalances and system backlogs. NDBC
has implemented  procedures designed to allow continuous execution of customers'
orders,  while lessening the exposure of the firm to extraordinary  market risk.
NDBC's normal policy is to provide continuous  automatic  execution on orders of
up to 2,000 shares.  However, NDBC may reduce or suspend its automatic execution
policy during unusual conditions and at its discretion.


Execution and Customer Services

         NDBC  believes  that a  highly  skilled  and  experienced  trading  and
customer  service  workforce is critical to delivering best execution  practices
and high quality  customer  service.  At May 31, 2000, it had  approximately  75
traders and 150  assistants/trainees.  Its traders have an average of five years
of trading experience,  and NDBC generally requires that its trainees complete a
minimum of two years of extensive in-house training and apprenticeship  prior to
permitting them to trade  independently.  It also has in-house training programs
for traders and trainees, which focus on specialized trading situations, such as
the handling of large  institutional  orders,  large  institutional  blocks, new
issues and highly volatile stocks. Its customer service workforce consisted,  at
May 31,  2000,  of  approximately  65  sales  professionals.  These  people  are
dedicated  to  establishing   and   maintaining   customer   relationships   and
facilitating  trade executions for its  institutional,  broker-dealer  and trade
program  clients.  During the fiscal year ending May 31,  2001,  NDBC intends to
expand  its  trading  floor and open  several  branch  offices,  thereby  adding
approximately  100 positions,  which will permit it to offer an expanded list of
securities in which it makes markets and handle increased trading activities.


Customers

         NDBC  customers  consisted,  at May 31, 2000,  of  approximately  1,000
institutional   investors,   such  as  mutual  funds,   pension  plan  sponsors,
foundations  and  endowments,  more than 400 hedge  funds and  almost all of the
currently registered national and regional broker-dealers.

                                       15
<PAGE>

NDBC's Securities Positions

         NDBC takes both long (owned  assets) and short (assets sold that it did
not own) positions in the  securities in which it makes  markets.  The following
table illustrates its highest,  lowest and average month-end inventory at market
value (based on the aggregate of its long and short  positions)  of  securities.
See Note 3 of Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>


Fiscal Year                     Highest             Lowest            Average
Ended May 31,                 Month End          Month End          Month End
-------------                 ---------          ---------          ---------
      <S>                  <C>                 <C>                <C>
      1998                 $128,078,159        $27,106,790        $53,688,382
      1999                  145,951,865         21,329,531         63,564,724
      2000                  131,747,236         53,434,749         85,700,021

</TABLE>

         NDBC's securities positions on any one day may not be representative of
its  exposure  on any  other  day  because  its  securities  positions  may vary
substantially with economic and market conditions,  allocations and availability
of capital, and trading volume.


Proposed Self-Clearing Operations - Millennium Clearing Company

         The Company currently maintains relationships with two clearing brokers
to clear and settle its  securities  transactions.  The  clearing  brokers  also
provide record keeping,  custody and other services.  NDB.com's transactions are
cleared  through the  Pershing  Division of  Donaldson,  Lufkin & Jenrette.  The
agreement  with Pershing is subject to  termination by either party upon 90 days
prior  notice.  NDBC clears its market  making  transactions  through  Broadcort
Capital Corp.  ("Broadcort"),  a subsidiary of Merrill Lynch.  NDBC's  agreement
with  Broadcort is for an indefinite  period of time but may be terminated  upon
180 days prior written notice by either party.  NDBC has given Broadcort  notice
of termination, which is expected to be effective January 2001.

         The Company intends to begin self-clearing operations by early-calendar
year 2001. The Company has contracted with ADP Financial Services, Inc. ("ADP"),
a third party  service  bureau,  to provide  computer  services to support these
operations.  The Company's regulatory net capital requirement will increase when
it begins self-clearing operations.  The level of that required net capital will
vary with the  amount  of  customer  margin  borrowings,  as well as with  other
factors. The Company plans to operate its clearing activities through its wholly
owned subsidiary, Millennium Clearing Company, L.L.C. ("Millennium").

         The Company believes that performing clearing operations will offer the
following advantages:

o             Margin  lending.  The Company will be  permitted to use customer
              securities  for its margin  lending  activities,  subject to
              regulatory rules;

o             Reduction in costs. The Company believes,  that over time, it will
              be able to perform  its own  clearing  less  expensively  and more
              efficiently than its current clearing arrangements;

                                     16
<PAGE>

o             Cash and securities management.  The Company will be able to offer
              clearing services to its existing broker-dealer  subsidiaries,  as
              well as other  broker-dealers  and other  financial  institutions.
              This will give it  additional  sources of revenue  from  clearance
              fees earned,  as well as additional  net interest  income and fees
              relating to margin lending, custody of customer assets, as well as
              from securities borrowing and lending activities.

The  commencement  of  clearing  activities  is subject  to  several  conditions
including the receipt of regulatory  approvals.  There can be no assurance  that
these self-clearing activities will commence as planned or ever.


Investments

        Venture capital investments.  The Company,  from time to time, makes and
continues to hold  investments  in developing  companies or companies in need of
additional  financing.  Some of these  investments are in restricted  securities
and, as such,  may only be sold pursuant to a registration  statement  under the
Securities  Act  of  1933,  as  amended,   or  pursuant  to  an  exemption  from
registration thereunder.

         The  Company,  for  financial  reporting  purposes,  generally  carries
venture capital investments at fair value. Although the securities of certain of
the  companies  in which  the  Company  invested  may be  publicly  traded,  the
Company's  valuation of such holdings may be discounted  significantly  from the
public market price due to restrictions on transfer, the size of the holdings or
other legal, contractual or practical restrictions on disposition.

         On October 4, 1993,  the  Company  paid  $400,000  for 8,000  shares of
common  stock of Emmett A.  Larkin  Company,  Inc.  ("EAL"),  a  minority  owned
broker-dealer. This holding represents, as of May 31, 2000, approximately 15% of
the  outstanding  common  shares of EAL.  As of May 31,  2000,  the value of the
Company's investment in EAL was estimated to be approximately $1,047,000.

         Between February and April 1998,  NDB.com invested $500,000 for 500,000
shares of Award Track,  Inc.  common stock.  During the year ended May 31, 1999,
the entire  investment  was written off as the  Company's  management  deemed it
worthless. However, on February 15, 2000, Award Track, Inc. was acquired by 24/7
Media Inc. As a result, NDB.com received 39,715 shares of 24/7 Media Inc. common
stock (8,737 shares of which are subject to an escrow agreement) in exchange for
its  shares of Award  Track,  Inc.  common  stock and  reversed  the  previously
recorded  $500,000 loss due to write-off,  thereby  reflecting the investment at
its currently estimated fair market value.

         On October 22,  1999,  the Company  purchased  20,000  shares of Aether
Systems Inc.  common stock for  $320,000.  The Company sold this  investment  on
February  23,  2000  and  recognized  a  profit,  reflected  in firm  securities
transaction in the Consolidated  Statements of Income and Comprehensive  Income,
of approximately $3,500,000.

         On April 13, 2000,  the Company  purchased  750,000  shares of National
Association of Securities Dealers, Inc. ("NASD") common stock for $8,250,000 and
an aggregate of 187,800  warrants to purchase an  additional  751,200  shares of
NASD common stock for $2,065,800.

         During  the fiscal  year  ended May 31,  2000,  the  Company  also made
investments in several other start-up ventures aggregating $3,352,000.

                                       17
<PAGE>

         Investment in property. NDB Group, through its wholly owned subsidiary,
Sherwood Properties Corp., is an investor in a real estate limited  partnership.
This investment is estimated to have a nominal value.


Personnel

         The Company had 902 full-time  employees as of June 30, 2000 (835 as of
May 31, 2000). Included in the preceding employee count are NDBC's 420 full-time
employees,  of which 307 are  institutional  salespeople,  traders  and  trading
assistants.  Also included in the Company's  total  employee count are NDB.com's
420 full-time employees of which 177 are NASD registered personnel.  None of the
Company's  personnel  are  covered by a  collective  bargaining  agreement.  The
Company considers its relations with its personnel to be satisfactory.

         NDBC's   sales   and   trading    personnel,    NDB.com's    registered
representatives,  certain  members  responsible for managing such activities and
certain  Millennium  personnel  are required to take  examinations  given by the
NASD. In certain  circumstances,  additional  examinations are required in order
for sales and  trading  personnel  to be  qualified  to do  business  in various
states.  Traders and certain sales  personnel of NDBC are paid under the "Annual
Trading/Sales  Production  Guarantee"  program,  based  on a number  of  factors
(including  trading  profits)  and  subject  to  an  annual  review.   NDB.com's
registered representatives work on a salary basis plus discretionary bonus.

         All full-time employees who have completed five years of employment may
take a four-week (three months in the case of members of the executive committee
of NDB Group) paid  sabbatical.  Such  sabbatical  must be taken within one year
after the employee's fifth  anniversary.  Sabbaticals may also be taken for each
subsequent  five-year  period of  employment  completed.  In addition,  NDBC has
usually  assumed any trading  losses  incurred  in a trader's  account  during a
trader's sabbatical.


Competition

         The  market  for  online  investing  services,  particularly  over  the
Internet,  is new,  rapidly  evolving  and  intensely  competitive.  The Company
expects  competition to continue to intensify in the future.  NDB.com encounters
direct  competition from discount  brokerage firms providing  either  touch-tone
telephone or online  investing  services,  or both.  These  competitors  include
American Express,  Ameritrade,  Charles Schwab, Datek Online, DLJdirect, E*Trade
Securities,  Fidelity  Brokerage  Services,  Quick &  Reilly  and TD  Waterhouse
Securities.  NDB.com  also  encounters  competition  from the  many  established
full-commission  brokerage  firms,  such as Merrill  Lynch,  Morgan Stanley Dean
Witter  and   PaineWebber.   Additionally,   NDB.com   competes  with  financial
institutions,  mutual  fund  sponsors  and  other  organizations,  some of which
provide online investing services.

         The Company believes that the principal  competitive  factors affecting
the  market  for  NDB.com's  services  are  cost,  customer  service,   quality,
execution, delivery platform capabilities,  ease of use, presentation layer look
and feel,  depth and breadth of services  and  content,  financial  strength and
innovation.

         Many of the Company's  competitors have longer operating  histories and
significantly greater financial,  technical,  marketing and other resources than
it  has.  Many  current  and  potential   competitors  also  have  greater  name
recognition and more extensive  customer bases that could be leveraged,  thereby
gaining market share to the Company's detriment.  Additionally,  new competitors
or alliances among competitors may emerge and rapidly acquire significant market
share.

                                       18
<PAGE>

         NDBC  is one of  several  independent  broker-dealers  whose  principal
activity is making markets in a broad range of Nasdaq and other over-the-counter
securities.  There  are  many  other  broker-dealers  making  markets  in  these
securities.  NDBC  generally  has one or more  competing  market makers for each
security in which it makes a market.  NDBC  competes  primarily  on the basis of
price, its experience in market making, its relationship with its customers, the
availability of its dedicated private electronic  communications network and its
ability  to effect  large  transactions  in an  orderly  manner.  NDBC now faces
increasing competition from electronic  communications networks and the Instinet
trading  market,  which enable  buyers and sellers to interact more directly and
allow for trading without a market maker.


Regulation

         The Company's business is subject to extensive regulation applicable to
the  securities  industry in the United  States.  As a matter of public  policy,
regulatory  bodies in the  United  States  are  charged  with  safeguarding  the
integrity of the securities and other financial  markets and with protecting the
interests  of customers  participating  in those  markets.  The  Securities  and
Exchange Commission ("SEC") is the federal agency charged with administration of
the federal  securities  laws.  However,  the SEC has delegated some  regulatory
matters to  self-regulatory  organizations,  such as the NASD.  The NASD  adopts
rules (which are subject to approval by the SEC),  examines  broker-dealers  and
requires strict compliance with its rules and regulations.  Securities firms are
also subject to  regulation  by state  securities  commissions  in the states in
which they are  registered.  As of May 31,  2000,  NDB.com was  registered  as a
broker-dealer  with the SEC,  the NASD and in all 50  states,  the  District  of
Columbia and the  Commonwealth  of Puerto Rico.  NDB.com is also a member of the
Boston Stock Exchange and the Chicago Stock  Exchange.  As of May 31, 2000, NDBC
was  registered as a  broker-dealer  with the SEC, the NASD and in 20 states and
the District of Columbia.

         SEC and  NASD  regulations  cover  many  aspects  of a  broker-dealer's
business,  including,  but not limited to,  capital  structure and  withdrawals,
sales methods,  trade  practices  among  broker-dealers,  use and safekeeping of
customers'  funds and  securities,  recordkeeping,  the  financing of customers'
purchases, broker-dealer and employee registration and the conduct of directors,
officers and employees. Additional legislation,  changes in rules promulgated by
the SEC and the  NASD,  or  changes  in the  interpretation  or  enforcement  of
existing  law and  rules  may  directly  affect  the  method  of  operation  and
profitability  of  broker-dealers.  The  SEC,  the  NASD  and  state  securities
commissions may conduct administrative proceedings, which can result in censure,
fine, the issuance of cease-and-desist  orders or the suspension or expulsion of
a broker-dealer, its officers or employees.

         NDB.com's and NDBC's sales and trading personnel and certain members of
management  are  required  to  take  examinations  given  by the  NASD.  In some
circumstances,  additional  examinations  are  required  for sales  and  trading
personnel to be qualified to do business in various states.

         Changes in regulations  pertaining to Nasdaq may have a material effect
on NDBC's  trading  activities.  Nasdaq  and the SEC have had and have  proposed
rules,  as well as regulatory  actions and changes in market  practices that may
continue to have an adverse  effect on NDBC's  revenues,  profit margins and the
manner in which it conducts its business.

                                       19
<PAGE>

         To become self-clearing,  Millennium must obtain approval from the NASD
and  other  self-regulatory  organizations.  There  can  be  no  guarantee  that
Millennium will be successful in obtaining the necessary approvals.

         Self-clearing  firms  are  subject  to  substantially  more  regulatory
control and supervision than other types of brokerage firms and must comply with
complex and changing  regulations.  Errors in performing  clearing  functions or
reporting  could lead to civil  penalties  being imposed by the SEC or the NASD.
Self-clearing  will involve a substantial  risk of losses due to clerical errors
relating to the handling of  customers'  funds and  securities.  There can be no
assurance that Millennium will be able to perform these operations as accurately
and  efficiently  as these  operations  are  currently  being  performed for the
Company by its current clearing firms.  Clearing processing errors may also lead
to civil claims by parties who are financially harmed by these errors.

         Self-clearing firms must obtain and retain highly trained personnel and
maintain sophisticated and redundant computer systems. System failures, employee
errors  and  circumstances  beyond the firm's  control  can lead to  significant
financial  losses.  Failure to maintain  accurate and complete records regarding
customer  funds and  securities  can result in  significant  financial risk to a
self-clearing  firm  because  of  the  expense  associated  with  detecting  and
correcting  those  errors.  Failure  to  detect  and  correct  errors  involving
securities  positions on a timely basis can result in significant losses because
of changes in the market values of securities.

         As a self-clearing  firm,  Millennium will have to pay for a portion of
the  securities  purchased by customers of NDB.com,  to the extent the purchases
are made on margin.  As of May 31, 2000,  NDB.com  customer margin debits at its
clearing  firms  were  $856.5   million.   Millennium   will  also  have  direct
responsibility for the clearance of customer securities transactions and for the
possession and control of customer securities and other assets. The Company will
also have to record on its  consolidated  statement of financial  condition  the
customer  receivables and customer payables that are a result of customer margin
loans and customer free credit balances,  which will significantly  increase the
Company's total assets and liabilities. Millennium will also be required to join
one or more clearing  agencies,  make substantial  deposits at those agencies to
secure its  obligations  to those  agencies,  and agree to  contribute  to those
agencies in the event of losses at those agencies, including losses arising from
the default of other clearing members.


Customer Protection and Insurance

         Customers of NDB.com and NDBC are protected  against some losses by the
Securities Investor Protection  Corporation  ("SIPC").  SIPC provides protection
against lost, stolen or missing  securities  (except loss in value due to a rise
or fall in  market  prices)  for  customers  in the  event of the  failure  of a
broker-dealer.  Accounts are  protected up to $500,000 per customer with a limit
of  $100,000  for cash  balances.  Both  NDB.com  and NDBC are  members of SIPC.
However, because the funds and securities of the Company's customers are held by
the Company's clearing firms,  Pershing and Broadcort,  the Company's  customers
are treated for SIPC purposes as customers of Pershing and Broadcort. Therefore,
SIPC coverage comes into play only in the event of the financial  failure of one
of those firms.  In addition to being members of SIPC,  the  Company's  clearing
firms also carry  private  insurance,  which  provides  unlimited  coverage  for
securities  held in  customer  accounts  in the  event of the  failure  of those
clearing  firms.  When the Company becomes  self-clearing,  the Company plans to
obtain coverage in excess of SIPC coverage from an insurance company, the amount
and terms of which have yet to be determined.

                                       20
<PAGE>

         The Company also  carries a financial  institutions  bond  covering NDB
Group and its  subsidiaries  for loss or theft of securities,  forgery of checks
and drafts,  embezzlement,  certain  employee  misconduct  and  misplacement  of
securities.  This bond provides total coverage of $3,000,000 for the Company and
contains a deductible of $10,000.


Net Capital and Customer Reserve Requirements

         As registered  broker-dealers and members of the NASD, NDB.com and NDBC
are subject to the SEC's Uniform Net Capital Rule 15c3-1. The Rule specifies the
minimum  level of net capital a  broker-dealer  must  maintain and also requires
that at least a minimum  part of its assets be kept in  relatively  liquid form.
The Rule provides that a broker-dealer  doing business with the public shall not
permit its net  capital to be less than the greater of a stated  minimum  dollar
requirement or one-fifteenth of its aggregate  indebtedness (the "basic method")
or,  alternatively,  that it not  permit  its net  capital  to be less  than the
greater of a stated  minimum  dollar  requirement  or 2% of its aggregate  debit
items computed in accordance with Rule 15c3-3 (the "alternative  method"). As of
May 31, 2000,  NDB.com was required to maintain  minimum net capital of $250,000
and had total net capital of approximately $12,716,000. As of May 31, 2000, NDBC
was  required to maintain  minimum net capital of  $1,000,000  and had total net
capital of approximately $112,818,000.  Based upon the activities of NDB.com and
NDBC at May 31, 2000,  management of the Company estimates that Millennium would
have a minimum net capital requirement of approximately $86 million.

         NDB.com  and  NDBC  qualify  for  the  exemptive   provisions  for  the
computation for determination of reserve  requirements for broker-dealers  under
subparagraph  (k)(2)(ii) of SEC Rule 15c3-3. During the period from June 1, 1999
through  May 31,  2000,  the  Company  believes  that  NDB.com  and NDBC were in
compliance  with the  conditions  of this  exemption.  When the Company  becomes
self-clearing,  the  Company  will no  longer  qualify  for  exemption  from the
provisions of Rule 15c3-3 that require a brokerage  firm to compute and maintain
a reserve  bank  account  for the  exclusive  benefit  of the  brokerage  firm's
customers.

         In computing net capital  under Rule 15c3-1,  various  adjustments  are
made to  exclude  assets  not  readily  convertible  into cash and to  provide a
conservative  statement of other assets,  such as the  inventory of  securities.
Therefore, a deduction is made against the market value of securities to reflect
the  possibility of a market decline prior to their  disposition.  Thus, the net
capital rule imposes financial  restrictions upon the Company's  businesses that
are more severe than those imposed on concerns in other types of businesses.

         In addition,  the SEC and NASD impose  rules that require  notification
when net capital falls below  certain  predefined  levels,  dictate the ratio of
debt to equity in the  regulatory  capital  composition of a  broker-dealer  and
limit the ability of a broker-dealer to expand its business volume under certain
circumstances.  Moreover,  the  Uniform Net  Capital  Rule and the NASD's  rules
impose requirements that may have the effect of prohibiting a broker-dealer from
distributing  or withdrawing  capital and requiring  prior notice to the SEC and
NASD for certain  withdrawals  of capital,  even capital in excess of regulatory
requirements.  Since NDB  Group's  principal  assets  are its  ownership  of its
broker-dealer subsidiaries,  the rules governing net capital and restrictions on
capital   withdrawals  could  prevent  NDB  Group  from  meeting  its  financial
obligations  on a  timely  basis.  See  Note  13 of  Notes  to the  Consolidated
Financial Statements.

                                       21
<PAGE>

         Compliance  with the  Uniform  Net  Capital  Rule may also limit  those
operations  of NDB.com and NDBC that require the use of  significant  amounts of
capital, such as market making activities.  Further, assets that are included in
their  respective  minimum net capital are not available for distribution to NDB
Group's shareholders in the form of dividends or otherwise. At May 31, 2000, the
Company  believed  NDB.com  and NDBC  were in  compliance  with the net  capital
requirements.  Failure to maintain  the required net capital may subject them to
suspension of business and may ultimately require their liquidation.



Item 2.     Properties

         The corporate  headquarters  of NDB Group and NDBC's office and trading
facilities  occupy an aggregate of approximately  51,600 square feet of space at
10 Exchange  Place  Centre,  Jersey  City,  New Jersey  under a lease  signed in
December 1994 and as  subsequently  amended.  This lease commenced on January 1,
1995 and  ultimately  expires on January 31,  2007.  Base rent for this space is
approximately $1,500,000 per year with periodic escalations.

         NDB.com's  office  and sales  facilities  were  relocated  to 90 Hudson
Street in Jersey  City,  New  Jersey as of May 2000 from 7 Hanover  Square,  New
York, New York. The new space,  occupied  pursuant to a lease signed in May 1999
for  approximately  96,000  square  feet,  commenced in June 1999 and expires in
December  2014,  unless  extended.  Base  rent on this  space  is  approximately
$3,000,000 per year with periodic  escalations.  This space will also be used by
Millennium for its securities clearing operations. NDB.com's former space in New
York City,  occupied under a lease signed in March 1996,  covered  approximately
36,000  square feet.  It commenced on April 1, 1996 and expires on September 29,
2008 unless  prior notice of  termination  is provided.  NDB.com  provided  such
notice on February 10, 2000 and effectively  abandoned the space as of May 2000.
The final rent  payment is due in  September  2000.  Base rent on this space was
approximately $718,000 per year with periodic escalations.

         In May 1999,  the  Company  had also  signed an  18-month  lease for an
additional  10,000  square  feet in New  York  for  base  rent of  approximately
$320,000 per year.  NDB.com used this space for some of its  operations  through
May 2000 at which  time it,  too,  was  abandoned  in favor of the new  space in
Jersey City. The final rent payment is due in October 2000.

         In addition to the above,  as of May 31,  2000,  the Company had leased
office space in Boston, Massachusetts;  Chicago, Illinois; Denver, Colorado; and
Los  Angeles,  California.  During  June 2000,  the  Company  signed a lease for
additional  space in Tinton Falls,  New Jersey.  See Note 14 to the Consolidated
Financial Statements.



Item 3.     Legal Proceedings and Contingencies

         Many aspects of the business of the Company involve  substantial  risks
of potential liability.  In recent years, there has been an increasing incidence
of litigation  involving the securities  industry,  including class action suits
that generally seek substantial  damages.  Companies engaged in the underwriting
and  distribution  of  securities  are exposed to  substantial  liability  under
federal and state securities  laws. The Company is, from time to time,  involved
in proceedings with, and  investigations  by,  governmental and  self-regulatory
agencies.

                                       22
<PAGE>

         The Company has been named as a defendant  in a number of lawsuits  and
arbitrations  and is the  subject of  investigations  that  allege,  among other
things,  violations  of Federal  and state  securities  laws and other  laws.  A
substantial  settlement or judgement in any of these cases could have a material
adverse  effect on the Company.  Except as described  below,  management  of the
Company  believes  that  none  of  these  pending  lawsuits,   arbitrations  and
investigations  is likely to have a  material  adverse  effect on its  financial
condition,  results of operations or liquidity,  although the Company  cannot be
certain of this.

         On March 22, 1999,  Weiss, Peck & Greer,  L.L.C.  ("WPG") filed an NASD
arbitration action against NDBC. WPG alleges that NDBC contravened  standards of
"commercial  reasonableness"  and "just and  equitable  principles  of trade" in
connection with the execution of trades of  approximately  1.5 million shares of
the stock  Amazon.com  from  Carnegie,  Childs & Co. on January 8, 1999. WPG was
Carnegie's  clearing  broker and alleges that the trades  resulted in Carnegie's
having a net short position in 1,462,000  shares of Amazon.com.  WPG covered the
short position on January 11, 1999 and alleges it sustained  losses of more than
$11 million.  NDBC filed an Answer and Statement of  Counterclaim  dated June 8,
1999 in which NDBC denied  liability for the claims asserted by WPG and asserted
a  counterclaim  against  WPG of  approximately  $1.3  million  for losses  NDBC
suffered in  connection  with these  trades.  WPG filed a Reply to  Counterclaim
dated June 28, 1999 denying  liability for the claim  asserted in the Answer and
Statement of Counterclaim.  WPG and NDBC then agreed to non-binding mediation, a
session of which was held on September 24, 1999. The attempted mediation was not
successful. Subsequently, a three-person arbitration panel was appointed and the
parties exchanged discovery requests and responses.  A hearing on the merits has
been scheduled for October 2000. NDBC, after consultation with counsel, believes
it has valid  defenses  to the claims  made by WPG and  intends to  continue  to
vigorously contest the claims.



Item 4.     Submission of Matters to a Vote of Security Holders.

         There were no matters  submitted to a vote of security  holders  during
the fourth quarter of the year ended May 31, 2000.




                                     PART II

Item 5. Market for NDB Group's Common Stock and Related Security Holder Matters.

         NDB Group trades its common  stock on the NYSE under the symbol  "NDB."
Prior to December 12, 1997, the symbol had been "SHD".  There were 1,266 holders
of record of NDB Group's common stock at June 30, 2000. As of June 30, 2000, the
closing sales price per share for NDB Group's common stock was $31.875.

         The  following  table sets forth the high and low sales price per share
for NDB  Group's  common  stock for each  quarterly  period  within the two most
recent fiscal years as reported by the New York Stock Exchange:

                                       23
<PAGE>
<TABLE>
<CAPTION>


                                               Sales Prices
Quarter Ended                            High                Low
-------------                            ----                ---
<S>                                  <C>                <C>
August 31, 1998                      $11.6250           $ 9.3750
November 30, 1998                      9.5625             8.1250
February 28, 1999                     47.0000             8.7500
May 31, 1999                          92.9375            22.3750
August 31, 1999                       61.0625            24.5000
November 30, 1999                     37.6875            20.4375
February 29, 2000                     45.2500            21.5000
May 31, 2000                          59.1250            22.5000
</TABLE>

         There were no cash dividends  declared on the common stock of NDB Group
in the two-year period ended May 31, 2000.  Funds available for  distribution to
shareholders  of NDB Group in the form of  dividends  are  limited to the extent
assets of the Company are utilized to meet the minimum net capital  requirements
of NDB.com,  NDBC and the expected  minimum  capital  requirements of Millennium
under Rule  15c3-1  promulgated  by the SEC.  See  "Business  - Net  Capital and
Customer Reserve Requirements".


Unregistered Sales of Securities

         On February 5, 2000, NDB Group sold 500,000 shares of its common stock,
along  with  warrants  to  purchase  500,000  shares of its  common  stock at an
exercise  price of  $33.00  per share for a period  of three  years  subject  to
earlier  termination if the market price of the common stock equaled or exceeded
$33.00 per share for a specified period of time. The aggregate sale price of the
initial 500,000 shares and the warrants was $13,500,000.  Go2Net, Inc. purchased
130,000 of the shares of common stock and warrants to purchase 130,000 shares of
common stock.  Vulcan Ventures Inc. purchased 370,000 shares of common stock and
warrants to purchase 370,000 shares of common stock. On March 27, 2000,  Go2Net,
Inc.  exercised  its  warrants  for  130,000  shares  for a  purchase  price  of
$4,290,000 and on April 14, 2000,  Vulcan  Ventures Inc.  exercised its warrants
for 370,000  shares for a purchase price of  $12,210,000.  The sales were exempt
from registration under Section 5 of the Securities Act of 1933, as amended,  by
virtue  of  Section  4(2) of the  Act and  Regulation  D of the  Securities  and
Exchange Commission thereunder.


Item 6.     Selected Consolidated Financial Data.

         The following selected consolidated  financial data for the Company for
each of the five  years in the  period  ended  May 31,  2000  should  be read in
conjunction with the respective  financial statements and related notes thereto,
and the  discussion  under  Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations  included in this report. All amounts are in
thousands,  except  per share  amounts.  Certain  prior year  amounts  have been
reclassified to conform to the fiscal year ended May 31, 2000 presentation.

                                       24
<PAGE>


<TABLE>
<CAPTION>




                                                                  Years Ended May 31,

                                                 2000           1999           1998           1997          1996
                                                 ----           ----           ----           ----          ----
Operating Data (a):
<S>                                          <C>            <C>            <C>            <C>            <C>
Revenues                                     $385,758       $207,865       $138,812       $161,182       $161,735
                                             ========       ========       ========       ========       ========

Income from continuing operations
       before income taxes                    $62,761        $34,681        $11,739        $12,647        $29,313

Income taxes                                   30,132         16,462          5,741          6,031         12,783
                                               ------         ------          -----          -----         ------

Net income from continuing
       operations                              32,629         18,219          5,998          6,616         16,530

Income from discontinued
       operations, net of taxes                    83          2,786          3,258          2,664          3,602

Gain from sale of discontinued
       operations, net of taxes                20,746             --          2,704             --             --
                                               ------       ---------      --------       ---------      ---------

Net income                                    $53,458        $21,005        $11,960         $9,280        $20,132
                                              =======        =======        =======         ======        =======


Per Share Data (b):
Basic:
Income from continuing operations,
       net of taxes                             $1.92          $1.30          $ .45          $ .51          $1.30

Income from discontinued
       operations, net of taxes                    --            .20            .24            .21            .29

Gain from sale of discontinued
       operations, net of taxes                  1.22             --            .20             --             --
                                               -------         ------         -----         ------         ------
Net income                                      $3.14          $1.50          $ .89          $ .72          $1.59
                                                =====          =====          =====          =====          =====

Diluted:
Income from continuing operations,
       net of taxes                             $1.86          $1.29          $ .45          $ .51          $1.25
Income from discontinued
       operations, net of taxes                    --            .20            .24            .21            .27

Gain from sale of discontinued
       operations, net of taxes                  1.19             --            .20             --             --
                                                 ----          ------         -----         ------          -----

Net income                                      $3.05          $1.49          $ .89          $ .72          $1.52
                                                =====          =====          =====          =====          =====


Balance Sheet Data:
Total assets                                 $429,182       $217,291       $188,474       $160,161       $143,255
Common stockholders'  equity                  317,412        141,995        124,173         92,274         86,570
Book value per share-basic (b)                  18.65          10.13           9.24           7.16           6.82
Book value per share-diluted (b)                18.11          10.04           9.20           7.13           6.56
Dividends                                          --             --             --             --             --

                                       25
<PAGE>

<FN>
 (a) In May 1999,  the Company  entered into a definitive  agreement to sell its
     ownership  interest in Equitrade.  The transaction  closed on June 18, 1999
     and,  as  such,   the  operations  of  Equitrade  have  been  reflected  in
     discontinued  operations for all periods reported. In addition, the results
     of operations of MXNet,  Inc. and the American  Stock  Exchange  Specialist
     business  of NDBC,  each of which  was sold in  February  1998,  have  been
     included in discontinued operations for all applicable periods.
</FN>
<FN>
(b)  Diluted earnings per share and diluted book value per share are computed by
     dividing net income and common stockholders' equity,  respectively,  by the
     weighted  average  number of common  shares  outstanding  (adjusted for the
     assumed conversion of outstanding common stock options at average month-end
     market price) during each of the years.  Basic  earnings per share excludes
     dilution for the assumed conversion of outstanding common stock options.
</FN>

</TABLE>


Item 7.  Management's Discussion and Analysis of Financial Condition and Results
         of  Operations

                              Results of Operations

Fiscal 2000 Compared to Fiscal 1999

         The results of continuing  operations of the Company for the year ended
May 31, 2000 reflect primarily the activities of NDB.com and NDBC.

         On June 18,  1999,  NDB Group sold its 46.845%  membership  interest in
Equitrade Partners, L.L.C. As a result, the results of operations of this entity
have  been   segregated  and  reflected  as   discontinued   operations  on  the
Consolidated  Statements of Income and Comprehensive  Income.  Accordingly,  the
consolidated  line  items  comprising   revenue  and  expenses  from  continuing
operations have been adjusted to exclude the discontinued operations. Net income
from  operations  of this  discontinued  operation  (net of taxes) for the years
ended May 31, 2000 and 1999 were $83,000 and $2,786,000,  respectively. See Note
12 to the Consolidated Financial Statements.

         The Company had  $32,629,000 of net income from  continuing  operations
for the year ended May 31, 2000,  compared to $18,219,000 for the year ended May
31, 1999.  NDBC had  $44,234,000  of net income for the year ended May 31, 2000,
compared to net income for the year ended May 31, 1999 of  $20,826,000.  NDB.com
had a net loss for the year ended May 31,  2000 of  $9,056,000,  compared to net
income of $1,463,000 for the year ended May 31, 1999.

         Total revenue from  continuing  operations of the Company  increased by
approximately  $177,893,000,  or  86%,  from  $207,865,000  in  fiscal  1999  to
$385,758,000 in fiscal 2000.

         Most of the  Company's  revenue  arises  from  NDBC's  firm  securities
transactions.   Revenue   from  firm   securities   transactions   increased  by
$141,637,000,  from $145,320,000 for the year ended May 31, 1999 to $286,957,000
for the year ended May 31, 2000, an increase of 97%. The  increased  activity in
the equity markets,  particularly trading volume in Internet and high technology
related  stocks,  resulted in increases in both the  Company's  ticket and share
volume  for the year  ended May 31,  2000,  as  compared  to a year ago.  NDBC's
overall batched ticket volume  increased  approximately  146% for the year ended
May 31, 2000 from 6,376,000 to 15,657,000  while its share volume increased 117%
from 7.7  billion in fiscal  1999 to 16.7  billion  shares in fiscal  2000.  The
foregoing revenue increase occurred despite the fact that NDBC's trading profits
per  batched  ticket  decreased  from  $22.87 for fiscal year 1999 to $18.03 for
fiscal year 2000.

                                       26
<PAGE>

         The  Company's  commission  income,  primarily  generated  by  NDB.com,
increased by  $23,327,000,  or 52%, from  $45,250,000 for the year ended May 31,
1999 to  $68,577,000  for the year ended May 31, 2000.  This  increase  occurred
primarily due to the increase in NDB.com's average daily ticket count, which was
approximately 12,200  commissionable  tickets per day for the year ended May 31,
2000 as compared to approximately 7,900  commissionable  tickets per day for the
year ended May 31, 1999.

      Interest and dividend income  increased by approximately  $13,834,000,  or
138%,  from  $10,022,000  in  fiscal  1999 to  $23,856,000  in  fiscal  2000 due
principally to two factors.  First,  there were larger  average  amounts of cash
available to earn  interest.  This was  primarily  due to the Company  taking in
aggregate cash of approximately  $206,000,000 in connection with both public and
private  offerings of its common stock and the sale of its membership  interests
in Equitrade, net of capital expenditure cash outflows. In addition, the average
customer debit and credit balances that are held with NDB.com's  clearing broker
continued to rise.

         Fee income increased $1,787,000, or 41%, from $4,308,000 in fiscal 1999
to $6,095,000 in fiscal 2000. The increases are due to NDB.com  receiving higher
distribution assistance fees from mutual funds as NDB.com customers' balances in
those funds have increased,  as well as an increase in the negotiated rates used
to calculate the rebate fees.

         Total expenses from continuing  operations increased  $149,814,000,  or
87%,  from  $173,184,000  in fiscal 1999 to  $322,998,000  in fiscal  2000.  The
reasons for the increase in expenses are set forth below.

         Clearing and related  charges  increased by  approximately  $22,833,000
from  $45,356,000  in fiscal 1999 to $68,189,000 in fiscal 2000. As a percentage
of revenue, clearing and related charges decreased to 18% for the year ended May
31, 2000 from 22% in the prior year.  The increase in expense for the year ended
May 31, 2000 is due  principally  to  increases  of 56% and 146% in total trades
executed by NDB.com and NDBC,  respectively,  during the year ended May 31, 2000
over the prior year.  Partially  offsetting these increases,  and leading to the
decrease in clearing and related  brokerage  charges as a percentage of revenue,
was a full year's  decrease in the per ticket  clearing  expense rate negotiated
with NDB.com's clearing broker which went into effect as of February 1999.

         Compensation and benefits  increased by approximately  $71,702,000,  or
90%, for the year ended May 31, 2000, compared with the prior year. The increase
in expense was primarily due to a rise in  compensation  paid to NDBC's  traders
and  salesmen  resulting  from the  increase in NDBC's net  trading  revenue and
profitability.  Further,  NDBC's  traders  are  compensated  based  on a  tiered
commission  rate schedule,  wherein they earn higher rates of commissions as the
profits they generate  increase.  Thus, the large increase in trading profits in
the  current  year  versus in the prior year led,  in part,  to the  increase in
compensation and benefits.  Similarly, based on the increasing profitability and
operational benchmarks of both NDB.com and NDBC, management and employee bonuses
have increased. Finally, the number of employees increased to 854 employees (835
full-time) as of May 31, 2000, from 624 employees as of May 31, 1999.

         Communication   expenses,   which  include  market  data  services  and
telecommunications  expenses, increased by $4,194,000 from $15,610,000 in fiscal
1999 to  $19,804,000 in fiscal 2000. The increase is mainly due to a rise in the
aggregate expense associated with obtaining market data and quotation  services.
Usage of such  services has increased as the number of users has risen since the
prior fiscal year.

                                       27
<PAGE>

         Advertising costs increased  $26,619,000 from $5,876,000 in fiscal 1999
to $32,495,000 in fiscal 2000. The Company advertises in order to attract retail
accounts directly to NDB.com as well as institutional  and  broker-dealer  order
flow  directly to NDBC.  The  increase  is due to  additional  media  buys,  the
initiation of Internet  advertising programs on Yahoo! and Go2Net, and the costs
to produce new lines of  advertisements  designed to  strengthen  NDB.com  brand
awareness  and to put a focus on its products and  services.  The Company uses a
combination  of network  and cable  television,  local  radio,  print  media and
Internet  advertising  to  attract  new  customers.  NDB.com  also  attains  new
customers through its affinity and  business-to-business  relationship programs.
Given the significant increase in advertising expenditures during fiscal 2000 in
association with the Company's new multi-media marketing campaigns,  acquisition
costs per  customer  account for NDB.com  were $311 and $140 for the years ended
May 31, 2000 and 1999, respectively, based on total advertising expenses for the
Company.  Increased  media  spending by NDB.com,  and by its  competitors in the
online brokerage industry,  has led to the overall increases in the average cost
to acquire an account. NDB.com continues to focus on attracting further affinity
and business-to-business partnerships to help abate these escalating acquisition
costs.

         Sales-related travel and entertainment increased by $1,612,000, or 80%,
from $2,011,000 in fiscal 1999 to $3,623,000 in fiscal 2000. The increase is due
mainly to an increase in the number of NDBC's  institutional  and  broker-dealer
sales personnel, additional efforts by this sales force to attract new customers
and maintain existing  relationships,  and the establishment of a sales force at
NDB.com  during  fiscal  2000 to attract new  customers  and  maintain  existing
relationships.

         Depreciation and amortization increased by approximately $9,987,000, or
129%,  from  $7,770,000 in fiscal 1999 to $17,757,000 for the year ended May 31,
2000.  This increase can be  attributed  to two main  factors.  NDB.com and NDBC
incurred additional charges for the write-off of obsolete computer equipment and
software in connection with upgrades of their brokerage operations. NDB.com also
wrote off  $4,500,000  in net book value of  equipment,  software and  leasehold
improvement costs of assets it abandoned when it moved its headquarters from New
York City to Jersey City during May 2000.  Also  contributing to the increase is
depreciation  and amortization  incurred on additional  fixed assets,  leasehold
improvements  and  computer  software  purchased  by  the  Company   aggregating
approximately  $56,564,000  during  the  year  ended  May  31,  2000,  of  which
approximately $38,000,000 is related to the new office in Jersey City.

         Equipment  rental costs  increased  $2,131,000  from $662,000 in fiscal
1999 to  $2,793,000  in fiscal  2000.  The  Company  has begun to lease a larger
portion of the equipment  used in connection  with  NDB.com's  WebstationTM  and
NDBC's  trading  operations  as the useful lives for much of this  equipment has
decreased due to the rapidly changing technologies involved.

         Technology  consulting  fees increased  $3,074,000  from  $2,094,000 in
fiscal 1999 to  $5,168,000  in fiscal 2000.  The  increase is  primarily  due to
rising fees paid to consultants in order to test and maintain  NDB.com's website
and NDBC's proprietary trading system.

         Repairs and maintenance expense increased by $1,588,000 from $2,303,000
in fiscal 1999 to  $3,891,000  in fiscal  2000.  This  increase,  primarily  for
NDB.com,  is  mainly  due to  maintenance  service  contract  fees  paid for new
equipment and in association with maintaining  existing  infrastructures  as the
original warranties on the various systems continue to expire.

                                       28
<PAGE>

         Professional  fees  decreased by $1,296,000  from  $3,373,000 in fiscal
1999 to $2,077,000 in fiscal 2000 primarily due to a decrease in legal fees.

         Occupancy costs increased  $3,609,000 from $2,610,000 in fiscal 1999 to
$6,219,000 in fiscal 2000.  This increase is  principally  due to the signing of
two  additional  leases for office  locations to house NDB.com and the Company's
forthcoming clearing operations.

         Other expenses  increased  $3,759,000 from $5,465,000 in fiscal 1999 to
$9,224,000 in fiscal 2000.  The increase is primarily due to an increase in fees
paid to employment  agencies for the  placement of new and temporary  employees,
principally at NDB.com,  and fees for training and  conferences for employees of
NDB.com and NDBC.  The remainder of the increase in other expenses is due to the
overall growth in the volume of business and the increase in staff size.

         The Company's  effective tax rate increased from  approximately 47% for
the year  ended May 31,  1999 to  approximately  48% for the year  ended May 31,
2000.  The  increase in  effective  tax rate is due  primarily to an increase in
non-deductible  expenses  over the prior year,  namely  meals and  entertainment
expenses  and  certain  compensation  costs,  as well as  additional  provisions
associated  with certain  investments.  Partially  offsetting  these items was a
shift in the states in which the Company does  business to states with lower tax
rates. In the prior year, a larger portion of the Company's  revenues,  property
and payroll were allocated to high tax rate states, such as New York.


Fiscal 1999 Compared to Fiscal 1998

         The results of continuing  operations of the Company for the year ended
May 31, 1999  reflect  primarily  the  activities  of NDB.com and NDBC.  Certain
fiscal 1999 and 1998  amounts  have been  reclassified  to conform to the fiscal
2000 presentation.

         On June 18,  1999,  NDB Group sold its 46.845%  membership  interest in
Equitrade  Partners,  L.L.C. In addition MXNet, Inc.  ("MXNet"),  a wholly owned
subsidiary  of NDB Group was sold on February 13, 1998.  NDBC also sold its AMEX
specialist  business in February 1998 for $325,000.  As a result, the results of
operations of these entities have been  segregated and reflected as discontinued
operations on the Consolidated  Statements of Income and  Comprehensive  Income.
Accordingly,  the consolidated  line items comprising  revenue and expenses from
continuing operations have been adjusted to exclude the discontinued operations.
Net income from operations of these  discontinued  operations for the year ended
May 31, 1999 was $2,786,000 (net of taxes). For the year ended May 31, 1998, the
net income from operations of these discontinued  operations was $3,258,000 (net
of taxes). See Note 12 to the Consolidated Financial Statements.

         The  Company  had net income from  continuing  operations  for the year
ended May 31,  1999 of  $18,219,000,  compared  to net  income  from  continuing
operations of $5,998,000 for the year ended May 31, 1998. NDB.com had net income
for the year  ended  May 31,  1999 of  $1,463,000,  compared  to net  income  of
$1,304,000  for the year  ended May 31,  1998.  NDBC had net income for the year
ended May 31, 1999 of $20,826,000, compared to net income for the year ended May
31, 1998 of  $4,259,000.  The  Company's  and NDBC's  fiscal  year 1998  results
include  a  non   tax-deductible   charge  of  $1,300,000  related  to  the  SEC
investigation  captioned In the Matter of Certain  Market-Making  Activities  on
NASDAQ, HO-2974.

                                       29
<PAGE>

         Total revenue from  continuing  operations of the Company  increased by
approximately  $69,053,000,   or  50%,  from  $138,812,000  in  fiscal  1998  to
$207,865,000 in fiscal 1999.

         Most of the  Company's  revenue  arises  from  NDBC's  firm  securities
transactions.  Revenue from firm securities  transactions  increased $55,064,000
from  $90,256,000 for the year ended May 31, 1998 to  $145,320,000  for the year
ended May 31, 1999. The increased  activity in the equity markets,  particularly
trading  volume in Internet  and high  technology  related  stocks,  resulted in
increases in both the  Company's  ticket and share volume for the year ended May
31, 1999, as compared to a year ago.  NDBC's  overall  ticket  volume  increased
approximately  51% for the year ended May 31, 1999 from  4,235,000 to 6,376,000.
Trading profits per ticket also increased from $21.32 to $22.87.

         The  Company's  commission  income,  primarily  generated  by  NDB.com,
increased by  $8,198,000,  or 22%, from  $37,052,000  for the year ended May 31,
1998 to $45,250,000 for the year ended May 31, 1999.  These  increases  occurred
primarily due to the increase in NDB.com's average daily ticket count, which was
approximately  7,900  commissionable  tickets per day for the year ended May 31,
1999 as compared to approximately 6,100  commissionable  tickets per day for the
year ended May 31, 1998.

         Realized gain on securities  for the year ended May 31, 1999  represent
gains from the sale of 260,100  shares of Astropower,  Inc.  common stock by NDB
Group and 75,000 shares of Eurotech, Ltd. common stock by NDBC.

         Interest and dividend income increased by approximately  $2,423,000, or
32%, from  $7,599,000 in fiscal 1998 to $10,022,000 in fiscal 1999 primarily due
to the growing  margin debits and free credits  balances that  customers  retain
with  NDB.com's  clearing  broker and the  increased  average  proprietary  cash
balance NDBC maintained with its clearing broker.

         Fee income increased  $740,000,  or 21%, from $3,568,000 in fiscal 1998
to $4,308,000 in fiscal 1999. The increases are due to NDB.com  receiving higher
distribution assistance fees (formerly called Rule 12b-1 fees) from mutual funds
as NDB.com  customers'  balances  in those funds have  increased,  as well as an
increase in the negotiated rates used to calculate the rebate fees. The increase
in fee income would have been even higher, except that during the year ended May
31, 1998,  NDBC received a  non-recurring  $275,000 fee for consulting  services
rendered in connection with the sale of its AMEX specialist business.

         Total expenses from continuing  operations  increased  $46,111,000,  or
36%,  from  $127,073,000  in fiscal 1998 to  $173,184,000  in fiscal  1999.  The
reasons for the increase in expenses are set forth below.

         Compensation and benefits  increased by approximately  $33,558,000,  or
72%,  for the year  ended  May 31,  1999,  compared  with the prior  year.  As a
percentage of revenue, employee compensation increased to 39% for the year ended
May 31, 1999, from 33% a year ago. The increases were primarily due to a rise in
compensation paid to NDBC's traders and salesmen  resultant from the increase in
NDBC's net trading revenue and profitability. Similarly, based on the increasing
profitability  and operational  benchmarks of both NDB.com and NDBC,  management
and employee bonuses have increased.  Finally, the number of employees increased
to 624 employees as of May 31, 1999, from 478 employees as of May 31, 1998.

                                       30
<PAGE>

         Clearing and related charges  decreased by approximately  $820,000 from
$46,176,000  in fiscal 1998 to  $45,356,000  in fiscal 1999.  As a percentage of
revenue,  clearing and related  charges  decreased to 22% for the year ended May
31, 1999 from 33% in the prior  year.  The  decrease  for the year ended May 31,
1999 is due  principally  to three  factors.  First,  there was the reduction in
clearance  charges due to a full year's  benefit  from  decreases  in per ticket
rates negotiated with NDBC's clearing broker during the year ended May 31, 1998.
Second,  there was a  reduction  in  clearance  charges due to a decrease in per
ticket rates negotiated with NDB.com's clearing broker as of February 1999. And,
lastly,  there was a reduction in order flow rebate fees paid by NDBC based upon
the overall size and type of the order flow received. These rate reductions were
more than enough to  compensate  for  increases  of 51% and 29% in total  trades
executed by NDB.com and NDBC,  respectively,  during the year ended May 31, 1999
over the prior year.

         Communication expenses,  which include market data services,  increased
by $3,916,000 from $11,694,000 in fiscal 1998 to $15,610,000 in fiscal 1999. The
increase is mainly due to an increase in the cost of real-time  quotations being
offered on NDB.com WebstationTM.

         Advertising  costs increased  $2,416,000 from $3,460,000 in fiscal 1998
to  $5,876,000  in fiscal  1999 due to  additional  media  buys and the costs to
produce a new line of advertisements for NDB.com.

         Sales-related travel and entertainment expense increased  approximately
$1,250,000  from  $761,000  in fiscal  1998 to  $2,011,000  in  fiscal  1999 and
reflects  primarily the  entertaining of customers by NDBC's  institutional  and
broker dealer sales force.

         Depreciation and amortization increased by approximately $1,212,000, or
18%,  for the year ended May 31,  1999,  as compared  to the prior  year.  These
increases  can be  attributed to three main  factors.  First,  NDB.com  incurred
additional  charges for the disposition of abandoned assets in connection with a
network  upgrade.  Second,  the  useful  lives for all of NDBC's  and  NDB.com's
computer-related  equipment were reduced. This revision was necessary due to the
fact that these assets are becoming  obsolete  faster (due to speed and capacity
limitations)  in view of the higher volume and volatility  conditions of current
markets.  Finally, the fixed asset,  leasehold improvement and computer software
additions  by  NDB.com  and  NDBC  aggregating   approximately   $4,900,000  and
$2,300,000, respectively, during the period from June 1998 through May 1999 also
increased depreciation and amortization.

         Equipment  rentals  increased  $477,000 from $185,000 in fiscal 1998 to
$662,000 in fiscal 1999. The increase is  principally  due to an increase in the
cost of rental of various  computer  hardware  and software  systems  related to
NDB.com Webstation(TM).

         Technology consulting fees increased $1,351,000 from $743,000 in fiscal
1998 to  $2,094,000  in  fiscal  1999.  The  increase  is  primarily  due to the
management of NDB.com new Webstation(TM) development project.

         Repairs and  maintenance  expense at both NDB.com and NDBC increased by
$397,000  from  $1,906,000  in fiscal 1998 to  $2,303,000  in fiscal  1999.  The
increase is principally due to maintenance  service  contract fees paid in order
to maintain  infrastructures  as the original  warranties on the various systems
continue to expire.

         Professional  fees increased by $2,668,000 from $705,000 in fiscal 1998
to $3,373,000  in fiscal 1999.  The increase is primarily due to a rise in legal
fees associated with a number of projects,  including corporate acquisitions and
dispositions by NDB Group, real estate lease negotiations  primarily by NDB.com,
architectural  and engineering needs analyses and other matters for both NDB.com
and NDBC.

                                       31
<PAGE>

         Occupancy  costs  increased  $323,000 from $2,287,000 in fiscal 1998 to
$2,610,000  in fiscal  1999.  This  increase is due to  additional  space leased
during  fiscal 1999 by both  NDB.com and NDBC,  as well as  increases in utility
charges.

         Other  expenses  decreased  $634,000 from  $6,099,000 in fiscal 1998 to
$5,465,000 in fiscal 1999. The decrease is primarily attributable to the absence
in  fiscal  1999 of an NDBC  charge  in  connection  with the SEC  investigation
referred to above, which was recorded in fiscal 1998.  Partially offsetting this
decrease  was an increase  in NDB.com  customer  accomodations  related to trade
executions.

         The Company's  effective tax rate decreased from  approximately 49% for
the year  ended May 31,  1998 to  approximately  47% for the year  ended May 31,
1999.   The   decrease  in   effective   tax  rate  is  due   primarily  to  the
non-deductibility  for tax  purposes in the prior year of the charge  related to
the SEC investigation referred to above.


Fiscal 1998 Compared to Fiscal 1997

         The Company's  results of continuing  operations for the year ended May
31, 1998 reflect  primarily the  activities of NDB.com and NDBC.  Certain fiscal
1998 and 1997  amounts  have been  reclassified  to conform  to the fiscal  2000
presentation.

         In addition, the results of operations of Equitrade, MXNet and the AMEX
specialist  business of NDBC,  each of which was sold by the Company,  have been
segregated  and  reflected  as  discontinued   operations  on  the  Consolidated
Statements of Income and  Comprehensive  Income.  As such, the  individual  line
items  comprising  revenue and expenses  from  continuing  operations  have been
adjusted to exclude the discontinued  operations.  Net income from operations of
these  discontinued  operations  for the year ended May 31, 1998 was  $3,258,000
(net of taxes).  For the year ended May 31, 1997, the net income from operations
of these  discontinued  operations was $2,664,000 (net of taxes). See Note 12 to
the Consolidated Financial Statements -- Discontinued Operations.

         The  Company  had net income from  continuing  operations  for the year
ended  May 31,  1998 of  $5,998,000,  compared  to net  income  from  continuing
operations of $6,616,000 for the year ended May 31, 1997. NDB.com had net income
from  continuing  operations  for the year  ended  May 31,  1998 of  $1,304,000,
compared to a net loss from continuing operations of $300,000 for the year ended
May 31, 1997. NDBC had net income from continuing  operations for the year ended
May 31, 1998 of $4,259,000,  compared to net income from  continuing  operations
for the year ended May 31, 1997 of  $6,680,000.  The results for the Company and
NDBC for fiscal 1997 reflect a litigation  settlement  charge of $9,188,000  and
associated professional fees. Exclusive of this charge, net of reduced bonus and
tax expenses,  net income from  continuing  operations  for the Company and NDBC
would have been  $10,491,000 and $11,458,000,  respectively,  for the year ended
May 31, 1997.  The Company's  and NDBC's fiscal year 1998 results  include a non
tax-deductible  charge of $1,300,000 related to the SEC investigation  captioned
In the Matter of Certain Market-Making Activities on NASDAQ, HO-2974.

         Total revenue from continuing  operations for the Company  decreased by
approximately  $22,370,000,   or  14%,  from  $161,182,000  in  fiscal  1997  to
$138,812,000 in fiscal 1998.

                                       32
<PAGE>

         Most of the  Company's  revenue  arises  from  NDBC's  firm  securities
transactions.  Revenue from firm  securities  transactions  decreased,  although
overall trading volume  increased  approximately  32% for the year ended May 31,
1998,  when compared  with the year ended May 31, 1997,  as trading  profits per
ticket  continued to decline.  Several  factors  contributed  to this  decrease.
Regulatory  changes  enacted  by the SEC and the NASD,  such as the limit  order
handling  rules,  have  resulted in an  increase  in the number of  transactions
executed on an "even" basis.  Tightened  spreads between "bid" and "ask" prices,
the new limit order display rules,  increased  volatility in the marketplace and
increased Small Order Execution Systems ("SOES") activity have also been factors
in the decrease in trading profits per ticket.

         The  Company's  commission  income,  primarily  generated  by  NDB.com,
increased   principally  due  to  a  31%  increase  in  customer  average  daily
commissionable tickets. Offsetting some of this increase is a continued shift in
the way customers  trade with NDB.com.  Throughout  the year ended May 31, 1998,
more customers  traded  utilizing  NDB.com's  lower-priced,  automated  systems,
PowerBrokerSM  and  Webstation(TM),  as opposed  to using  higher  costing  live
representatives.

         For the year ended May 31, 1997, the principal portion of equity income
in  partnerships  was an equity loss from NDB  Group's  49% limited  partnership
interest it held in Anvil Institutional  Services Company ("Anvil").  On January
24,  1997,  NDB  Group  acquired  the  remaining  51% of  Anvil  that it did not
previously  own. As such, for the year ended May 31, 1998,  Anvil's results were
consolidated  with those of the  Company  until Anvil was sold on  September  5,
1997.

         Interest and dividend  income  decreased  slightly  from  $7,652,000 in
fiscal  1997 to  $7,599,000  in fiscal  1998,  although  the sources of interest
income varied.  Interest  income  increased due to the growing margin debits and
free credit  balances that  customers  retain with  NDB.com's  clearing  broker.
Meanwhile,  interest  income of NDBC decreased  primarily due to reduced average
amounts of cash being available for investment.

         Fee income  increased by $1,055,000,  or 42%, from $2,513,000 in fiscal
1997 to  $3,568,000 in fiscal 1998.  The increases are due to NDB.com  receiving
higher  distribution  assistance  fees from  money  market  funds as  customers'
balances in those funds have increased, as well as an increase in the negotiated
rates used to calculate the rebate fees. Finally, in connection with NDBC's sale
of its AMEX  specialist  business,  fees were  received  for certain  consulting
services performed during the transition period for the purchaser.

         Total expenses from continuing  operations  decreased  $21,462,000,  or
14%, from $148,535,000 in fiscal 1997 to $127,073,000 in fiscal 1998.  Exclusive
of the litigation  settlement charges of $9,188,000 and associated  professional
fees,  net of reduced bonus  expense,  total expenses for the year ended May 31,
1997, would have been $141,084,000,  resulting in a decrease of 11% for the year
ended May 31,  1998.  The  reasons for the  decrease  in expenses  are set forth
below.

         Compensation  and benefits  decreased  $6,390,000  from  $52,887,000 in
fiscal 1997 to  $46,497,000  in fiscal 1998.  The decrease was  primarily due to
lower commissions paid to NDBC's traders because of the decrease in revenue from
firm securities transactions.

         Clearing and related charges  decreased by $8,833,000 from  $55,009,000
in fiscal 1997 to  $46,176,000  in fiscal 1998. The decrease is due primarily to
lower  order flow  rebates  being paid to NDBC's  correspondents  based upon the
overall size and type of order flow received.  Also contributing to the decrease
are lower per  ticket  clearance  charges  due to newly  negotiated  rates  with
NDB.com and NDBC's clearing brokers.

         Communication expenses,  which include market data services,  decreased
by $645,000 from  $12,339,000  in fiscal 1997 to $11,694,000 in fiscal 1998. The
decrease was mainly due to the fiscal 1997  upgrade of  NDB.com's  PowerBrokerSM
IVR System and  development  of an in-house  quote  server.  These costs did not
occur in fiscal 1998.

                                       33
<PAGE>

         Advertising  costs increased  $1,289,000 from $2,171,000 in fiscal 1997
to $3,460,000 in fiscal 1998 due to additional media buys by NDB.com.

         Sales-related  travel and entertainment  expense primarily  incurred by
NDBC decreased  $36,000 from $797,000 in fiscal 1997 to $761,000 in fiscal 1998.
The decrease is primarily due to cost control measures.

         Depreciation and  amortization  increased by $2,235,000 from $4,323,000
in fiscal 1997 to $6,558,000  in fiscal 1998.  The increase was primarily due to
depreciation and amortization incurred on fixed asset, leasehold improvement and
computer  software  additions  by  NDB.com  and NDBC  aggregating  approximately
$4,500,000 and $1,700,000,  respectively, during the year ended May 31, 1998, as
well as a full year's expense on $12,000,000 of additions during the prior year.

         Repairs and maintenance  expense increased by $994,000 from $912,000 in
fiscal 1997 to  $1,906,000  in fiscal 1998.  The  increase is  primarily  due to
maintenance  service  contract  fees paid by both  NDB.com  and NDBC in order to
maintain  infrastructures  as the  original  warranties  on the various  systems
expire.

         Litigation  settlement,  for the year  ended May 31,  1997,  represents
charges for NDBC in connection with the Settlement Agreement. See Note 16 to the
Consolidated Financial Statements, "Contingencies and Legal Matters".

         Professional  fees  decreased by $2,485,000  from  $3,190,000 in fiscal
1997 to $705,000 in fiscal 1998.  During the year ended May 31, 1997,  NDB Group
incurred approximately $535,000 in legal,  accounting and investment banker fees
and expenses,  financial institution  commitment fees and out-of-pocket expenses
in connection  with NDB Group's review of a possible  acquisition  which was not
consummated.  NDBC also incurred  additional  legal fees in connection  with the
litigation  settlement  negotiations and the entry into the Settlement Agreement
in the case entitled In Re: NASDAQ Market-Makers  Antitrust Litigation,  94 Civ.
3996(RWS). See Note 16 to the Consolidated Financial Statements,  "Contingencies
and Legal  Matters".  These prior year expenses did not recur to the same extent
in the current fiscal year, leading to the reduction in professional fees.

         Occupancy  costs  decreased  $208,000 from $2,495,000 in fiscal 1997 to
$2,287,000  in fiscal  1998.  The  decrease is  attributable  to a decrease  for
NDB.com which, last year, incurred rent concurrently,  from November 1996 on two
main office  locations as it awaited the move of its  headquarters  to 7 Hanover
Square in New York City. In addition, the closing of NDB.com's branch offices as
of October 31, 1997 has led to a reduction in rent expense.

         Other expenses  increased  $1,312,000 from $4,787,000 in fiscal 1997 to
$6,099,000 in fiscal 1998. The increase is primarily  attributable  to increases
in  NDB.com  customer  accommodations  related to trade  executions,  employment
agency  fees  and  certain   expense   accruals  by  NDBC  related  to  the  SEC
investigation referred to above.

         The Company's  effective tax rate increased from  approximately 48% for
the year  ended May 31,  1997 to  approximately  49% for the year  ended May 31,
1998.   The   increase  in   effective   tax  rate  is  due   primarily  to  the
non-deductibility of certain expense accruals for tax purposes in the year ended
May 31, 1998.

                                       34
<PAGE>

         For the year ended May 31,  1998,  deferred  tax  expenses  principally
relate to the reversal of the prior year's tax benefit as the remaining  balance
due under the Settlement  Agreement,  as amended, was paid during the year ended
May 31,  1998.  The Company  took a deduction on its fiscal 1998 tax returns for
this payment.


Liquidity and Capital Resources

         The Company's  tangible assets are highly liquid, but subject to market
price  fluctuation,  with more  than 76%  consisting  of cash or assets  readily
convertible into cash  (principally  firm securities  positions,  U.S.  Treasury
obligations,  receivables from brokers and cash). The Company's  operations have
generally  been  financed by  internally  generated  funds and,  during the past
fiscal year, from the proceeds from the sales of its common stock in both public
and private offerings and the sale of its interest in Equitrade.

         NDB Group's broker-dealer  subsidiaries,  NDB.com and NDBC, are subject
to the minimum net capital  requirement of the SEC, which is designed to measure
the general  financial  soundness and liquidity of brokers.  As of May 31, 2000,
NDB.com and NDBC had approximately $12,466,000 and $111,818,000 in excess of the
minimum required net capital requirements,  respectively, representing increases
of $8,612,000  for NDB.com and  $50,420,000  for NDBC,  from the prior year. The
increases for NDB.com and NDBC resulted primarily, in the case of NDBC, from the
year's net income,  and from capital  contributions to both  subsidiaries by NDB
Group. The net capital rule imposes  financial  restrictions  upon NDB.com's and
NDBC's  businesses,  which are more  severe  than  those  imposed  on most other
non-financial businesses.

         Cash  flows  from  operations  vary on a daily  basis as the  Company's
portfolio of marketable  securities  changes.  The Company's  ability to convert
marketable  securities  owned into cash is determined by the depth of the market
and the size of the Company's  security positions in relation to the market as a
whole.  The  portfolio  mix also  affects the  regulatory  capital  requirements
imposed  on  NDB.com  and  NDBC,  which  directly  affects  the  amount of funds
available for operating, investing and financing activities.

         From time to time,  the Company has borrowed  funds in connection  with
its trading  activities.  The Company currently has no committed lines of credit
and such borrowings  were done on an "as needed" basis.  Management is reviewing
alternatives to meeting these funding requirements.

         As a result of the sale of  Equitrade  on June 18,  1999,  the  Company
received approximately $85,000,000 in net cash proceeds comprised principally of
a pre-tax book gain of approximately $36,000,000 (after a bonus to the Company's
chief executive officer of approximately  $6,000,000),  the return of capital of
approximately  $28,000,000,  the repayment of subordinated  notes  receivable of
$27,000,000  and the  repayment  of  other  notes  and  interest  receivable  of
approximately  $3,000,000.  As part of the sale,  the  Company  also  repaid its
$15,000,000  loan  to  Spear,  Leeds &  Kellogg,  LP from  the  above  mentioned
proceeds.

         On June 25, 1999, NDB Group closed an  underwritten  public offering of
2,990,000  shares  of  its  common  stock,  which  resulted  in its  receipt  of
approximately  $91,600,000  in  proceeds,  net of  underwriters'  discounts  and
commissions and expenses related to the offering.

                                       35
<PAGE>

         On February 5, 2000,  NDB Group sold an aggregate of 500,000  shares of
its common stock and warrants  convertible to 500,000  additional  shares of its
common stock in a private  placement to Go2Net and Vulcan for  $13,500,000.  The
warrants  were  exercised  during March and April 2000 with NDB Group  receiving
additional aggregate proceeds of $16,500,000

         The Company made capital  expenditures of $56.5 million during the year
ended May 31,  2000.  Capital  expenditures  during  fiscal 2000 were  primarily
related  to the build out of the new  facilities  at 90 Hudson  Street in Jersey
City for NDB.com and  Millennium,  the  expansion  of NDBC's  trading  floor and
offices, and for the continued upgrading of the Company's information technology
systems  and  telecommunications  equipment.  The Company  expects  that it will
continue to invest  during fiscal year 2001 in capital  expenditures  on ongoing
technological  improvements  and  product  enhancements.  The  Company  also  is
planning to open new branch offices  designed to house both additional  customer
service  personnel for NDB.com and  additional  trading and sales  personnel for
NDBC. The Company intends to finance these upgrades and expansions, estimated to
approximate $20 million to $25 million, with working capital.

         Cash  flows  from the  Company's  investment  activities  are  directly
related to market conditions.

         During  the year  ended  May 31,  1997,  NDB  Group  made two  loans of
$3,000,000  each to NDB.com,  in the form of  subordination  agreements.  During
fiscal 2000,  NDB Group  contributed  an aggregate of $50,320,000 to NDB.com and
$25,000,000 to NDBC.  These funds were expended in order for NDB.com to maintain
adequate regulatory capital levels and for NDBC to be able to increase the level
of  securities  positions  that it could hold in its  inventory  at any point in
time. The Company is likely to make  additional  loans or  contributions  to its
broker-dealer subsidiaries,  as necessary, to maintain regulatory capital levels
and to accommodate business growth. In addition,  the Company intends to expend,
during fiscal year 2001,  between  $30,000,000 and $50,000,000 for marketing and
advertising,  primarily for its discount brokerage  services.  Such expenditures
are anticipated to be funded by the Company's working capital.

         On October 22,  1999,  the Company  purchased  20,000  shares of Aether
Systems Inc.  common stock for  $320,000.  The Company sold this  investment  on
February 23, 2000 and recognized a pretax profit,  reflected in firm  securities
transaction on the Consolidated  Statements of Income and Comprehensive  Income,
of approximately $3,500,000.

         The Company estimates that it will begin self-clearing NDB.com and NDBC
transactions by early calendar year 2001 through Millennium.  Management expects
to incur up front  costs  associated  with the  implementation  of the  clearing
operations  and, in addition,  Millennium  will be required to maintain  certain
levels of net  capital,  which  will be based on the amount of  customer  margin
borrowings as well as other  factors.  Based upon the  activities of NDB.com and
NDBC at May 31, 2000,  management of the Company estimates that Millennium would
have a minimum net capital  requirement  of  approximately  $86  million.  It is
anticipated that such costs and capital requirements  associated with Millennium
will be funded by the Company's working capital.

         NDB Group has also  executed  term sheets with  Deutsche Bank to launch
joint venture  retail  discount  brokerage  activities in Western Europe and the
rest of the world  other than the United  States.  These  ventures  may  result,
during  the  fiscal  year  ended  May 31,  2001,  in  expenditures  to  initiate
operations and the investment of capital in the joint venture.

                                       36
<PAGE>


Effects of Inflation

            The  Company's  assets are not  significantly  affected by inflation
because  they  are  primarily  monetary  in  nature.  Management  believes  that
replacement  costs of furniture,  equipment and leasehold  improvements will not
materially  affect  operations.  However,  the  rate of  inflation  affects  the
Company's   principal   expenses  such  as  employee   compensation,   rent  and
communications,  which may not be readily  recoverable from increased  revenues.
Because of market forces and competitive  conditions in the securities industry,
a  broker-dealer  may be unable to  restructure  its profit  margins in order to
recover  increased  costs related to inflation.  Consequently,  the Company must
rely on increased volume for this purpose.  However, the Company has significant
cash balances on deposit with  financial  institutions,  including  money market
accounts,  as well as with its principal  clearing  brokers on which interest is
paid which,  in the event there are higher  interest rates which normally result
from inflation, would offset some of the costs.


Impact of the Year 2000 Issue

         The  Company  prepared  for the issues  associated  with the year 2000,
including  changes in the programming of internal and vendor  computer  systems.
The year 2000  problem was  pervasive  and complex as virtually  every  computer
operation  was affected by the rollover of the  two-digit  year value to 00. The
issue was whether  computer  systems would  properly  recognize  date  sensitive
information  when the year  changed to 2000.  Systems  that  would not  properly
recognize such  information  could generate  erroneous data or cause a system to
fail.  Through the date of this report, the Company has not experienced any year
2000 problems with its  production  systems.  Through May 31, 2000,  the Company
spent approximately  $488,000 for software  modifications,  hardware and testing
related to year 2000 of which  $285,000 was  incurred  during the year ended May
31, 2000.  The Company did not track internal costs related to year 2000 issues,
which consisted  primarily of payroll  expenses and, as a result,  the foregoing
actual expenditures do not include such internal costs.


Looking Ahead

         As a result of the sales of its common  stock  through  both public and
private  offerings between June 1999 and June 2000, and the sale of its interest
in Equitrade on June 18, 1999,  including the return of its invested  capital at
Equitrade,  the Company had accumulated cash and other short-term investments of
approximately  $289,000,000  as of June 30, 2000.  During the fiscal year ending
May 31, 2001, the Company intends to execute the following strategic plan.

         NDB.com  intends to expend  between  $30,000,000  and  $50,000,000  for
marketing and advertising its discount brokerage services. Specifically, NDB.com
will focus on the  continued  branding  of its  services  through the use of its
logo, the mallard duck.

         Millennium will serve as the vehicle to clearing transactions initially
for NDB.com and NDBC and later for third parties.  The Company estimates,  based
upon the  current  level of activity  of NDB.com  and NDBC,  that  approximately
$86,000,000  will be needed to satisfy  regulatory net capital  requirements for
this  operation.  Additional  funds  will be  expended  for the  start up of the
operation.  The Company estimates that Millennium will commence  operation prior
to March 31, 2001.  Millennium  will be required to register as a broker  dealer
and seek other  regulatory  clearances  prior to the  commencement  of business.
While the Company believes self-clearing NDB.com and NDBC will eventually reduce
clearing  expenses for these  entities,  clearing costs will likely be initially
higher than levels paid to outside  clearing  brokers  used by NDB.com and NDBC.
There can be no  assurance  that  clearing  expenses  will be reduced  or, if it
occurs, when the savings will be achieved.

                                       37
<PAGE>

         In addition,  NDB.com  intends to continue to invest in the development
and introduction of new products.  Products being reviewed are greater access to
initial public  offerings,  the introduction of insurance and banking  products,
electronic bill presentment and payment and credit products.

         NDB.com also expects to implement its previously  announced  co-branded
brokerage services with Bank United,  Pentagon Federal Financial Services,  Inc.
and two community banks during the late-summer and fall of 2000.

         NDBC  intends to expand its trading  facilities  by opening  offices in
Long Island, New York and in central New Jersey.  These offices are projected to
employ an additional 60 persons engaged in trading and support functions. By May
31, 2001,  NDBC plans to expand its current  number of traders by between 15 and
20 persons.  NDBC also intends to begin making a market in an additional  500 to
1,000 equities, including equities listed on the NYSE, by the end of fiscal year
2001.  NDB.com  will  share  each of these  new  offices  with  NDBC and  employ
approximately 60 people at the facilities.

         NDB Group has also  executed  term sheets with  Deutsche Bank to launch
joint venture  retail  discount  brokerage  activities in Western Europe and the
rest of the world  other than the United  States.  These  ventures  may  result,
during  the  fiscal  year  ended  May 31,  2001,  in  expenditures  to  initiate
operations and the investment of capital in the joint venture.

         Management of the Company  believes these  investments  and innovations
are required to compete in the rapidly evolving  businesses of market making and
discount  retail  brokerage.  There can be no  assurance  that the Company  will
implement any part of this strategic plan or that such proposed  operations will
be successful.


Item 7a.   Quantitative and Qualitative Disclosures About Risk

         The Company's principal business activities are, by their nature, risky
and  volatile  and are  directly  affected by many  national  and  international
factors.  Any one of  these  factors  may  cause a  substantial  decline  in the
securities  markets,  which  could  materially  adversely  affect the  Company's
business.  Managing  risk is  critical  to the  Company's  profitability  and to
reducing the likelihood of earnings  volatility.  The Company's risk  management
policies and procedures have been established to continually  identify,  monitor
and manage risk. The major types of risk that the Company faces include, but are
not limited to, credit risk, legal risk, operating risk and market risk.

         Credit risk is the potential for loss due to a customer or counterparty
failing  to  perform  its  contractual  obligations.   The  Company  clears  its
securities transactions through unaffiliated clearing agents. Under the terms of
its clearing agent agreements,  the Company's  clearing agents have the right to
charge it for losses that result from its  customers'  failure to fulfill  their
contractual  obligations.  In order to mitigate risk, the Company's policy is to
monitor the credit standing of its customers and maintain  collateral to support
margin loans and short sales.  Further,  a significant  portion of the Company's
and its customer assets are held at one or more clearing agents.  Therefore, the
Company would incur substantial  losses if one of the Company's  clearing agents
were to become insolvent or otherwise unable to meet its financial obligations.

                                       38
<PAGE>

         Operating risk is the potential for loss due to deficiencies in control
processes or computer and technological  systems.  The Company relies heavily on
various computer and communications  systems to operate its business,  including
NDB.com's  website.  The Company  relies  particularly  on third parties such as
Nasdaq,  telephone  companies,  online service providers,  clearing agents, data
processors and software and hardware  vendors.  The Company's  business could be
negatively impacted by unanticipated disruptions in service to customers, slower
response  times,  delays in  trading,  failed  settlement  of trades,  decreased
customer  service and  satisfaction,  incomplete  or  inaccurate  accounting  or
processing of trades,  and delays in the Company's  introduction of new products
and  services.  The Company  attempts to mitigate  operating  risk by  employing
experienced  personnel,  maintaining an internal control system, and maintaining
backup and recovery functions.

         Legal risk is the risk  associated with  non-compliance  with legal and
regulatory requirements,  and counterparty non-performance based upon non-credit
related  conditions,  such as legal  authority or capacity.  The SEC,  NASD, and
other agencies extensively regulate the U.S. securities industry. The Company is
required to comply  strictly with the rules and  regulations of these  agencies.
Further,  there are frequent  changes in the laws and regulations  affecting the
securities  industry and the securities  markets. If the Company fails to comply
with any of these laws, rules, or regulations,  it is subject to censure, fines,
cease-and-desist  orders or suspensions of its business.  Additionally,  the SEC
and NASD have strict rules that require it to maintain  sufficient  net capital.
If it  fails to  maintain  the  required  net  capital,  the SEC or the NASD may
suspend or revoke its broker-dealer  licenses.  In addition,  the Company may be
subject to lawsuits or arbitration claims by customers, employees or other third
parties in the different jurisdictions in which it conducts business (see Item 3
above).  The Company has  established  procedures in  accordance  with legal and
regulatory  requirements  that are designed to reasonably  ensure  compliance in
these matters.

         Market  risk is the  risk of loss  that  may  result  from  changes  in
interest  and  foreign  exchange  rates,  equity  and  commodity  prices and the
correlations  among them. The Company's current  operations and trading activity
limit its exposure to the interest rate and equity price exposure  components of
market risk.

         Interest  rate  risk  is the  possibility  of a loss  in the  value  of
financial  instruments  from changes in interest  rates.  The Company's  primary
exposure to interest rate risk arises from its interest  earning  assets (mainly
deposits at  clearing  brokers,  loans and notes  receivable  and U.S.  Treasury
obligations)  and funding  sources  (loans  payable).  The  Company  attempts to
mitigate this risk by only holding U.S. Treasury  obligations with maturities of
one year or less. For the other interest earning assets and funding sources, the
interest rate risk is not material,  as the underlying value of such assets will
not vary with changes in interest rates.

         Included in the Company's  inventory of financial  instruments held for
trading  purposes are government  securities  with a fair value of $87.1 million
and $8.4 million at May 31, 2000 and 1999, respectively. The interest rate risk,
which arises from short-term treasury rates,  associated with these positions is
not material to the Company's financial position,  results of operations or cash
flows.  All other financial  instruments  exposed to interest rate risk are held
for purposes other than trading. For these instruments the interest rate risk is
not  material,  as the  underlying  value will not vary with changes in interest
rates.

         Equity price risk generally means the risk of loss that may result from
the  potential  change in the  value of a  financial  instrument  as a result of
absolute and relative price movements, price volatility or changes in liquidity,
over which the Company has no control.  The Company's  market making  activities
expose its capital to  significant  equity  price risk.  To mitigate  this risk,
senior  management  monitors  profits and losses on a real-time basis throughout
the trading day. Further, from the Company's  system-generated  reports,  senior
management reviews positions,  mark-to-market  valuations, and daily profits and
losses on individual security positions.  Additionally,  traders are required to
maintain  positions meeting a specified  potential  profit/loss  ratio, which is
monitored by management.

                                       39
<PAGE>

         The   Company   maintains   inventories   for   trading   purposes   in
exchange-listed, Nasdaq and other over-the-counter securities on both a long and
short  basis.  The fair  value of these  securities  at May 31,  2000 was  $47.5
million in long positions and $12.3 million in short  positions.  The fair value
of these  securities  at May 31, 1999 was $38.0  million in long  positions  and
$11.7  million in short  positions.  The potential  loss in fair value,  using a
hypothetical  10% decline in prices,  is  estimated  to be $3.5 million and $2.6
million as of May 31, 2000 and 1999,  respectively.  A 10% hypothetical  decline
was used to represent a significant yet plausible market change.

         Other  financial  instruments  exposed to equity rate risk are held for
purposes other than trading. This includes investments by the Company in several
privately held corporations.  These investments were valued at their fair value,
$15.3  million and $500,000 at May 31, 2000 and May 31, 1999,  respectively,  in
the Company's  condensed  consolidated  financial  statements  under the heading
"Securities not readily  marketable".  The potential loss in fair value, using a
hypothetical 10% decline in prices,  is estimated to be $1.5 million and $50,000
as of May 31, 2000 and 1999, respectively.



Item 8.     Financial Statements and Supplementary Data.

         The response to this item is  submitted  in a separate  section of this
report commencing on Page F-1.



Item 9.     Changes in and Disagreements with Accountants on Accounting and
            Financial Disclosure.

         On February 12, 1999,  KPMG LLP resigned by mutual  agreement  with NDB
Group as NDB Group's independent public accountants.  The Audit Committee of the
Board of  Directors  of NDB Group  recommended  to the Board of  Directors  that
PricewaterhouseCoopers LLP be selected as the independent public accountants for
NDB Group.  The Board of  Directors  approved  the  recommendation  of its Audit
Committee.  PricewaterhouseCoopers  LLP became NDB  Group's  independent  public
accountants  on  February  19,  1999.  The  report of KPMG LLP on the  financial
statements of the Company for the fiscal year ended May 31, 1998 did not contain
any adverse  opinion or disclaimer of opinion,  nor was it qualified or modified
as to uncertainty, audit scope or accounting principles. During the fiscal years
ended May 31, 2000 and 1999, there were no  disagreements  between NDB Group and
PricewaterhouseCoopers LLP on any matters of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.

                                       40
<PAGE>



                                    PART III

Item 10.    Directors and Executive Officers of the Company.

         The material contained in "Election of Directors" and in "Section 16(a)
Beneficial  Ownership  Reporting  Compliance"  of NDB Group's  definitive  proxy
statement  (to be filed  pursuant to the  Securities  Exchange  Act of 1934,  as
amended) for the annual meeting of  stockholders  to be held on October 25, 2000
is hereby incorporated by reference.


Item 11.    Executive Compensation.

         The material  contained in  "Compensation  of Directors  and  Executive
Officers",   "Compensation  Committee  Report  on  Executive  Compensation"  and
"Company  Performance"  of NDB Group's  definitive  proxy statement (to be filed
pursuant to the  Securities  Exchange  Act of 1934,  as amended)  for the annual
meeting of stockholders to be held on October 25, 2000 is hereby incorporated by
reference.


Item 12.    Security Ownership of Certain Beneficial Owners and Management.

         The material  contained in "Voting  Securities  and  Principal  Holders
Thereof" of NDB Group's  definitive proxy statement (to be filed pursuant to the
Securities  Exchange  Act of  1934,  as  amended)  for  the  annual  meeting  of
stockholders to be held on October 25, 2000 is hereby incorporated by reference.



Item 13.    Certain Relationships and Related Transactions.

         The   material   contained  in  "Certain   Relationships   and  Related
Transactions" of NDB Group's definitive proxy statement (to be filed pursuant to
the  Securities  Exchange  Act of 1934,  as amended)  for the annual  meeting of
stockholders to be held on October 25, 2000 is hereby incorporated by reference.
See also, "Recent Developments."


                                     PART IV

Item 14.    Exhibits, Financial Statement Schedules and Reports on Form 8-K.

            (a)      Financial Statements

                     Reference  is made to page F-1 for a list of all  financial
statements and schedules filed as part of this report.

                                       41
<PAGE>


(b)      Reports on Form 8-K

                     During the fourth  quarter of the fiscal year ended May 31,
                     2000,  NDB Group filed three reports on Form 8-K. The first
                     report,  dated March 27,  2000,  was filed in regard to the
                     signing  of a  non-binding  letter of intent  (the  "letter
                     agreement") with Deutsche Bank Americas Holding Corporation
                     ("DB")  pursuant  to  which  the  Corporation   would  sell
                     3,000,000  shares of its  common  stock to DB or one of its
                     designated  affiliates  for $45.31  per  share.  The second
                     report,  dated  May 1,  2000,  was  filed in  regard  to an
                     amendment  to the letter  agreement  dated  March 27,  2000
                     between  NDB Group and DB to extend  the term of the letter
                     agreement and certain other  provisions.  The third report,
                     dated May 18, 2000, was filed because NDB Group had entered
                     into a Securities  Purchase  Agreement  dated as of May 15,
                     2000 with DB U.S.  Financial  Markets  Holding  Corporation
                     ("DBUS")  pursuant  to which  the  Corporation  would  sell
                     3,000,000 shares of its common stock to DBUS for $45.31 per
                     share.

            (c)      Exhibits

                     The exhibits  that are filed with this report,  or that are
                     incorporated  herein  by  reference,  are set  forth in the
                     Exhibit Index beginning on page E-1.

                                       42
<PAGE>











National Discount Brokers Group, Inc. and Subsidiaries
Consolidated Financial Statements
For the Years Ended
May 31, 2000, 1999 and 1998


                                       43
<PAGE>






National Discount Brokers Group, Inc. and Subsidiaries
Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                          Page

<S>                                                                                    <C>
Independent Accountants' Reports                                                         F-1-2

Consolidated Financial Statements and Notes

    Consolidated Statements of Financial Condition -
      May 31, 2000 and 1999                                                               F-3

    Consolidated Statements of Income and Comprehensive Income -
      Years Ended May 31, 2000, 1999 and 1998                                            F-4-5

    Consolidated Statements of Changes in Stockholders' Equity -
      Years Ended May 31, 2000, 1999 and 1998                                             F-6

    Consolidated Statements of Cash Flows -
      Years Ended May 31, 2000, 1999 and 1998                                           F-7-10

    Notes to Consolidated Financial Statements                                         F-11-30

Schedule I - Condensed Financial Statements of the Registrant (Parent) and Notes

    Statements of Financial Condition -
      May 31, 2000 and 1999                                                                S-1

    Statements of Income and Comprehensive Income-
      Years Ended May 31, 2000, 1999 and 1998                                              S-2

    Statements of Cash Flows-
      Years Ended May 31, 2000, 1999 and 1998                                            S-3-6

    Notes to Condensed Financial Statements                                                S-7

</TABLE>



<PAGE>





                       Report of Independent Accountants


To the Board of Directors and Stockholders of
National Discount Brokers Group, Inc.

In our opinion, the accompanying  consolidated statements of financial condition
and the related  consolidated  statements  of income and  comprehensive  income,
changes in stockholders'  equity and cash flows present fairly,  in all material
respects,  the financial  position of National  Discount Brokers Group, Inc. and
its  Subsidiaries  at May 31,  2000 and May 31,  1999,  and the results of their
operations  and their cash  flows for each of the two years in the period  ended
May 31, 2000, in conformity with accounting principles generally accepted in the
United  States.  These  financial  statements  are  the  responsibility  of  the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements  based on our  audits.  We  conducted  our audits of these
statements  in  accordance  with auditing  standards  generally  accepted in the
United  States,  which  require  that we plan and  perform  the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the  amounts  and  disclosures  in  the  financial  statements,   assessing  the
accounting  principles  used and significant  estimates made by management,  and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for the opinion expressed above.



PricewaterhouseCoopers LLP


July 20, 2000


                                      F-1














<PAGE>



                          Independent Auditors' Report



The Board of Directors and Stockholders of
National Discount Brokers Group, Inc.:


We  have  audited  the  accompanying   consolidated  statements  of  income  and
comprehensive  income,  changes  in  stockholders'  equity,  and  cash  flows of
National  Discount  Brokers Group,  Inc. and subsidiaries for the year ended May
31, 1998. These consolidated  financial statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the results of operations and cash flows of
National  Discount  Brokers Group,  Inc. and subsidiaries for the year ended May
31, 1998, in conformity with generally accepted accounting principles.





KPMG LLP
July 15, 1998


                                      F-2
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Consolidated Statements of Financial Condition
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                            May 31,
                                                                            ----------------------------------------
                                                                                   2000                 1999
                                                                            -------------------  -------------------

  Assets
  <S>                                                                       <C>                  <C>
  Cash and cash equivalents                                                 $      17,250,832    $         411,629
  U.S. Treasury obligations, including $928,797 and $8,418,260 held as
    collateral, respectively                                                       87,098,695            8,418,260
  Receivables
    Clearing brokers                                                              175,660,353           86,509,122
    Other                                                                           5,273,063            2,901,799
  Securities owned, at market value                                                47,500,200           38,048,489
  Securities not readily marketable, at fair value                                 15,315,150              500,000
  Investment in discontinued operations                                                     -           28,341,746
  Loans and notes receivable                                                        1,674,533            1,094,989
  Furniture, fixtures, equipment and leasehold improvements, at cost, net
    of accumulated depreciation and amortization (Note 5)                          48,176,697           14,837,114
  Computer software, at cost, net of accumulated amortization of $6,726,857
    and $3,624,381, respectively                                                   10,464,153            4,996,223
  Exchange memberships (market value of $1,520,000, at May 31, 1999)                        -              351,496
  Secured demand notes receivable                                                           -           27,000,000
  Income taxes receivable                                                           7,388,870                    -
  Deferred tax asset                                                                2,199,072              825,797
  Other assets                                                                     11,180,366            3,054,144
                                                                            -------------------  -------------------

         Total assets                                                       $     429,181,984    $     217,290,808
                                                                            -------------------  -------------------

  Liabilities and Stockholders' Equity

  Liabilities
    Securities sold, not yet purchased, at market value                     $      12,335,906    $      11,723,172
    Accounts payable and accrued expenses                                          99,434,509           46,296,949
    Loan payable                                                                            -           15,000,000
    Income taxes payable                                                                    -            2,275,481
                                                                            -------------------  -------------------

         Total liabilities                                                        111,770,415           75,295,602
                                                                            -------------------  -------------------

  Commitments and contingencies

  Stockholders' equity
    Preferred stock-$.01 par value; 1,000,000 shares authorized, none issued                -                    -
    Common stock-$.01 par value; 50,000,000 shares authorized, 18,333,201
       and 14,343,201, shares issued and outstanding, respectively                    183,332              143,432
    Additional paid-in capital                                                    187,583,451           65,828,938
    Retained earnings                                                             133,639,888           80,181,611
                                                                            -------------------  -------------------

                                                                                  321,406,671          146,153,981

    Less: treasury stock, at cost, 334,569 and 348,277 shares, respectively        (3,995,102)          (4,158,775)
                                                                            -------------------  -------------------

         Total stockholders' equity                                               317,411,569          141,995,206
                                                                            -------------------  -------------------

         Total liabilities and stockholders' equity                         $     429,181,984    $     217,290,808
                                                                            -------------------  -------------------



                   The accompanying notes are an integral part of the consolidated financial statements

</TABLE>
                                       F-3
<PAGE>



National Discount Brokers Group, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                             Years Ended May 31,
                                                         ------------------------------------------------------------
                                                              2000                 1999                  1998
                                                       -------------------- --------------------  -------------------
  <S>                                                  <C>                  <C>                   <C>
  Revenue
    Firm securities transactions, net                  $     286,956,912    $     145,319,935     $      90,256,181
    Commission income                                         68,576,731           45,250,436            37,052,201
    Realized gain on securities                                        -            2,370,242                63,625
    Interest and dividends                                    23,856,633           10,022,013             7,599,179
    Fee income                                                 6,094,867            4,308,393             3,567,837
    Other                                                        273,336              594,153               272,921
                                                       -------------------- --------------------  -------------------

         Total revenue                                       385,758,479          207,865,172           138,811,944
                                                       -------------------- --------------------  -------------------

  Expenses
    Compensation and benefits                                151,757,218           80,055,124            46,497,144
    Clearing and related brokerage charges                    68,189,142           45,356,150            46,176,341
    Communications                                            19,804,403           15,609,756            11,694,337
  Advertising and marketing
    Advertising costs                                         32,495,362            5,876,159             3,460,371
    Sales-related travel and entertainment                     3,622,762            2,011,380               761,090
  Technology related
    Depreciation and amortization                             17,756,571            7,769,722             6,557,551
    Equipment rental                                           2,792,581              662,212               184,876
    Technology consulting                                      5,168,463            2,094,070               743,269
    Repairs and maintenance                                    3,891,453            2,302,834             1,906,181
  Other
    Professional fees                                          2,076,961            3,372,602               705,127
    Occupancy costs                                            6,218,532            2,609,520             2,286,897
    Other                                                      9,224,168            5,464,963             6,099,389
                                                       -------------------- --------------------  -------------------

         Total expenses                                      322,997,616          173,184,492           127,072,573
                                                       -------------------- --------------------  -------------------

  Income from continuing operations before income taxes       62,760,863           34,680,680            11,739,371

  Income taxes                                                30,131,852           16,461,273             5,740,913
                                                       -------------------- --------------------  -------------------

  Net income from continuing operations                       32,629,011           18,219,407             5,998,458
                                                       -------------------- --------------------  -------------------

  Discontinued operations
    Income from discontinued operations, net of taxes             82,994            2,786,052             3,257,776
    Gain on sale of discontinued operations, net of
       taxes                                                  20,746,272                    -             2,704,085
                                                       -------------------- --------------------  -------------------
                                                              20,829,266            2,786,052             5,961,861
                                                       -------------------- --------------------  -------------------

         Net income                                    $      53,458,277    $      21,005,459     $      11,960,319
                                                       -------------------- --------------------  -------------------

                 The  accompanying  notes  are an  integral  part of the  consolidated  financial statements.
</TABLE>

                                      F-4
<PAGE>




National Discount Brokers Group, Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income, Continued
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                         Years Ended May 31,
                                                                   --------------------------------------------------------------
                                                                          2000                  1999                 1998
                                                                   --------------------  -------------------  -------------------
  <S>                                                              <C>                   <C>                 <C>

  Other  comprehensive  (loss)  income,  before tax:  Unrealized
  (loss) gain on
    securities available-for-sale:
       Unrealized holding (loss) gain arising during period        $               -     $        (275,342)   $       2,615,000
       Less: reclassification adjustment for gain included in net
         income                                                                    -            (2,290,318)                   -
                                                                   --------------------  -------------------  -------------------

  Other comprehensive (loss) income, before tax                                    -            (2,565,660)           2,615,000

  Income tax (benefit) expense related to items of other
    comprehensive (loss) income                                                    -            (1,205,860)           1,255,200
                                                                   --------------------  -------------------  -------------------

  Other comprehensive (loss) income, net                                           -            (1,359,800)           1,359,800
                                                                   --------------------  -------------------  -------------------

         Comprehensive income                                      $      53,458,277     $      19,645,659    $      13,320,119
                                                                   --------------------  -------------------  -------------------

  Net income per common and common equivalent share
    Basic
       Net income from continuing operations                       $           1.92      $           1.30     $            .45
       Income from discontinued operations, net of taxes                          -                   .20                  .24
       Gain on sale of discontinued operations, net of taxes                   1.22                     -                  .20
                                                                   --------------------  -------------------  -------------------

         Net income                                                $           3.14      $           1.50     $            .89
                                                                   --------------------  -------------------  -------------------

  Weighted average common shares outstanding                             17,021,113            14,018,257           13,432,726
                                                                   --------------------  -------------------  -------------------

    Diluted
       Net income from continuing operations                                   1.86                  1.29                  .45
       Income from discontinued operations, net of taxes                          -                   .20                  .24
       Gain on sale of discontinued operations, net of taxes                   1.19                     -                  .20
                                                                   --------------------  -------------------  -------------------

         Net income                                                $           3.05      $           1.49     $            .89
                                                                   --------------------  -------------------  -------------------

  Weighted average common shares outstanding                             17,525,126            14,143,240           13,501,346
                                                                   --------------------  -------------------  -------------------

            The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

                                      F-5
<PAGE>







National Discount Brokers Group, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                              Years Ended May 31, 2000, 1999 and 1998
                            ------------------------------------------------------------------------------------------------------

                                                                 Accumulated
                                   Common Stock     Additional       Other                         Treasury Stock
                               ------------------     Paid-in   Comprehensive Retained     -------------------------
                               Shares       Amount    Capital       Income    Earnings       Shares        Amount         Total
                           ------------ ---------- -----------  ------------ -----------  ------------- -----------  ------------

<S>                          <C>         <C>      <C>            <C>         <C>           <C>          <C>           <C>
Balance at May 31, 1997      14,343,201  $143,432 $ 57,189,985   $        -  $47,215,833   (1,648,536)  $(12,274,765) $ 92,274,485


Net income                            -         -            -            -   11,960,319            -              -    11,960,319

Unrealized gain                       -         -            -    1,359,800            -            -              -     1,359,800

Acquisition of treasury stock         -         -            -            -            -     (309,146)    (3,757,376)   (3,757,376)

Sale of treasury stock                -         -    7,023,900            -            -    1,500,000     12,243,600    19,267,500

Issuance of treasury stock upon
  exercise of options                 -         -      836,932            -            -      294,758      2,230,988     3,067,920
                           ------------- ---------- ----------   ------------ ----------   ----------   ------------    -----------

Balance at May 31, 1998      14,343,201   143,432   65,050,817    1,359,800   59,176,152     (162,924)    (1,557,553)  124,172,648

Net income                            -         -            -            -   21,005,459            -              -    21,005,459

Reversal of unrealized gain
 for investments sold                 -         -            -   (1,359,800)           -            -              -    (1,359,800)

Acquisition of treasury stock         -         -            -            -            -     (244,822)    (3,231,647)   (3,231,647)

Issuance of treasury stock
  upon exercise of options            -         -      778,121            -            -       59,469        630,425     1,408,546
                           ------------ ---------- ----------- ------------- -----------  -----------    -----------  -------------

Balance at May 31, 1999      14,343,201   143,432   65,828,938            -   80,181,611     (348,277)    (4,158,775)  141,995,206


Net income                            -         -            -            -   53,458,277            -              -    53,458,277

Issuance of common stock      3,990,000    39,900  121,564,050            -            -            -              -   121,603,950

Issuance of treasury stock
  upon exercise of options            -         -      190,463            -            -       13,708        163,673       354,136
                           ------------  --------- -----------  ------------ -----------  ------------  ------------  -------------

Balance at May 31, 2000      18,333,201  $183,332 $187,583,451   $        - $133,639,888     (334,569)  $ (3,995,102) $317,411,569
                           ------------  -------- ------------   ---------- ------------  ------------  ------------  -------------

The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                      F-6

<PAGE>






National Discount Brokers Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                             Years Ended May 31,
                                                         ------------------------------------------------------------
                                                              2000                 1999                  1998
                                                       -------------------- --------------------  -------------------

<S>                                                    <C>                  <C>                   <C>
Cash flows from operating activities
  Net income from continuing operations                $      32,629,011    $      18,219,407     $       5,998,458
  Net income from discontinued operations                     20,829,266            2,786,052             3,257,776
  Non-cash items included in net income:
     Equity income in partnerships                                     -                    -                (1,299)
     Depreciation and amortization                            17,756,571            7,769,722             7,797,133
     Gain on sale of securities available-for-sale                     -           (2,290,318)                    -
     (Gain) loss on sale/write-off of securities not
       readily marketable                                              -              420,076               (63,625)
     Income of Equitrade allocated to minority partners                -                    -             5,766,440
     Provision for deferred taxes                             (1,373,275)            (542,911)            1,937,586
     Provision for loss on notes receivable                            -              102,865                     -
  (Increase) decrease in operating assets:
     Funds segregated for customers                                    -                    -                29,203
     Receivables
       Clearing brokers                                      (89,151,231)         (18,766,614)           (9,695,325)
       Other                                                  (2,371,264)          (2,174,700)             (266,289)
     Securities owned                                         (9,451,711)          29,920,622           (27,785,967)
     Income taxes receivable                                  (7,246,262)                   -                     -
     Other assets                                             (8,126,222)          (1,985,610)              900,905
  Increase (decrease) in operating liabilities:
     Securities sold, not yet purchased                          612,734          (16,964,314)            3,558,196
     Accounts payable and accrued expenses                    53,137,560           26,093,670           (12,786,419)
     Income taxes payable                                     (2,275,481)           1,708,046              (322,518)
  (Increase)  decrease  in  operating  assets  due  to
    sale/deconsolidation of Equitrade:
     Investment in discontinued operations                    28,341,746          (28,341,746)                    -
     Furniture, fixtures, equipment and leasehold
       improvements                                                    -              290,122                     -
     Intangible assets                                                 -            6,394,789                     -
     Exchange memberships                                        351,496            7,065,000                     -
     Secured demand notes receivable                                   -          (23,500,000)                    -
  Decrease in operating liabilities due to
     deconsolidation of Equitrade
     Minority interest in Equitrade                                    -           (9,465,741)                    -
     Subordinated notes payable                                        -           (3,500,000)                    -
                                                       -------------------- --------------------  -------------------

         Net cash provided by (used in) operating
           activities                                  $      33,662,938    $      (6,761,583)    $     (21,675,745)
                                                       -------------------- --------------------  -------------------


</TABLE>











                                      F-7
<PAGE>

National Discount Brokers Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows, Continued
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                               Years Ended May 31,
                                                               ----------------------------------------------------
                                                                     2000               1999            1998
                                                               ------------------  --------------- ----------------

<S>                                                            <C>                 <C>             <C>
Cash flows from investing activities
   Net purchases of U.S. Treasury obligations                  $     (78,680,435)  $    (750,797)  $    5,661,083
   Proceeds from sales of securities available-for-sale                        -       2,290,318               -
   Proceeds from sales of securities
     not readily marketable                                                    -          81,244          63,625
   Payment for purchase of securities
     not readily marketable                                          (14,815,150)              -        (500,000)
   Loans made and notes issued to employees
     and officers                                                     (1,660,000)       (906,000)        (60,000)
   Principal collected on notes receivable                             1,080,456         468,555         233,124
   Purchases of furniture, fixtures,
     equipment and leasehold improvements                            (46,826,753)     (3,035,696)     (4,949,659)
   Purchases of computer software                                     (9,737,331)     (4,118,607)     (1,842,745)
   Acquisition of intangible asset                                             -        (450,000)              -
   Sale of subsidiaries (net of cash, intangibles and
      exchange memberships acquired)                                           -               -       6,600,000
   Principal collected on subordinated notes receivable               27,000,000               -               -
   Other                                                                       -               -         (38,917)
                                                               ------------------  --------------- ----------------
       Net cash provided by (used in)
          investing activities                                      (123,639,213)     (6,420,983)      5,166,511
                                                               ------------------  --------------- ----------------

Cash flows from financing activities
   Proceeds from issuances of common stock                           121,603,950               -               -
   Proceeds from loan payable                                                  -      15,000,000               -
   Repayment of loan                                                 (15,000,000)              -               -
   Sale of treasury stock                                                      -               -      19,267,500
   Purchase of treasury stock                                                  -      (3,231,647)       (614,281)
   Proceeds from exercise of options                                     211,528         786,721               -
   Capital contribution by minority interest                                   -               -         275,086
   Capital withdrawals by minority interest                                    -               -      (4,296,021)
                                                               ------------------  --------------- ----------------

       Net cash provided by
         financing activities                                        106,815,478      12,555,074      14,632,284
                                                               ------------------  --------------- ----------------

       Net increase (decrease) in cash                                16,839,203        (627,492)     (1,876,950)

Cash surrendered on sale of MXNet, Inc.                                        -               -        (117,747)

       Cash at beginning of year                                         411,629       1,039,121       3,033,818
                                                               ------------------  --------------- ----------------

       Cash at end of year                                     $      17,250,832   $     411,629   $   1,039,121
                                                               ------------------  --------------- ----------------



</TABLE>



                                      F-8


<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows, Continued
-------------------------------------------------------------------------------

Supplemental disclosures of cash flow information:

  Income tax payments totaled $56,179,617, $17,266,322 and $7,510,410 during the
  years ended May 31, 2000, 1999 and 1998, respectively.

  Interest payments totaled  $164,024,  $315,334 and $1,129,763 during the years
  ended May 31, 2000, 1999 and 1998, respectively.

Supplemental disclosures of non-cash investing and financing activities:

  During  September  1997,  NDB Group  sold all of the stock of its  subsidiary,
  Anvil  Institutional  Services,  Inc.,  and  received  a note in the amount of
  $102,945, which was repaid in January 1999.

  During  October  1997,   Equitrade  Partners  L.P.  entered  into  a  $500,000
  subordinated  note agreement in the form of a secured  demand note  receivable
  with an unrelated  party.  The note had a stated  interest  rate of 4% and was
  repaid on June 18, 1999.

  During  February  1998,  NDB  Group  sold  the  remaining  net  assets  of its
  subsidiary,  MXNet,  Inc., and received a promissory  note for $6,600,000 with
  interest  accrued  at 6% from the date of sale.  The note was  repaid in April
  1998.

  Between  February  1998 and May 1998,  certain  available-for-sale  securities
  appreciated due to the entity's  successful initial public offering.  As such,
  NDB Group reflected these  securities at fair market value on the consolidated
  statements of financial  condition.  The unrealized gain of $1,359,800,  as of
  May 31, 1998,  associated with marking these  securities to fair market value,
  is  reflected  as a  component  of  accumulated  comprehensive  income  on the
  consolidated  statements  of  financial  condition,  net of  income  taxes  of
  $1,255,200.

  During the year ended May 31, 1999,  various  employees of NDB Group exercised
  an  aggregate  of 59,469  options  for the  purchase  of 59,469  shares of NDB
  Group's  common stock with  exercise  prices  ranging from $11.00 per share to
  $13.50 per share. In connection with the exercise of these options,  NDB Group
  recorded an income tax benefit of $621,825.

  During the year ended May 31, 2000,  various  employees of NDB Group exercised
  an  aggregate  of 13,708  options  for the  purchase  of 13,708  shares of NDB
  Group's  common stock with  exercise  prices  ranging from $13.50 per share to
  $22.50 per share. In connection with the exercise of these options,  NDB Group
  recorded an income tax benefit of $142,608.

  The accompanying notes are an integral part of the consolidated
  financial statements.


                                      F-9

<PAGE>

National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------
1.   Organization and Business

     National  Discount  Brokers Group,  Inc. ("NDB Group") and its subsidiaries
     (collectively,  the "Company") are engaged in the retail discount brokerage
     (primarily   online)  and  market  making   businesses.   NDB  Group's  two
     wholly-owned  subsidiaries,   NDB  Capital  Markets  Corporation  (formerly
     Sherwood  Securities  Corp.),  and National  Discount  Brokers  Corporation
     (formerly Triak Services Corp.),  doing business as NDB.com  ("NDB.com")are
     registered as  broker-dealers  with the Securities and Exchange  Commission
     ("SEC") and are members of the National  Association of Securities Dealers,
     Inc. ("NASD").

     NDB.com provides retail discount  brokerage  services.  As a retail broker,
     NDB.com  executes  orders for  customers to buy and sell  securities  for a
     commission.

     NDB  Capital  Markets  Corporation  ("NDBC")  is a market  maker in  equity
     securities  traded on the Nasdaq stock market and over the counter bulletin
     board.  As a market maker,  NDBC  maintains  firm bid and offer prices in a
     given security by standing  ready to buy or sell at publicly  quoted prices
     and  maintains an inventory in the  securities  in which it makes a market.
     NDBC  executes  transactions  for  its own  account,  the  accounts  of its
     customers and on behalf of other broker-dealers.

     NDB Group and another wholly owned  subsidiary,  SHD  Corporation  ("SHD"),
     also   owned   membership   interests   in   Equitrade   Partners,   L.L.C.
     ("Equitrade"), a Delaware limited liability company, which was a registered
     specialist  on the New York Stock  Exchange  ("NYSE").  In June  1999,  the
     Company sold its 46.845% membership interest in Equitrade to Spear, Leeds &
     Kellogg  Specialists  LLC ("SLK  Specialists").  Prior to the closing,  NDB
     Group  exercised  its  right  to  purchase  .03%  membership  interests  in
     Equitrade  from three  special  members in  exchange  for cash equal to the
     capital  accounts  of these  special  members.  NDB Group and SHD  received
     approximately  $85,000,000 in cash from SLK Specialists net of repayment of
     a $15,000,000  loan from Spear,  Leeds & Kellogg L.P. ("SLK") to NDB Group.
     The  Company  recognized  a net  pre-tax  economic  gain  of  approximately
     $36,000,000 in connection with this transaction. See Note 12 - Discontinued
     Operations.

     On January 24, 1997, NDB Group acquired,  from its joint venture partner at
     that time, the remaining 51% of Anvil  Institutional  Services Company (the
     "Anvil  Joint  Venture")  that  it  did  not  previously  own.  NDB  Group,
     therefore,  became  the 100%  owner of Anvil  Institutional  Services  Inc.
     ("Anvil"), a broker-dealer  previously owned by the Anvil Joint Venture. On
     September 5, 1997,  NDB Group sold all of the stock of Anvil for  $217,000,
     which approximated book value.

     On  February  13,  1998,  MXNet,  Inc.  ("MXNet"),   another  wholly  owned
     subsidiary of NDB Group, was sold. In addition,  on February 27, 1998, NDBC
     sold its American Stock Exchange ("AMEX") specialist business.  See Note 12
     - Discontinued Operations.

                                      F-10


<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

2.   Summary of Significant Accounting Policies

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     the  disclosure of  contingent  assets and  liabilities  at the date of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during the  reporting  periods.  Actual  results  could  differ  from those
     estimates.

     The consolidated financial statements include the accounts of NDB Group and
     its subsidiaries.  All significant  intercompany  balances and transactions
     have been eliminated in consolidation.  In 1998, NDB Group consolidated its
     majority-owned subsidiary,  Equitrade. In 1999, the net assets of Equitrade
     are  presented  as a separate  line item in the  consolidated  statement of
     financial condition since its operations have been discontinued.

     Firm  securities  transactions  (trading  gains,  net of  trading  losses),
     commission  income and related  revenues  and  expenses  are  recorded on a
     trade-date basis.

     Interest and dividend  income  consists of interest earned on the Company's
     and customer  balances  held by clearing  brokers and  dividends  earned on
     securities  owned.  Interest  income  is  recorded  on the  accrual  basis.
     Dividend income is recorded on the ex-dividend date.

     Fee income  comprises  mutual fund  distribution  assistance fees and short
     stock rebates. Fee income is recorded as earned.

     Receivable from clearing  brokers  comprises cash in proprietary  accounts,
     cash on deposit with the Company's clearing brokers and commissions.

     Securities  owned and securities  sold,  not yet purchased,  are carried at
     market value.  The difference  between cost and market value is included in
     firm securities  transactions on the consolidated  statements of income and
     comprehensive income.

     Securities  not readily  marketable  are  carried at cost which  management
     believes approximates fair value.

     Management  estimates that the fair values of other  financial  instruments
     recognized  in  the  consolidated  statement  of  financial  condition  are
     approximated by their carrying  values,  as such financial  instruments are
     short-term in nature,  bear interest at current market rates or are subject
     to frequent repricing.

Furniture, fixtures and equipment are depreciated using the straight-line method
over their estimated useful lives of 2.5 to 5 years.  Leasehold improvements are
amortized  using the  straight-line  method  over the terms of the leases or the
estimated useful lives of the improvements, whichever is less.

                                      F-11
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

     Computer  software is  amortized  using the  straight-line  method over its
     estimated useful life of three years.

     Deferred  income  taxes are  recognized  for the  future  tax  consequences
     attributable  to  differences  between  the  financial  statement  carrying
     amounts of existing assets and liabilities and their  respective tax bases.
     Deferred tax assets and  liabilities  are measured  using enacted tax rates
     expected to apply to taxable  income in the years in which those  temporary
     differences are expected to be recovered or settled. The effect on deferred
     taxes of a change in tax rates is  recognized  in income in the period that
     includes the enactment date.

     In accounting for its stock option plans,  the Company  applies  Accounting
     Principles  Board  Opinion  No.  25 ("APB  25") to  calculate  compensation
     expense.  Under APB 25, compensation  expense would be recorded on the date
     of an option grant only if the current market price of the underlying stock
     exceeded the exercise  price. As required,  the Company  provides pro forma
     net income and pro forma earnings per share  disclosures for employee stock
     option  grants  made in 1995 and  future  years as if the  fair-value-based
     method defined in Statement of Financial  Accounting Standards ("SFAS") 123
     had been applied.

     Net income per common share is computed  using the weighted  average number
     of shares of common stock and potential common stock outstanding. Potential
     common  stock is  comprised  of stock  issuable  under stock  options.  The
     treasury  stock method is used in computing the potential  common stock for
     the  computation of diluted  earnings per common share.  Basic earnings per
     share  differs  from  diluted  earnings  per  share  in that  dilution  for
     potential common stock is excluded.

     Statement of Position 98-1,  "Accounting for the Costs of Computer Software
     Developed or Obtained for Internal Use" ("SOP 98-1")  provides  guidance on
     accounting  for the costs of computer  software  developed  or obtained for
     internal use and for determining  when specific costs should be capitalized
     and when they should be expensed.  SOP 98-1 was  implemented by the Company
     as of the beginning of fiscal 1999. The adoption of SOP 98-1 did not have a
     material impact on the Company's consolidated financial statements.

     Certain prior year amounts have been  reclassified  to conform with the May
     31, 2000 presentation.  Additionally, the accompanying financial statements
     for the year ended May 31,  1998 have been  restated  to include the income
     tax expense related to items of other comprehensive income. The restatement
     had no impact on net income for the year ended May 31, 1998.


                                      F-12
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

3.   Securities Owned and Sold, Not Yet Purchased

     Securities  owned and sold,  not yet purchased  consist solely of corporate
     equities as of May 31, 2000 and 1999:
<TABLE>
<CAPTION>

                                                                                           May 31,
                                                                              -----------------------------------
                                                                                    2000              1999
                                                                              -----------------  ----------------

     <S>                                                                           <C>             <C>
     Securities owned                                                              $47,500,200     $38,048,489
                                                                              -----------------  ----------------

     Securities sold, not yet purchased                                            $12,335,906     $11,723,172
                                                                              -----------------  ----------------
</TABLE>


4.   Financial Instruments with Off-Balance Sheet Risk and Concentrations of
     Credit Risk

     In the  normal  course  of  business,  NDBC and  NDB.com  clear  securities
     transactions through two unaffiliated clearing brokers on a fully disclosed
     basis. Pursuant to the terms of the agreements between NDBC and NDB.com and
     their respective  clearing brokers,  the clearing brokers have the right to
     recover  losses  resulting  from a  counterparty's  failure to fulfill  its
     contractual  obligations.  NDBC  and  NDB.com  seek  to  control  the  risk
     associated with their customer  activities by making credit  inquiries when
     establishing  customer  relationships  and by monitoring  customer  trading
     activity.

     Credit  risk  arises  from  the  potential   inability  of  counterparties,
     including clearing brokers, to fulfill their contractual  obligations.  The
     subsequent  settlement  of open  positions  at May 31, 2000 had no material
     adverse effect on the financial position of the Company.

     During the normal course of business,  NDBC and NDB.com may sell securities
     which have not yet been purchased,  which represent obligations of NDBC and
     NDB.com to deliver the specified security at a later date, thereby creating
     a liability to purchase the  security in the market at  prevailing  prices.
     Such  transactions  result in  off-balance  sheet market risk as NDBC's and
     NDB.com's  ultimate  obligation to satisfy the sale of securities sold, but
     not yet  purchased,  may  exceed the amount  recorded  on the  consolidated
     statement  of  financial  condition.  NDBC and NDB.com seek to control such
     market risk through the use of internal monitoring guidelines. Neither NDBC
     nor NDB.com engage in any derivative activities.

     NDBC's balances of receivable from clearing  broker,  securities  owned and
     securities  sold,  but  not  yet  purchased,   included  in  the  Company's
     consolidated  statement  of  financial  condition  are  held  at one  major
     clearing  broker.  NDB.com's  balances of receivable from clearing  broker,
     securities owned and securities sold, but not yet purchased,  also included
     in the Company's  consolidated statement of financial condition are held at
     a separate major clearing broker.

                                      F-13
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

5.   Furniture, Fixtures, Equipment and Leasehold Improvements

     Furniture,  fixtures,  equipment and leasehold  improvements consist of the
following:
<TABLE>
<CAPTION>

                                                                                              May 31,
                                                                                  --------------------------------
                                                                                      2000             1999
                                                                                  --------------  ----------------

     <S>                                                                            <C>               <C>
     Furniture, fixtures and equipment                                              $49,504,928       $26,309,299
     Leasehold improvements                                                          24,191,098         3,832,350
                                                                                  --------------  ----------------

                                                                                     73,696,026        30,141,649
     Less accumulated depreciation
       and amortization                                                              25,519,329        15,304,535
                                                                                  --------------  ----------------

                                                                                    $48,176,697       $14,837,114
                                                                                  --------------  ----------------
</TABLE>

     The amounts for  furniture,  fixtures  and  equipment  and for  accumulated
     depreciation   and  amortization  are  net  of  amounts  related  to  fully
     depreciated/amortized items which have been retired.

6.   Acquisition of SHD Corporation (Formerly Dresdner-NY Incorporated)

     On May 2,  1997,  NDB  Group  acquired  100% of the  stock  of  Dresdner-NY
     Incorporated  (subsequently  renamed SHD  Corporation),  a NYSE  specialist
     firm,  from Dresdner  Bank AG for a purchase  price of  $15,261,493,  which
     included  four NYSE seats with a market value of  $4,800,000.  The purchase
     price  resulted in an intangible  asset  amounting to $4,150,000  which was
     being  amortized on a straight line basis over ten years.  The  acquisition
     was accounted for by the purchase  method of accounting  and,  accordingly,
     the  results  of  operations  of  SHD  are  included  in  the  accompanying
     consolidated   statement  of  income  and  comprehensive  income  from  the
     acquisition date. The SHD business was sold to SLK concurrent with the sale
     of  Equitrade  in June  1999;  therefore,  the  business  has been shown as
     discontinued  operations and the remaining unamortized intangible asset was
     expensed.

7.   Income Taxes

     The Company files consolidated  Federal and combined income tax returns for
     certain  states  and  localities  (inclusive  of all  subsidiaries,  except
     Equitrade)  based on a May 31 year end.  Separate  tax returns are filed in
     certain states as required.

     The current  Federal,  state and local income tax  provisions for the years
     ended  May 31,  2000,  1999  and  1998  have  been  provided  based  on the
     appropriate tax computation for each jurisdiction.

     Deferred income taxes reflect the net tax effects of temporary  differences
     between  the  carrying  amounts of assets  and  liabilities  for  financial
     reporting purposes and the amounts used for income tax purposes. At May 31,
     2000,  the Company had net deferred tax assets which are  primarily  due to
     differences  in the  period in which  depreciation  and rent  expenses  are
     deductible  for  book  and tax  purposes.  Management  of the  Company  has
     established a valuation  allowance of  approximately  $534,000 because they
     concluded  that it is more  likely than not that a portion of the state tax
     benefit at one of its subsidiaries will not be realized.

                                      F-14
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

     The provisions for income taxes included in the consolidated  statements of
     income and comprehensive income are as follows:

<TABLE>
<CAPTION>
                                                                                 Years Ended May 31,
                                                                  --------------------------------------------------
                                                                       2000              1999             1998
                                                                  ----------------  ---------------  ---------------

     <S>                                                          <C>               <C>              <C>
     Continuing operations
        Federal
          Current                                                 $   21,898,953    $   10,941,702   $   2,811,254
          Deferred (benefit) expense                                    (346,257)         (382,360)      1,022,050
                                                                  ----------------  ---------------  ---------------

                                                                      21,552,696        10,559,342       3,833,304
                                                                  ----------------  ---------------  ---------------

     State and local
        Current                                                        9,606,174         6,062,482         992,073
        Deferred (benefit) expense                                    (1,027,018)         (160,551)        915,536
                                                                  ----------------  ---------------  ---------------

                                                                       8,579,156         5,901,931       1,907,609
                                                                  ----------------  ---------------  ---------------

                                                                  $   30,131,852       $16,461,273      $5,740,913
                                                                  ----------------  ---------------  ---------------

     Discontinued operations
        Federal
          Current                                                 $       46,976    $    1,577,010   $   2,325,179

        State and local
          Current                                                         26,620           893,639       1,063,568
                                                                  ----------------  ---------------  ---------------

                                                                  $       73,596    $    2,470,649   $   3,388,747
                                                                  ----------------  ---------------  ---------------
</TABLE>


                                      F-15
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

     A reconciliation of differences  between the income tax provisions included
     in continuing operations and the amounts computed by applying the statutory
     Federal income tax rate is as follows:
<TABLE>
<CAPTION>

                                                                               Years Ended May 31,
                                                                --------------------------------------------------
                                                                      2000              1999            1998
                                                                -----------------  ---------------  --------------

     <S>                                                            <C>               <C>              <C>
     Statutory provision on pretax income                           $21,966,302       $12,138,238      $4,108,779

     State and local taxes, net of Federal tax benefit                5,576,451         3,836,255       1,239,946

     Tax effect of disallowed expenses                                  946,475           278,236         124,804

     Other - net                                                      1,642,624           208,544         267,384
                                                                -----------------  ---------------  --------------

          Income tax provision                                       $30,131,852      $16,461,273      $5,740,913
                                                                -----------------  ---------------  --------------
</TABLE>

8.   Subordinated Notes Payable

     As of May 31, 1998, Equitrade had three subordinated note agreements in the
     aggregate amount of $3,000,000, each with a stated interest rate of 5%, and
     an additional $500,000 subordinated note agreement ("Additional Note") with
     a stated interest rate of 4%. Such notes were due on March 23, 2000, except
     for the  Additional  Note, for which the maturity date was October 1, 1999.
     Each note contained yearly automatic  roll-over  provisions.  In connection
     with these  agreements,  the lenders pledged  marketable  securities with a
     market value of  approximately  $5,940,000  as  collateral  for the related
     secured demand notes  receivable.  Concurrent with the sale of Equitrade on
     June  18,  1999,  the  aforementioned  subordinated  note  agreements  were
     cancelled.

9.   Stock Option Plans

     On October 24, 1995, the  stockholders of the Company approved The Sherwood
     Group,  Inc.  1995 Stock  Option Plan (the "1995  Plan")  allowing  for the
     issuance of up to 767,200 shares of the Company's  common stock pursuant to
     stock options and permitting the issuance of stock  appreciation  rights in
     connection  with the issuance of stock  options.  On October 21, 1997,  the
     stockholders  of the  Company  approved  an  amendment  to the 1995 Plan to
     increase by 420,000 the number of shares of the Company's  common stock for
     which options and stock appreciation  rights may be granted thereunder from
     767,200 shares to 1,187,200  shares.  The Compensation  Committee issued to
     employees,  exercising  options  under a plan  initiated in 1983 (the "1983
     Plan"),  new options  (reload  options) in an amount equal to the number of
     shares of common stock the employees used to satisfy the exercise price and
     the withholding taxes due upon exercise of the options.  Generally,  reload
     options  granted  have  provided  for vesting six months  after the date of
     grant.  Other options granted under the 1995 Plan have provided for vesting
     ratably over three years after the date of grant.  All options granted have
     exercise  prices  equal to the fair market  value of the  Company's  common
     stock on the date of the grant and have a ten-year term.

                                      F-16
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

     On April 21,  1999,  the Board of  Directors  of the Company  approved  the
     National Discount Brokers Group, Inc. 1999 Non-Qualified  Stock Option Plan
     (the "1999 Plan")  permitting the granting of  non-qualified  stock options
     covering up to 1,000,000  additional  shares of the Company's common stock.
     Options  granted  under the 1999 Plan have  generally  provided for vesting
     ratably over three years after the date of grant  except  those  granted to
     non-employee  directors.  All options granted have exercise prices equal to
     or greater than the fair market value of the Company's  common stock on the
     date of the grant and have a ten year term.

     On October 20,  1999,  the  stockholders  of the Company  approved the 2000
     National Discount Brokers Group,  Inc.  Compensation Plan (the "2000 Plan")
     allowing  for  the  issuance  of up to  800,000  additional  shares  of the
     Company's  common  stock  pursuant  to stock  options  or as stock  awards.
     Options  granted  under the 2000 Plan have  generally  provided for vesting
     ratably over three years after the date of grant.  All options granted have
     exercise  prices  equal to or  greater  than the fair  market  value of the
     Company's common stock on the date of grant and have a ten year term.

     At May 31, 2000, an aggregate of 590,863  shares were  available for future
     grant  under  the 1995  Plan,  the 1999  Plan and the 2000  Plan.  No stock
     appreciation  rights or stock awards have been issued.  The following table
     summarizes  transactions  in stock options granted under the 1995 Plan, the
     1999 Plan and the 2000 Plan from June 1, 1997 through May 31, 2000:
<TABLE>
<CAPTION>

                                                                                     Optioned Shares
                                                                              -------------------------------
                                                                                                   Weighted
                                                                                                   Average
                                                                                Number of       Exercise Price
                                                                                 Shares            per Share
                                                                              --------------  -------------------

     <S>                                                                         <C>                 <C>
     Balance at June 1, 1997                                                       465,857           $ 9.45

        Options exercised                                                         (294,758)            9.17
        Options granted (including 255,450 reload options)                         539,600            12.94
        Options cancelled                                                          (68,214)           11.77
                                                                              --------------

     Balance at May 31, 1998                                                       642,485            12.26

        Options exercised                                                          (59,469)           13.23
        Options granted - original                                                 942,750            52.81
        Options cancelled                                                          (40,117)           13.29
                                                                              --------------

     Balance at May 31, 1999                                                     1,485,649            37.93

        Options exercised                                                          (13,708)           15.43
        Options granted - original                                                 578,600            31.52
        Options cancelled                                                         (116,166)           50.24
                                                                              --------------

     Balance at May 31, 2000                                                     1,934,375            35.43
                                                                              --------------
</TABLE>



                                      F-17
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

     The following table summarizes  information about stock options outstanding
and exercisable at May 31, 2000.
<TABLE>
<CAPTION>

                                            Options Outstanding                       Options Exercisable
                           ------------------------------------------------------ --------------------------------
                                             Weighted-Average   Weighted-Average                  Weighted-Average
           Range of             Number           Remaining       Exercise Price     Number        Exercise Price
       Exercise Prices       Outstanding     Contractual Life      Per Share      Exercisable        Per Share

       <S>         <C>       <C>                    <C>            <C>                <C>             <C>
       $ 8.81   -  $12.69      365,375              6.9            $  11.42           365,375         $ 11.42

        13.25       13.50      160,199              7.5               13.48            92,378           13.47

        22.50   -   29.16      630,736              9.3               25.57            52,928           22.67

        39.63       53.88       44,000              8.9               45.07            23,333           41.66
                -
        60.06       60.06      734,065              8.9               60.06           225,433           60.06
                           ------------                                           ------------
                -
         8.81       60.06    1,934,375              8.5               35.43           759,447           27.82
                           ------------                                           ------------
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
     the Black-Scholes option pricing model with the following  weighted-average
     assumptions  used for grants under the option plans for the years ended May
     31, 2000, 1999 and 1998.
<TABLE>
<CAPTION>

                                                                           Years Ended May 31,
                                                       ------------------------------------------------------------
         Weighted-Average Assumptions                       2000                 1999                 1998
                                                     -------------------- -------------------- --------------------

     <S>                                                    <C>                    <C>                  <C>
     Dividend yield                                          0%                       0%                   0%
     Expected volatility                                    74.0%                  66.0%                37.0%
     Risk-free interest rate                                6.10%                  4.92%                5.61%
     Expected lives                                           3                      3                    3
</TABLE>

     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
     estimating  the  fair  value  of  traded  options  which  have  no  vesting
     restrictions  and are fully  transferable.  In addition,  option  valuation
     models  require the input of highly  subjective  assumptions  including the
     expected stock price  volatility.  Because the Company's stock options have
     characteristics  significantly  different from those of traded options, and
     because changes in the subjective input  assumptions can materially  affect
     the fair value estimate,  in management's  opinion,  the existing models do
     not necessarily  provide a reliable single measure of the fair value of its
     employee stock options.

     Had the Company accounted for its stock-based  compensation  plans based on
     the fair  value of awards  at grant  date in a manner  consistent  with the
     methodology  of SFAS 123,  the  Company's  net income and income per common
     share would have decreased as indicated in the table below. For purposes of
     pro forma disclosures, the estimated fair value of stock-based compensation
     plans and other options is amortized to expense  primarily over the vesting
     period.

                                      F-18
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                             Years Ended May 31,
                                                            -------------------------------------------------------
                                                                  2000               1999               1998
                                                            -----------------  -----------------  -----------------
     <S>                                                        <C>                <C>                <C>
     Net income
        As reported                                             $53,458,277        $21,005,459        $11,960,319
        SFAS 123 fair value adjustment                           (4,846,529)          (995,559)          (672,646)
                                                            -----------------  -----------------  -----------------

        Pro forma                                               $48,611,748        $20,009,900        $11,287,673
                                                            -----------------  -----------------  -----------------

     Net income per common share:
     Basic
        As reported                                                   $3.14              $1.50              $0.89
        SFAS 123 fair value adjustment                                 (.28)              (.07)              (.05)
                                                            -----------------  -----------------  -----------------

        Pro forma                                                     $2.86              $1.43               $.84
                                                            -----------------  -----------------  -----------------

     Diluted
        As reported                                                   $3.05              $1.49              $0.89
        SFAS 123 fair value adjustment                                 (.27)              (.07)              (.05)
                                                            -----------------  -----------------  -----------------

        Pro forma                                                     $2.78              $1.42               $.84
                                                            -----------------  -----------------  -----------------
</TABLE>

     The effects of applying SFAS 123 for providing pro forma disclosures during
     the initial  phase-in  period may not be  representative  of the effects on
     reported net income for future years.

     The  weighted-average  fair value of options  granted  under the 1995 Plan,
     1999  Plan and 2000 Plan for the years  ended May 31,  2000,  1999 and 1998
     were $16.31, $25.39 and $3.93, respectively.

10.  Related Party Transactions

     The Company  has,  from time to time,  entered  into  short-term  borrowing
     facilities  with Spear,  Leeds & Kellogg,  L.P.  ("SLK") for the purpose of
     financing  trading  positions.  On December  31, 1998,  NDB Group  borrowed
     $15,000,000,  at an interest rate of 6% per annum and a six-month maturity,
     from SLK in order to increase the capital of Equitrade. Concurrent with the
     sale of Equitrade on June 18, 1999 to SLK Specialists, the $15,000,000 loan
     from SLK was repaid in full.  See Note 1 for a  description  of the sale of
     Equitrade to SLK Specialists.

     On December 8, 1997, the Company sold, at market value, 1,500,000 shares of
     its common stock held in treasury to IAT  Reinsurance  Syndicate  Ltd.,  an
     affiliate  of Peter R.  Kellogg.  Prior to this  acquisition,  Mr.  Kellogg
     beneficially owned 1,025,000 shares of NDB Group common stock.

     During the year ended May 31, 2000, the Company paid  $7,500,000 to Go2Net,
     Inc.  related  to the  Company's  advertising  plan.  This  amount is being
     charged  to  income  over the term of the  agreement.  As of May 31,  2000,
     included  in  other  assets  on the  consolidated  statement  of  financial
     condition is approximately  $5,625,000 in relation to the Go2Net agreement.
     Go2Net,  Inc. is a  stockholder  of the  Company  and Russell C.  Horowitz,
     Go2Net,  Inc.'s  Chairman and Chief Executive  Officer,  is a member of the
     Company's Board of Directors.

                                      F-19
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

11.  Employee Benefit Plans

     The  Company  has  an  employee   deferred   compensation   plan   covering
     substantially  all employees  which  qualifies  under Section 401(k) of the
     Internal  Revenue  Code.  The  Company  contributed  $108,221,  $93,115 and
     $82,013  to the plan for the  years  ended  May 31,  2000,  1999 and  1998,
     respectively.

12.      Discontinued Operations

     Pursuant to  Accounting  Principles  Board Opinion No. 30,  "Reporting  the
     Results of Operations - Reporting the Effects of Disposal of a Segment of a
     Business, and Extraordinary,  Unusual and Infrequently Occurring Events and
     Transactions",  the consolidated  financial  statements of the Company have
     been  reclassified  to reflect the  dispositions  of  Equitrade,  MXNet and
     NDBC's AMEX specialist business.

     In May 1999,  the Company  entered into a definitive  agreement to sell its
     ownership  interest in Equitrade.  The transaction closed on June 18, 1999,
     and  as  such,   the   operations  of  Equitrade  have  been  reflected  in
     discontinued  operations for all periods reported.  Prior to the allocation
     of minority  interest and income taxes,  revenues and expenses for the year
     ended  May  31,  2000  applicable  to  this  discontinued   operation  were
     $1,728,146 and  $1,690,147,  respectively;  for the year ended May 31, 1999
     were $21,834,533 and $13,934,463,  respectively; and for the year ended May
     31, 1998 were $25,636,056 and $12,173,172, respectively. The gain from this
     transaction was $20,746,272,  net of $15,073,923 of applicable income taxes
     and other expenses directly related to the sale.

     On  February  13,  1998,  NDB Group  sold 100% of the  common  stock of its
     subsidiary,  MXNet,  to IPC  Information  Systems,  Inc. for cash  proceeds
     amounting to $6,600,000.  In addition,  during February 1998, NDBC sold its
     AMEX  specialist  business  for  $325,000.  The  aggregate  net gain on the
     aforementioned sales was $2,704,000, net of $2,353,000 of applicable income
     taxes and other  expenses  directly  related  to the  sales.  Revenues  and
     expenses for the year ended May 31, 1998  applicable to these  discontinued
     operations were $1,324,114 and $2,374,035, respectively.

13.      Net Capital and Customer Reserve Requirements

     NDBC and NDB.com  introduce all customer  transactions to clearing  brokers
     and do not maintain  custody of customer funds or securities.  Accordingly,
     NDBC and NDB.com  qualify for  exemption  from the  provisions  of SEC Rule
     15c3-3 under subparagraph  (k)(2)(ii).  NDBC and NDB.com were in compliance
     with the conditions of this exemption  during the years ended May 31, 2000,
     1999 and 1998.

     As registered  broker-dealers,  NDBC and NDB.com are subject to SEC Uniform
     Net Capital Rule 15c3-1 (the "Rule").  As of May 31, 2000,  the net capital
     of NDBC and NDB.com exceeded their SEC required net capital by $111,817,563
     and $12,465,936, respectively.

                                      F-20
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

     The Rule also  provides  that equity  capital may not be  withdrawn or cash
     dividends  paid if the  resulting net capital of a  broker-dealer  would be
     less than the amount required under the Rule. Accordingly, at May 31, 2000,
     the payment of dividends and advances to the Company by NDBC and NDB.com is
     limited  to  $111,617,563  and  $12,415,936,  respectively,  under the most
     restrictive of these requirements.

14.  Commitments

     The Company has non-cancelable  operating leases for rental of office space
     at its various locations expiring at various dates through 2014. All leases
     are subject to escalation for increases in taxes, fuel and other costs.

     Commitments  for minimum  lease  payments  under  non-cancelable  operating
     leases as of May 31, 2000 are as follows:
<TABLE>
<CAPTION>

     <S>                                                          <C>
     Fiscal year ending May 31,

     2001                                                         $ 5,146,000
     2002                                                           4,853,000
     2003                                                           4,800,000
     2004                                                           4,820,000
     2005                                                           4,888,000
     Thereafter                                                    34,349,000
                                                                  ------------
                                                                  $58,856,000
                                                                  ------------
</TABLE>

     The Company has free rent periods which are being  amortized over the lives
of the leases.

     Included in occupancy  costs are office  rental  expenses of  approximately
     $5,210,000,  $2,097,000  and  $2,201,000  for the years ended May 31, 2000,
     1999 and 1998, respectively.


                                      F-21
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

     NDB Group has a  contract  with  Arthur  Kontos,  Chief  Executive  Officer
     ("CEO") of NDB Group,  with an initial  term  ending on May 31,  2000.  The
     contract has been  extended,  pursuant to its terms,  for fiscal year ended
     May 31, 2001 and may be extended one additional year in accordance with its
     terms.  Remuneration under this contract consists of base salary and a cash
     bonus.  The CEO's  cash bonus is paid  pursuant  to the  National  Discount
     Brokers  Group,  Inc.  1996 CEO Bonus Plan (the "CEO  Plan").  The CEO Plan
     provides,  through May 31,  2000,  for an annual cash bonus payout equal to
     10% of the first  $10,000,000 of income (as defined) and 15% of income over
     $10,000,000.   Included  in  accounts   payable  and  accrued  expenses  is
     approximately  $8,244,000 and $3,530,000 due to the CEO at May 31, 2000 and
     1999,  respectively.  The CEO has waived the receipt of  $2,400,000  of his
     cash bonus  under the CEO Plan for the fiscal year ended May 31,  2000.  In
     connection with this contract and the CEO Plan, approximately  $10,515,000,
     $5,532,000 and $1,366,000 is reflected in compensation and benefits for the
     years ended May 31, 2000, 1999 and 1998,  respectively.  Additionally,  for
     the  years  ended  May  31,  1999  and  1998,  approximately  $928,000  and
     $1,358,000,  respectively,  were netted  against  income from  discontinued
     operations  and  for  the  years  ended  May 31,  2000  and  May 31,  1998,
     approximately  $6,337,000 and $755,000 were netted against the gain on sale
     of discontinued  operations as reflected in the  accompanying  consolidated
     statements of income and comprehensive income.

     A senior  executive  officer of NDB Group has agreed to defer $3,000,000 of
     his cash  bonus for the fiscal  year  ended May 31,  2000 over a three year
     period payable  $1,000,000 per year on January 1, 2001,  2002 and 2003. The
     deferred bonus will bear interest at the 90-day treasury bill rate.

15.      Segments

     Under the provisions of SFAS 131, the Company has two reportable  segments:
     discount  brokerage and market making.  NDB.com transacts all business that
     will be reported in the Company's discount brokerage segment.  Its revenues
     are  principally  in the form of  retail  commission  income,  distribution
     assistance  fees from mutual  funds and interest  earned on its  customers'
     balances held at its clearing broker.  NDBC represents the Company's market
     making  segment,  which primarily  derives its firm securities  transaction
     revenues  from the spread  between the price paid when a security is bought
     and the  price  received  when a  security  is  sold  or  from  proprietary
     investments,  as well as limited interest and dividend income.  "All Other"
     category revenues consist principally of interest and realized gains/losses
     on marketable securities.

     The accounting  policies of the segments are the same as those described in
     Note 2.  Revenues  from the  transactions  with other  segments  within the
     Company  (referred  to as  intersegment  revenues)  are  recorded at market
     value, as if the transactions were with third parties.

                                      F-22
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended May 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------

     The Company  evaluates the  performance  of its segments based on profit or
     loss from operations before income taxes. No single customer  accounted for
     more  than  10% of the  Company's  consolidated  revenues.  Information  on
     segment  assets  is not  disclosed  because  it is not used for  evaluating
     segment  performance  and deciding  how to allocate  resources to segments.
     However,  capital  expenditures are used in evaluating segment  performance
     and are  therefore  disclosed.  Capital  expenditures  are  reported net of
     proceeds from the sale of fixed assets,  if any.  Substantially  all of the
     Company's revenues and assets are attributable to or located in the U.S.

     Financial information for the Company's reportable segments is presented in
     the following table which excludes the Company's  discontinued  operations,
     primarily Equitrade.


<TABLE>
<CAPTION>
                                                                    Year Ended May 31, 2000
                                             ----------------------------------------------------------------------
                                                 Discount          Market              All
                                                Brokerage          Making             Other             Total
                                             ----------------  ----------------  ----------------  ----------------
     <S>                                        <C>              <C>                 <C>             <C>
     Revenue from external sources              $88,314,000      $290,195,000        $7,249,000      $385,758,000
     Intersegment revenue                         6,458,000             5,000           548,000         7,011,000
                                             ----------------  ----------------  ----------------  ----------------
      Total revenue                             $94,772,000      $290,200,000        $7,797,000      $392,769,000
                                             ----------------  ----------------  ----------------  ----------------
     Interest and dividends (included in
     total revenues)                            $12,032,000      $  5,297,000        $7,081,000      $ 24,410,000
     Interest expense                               433,000             1,000            88,000           522,000
     Depreciation and amortization               13,114,000         4,255,000           388,000        17,757,000
     Profit or (loss) before income taxes       (14,858,000)       78,916,000        (1,297,000)       62,761,000
     Capital expenditures                        30,766,000         7,418,000        18,380,000        56,564,000

                                                                    Year Ended May 31, 1999
                                             ----------------------------------------------------------------------
                                                 Discount          Market              All
                                                Brokerage          Making             Other             Total
                                             ----------------  ----------------  ----------------  ----------------

     Revenue from external sources              $54,706,000      $150,194,000        $2,965,000      $207,865,000
     Intersegment revenue                         6,979,000           118,000         2,862,000         9,959,000
                                             ----------------  ----------------  ----------------  ----------------
     Total revenue                              $61,685,000      $150,312,000        $5,827,000      $217,824,000
                                             ----------------  ----------------  ----------------  ----------------
     Interest and dividends (included in
     total revenues)                            $ 6,938,000      $  2,635,000        $  856,000      $ 10,429,000
     Interest expense                               407,000             7,000           383,000           797,000
     Depreciation and amortization                4,350,000         3,377,000            43,000         7,770,000
     Profit or loss before income taxes           2,570,000        38,387,000        (6,276,000)       34,681,000
     Capital expenditures                         4,865,000         2,329,000           410,000         7,604,000

                                                                    Year Ended May 31, 1998
                                             ----------------------------------------------------------------------
                                                 Discount          Market              All
                                                Brokerage          Making             Other             Total
                                             ----------------  ----------------  ----------------  ----------------

     Revenue from external sources              $44,186,000       $93,583,000        $1,043,000      $138,812,000
     Intersegment revenue                         6,976,000           100,000         2,302,000         9,378,000
                                             ----------------  ----------------  ----------------  ----------------
     Total revenue                              $51,162,000       $93,683,000        $3,345,000      $148,190,000
                                             ----------------  ----------------  ----------------  ----------------
     Interest and dividends (included in
     total revenues)                            $ 5,448,000       $ 1,610,000         $ 984,000      $  8,042,000
     Interest expense                               435,000           303,000            44,000           782,000
     Depreciation and amortization                3,844,000         2,704,000            10,000         6,558,000
     Profit before income taxes                   2,183,000         8,223,000         1,334,000        11,740,000
     Capital expenditures                         4,454,000         1,668,000           671,000         6,793,000

</TABLE>
                                      F-23
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended May 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------

     The following table is a  reconciliation  of reportable  segment  revenues,
     profit or loss before  income  taxes and other  significant  items,  to the
     Company's consolidated totals.
<TABLE>
<CAPTION>

                                                                              Years Ended May 31,
                                                            --------------------------------------------------------
                                                                  2000               1999               1998
                                                            -----------------  -----------------  ------------------
     <S>                                                       <C>                <C>                 <C>
     Revenue

     Total revenue for reportable segments                     $384,972,000       $211,997,000        $144,845,000
     Other revenue                                                7,797,000          5,827,000           3,345,000
     Elimination of intersegment revenue                         (7,011,000)        (9,959,000)         (9,378,000)
                                                            -----------------  -----------------  ------------------
     Total consolidated revenue                                $385,758,000       $207,865,000        $138,812,000
                                                            -----------------  -----------------  ------------------

     Profit or loss before income taxes

     Total profit or loss before income taxes for
        reportable segments                                     $64,058,000        $40,957,000         $10,406,000
     Other profit or loss                                        (1,297,000)        (6,276,000)          1,334,000
     Elimination of intersegment profit or loss                           -                  -                   -
                                                            -----------------  -----------------  ------------------
     Total consolidated profit or loss before
        Income taxes                                            $62,761,000        $34,681,000         $11,740,000
                                                            -----------------  -----------------  ------------------

     Interest and dividends

     Total interest and dividends for reportable
        segments                                                $17,329,000         $9,573,000          $7,058,000
     Other interest and dividends                                 7,081,000            856,000             984,000
     Elimination of intersegment interest and dividends            (553,000)          (407,000)           (443,000)
                                                            -----------------  -----------------  ------------------
     Total consolidated interest and dividends                  $23,857,000        $10,022,000          $7,599,000
                                                            -----------------  -----------------  ------------------

     Interest expense

     Total interest expense for reportable
        segments                                                   $434,000           $414,000            $738,000
     Other interest expense                                          88,000            383,000              44,000
     Elimination of intersegment interest expense                  (433,000)          (407,000)           (443,000)
                                                            -----------------  -----------------  ------------------
     Total consolidated interest expense                            $89,000           $390,000            $339,000
                                                            -----------------  -----------------  ------------------

     Depreciation and amortization

     Total depreciation and amortization for
        reportable segments                                     $17,369,000         $7,727,000          $6,548,000
     Other depreciation and amortization                            388,000             43,000              10,000
     Elimination of intersegment depreciation
        and amortization                                                  -                  -                   -
                                                            -----------------  -----------------  ------------------
     Total consolidated depreciation and amortization           $17,757,000         $7,770,000          $6,558,000
                                                            -----------------  -----------------  ------------------

     Capital expenditures

     Total capital expenditures for reportable
        segments                                                $38,184,000         $7,194,000          $6,122,000
     Other capital expenditures                                  18,380,000            410,000             671,000
     Elimination of intersegment capital expenditures                     -                  -                   -
                                                            -----------------  -----------------  ------------------
     Total consolidated capital expenditures                    $56,564,000         $7,604,000          $6,793,000
                                                            -----------------  -----------------  ------------------
</TABLE>


                                      F-24
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended May 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------



     During the year,  NDB Group  acquired a principal  trading  position in the
     amount $320,000. This position was subsequently  transferred to NDB.com and
     recorded  as a capital  contribution  at NDB  Group's  original  cost.  The
     position was subsequently  liquidated by NDB.com at a gain of approximately
     $3,470,000 which is included in revenues from principal transactions in the
     consolidated statement of income.

16.  Contingencies and Legal Matters

     NDB Group's  subsidiaries,  and in some cases NDB Group, have been named as
     defendants   in  lawsuits   and   arbitrations   and  are  the  subject  of
     investigations,  that allege, among other things, violations of Federal and
     state securities and related laws and other laws.

     As part of a global settlement  involving more than 25 Nasdaq market making
     firms, NDBC has settled  proceedings  brought against it in connection with
     an  investigation  by the SEC.  In  connection  with the  settlement,  NDBC
     consented  to  the  entry  of  certain   Orders  by  the  SEC   instituting
     proceedings,  making findings and imposing sanctions. NDBC neither admitted
     nor denied the substantive  allegations set forth in the Orders. As part of
     the settlement,  NDBC paid a civil penalty of $1,000,000 to the SEC and the
     sum of $8,138 in  disgorgement.  NDBC's  results for the year ended May 31,
     1998 reflect a charge to  establish a reserve for the SEC's  investigation,
     which is included in  professional  fees on the  consolidated  statement of
     income and comprehensive income, which was paid in January 1999.

     On April 9, 1997, NDBC entered into a settlement agreement (the "Settlement
     Agreement")  in  the  case  of  In  Re:  NASDAQ   Market-Makers   Antitrust
     Litigation,  94 Civ.  3996(RWS)  currently  pending  in the  United  States
     District  Court for the Southern  District of New York (the  "Court").  The
     Settlement  Agreement  provided  for  payment  by  NDBC of  $4,375,000  per
     percentage  point of its market share of the "Defendants'  Market".  NDBC's
     agreed  market share of the  Defendants'  Market was set in the  Settlement
     Agreement, as amended, at 2.10% which resulted in a total principal payment
     obligation of $9,187,500. The Settlement Agreement provided for the payment
     of the verified amount in two installments. On April 23, 1997, NDBC made an
     installment  payment in the amount of $4,593,750.  The remaining balance of
     $4,926,797, including $333,047 of interest, was paid on April 9, 1998.


                                      F-25
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended May 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------

     Weiss,  Peck & Greer,  L.L.C.  ("WPG") has filed a Statement of Claim dated
     March 22,  1999 in an  arbitration  before the NASD titled In the Matter of
     the Arbitration of Weiss, Peck & Greer,  L.L.C.,  Claimant against Sherwood
     Securities Corp.,  Respondent.  In the Statement of Claim, WPG alleges that
     NDBC  contravened  standards of "commercial  reasonableness"  and "just and
     equitable  principles of trade" in connection with trades of  approximately
     1.5  million  shares of  Amazon.com  from  Carnegie,  Childs & Co.,  L.L.C.
     ("Carnegie") on January 8, 1999. WPG was Carnegie's  clearing  broker.  WPG
     alleges that the trades resulted in Carnegie having a net short position in
     Amazon.com of 1,462,000  shares.  WPG covered the short position on January
     11, 1999 and alleges it sustained losses in excess of $11,000,000.  WPG has
     requested  relief of  compensatory  damages in excess of  $11,000,000  plus
     consequential  damages and interest,  WPG's costs and  attorneys'  fees and
     such other  relief as the  arbitration  panel  deems just and  appropriate.
     Management of NDBC, after consultation with counsel,  believes it has valid
     defenses to these claims and intends to  vigorously  defend  against  these
     claims.  NDBC filed an Answer and Statement of  Counterclaim  dated June 8,
     1999 in which NDBC  denies  liability  for the claims  asserted  by WPG and
     asserts a counterclaim of approximately $1,300,000 for losses NDBC suffered
     in connection  with trades in  Amazon.com  executed by NDBC for Carnegie on
     January 8, 1999. WPG has filed a Reply to Counterclaim  dated June 28, 1999
     denying  liability  for the claim  asserted in the Answer and  Statement of
     Counterclaim.

17.  Subsequent Events

     On June 15, 2000, NDB Group consummated the sale of 3,000,000 shares of its
     common stock to DB U.S. Financial Markets Holding Corporation,  an indirect
     subsidiary of Deutsche Bank AG ("DB"),  for  $135,930,000 in gross proceeds
     pursuant to a Securities  Purchase  Agreement dated as of May 15, 2000. NDB
     Group and DB also entered into (1) a Stockholder  Agreement  providing for,
     among  other  things,  the  appointment  of a  representative  of DB to NDB
     Group's  board of  directors,  (2) an agreement  regarding the providing of
     certain research  materials  prepared by DB or certain of its affiliates to
     customers  of the Company in the United  States and (3) an  agreement  with
     respect to the Company being a distributor of initial  public  offerings of
     equity securities in the United States if DB or one of its affiliates is an
     underwriter of the  securities and the internet is a distribution  channel.
     The Company and DB also executed term sheets for joint ventures  between DB
     and the Company  regarding  the  offering of online  discount  brokerage in
     Western  Europe and the rest of the world other than Western Europe and the
     United States.

     As part of the CEO's employment contract with NDB Group, which was extended
     by NDB Group until May 31, 2001 when it exercised  its option,  the CEO has
     agreed to reduce the annual cash bonus  payout due to him by 20%  effective
     June 1, 2000.

     The  Compensation  Committee of the Board of Directors has approved the NDB
     Capital  Markets CEO Bonus Plan ("NDBC Bonus Plan") which  provides for the
     payment of a cash bonus to the Chief  Executive  Officer of NDBC commencing
     with the fiscal  year ended May 31,  2001.  The plan is subject to Board of
     Director  and  stockholder  approvals.  The  bonus  is  equal  to 5% of the
     Company's  pre-tax income from continuing  operations  before reduction for
     the bonuses under the NDBC Bonus Plan and the CEO Plan.


                                      F-26
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------

18.  Quarterly Financial Information (unaudited)

     (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                                 First        Second         Third         Fourth
                                                              ------------  ------------  -------------  ------------
     <S>                                                         <C>           <C>           <C>           <C>
     Year ended May 31, 2000

     Revenues                                                    $53,022       $70,855       $141,213      $120,668
     Expenses                                                     52,221        62,709        106,008       102,059
                                                              ------------  ------------  -------------  ------------

     Income from continuing operations before income taxes           801         8,146         35,205        18,609

     Income taxes                                                    366         3,835         15,974         9,957
                                                              ------------  ------------  -------------  ------------

             Net income from continuing operations                   435         4,311         19,231         8,652

     Income from discontinued operations                              83             -              -             -
     Gain on sale of discontinued operations, net                 20,055           461              -           230
                                                              ------------  ------------  -------------  ------------

     Net income                                                  $20,573        $4,772        $19,231        $8,882
                                                              ------------  ------------  -------------  ------------

     Basic income per share:
        Continuing operations                                       $.02          $.25          $1.12          $.49
        Discontinued operations                                      .01           .00            .00           .00
        Gain on sale of discontinued operations, net                1.24           .03            .00           .01
                                                              ------------  ------------  -------------  ------------

             Net income per share - basic                          $1.27          $.28          $1.12          $.50
                                                              ------------  ------------  -------------  ------------

     Diluted income per share:
        Continuing operations                                       $.02          $.25          $1.10          $.47
        Discontinued operations                                      .01           .00            .00           .00
        Gain on sale of discontinued operations, net                1.22           .03            .00           .01
                                                              ------------  ------------  -------------  ------------

             Net income per share - diluted                        $1.25          $.28          $1.10          $.48
                                                              ------------  ------------  -------------  ------------
</TABLE>


                                      F-27
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended May 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------

18.  Quarterly Financial Information (unaudited), continued

     (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                                 First          Second         Third          Fourth
                                                              -------------  -------------  -------------  -------------
     <S>                                                         <C>            <C>            <C>            <C>
     Year ended May 31, 1999

     Revenues                                                    $  31,748      $  45,379      $  63,873      $  66,865
     Expenses                                                       32,483         37,617         49,383         53,701
                                                              -------------  -------------  -------------  -------------

     Income from continuing operations before taxes                  (735)          7,762         14,490         13,164

     Income taxes                                                     (85)          3,330          6,740          6,477
                                                              -------------  -------------  -------------  -------------

            Net income (loss) from continuing operations             (650)          4,432          7,750          6,687

     Income (loss) from discontinued operations                      (685)          1,451            422          1,598
                                                              -------------  -------------  -------------  -------------

     Net income (loss)                                           $ (1,335)      $   5,883      $   8,172      $   8,285

                                                              -------------  -------------  -------------  -------------

     Basic income (loss) per share:
        Continuing operations                                    $   (.04)       $    .32       $    .55       $    .48
        Discontinued operations                                      (.05)            .10            .03            .11
                                                              -------------  -------------  -------------  -------------

            Net income (loss) per share - basic                  $   (.09)       $    .42       $    .58       $    .59
                                                              -------------  -------------  -------------  -------------

     Diluted income (loss) per share:
        Continuing operations                                    $   (.04)       $    .32       $    .55       $    .47
        Discontinued operations                                      (.05)            .10            .03            .11
                                                              -------------  -------------  -------------  -------------

            Net income (loss) per share - diluted                $   (.09)       $    .42       $    .58       $    .58
                                                              -------------  -------------  -------------  -------------
</TABLE>



                                      F-28
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
For the Years Ended May 31, 2000, 1999 and 1998
--------------------------------------------------------------------------------

18.  Quarterly Financial Information (unaudited), continued

     (In thousands, except per share data)
<TABLE>
<CAPTION>

                                                                     First          Second        Third        Fourth
     <S>                                                               <C>           <C>          <C>          <C>
     Year ended May 31, 1998

     Revenues                                                          $ 34,896      $ 34,845     $ 31,584     $ 37,485
     Expenses                                                            31,377        33,198       29,610       32,888
                                                                ----------------  ------------ ------------  -----------

     Income from continuing operations before taxes                       3,519         1,647        1,974        4,597

     Income taxes                                                         1,527           655          925        2,634
                                                                ----------------  ------------ ------------  -----------

            Net income from continuing operations                         1,992           992        1,049        1,963

     Income from discontinued operations                                    716         1,095          468          981

     Gain on sale of discontinued operations                                  -             -        2,704            -
                                                                ----------------  ------------ ------------  -----------

     Net income                                                         $ 2,708       $ 2,087      $ 4,221      $ 2,944
                                                                ----------------  ------------ ------------  -----------

     Basic income per share:
        Continuing operations                                           $   .16       $   .07      $   .07      $   .14
        Discontinued operations                                             .05           .09          .03          .07
        Gain on sale of discontinued operations, net                          -             -          .20            -
                                                                ----------------  ------------ ------------  -----------

            Net income per share - basic                                $   .21       $   .16      $   .30      $   .21
                                                                ----------------  ------------ ------------  -----------

     Diluted income per share:
        Continuing operations                                           $   .16       $   .07      $   .07      $   .14
        Discontinued operations                                             .05           .09          .03          .07
        Gain on sale of discontinued operations, net                          -             -          .20            -
                                                                ----------------  ------------ ------------  -----------

            Net income per share - diluted                              $   .21       $   .16      $   .30      $   .21
                                                                ----------------  ------------ ------------  -----------
</TABLE>


                                      F-29
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Condensed Financial Statements of the Registrant (Parent)
Statements  of  Financial  Condition                                Schedule I
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                                           May 31,
                                                                           ----------------------------------------
                                                                                  2000                 1999
                                                                           -------------------  -------------------
<S>                                                                             <C>                   <C>
Assets

Cash and cash equivalents                                                        $ 15,938,335         $    145,619
U.S. Treasury obligations, $753,709 and $5,971,505 held as collateral,             86,923,607            5,971,505
   respectively
Receivables                                                                           248,090            1,488,294
Notes receivable                                                                    1,608,025            1,028,481
Investment in securities, not readily marketable                                    4,399,350              400,000
Investment in, less net amounts due to,
   subsidiaries and affiliates                                                    198,365,711          107,057,296
Investment in discontinued operations                                                       -           17,946,870
Furniture, equipment and leasehold improvements, net                               17,998,922                5,938
Intangible asset, net                                                                       -              409,091
Subordinated notes receivable                                                       6,000,000           38,000,000
Income taxes receivable                                                             6,466,690                    -
Other assets                                                                          699,029            2,105,525
                                                                           -------------------  -------------------

     Total assets                                                                $338,647,759         $174,558,619
                                                                           -------------------  -------------------

Liabilities and Stockholders' Equity

Accounts payable and accrued expenses (including income taxes
  payable in 1999)                                                               $ 21,236,190         $ 12,563,413
Subordinated note payable                                                                   -            5,000,000
Loan payable                                                                                -           15,000,000
                                                                           -------------------  -------------------

                                                                                   21,236,190           32,563,413
                                                                           -------------------  -------------------
Stockholders' equity
   Common stock                                                                       183,332              143,432
   Retained earnings and other equity                                             317,228,237          141,851,774
                                                                           -------------------  -------------------

                                                                                  317,411,569          141,995,206
                                                                           -------------------  -------------------

     Total liabilities and stockholders' equity                                  $338,647,759         $174,558,619
                                                                           -------------------  -------------------



The accompanying notes are an integral part of the condensed financial statements.
</TABLE>

                                      S-1
<PAGE>





National Discount Brokers Group, Inc. and Subsidiaries
Condensed Financial Statements of the Registrant (Parent), continued
Statements of Income and Comprehensive  Income                        Schedule I
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>



                                                                              Years Ended May 31,
                                                             -------------------------------------------------------
                                                                   2000               1999               1998
                                                             -----------------  -----------------  -----------------
<S>                                                               <C>                <C>               <C>
Revenues
   Firm securities transactions, net                              $  647,350         $  974,433        $ 1,063,774
   Interest                                                        7,029,911                  -                  -
   Realized gain on securities available-for-sale                          -          2,290,318                  -
   Service fees paid by subsidiaries eliminated
     in consolidation                                                      -          4,140,000          4,233,345
   Other                                                              69,478              6,444                  -
                                                             -----------------  -----------------  -----------------

                                                                   7,746,739          7,411,195          5,297,119
                                                             -----------------  -----------------  -----------------

Expenses
   Compensation and benefits                                       3,213,869         11,858,572          4,016,895
   Interest                                                           87,655            382,828             35,033
   Other                                                           5,673,046          2,560,359          1,299,167
                                                             -----------------  -----------------  -----------------

                                                                   8,974,570         14,801,759          5,351,095
                                                             -----------------  -----------------  -----------------

Loss from continuing operations before equity in income of
   subsidiaries and income taxes                                  (1,227,831)        (7,390,564)           (53,976)

Equity in income of subsidiaries                                  34,311,049         22,835,661          8,837,016
                                                             -----------------  -----------------  -----------------

   Income from continuing operations
     before income taxes                                          33,083,218         15,445,097          8,783,040

Income tax benefit                                                (1,318,366)        (2,742,257)         (218,785)
                                                             -----------------  -----------------  -----------------

       Net income from continuing operations                      34,401,584         18,187,354          9,001,825

Income from discontinued operations, net of taxes                     38,683          2,818,105          3,663,155
Gain (loss) on sale of discontinued operations, net of taxes      19,018,010                  -           (727,116)
                                                             -----------------  -----------------  -----------------

       Net income                                                 53,458,277         21,005,459         11,937,864

Other comprehensive income (loss), net of taxes                            -         (1,359,800)         1,359,800
                                                             -----------------  -----------------  -----------------

       Comprehensive income                                      $53,458,277        $19,645,659        $13,297,664
                                                             -----------------  -----------------  -----------------


The accompanying notes are an integral part of the condensed financial statements.
</TABLE>

                                      S-2
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Condensed Financial Statements of the Registrant (Parent), continued
Statements of Cash Flows                                              Schedule I
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                              Years Ended May 31,
                                                            ---------------------------------------------------------
                                                                   2000                1999               1998
                                                            -------------------  -----------------   ----------------
<S>                                                             <C>                 <C>                 <C>
Cash flows from operating activities
   Net income from continuing operations                        $  34,401,584       $ 18,187,354        $ 9,001,825
   Net income from discontinued operations                         19,056,693          2,818,105          3,663,155
   Non-cash items included in net income:
     Net equity in gain of subsidiaries                           (34,311,049)       (22,835,661)        (8,837,016)
     Equity income in discontinued operations                               -         (3,568,584)        (5,852,353)
     Depreciation and amortization                                    387,514             42,079            144,494
     Gain on sale of investment securities
       available-for-sale                                                   -         (2,290,318)                 -
   Decrease (increase) in operating assets:
     Receivables                                                    1,240,204         12,629,490       (13,480,564)
     Income taxes receivable                                       (8,365,660)                  -                  -
     Other assets                                                   1,406,497         (1,659,252)           179,234
   (Decrease) increase in operating liabilities
     Accounts payable and accrued expenses                         10,714,352          8,972,534        (3,464,080)
   (Increase) decrease in operating assets due to sale of
      Equitrade:
         Investment in discontinued operations                     17,946,870                  -                  -
         Exchange membership                                          406,507                  -                  -
                                                            -------------------  -----------------   ----------------
         Net cash provided by (used in) operating
           activities                                              42,883,512         12,295,747        (18,645,305)
                                                            -------------------  -----------------   ----------------

Cash flows from investing activities
   Net purchases of U.S. Treasury obligations                     (80,952,102)          (747,623)           257,938
   Proceeds from sales of securities available-for sale                     -          2,290,318                  -
   Investment in discontinued operations                                    -           (602,803)          (444,068)
   Purchase of investment securities not readily marketable        (3,999,350)                 -                  -
   Distribution from partnerships                                           -                  -          4,362,952
   Loans made                                                      (1,660,000)          (900,000)                 -
   Principal collected on notes receivable                          1,080,456            440,229             45,465
   Return of capital from subsidiary                                        -                  -          3,538,554
   Purchase of furniture, equipment and
     leasehold improvements                                       (18,377,914)            (4,715)                 -
   Payment for purchase of identified intangible asset                       -          (450,000)                 -
   Additional capital contributed to subsidiaries                 (75,000,000)                 -                  -
   Issuance of subordinated notes receivable                                -        (22,000,000)                 -
   Principal collected on subordinated notes receivable            27,000,000                  -                  -
                                                            -------------------  -----------------   ----------------

         Net cash (used in) provided by
           investing activities                                 $(151,908,910)     $ (21,974,594)        $7,760,841
                                                            -------------------  -----------------   ----------------

</TABLE>

                                      S-3
<PAGE>



National Discount Brokers Group, Inc. and Subsidiaries
Condensed Financial Statements of the Registrant (Parent), continued
Statements of Cash Flows, continued                                   Schedule I
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>


                                                                               Years Ended May 31,
                                                              ------------------------------------------------------
                                                                    2000                1999              1998
                                                              ------------------  -----------------  ---------------
<S>                                                           <C>                 <C>                <C>
Cash flows from financing activities
   Proceeds from issuances of common stock                    $     121,603,950   $             -    $           -
   Sale of treasury stock                                                     -                 -       19,267,500
   Purchase of treasury stock                                                 -        (3,231,647)        (614,281)
   Proceeds from exercise of options                                    211,528           786,721                -
   Proceeds from loan payable                                                 -        15,000,000                -
   Repayment of loan payable                                        (15,000,000)                -                -
   Net receipts (disbursements) on intercompany
     borrowings                                                      18,002,636        (2,951,936)      (7,633,750)
                                                              ------------------  -----------------  ---------------

         Net cash provided by financing activities                  124,818,114         9,603,138       11,019,469
                                                              ------------------  -----------------  ---------------

Net increase (decrease) in cash                                      15,792,716           (75,709)         135,005

         Cash at beginning of year                                      145,619           221,328           86,323
                                                              ------------------  -----------------  ---------------

         Cash at end of year                                  $      15,938,335   $        145,619   $     221,328
                                                              ------------------  -----------------  ---------------


</TABLE>


                                      S-4
<PAGE>






National Discount Brokers Group, Inc. and Subsidiaries
Condensed Financial Statements of the Registrant (Parent), continued
Statements of Cash Flows, continued                                   Schedule I
--------------------------------------------------------------------------------

Supplemental disclosures of cash flow information:

    Income tax payments totaled  $48,515,074,  $14,420,322 and $6,287,938 during
    the years ended May 31, 2000, 1999 and 1998, respectively.

    Interest  payments totaled  $162,655,  $307,828 and $35,033 during the years
    ended May 31, 2000, 1999 and 1998, respectively.

    Supplemental disclosures of non-cash investing and financing activities:

    During  September  1997, NDB Group sold all of the stock of its  subsidiary,
    Anvil  Institutional  Services,  Inc.,  and received a note in the amount of
    $102,945, which was repaid in January 1999.

    During  October  1997 and December  1997,  certain  executives  of NDB Group
    exercised an aggregate of 294,758 options for the purchase of 294,758 shares
    of NDB Group's  common stock with exercise  prices  ranging from $7.9375 per
    share to  $10.125  per  share.  In order  to pay for the  exercise  price of
    $2,701,705  and to  reimburse  NDB Group for the  personal  income  taxes of
    $441,389 on the gain related to the transaction,  the executives remitted to
    NDB Group 255,450  shares of NDB Group's common stock with a market value of
    $3,143,094.  In  connection  with the exercise of these  options,  NDB Group
    recorded an income tax benefit of $366,215.

    During  February  1998,  NDB  Group  sold the  remaining  net  assets of its
    subsidiary,  MXNet, Inc., and received a promissory note for $6,600,000 with
    interest  accrued at 6% from the date of sale.  The note was repaid in April
    1998.

    Between February 1998 and May 1998,  certain  available-for-sale  securities
    appreciated due to the entity's successful initial public offering. As such,
    NDB Group reflected these  securities at fair market value on the statements
    of financial  condition.  The unrealized  gain of $1,359,800,  as of May 31,
    1998,  associated  with marking these  securities  to fair market value,  is
    reflected  as  a  component  of  accumulated  comprehensive  income  on  the
    statements of financial condition, net of income taxes of $1,255,200.

    Between December 1998 and May 1999, various employees of NDB Group exercised
    an  aggregate  of 59,469  options for the  purchase of 59,469  shares of NDB
    Group's  common stock with exercise  prices ranging from $11.00 per share to
    $13.50 per share.  In  connection  with the exercise of these  options,  NDB
    Group recorded an income tax benefit of $621,825.

    During the year ended May 31, 2000, various employees of NDB Group exercised
    an  aggregate  of 13,708  options for the  purchase of 13,708  shares of NDB
    Group's  common stock with exercise  prices ranging from $13.50 per share to
    $22.50 per share.  In  connection  with the exercise of these  options,  NDB
    Group recorded an income tax benefit of $142,608.


                                      S-5
<PAGE>


National Discount Brokers Group, Inc. and Subsidiaries
Condensed Financial Statements of the Registrant (Parent), continued
Statements of Cash Flows, continued                                   Schedule I
--------------------------------------------------------------------------------

    On November 30, 1999,  NDB Group  received a dividend  from its  subsidiary,
    Sherwood  Securities  Corp.   (subsequently   renamed  NDB  Capital  Markets
    Corporation).  In lieu of making the  payment in cash,  Sherwood  Securities
    Corp.  offset  the then  outstanding  receivable  balance it was owed by NDB
    Group, $51,985,840.




    During  February  2000,  NDB  Group   contributed   $320,000  as  additional
    paid-in-capital to its subsidiary, National Discount Brokers Corporation, in
    the form of 20,000 shares of a common stock position.



          The accompanying notes are an integral part of the condensed
                             financial statements.

                                      S-6
<PAGE>



National Discount Brokers Group, Inc. and Subsidiaries
Condensed Financial Statements of the Registrant (Parent), continued
Notes to Condensed Financial Statements                               Schedule I
--------------------------------------------------------------------------------


    Registrant (Parent) Disclosures

    The  condensed  financial  statements  of the  registrant  should be read in
    conjunction  with  the  consolidated   financial  statements  and  notes  to
    consolidated financial statements which are included elsewhere herein.

    Investment  in,  less  net  amounts  due  to,  subsidiaries  and  affiliates
    represents  NDB  Group's  investment  in  its  subsidiary   companies  after
    deducting net amounts owed to several subsidiaries  primarily related to the
    funding of NDB Group's cash flow needs by its operating subsidiaries. Income
    and losses of the  subsidiaries  are  recognized  using the equity method of
    accounting.

    During the year ended May 31, 1995, NDB Group entered into two subordination
    agreements with  Equitrade.  The first note had a stated interest rate of 0%
    and a maturity date of February 28, 2000. In connection with this agreement,
    NDB Group pledged U.S. Treasury  securities with a market value in excess of
    $5,000,000.  The second note had a stated interest rate of 8% and a maturity
    date of February 28, 2000.  In  connection  with this  agreement,  NDB Group
    loaned Equitrade $5,000,000.  On December 31, 1998, NDB Group entered into a
    subordination agreement with Equitrade.  The note had a stated interest rate
    of 6% and a maturity  date of December 31,  1999.  In  connection  with this
    agreement, NDB Group loaned Equitrade $22,000,000.  Concurrent with the sale
    of  Equitrade  on  June  18,  1999,  the  aforementioned  subordinated  note
    agreements were cancelled.

    During the year ended May 31, 1997, NDB Group entered into two subordination
    agreements with NDB.com. The first note has a stated interest rate of broker
    call and matures on  December  31,  2001.  The second note also has a stated
    interest  rate of broker call and matures on March 31,  2002.  The  weighted
    average  broker  call  rate was 7.22% for the year  ended May 31,  2000.  In
    connection  with each of these  subordination  agreements,  NDB Group loaned
    NDB.com $3,000,000.

    No dividends were paid to NDB Group by its wholly owned subsidiaries for the
    years  ended  May 31,  2000,  1999 and  1998;  however,  NDBC  did  offset a
    receivable  balance  due from NDB  Group in lieu of a  dividend  payment  of
    $51,985,840.

    Subsequent Events

    On June 15, 2000, NDB Group  consummated the sale of 3,000,000 shares of its
    common stock to DB U.S. Financial Markets Holding  Corporation,  an indirect
    subsidiary of Deutsche  Bank AG ("DB") for  $135,930,000  in gross  proceeds
    pursuant to a Securities  Purchase  Agreement  dated as of May 15, 2000. NDB
    Group and DB also entered into (1) a Stockholder  Agreement  providing  for,
    among other things, the appointment of a representative of DB to NDB Group's
    board of  directors,  (2) an agreement  regarding  the  providing of certain
    research  materials prepared by DB or certain of its affiliates to customers
    of the Company in the United States and (3) an agreement with respect to the
    Company being a distributor of initial public offerings of equity securities
    in the United States if DB or one of its affiliates is an underwriter of the
    securities  and the internet is a distribution  channel.  The Company and DB
    also  executed  term  sheets for joint  ventures  between DB and the Company
    regarding the offering of online  discount  brokerage in Western  Europe and
    the rest of the world other than Western Europe and the United States.

                                      S-7
<PAGE>

                                   Signatures

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934 the  registrant  has duly  caused  this  report  to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated:      August 15, 2000                NATIONAL DISCOUNT BROKERS GROUP, INC.
                                           By:  /s/  Arthur Kontos
                                           Arthur Kontos
                                           Chief Executive Officer

                                           By: /s/ Daniel Fishbane
                                           Daniel Fishbane
                                           Chief Financial Officer
                                           and Principal Accounting Officer

  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
  Act of 1934,  this report has been signed  below by the  following  persons on
  behalf of the registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

         Signature                                               Title                     Date
<S>                                                  <C>                                <C>
/s/ James H. Lynch, Jr.                              Chairman of the Board              August 15, 2000
-----------------------
James H. Lynch, Jr.

/s/ Arthur Kontos                                    Director and Chief                 August 15, 2000
-----------------                                    Executive Officer
Arthur Kontos

/s/ Dennis V. Marino                                 Director                           August 15, 2000
--------------------
Dennis V. Marino

/s/ Thomas W. Neumann                                Director                           August 15, 2000
---------------------
Thomas W. Neumann

/s/ John P. Duffy                                    Director                           August 15, 2000
-----------------
John P. Duffy

/s/ Ralph N. Del Deo                                 Director                           August 15, 2000
--------------------
Ralph N. Del Deo

/s/ Charles Kirkland Kellogg                         Director                           August 15, 2000
----------------------------
Charles Kirkland Kellogg

/s/ Russell C. Horowitz                              Director                           August 15, 2000
-----------------------
Russell C. Horowitz

/s/ Kevin Parker                                     Director                           August 15, 2000
---------------------
Kevin Parker

</TABLE>

                                       43
<PAGE>

<TABLE>
<CAPTION>


                                  EXHIBIT INDEX

             Description of Document                                        SEC Exhibit Document
<S>          <C>                                                  <C>
3.1          Restated Certificate of                              Incorporated by reference to Exhibit 3.1 to NDB
             Incorporation of NDB Group.                          Group's Registration Statement No. 33-12904 on
                                                                  Form S-1, effective May 29, 1987 (the "Initial
                                                                  Registration Statement").


3.2          Amendment to NDB Group's Restated Certificate of     Incorporated by reference to Exhibit 4.3 to NDB
             Incorporation.                                       Group's Registration Statement on Form S-8, file
                                                                  number 333-41819 filed on December 9, 1997 (the
                                                                  "December 1997 Form S-8").


3.3          Amendment to NDB Group's Restated Certificate of     Incorporated by reference to Exhibit A to NDB
             Incorporation, as amended.                           Group's Proxy Statement dated November 12, 1997.

3.4          Restated Certificate of Incorporation, as amended.   Incorporated by reference to Exhibit 3.3 to NDB
                                                                  Group's Form 10-Q for the quarter end November 30,
                                                                  1997 (the "November 1997 Form 10-Q").

3.5          By-Laws of NDB Group, as amended.                    Incorporated by reference to Exhibit 4.4 to NDB
                                                                  Group's Registration Statement on Form S-8, file
                                                                  number 333-41819 filed on December 9, 1997.

4.1          Registration Rights Agreement among NDB Group and    Incorporated by reference to Exhibit 10(a) to NDB
             stockholders  listed  therein dated as of June 15,   Group's Form 8-K dated June 15, 2000.
             2000.

4.2          Stockholder Agreement between NDB Group and          Incorporated by reference to Exhibit 10(a) to NDB
             Deutsche Bank AG dated as of June 15, 2000.          Group's Form 8-K dated June 15, 2000.

4.3          Common Stock Purchase Warrants of NDB Group in       Incorporated by reference to Exhibits 4(b) and
             favor of each of Vulcan Ventures Incorporated and    4(c) to NDB Group's Form 8-K dated February 5,
             Go2Net, Inc. dated February 5, 2000.                 2000.

4.4          Securities Purchase Agreement among NDB Group and    Incorporated by reference to Exhibit 99(a) to NDB
             Vulcan Ventures Incorporated and Go2Net, Inc.        Group's Form 8-K dated February 5, 2000.
             dated February 5, 2000.

10.1         Form of Option Agreement under NDB Group's 1995      Incorporated by reference to Exhibit 10.7 to NDB
             Stock Option Plan.                                   Group's Form 10-K for Fiscal Year ended May 31,
                                                                  1997.

10.2         Employment Agreement dated as of May 31, 1997 by     Incorporated by reference to Exhibit 10.9 to NDB
             and between Arthur Kontos and NDB Group.             Group's Form 10-K for Fiscal Year ended May 31,
                                                                  1997.
                                       1
<PAGE>


10.3         Waiver of Bonus by Arthur Kontos.                    Incorporated by reference to Exhibit 10.1 to NDB
                                                                  Group's   Form 10-Q for the quarter ended
                                                                  February 29, 1996.

10.4         Voting Trust Agreement between Arthur Kontos and     Incorporated by reference to Exhibit 10.7 to NDB
             Vicki Kontos dated May 11, 1993.                     Group's Form 10-K for Fiscal Year ended May 31,
                                                                  1994.

10.5         Exhibit 10.13 Sublease Agreement between Johnson &   Incorporated by reference to Exhibit 10.2 to NDB
             Higgins and Triak Services Corp.                     Group's Form 10-Q for the quarter ended February
                                                                  29, 1996.

10.6         Guaranty dated as of March 1, 1996 by and between    Incorporated by reference to Exhibit 10.14 to NDB
             Johnson & Higgins and NY Broad Holdings, Inc.        Group's Form 10-K for Fiscal Year ended May 31,
                                                                  1996.

10.7         Lease Agreement dated as of November 30, 1994        Incorporated by reference to Exhibit 10.2 to NDB
             between S.P.N.W. Management Associates Limited       Group's Form 10-Q for the quarter ended November
             Partnership and Sherwood Securities Corp.            30, 1994.

10.8         The Sherwood Group, Inc. 1996 CEO Bonus Plan.        Incorporated by reference to Exhibit A to NDB
                                                                  Group's Proxy Statement dated September 10, 1996.

10.9         Settlement Agreement.                                Incorporated by reference to Exhibit 10(a) to NDB
                                                                  Group's   Form 10-Q for the quarter ended February
                                                                  28, 1997.

10.10        Amended Settlement Agreement.                        Incorporated by reference to Exhibit 10.23 to NDB
                                                                  Group's   Form 10-K for Fiscal Year ended May 31,
                                                                  1997.

10.11        The Sherwood Group, Inc. 1995 Stock Option Plan,     Incorporated by reference to Exhibit 4.1 to NDB
             as amended.                                          Group's December 1997 Form S-8.

10.12        Stock Purchase Agreement dated as of February 13,    Incorporated by reference to Exhibit 10 to NDB
             1998 between MXNet, Inc., NDB Group and IPC          Group's Form 10-Q for the quarter ended February
             Information Systems, Inc.                            28, 1998.

10.13        Employment Agreement dated as of April 1, 1999       Incorporated by reference to Exhibit 10.3 to NDB
             between Frank E. Lawatsch, Jr. and NDB Group         Group's Form 10-Q for the quarter ended February
                                                                  28, 1999.

10.14        Change of Control Agreement dated as of April 1,     Incorporated by reference to Exhibit 10.4 to NDB
             1999 between Frank E. Lawatsch, Jr. and NDB Group    Group's From 10-Q for the quarter ended February
                                                                  28, 1999.
                                       2
<PAGE>

10.15        Amended and Restated Purchase Agreement dated as     Incorporated by reference to Exhibit 2 to NDB
             of June 11, 1999 among Spear, Leeds & Kellogg        Group's Form 8-K dated June 15, 1999.
             Specialists LLC, the Selling Members listed on the
             Signature Pages thereto and the Members'
             Representative relating to the purchase and sale
             of 100% of the Membership Interests in Equitrade
             Partners L.L.C. dated June 21, 1999 (with
             schedules and Exhibits which NDB Group agrees to
             provide to the staff of the Commission at its
             request)

10.16        Amended Lease at 90 Hudson Street, Jersey City,      Incorporated by reference to Exhibit 10 (a) to NDB
             New Jersey                                           Group's Form 8-K dated June 15, 1999.

10.17        National Discount Brokers Group, Inc. 1999 Stock     Incorporated by reference to Exhibit 10 (a) to NDB
             Option Plan                                          Group's Form 8-K dated May 1, 1999.

10.18        National Discount Brokers Group, Inc. 1999 Stock     Filed herewith.
             Option Plan, as amended and restated

10.19        Amendments to Lease at 10 Exchange Place Centre      Incorporated by reference to Exhibit 10.38 to NDB
                                                                  Group's Form 10-K for the fiscal year ended May
                                                                  31, 1999.

10.20        Securities Purchase Agreement between NDB Group      Incorporated by reference to Exhibit 10 (a) to NDB
             and DB U.S. Financial Markets Holding Corporation    Group's Form 8-K dated May 18, 2000.
             dated as of May 15, 2000.

10.21        Amendment to the National Discount Brokers Group,    Incorporated by reference to Exhibit 10 (a) to NDB
             Inc. 1999 Non-Qualified Stock Option Plan.           Group's Form 10-Q-A for the quarter ended February
                                                                  29, 2000.

10.22        Letter of NDB Group  exercising  its option under    Incorporated  by  reference to Exhibit 10 (b) to NDB
             the Employment  Agreement  dated as of May 31,       Group's  Form  10-Q-A  for the  quarter  ended February
             1997 by and between Arthur Kontos and NDB Group.     29, 2000.

10.23        Employment Agreement dated as of November 8, 1999    Incorporated by reference to Exhibit 10 (a) to NDB
             between Daniel Fishbane and NDB Group                Group's Form 10-Q for the quarter ended November
                                                                  30, 1999.

10.24        2000 National Discount Brokers Group, Inc.           Incorporated by reference to Exhibit A to NDB
             Compensation Plan.                                   Group's Proxy Statement dated September 9, 1999.

                                       3
<PAGE>

10.25        Schedule 2.1 to the Stockholder  Agreement between   Incorporated by reference to Exhibit 4 to NDB
             NDB Group and Deutsche  Bank AG dated as of          Group's Form 8-K dated as of June 15, 2000.
             June 15, 2000.

10.26        Agreement between NDB Group and Deutsche Bank AG     Filed herewith.
             regarding initial public offerings dated as of
             June 15, 2000.

10.27        Securities Research Agreement between National       Filed herewith.
             Discount Brokers Corporation and Deutsche Bank AG
             dated as of June 15, 2000.

10.28        European  Joint Venture Term Sheet between NDB       Filed herewith
             Group and Deutsche Bank AG dated as of June
             15, 2000.

10.29        Worldwide Joint Venture Term Sheet between NDB       Filed herewith.
             Group and Deutsche Bank AG dated as of June 15,
             2000.

10.30        Waiver of Bonus by Arthur Kontos                     Filed herewith.

10.31        Deferred Compensation Agreement between NDB Group    Filed herewith.
             and Thomas W. Neumann

11.          Statement re: computation of per share earnings.     Filed herewith.

16.          Letter from KPMG LLP                                 Filed herewith.

21.          Subsidiaries of NDB Group                            Filed herewith.

23.1         Consent of Independent Public Accountants.           Filed herewith.

23.2         Consent of Independent Public Accountant             Filed herewith.

27.          Financial Data Schedule.                             Filed herewith.

99.1         Form of  Indemnification  Agreement to be entered    Incorporated by reference to Exhibit 99.1 to
             into between NDB Group and each of certain of its    NDB Group's Form 8-K dated September 18, 1995.
             executive officers and directors.


</TABLE>


                                       4
<PAGE>



                                                                   EXHIBIT 10.18


                        NATIONAL DISCOUNT BROKERS GROUP, INC.

                   1999 NON-QUALIFIED STOCK OPTION PLAN, AS AMENDED

SECTION 1.  PURPOSE

         The purpose of National  Discount Brokers Group, Inc. 1999 Stock Option
Plan  (the  "Plan")  is  to  provide  an  additional   incentive  to  employees,
independent  contractors,  agents and consultants of National  Discount  Brokers
Group,  Inc. (the  "Company")  and its  subsidiaries,  to aid in attracting  and
retaining employees,  independent  contractors,  agents and consultants,  and to
closely align their interests with those of shareholders. The Plan also provides
for the granting of  additional  incentives to members of the Board of Directors
of the Company who are not Employees.

SECTION 2.  DEFINITIONS

         Unless the context clearly  indicates  otherwise,  the following terms,
when used in the Plan, shall have the meanings set forth in this Section 2.

         (a)      "Board" shall mean the Board of Directors of the Company.

         (b) "Change in  Control".  A change in control of the Company  shall be
deemed to have occurred if, over the initial  opposition  of the  then-incumbent
Board (whether or not such Board ultimately acquiesces therein),  (i) any person
or group of persons shall acquire, directly or indirectly,  stock of the Company
having  at  least  25%  of  the   combined   voting   power  of  the   Company's
then-outstanding  securities,  or (ii) any  shareholder or group of shareholders
shall elect a majority of the members of the Board in each case after January 1,
1999.

         (c) "Code" shall mean the  Internal  Revenue Code of 1986 and the rules
and regulations thereunder, as it or they may be amended from time to time.

         (d) "Committee"  shall mean the Compensation  Committee of the Board or
such other  committee as may be  designated by the Board.  The  Committee  shall
consist of two or more  members of the Board who are  Non-Employee  Directors as
such term is defined in Rule 16b-3 of the Exchange Act.

     (e) "Date of Exercise"  shall mean the earlier of the date on which written
notice of exercise,  together with payment in full, is received at the office of
the  Secretary  of the  Company or the date on which such notice and payment are
mailed to the Secretary of the Company at its  principal  office by certified or
registered mail.

     (f) "Employee" shall mean any employee or any officer of the Company or any
of its  Subsidiaries,  or any other person,  who is an  independent  contractor,
agent or consultant of the Company or any of its Subsidiaries, and excluding any
director of the Company who is not otherwise an employee of the Company.

     (g)"Exchange  Act" shall mean the  Securities  and Exchange Act of 1934, as
amended.

                                       1
<PAGE>

         (h) "Fair Market  Value" shall mean for any day the mean of the highest
and lowest  selling  prices of the Stock as reported on the  Composite  Tape for
securities traded on the New York Stock Exchange.

     (i) "Grantee" shall mean an Employee or an Independent  Director  granted a
Stock Option.

(j) "Granting Date" shall mean the date on which the Committee in the case of an
Employee  or the  Plan in the case of an  Independent  Director  authorizes  the
issuance  of a Stock  Option  for a  specified  number  of  shares of Stock to a
specified Employee or Independent Director.

         (k)  "Nonqualified  Stock  Option"  shall mean a Stock  Option  granted
within the Plan which is not an incentive stock option, under Section 422 of the
Code or otherwise qualified under similar tax provisions.

         (l) "Progressive  Stock Options" shall mean Nonqualified  Stock Options
granted pursuant to Section 5(h) of this Plan.

     (m) "Stock"  shall mean the Common Stock,  as par value $.01 per share,  of
the Company.

         (n) "Stock  Option"  shall mean a  Nonqualified  Stock  Option  granted
pursuant to the Plan to purchase shares of Stock.

     (o)  "Subsidiary"  shall  mean any  subsidiary  corporation  as  defined in
Section 424 of the Code.

     (p)  "Independent  Director"  means a  member  of the  Board  who is not an
Employee at the time of the Granting Date or within two years prior thereto.

SECTION 3.  SHARES OF STOCK SUBJECT TO THE PLAN

         Subject to adjustment  pursuant to Section 8, 1,000,000 shares of Stock
shall be  reserved  for  issuance  upon the  exercise of Stock  Options  granted
pursuant to the Plan.  Shares  delivered  under the Plan may be  authorized  and
unissued  shares or issued  shares held by the Company in its  treasury.  If any
Stock Options expire or terminate  without having been exercised,  the shares of
Stock covered by such Stock Option shall become available again for the grant of
Stock Options  hereunder.  Shares of Stock covered by Stock Options  surrendered
for Stock pursuant to Section 6, however,  shall not become  available again for
the grant of Stock Options hereunder.

SECTION 4.  ADMINISTRATION OF THE PLAN

         (a) The Plan shall be  administered  by the  Committee.  Subject to the
express  provisions of the Plan, the Committee shall have authority to interpret
the Plan, to prescribe,  amend and rescind rules and regulations relating to it,
to determine the terms and  provisions of Stock Option  grants,  and to make all
other determinations necessary or advisable for the administration of the Plan.


         (b) It is intended that the Plan and any transaction hereunder meet all
of the  requirements  of Rule 16b-3  promulgated  by the Securities and Exchange
Commission,  as such rule is  currently  in effect or as  hereafter  modified or
amended,  and all other  applicable  laws.  If any  provision of the Plan or any
transaction  would disqualify the Plan or such  transaction  under, or would not
comply with, Rule 16b-3 or other  applicable laws, such provision or transaction
shall be  construed  or deemed  amended  to  conform to Rule 16b-3 or such other
applicable  laws or otherwise  shall be deemed to be null and void, in each case
to the extent permitted by law and deemed advisable by the Committee.

                                       2
<PAGE>

     (c) Any controversy or claim arising out of or related to the Plan shall be
determined unilaterally by and at the sole discretion of the Committee.

SECTION 5.  GRANTING OF STOCK OPTIONS

         (a) Except as provided in  Subsection 5 (i),  only  Employees  shall be
eligible  to  receive  Stock  Options  under the Plan.  Except  as  provided  in
Subsection  5 (i),  Directors  of the Company who are not also  employees of the
Company or one of its Subsidiaries shall not be eligible for Stock Options.

         (b) Except as provided in  Subsection  5 (i),  the option price of each
share of Stock subject to a Nonqualified  Stock Option shall be 100% of the Fair
Market Value of a share of the Stock on the Granting  Date,  or such other price
either  greater  than or less than the Fair  Market  Value (but in no event less
than the par value of the Stock) as the Committee shall determine appropriate to
the purposes of the Plan and to the Company's total compensation program.

         (c) The Committee shall determine and designate from time to time those
Employees  who are to be granted Stock Options and shall also specify the number
of shares  covered by and the option price per share of each Stock Option.  Each
Stock Option granted under the Plan shall be clearly identified as to its status
as a Nonqualified Stock Option.

         (d) A Stock Option shall be  exercisable  during such period or periods
and in such  installments  as shall be  fixed by the  Committee  at the time the
Stock Option is granted or in any amendment thereto, but each Stock Option shall
expire not later than ten years from the Granting Date.

         (e) The Committee  shall have the authority to grant both  transferable
Stock  Options  and  nontransferable  Stock  Options,  and to amend  outstanding
nontransferable   Stock   Options   to   provide   for   transferability.   Each
nontransferable  Stock Option  intended to qualify under Rule 16b-3 or otherwise
shall provide by its terms that it is not transferable otherwise than by will or
the laws of descent and  distribution  and is exercisable,  during the Grantee's
lifetime,  only by the Grantee.  Each transferable  Stock Option may provide for
such  limitations on  transferability  and  exercisability  as the Committee may
designate  at the time a Stock  Option is  granted  or is  otherwise  amended to
provide for transferability.

         (f) Stock  Options  may be granted to an  Employee  who has  previously
received  Stock  Options or other  options  whether such prior Stock  Options or
other  options  are  still  outstanding,   have  previously  been  exercised  or
surrendered in whole or in part, or are canceled in connection with the issuance
of new Stock Options.

         (g) Subject to adjustment  pursuant to Section 8, the aggregate  number
of shares of Stock subject to Stock  Options  granted to an Employee or Director
under the Plan  shall not exceed  125,000  shares  (as such  number is  adjusted
pursuant to Section 8).

                                       3
<PAGE>

         (h) Subject to Section 5 (g), without in any way limiting the authority
of the Committee to make grants of Stock Options under the Plan, and in order to
induce  Employees to retain  ownership of Stock,  the  Committee  shall have the
authority (but not the obligation) to include within any agreement  reflecting a
Stock Option a provision entitling the Grantee of such Stock Option to a further
Stock Option (a "Progressive  Stock Option") in the event the Grantee  exercises
such Nonqualified Stock Option evidenced by such agreement, in whole or in part,
by surrendering other shares of Stock in accordance with this Plan and the terms
and conditions of such agreement. Any such Progressive Stock Option shall be for
a number of shares of Stock  equal to the number of  surrendered  shares,  shall
become  exerciseable  no sooner than six months after the  Granting  Date of the
Stock Option or such longer period as the Committee may establish, shall have an
option  price per share equal to one hundred  percent  (100%) of the Fair Market
Value of a share of Stock on the Granting Date of the Progressive  Stock Option,
and shall be subject to such other terms and  conditions  as the  Committee  may
determine.

(i) Notwithstanding any provision of the Plan to the contrary,  each Independent
Director  shall  receive (I) a one time grant of a Stock Option  covering  5,000
shares  of stock  (adjusted  as  provided  in  Section  8) on the date  when the
Independent  Director  first  joins the Board after July 28, 1999 or on July 28,
1999 in the case of any  Independent  Director  serving on the Board on July 28,
1999 and (II) each  Independent  Director  elected  after January 19, 2000 shall
receive the grant of a Stock Option  covering 5,000 shares of stock (adjusted as
provided in Section 8) on each date the  Independent  Director is elected to the
Board  after the first such  election.  The Stock  Option  will have an Exercise
Price equal to Fair Market  Value at the Granting  Date,  have a term of 9 years
and 364 days from the Granting Date, vest six months after the Granting Date for
the Stock Option,  be transferable to the extent  permitted by the Committee for
Employees,  not be subject to the  benefits  of  Subsection  5(h) and 6(c),  and
otherwise  be subject to the terms and  conditions  of the Plan  except that the
Stock  Option  awarded to an  Independent  Director  shall not  expire  when the
Independent  Director  leaves the Board but shall  continue until the earlier of
two  years  from the date the  Director  leaves  the Board or the date the Stock
Option expires.  Notwithstanding the foregoing no Independent  Director shall be
entitled to receive a Stock Option under this  subsection  5(i) if the number of
shares of Stock  received  as a result of the  conversion  of, or to be received
upon  exercise of, Stock Options would exceed one percent of the shares of stock
then  outstanding  or one per  cent of the  voting  power of  securities  of the
Company then outstanding.


SECTION 6.  EXERCISE OF STOCK OPTIONS

         (a) Except for the Stock Option granted to an Independent  Director and
except as provided in Section 7, no Stock  Option may be  exercised  at any time
unless the Grantee is an Employee on the Date of Exercise.

         (b) The  Grantee  shall  pay the  option  price  in full on the Date of
Exercise of a Stock Option in cash,  by check,  or by delivery of full shares of
Stock of the Company,  duly endorsed for transfer to the Company with  signature
guaranteed,  or by any combination  thereof.  Stock will be accepted at its Fair
Market Value on the Date of Exercise.

                                       4
<PAGE>

         (c) Subject to the approval of the Committee, or of such person to whom
the Committee may delegate such authority ("its designee"), the Company may loan
to the  Grantee a sum  equal to an amount  which is not in excess of 100% of the
purchase  price of the shares of Stock acquired upon exercise of a Stock Option,
such loan to be evidenced by the  execution  and delivery of a promissory  note.
Interest  shall be paid on the  unpaid  balance of the  promissory  note at such
times and at such rate as shall be  determined by the Committee or its designee.
Such  promissory note shall be secured by the pledge to the Company of shares of
Stock having an  aggregate  purchase  price on the date of purchase  equal to or
greater than the amount of such note. A Grantee  shall have,  as to such pledged
shares of Stock, all rights of ownership including the right to vote such shares
of Stock and to receive  dividends paid on such shares of Stock,  subject to the
security interest of the Company.  Such shares of Stock shall not be released by
the Company from the pledge unless the proportionate  amount of the note secured
thereby has been repaid to the Company;  provided,  however that shares of Stock
subject to a pledge may be used to pay all or part of the purchase  price of any
other option  granted  hereunder or under any other stock  incentive plan of the
Company under the terms of which the purchase  price of an option may be paid by
the  surrender of shares of Stock,  subject to the terms and  conditions  of the
Plan  relating to the  surrender  of shares of Stock in payment of the  exercise
price of an option.  In such event, that number of the newly purchased shares of
Stock  equal to the  shares of Stock  previously  pledged  shall be  immediately
pledged as substitute  security for the pre-existing  debt of the Grantee to the
Company,  and thereupon  shall be subject to the provisions  hereof  relating to
pledged shares of Stock.  All notes executed  hereunder shall be payable at such
times  and in such  amounts  and  shall  contain  such  other  terms as shall be
specified by the  Committee  or its designee or stated in the option  agreement;
provided,  however,  that such terms shall conform to requirements  contained in
any applicable regulations which are issued by any governmental authority.

SECTION 7.  TERMINATION OF EMPLOYMENT

         Except as  otherwise  provided by the  Committee  at the time the Stock
Option  is  granted  or any  amendment  thereto,  if a  Grantee  ceases to be an
Employee then:

         (a) if termination  of employment is voluntary or  involuntary  without
cause,  the Grantee may exercise  each Stock  Option held by the Grantee  within
three months after such  termination  (but not after the expiration  date of the
Stock Option) to the extent of the number of shares  subject to the Stock Option
which are purchasable pursuant to its terms at the date of termination;

     (b) if  termination  is for cause,  all Stock  Options  held by the Grantee
shall be canceled as of the date of termination;

     (c) subject to the  provisions of Section 7(d),  if  termination  is (i) by
reason of  retirement  at a time when the  Grantee is  entitled  to the  current
receipt of benefits under any retirement  plan  maintained by the Company or any
Subsidiary,  or (ii) by reason of  disability,  each  Stock  Option  held by the
Grantee  may be  exercised  by the  Grantee  at any  time  (but  not  after  the
expiration  date of the Stock  Option)  to the  extent  of the  number of shares
subject to the Stock Option which were purchasable  pursuant to its terms at the
date of termination;

         (d) if termination is by reason of the death of the Grantee,  or if the
Grantee dies after retirement or disability as referred to in Section 7(c), each
Stock Option held by the Grantee may be exercised by the Grantee's estate, or by
any person who  acquires the right to exercise the Stock Option by reason of the
Grantee's death, at any time within a period of three years after death (but not
after the expiration date of the Stock Option) to the extent of the total number
of shares  subject to the Stock  Option which were  purchasable  pursuant to its
terms at the date of termination; or

         (e) if the  Grantee  should die within  three  months  after  voluntary
termination  of  employment  or  involuntary   termination   without  cause,  as
contemplated  in Section  7(a),  each Stock  Option  held by the  Grantee may be
exercised by the  Grantee's  estate,  or by any person who acquires the right to
exercise by reason of the  Grantee's  death,  at any time within a period of one
year after death (but not after the expiration  date of the Stock Option) to the
extent  of  the  number  of  shares  subject  to the  Stock  Option  which  were
purchasable pursuant to its terms at the date of termination.

                                       5
<PAGE>

SECTION 8.  ADJUSTMENTS

         In  the   event   of   any   merger,   consolidation,   reorganization,
recapitalization,  stock dividend,  stock split or other change in the corporate
structure or capitalization  affecting the Stock,  there shall be an appropriate
adjustment  made by the  Board  in the  number  and kind of  shares  that may be
granted in the aggregate and to individual  Employees or  Independent  Directors
under the Plan, the number and kind of shares subject to each outstanding  Stock
Option and the option  prices.  In the event of a transaction  involving (i) the
liquidation  or dissolution of the Company,  (ii) a merger or  consolidation  in
which  the  Company  is not the  surviving  corporation  or  (iii)  the  sale or
disposition of all or substantially all of the Company's assets, provision shall
be made in connection with such  transaction for the assumption of Stock Options
theretofore  granted under the Plan, or the  substitution for such Stock Options
of new options of the successor  corporation,  with appropriate adjustment as to
the number and kind of stock and the purchase price for stock thereunder, or, in
the discretion of the Committee, the Plan and the Stock Options issued hereunder
shall  terminate  on the  effective  date of  such  transaction  if  appropriate
provision  is made for  payment to the Grantee of an amount in cash equal to the
fair  market  value of a share of stock  multiplied  by the  number of shares of
stock  subject to the Stock  Options (to the extent such Stock  Options have not
been  exercised)  less the exercise  price for such Stock Options (to the extent
such Stock Options have not been exercised); provided, however, that in no event
shall the Committee take any action or make any determination under this Section
8 which would prevent a transaction described in clause (ii) or (iii) above from
being  treated as a pooling of interests  under  generally  accepted  accounting
principles.

SECTION 9.  TENDER OFFER; CHANGE IN CONTROL

         A Stock Option shall become  immediately  exercisable  to the extent of
the total  number of shares  subject  to the Stock  Option in the event of (i) a
tender  offer by a person or persons  other than the Company for all or any part
of the outstanding  Stock if, upon  consummation of the purchases  contemplated,
the offeror or offerors would own,  beneficially  or of record,  an aggregate of
more  than 25% of the  outstanding  Stock,  or (ii) a Change in  Control  of the
Company.


SECTION 10.  GENERAL PROVISIONS

         (a) Each  Stock  Option  shall be  evidenced  by a  written  instrument
containing such terms and conditions,  not  inconsistent  with this Plan, as the
Committee shall approve.

         (b) The  granting  of a Stock  Option  in any year  shall  not give the
Grantee any right to similar  grants in future years or any right to be retained
in the employ of the Company or any  Subsidiary or interfere in any way with the
right of the Company or such Subsidiary to terminate an Employee's employment at
any time.

         (c)  Notwithstanding any other provision of the Plan, the Company shall
not be required to issue or deliver any certificate or  certificates  for shares
of Stock under the Plan prior to fulfillment of all of the following conditions:

     (i)The  listing,  or approval for listing upon notice of issuance,  of such
shares on the New York Stock Exchange;

                  (ii) Any  registration or other  qualification  of such shares
under any state or federal law or  regulation,  or the  maintaining in effect of
any such  registration  or other  qualification  which the Committee may, in its
discretion upon the advice of counsel, deem necessary or advisable; and


                                       6
<PAGE>

                  (iii) The obtaining of any other  consent,  approval or permit
from any state or federal  governmental  agency which the Committee  may, in its
discretion upon the advice of counsel, determine to be necessary or advisable.

         (d) The  Company  shall  have the right to deduct  from any  payment or
distribution  under  the Plan  any  federal,  state  or local  taxes of any kind
required by law to be  withheld  with  respect to such  payments or to take such
other action as may be necessary to satisfy all  obligations  for the payment of
such taxes. In case distributions are made in shares of Stock, the Company shall
have the right to retain  the value of  sufficient  shares of Stock to equal the
amount of tax to be withheld  for such  distributions  or require a recipient to
pay the  Company  for any such taxes  required  to be withheld on such terms and
conditions prescribed by the Committee.

     (e) No Grantee shall have any of the rights of a shareholder by reason of a
Stock Option until it is exercised.

         (f) The Plan shall be  construed  and enforced in  accordance  with the
laws of the State of Delaware  (without  regard to the  legislative  or judicial
conflict of laws rules of any state), except to the extent superseded by federal
law.

SECTION 11.  AMENDMENT AND TERMINATION

         (a) The Plan shall terminate on April 1, 2008 and no Stock Option shall
be granted hereunder after that date,  provided that the Board may terminate the
Plan at any time prior thereto.

         (b)      The Board may amend the Plan at any time without notice.

         (c) No termination or amendment of the Plan may, without the consent of
a Grantee to whom a Stock Option shall theretofore have been granted,  adversely
affect the rights of such Grantee under such Stock Option.


                                       7
<PAGE>


                                                                   EXHIBIT 10.26

                                                                  CONFORMED COPY


                      NATIONAL DISCOUNT BROKERS GROUP, INC
                            10 Exchange Place Centre
                          Jersey City, New Jersey 07302




June 15, 2000



Deutsche Bank AG
Taunusanlage 12
60325 Frankfurt
Germany

Ladies and Gentlemen:

We are writing to memorialize  our  understanding  concerning the involvement by
National Discount Brokers Group,  Inc. or any of its broker-dealer  subsidiaries
(collectively, "NDB") in underwritten offerings of common stock for which you or
any of your  Affiliates  (collectively,  "DB") shall serve as  book-running or a
joint  book-running  managing  underwriter.  Any  capitalized  term used but not
otherwise defined in this letter agreement (this "Letter  Agreement") shall have
the meaning set forth in the Stockholder Agreement, dated as of the date hereof,
between NDB and DB (collectively,  the "Parties"). It is an express condition to
the  consummation  of the Securities  Purchase  Agreement that the Parties enter
into this Letter Agreement and the transactions contemplated hereby.

1. Participation in Qualified Offerings. (a) If DB (the "Managing Affiliate") is
the  book-running  or a joint  book-running  managing  underwriter in an initial
public  offering  of  equity  securities  in the  United  States,  and  seeks to
distribute in the United States through a U.S.  On-Line  Discount  Broker all or
any portion of such equity securities (a "Qualified Exclusive  Offering"),  then
DB shall invite NDB (an "Invitation") to participate, subject to applicable law,
in such Qualified  Exclusive Offering as a member of the underwriting  syndicate
or the selling  group,  as  determined  by the  Managing  Affiliate  in its sole
discretion.

                                       1
<PAGE>

(b) For purposes of this Letter Agreement,  "U.S. On-Line Discount Broker" means
a securities brokerage firm that (i) is either located within or otherwise doing
business in the United States; (ii) is duly licensed as a broker-dealer with the
U.S.  Securities  and  Exchange  Commission  and is a  member  of  the  National
Association  of  Securities  Dealers,   Inc.;  (iii)  does  not  employ  account
executives  or  registered   representatives   who  (A)  are  assigned  to,  and
responsible for  maintaining  relationships  with,  customers for the purpose of
providing  advised  brokerage and trade execution  services (whether provided in
person or  electronically  and  whether  general or  trade-specific)  or (B) are
compensated  with a portion of the  commissions  earned for any trade  execution
services performed for such customers;  (iv) offers its customers the ability to
execute  securities  trades  directly  through  computerized  on-line  or  other
electronic or wireless execution systems,  including,  without  limitation,  the
Internet and IVR, without the direct assistance or recommendation of any account
executive or registered representative;  and (v) generally charges its customers
a lower cost for its services than is customarily charged in the relevant market
for  brokerage  services by full  service  advised  brokerage  firms taking into
account  commission  charges,  account  investment  advisory fees and such other
charges  and fees and  minimum  balance  requirements.  The term  "U.S.  On-Line
Discount  Broker"  shall  include,  without  limitation,  any entity listed on a
schedule to be prepared  from time to time by the Parties,  as amended from time
to time by mutual  consent of the Parties.  Such  schedule  shall not include DB
Alex.  Brown LLC or Deutsche Bank  Securities,  Inc. or any of their  respective
successors.

(c) The Managing Affiliate shall not allocate shares in any Qualified  Exclusive
Offering to any U.S. On-Line Discount Broker other than NDB; provided,  that the
foregoing  limitation  shall  not  apply  to  (i)  any  allocation  by  a  joint
book-running  managing  underwriter (other than the Managing Affiliate) for such
Qualified  Exclusive  Offering to a U.S. On-Line Discount Broker other than NDB;
and  (ii) any  allocation  by the  Managing  Affiliate  to (A) any U.S.  On-Line
Discount Broker that is an Affiliate of any co-managing  underwriter (other than
the Managing Affiliate); (B) any U.S. On-Line Discount Broker other than NDB, if
the issuer so directs the Managing  Affiliate;  or (C) any  broker-dealer  other
than a U.S.On-Line  Discount Broker,  including any such broker-dealer that uses
computerized on-line or other electronic execution systems, without prejudice in
each case  specified in clauses (A), (B) and (C) above to NDB's right  hereunder
to participate in such Qualified Exclusive Offering.

(d) The  Managing  Affiliate  shall,  in good faith,  consider  inviting  NDB to
participate  in any equity  offering that has a retail  component  (other than a
Qualified  Exclusive Offering) where the Managing Affiliate is a book-running or
joint  book-running  managing  underwriter and seeks to distribute in the United
States through a U.S.  On-Line Discount Broker all or any portion of such equity
securities (a "Qualified Good Faith Offering" and, collectively with a Qualified
Exclusive Offering, a "Qualified Offering").

(e)  Notwithstanding  paragraph  (a), (c) or (d) above,  the Managing  Affiliate
shall not be  obligated to extend an  Invitation  to NDB in the event the issuer
objects to the inclusion of NDB in such offering.  The Managing  Affiliate shall
notify NDB of such objection promptly.

                                       2
<PAGE>

(f) Each  Invitation  shall take the form of a terms telex customary in form and
scope to similar  communications  used for the  purpose of forming  underwriting
syndicates or selling groups (as the case may be) in similar offerings and shall
be extended to NDB as and when  extended to each other  proposed  members of the
underwriting  syndicate  or  selling  group (as the case may be) in the  related
Qualified Offering.

(g) The  Managing  Affiliate  shall  circulate to NDB copies,  in Adobe  Acrobat
(".pdf")  or  equivalent  "read only"  electronic  format,  of each  preliminary
prospectus, final prospectus and amendments or supplements thereto to be used in
connection with each Qualified Offering in which NDB agrees to participate. Such
documents  shall be provided to NDB at such times as they are made  available in
written or electronic  format to other members of the underwriting  syndicate or
selling group (as the case may be).  Subject to the terms of any agreement among
underwriters,  underwriting  agreement or selling group agreement  applicable to
such  Qualified  Offering,  NDB shall have complete  discretion  concerning  NDB
customer  accounts to which  shares in the  Qualified  Offering are sold and the
number of shares sold to a particular NDB account and not be required to divulge
to the  Managing  Affiliate or any  underwriting  syndicate  member  information
relating to any individual customer's participation in the Qualified Offering or
any other proprietary customer or technological information;  provided, however,
that NDB shall  promptly  upon  request by the Managing  Affiliate  provide such
information  with  respect to NDB's  participation  in any  Qualified  Offering,
including customer account  information,  to the extent (and only to the extent)
as is necessary for purposes of complying with any law, regulation or request of
the issuer or of any Governmental Entity, including for these purposes the NASD,
the New York Stock Exchange,  Inc. and any U.S. or foreign exchange on which any
equity  securities  distributed  as part of a Qualified  Offering may be listed;
provided, however, that any such request contemplated hereby shall be subject to
any and all customary confidentiality  agreements that may exist between NDB (or
any of its Affiliates) and a customer of NDB (or any of its Affiliates) prior to
the date of such request.

(h) This Letter  Agreement shall not in any way restrict NDB from  participating
as an underwriter or selling group member in any offering  regardless of whether
DB  is  the  book-running  or  a  joint  book-running  managing  underwriter  or
otherwise.  Except as expressly required  hereunder,  DB shall not be prohibited
from  participating as an underwriter or selling group member in any offering in
which NDB is neither an underwriter nor a selling group member.

2.  Disclaimer.  This Letter Agreement is being entered into in order to outline
the Parties'  working  relationship for any Qualified  Offering in general,  and
therefore  does not evidence an obligation  of the Parties to purchase,  sell or
underwrite securities for any particular issuer or offering. Neither NDB nor any
of NDB's  accounts  has  offered  to  purchase  or has  agreed to  purchase  any
particular security in connection with this Letter Agreement.  The Parties agree
that, subject to the terms of this Letter Agreement and each Invitation,  to the
extent  NDB  accepts  any  such  Invitation,   NDB's  obligation  to  underwrite
securities  and right to derive  compensation  in connection  with any Qualified
Offering shall be consistent with the terms applicable to the other underwriters
or selling group members in such Qualified  Offering as such terms are specified
in the final prospectus and terms telex concerning the Qualified Offering and in
the underwriting  agreement,  agreement among  underwriters and selected dealers
agreement applicable to such Qualified Offering.


                                       3
<PAGE>

3.  Publicity.  NDB and DB shall  jointly  advertise or market the  arrangements
relating  to this  Letter  Agreement  and  their  participation  in a  Qualified
Offering.  Notwithstanding the foregoing,  the Parties understand and agree that
DB's  private  presentation  materials  for its issuer  clients  do not  require
pre-clearance  from NDB,  except as they pertain to NDB. DB and NDB agree not to
disclose  this  Letter  Agreement  in any manner and  further  agree not to make
copies  available to any third party  without the prior  written  consent of the
other  Party to this Letter  Agreement,  except as required by law. In the event
that either Party is requested  pursuant to, or required by,  applicable  law or
regulation  or by legal  process to  disclose  this  Letter  Agreement  it shall
promptly  inform  the other  Party of such  request or  requirement  in order to
enable the  Parties  jointly to seek an  appropriate  protective  order or other
remedy,  or to resist or narrow the scope of such request or legal  process.  In
any such event,  each Party agrees to use its reasonable  best efforts to obtain
from the Party to whom  disclosure is made written  assurances  that this Letter
Agreement will be accorded confidential treatment.

4. Termination.  (a) Either Party may terminate this Letter Agreement by written
notice to the other  Party (i) upon the  occurrence  of a For Cause  Termination
Event with  respect to the other  Party;  or (ii) upon the giving of a notice of
termination,  by  any  party,  of  any of the  other  Joint  Venture  Agreements
delivered not less than 30 days prior to the effective date of  termination  set
forth in such  notice;  provided  that the rights and  obligations  set forth in
Sections 2, 3 and 4 shall survive  termination of this  Agreement;  and provided
further,  that no such  termination  shall relieve NDB or DB of liability it may
have incurred hereunder prior to such termination.  Except as otherwise provided
in this  Letter  Agreement,  upon  termination  or  expiration  of  this  Letter
Agreement for any reason,  all rights of NDB hereunder  shall  terminate and NDB
shall delete or destroy any and all materials, as contemplated by Paragraph 1(g)
above, in NDB's possession,  custody or control and provide written confirmation
of such  deletion or  destruction  to DB within 30 days of such  termination  or
expiration  and NDB shall not use such  material for any purpose.  The rights of
each Party under this Section 4 are without prejudice to any other rights of the
parties pursuant to this Letter Agreement or otherwise and shall not be affected
by any dispute between the parties with respect to this Letter  Agreement or any
other matter.

(b) For purposes of this Letter Agreement,  "For Cause Termination Event" means,
with  respect  to any Party,  (i) a material  breach by such Party or any of its
Affiliates of any covenant  contained in this Agreement,  which breach shall not
have been cured within 90 days following  delivery of a notice in writing to the
breaching party that specifies in detail the matter constituting such breach and
such action as may be reasonably required to effect its cure; (ii) an Insolvency
Event of the  non-terminating  Party;  and  (iii) a  Change  in  Control  of the
non-terminating Party.


                                       4
<PAGE>

(c) For purposes of this Letter Agreement, "Insolvency Event" means with respect
to any Person, any of the following: (i) such Person is dissolved, (ii) an order
for relief  against  such  Person is  entered,  if in the United  States,  under
Chapter 11 of the federal bankruptcy law or, if not in the United States,  under
any  applicable  statute  providing  generally  for  relief  comparable  to that
provided by the United States federal bankruptcy law ("Foreign Bankruptcy Law"),
(iii) such Person  makes a general  assignment  for the benefit of  creditors or
other  marshaling  of assets and  liabilities  of such Person,  (iv) such Person
files  a  voluntary  petition  under  the  federal  bankruptcy  law  or  Foreign
Bankruptcy  Law,  (v) such Person  files a petition  or answer  seeking for such
Person any reorganization,  arrangement, composition, readjustment, liquidation,
dissolution,  other  winding up or similar  relief  under any  statute,  law, or
regulation,  whether or not involving insolvency or bankruptcy, (vi) such Person
files an answer or other  pleading  admitting or failing to contest the material
allegations  of a petition  filed against such Person in any  proceeding of this
nature,  (vii) such Person seeks,  consents to, or acquiesces in the appointment
of a trustee, receiver or liquidator of such Person or of all or any substantial
part of such  Person's  assets and  properties,  (viii) within 60 days after the
commencement  of any  proceeding  against  such Person  seeking  reorganization,
arrangement, composition, readjustment,  liquidation, dissolution, other winding
up or  similar  relief  under any  statute,  law or  regulation,  whether or not
involving  insolvency or bankruptcy,  such  proceeding has not been dismissed or
(ix)  within 60 days after the  appointment  without  such  Person's  consent or
acquiescence  of a trustee,  receiver or  liquidator of such Person or of all or
any  substantial  part of such  Person's  properties,  such  appointment  is not
vacated or stayed,  or within 60 days after the expiration of any such stay, the
appointment is not vacated.

     5. Assignment. Neither Party shall assign this Letter Agreement without the
other Party's prior written consent,  which consent may be withheld in the other
Party's sole discretion. Any purported assignment in violation of this Paragraph
5 shall be null and void.

     6.  Miscellaneous.  (a) The notice  provisions of the  Securities  Purchase
Agreement shall apply to this Letter Agreement.

(b) Nothing  contained  herein shall make the Parties  partners or render any of
them liable to make  payments not  expressly  identified  or referred to in this
Letter Agreement.

(c) The Parties  hereby  agree that this Letter  Agreement,  and the  respective
rights,  duties and obligations of the parties  hereunder,  shall be governed by
and  construed  in  accordance  with the laws of the State of New York,  without
giving effect to principles of conflicts of laws thereunder.


                                       5
<PAGE>

(d) If any  provision  of this Letter  Agreement  is held  invalid or  otherwise
unenforceable,  the  enforceability  of the  remaining  provisions  shall not be
impaired thereby.

(e) The failure by any Party to exercise any right provided for herein shall not
be deemed a waiver of any right hereunder.

(f) Each Party  agrees to bear its own expenses in  connection  with this Letter
Agreement and the transactions contemplated hereby.

(g) This Letter Agreement sets forth the entire  understanding of the Parties as
to its subject  matter and may not be modified  except in a writing  executed by
both Parties.  In  particular,  this Letter  Agreement  supersedes the letter of
intent,  dated March 27, 2000,  between NDB and Deutsche Bank  Americas  Holding
Corporation, with respect to the subject matter hereof, among other matters.

(h) No waiver  by  either  Party of a breach  of any  provision  of this  Letter
Agreement  by the other Party shall  operate or be  construed as a waiver of any
subsequent breach.

(i) This Letter  Agreement  and any  exhibit  hereto may be executed in multiple
counterparts,  each of which shall constitute an original but all of which shall
constitute but one and the same  instrument.  One or more  counterparts  of this
Letter Agreement or any exhibit hereto may be delivered via telecopier, with the
intention  that  they  shall  have the same  effect as an  original  counterpart
hereof.

Sincerely,

National Discount Brokers Group, Inc.


By:  /s/ Arthur Kontos
Name:    Arthur Kontos
Title:   President and Chief Executive Officer


Agreed and acknowledged as of the date set forth above:

Deutsche Bank AG


By: /s/ Thomas A. Curtis
Name:   Thomas A. Curtis
Title:  Attorney-In-Fact


                                       6
<PAGE>


                                                                   EXHIBIT 10.27

                                                                  CONFORMED COPY


                          SECURITIES RESEARCH AGREEMENT


         National  Discount  Brokers  Corporation,  a New York  corporation (the
"Company")  and  Deutsche  Bank AG ("DB"  and  together  with the  Company,  the
"Parties")  enter into this Agreement as of the June 15, 2000 to memorialize the
Parties'  understanding   concerning  the  Company's  license  to  the  Research
Material.  Any capitalized  term used herein without  definition  shall have the
meaning assigned to such term in the Stockholder Agreement.

                               W I T N E S S E T H

     WHEREAS,  DB  U.S.  Financial  Markets  Holding  Corporation  and  National
Discount Brokers Group, Inc. ("NDBG") have entered into the Securities  Purchase
Agreement (the "Securities Purchase Agreement"), dated as of May 15, 2000; and

     WHEREAS,  it is an express condition to the purchase and sale of Common
Stock of NDBG  thereunder  that the Parties  enter into this  Agreement  and the
strategic relationship contemplated hereby;

     NOW,  THEREFORE,  in  consideration  of the  premises  and  the  mutual
covenants  contained herein and for other good and valuable  consideration,  and
agreements herein contained, the Parties hereto covenant and agree as follows:

Section 1.   DEFINITIONS.

         As  used  in  this  Agreement,  the  following  terms  shall  have  the
         respective meanings assigned to them below:

(a)  "Agreement" means this Agreement,  together with all Exhibits and Schedules
     hereto,  as the same may be amended from time to time.  References  in this
     Agreement to  "herein,"  "hereunder"  and words of similar  import shall be
     references to this Agreement,  together with all Exhibits and Schedules, as
     the same may be amended from time to time.

(b)  "Click  Agreement" means an electronic  agreement between the Company and a
     user,  in a form to be agreed  between the Parties,  as may be amended from
     time to time by the mutual agreement of the Parties, that is designed to be
     executed by such user by selecting a button or other similar user-prompt.

(c)  "Click  Agreement  Page"  means a Page on the NDB  Sites on which the Click
     Agreement appears, which shall be designed in accordance with Section 2(f).

(d)  "DB IP Rights" means DB's and its  Affiliates'  (including  any DB Research
     Affiliate's)  Intellectual  Property Rights in and to the Research Material
     and DB Marks, whether owned or licensed by DB or its Affiliates.

                                       1
<PAGE>

(e)  "DB Marks" means any of DB's or its Affiliates'  (including any DB Research
     Affiliate's)  trademarks,  trade  names,  service  marks,  logos  and other
     designations of origin included on or associated with Research Material.

(f)  "DB  Research  Affiliate"  means  any  Affiliate  of DB that  produces  the
     Research Material licensed hereunder to the Company.

(g)  "DBSI" means Deutsche Bank  Securities,  Inc., a  broker-dealer  registered
     with the  Securities  and Exchange  Commission and a member of the New York
     Stock Exchange and the National  Association of Securities  Dealers, or any
     of its successors hereunder.

(h)  "Delivery  Provider" means any Person identified in accordance with Section
     4(c)(ii) hereof.

(i)  "Distribute"  means  to  reproduce,   make  available,   provide,  display,
     transmit,  promote  or  otherwise  distribute  through  a  secure  Internet
     website, or wireless, cable or other electronic means of communication.

(j)  "Frame"  means,  with respect to a Page, the  simultaneous  display of such
     Page within an Internet  browser or other similar  application  with one or
     more other Pages (or portion  thereof) set off by a constant visible border
     or frame.

(k)  "GCI" means the Global  Corporates  &  Institutions  Division of DB (or any
     successor  division or entity),  which  prepares  substantially  all of the
     equity research distributed to retail customers of DB and its Affiliates.

(l)  "Inline" (or "Inlining")  means,  with respect to a Page, the  simultaneous
     display  of  such  Page  within  an  Internet   browser  or  other  similar
     application  with one or more other  Pages (or portion  thereof)  without a
     constant visible border or frame.

(m)  "Intellectual  Property Rights" means all intellectual property and similar
     proprietary rights in any jurisdiction, including all such rights in and to
     (i) original works of authorship,  copyrights and moral rights; (ii) issued
     patents,    patent    applications,     divisions,     continuations    and
     continuations-in-part,  reissues,  patents of  additions,  utility  models,
     inventors'  certificates  and  invention  disclosures;   (iii)  trademarks,
     service  marks,  brand names,  certification  marks,  trade dress,  assumed
     names,  trade names and other indications of origin;  (iv) confidential and
     proprietary  know-how  and trade  secrets;  and (v)  computer  software  or
     hardware,  whether or not copyrightable,  including all source code, object
     code, programs,  applications,  tables,  models,  databases,  repositories,
     specifications  and  documentation,  including  in the  case of each of the
     foregoing  property and rights, all goodwill  associated  therewith and all
     registrations  thereof,  and  applications  to register,  such  property or
     rights.

(n)  "Knowledge"  shall mean the actual  knowledge of any member of the Board of
     Managing  Directors or any executive officer of DB after due inquiry and an
     investigation of the books and records of DB and DBSI.

                                       2
<PAGE>

(o)  "Legends"  means  copyright  and other  proprietary  notices,  disclaimers,
     credit-lines,  date-lines  and other legends that (i) are placed by DB or a
     DB Research Affiliate on the Research  Material;  or (ii) which the Company
     is  required or  permitted  to place on the  Research  Material or in close
     proximity thereto under this Agreement or applicable law.

(p)  "Licensed DB Page" means a Page on which any  Research  Material or portion
     thereof  (including the title thereof) is displayed in accordance with this
     Agreement.

(q)  "Login Page" means an interactive  Page on the NDB Sites that (i) prompts a
     user to provide (A) a unique user  identification  name or number and (B) a
     secure  password;  and (ii) when such  information  is validly and properly
     entered, permits such user to access a Licensed DB Page.

(r)  "NDB Group"  means NDBG and any Person of which NDBG owns a majority of the
     outstanding  voting securities and all majority owned  subsidiaries and all
     of their respective employees, officers, directors and agents.

(s)  "NDB Research  Recipients" means all Persons that maintain retail brokerage
     accounts in the United States with the Company.

(t)  "NDB Site"  means any of (i) the  Company's  website at  "ndb.com"  (or any
     successor website); or (ii) any other Internet website, or wireless,  cable
     or other electronic means of communication,  owned,  operated or controlled
     by the  Company,  as  selected  or  developed  by the  Company  in its sole
     discretion from time to time.

(u)  "Page"  means a  single  computer  terminal  display  page  of an  Internet
     website.

(v)  "Representative"  means, as to any Person, such Person's Affiliates and its
     and their directors,  officers,  employees,  agents,  advisors  (including,
     without  limitation,  financial  advisors,  counsel  and  accountants)  and
     controlling Persons.

(w)  "Research   Material"  means  all  of  the  following   materials  created,
     generated,  compiled or otherwise developed by GCI for general distribution
     to retail  customers in the United  States that are required to be reviewed
     by a supervisory  analyst  under New York Stock  Exchange Rule 472: (i) all
     narrative, statistical,  analytical, illustrative and other data concerning
     issuer,  industry  and  market  analyses,  commentary  and  recommendations
     (daily,  weekly and monthly,  as the case may be)  contained in AM/PM daily
     calls (video and audio), call summaries,  brief intraday research bulletins
     relating to equity securities and  industry/company  reports,  and (ii) all
     updates,  supplements,  amendments,  analyses and  statistical  information
     related to the matter  referred to in clause (i) above.  Research  Material
     also includes all DB Marks appearing on the information,  reports and other
     materials described in the preceding sentence.

                                       3
<PAGE>

(x)  "Transaction  Documents"  means  the  Securities  Purchase  Agreement,  the
     definitive agreement with respect to the U.S. Underwriting Agreement,  this
     Agreement and any other  agreements,  instruments and documents that may be
     entered  into  between  the  Parties or their  Affiliates  relating  to the
     European Joint Venture and the Worldwide Joint Venture.

(y)  "U.S.  On-Line Discount Broker" means a securities  brokerage firm that (i)
     is either located within or otherwise  doing business in the United States;
     (ii) is duly  licensed  as a  broker-dealer  with the U.S.  Securities  and
     Exchange  Commission  and  is a  member  of  the  National  Association  of
     Securities  Dealers,  Inc.;  (iii) does not employ  account  executives  or
     registered  representatives  who (A) are assigned to, and  responsible  for
     maintaining  relationships  with,  customers  for the purpose of  providing
     advised brokerage and trade execution  services (whether provided in person
     or  electronically  and  whether  general  or  trade-specific)  or (B)  are
     compensated  with a  portion  of  the  commissions  earned  for  any  trade
     execution services performed for such customers;  (iv) offers its customers
     the ability to execute  securities  trades  directly  through  computerized
     on-line or other  electronic  or  wireless  execution  systems,  including,
     without limitation,  the Internet and IVR, without the direct assistance or
     recommendation of any account executive or registered  representative;  and
     (v)  generally  charges its customers a lower cost for its services than is
     customarily  charged in the relevant market for brokerage  services by full
     service  advised  brokerage firms taking into account  commission  charges,
     account  investment  advisory  fees and  such  other  charges  and fees and
     minimum balance requirements. The term "U.S. On-Line Discount Broker" shall
     include, without limitation, any entity listed on a schedule to be prepared
     from time to time by the  Parties,  as amended  from time to time by mutual
     consent of the Parties.  Such schedule shall not include DB Alex. Brown LLC
     or DBSI or any of their respective successors.

Section 2.  LICENSE TO THE RESEARCH MATERIAL.

(a)  DB hereby grants and will ensure that each DB Research  Affiliate grants to
     the  Company,   during  the  term  of  this  Agreement  without  charge,  a
     non-exclusive   (except  as   expressly   provided   in  this   Agreement),
     non-transferable,  non-sublicenseable,  royalty-free  license to Distribute
     the Research Material to the NDB Research  Recipients through any NDB Site,
     subject to the terms set forth in this Agreement.

(b)  In the event that DB  Distributes  any of the  Research  Material  to third
     parties in the United States without restriction, DB hereby consents to the
     Company  Distributing  such  Research  Material  on any NDB  Site,  without
     restriction.

(c)  DB hereby grants and will ensure that each DB Research  Affiliate grants to
     the  Company  the  right to  include  certain  references  to the  Research
     Material on the Company's promotional material, all NDB Sites and any other
     media which the  Company or NDBG may use from time to time in its  business
     and  the  right  to  use  the DB  Marks  solely  in  connection  with  such
     references;  provided,  however,  that  (i)  DB  shall  have  a  reasonable
     opportunity to review any such  references and use of the DB Marks prior to
     publication;  and (ii) the Company shall  promptly make any changes to such
     references and use of the DB Marks as may be reasonably requested by DB. DB
     agrees to conduct any such review in a prompt manner.

                                       4
<PAGE>

(d)  Except as expressly set forth in this Agreement,  the Company shall have no
     other right to use, copy,  display or redistribute in any form the Research
     Materials, in whole or in part, without the prior written consent of DB.

(e)  The Company shall design,  operate and maintain the NDB Sites such that (i)
     the Research Material or any portion thereof  (including the title thereof)
     is displayed  exclusively on a Licensed DB Page; (ii) each Licensed DB Page
     may  be  accessed  only  by an  NDB  Research  Recipient,  and  only  after
     successfully  processing  a  Login  Page  by  entering  (A)  a  valid  user
     identification  name or number;  and (B) a valid password;  (iii) no Person
     may identify  and/or gain access to any Licensed DB Page through the use of
     any Internet  search  engine,  a hypertext link on a website other than the
     NDB  Sites,  or any  similar  means;  and (iv) the  Company  shall have the
     ability to terminate any NDB Research Recipient's access to the Licensed DB
     Reports  if such NDB  Research  Recipient  has  acted  in a manner  that is
     detrimental to DB's rights in the Research Materials and/or upon receipt of
     a notice from DB pursuant to Section 8(c) hereof.

(f)  The Company  shall design each NDB Site such that, as a condition to access
     by any NDB  Research  Recipient  to Research  Material,  such NDB  Research
     Recipient must access a Click Agreement Page and execute a Click Agreement.
     The Click Agreement Page shall be designed such that (i) the entire text of
     the Click  Agreement  appears on a single Page,  in an internal  scrollable
     window or  otherwise;  (ii) the button or similar  user prompt by which the
     user  executes  the Click  Agreement  contains  the text "I  Agree"  and is
     located  immediately  proximate  to the  bottom  of the  text of the  Click
     Agreement;  and (iii) the title(s) of the Research Material(s) that the NDB
     Research  Recipient  has  requested  appear(s)   immediately  below  or  is
     otherwise  connected to the Click Agreement such that it is apparent to the
     Research  Recipient  that the provisions of the Click  Agreement  relate to
     such Research Material(s).

(g)  Except as expressly provided herein, the Company shall display the Research
     Material on the Licensed DB Pages  verbatim as received and shall not edit,
     modify or use any portion of Research  Material to create any  translation,
     summary,  abstract,  adaptation or other derivative works from the Research
     Material in any way, or make any additions thereto or deletions  therefrom;
     provided, however, that the Company shall be permitted to modify the layout
     of Research Material to the extent necessary to comply with any requirement
     of any Governmental  Entity. The Company shall not (i) sell, lease, assign,
     sublicense or otherwise  transfer or provide the Research  Material (or any
     part thereof or rights therein),  directly or indirectly,  to any Person or
     permit any Person,  directly or indirectly,  to use, view, copy,  download,
     Distribute  or otherwise  have access to the Research  Material,  except as
     otherwise permitted herein; or (ii) copy or reproduce the Research Material
     in whole or in part in any form or medium, except as required in connection
     with the  Company's  permitted  use of the  Research  Material  as provided
     herein.

(h)  In no event shall the Company display any Research  Material  received more
     than  twenty-four  (24) hours  earlier  under any  heading  labeled  "New",
     "Today's  News",   "Current",   or  under  any  other  heading  of  similar
     significance.
                                       5
<PAGE>

(i)  The Company shall  display each Research  Material on the Licensed DB Pages
     only for so long as DB  permits  third  parties  in the  United  States  to
     Distribute such Research Material.  After such period,  upon notice from DB
     the Company  shall  promptly  remove each such  Research  Material from the
     Licensed DB Pages.

(j)  DB or the  applicable  DB  Research  Affiliate  shall at all  times  retain
     exclusive and complete  editorial control over the Research  Materials with
     respect to both form and content,  and the Company shall comply with all of
     DB's  editorial  instructions  respecting  the Research  Material.  Without
     limiting the foregoing,  in the event that DB or any DB Research  Affiliate
     issues  and  transmits  to  the  Company  any  retraction,   correction  or
     alteration of any Research  Material,  the Company shall  promptly  display
     such retraction,  correction or alteration on the Licensed DB Pages in such
     manner as DB or such DB Research  Affiliate shall  reasonably  request.  DB
     also reserves the right, upon written notice to the Company, to require the
     Company to remove  immediately  any  Research  Material  or a  category  of
     Research  Material  from  the NDB  Sites  to the  extent  that DB or any DB
     Research Affiliate takes comparable steps, in comparable circumstances,  to
     cease Distributing or making such Research Material available generally.

(k)  Display of Research Materials

 (i) Format.  The Company  shall post the  Research  Materials  on the NDB Sites
     exclusively  (A) in Adobe  Acrobat  (".pdf")  format;  (B)  upon the  prior
     written consent of DB, which shall not be unreasonably withheld, in another
     equivalent "read-only" format; or (C) upon the prior written consent of DB,
     which shall be at DB's sole discretion,  in any other format in which DB is
     at that time displaying the Research Material in comparable circumstances.

 (ii)Inlining  Prohibited. The  Company  shall not Inline,  but may Frame,  any
     Research  Materials.  If the  Company  becomes  aware that a third party is
     Inlining or Framing the Research Material,  the Company will cooperate with
     DB to cause such  third  party to cease and desist  from such  Inlining  or
     Framing.

(iii)Co-Branding Confusion.  The Company  shall not  display any third  party's
     name,  logo,  trademark,  service mark or other  identifier  on an NDB Site
     (including, without limitation, by Framing) in such way as to give a viewer
     the impression that such third party is a publisher,  distributor,  author,
     owner or sponsor of the Research Materials or an Affiliate of DB, including
     any DB Research Affiliate.

(iv) Content.  The Company shall not, without DB's prior written consent,  Frame
     any Research Material with, or display with any Research Material or on any
     Licensed  DB  Page,  any NDB or third  party  content,  including,  without
     limitation, news, research, analytics and commentary.

                                       6
<PAGE>

(v)  Advertising.  The Company shall not display any advertising on any Licensed
     DB  Page  that  falsely   implies  that  the  advertiser  is  a  publisher,
     distributor,  author,  owner or  sponsor  of the  Research  Material  or an
     Affiliate of DB, including any DB Research Affiliate.  DB also reserves the
     right, in the exercise of its reasonable discretion and upon written notice
     to the Company  (setting  forth in  reasonable  detail the reasons for such
     requirement),  to require the Company to remove immediately any advertising
     from the Licensed DB Pages. In exercising its reasonable discretion, DB may
     take into consideration,  among other factors, its determination  regarding
     legal  and  compliance  risks,  reputational  concerns  and  the  Company's
     compliance  with  the  provisions  of this  Agreement.  The  Company  shall
     promptly give DB written notice confirming any such removal.

(vi) Legends.

                           (A)      The  Company  shall  display  and  shall not
                                    remove or conceal  any Legend  affixed by DB
                                    or any DB Research Affiliate to the Research
                                    Materials.   To  the  extent   not   already
                                    present,  the Company  shall  insert on each
                                    Licensed  DB  Page  that  contains  Research
                                    Material or any portion thereof and in close
                                    proximity  to  such  Research  Materials  or
                                    portion thereof the following Legend:

                                    Copyright (Year) [Deutsche Bank]. All Rights
                                    Reserved. "[DEUTSCHE BANK]" is a service
                                    mark of [Deutsche Bank].

                           (B)      In connection  with any Research  Material
                                    prepared by a Person relying on the
                                    exemption  from  broker-dealer  registration
                                    afforded  by  Rule  15a-6  of the
                                    Exchange Act, including the so-called
                                    "Research  Interpretation"  described in
                                    Exchange Act Release No. 27017 (July 11,
                                    1989),  43 SEC Docket 2079,  (A) DBSI
                                    shall be the U.S.  broker-dealer  accepting
                                    responsibility  for the content of
                                    such Research  Material;  and (B) such
                                    Research Material shall contain a Legend
                                    to  such  effect  to the  extent  required
                                    by  Rule  15a-6  and  the  Research
                                    Interpretation.

                           (C)      The  Company   shall  add  such   additional
                                    Legends  relating to the Research  Materials
                                    to the  Licensed  DB  Pages  as  (I)  may be
                                    required by  applicable  law; (II) as it may
                                    deem   necessary  or   appropriate   in  its
                                    reasonable  discretion,  provided  that  the
                                    Company shall give DB timely prior notice of
                                    any such  additional  Legends and reasonable
                                    opportunity to comment thereon; and (III) DB
                                    shall  require  from  time  to  time  in its
                                    reasonable  discretion,  upon prior  written
                                    notice to the Company.

                                       7
<PAGE>

Section 3.  DELIVERY AND ARCHIVAL RESPONSIBILITIES.

(a)  Throughout the term of this Agreement,  DB shall,  without charge,  deliver
     the Research  Material to the Company or a Delivery  Provider in the format
     described in Section  2(k)(i)  above,  or in such format as the Parties may
     agree,  concurrently  with the time DB first  makes the  Research  Material
     available  (i)  publicly,  (ii) to retail  customers  in the United  States
     (including  through  First Call  Corporation,  Multex  Systems,  Inc.  or a
     similar  third party),  or (iii) to any DB customer;  provided that (x) the
     delivery by DB of the Research  Material outside of the United States or to
     institutional customers,  whether in the United States or otherwise,  shall
     not give rise to any  obligation to deliver such  Research  Material to the
     Company under this Section  3(a);  (y) any delivery to the Company shall be
     subject to any embargo specified by DB in its sole discretion in connection
     with  its  publication,  dissemination  or  distribution  of  the  Research
     Material  generally;  and (z) DB shall not be required to deliver  Research
     Material if it would cause DB to violate any Law, rule or regulation of any
     Governmental Entity.

(b)  DB, for the  benefit of and upon  request by the  Company,  shall,  without
     charge:  (i) provide access to the Research Material archived for the three
     years immediately  preceding the date of such request but in no event prior
     to January 1, 2000; and; (ii) promptly,  upon such request,  deliver to the
     Company or  Delivery  Provider  such  archived  material  in such format as
     contemplated  by Section  2(k)(i) and (iii)  maintain  and make  available,
     promptly on request,  a copy of each item of such archived material and any
     other  Research  Material  made  available to the Company  hereunder  for a
     period of three years  following  termination  of this  Agreement  (in such
     format  as  contemplated  by  section  2(k)(i))  for  use  by  the  Company
     exclusively to satisfy any  recordkeeping or related  requirements to which
     the  Company  may be  subject  under  applicable  Laws,  orders,  rules and
     regulations  and not for  purposes of  commercial  exploitation;  provided,
     however, that after the termination of this Agreement, the Company may only
     request  copies  of  Research  Material  that  was  produced  prior  to the
     termination  of this  Agreement  and is  maintained  by DB  pursuant to any
     recordkeeping or related requirements to which it is subject or otherwise.

(c)  Nothing  herein  shall  require DB or any DB Research  Affiliate  to create
     Research  Material.  Except as provided in this  Agreement,  DB and each DB
     Research Affiliate shall have no obligation to deliver Research Material to
     the  Company  or  provide  to  the  Company  any  additional   information,
     materials,  services or support  pursuant to this  Agreement.  In the event
     that DB provides any  additional  information  or materials to the Company,
     unless DB otherwise  agrees in writing,  DB's  obligations  respecting such
     additional  information  and  materials  shall  be in  accordance  with its
     obligations hereunder respecting Research Material.

(d)  Neither  DB nor any DB  Research  Affiliate  shall have any  obligation  to
     provide  assistance  or  training  to  the  Company  with  respect  to  the
     Distribution of the Research Material on the NDB Sites.

                                       8
<PAGE>

Section 4.  REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.

(a)  DB hereby represents, warrants and covenants to the Company as follows:

(i)  DB or one or more of the DB Research Affiliates, as the case may be, is the
     exclusive  owner of the  Research  Material or  otherwise  has obtained all
     required third party consents or the right (including Intellectual Property
     Rights) to permit DB to grant to the Company  the  license to the  Research
     Material and the DB IP Rights as set forth in this Agreement throughout the
     term of this Agreement. The use by the Company of the Research Material and
     the DB IP  Rights  owned by DB or the DB  Research  Affiliates,  and to the
     Knowledge  of DB  the  DB IP  Rights  licensed  to DB or  the  DB  Research
     Affiliates,  in accordance  with this Agreement  will not breach,  violate,
     infringe or constitute misappropriation of any Intellectual Property Rights
     of any other  Person.  DB's  execution,  delivery and  performance  of this
     Agreement does not and will not give rise to any rights of a Person,  other
     than DB, to request,  demand or claim a right to compensation or payment by
     the Company with respect to the Company's  license of the Research Material
     and the DB IP Rights owned by DB or the DB Research Affiliates,  and to the
     Knowledge  of DB  the  DB IP  Rights  licensed  to DB or  the  DB  Research
     Affiliates,  in conformity with this Agreement,  and there is no actual or,
     to the knowledge of DB, threat of, demand,  claim,  investigation  or other
     proceeding brought by any third party with respect to the Research Material
     and the DB IP Rights based on an alleged right to compensation or violation
     of any right or agreement involving DB or a DB Research Affiliate.

(ii) The Research  Material will be prepared,  reviewed,  and  Distributed by DB
     and/or DBSI pursuant to this  Agreement in accordance  with all  applicable
     requirements,   rules  and  regulations  of  the  Securities  and  Exchange
     Commission,  any stock  exchange  (including  the New York Stock  Exchange,
     Inc.)  and  any  self-regulatory   organization   (including  the  National
     Association of Securities Dealers, Inc.) having jurisdiction.

(iii)DBSI is duly  licensed as a  broker-dealer  and in good  standing  with the
     Securities  and  Exchange  Commission  and each of DB  and/or  DBSI is duly
     licensed as a broker-dealer or other regulated  financial  institution,  as
     applicable,  in any other  jurisdiction  where the conduct of its  business
     requires  such  licensing,  except where the failure to have such a license
     would not be  reasonably  likely to have a Material  Adverse  Effect on the
     business of DB and its Subsidiaries taken as a whole. DBSI is a member firm
     in good standing of the National Association of Securities Dealers, Inc. or
     the New York Stock Exchange,  Inc., and the Securities  Industry Protection
     Corporation.   Each  of  DB  and  DBSI  has  all   permits,   licenses  and
     authorizations   required   by   applicable   regulatory   authorities   or
     governmental  entities to conduct  the  transactions  contemplated  by this
     Agreement.

(iv) DB is exempt from the  registration  requirements  of Section  15(a)(1) and
     15B(a)(1)  of the Exchange  Act because of the  exemption  pursuant to Rule
     15a-6  under the  Exchange  Act and has  complied  with and  performed  its
     obligations in accordance with Rule 15a-6(a)(1)-(3) under the Exchange Act.

(v)  Each DB Research  Affiliate is either (A) duly licensed as a  broker-dealer
     and in good  standing with the  Securities  and Exchange  Commission  and a
     member firm in good  standing of the  National  Association  of  Securities
     Dealers,  Inc. or the New York Stock  Exchange,  Inc.,  and the  Securities
     Industry Protection Corporation; or (B) with respect to the Distribution of
     Research  Material,  exempt from the  registrations of Section 15(a)(1) and
     15B(a)(1)  of the Exchange  Act because of the  exemption  pursuant to Rule
     15a-6  under the  Exchange  Act and has  complied  with and  performed  its
     obligations in accordance with Rule 15a-6(a)(1)-(3) under the Exchange Act.

                                       9
<PAGE>

(vi) During the term of this Agreement,  without the Company's prior consent, DB
     shall not directly  Distribute  the Research  Material to any U.S.  On-Line
     Discount Broker,  other than the Company for purposes of  reDistribution to
     retail investors in the United States.  The foregoing shall not prohibit or
     restrict DB's existing  agreements  with First Call  Corporation and Multex
     Systems, Inc.

(b)  The Company hereby represents,  warrants and covenants that (i) the Company
     takes full  responsibility  for any suitability  obligations it may have in
     connection   with  making  the  Research   Material   available,   and  the
     Distribution  of  the  Research   Material,   to  individual  NDB  Research
     Recipients;  (ii)  Research  Material  will  not  be  made  available  in a
     commingled format with research items prepared by any other  broker-dealer;
     and (iii) it shall  comply  with all Laws,  orders,  rules and  regulations
     applicable to its use of any of the Research Material,  including,  without
     limitation, any such Laws, orders, rules or regulations of any Governmental
     Entity (including for these purposes the NASD) having jurisdiction over the
     Company's business activities.

(c)  Each of the Parties,  except as otherwise  contemplated  by this Agreement,
     acknowledges and agrees that the Research Material may be made available on
     a secure basis to the Company and the NDB Research  Recipients  (i) through
     any NDB Site; or (ii) through a service  provider or providers  selected by
     the  Company at any time during the term of this  Agreement  and subject to
     DB's  consent,  such consent not to be  unreasonably  withheld (a "Delivery
     Provider").

Section 5.   ADDITIONAL INTELLECTUAL PROPERTY RIGHTS.

(a)  The Company hereby  acknowledges  and agrees that (i) as between DB and the
     Company,  DB or each applicable DB Research Affiliate owns or has a license
     to all right,  title and interest in and to the Research Material and DB IP
     Rights; (ii) as between DB and the Company, the Research Material and DB IP
     Rights,  and the goodwill  therein,  constitute the valuable property of DB
     and each  applicable DB Research  Affiliate;  and (iii) except as expressly
     provided  herein,  this Agreement  transfers no title,  ownership  right or
     Intellectual  Property  Rights to the Company  with respect to the Research
     Material or DB IP Rights.  All rights with respect to the Research Material
     and DB IP Rights,  whether now existing or hereafter arising,  that are not
     expressly  granted  to the  Company  herein  are  reserved  to DB and  each
     applicable  DB  Research  Affiliate.  Any  goodwill  generated  through the
     Company's use of the Research  Material and DB IP Rights shall inure solely
     to the benefit of DB and each applicable DB Research Affiliate. The Company
     also covenants not to challenge DB's ownership of the Research Material and
     the DB IP Rights licensed hereunder in any form or manner.

                                       10
<PAGE>

(b)  The Company,  in  connection  with the licensed use of the DB Marks,  shall
     maintain  the quality  control  standards  provided by DB to the Company in
     writing from time to time that DB maintains  with respect to its use of the
     DB Marks generally.

(c)  Except as expressly  provided in this Agreement,  the Company shall have no
     other rights with  respect to any of the  Research  Material as a result of
     this Agreement.

(d)  DB  shall  have  the   exclusive   right  to  prosecute  and  maintain  any
     registrations  of any of the DB IP  Rights  and  to  defend  any  claim  of
     infringement  related thereto. The Company shall execute such documents and
     provide  such  reasonable  cooperation  to DB, at DB's  expense,  as DB may
     reasonably  request in order to perfect,  evidence,  protect or secure such
     rights and to conduct such prosecution, registration or defense.

(e)  The Company shall  promptly  notify DB of any threat,  warning or notice in
     writing  of any claim or  action  adverse  to any of DB IP Rights  that the
     Company may receive  from time to time.  In the event that an NDB  Research
     Recipient engages in any activity that is adverse to the DB IP Rights, upon
     the reasonable request of DB, the Company shall cooperate with DB in taking
     action to protect  DB's  rights,  including  terminating  such NDB Research
     Recipient's access to the Research Material on the NDB Sites.

(f)  The Company shall take no action  inconsistent  with the  acknowledgements,
     agreements and  assignments set forth in this Section.  In particular,  the
     Company shall not at any time undertake to copyright or trademark (or apply
     for a  copyright  or  trademark  registration)  or apply for a patent  with
     respect  to any of the  Research  Material  or DB IP Rights or any  portion
     thereof.  The  Company  shall  not at any  time  during  the  term  of this
     Agreement or at any time after  termination or expiration of this Agreement
     (i) use the  Research  Material or DB IP Rights in any way that may tend to
     impair the validity of DB's or any DB Research  Affiliate's rights therein;
     or (ii) take any other action that could disparage, or jeopardize or impair
     DB's or any DB Research  Affiliate's rights in, the Research Material or DB
     IP Rights  (including the goodwill  associated  with the DB Marks) or their
     validity or enforceability.

Section 6.  CONFIDENTIALITY.

(a)  The Company  acknowledges  that it may,  during the term of this  Agreement
     acquire information, other than the Research Material, which is proprietary
     or  confidential  to DB or its clients or  customers or to a third party to
     whom  DB  has an  obligation  of  confidentiality  (collectively,  the  "DB
     Proprietary Information").  The DB Proprietary Information does not include
     information which (i) is or becomes generally available to the public other
     than as a result of a prohibited disclosure by the Company or the Company's
     Representatives;  (ii) was  available  to the Company on a  nonconfidential
     basis prior to its disclosure by DB or DB's Representatives;  (iii) becomes
     available  to the Company on a  nonconfidential  basis from a Person  other
     than  DB  or  DB's   Representatives  who  is  not  otherwise  bound  by  a
     confidentiality  agreement  with  DB or any  Representative  of  DB,  or is
     otherwise not under an obligation to DB or any  Representative of DB not to
     transmit the information to the Company; or (iv) is independently developed
     by the Company.  Except as required by law, the Company  agrees to hold and
     to cause its employees and agents to hold the DB Proprietary Information in
     strict  confidence,  and not to copy  for use by  Persons  other  than  the
     Company,  reproduce,  sell, assign, license,  market, transfer or otherwise
     dispose of the DB  Proprietary  Information  or to give or disclose  the DB
     Proprietary  Information to third parties. In the event that the Company is
     requested pursuant to, or required by, applicable Law,  regulation or legal
     process  or  is   requested  by  any  court,   regulatory   agency  or  any
     self-regulatory authority to disclose any DB Proprietary Information or any
     other  information  concerning  DB, the  Company  agrees to provide DB with
     prompt notice of such request or  requirement in order to enable DB to seek
     an  appropriate  protective  order or other  remedy,  to  consult  with the
     Company  with  respect to DB taking  steps to resist or narrow the scope of
     such request or legal process, or to waive compliance, in whole or in part,
     with the terms of this provision.  In any such event,  the Company will use
     its  commercially  reasonable  efforts  to  obtain  from the  party to whom
     disclosure is made written  assurances that all DB Proprietary  Information
     and other  information  that is so disclosed will be accorded  confidential
     treatment.

                                       11
<PAGE>

(b)  DB  acknowledges  that it may,  during the term of this  Agreement  acquire
     information  which is  proprietary  or  confidential  to the Company or its
     clients  or  customers  or to a third  party  to whom  the  Company  has an
     obligation  of  confidentiality  (collectively,  the  "Company  Proprietary
     Information").   The  Company  Proprietary  Information  does  not  include
     information which (i) is or becomes generally available to the public other
     than as a result of a prohibited  disclosure by DB or DB's Representatives;
     (ii) was available to DB on a nonconfidential basis prior to its disclosure
     by the Company or the Company's Representatives; (iii) becomes available to
     DB on a  nonconfidential  basis from a Person other than the Company or the
     Company's  Representatives  who is not otherwise bound by a confidentiality
     agreement  with the Company or any  Representative  of the  Company,  or is
     otherwise not under an obligation to the Company or any  Representative  of
     the Company not to transmit the  information  to; or (iv) is  independently
     developed by DB.  Except as required by law, DB agrees to hold and to cause
     its employees  and agents to hold the Company  Proprietary  Information  in
     strict  confidence,  and not to copy  for use by  Persons  other  than  DB,
     reproduce,  sell, assign, license, market, transfer or otherwise dispose of
     the Company  Proprietary  Information  or to give or  disclose  the Company
     Proprietary Information to third parties. In the event that DB is requested
     pursuant to, or required by, applicable Law, regulation or legal process or
     is  requested  by any  court,  regulatory  agency  or  any  self-regulatory
     authority  to disclose  any Company  Proprietary  Information  or any other
     information  concerning  DB, DB agrees to provide the  Company  with prompt
     notice of such  request or  requirement  in order to enable the  Company to
     seek an appropriate  protective  order or other remedy,  to consult with DB
     with  respect to the Company  taking steps to resist or narrow the scope of
     such request or legal process, or to waive compliance, in whole or in part,
     with  the  terms of this  provision.  In any  such  event,  DB will use its
     commercially reasonable efforts to obtain from the party to whom disclosure
     is made written  assurances  that all Company  Proprietary  Information and
     other  information  that  is so  disclosed  will be  accorded  confidential
     treatment.

                                       12
<PAGE>

Section 7.  PUBLICITY.

         DB acknowledges and agrees that the Company may Distribute the Research
         Material as contemplated by this Agreement.  Each of the Parties agrees
         that the other shall be entitled to advertise  and market the existence
         and the  availability  of the  Research  Material  to the NDB  Research
         Recipients and others,  but not the terms of this Agreement;  provided,
         however,  that  (a)  each of the  Parties  shall  have  had  reasonable
         opportunity to review any advertising or marketing  materials  prepared
         by the other  Party  prior to use of such  advertisement  or  marketing
         initiative; and (b) each Party shall make any changes to such materials
         as may  reasonably be requested by the other Party.  DB and the Company
         agree not to  disclose  this  Agreement  in any manner nor make  copies
         available to any third party without the prior  written  consent of the
         other Party hereto, except as required by law. In the event that either
         Party is  requested  pursuant  to, or required  by,  applicable  law or
         regulation  or by legal  process to disclose  this  Agreement  it shall
         promptly inform the other Party of such request or requirement in order
         to enable the Parties to jointly seek an appropriate  protective  order
         or other  remedy,  or to resist or narrow the scope of such  request or
         legal  process.  In any  such  event,  each  Party  agrees  to use  its
         commercially  reasonable efforts to obtain from the third party to whom
         disclosure  is made  written  assurances  that this  Agreement  will be
         accorded confidential treatment.

Section 8.  AUDIT RIGHTS; RECORD-KEEPING.

(a)  DB shall have the right to conduct, from time to time, reasonable audits of
     the Company for the purpose of  confirming  the  compliance  of the Company
     with the terms of Section 2. To facilitate such audits,  the Company shall,
     on DB's  reasonable  request,  give DB free access during  normal  business
     hours to the NDB Sites,  including to all  Licensed DB Pages.  In the event
     that DB  reasonably  determines  that the Company has breached the terms of
     Section  2, in  addition  to the  other  rights  granted  to DB under  this
     Agreement,  DB shall have the right to reasonably  limit the  categories of
     the Research Materials provided to the Company, by providing written notice
     to the Company  (setting  forth in  reasonable  detail the reasons for such
     termination or limitation);  provided, however, that, (i) the Company shall
     have a reasonable  opportunity to cure any breach that was not  intentional
     and that is capable of being  cured,  and (ii) upon request by the Company,
     DB shall in good  faith  discuss  with the  Company  the  reasons  for such
     termination and, if possible,  any alternatives  thereto. In exercising its
     right to limit the license  grant,  DB may take into  consideration,  among
     other factors,  its  determination  regarding  legal and compliance  risks,
     reputational  concerns and the Company's  compliance with the provisions of
     this Agreement.

(b)               (i) The Company  shall  maintain a log of the total  number of
                  times the  Licensed DB Pages are  accessed by users of the NDB
                  Sites. Upon DB's request, the Company shall provide a complete
                  copy of such log to DB at no additional cost to DB.

                  (ii) The Company shall  maintain a log of the names of all NDB
                  Research Recipients as well as their user identification names
                  or numbers and passwords.

                                       13
<PAGE>

(c)  DB shall at all times have the right, in its reasonable business discretion
     to direct the Company to exclude any particular NDB Research Recipient from
     accessing the Research  Materials.  In exercising  such right,  DB may take
     into consideration factors affected by such NDB Research Recipient's access
     to  the  Research   Materials,   including  legal  and  compliance   risks,
     reputational concerns and such NDB Research Recipient's compliance with the
     provisions of the relevant Click  Agreement.  For purposes of this Section,
     "reputational  concerns" means that the particular NDB Research Recipient's
     access to the Research  Material  would be  reasonably  likely to impugn or
     besmirch the reputation and value of DB and/or the DB Marks.

Section 9.  LIMITATION OF WARRANTIES AND LIABILITIES.

(a)  EXCEPT AS OTHERWISE  PROVIDED IN THIS AGREEMENT,  THE RESEARCH  MATERIAL IS
     PROVIDED TO THE  COMPANY  HEREUNDER  STRICTLY  ON AN "AS IS" BASIS,  AND NO
     WARRANTIES, EXPRESS OR IMPLIED,  REPRESENTATIONS OR PROMISES HAVE BEEN MADE
     OR ARE  GIVEN BY DB OR ANY  AFFILIATE  OF DB TO THE  COMPANY  OR ANY  OTHER
     PERSON  (INCLUDING  ANY NDB RESEARCH  RECIPIENT)  REGARDING  THE  ACCURACY,
     TIMELINESS  ORIGINALITY,  MERCHANTABILITY,  SUITABILITY  OR  FITNESS  FOR A
     PARTICULAR  PURPOSE OF THE  RESEARCH  MATERIAL  OR ANY OTHER  MATTER AND NO
     WARRANTY  IS  GIVEN  THAT  THE  RESEARCH   MATERIAL  WILL  CONFORM  TO  ANY
     DESCRIPTION THEREOF OR BE FREE OF DEFECTS.

(b)  EXCEPT AS PROVIDED IN SECTION 13 HEREOF,  IN NO EVENT SHALL  EITHER  PARTY,
     THEIR RESPECTIVE  AFFILIATES OR THEIR RESPECTIVE  REPRESENTATIVES  HAVE ANY
     LIABILITY  TO THE  OTHER  PARTY  OR ANY  OTHER  PERSON  (INCLUDING  ANY NDB
     RESEARCH RECIPIENT) FOR ANY CONSEQUENTIAL,  INCIDENTAL, PUNITIVE, EXEMPLARY
     OR SPECIAL DAMAGES  (INCLUDING LOST PROFITS AND REVENUES) ARISING OUT OF OR
     IN ANY MANNER IN CONNECTION WITH THIS AGREEMENT,  THE PERFORMANCE OR BREACH
     HEREOF, THE SUBJECT MATTER HEREOF OR THE PARTIES' OR ANY OTHER PERSON'S USE
     OF, OR INABILITY TO USE, THE RESEARCH  MATERIAL  REGARDLESS  OF THE FORM OF
     ACTION  (INCLUDING  NEGLIGENCE OR STRICT  LIABILITY) AND WHETHER OR NOT THE
     OTHER PARTY HAS BEEN ADVISED OF, OR OTHERWISE  MIGHT HAVE  ANTICIPATED  THE
     POSSIBILITY  OF, SUCH DAMAGES.  SUBJECT TO SECTIONS 4(a) AND 13 HEREOF,  BY
     USING THE RESEARCH  MATERIAL,  THE COMPANY AGREES TO ASSUME THE ENTIRE RISK
     OF SUCH USE.

Section 10.  DB'S PROPRIETARY NOTICES.

     DB shall have the right to require that the  Research Material released and
     Distributed to the NDB Research Recipients or as otherwise  contemplated by
     this Agreement bear the DB Marks inserted therein,  and made a part thereof
     by DB or any DB Research Affiliate, as the case may be.

                                       14
<PAGE>

Section 11.  THE COMPANY AS A PRIVILEGED DB RESEARCH CUSTOMER.

         With regard to the  Company's  license of the Research  Material  under
         this Agreement and such third-party  access to the Research Material as
         is permitted by this  Agreement  with respect to certain  third parties
         other than the Company ("Permitted Purchasers"), DB agrees to treat the
         Company as a privileged  customer with respect to the  Distribution  of
         the  Research  Material.  DB  represents  that  all of the  indemnities
         provided  to the  Company  hereunder  are or will be  comparable  to or
         better than those provided by DB to Permitted  Purchasers  with respect
         to the  Distribution of the Research  Material.  If, during the term of
         this  Agreement,  DB  enters  into  an  agreement  with  any  Permitted
         Purchaser  with respect to the  Distribution  of the Research  Material
         with any indemnities more favorable to such Permitted  Purchaser in the
         aggregate,  then DB shall so notify the Company and  promptly  take all
         steps necessary to effect an appropriate amendment to this Agreement.

Section 12.  ASSIGNMENT.

         This Agreement may be assigned by either Party to an Affiliate, as part
         of the sale of its securities brokerage business or, in the case of DB,
         the sale of GCI,  or pursuant  to any  merger,  consolidation  or other
         reorganization,  without the other Party's consent,  upon prior written
         notice  to the  other  Party.  Except  as  provided  in  the  preceding
         sentence,  neither Party shall assign this Agreement  without the other
         Party's prior written consent,  which consent shall not be unreasonably
         withheld. An assignee of either Party, if authorized  hereunder,  shall
         have all of the rights and obligations of the assigning Party set forth
         in this  Agreement.  Any  purported  assignment  in  violation  of this
         Section 12 shall be null and void for all purposes.

Section 13.  INDEMNITY.

(a)  DB hereby  agrees to  indemnify,  defend and hold  harmless the Company and
     each of its employees, officers, directors, agents and Affiliates (and each
     of their employees,  officers,  directors,  agents and Affiliates) from and
     against  any and all  losses,  claims,  damages or  liabilities  (including
     without limitation reasonable legal fees and other expenses) (collectively,
     "Losses") arising out of or related to any claim,  demand,  action, suit or
     proceeding of any nature  (collectively,  a  "Proceeding")  asserted by any
     third party which, if true, would  constitute (i) an infringement,  breach,
     violation or misappropriation of any copyright, patent, trademark (or other
     indication  of origin),  know how or trade secret of such third party based
     on the use of the Research Material;  (ii) libel related to the contents of
     the  Research  Material;  and (iii) a breach,  or  alleged  breach,  of any
     representation  or warranty  set forth in Section  4(a)(ii),  except to the
     extent any such  Proceeding  results from any gross  negligence  or willful
     misconduct on the part of the Company or any modification by the Company of
     the Research Material.

(b)  The Company  hereby  agrees to  indemnify,  defend and hold harmless DB and
     each of its employees, officers, directors, agents and Affiliates (and each
     of their employees,  officers,  directors,  agents and Affiliates) from and
     against  any and all Losses  arising  out of or  related to any  Proceeding
     asserted  by any  third  party  based on (i) any  inaccurate,  untimely  or
     incomplete  transmission of Research  Material caused by the Company or any
     Delivery Provider, and (ii) any use by the Company or any Delivery Provider
     of  Research  Material  in a manner not  authorized  under this  Agreement,
     except to the extent any such  Proceeding  results  from a Loss  subject to
     Section 13(a).
                                       15
<PAGE>

(c)  In the event that a Proceeding  is asserted or  commenced  against a Person
     for which such Person is entitled to indemnification  under this Agreement,
     the indemnified  Person  ("Indemnified  Party") shall give the indemnifying
     Person ("Indemnifying Party") prompt written notice of such Proceeding. The
     failure of the Indemnified  Party to give such notice shall not relieve the
     Indemnifying  Party of its obligations  under this Section 13 except to the
     extent that the Indemnifying Party is actually and materially prejudiced by
     the  failure  to give such  notice.  In case any such  Proceeding  shall be
     brought against the Indemnified  Party and it shall notify the Indemnifying
     Party thereof,  the Indemnifying Party shall be entitled to participate in,
     and,  to the extent  that it shall  wish,  to assume the  defense  thereof,
     including appeals, with counsel reasonably  satisfactory to the Indemnified
     Party,  and after  notice from the  Indemnifying  Party to the  Indemnified
     Party of its election so to assume the defense  thereof,  the  Indemnifying
     Party shall not be liable to such Indemnified  Party for any legal or other
     expenses subsequently incurred by the Indemnified Party after the date such
     notice is given to the  Indemnified  Party in  connection  with the defense
     thereof.   The  Indemnified  Party  shall  have  the  right,  but  not  the
     obligation,  to  participate at its own cost and expense in such defense by
     counsel of its own choice. In the event that the Indemnifying Party and the
     Indemnified  Party are named  parties in or are subject to such  Proceeding
     and either such party  determines with the advice of counsel that there may
     be one or more legal  defenses  available to it that are different  from or
     additional  to  those  available  to the  other  party  or that a  material
     conflict  of  interest  between  such  parties may exist in respect of such
     Proceeding, the Indemnified Party may retain the defense of such Proceeding
     on its own behalf and in such case the Indemnifying Party shall be required
     to  pay  any  legal  or  other  expenses,  including,  without  limitation,
     reasonable  attorneys' fees and disbursements,  incurred by the Indemnified
     Party in such defense.  If the Indemnifying  Party shall assume the defense
     of any such Proceeding,  the Indemnified  Party shall cooperate with it and
     the  Indemnifying  Party shall not,  without the consent of the Indemnified
     Party consent, settle, compromise,  consent to the entry of any judgment in
     or  otherwise  seek  to  terminate  such  Proceeding  (whether  or not  any
     Indemnified  Party is a party thereto) unless such settlement,  compromise,
     consent or termination includes a release (i) of the Indemnified Party from
     any  liabilities  arising  out of such  Proceeding,  (ii)  which  does  not
     constitute an admission of wrongdoing by the Indemnified Party, (iii) which
     does not restrict in any manner the activities of the Indemnified Party and
     (iv)  which if it  provides  for the  payment  of  money  such  payment  is
     satisfied in full by the Indemnifying  Party. No Indemnified  Party seeking
     indemnification,  reimbursement or contribution  under this Agreement will,
     without the Indemnifying Party's prior written consent, settle, compromise,
     consent to the entry of any judgment in or otherwise  seek to terminate any
     Proceeding  referred  to in  Paragraph  (a)  except  as  permitted  in  the
     following sentence.  Provided the proper notice has been duly given, if the
     Indemnifying   Party  shall  decide  not  to  assume  the  defense  of  any
     Proceeding,  the  Indemnified  Party may  respond  to,  contest  and defend
     against such Proceeding and make in good faith any compromise or settlement
     with respect thereto , subject to the Indemnifying  Party's written consent
     in the event that the proposed compromise or settlement  materially affects
     the Indemnifying Party, which consent shall not be unreasonably withheld or
     delayed,  and recover any  reasonable  Losses  incurred as a result of such
     response,  contest or  defense  of such  Proceeding  or the  settlement  or
     compromise thereof from the Indemnifying Party.

                                       16
<PAGE>

(d)  If  the  indemnification  provided  for  in  Section  13(a)  is  judicially
     determined  to be  unavailable  to an  Indemnified  Party in respect of any
     Losses  indemnified  hereunder,  in lieu of indemnifying  such  Indemnified
     Party hereunder, the Indemnifying Party shall contribute to the amount paid
     or payable  by such  Indemnified  Party as a result of such  Losses in such
     proportion  as  is  appropriate  to  reflect  the  relative  fault  of  the
     Indemnified Party and the Indemnifying Party, as well as any other relevant
     equitable considerations.

Section 14.  NOTICE.

         All notices required or permitted to be given by one Party to the other
         under  this  Agreement  shall be  sufficient  if sent by  e-mail,  fax,
         overnight express delivery or certified mail, return receipt requested,
         to such Party at the address  set forth below or to such other  address
         as the Parties  entitled to receive the notice has designated by notice
         hereunder to the other Party.

         If to DB, to:

                                    Deutsche Bank AG, New York Branch
                                    31 West 52nd Street
                                    New York, NY 10019
                                    Attention: General Counsel
                                    Tel. No.: (212) 469-8200

         If to the Company, to:

                                    National Discount Brokers Corporation
                                    90 Hudson Street
                                    Jersey City, NJ  07302
                                    Attention:  Executive Vice President &
                                    General Counsel
                                    Tel. No.:  201-209-7050
                                    Fax No.:  201-209-6914
                                    E-mail:  flawatsch@ndbgroup.com


Section 15.  TERMINATION.

(a)  Either  Party  may  terminate  this  Agreement  in its sole  discretion  by
     providing  written  notice to the other Party (i) upon the  occurrence of a
     For Cause  Termination  Event with respect to the other Party; or (ii) upon
     the giving of a notice of  termination,  by any party,  of any of the other
     Joint Venture Agreements. Notwithstanding any termination effected pursuant
     to this Section 15, the rights and  obligations set forth in Sections 5, 6,
     7, 9, 11, 13,  14,  15, 16 and 17 shall  survive  any  termination  of this
     Agreement,  and no such termination shall relieve any Party of liability it
     may have incurred hereunder prior to such termination.

                                       17
<PAGE>

(b)  Upon termination or expiration of this Agreement for any reason, all rights
     of the Company  with respect to the Research  Material  licensed  hereunder
     shall  terminate  and the  Company  shall  delete or destroy  all  Research
     Material  in the  Company's  possession,  custody  or control  and  provide
     written  confirmation  of such deletion or destruction to DB within 30 days
     of such  termination  or  expiration  and the  Company  shall  not use such
     Research  Material  for any  purpose.  The rights of each Party  under this
     Section  15(b) are  without  prejudice  to any other  rights of the Parties
     pursuant to this Agreement and shall not be affected by any dispute between
     the Parties with respect to this Agreement or any other matter.

(c)  For purposes of this Agreement,  "For Cause Termination  Event" means, with
     respect  to any Party,  (i) a  material  breach by such Party or any of its
     Affiliates of any covenant or warranty  contained in this Agreement,  which
     breach  shall not have been cured  within 90 days  following  delivery of a
     notice in writing by the  non-breaching  Party to the breaching  Party that
     specifies in detail the matter  constituting such breach and such action as
     may be reasonably  required to effect its cure; (ii) an Insolvency Event of
     the   non-terminating   Party;  and  (iii)  a  Change  in  Control  of  the
     non-terminating Party.

Section 16.  REMEDIES.

         Each of the Parties  acknowledges  and agrees  that the  benefits to be
         obtained by the other Party from this  Agreement  are unique,  and each
         Party acknowledges and agrees that the other Party shall be entitled to
         seek all  available  remedies  in the event of any  breach by it of any
         representation,  warranty  or  agreement  contained  herein,  including
         specific  performance and/or injunctive remedies.  In addition,  in the
         event that any Party  breaches  any  provision of this  Agreement,  the
         other Party may exercise all remedies available under this Agreement or
         applicable law.

Section 17.  MISCELLANEOUS.

(a)  Nothing  contained  herein shall make the Parties partners or render any of
     them liable to make  payments not  expressly  identified  or referred to in
     this Agreement.

(b)  The Parties hereby agree that this  Agreement,  and the respective  rights,
     duties and obligations of the parties  hereunder,  shall be governed by and
     construed  in  accordance  with the Laws of the State of New York,  without
     giving effect to principles of conflicts of Laws thereunder. To the fullest
     extent  permitted  by  applicable  Law,  each  of the  Parties  hereby  (i)
     irrevocably  consents  and  agrees  that any legal or  equitable  action or
     proceeding  arising under or in  connection  with this  Agreement  shall be
     brought  exclusively in the state and federal courts having jurisdiction in
     New York  County,  New York;  and (ii) by  execution  and  delivery of this
     Agreement,  irrevocably  submits to and  accepts,  with respect to any such
     action or  proceeding,  for itself and in  respect  of its  properties  and
     assets,  for purposes of this Agreement,  the jurisdiction of the aforesaid
     courts, and irrevocably waives any objection to venue in such courts.

                                       18
<PAGE>
(c)  Each of the Parties hereby  expressly  waives its rights to a jury trial of
     any claim or cause of action  based upon or arising out of this  Agreement.
     Each of the Parties  also  waives any bond or surety of security  upon such
     bond which might but for this waiver,  be required of any Party.  The scope
     of this waiver is intended to be all  encompassing  of any and all disputes
     that may be filed in any court and that  relate  to the  subject  matter of
     this  Agreement,  including,  without  limitation,  contract  claims,  tort
     claims,  breach of duty  claims,  and all other  common  law and  statutory
     claims.  The Parties  further  warrant and represent  that each of them has
     reviewed  this waiver  with its legal  counsel,  and that each  voluntarily
     waives its jury trial rights  following  consultation  with legal  counsel.
     This waiver is irrevocable and may only be modified by written amendment to
     this Agreement. In the event of litigation,  this Agreement may be filed as
     a written consent to a trial (without a jury) by the court.

(d)  If  any   provision  of  this   Agreement  is  held  invalid  or  otherwise
     unenforceable,  the enforceability of the remaining provisions shall not be
     impaired thereby.

(e)  The failure by any party to exercise  any right  provided  for herein shall
     not be deemed a waiver of any right hereunder.

(f)  Each  Party  agrees  to bear  its own  expenses  in  connection  with  this
     Agreement and the transactions contemplated hereby.

(g)  This Agreement sets forth the entire understanding of the Parties as to its
     subject matter and may not be modified except in a writing executed by both
     Parties.  In particular,  this  Agreement  supersedes the letter of intent,
     dated  March 27,  2000,  between NDB and  Deutsche  Bank  Americas  Holding
     Corporation,  with  respect  to the  subject  matter  hereof,  among  other
     matters.

(h)  No waiver by either Party of a breach of any provision of this Agreement by
     the other party shall operate or be construed as a waiver of any subsequent
     breach.

(i)  Except with respect to any  obligations to make payments when due,  neither
     Party shall be liable to the other Party hereto for any failure or delay in
     the performance of its obligations  under this Agreement to the extent such
     failure or delay is caused by a Force  Majeure  Event (as  defined  below),
     provided, however, that this Agreement may be terminated by the Party whose
     performance is not affected by the Force Majeure Event if the Force Majeure
     Event continues for a period of more than thirty (30) days. The Party whose
     performance  is affected  by a Force  Majeure  Event  shall use  reasonable
     efforts to: (i) avoid,  remove, or minimize the impact of such event on its
     performance and other obligations;  and (ii) recommence  performance of its
     obligations at the required level as soon as possible.  If either Party is,
     or anticipates it is likely to be, delayed or prevented from performing its
     obligations  in  connection  with a Force Majeure  Event,  such Party shall
     promptly  notify the other Party by telephone with  confirmation in writing
     within two (2) business  days after the  inception  of such delay.  As used
     herein,  the term "Force Majeure Event" refers to fire, flood,  earthquake,
     the elements,  other  casualties,  riot,  civil disorder,  rebellion,  war,
     revolution,  states of  belligerency  or acts of the  public  enemy,  labor
     disputes,  or any other cause  beyond the  reasonable  control of the Party
     whose performance is delayed or otherwise affected by such event.

                                       19
<PAGE>
(j)  This  Agreement  may be executed in  multiple  counterparts,  each of which
     shall  constitute an original but all of which shall constitute but one and
     the same  instrument.  One or more  counterparts  of this  Agreement may be
     delivered via telecopier,  with the intention that they shall have the same
     effect as an original counterpart hereof.
























                                       20
<PAGE>


                  IN WITNESS  WHEREOF,  the Parties have executed this agreement
on the date first set forth above.



                                        DEUTSCHE BANK AG
                                        By:  /s/ Thomas A. Curtis
                                             Name:  Thomas A. Curtis
                                             Title: Attorney-In-Fact




                                       NATIONAL DISCOUNT BROKERS CORPORATION
                                       By:  /s/ Dennis Marino
                                            Name:  Dennis Marino
                                            Title: Chairman














                                       21
<PAGE>

                                                                   EXHIBIT 10.28


                                                                  CONFORMED COPY
                         European Joint Venture ("EJV")

                           Summary of Principal Terms

         This  memorandum  dated as of June 15, 2000  between  Deutsche  Bank AG
("DB") and National  Discount  Brokers Group,  Inc. ("NDB") (each, a "Party" and
together, the "Parties") sets forth certain terms, conditions and understandings
upon which the Parties  intend to use their good faith  efforts to negotiate and
enter into definitive agreements and other related documents as set forth below.
Such  terms,  conditions  and  understandings  are not  exhaustive  and shall be
supplemented  in the definitive  agreements by such other terms,  conditions and
understandings as are customary in joint venture and related transactions of the
type contemplated and as shall be mutually agreed by the Parties. Terms used but
not defined  herein have the  meanings  assigned  in the  Stockholder  Agreement
between DB and NDB, dated as of the date hereof.

Object of the EJV:  Except as  indicated  below,  the EJV will be the  exclusive
     vehicle whereby DB's Global  Corporates and Institutions  Division as it is
     currently  constituted  or may  be  expanded  and  any  successor  division
     (together,  "GCI"), on the one hand, and NDB and its controlled Affiliates,
     on the other hand, provide On-Line Discount Brokerage for Equity Securities
     to  Retail  Investors  within  the  Territory.   Each  Party  may,  in  its
     discretion, additionally offer for distribution through the EJV (i) On-Line
     Discount  Brokerage  for  Other  Products;   and  (ii)  On-Line  Incidental
     Services,  in each  case  which  the  Party  currently  offers  to,  or may
     subsequently develop for, Retail Investors within the Territory, subject to
     regulatory  requirements,  prior  commitments to third parties and internal
     strategic  and resource  allocation  priorities,  and on such terms as such
     Party and the EJV may mutually agree.

     NDB acknowledges that DB currently offers and may in the future offer On-
     Line Discount Brokerage for Equity Securities to  Retail  Investors  in the
     Territory,  outside of GCI,  including without limitation through Brokerage
     24, DBNet 24 and DB's branches in the Territory (collectively, the "Non-GCI
     On-Line  Businesses").  DB may in the future  centralize  ownership  of the
     various Non-GCI On-Line  Businesses in one or more holding  companies,  but
     shall have no  obligation  to do so. If DB creates one or more such holding
     companies,  it may,  but  shall  not be  obligated  to,  offer  the EJV the
     opportunity  to acquire an equity  interest in one or more of such  holding
     companies in exchange for the contribution of the EJV's business and assets
     to such holding  company.  The amount of such equity interest will be based
     on relative fair market values at the time of contribution.

On-Line Discount Brokerage:  The execution of securities trades for customers by
     an  entity  that (i) does  not  employ  account  executives  or  registered
     representatives  who (A) are assigned to, and  responsible  for maintaining
     relationships  with,   customers  for  the  purpose  of  providing  advised
     brokerage  and trade  execution  services  (whether  provided  in person or
     electronically   and  whether  general  or   trade-specific)   or  (B)  are
     compensated  with a  portion  of  the  commissions  earned  for  any  trade
     execution services performed for such customers,  (ii) offers its customers
     the ability to execute  securities  trades  directly  through  computerized
     on-line or other  electronic  or  wireless  execution  systems,  including,
     without limitation,  the Internet and IVR, without the direct assistance or
     recommendation of any account executive or registered  representative,  and
     (iii) generally charges its customers a lower cost for its services than is
     customarily  charged in the  relevant  market  for  brokerage  services  by
     brokerage firms or banks offering traditional advised brokerage taking into
     account commission charges, account investment advisory fees and such other
     charges  and  fees  and  minimum  balance  requirements.  On-Line  Discount
     Brokerage does not include the provision of On-Line Incidental Services.




<PAGE>

On-Line  Incidental  Services:  On-line  services,  other than On-Line  Discount
     Brokerage, including without limitation the preparation and distribution of
     research  or  other  commentary,   the  provision  of  private  banking  or
     commercial banking services, margin lending,  custody,  investment advisory
     management or supervisory  services,  including  through financial or other
     models  developed  internally  or by third  parties,  and customer  message
     boards or  discussion  forums,  in each case whether with respect to Equity
     Securities or Other Products.

Territory: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland,
     Ireland, Italy, Liechtenstein, Luxembourg, Monaco, the Netherlands, Norway,
     Portugal,   Spain,   Sweden,   Switzerland  and  the  United  Kingdom  (the
     "Territory").


Equity Securities:  Capital stock of European and U.S. issuers, including shares
     of exchange-listed, closed end mutual funds holding such capital stock, but
     not including  options on or warrants to purchase equity securities of such
     issuers  or  securities   exchangeable   for  or  convertible  into  equity
     securities of such issuers.

OtherProducts: All securities and instruments,  such as options, warrants, fixed
     income securities,  convertibles,  foreign exchange,  commodity options and
     commodity futures, and other derivatives, other than Equity Securities.

Retail Investors:  Natural  persons,  including  without  limitation any natural
     persons who are the primary  beneficiaries  of  services  organized  by any
     institution primarily for their benefit (e.g, NDB's Netlink program).

                                       2
<PAGE>

Initial Business  Plan:  Prior to the closing of the EJV, the Parties will adopt
     an Initial Business Plan (the "Initial Business Plan") describing the EJV's
     projected  funding needs and operations  during the period through December
     31, 2004.

LegalStructure:  To be determined in  consultation  with tax and other  counsel,
     but the structure  shall, to the extent  possible,  permit treatment of the
     EJV as a partnership for U.S. tax purposes.

Ownership:  The EJV will be conducted  through a separate  legal entity in which
     voting control and economic interests are both owned directly or indirectly
     75% by DB and 25% by NDB or a direct or indirect wholly-owned subsidiary of
     NDB.

The  Parties will have preemptive  rights in respect of all issuances by the EJV
     of stock  or other  capital  securities  after  the  initial  issuance,  in
     proportion to their then existing ownership interests.

Tax  Matters:  To be determined in consultation with tax counsel;  provided that
     the entity  shall to the extent  possible be treated as a  partnership  for
     U.S. tax purposes.

Global Strategic  Oversight  Committee:  DB and NDB will form a joint  committee
     (the "Global  Strategic  Oversight  Committee") to consider and discuss the
     overall  strategic  direction and coordination of the EJV, the contemplated
     worldwide  joint  venture  and any  other  ventures  that DB and NDB  might
     undertake from time to time. The Global Strategic  Oversight Committee will
     have no formal constitution or formal authority to direct the operations of
     the EJV or any other venture of the Parties.  The  membership of the Global
     Strategic  Oversight Committee will be shared equally by representatives of
     DB and NDB.

Boardof Directors:  The overall management and control of the EJV will be vested
     in its board of directors (the  "Board").  The decisions of the Board shall
     be binding on the EJV.

Membership: 8 members, each member having one vote.

Appointment:  DB appoints  six members;  NDB  appoints two members.  Appointment
     initiated by written notice from one Party to the other.

Removal: Each Party may remove or change its representatives on the Board at any
     time and from time to time by written notice.

Voting Requirements:    Board  decisions  will  be  by  majority  vote  of  the
     participating directors,  except as provided under "Veto Rights" below. The
     Board may also act in writing as  permitted  by  applicable  law so long as
     both parties have an opportunity to consent.

                                       3
<PAGE>

Veto Rights:  Board resolutions relating to the following will require, in order
     to be adopted,  the affirmative vote of at least one representative of each
     Party:  (i) any amendment to the basic joint venture and other  constituent
     documents  or the  Initial  Business  Plan that  would  adversely  affect a
     Party's rights or  obligations  (except to the extent any such amendment is
     necessary to effect a capital  increase as provided under " Initial Capital
     Contributions"  or  "Additional  Capital  Contributions"  below) ; (ii) the
     entry into or material  amendment or termination of any transaction  with a
     Party or its  affiliate  that is not in the  ordinary  course  of the EJV's
     business,  at arm's length and on commercially  reasonable terms; (iii) the
     issuance  of  any  equity  securities,  or  of  rights  to  acquire  equity
     securities, of the EJV to a third party; (iv) a change in the tax status of
     the EJV that is adverse to a Party;  (v) any  proposal by the EJV to engage
     in any line of business  other than On-Line  Discount  Brokerage or On-Line
     Incidental  Services;  and (vi) any repurchase or redemption of any capital
     interest of the EJV other than on a pro rata basis.

Quorum: Majority of members of the entire Board, who may be present in person or
     over an open phone line but including at least one  representative  of each
     Party,  except where a Party has missed more than two consecutive  proposed
     meetings immediately prior thereto.

Special Meetings:  Chairman or any two directors  can call a special  meeting by
     not less than five business days' notice delivered to all directors.

Appointment  of  Chairman:  Chairman  nominated  by the EJV  Board  members  and
     selection approved by a majority of the EJV Board.

Powers and Duties of the Chairman:  The Chairman will consult regularly with the
     Global Strategic  Oversight Committee and monitor the activities of the CEO
     to ensure the  business  of the EJV is  conducted  in  accordance  with the
     policies set by the Board.

Appointment  and  Removal  of CEO:  CEO to be  nominated  by DB and  subject  to
     confirmation or removal by the affirmative vote of a majority of the Board.

Powers and  Duties  of the CEO:  The  powers  and  duties  of the CEO will be as
     determined by the Board from time to time.

Initial Capital Contributions:  DB and NDB will commit an initial amount of cash
     to be  agreed  between  the  Parties,  pro rata in  accordance  with  their
     respective  ownership  interests  in the  EJV  to be  used  as the  initial
     regulatory and working capital by the EJV.

                                       4
<PAGE>

Additional Capital Contributions: In addition, the Parties shall make additional
     capital and other  contributions to the EJV in the aggregate amounts and at
     such stages as provided in the Initial  Business Plan and to be made by the
     Parties pro rata in accordance with their respective ownership interests in
     the EJV.

     Except  as  provided  in the  preceding  paragraph,  a Party  shall  not be
     obligated to provide additional funding to the EJV. If the Board of the EJV
     concludes  that  additional  equity  financing is  reasonably  advisable or
     necessary  for the EJV's  growth  and  operations  and NDB does not wish to
     contribute its pro rata share of such equity  financing,  DB shall have the
     right, but no obligation,  to provide all (or a disproportionate  share) of
     such equity  financing in the form of common stock,  preferred stock and/or
     other  securities that provide DB with an appropriate and customary  equity
     return for the investment in question, all as requested by the Board of the
     EJV.  If the EJV's  Board  concludes  that  common  stock would be the most
     appropriate  form of such  additional  equity  financing  and NDB  does not
     contribute  its pro rata  share of such  financing,  additional  shares  of
     common stock will be issued to DB and NDB's equity interest will be diluted
     on the basis of the EJV's  Fair  Value  (as  defined  below) at the time of
     issuance of such  additional  shares.  NDB's  representatives  on the Board
     shall have no veto right  regarding any amendment of the EJV's  constituent
     documents  needed to issue such common stock,  preferred stock and/or other
     securities to DB as provided  above.

     Neither NDB, DB nor their  respective  Affiliates shall have any obligation
     to provide any credit or other financing to the EJV, and any such extension
     of credit or other  financing  shall be in each Party's sole discretion and
     at arm's length.

Affiliate  Transactions:  DB and NDB may make available to the EJV such products
     and  services  as the  EJV  reasonably  requires  and DB and  NDB  are in a
     position to supply,  all on such terms as may be mutually  agreed.  The EJV
     will  deal  with DB and NDB on an  arm's-length  basis.  All  products  and
     services  to be  supplied  by  either  Party  will  be  documented  through
     appropriate written service or other agreements.

Services Agreement:  Initially and until such date as the Board  determines,  DB
     will  provide   administrative  support  services  (such  as  legal,  human
     resources,  tax, payroll,  controlling and compliance  services) to the EJV
     pursuant  to  an   administrative   services   agreement   (the   "Services
     Agreement"),  in  consideration  for which the EJV will pay to DB a service
     fee to be negotiated on an arm's-length basis.

DB   Research:  DB will enter  into a  non-exclusive  agreement  with the EJV to
     provide the EJV, on terms to be  determined,  with research  prepared by DB
     for distribution to Retail Investors in the Territory.

                                       5
<PAGE>

Intellectual  Property:  Each of the  Parties  owns or has rights to use certain
     confidential and proprietary know-how and trade secrets, computer software,
     source code, designs, algorithms, specifications,  formulas, plans, models,
     data,  technical  information,  processes,  practices,  systems and similar
     intellectual  and proprietary  property  (collectively,  the  "Intellectual
     Property")  that will be required or useful for the  operation  of the EJV.
     With respect to any Intellectual Property owned by a Party, such Party will
     enter into a non-exclusive,  non-transferable  license with the EJV, for so
     long as the EJV continues with such Party as an  equityholder,  to use such
     Intellectual  Property  for  the  purpose  of  providing  On-Line  Discount
     Brokerage and On-Line Incidental Services in the Territory. With respect to
     any  Intellectual  Property  licensed by a Party from third  parties,  such
     Party will use commercially reasonable efforts to negotiate new licenses on
     commercially  reasonable  terms at the expense of the EJV to permit the EJV
     to use such  Intellectual  Property.  Each Party will make available to the
     EJV a reasonable  number of  qualified  personnel at the expense of the EJV
     for a  reasonable  period of time to effect the  transfer  of such  Party's
     Intellectual Property, all on terms to be mutually agreed between the Party
     concerned and the EJV.

     Upon  termination of the EJV, the above licenses of  Intellectual  Property
     will automatically continue as perpetual,  non-exclusive,  non-transferable
     licenses to use such  Intellectual  Property  for the purpose of  providing
     On-Line  Discount  Brokerage  and  On-Line   Incidental   Services  in  the
     Territory.

Transfer Restrictions and Right of First Refusal: Until the first anniversary of
     the execution of a definitive  agreement relating to the EJV, no Party will
     have the right to transfer any ownership interest in the EJV, other than to
     a wholly-owned  affiliate of such Party, without the prior written approval
     of the other Party. Thereafter,  all proposed transfers by any Party, other
     than to a  wholly-owned  affiliate,  will be  subject  to a right  of first
     refusal on the same terms by the other Party.

Transferee's Rights and Obligations:  A third party that acquires an interest in
     the EJV in a permitted  transfer shall assume the  obligations  and, unless
     otherwise agreed by the transferee,  acquire the rights of the transferring
     party with respect to the interest that it acquires.

Tag  Along  Rights:  Upon any proposed  sale by DB of any of its interest in the
     EJV as to which NDB does not elect to exercise its right of first  refusal,
     NDB  shall be  entitled  to sell a pro rata  share of its  interest  to the
     purchaser on the same terms.

                                       6
<PAGE>

Term and Termination: The EJV will continue until terminated as described below.

     The EJV may be  terminated,  at the option of either  Party,  upon  written
     notice  to the  other  Party  given  (i)  at  any  time  after  the  second
     anniversary of the execution of a definitive agreement relating to the EJV;
     (ii) upon a Change in Control of the other  Party;  (iii) upon the material
     failure of the other Party to perform or observe any  covenant or agreement
     relating to the EJV,  which failure is  continuing  for a period of 90 days
     after  notice  thereof  has  been  given  to the  defaulting  Party  by the
     terminating  Party;  (iv) upon an Insolvency  Event (as defined in the U.S.
     Underwriting Agreement) of the other Party; (v) upon the termination of any
     of the  Worldwide  Joint  Venture,  the U.S.  Research  Venture or the U.S.
     Underwriting  Venture,  or (vi)  except  for a  contribution  to a  holding
     company for Non-GCI On-Line Businesses as contemplated under "Object of the
     EJV" above , any merger,  consolidation,  or sale of substantially  all the
     assets of the EJV.  Notice of  termination  shall become  effective 30 days
     following the date of such notice.  Any  termination of the EJV pursuant to
     clause (ii), (iii) or (iv) shall constitute termination "for cause".

     If the EJV is  terminated, then DB will have the  right to  purchase  NDB's
     interest in the EJV,  and NDB will have the right to require DB to purchase
     NDB's  interest in the EJV, in each case for a purchase  price equal to the
     greater of (i) NDB's  proportionate share of the Fair Value of the business
     of the EJV as a going concern and (ii) NDB's cash capital  contribution  to
     the equity of the EJV; provided, however, that clause (ii) shall apply only
     if (1) such termination occurs on or prior to the second anniversary of the
     execution of the definitive  agreement regarding the EJV and (2) either (a)
     DB  terminates  the EJV  pursuant  to clauses  (ii) or (v) above or (b) NDB
     terminates the EJV pursuant clause (iii) above.

     "Fair Value" means, with respect to the business of the EJV (i) a valuation
     made by the unanimous determination of the Board;  or  (ii)  failing  such
     determination  of the Board within the 30-day  period  following  notice of
     exercise of the above rights by DB or NDB, the  valuation  determined  by a
     leading  international  investment  bank  jointly  selected  by the Parties
     within 15 days of the end of such 30-day period (or,  failing  agreement on
     an  investment  bank,  selected by the ICC), as follows:  immediately  upon
     designation  of  such  investment   bank,  each  Party  shall  notify  such
     investment  bank and each other in writing of its  estimate for Fair Value.
     Such  investment bank shall be instructed to select one of the two proposed
     estimates  of  Fair  Value  (and  no  other  amount)   within  30  days  of
     appointment.  "Fair  Value"  shall  be the  estimate  so  selected  by such
     investment bank and shall be final and binding on the Parties. The fees and
     expenses of the  investment  bank shall be paid by the Party whose estimate
     was not selected.

                                       7

<PAGE>


Non-Competition:  Except as expressly agreed by the Parties,  DB agrees that GCI
     will not, and NDB agrees that it and its  subsidiaries  will not,  offer or
     seek to offer any  On-Line  Discount  Brokerage  for Equity  Securities  to
     Retail Investors within the Territory, other than through the EJV; provided
     that  this  restriction  shall not apply to (i)  services  provided  in the
     Territory  by NDB to  employees  of  U.S.-based  companies or groups in the
     context of programs for the exercise of employee  stock options or employee
     stock purchase plans, (ii) 'private label' or co-branded  services provided
     by NDB to third parties whose  principal  business is outside the Territory
     and whose business in the Territory is merely  incidental to their business
     outside the Territory,  (iii) any Non-GCI On-Line  Business,  (iv) accounts
     opened by NDB in the  United  States  for US  citizens  or  residents,  (v)
     accounts  opened  by NDB  for  members  of the US  Armed  Forces  or  their
     dependents  stationed in the Territory,  pursuant to referrals by Penn Fed,
     or (vi) accounts of Retail Investors located in the Territory,  that are on
     the books of NDB on the date of the  definitive EJV  agreements,,  provided
     that NDB makes a  reasonable  effort to transfer  these  accounts in clause
     (vi) once the EJV is operational.

Confidentiality: No persons other than the Parties and their subsidiaries, which
     are  agreed  to  by  the  Parties,   may  have  access  to  proprietary  or
     confidential  information  with  respect  to the  EJV,  including,  without
     limitation,  customer  data;  market and customer  research;  segmentation,
     attitude  or  usage   information;   strategies   and  specific  plans  for
     positioning,  advertising,  public relations,  promotions, pricing, product
     design,  Website  design and  development,  including  content and trading,
     customer service model, training recruitment and compensation programs.

Financial Statements: The EJV will prepare and distribute to the Parties monthly
     financial statements of the EJV.

Accounting:  Separate books of account maintained at the EJV's head office using
     U.S. GAAP.

Inspection of  Records:  The records and reports of the EJV will also be kept in
     the  English  language  and  are  open  to  inspection  by a  Party  or its
     designated  representative  during business hours upon  reasonable  notice,
     including tax returns and financial statements.

                                       8
<PAGE>

Audit: Annual audit will be performed by a firm of independent  certified public
     accountants to be appointed by the Board.

Dispute Resolution:  It is the  objective of the Parties to use all  reasonable
     efforts to resolve disputes  amicably through  negotiation.  This objective
     will not limit any Party from seeking judicial redress as provided below.

     All disputes that are not resolved by negotiation  shall be resolved by the
     federal or state courts  located in the New York  metropolitan  area in the
     state of New  York,  to  whose  exclusive  jurisdiction  the  Parties  will
     irrevocably submit.

Governing Law: To be determined  with respect to the EJV. The  provisions  under
     the  heading  "Exclusivity"  in this  memorandum  shall be  governed by and
     construed in accordance with the law of New York.

Exclusivity:  During  the period  described  under the  heading  "Effect of Term
     Sheet" below, neither DB nor NDB nor any of their respective  subsidiaries,
     affiliates or representatives will, directly or indirectly,  (i) solicit or
     encourage any inquiries, discussions or proposals regarding, (ii) continue,
     propose or enter into  negotiations or discussions with respect to or (iii)
     enter  into  any  agreement  or  other  understanding  providing  for,  any
     transaction  involving a joint venture or alliance with any third party for
     the provision of On-Line Discount Brokerage for Equity Securities to Retail
     Investors  within the Territory;  nor shall any of such persons or entities
     provide any  information  to any other  person or entity for the purpose of
     making, evaluating, or determining whether to make or pursue, any inquiries
     or proposals  with  respect to, any such  transaction;  provided  that this
     restriction  shall not apply to the extent  that a Party is not  subject to
     the  Non-Competition  clause; and provided further that, in the case of DB,
     the foregoing restrictions shall apply only to activities conducted by GCI.

Effect of Term Sheet:  The Parties  agree that this  memorandum  does not create
     binding rights or obligations,  other than the obligation of the Parties to
     negotiate  in good faith  definitive  agreements  with  respect to the EJV,
     except that the provisions under the heading "Exclusivity" shall be binding
     upon  each  of the  Parties  and  their  respective  Affiliates,  from  and
     including  the date hereof to but not including the earlier of (i) the date
     on which the Parties  execute the definitive EJV  agreements,  and (ii) the
     first anniversary of the closing of the Securities Purchase Agreement.

                                      * * *







                                       9
<PAGE>




NATIONAL DISCOUNT BROKERS GROUP, INC.                  DEUTSCHE BANK AG



By:  /s/ Arthur Kontos                                 By:  /s/ Thomas A. Curtis
     -----------------                                      --------------------
Name:  Arthur Kontos                                   Name:  Thomas A. Curtis
Title: President and Chief Executive Officer           Title: Attorney-in-Fact





                                       10

<PAGE>

                                                                   EXHIBIT 10.29

                                                                  CONFORMED COPY


                         Worldwide Joint Venture ("WJV")

                           Summary of Principal Terms

         This  memorandum  dated as of June 15, 2000  between  Deutsche  Bank AG
("DB") and National  Discount  Brokers Group,  Inc. ("NDB") (each, a "Party" and
together, the "Parties") sets forth certain terms, conditions and understandings
upon which the Parties  intend to use their good faith  efforts to negotiate and
enter into definitive agreements and other related documents as set forth below.
Such  terms,  conditions  and  understandings  are not  exhaustive  and shall be
supplemented  in the definitive  agreements by such other terms,  conditions and
understandings as are customary in joint venture and related transactions of the
type contemplated and as shall be mutually agreed by the Parties. Terms used but
not defined  herein have the  meanings  assigned  in the  Stockholder  Agreement
between DB and NDB, dated as of the date hereof.



Object of the WJV: DB's Global  Corporates  and  Institutions  Division as it is
     currently constituted and any successor division (together,  "GCI"), on the
     one hand, and NDB and its controlled  Affiliates,  on the other hand,  will
     form the WJV to provide or  participate in On-Line  Discount  Brokerage and
     On-Line  Incidental  Services for Retail Investors in the Rest of World, as
     provided herein. The WJV may engage or participate in such On-Line Discount
     Brokerage  and  On-Line  Incidental  Services  either  directly  or through
     operating companies in various countries.

     Each of NDB and GCI will offer the WJV an opportunity to invest in any
     On-Line Brokerage for Equity Securities for Retail Investors in the Rest of
     World that it may from time to time create or control,  subject to
     commitments to third parties,  overall financing needs,  regulatory
     requirements and other considerations,  all on such terms as the WJV and
     the Party  concerned  may mutually agree.

Definitions

On-Line Discount Brokerage:  The execution of securities trades for customers by
     an  entity  that (i) does  not  employ  account  executives  or  registered
     representatives  who (A) are assigned to, and  responsible  for maintaining
     relationships  with,   customers  for  the  purpose  of  providing  advised
     brokerage  and trade  execution  services  (whether  provided  in person or
     electronically   and  whether  general  or   trade-specific)   or  (B)  are
     compensated  with a  portion  of  the  commissions  earned  for  any  trade
     execution services performed for such customers,  (ii) offers its customers
     the ability to execute  securities  trades  directly  through  computerized
     on-line or other  electronic  or  wireless  execution  systems,  including,
     without limitation,  the Internet and IVR, without the direct assistance or
     recommendation  of any account executive or registered  representative  and
     (iii) generally charges its customers a lower cost for its services than is
     customarily  charged in the relevant market for brokerage  services by full
     service  advised  brokerage  firms or banks  offering full service  advised
     brokerage  taking  into  account  commission  charges,  account  investment
     advisory  fees  and  such  other  charges  and  fees  and  minimum  balance
     requirements.  On-Line Discount Brokerage does not include the provision of
     On-Line Incidental Services.


<PAGE>

On-Line  Incidental  Services:  On-line  services,  other than On-Line  Discount
     Brokerage, including without limitation the preparation and distribution of
     research  or  other  commentary,   the  provision  of  private  banking  or
     commercial banking services, margin lending,  custody,  investment advisory
     management or supervisory  services,  including  through financial or other
     models  developed  internally  or by third  parties,  and customer  message
     boards or  discussion  forums,  in each case whether with respect to Equity
     Securities or Other Products.

Territory: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland,
     Ireland, Italy, Liechtenstein, Luxembourg, Monaco, the Netherlands, Norway,
     Portugal,   Spain,   Sweden,   Switzerland  and  the  United  Kingdom  (the
     "Territory").

Rest of World:  All  countries  of the world  other  than the  United  States of
     America,  its territories and possessions and the countries  located in the
     Territory.

Equity Securities:  Capital stock,  including shares of exchange-listed,  closed
     end mutual funds holding  capital  stock,  but not including  options on or
     warrants to purchase equity  securities or securities  exchangeable  for or
     convertible into equity securities.

OtherProducts: All securities and instruments,  such as options, warrants, fixed
     income securities,  convertibles,  foreign exchange,  commodity options and
     commodity futures, and other derivatives, other than Equity Securities.

Retail Investors:  Natural  persons,  excluding any natural  persons who are the
     primary  beneficiaries of services organized by any US institution with NDB
     primarily for their benefit (e.g., Netlink or a similar program).

Global Strategic  Oversight  Committee:  DB and NDB will form a joint  committee
     (the "Global  Strategic  Oversight  Committee") to consider and discuss the
     overall  strategic  direction and coordination of the WJV, the contemplated
     European  joint  venture  and any  other  ventures  that  DB and NDB  might
     undertake from time to time. The Global Strategic  Oversight Committee will
     have no formal constitution or formal authority to direct the operations of
     the WJV or any other venture of the Parties.  The  membership of the Global
     Strategic  Oversight Committee will be shared equally by representatives of
     DB and NDB.
                                       2
<PAGE>

Initial Business  Plan:  Prior to the closing of the WJV, the Parties will adopt
     an Initial Business Plan (the "Initial Business Plan") describing the WJV's
     projected  funding  needs and  operations  during an  initial  period to be
     agreed by the Parties.

WJV  Coordinating  Company: The activities of the WJV will be coordinated by the
     WJV Coordinating  Company,  whose legal form and place of organization will
     be  determined  by  the  Parties  based  on  tax,   management   and  other
     considerations;  provided that the structure shall, to the extent possible,
     permit treatment of the WJV Coordinating  Company as a partnership for U.S.
     tax purposes.

Powers  and   Responsibilitie:   The  WJV  Coordinating   Company's  powers  and
     responsibilities will consist primarily of the following:

                                            (1) coordination and planning of the
                                            WJV's   participation   in   On-Line
                                            Discount   Brokerage   and   On-Line
                                            Incidental  Services  in the Rest of
                                            World;
                                            (2) determination of the Rest
                                            of World  countries in which the WJV
                                            will  operate  or  participate   and
                                            those  in  which  NDB  and  GCI  may
                                            operate  independently;
                                            (3)  joint development,  and direct
                                            or indirect holding, of intellectual
                                            property rights for the WJV;  and
                                            (4) holding equity and other
                                            investments in one or more WJV
                                            Operating  Companies (as defined
                                            below).

Ownership: Initially, each of NDB and GCI will hold 50% of the equity in the WJV
     Coordinating Company.

Capital Contributions:

Initial Capital Contributions: DB and NDB will commit an initial amount of cash
     to be  agreed  between  the  Parties,  pro rata in  accordance  with  their
     respective  ownership  interests in the WJV, to be used as initial  working
     capital by the WJV.

Additional Capital Contributions: In addition, the Parties shall make additional
     capital and other  contributions to the WJV in the aggregate amounts and at
     such stages as provided in the Initial Business Plan, and to be made by the
     Parties pro rata in accordance with their respective ownership interests in
     the WJV.
                                       3
<PAGE>

     Except as provided in the preceding paragraph, a Party shall not be
     obligated to provide additional funding to the WJV Coordinating Company.

     Neither NDB, DB, nor their respective affiliates shall have any obligation
     to provide any credit or other financing to the WJV Coordinating Company or
     any WJV  Operating  Company,  and any such  extension  of  credit  or other
     financing shall be in each party's sole discretion and at arm's length.

     The Parties will have preemptive rights in respect of all issuances by the
     WJV Coordinating Company of stock or other capital securities after the
     initial issuance, in proportion to their then existing ownership interests.

Management:  The WJV  Coordinating  Company  shall  be  managed  by a  board  of
     directors (or comparable body for the legal entity  concerned) on which NDB
     and GCI will have equal  representation.  A quorum for  meetings  will be a
     majority of the  members of the entire  board (who may be present in person
     or over an open phone line),  and board  decisions will be by majority vote
     of the members  participating  in a meeting (which majority must include at
     least one member nominated by each of NDB and GCI).

Planning  and  Right  to  Invest:  If  either  NDB or GCI so  requests,  the WJV
     Coordinating  Company will consider the Rest of World countries in which it
     expects to organize the provision of On-Line Discount Brokerage.  If either
     NDB or GCI wishes to organize the provision of On-Line  Discount  Brokerage
     in a particular country that is not already being served by a WJV Operating
     Company,  the Party concerned shall so notify the WJV Coordinating  Company
     indicating  the  country  and the  proposed  terms  on which  such  On-Line
     Discount Brokerage would be organized.

Affirmative  Decision: If the WJV Coordinating  Company  decides to organize the
     provision of On-Line Discount Brokerage in a particular country or group of
     countries,  it shall proceed to facilitate such  organization and make such
     equity investment(s),  if any, in the WJV Operating Company or Companies as
     its board (or equivalent body) shall determine.  Depending on tax and other
     considerations,  NDB and GCI may  elect  to make  such  equity  investments
     either  through  the  WJV  Coordinating  Company  or  directly  in the  WJV
     Operating Company(ies) concerned.

                                       4
<PAGE>

    If any WJV Operating Company(ies) reasonably require more capital investment
     than the WJV  Coordinating  Company (or NDB and GCI  together)  are able or
     willing  to  provide  on an  equal  basis,  NDB,  GCI or  their  respective
     affiliates may  unilaterally  provide such  additional  capital  investment
     outside the WJV  Coordinating  Company,  on customary and reasonable  terms
     (including for the issuance of common stock); provided that each of NDB and
     GCI shall always have the right, but not the obligation,  to invest equally
     and on equal terms in any WJV Operating Company.

No Affirmative  Decision:  If the WJV  Coordinating  Company  is unable  for a
     period  of two  months to reach a  decision  on  whether  to  organize  the
     provision of an On-Line Discount Brokerage in a particular country or group
     of countries or on a material aspect of such  organization  (whether before
     or after activities  regarding any such organization  have commenced),  the
     party  proposing  such  organization  (NDB or GCI,  as the case may be) may
     proceed  unilaterally to organize (or to complete the  organization of) the
     On-Line Discount Brokerage concerned substantially on the terms proposed to
     the WJV Coordinating Company,  without using the facilities or resources of
     the WJV, except that the On-Line Discount Brokerage concerned will have the
     right  to  obtain  a   non-exclusive,   non-transferable   license  of  WJV
     Intellectual Property from the WJV Coordinating Company on arm's length and
     commercially reasonable royalty and other terms.

     If the WJV Coordinating Company and such On-Line Discount Brokerage are
     unable to agree on arm's length and commercially reasonable  royalty and
     other terms for a license of WJV Intellectual Property, such royalty and
     other terms will be finally  determined by "baseball  arbitration"  (as
     described below under "Fair Value").

WJV  Operating  Companies:  Operations  of the WJV in  individual  countries  or
     groups of countries  will be conducted  through  individual  WJV  Operating
     Companies in the particular countries or groups of countries concerned. The
     legal form of such WJV  Operating  Companies  will  depend on tax and other
     considerations in the countries concerned.

Ownership:  Depending on its needs for capital,  available  resources of the WJV
     Coordinating  Company and the Parties,  and  competitive  conditions in the
     market concerned,  ownership interests in each WJV Operating Company may be
     held by the WJV  Coordinating  Company,  the  Parties  or their  affiliates
     independently of the WJV Coordinating Company, or third party investors.

Capital Contributions:  As needed, based on regulatory requirements and each WJV
     Operating Company's business plan.

     The WJV Coordinating Company will  always  have  the  right,  but  not  the
     obligation, to invest in the equity of a WJV Operating Company, and each of
     NDB and GCI shall always have the right, but not the obligation,  to invest
     equally and on equal terms in any WJV Operating Company.

                                       5
<PAGE>

Management:  Management  rights and  representation  on boards of  directors  or
     equivalent  bodies will be in proportion to capital  investment,  except as
     may otherwise be agreed between the Parties or with a third party investor.

Affiliate  Transactions:  DB and NDB may make available to the WJV such products
     and  services  as the  WJV  reasonably  requires  and DB and  NDB  are in a
     position to supply,  all on such terms as may be mutually  agreed.  The WJV
     will  deal  with DB and NDB on an  arm's-length  basis.  All  products  and
     services  to be  supplied  by  either  Party  will  be  documented  through
     appropriate written service or other agreements.

DB Research:   DB will enter  into a  non-exclusive  agreement  with the WJV to
     provide the WJV, on terms to be  determined,  with research  prepared by DB
     for distribution to Retail Investors in the Rest of World.

Intellectual Property:

Intellectual  Property:  Each of the  Parties  owns or has rights to use certain
     confidential and proprietary know-how and trade secrets, computer software,
     source code, designs, algorithms, specifications,  formulas, plans, models,
     data,  technical  information,  processes,  practices,  systems and similar
     intellectual  and proprietary  property  (collectively,  the " Intellectual
     Property")  that will be required or useful for the  operation  of the WJV.
     With respect to any Intellectual Property owned by a Party, such Party will
     enter  into  a  non-exclusive,   non-transferable   license  with  the  WJV
     Coordinating   Company  or  its   wholly-owned   subsidiary   to  use  such
     Intellectual  Property  for  the  purpose  of  providing  On-Line  Discount
     Brokerage  or On-Line  Incidental  Services in the Rest of World and with a
     right to sub-license such Intellectual  Property to WJV Operating Companies
     and to other  Affiliates of the Parties as provided above.  With respect to
     any  Intellectual  Property  licensed by a Party from third  parties,  such
     Party will use commercially reasonable efforts to negotiate new licenses on
     commercially  reasonable  terms at the expense of the WJV to permit the WJV
     to use such  Intellectual  Property.  Each Party will make available to the
     WJV a reasonable  number of  qualified  personnel at the expense of the WJV
     for a  reasonable  period of time to effect the  transfer  of such  Party's
     Intellectual  Property  to the  WJV,  all on terms  to be  mutually  agreed
     between the Party concerned and the WJV.

     Upon termination of the WJV, the above licenses of Intellectual Property
     will automatically continue as perpetual,  non-exclusive,  non-transferable
     licenses of the Intellectual  Property for the purpose of providing On Line
     Discount  Brokerage  and  On-Line  Incidental  Services  in the Rest of the
     World.
                                       6
<PAGE>

WJV  Intellectual  Property:  The WJV Coordinating  Company shall be responsible
     for  developing  new   intellectual   property  and/or  adapting   existing
     Intellectual  Property or other  intellectual  property for use in the WJV,
     all as provided in the Initial  Business  Plan or  otherwise  agreed by the
     Parties.

Transfer Restrictions and Right of First Refusal: Until the first anniversary of
     the execution of a definitive  agreement relating to the WJV, no Party will
     have the right to transfer any ownership  interest in the WJV  Coordinating
     Company,  other than to a wholly-owned affiliate of such Party, without the
     prior  written  approval  of the  other  Party.  Thereafter,  all  proposed
     transfers by any Party,  other than to a  wholly-owned  affiliate,  will be
     subject to a right of first refusal on the same terms by the other Party.



Transferee's Rights and Obligations:  A third party that acquires an interest in
     the WJV  Coordinating  Company in a  permitted  transfer  shall  assume the
     obligations  and, unless  otherwise  agreed by the transferee,  acquire the
     rights of the  transferring  party  with  respect to the  interest  that it
     acquires.

Term and Termination: The WJV will continue until terminated as described below.

     The WJV may be terminated, at the option of either Party, upon written
     notice to the other Party given (i) at any time after the second
     anniversary of the execution of a definitive agreement relating to the WJV;
     (ii) upon a Change in Control of the other Party;  (iii) upon the  material
     failure of  the other Party to perform or observe any covenant or agreement
     relating to the WJV,  which failure is continuing  for a period of 90 days
     after notice thereof has been given to the defaulting Party by the
     terminating  Party; (iv)  upon the  Insolvency  Event  (as  defined  in the
     U.S. Underwriting Agreement) of the other Party; or (v) upon the
     termination of any of the European Joint Venture, the U.S. Research Venture
     or the U.S. Underwriting Venture. Notice of termination shall become
     effective 30 days following the date of such notice.  Any  termination  of
     the WJV pursuant to clause (ii), (iii) or (iv) shall constitute termination
     "for cause".

     If the WJV is  terminated,  then DB will  have the  right to  purchase
     NDB's  interest  in the WJV  Coordinating  Company  and each WJV  Operating
     Company,  and NDB will  have the  right to  require  DB to  purchase  NDB's
     interest in the WJV Coordinating Company and each WJV Operating Company, in
     each  case for a  purchase  price  equal  to to the  greater  of (i)  NDB's
     proportionate  share  of  the  Fair  Value  of  the  business  of  the  WJV
     Coordinating  Company and each WJV Operating Company as a going concern and
     (ii) NDB's cash capital  contribution  to the equity of the WJV;  provided,
     however,  that clause (ii) shall apply only if (1) such termination  occurs
     on or prior to the second  anniversary  of the execution of the  definitive
     agreement  regarding  the WJV  and (2)  either  (a) DB  terminates  the WJV
     pursuant  to  clauses  (ii)  or (v)  above  or (b) NDB  terminates  the WJV
     pursuant clause (iii) above.
                                       7
<PAGE>

     "FairValue" means, with respect to the business of the WJV (i) a valuation
     made by the unanimous determination of the  Board;  or  (ii)  failing  such
     determination  of the Board within the 30-day  period  following  notice of
     exercise of the above rights by DB or NDB, the  valuation  determined  by a
     leading  international  investment  bank  jointly  selected  by the Parties
     within 15 days of the end of such 30-day period (or,  failing  agreement on
     an  investment  bank,  selected by the ICC), as follows:  immediately  upon
     designation  of  such  investment  bank ,  each  Party  shall  notify  such
     investment  bank and each other in writing of its  estimate  of Fair Value.
     Such  investment bank shall be instructed to select one of the two proposed
     estimates  of  Fair  Value  (and  no  other  amount)   within  30  days  of
     appointment.  "Fair  Value"  shall  be the  estimate  so  selected  by such
     investment bank and shall be final and binding on the Parties. The fees and
     expenses of the  investment  bank shall be paid by the Party whose estimate
     was not  selected.  Confidentiality:  No persons other than the Parties and
     their  subsidiaries  which are agreed to by the  Parties may have access to
     proprietary or confidential information with respect to the WJV, including,
     without   limitation,   customer  data;   market  and  customer   research;
     segmentation,  attitude or usage information; strategies and specific plans
     for  positioning,   advertising,  public  relations,  promotions,  pricing,
     product  design,  Website  design and  development,  including  content and
     trading,  customer  service model,  training  recruitment and  compensation
     programs.

Financial Statements: The WJV will prepare and distribute to the Parties monthly
     financial statements of the WJV.

Accounting:  Separate books of account maintained at the WJV's head office using
     U.S. GAAP.

Inspection of  Records:  The records and reports of the WJV will also be kept in
     the  English  language  and  are  open  to  inspection  by a  Party  or its
     designated  representative  during business hours upon  reasonable  notice,
     including tax returns and financial statements.

Audit: Annual audit will be performed by a firm of independent  certified public
     accountants to be appointed by the Board.

                                       8
<PAGE>

Dispute  Resolution:  It is the  objective of the Parties to use all  reasonable
     efforts to resolve disputes  amicably through  negotiation.  This objective
     will not limit any Party from seeking judicial redress as provided below.

     All  disputes that are not resolved by negotiation shall be resolved by the
     federal or state courts  located in the New York  metropolitan  area in the
     State of New  York,  to  whose  exclusive  jurisdiction  the  Parties  will
     irrevocably submit.

Governing Law: To be determined  with respect to the WJV. The  provisions  under
     the  heading  "Exclusivity"  in this  memorandum  shall be  governed by and
     construed in accordance with the law of New York.

Exclusivity:  During  the period  described  under the  heading  "Effect of Term
     Sheet" below, neither DB nor NDB nor any of their respective  subsidiaries,
     affiliates or representatives will, directly or indirectly,  (i) solicit or
     encourage any inquiries, discussions or proposals regarding, (ii) continue,
     propose or enter into  negotiations or discussions with respect to or (iii)
     enter  into  any  agreement  or  other  understanding  providing  for,  any
     transaction  involving a worldwide joint venture or alliance with any third
     party for the provision of On-Line Discount Brokerage for Equity Securities
     to Retail  Investors  within  the Rest of World on terms  similar  to those
     contemplated for the WJV; nor shall any of such persons or entities provide
     any  information  to any other  person or entity for the purpose of making,
     evaluating,  or  determining  whether to make or pursue,  any  inquiries or
     proposals with respect to, any such transaction; provided that, in the case
     of DB, the foregoing  restrictions shall apply only to activities conducted
     by GCI.

Effect of Term Sheet:  The Parties  agree that this  memorandum  does not create
     binding rights or obligations,  other than the obligation of the Parties to
     negotiate  in good faith  definitive  agreements  with  respect to the WJV,
     except that the provisions under the heading "Exclusivity" shall be binding
     upon  each  of the  Parties  and  their  respective  Affiliates,  from  and
     including  the date hereof to but not including the earlier of (i) the date
     on which the Parties  execute the definitive WJV  agreements,  and (ii) the
     first anniversary of the closing of the Securities Purchase Agreement.

                                      * * *


                                       9
<PAGE>






NATIONAL DISCOUNT BROKERS GROUP, INC.            DEUTSCHE BANK AG



By:  /s/ Arthur Kontos                           By:  /s/ Thomas A. Curtis
     -----------------                                  --------------------
Name:  Arthur Kontos                                  Name:  Thomas A. Curtis
Title: President and Chief Executive Officer          Title:    Attorney-in-Fact





















                                       10
<PAGE>
                                                                   EXHIBIT 10.30

                                 WAIVER OF BONUS


         WHEREAS,  NATIONAL  DISCOUNT  BROKERS GROUP,  INC., a Delaware
corporation  (the  "Company"),  and ARTHUR KONTOS  (the  "Executive"),  entered
into an  Employment  Agreement  dated  as of May 31,  1997  (the  "Employment
Agreement");

         WHEREAS,  Section  4 of the  Employment  Agreement  provides  that  the
Executive  shall receive a bonus (the "Bonus"),  pursuant to The Sherwood Group,
Inc. 1996 CEO Bonus Plan (the "Plan"); and

         WHEREAS,  for good and valuable  consideration the receipt of which the
Executive  acknowledges,  the Executive wishes irrevocably to waive a portion of
the Bonus under the  Employment  Agreement  to which he may be entitled  for the
fiscal year of the Company ended May 31, 2000 specified below,

         NOW, THEREFORE,

         The Executive hereby irrevocably waives to the fullest extent permitted
by law the  portion of the Bonus for the fiscal year which ended on May 31, 2000
equal to $2,400,000.

         The  Company by  acknowledging  this Waiver  covenants  and agrees that
except as  specifically  waived by this Waiver the  provisions of the Employment
Agreement and the Plan remain in full force and effect.

         IN WITNESS  WHEREOF,  the Executive has duly executed this Waiver as of
this 31st day of May, 2000.

                                          --------------------------
                                           Arthur Kontos

Acknowledged:

NATIONAL DISCOUNT BROKERS GROUP, INC.


By:      ______________________
         James H. Lynch, Jr.
         Chairman of the Board of Directors






<PAGE>

                                                                   EXHIBIT 10.31


                         AGREEMENT TO DEFER COMPENSATION


         THIS  AGREEMENT  is made  effective as of May 31, 2000 by and among NDB
CAPITAL MARKETS CORPORATION,  a Delaware corporation,  with its principal office
at 10 Exchange  Place Centre,  15th Floor,  Jersey City,  New Jersey  07302-3913
("NDB"); NATIONAL DISCOUNT BROKERS GROUP, INC., a Delaware Corporation, with its
principal  office at 10 Exchange  Place  Centre,  15th Floor,  Jersey City,  New
Jersey 07302-3913  ("NDBG");  and THOMAS W. NEUMANN,  Chief Executive Officer of
NDB, with an office at NDB, 10 Exchange Place Centre,  15th Floor,  Jersey City,
New Jersey 07302-3913 ("Neumann").
         WHEREAS,  Neumann,  under his existing compensation  arrangements,  has
earned but unpaid  compensation  of $3,000,000,  the due date for the payment of
which has not occurred (the "Compensation"); and
         WHEREAS, NDB, NDBG, and Neumann wish to defer Neumann's receipt of the
Compensation.
         NOW, THEREFORE, it is agreed as follows:
         1.    NDB, NDBG, and Neumann shall defer NDB's and NDBG's payment, and
Neumann's receipt, of the Compensation. NDB or NDBG shall pay Neumann or his
Beneficiary $1,000,000 of the Compensation  on January 1, 2001;  $1,000,000 of
the  Compensation on January 1, 2002;  and  $1,000,000  of the  Compensation  on
January 1, 2003.  All  deferred payments of the Compensation shall accrue
interest at the ninety (90) day United States  Treasury  bill  rate  beginning
as of the date the  Compensation  would otherwise have been paid and as of


<PAGE>


each ninety-first (91st) day thereafter as published in The Wall Street Journal.
All accrued and unpaid  interest  shall be payable on each date that NDB or NDBG
makes a payment of the Compensation to Neumann or his Beneficiary.
         2. Within  thirty (30) days after the date of a Change of Control,  NDB
or NDBG shall pay Neumann or his  Beneficiary  all remaining  unpaid  amounts of
Compensation  and accrued  interest  thereon in a single lump sum payment.  Upon
this payment,  this  Agreement  terminates.  For purposes of this  Agreement,  a
Change of  Control  occurs  if,  (a) any  person or group of  persons  acquires,
directly or indirectly, stock of NDBG having at least fifty (50%) percent of the
combined voting power of NDBG's then  outstanding  securities,  or (b) a person,
other than NDBG, or a person wholly owned directly or indirectly by NDBG,  shall
directly or indirectly own more than fifty (50%) percent of the combined  voting
power of NDB's then  outstanding  securities,  or (c) the  shareholders  of NDBG
approve or NDBG completes a merger, consolidation or similar transaction of NDBG
or a subsidiary of NDBG with or into any other  corporation,  or a binding share
exchange  involving  NDBG's  securities  occurs  in which  the  NDBG  securities
outstanding  immediately  prior to such  event do not  represent  66-2/3% of the
combined  voting  power  of  voting  securities  after  such  event,  or (d) the
shareholders  of NDBG  approve  a plan  of  complete  liquidation  of NDBG or an
agreement for the sale or  disposition  by NDBG of all or  substantially  all of
NDBG's  assets,  or (e) any  shareholder  or  group  of  shareholders  over  the
objection  of the Board of  Directors  of NDBG  elects  after the date  hereof a
majority  of the  members of the NDBG Board of  Directors,  in each case of (a),
(b), (c), (d) or (e) after the effective date of this Agreement.

                                       2
<PAGE>


         3.  Upon the death of  Neumann,  NDB or NDBG  shall  pay the  remaining
unpaid amounts of Compensation  and the accrued  interest  thereon in accordance
with the schedule set forth in Section 1 or Section 2; provided,  however,  that
NDB or NDBG may, in its exclusive  discretion,  pay the entire  remaining unpaid
amounts of  Compensation  and  accrued  interest  thereon  in a single  lump sum
payment to the estate of Neumann at any time.
         4. NDB and NDBG shall not  segregate  any of its assets for  payment of
the Compensation and accrued interest  thereon,  and Neumann and his Beneficiary
do not have any right,  title, or interest in any asset of NDB and NDBG. Neumann
and his Beneficiary have only the rights of a general unsecured  creditor of NDB
and NDBG.
         5. The payments  under this  Agreement  are not subject to  alienation,
assignment,  encumbrance,  pledge, sale, or transfer prior to receipt by Neumann
or  his  Beneficiary.  NDB  and  NDBG  are  not  liable  for or  subject  to the
liabilities and obligations of Neumann or his Beneficiary.
         6. NDB or NDBG shall deduct from all payments  under this Agreement all
federal,  state, and local employment,  excise,  payroll,  and withholding taxes
reasonably determined by NDB and NDBG as required by law to be withheld.  NDB or
NDBG  shall  timely  pay  the  amounts   withheld  to  the  appropriate   taxing
authorities.
         7. This Agreement is not a contract of employment nor a consulting
agreement by and among NDB, NDBG, and Neumann or his Beneficiary.
         8. This Agreement may be executed in any number of counterparts, each
of which is deemed to be an original, but all of which together constitute one
Agreement.
         9. This Agreement shall be governed and construed in accordance with
the laws of the State of New Jersey.

                                       3
<PAGE>



         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
31st day of May, 2000 effective as of the date first above written.

                                           NDB CAPITAL MARKETS CORPORATION


                                           By:


                                           NATIONAL DISCOUNT BROKERS GROUP, INC.


                                           By:



                                           THOMAS W. NEUMANN
















                                       4
<PAGE>

                                                                      EXHIBIT 11
                     NATIONAL DISCOUNT BROKERS GROUP, INC.
                                AND SUBSIDIARIES

                    Computation of Earnings Per Common Share

                     Years ended May 31, 2000, 1999 and 1998
<TABLE>
<CAPTION>




                                                              2000                    1999                1998
                                                              ----                    ----                ----

<S>                                                   <C>                    <C>                    <C>
Net income from continuing operations                 $   32,629,011         $    18,219,407        $  5,998,458
Discontinued operations (net)                             20,829,266               2,786,052           5,961,861
                                                       -------------         ---------------        ------------

                  Net income                          $   53,458,277         $    21,005,459        $ 11,960,319
                                                       =============         ===============        ============

Net income per common share Basic:
   Net income from continuing operations                      $1.92                   $1.30               $.45
   Discontinued operations (net)                               1.22                     .20                .44
                                                               ----                   -----               ----

                  Net income                                  $3.14                   $1.50               $.89
                                                               ====                  ======                ===

Diluted:
   Net income from continuing operations                      $1.86                   $1.29               $.45
   Discontinued operations (net)                               1.19                     .20                .44
                                                               ----                    ----                ---

                  Net income                                  $3.05                   $1.49               $.89
                                                              =====                   =====                ===

Historical:
   Weighted average number of
      common stock and common stock
      equivalents outstanding:
         Basic                                            17,021,113              14,018,257          13,432,726
                                                        ============           =============          ==========

         Diluted                                          17,525,126              14,143,240          13,501,346
                                                          ==========           =============          ===========






</TABLE>

<PAGE>





                                                                      EXHIBIT 16


August 15, 2000

Office of the Chief Accountant
Securities and Exchange Commission
SECPS Letter Files
Mail Stops 9-5
450 Fifth Street, N.W.
Washington, D.C.  20549


Ladies and Gentlemen:


We were previously  principal  accountants for National  Discount Brokers Group,
Inc.,  and under the date of July 15,  1998,  we  reported  on the  consolidated
financial  statements of National  Discount Brokers Group, Inc. and subsidiaries
as of and for the years ended May 31, 1998 and 1997.  On February 12,  1999,  we
resigned. We have read National Discount Brokers Group, Inc. statements included
under Item 9 of its Form 10-K for the year ended May 31, 2000, and we agree with
such statements,  except for the statements  relating to  PricewaterhouseCoopers
LLP as we have no basis to confirm such statements.

Very truly yours,

 s/KPMG LLP


New York, New York

Cc:  C. Goldstein - National Discount Brokers Group, Inc.




<PAGE>


                                                                      EXHIBIT 21

              SUBSIDIARIES OF NATIONAL DISCOUNT BROKERS GROUP, INC.


A) NDB CAPITAL MARKETS CORPORATION (formerly Sherwood Securities Corp.),
incorporated under the laws of the State of Delaware.

B) SHERWOOD CAPITAL, INC., incorporated under the laws of the State of
New Jersey.

C) SHERWOOD PROPERTIES CORP., incorporated under the laws of the State of
Delaware.

D) NDB INSURANCE AGENCY CORP., incorporated under the laws of the State of
Delaware.

E) THE EBERCOM COMPANY., incorporated under the laws of the State of Delaware.

F) SIMCON CORPORATION, incorporated under the laws of the State of Delaware.

G) SHERWOOD MANAGEMENT CORP., incorporated under the laws of the State of
Delaware.

H) NATIONAL DISCOUNT BROKERS CORPORATION (formerly Triak Services Corp.),
incorporated under the laws of the State of New York.

 I) SHD CORPORATION, incorporated under the laws of the State of Delaware.

J) MILLENNIUM CLEARING COMPANY LLC,  incorporated under the laws of the State of
Delaware.

K) NDB CAPITAL MARKETS, L.P., formed under the laws of the State of Delaware.

L) NDBCM  CALIFORNIA  CORPORATION,  incorporated  under the laws of the State of
Delaware.
<PAGE>

                                                                    EXHIBIT 23.1








                       Consent of Independent Accountants


The Board of Directors
National Discount Brokers Group, Inc.:

     We consent to incorporation  by reference in the registration  statement on
Form S-8 of National  Discount Brokers Group,  Inc. of our report dated July 15,
1998,  relating  to the  consolidated  statements  of income  and  comprehensive
income, changes in stockholders' equity, and cash flows of National Discount
Brokers Group, Inc. for the year ended May 31, 1998, which report appears in the
May 31, 2000 annual report on Form 10-K of National Discount Brokers Group, Inc.


KPMG LLP


New York, New York
August 15, 2000





<PAGE>



                                                                    EXHIBIT 23.2









                       Consent of Independent Accountants





     We hereby  consent to the  incorporation  by reference in the  Registration
Statements  on Form  S-8  (No.  333-41819,  No.  033-64571,  No.  33-72790,  No.
333-88865 and No.  333-31888) of National  Discount  Brokers Group,  Inc. of our
report dated July 20, 2000  relating to the financial  statements  and financial
statement schedules, which appears in this Form 10-K.


PricewaterhouseCoopers LLP

August 16, 2000
New York, NY