SCHEDULE 14A INFORMATION
(Rule 14a)
Information Required in Proxy Statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the registrant: /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/X/ Preliminary proxy statement
/ / Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14(a)-11(c) or Rule 14a-12
NetSol International, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was previously
paid. Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
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(4) Date filed:
PRELIMINARY PROXY STATEMENT, SUBJECT TO COMPLETION, DATED MAY 4, 2001
[NETSOL INTERNATIONAL LETTERHEAD]
May __, 2001
Dear Fellow Stockholder:
As required by the SEC's rules, we mailed to you a proxy
statement dated May __, 2001 of NetSol Shareholders Group, LLC related to a
special meeting of our stockholders to be held on June 1, 2001 at our software
development facility in Lahore, Pakistan. We invite you to attend the meeting
and see our development team, a key force behind the value NetSol International
is creating for you, its stockholders. NetSol Shareholders Group, LLC, or the
group, has submitted proposals to be considered and acted upon at the special
meeting to (1) remove your entire existing board of directors and (2) elect five
new directors named in their proxy statement. If the group's first proposal,
removal of the board of directors you elected, fails, its second proposal,
electing five new directors, will not be considered. However, if the group's
first proposal is successful, we ask that you vote to fill the newly created
vacancies with our nominees rather than the group's nominees. The SEC's rules
did not allow us to solicit your vote to retain your board of directors that is
experienced in the software business until now. So, let us tell you why you
should vote to keep your board of directors and management team in place.
1. In the past year we have focused on our core competency and it is
paying off. We curtailed our non-core businesses and are now driving our team of
engineers in Lahore, Pakistan to truly capitalize on our cost advantages. We
have signed contracts with three units of one of the largest automobile
manufacturers in the world.
2. We plan to introduce many of our successful software products
into the North American market during the first half of fiscal 2002.
3. We have a large portion of our net worth invested in your
company. Our interests are aligned with yours in a very serious way.
4. The group's proposed board may explore the sale of your company
when valuations in the software sector are the lowest they have been in several
years.
5. The group's nominees include Don Danks and Shelly Singhal, both
directors of Netgateway, Inc., the very company which the group may intend to
combine with NetSol. Mr. Danks is also chief executive officer of Netgateway.
Mr. Danks and Mr. Singhal would, therefore, sit on both sides of the negotiating
table.
6. We have serious concerns about the ability of the group's
proposed board to operate our business. They have failed to propose any
individual who has experience in running an international company with a major
development facility in the Indian sub-continent. The proposed slate includes a
hedge fund manager, a racing car company owner and a couple of Wall Street
financiers, as well as Cary Burch, who is already on the current board.
No matter how few shares you hold, please return the enclosed WHITE
proxy card as soon as possible.
Sincerely yours,
Najeeb Ghauri Nasim Ashraf Waheed Akbar Salim Ghauri
Irfan Mustafa Naeem Ghauri Shahab Ghauri
We first sent or gave this proxy statement to stockholders on or
about May __, 2001.
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NETSOL INTERNATIONAL, INC.
24025 PARK SORRENTO, SUITE 220
CALABASAS, CA 91302
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
Notice is hereby given that a special meeting of the stockholders of
NetSol International, Inc., a Nevada corporation, will be held beginning at 9:00
a.m. (local time), at NetSol's offices at Y-126 Comm DHA, Lahore, Pakistan, on
Friday, June 1, 2001, for the following purpose:
1. Consider and act upon a proposal submitted by NetSol Shareholders
Group, LLC to remove the entire existing board of directors; and if this
proposal is successful, then
2. Fill the newly created vacancies by electing the nominees of your
board of directors named in this proxy statement or the nominees of NetSol
Shareholders Group, LLC named in its proxy statement dated May __, 2001.
No other business may be transacted at the special meeting.
Stockholders of record at the close of business on May 11, 2001 are
entitled to notice of and to vote at the special meeting. Only stockholders and
our invited guests will be permitted to attend the special meeting.
/s/ Irfan Mustafa
Irfan Mustafa
Chairman of the Board of Directors
May __, 2001
YOUR VOTE IS VERY IMPORTANT. PLEASE SIGN, DATE AND RETURN THE ENCLOSED WHITE
PROXY CARD IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND IN
PERSON. STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND VOTE IN
PERSON IF THEY DESIRE.
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NETSOL INTERNATIONAL, INC.
24025 PARK SORRENTO, SUITE 220
CALABASAS, CA 91302
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
May __, 2001
We are providing this proxy statement and the accompanying WHITE proxy
card to you in connection with our board of directors' solicitation of proxies
for use at a special meeting of our common stockholders to be held on June 1,
2001, beginning at 9:00 a.m. (local time), at our software development facility,
Y-126 Comm DHA, Lahore, Pakistan, and any and all adjournments or postponements
of the special meeting.
The special meeting has been called solely to consider the proposed (1)
removal of the entire existing board of directors of the company, and if this
proposal is successful, (2) election of eight persons to fill the newly created
vacancies by electing nominees of your board named in this proxy statement or
nominees of the group named in its proxy statement dated May __, 2001, to serve
as directors of your company.
We will bear the cost of preparing and mailing the notice of the
special meeting, this proxy statement and white proxy card and the cost of
charges made by brokerage houses and other custodians, nominees and
fiduciaries for forwarding documents to our stockholders. We engaged MacKenzie
Partners, Inc. to assist our board of directors in its solicitation. We will
pay MacKenzie $5,000, reimburse it for its expenses and indemnify it against
liabilities, including liabilities under the securities laws. Our officers or
employees may solicit proxies either in person or by telephone and they will
not receive separate or additional compensation for their solicitation
efforts. Our total costs in connection with our board's solicitation of
proxies for the special meeting are currently expected to be $175,000.
THEIR PROPOSALS
A group of five dissident stockholders led by Blue Water Master Fund,
L.P., calling themselves NetSol Shareholders Group, LLC, are attempting to take
complete control of your company. Rather than offering to buy your shares in
order to get control, they are soliciting your vote to (1) remove the entire
board of directors that you elected and (2) appoint five of their hand-picked
nominees to the board, by means of blue proxy cards.
YOU SHOULD NOT SIGN ANY BLUE PROXY CARDS OR OTHER FORMS THAT MAY BE
FURNISHED TO YOU BY THE SHAREHOLDER GROUP.
A SUMMARY OF YOUR BOARD'S PLANS FOR NETSOL
In late 2000, your board of directors and management conducted a
comprehensive strategic analysis of our global operations. Historically, we were
an offshore-based software development company. As part of this analysis, your
board decided to focus on building our software development business, which is
our core business, and to significantly scale down non-core business activities,
such as Internet and infrastructure businesses. In connection with this effort,
during 2001, we scaled down our networking operations in the United Kingdom, our
operations in Germany and our Internet service provider operation in Karachi,
all of which were not tied to our core business.
We believe our operational performance over the past 12 months has been
strong. In the past eighteen months, we added Daimler-Chrysler Financial
Services Australia, Daimler-Chrysler Financial Services Singapore,
Daimler-Chrysler Financial Services Taiwan, Volvo Australia, Wells Fargo Bank,
Askari Leasing and Citibank Pakistan as customers, among many others. We also
launched new products, including a product called the Contract Management
System, or CMS, which is a comprehensive lease asset-based application suite.
During the past twelve months, our operating ratio (operating income as a
percentage of operating revenue) for our development center in Lahore, Pakistan
has averaged 50%.
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Since your board refocused our company on software development, our
Asian operations have reported record revenues in nearly every quarter.
Unfortunately, recent improvements in our business, its prospects and our
financial results have not been rewarded in the equity market. We believe our
stock has done slightly better than other software stocks.
As you know, members of your board of directors are substantial
stockholders of ours. As a result, your board has their own money on the line
awaiting a return of proper valuations in the software sector of the U.S. equity
markets. Your board views enhancing stockholder value as its primary objective.
Over the past year, while taking the actions described above to improve
operating performance, your board of directors also examined many strategies for
enhancing stockholder value through expansion into North American markets,
acquisitions and other transactions.
Having proved our software in the Asian market, we are poised to
introduce the work of our development team in Pakistan into the North American
market by the first half of fiscal 2002. We plan to do this by setting up a team
of marketing and sales experts to market and sell our products and services in
North America. As you know, each additional sale of software has a low marginal
cost. This means that if we are successful in our plans to introduce our
products into North America, we expect to achieve significant growth in our
operating ratio.
You can act today to protect your investment in NetSol. Whether or not
you have previously signed a blue proxy card, please sign and date the enclosed
WHITE proxy card and return it in the enclosed postage-paid envelope. Our
special meeting will be held on June 1, 2001, so it is important that you send
in the WHITE proxy card today.
YOUR BOARD OF DIRECTORS UNANIMOUSLY (WITH MR. BURCH ABSTAINING) URGES
YOU TO OPPOSE THE SHAREHOLDER SOLICITATION.
WHAT YOU SHOULD DO NOW
o SIGN AND MAIL BACK THE WHITE PROXY CARD; AND
o DO NOT SIGN OR MAIL IN THE BLUE PROXY CARD OR ANY OTHER FORMS WHICH
MAY BE SENT TO YOU BY THE SHAREHOLDER GROUP.
Even if you previously signed and returned a blue proxy card, you have
a right to change your vote. You may revoke your BLUE proxy card by (1) signing
and returning a WHITE proxy card dated after the date of your BLUE proxy card or
(2) by giving written notice of your revocation to us either (a) by mail, fax
machine, email or other transmission or (b) in person at the special meeting
before your BLUE proxy card is voted.
If your shares are held in "street name," only your broker or banker
can vote your shares. Please contact the person responsible for your account and
instruct that person to vote a WHITE proxy card on your behalf today.
If you have any questions about giving your proxy or require
assistance, please call MacKenzie Partners, Inc., at (800) 322-2885 or (212)
929-5500 (call collect) or at proxy@mackenziepartners.com.
VOTING AND REVOCATION OF PROXIES
If you give a proxy on the enclosed WHITE proxy card or on the BLUE
proxy card, you may revoke it at any time prior to the actual voting at the
special meeting by:
o attending the special meeting, filing written notice of the termination
of the appointment with one of our officers, and voting in person; or
o filing a new written appointment of a proxy with one of our officers.
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If your revocation is received after the vote at the special meeting,
it will not be effective. Unless you revoke your proxy, it will be:
o voted at the special meeting; and
o if you specified a choice as to how to vote your shares, the proxies
will vote for you in accordance with your choice.
Unless you indicate otherwise on your WHITE proxy card, all of your
shares will be voted in the manner you indicate. If no choice is specified on
your WHITE proxy card, but you properly signed, dated and returned the WHITE
proxy card, the proxies named in the WHITE proxy card will vote all shares
represented by those proxies against the proposal to remove the existing board
and in favor of the nominees to our board of directors we describe in this
document.
The only other matters that could properly come before the meeting are
ministerial matters like adjournment. Unless you check the box on the WHITE
proxy card, your proxies will have the power to vote your shares on other
matters in your proxies' discretion.
VOTING AT OUR SPECIAL MEETING
Only stockholders of record at the close of business on May 11, 2001
are entitled to notice of and to vote at our special meeting or any adjournments
or postponements of the special meeting. At the close of business on May 11,
2001, there were __________ shares of our common stock outstanding. You are
entitled to one vote for each share of common stock you owned at the record
date.
A majority of the votes entitled to be cast on matters to be
considered at our special meeting, present in person or by proxy, will
constitute a quorum at our special meeting. If a share is represented for any
purpose at the special meeting, it is deemed to be present for all other
matters. Abstentions and broker nonvotes will be counted for purposes of
determining the presence or absence of a quorum. "Broker nonvotes" are shares
held by brokers or nominees which are present in person or represented by
proxy, but which are not voted on a particular matter because instructions
have not been received from the beneficial owner. Under applicable Nevada law,
the effect of broker nonvotes on a particular matter depends on whether the
matter is one as to which the broker or nominee has discretionary voting
authority. Broker nonvotes will have the effect of a vote against the group's
proposal to remove your elected board of directors. If the proposal to remove
our existing directors were to be successful, then broker nonvotes will have
the effect of an abstention in the subsequent vote on the election of
directors.
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When you are voting for the election of directors, you may cumulate
your votes. This means you may multiply the number of shares you own as of the
record date, May 11, 2001, by eight and:
o give any one candidate whose name has been placed in nomination
prior to the voting that total number of votes, or
o distribute your votes among as many candidates as you choose.
You may not cumulate your votes unless at least one stockholder has
given notice, not less than forty eight hours before our special meeting, of the
intention to cumulate votes. If any stockholder present at the special meeting
gives notice in that manner, all stockholders may cumulate their votes.
You may inspect the list of our stockholders entitled to vote at the
special meeting at our principal executive offices, 24025 Park Sorrento, Suite
220, Calabasas, CA 91302, and at our special meeting.
WHY YOUR BOARD THINKS YOU SHOULD SEND BACK A WHITE PROXY CARD
You should not support the group's attempt to take control of your
company. We urge you to consider carefully the following:
1. Your board has a track record. They have completed:
o our initial public offering in 1998;
o getting our common stock listed on the Nasdaq Small Cap market
in 1999 -- it was originally only quoted on the over-the-counter
bulletin board;
o the acquisition of Mindsources, Inc. (now NetSol USA, Inc.), an
information technology consulting service company, in August
1999;
o the acquisition of Network Solutions Pvt. Ltd. in Pakistan in
1998;
o the execution of contracts with units of several multinational
corporations, including:
o Daimler-Chrysler of Australia, Singapore and Taiwan,
o Volvo Australia,
o Wells Fargo Bank,
o Askari Leasing,
o Citibank Pakistan,
o General Motors Australia, and
o VoiceStream Wireless USA.
Additionally, under your board's leadership, your company has completed
the development or further development and launch of new products, including:
o Contract Management System, or CMS,
o Proposal Management System, or PMS,
o Settlement Management System, or SMS,
o Electronic Point of Sale, or ePOS, and
o Wholesale Finance System, or WFS.
2. Your board is optimistic about its ability to position your company
for long term growth by (a) focusing on industries we know well -- the leasing
and finance business, (b) continuing to exploit the significant cost advantage
we enjoy because of our development center in Lahore, Pakistan and (c)
leveraging the team that we built into a near-term revenue generating consulting
force.
LEASING AND FINANCE. Members of your board and our management team have
extensive experience in the leasing and finance business. The leasing and
finance business is very complex and requires multi-layered workflows. Our PMS
and CMS applications fully automate these processes and have hundreds of man
years of engineering time invested.
7
OUR COST BASE. Your board and management team have extensive contacts
in Pakistan. We have a team of over 275 software engineers in Lahore, Pakistan.
We enjoy significant cost advantages of having an offshore team. In some
instances, offshore costs can be as little as one-eighth of the costs incurred
by domestic software development houses. Our challenge is in managing delivery
from an offshore center and, therefore, we need experienced senior management to
oversee this complex process. In general, the software products business is
characterized by high contribution margins for each additional sale of product.
With a lower fixed-cost base, in the form of our Lahore team, more of that
contribution margin is expected to flow into our net income.
LEVERAGE OUR TEAM. Our development team successfully brought five new
systems to market in the last two years. We have excess capacity in the near
term, and intend to use this capacity to win new customers in the current
competitive pricing environment through our significant cost advantages.
3. Your board of directors has taken the following steps which have been
and are expected to be successful in improving operating results.
DEVELOPED SUITE OF NICHE SOFTWARE APPLICATIONS. We developed a suite of
software for use in the automobile finance and leasing industries that we expect
will drive revenues in 2001 and 2002, mainly our CMS, PMS, SMS, ePOS and WFS.
ATTRACTED NEW CUSTOMERS. In the past 12 months, we have doubled our
customer list, adding customers such as Volvo Australia, Wells Fargo Bank,
Askari Leasing, Citibank Pakistan, Ilas of Germany, Clinical Interaction, St.
George Bank Australia and VoiceStream Wireless USA, to name a few. A key
accomplishment included the signing of a CMS system contract with
Daimler-Chrysler in Australia, Singapore and Taiwan, valued at approximately
$2.0 million.
INCREASED REVENUE GROWTH. Our net revenues increased from
approximately $3.55 million as of the fiscal year ended 1999 to approximately
$6.98 million as of the fiscal year ended 2000, a 97% increase. Net revenues
for the six months ended December 31, 1999 increased from approximately $3.50
million to approximately $4.26 million for that same period in 2000, a 21%
increase.
IMPROVED OPERATING EFFICIENCY. We scaled down our non-core business
activities in the United Kingdom and in Germany. These efforts have been
successful and at minimum restructuring costs. We believe these changes will
improve our operating efficiency and result in an improvement in our bottom line
in the future.
4. Your board has their own money on the line. As of April 30, 2001,
members of your board of directors collectively owned 41.4% of the outstanding
shares of our common stock.
5. Your board and the current management team bring years of experience
to your company. It is important for you to know that several members of your
board have substantial experience in selling software properties. This
substantial experience should prove invaluable to your company as we enter a
more difficult economic environment and continue to explore options to enhance
the value of your investment in our common stock.
YOUR BOARD RECOMMENDS THAT YOU VOTE "AGAINST" PROPOSAL NO. 1 AND VOTE
"FOR" THE BOARD'S NOMINEES IN PROPOSAL NO. 2 BY SIGNING AND RETURNING A WHITE
PROXY CARD.
YOUR BOARD ALSO URGES YOU NOT TO SIGN ANY BLUE PROXY CARD OR ANY OTHER
FORMS WHICH MAY BE SENT TO YOU BY THE SHAREHOLDER GROUP.
Even if you previously signed and returned a BLUE proxy card, you have
every right to revoke your proxy. We urge you to sign, date and mail the
enclosed WHITE proxy card in the postage-paid envelope provided.
WHY YOUR BOARD THINKS YOU SHOULD NOT SUBMIT A BLUE PROXY CARD
Your board of directors believes that their own sizable investment in
our common stock would be in jeopardy if NetSol Shareholders Group, LLC was
successful in its attempt to take control of your company without paying you a
control premium.
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1. THE GROUP HAS NO SIGNIFICANT EXPERIENCE WITH PAKISTANI CULTURE. The
majority of our software development takes place in Pakistan. The group has
proposed to replace our entire board, most of whom are current members of our
management team. Without the ability to effectively manage cross-culturally, our
software development team in Lahore would likely fall apart. We are holding our
special meeting in Lahore so that you will have a chance to see our team at
work. We have a track record of low cost software development with our Pakistani
team. Can you see a group led by a 44 year old Wall Street investment banker
successfully managing a team of Pakistani engineers?
2. THE GROUP'S INTERESTS ARE NOT ALIGNED WITH YOUR INTERESTS NEARLY AS
WELL AS YOUR BOARD'S INTERESTS ARE. As of April 27, 2001, the group reported in
its Schedule 13D that it beneficially owned 26.0% of our common stock and your
board and its management team beneficially owned over 41.4% of our common
stock. Much of your board's personal net worth is tied up in your company.
Would you rather be an owner of just another portfolio company that happens to
be in the software business of a Netherland Antilles/Cayman Island based
private equity fund or part of a company where management had its personal
future at stake?
3. THE GROUP'S OPERATING STRATEGY FOR YOUR COMPANY IS UNKNOWN. The group's
filings reveal a number of links with a company called Netgateway, Inc. As we
said, the group has two Wall Street financiers without operating experience. The
group also includes the chief executive officer of Netgateway as a member.
Netgateway recently was dropped from the Nasdaq Small Cap market to the
over-the-counter bulletin board while your board took our company from the
over-the-counter bulletin board to the Nasdaq Small Cap market. The group has
not come out and said if they have any plans to combine Netgateway with us, but
this is a strong possibility. Do you know anything about Netgateway?
4. THE GROUP WILL STICK YOU WITH THE COST OF ITS TAKEOVER. The group has
indicated that if it is successful, we will pay them approximately $250,000 for
their troubles. If the first thing they will do with our money is pay
themselves, what will be the second thing that they do?
5. THE GROUP HAS NOT SHOWN ITSELF TO BE THOROUGH. The group filed a
proxy statement seeking to replace our entire board of directors. Nevada law
requires a vote of two-thirds of the outstanding shares entitled to vote to
remove the entire board of directors. Your board owned, as of April 30, 2001,
41.4% of our outstanding common stock and will block the approval of Proposal
No. 1 to remove the entire board. It appears the group did not carefully
research this question before they filed a proxy statement with the Securities
and Exchange Commission. If they are this careless, what kind of stewards
would they be of your investment in our common stock?
BACKGROUND INFORMATION ON THE ELECTION OF OUR DIRECTORS
Our bylaws authorize eight directors, and state that stockholders
will elect our directors at each annual meeting. Your board is currently
comprised of eight members. Our directors are elected to serve for a one-year
term or until their successors have been duly elected and qualified. If any
directors are elected at our special meeting, they would serve until our next
annual meeting of stockholders, or until their successors have been duly
elected and qualified.
If a quorum is present at the special meeting and if the group's
proposal to remove all of your elected directors is successful, the eight
nominees receiving the highest number of affirmative votes of the shares present
in person or represented by proxy and entitled to vote for them will be elected
as directors. Only votes cast for a nominee will be counted, and the
accompanying WHITE proxy will be voted "FOR" all of the board's nominees in the
absence of instruction to the contrary. Abstentions, broker nonvotes and
instructions on the accompanying WHITE proxy to withhold authority to vote for
one or more nominees will result in all the nominees receiving fewer votes.
However, the number of votes otherwise received by the nominee will not be
reduced by that action.
YOUR BOARD AND ITS MANAGEMENT TEAM
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BIOGRAPHICAL INFORMATION. We are providing you with information about
the board of directors who you have ALREADY elected and who are our nominees for
election to the board at the special meeting. The business address for our
nominees is c/o 24025 Park Sorrento, Suite 220, Calabasas, CA 91302.
NAME AND AGE DIRECTOR SINCE POSITION WITH THE COMPANY
Najeeb U. Ghauri (46) 1997 Chief Executive Officer, Director
Irfan Mustafa (49) 1997 Chairman of the Board, Director
Salim Ghauri (45) 1999 President, Director
Naeem Ghauri (43) 1999 Chief Operating Officer, Director
Shahab Ghauri (50) 1999 Director
Waheed Akbar (49) 1999 Director
Nasim Ashraf (50) 2001 Executive Vice President, Director
Cary Burch (39) 1999 Director
NAJEEB U. GHAURI served as our president from 1997 to 2000 and from
2000, has served as our chief executive officer. He has also served as one of
your directors since 1997. Mr. Ghauri has an M.B.A. in Marketing Management from
the Claremont Graduate School and a B.S. degree in Management/Economics from
Eastern Illinois University. Prior to joining us, Mr. Ghauri was part of the
marketing team of Atlantic Richfield Company from 1987 to 1997 and was with
Unilever from 1983 to 1986. Mr. Ghauri was instrumental in our successful
initial public offering in 1998. Mr. Ghauri is responsible for all of our
operations in the U.S. and globally.
IRFAN MUSTAFA has been chairman of your board and one of our directors
since the inception of the company in April 1997. Mr. Mustafa has an M.B.A. from
IMD (formerly Imede), Lausanne, Switzerland (1975); an M.B.A. from the Institute
of Business Administration, Karachi, Pakistan (1974); and a B.S.C. in Economics,
from Punjab University, Lahore, Pakistan (1971). Mr. Mustafa began his 14 year
career with Unilever, Plc where he was one of the youngest senior management and
board members. Later, he was employed with Pepsi International from 1990 to 1997
as a chief executive officer in Pakistan, Bangladesh, Sri Lanka and Egypt. He
spent two years in the U.S. with Pepsi in their Executive Development Program
from 1996 to 1997. Mr. Mustafa was relocated to Dubai as head of TRICON Middle
East and North African regions. Pepsi International spun off TRICON in 1997. Mr.
Mustafa is a member of our compensation committee and audit committee.
SALIM GHAURI has been with us since 1999 as our president and a member
of your board of directors. Mr. Ghauri started his computer career with Citibank
Riyadh from 1979 to 1984 as a programmer. Before his employment with Network
Solutions (Pvt.) Ltd., Mr. Ghauri was employed with BHP in Sydney, Australia
from 1987-1995, where he commenced his employment as an information technology
consultant. Mr. Ghauri was the original founder of Network Solutions. Network
Solutions was founded in Pakistan in 1996. Under Mr. Ghauri's leadership, we
gradually built a strong team of IT professionals and infrastructure in Pakistan
and became the first software house in Pakistan certified as ISO 9001.
NAEEM GHAURI has been our chief operating officer and has been one of
our directors since 1999. Prior to joining us, Mr. Ghauri was a project director
for Mercedes-Benz Finance Ltd., a subsidiary of Daimler-Chrysler, in Germany
from 1994 to 1999. Mr. Ghauri supervised over 200 project managers, developers,
analysts and users in nine European countries. Mr. Ghauri earned his degree in
Computer Science from Brighton University, England.
SHAHAB GHAURI has been one of our directors since 1999 and managing
director of NetSol UK Ltd. since 1999. Mr. Ghauri received his Bachelor of
Arts degree in Economics from the University of Punjab in Pakistan in 1971.
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WAHEED AKBAR has been one of our directors since 1999. Dr. Akbar is
an orthopedic surgeon with licenses in New York, Michigan, Florida and
California. Dr. Akbar is the past president of Saginaw County Medical Society,
a past president of the medical staff at St. Mary's Hospital and a present
board member of the Field Neuroscience Institute. Dr. Akbar has been
instrumental in attracting a group of Pakistani-American physicians and
business persons who invested in our company in exchange for restricted shares
in 1999-2000. Dr. Akbar assists the company's development team in furthering
some key medical software applications, which is currently at the research and
development stage. Dr. Akbar is a member of our compensation committee and
audit committee.
NASIM ASHRAF has been one of our directors since 2000 and is our
Executive Vice President. Dr. Ashraf is a prominent U.S.-based physician
residing in Maryland. He has practiced medicine for nearly 25 years as a
Nephrologist. He is also very actively involved in promoting and developing
the young information technology industry in Pakistan through his high level
association with several ministries and cabinets in Pakistan. Dr. Ashraf has
been a key figure in an effort to improve the U.S. and Pakistani relationship
and is very active in several educational, human development and medical
causes in under-developed countries. Dr. Ashraf will play a key role in
financing and public relations activities in both the U.S. and Pakistan.
CARY BURCH has been one of our directors since 1999. Mr. Burch is
currently the President and CEO of CreditNet, Inc., which is a division of First
American CREDCO. He has an MBA from Pepperdine University and has attended
Harvard Business School for a Senior Executive Management course. Mr. Burch is a
member of our compensation committee and audit committee.
Messrs. Najeeb Ghauri, Salim Ghauri, Naeem Ghauri and Shahab Ghauri
are brothers.
BOARD MEETINGS AND BOARD COMMITTEES. We have a compensation committee
and an audit committee. Our audit committee and compensation committee each had
one meeting during fiscal year 2000. Your board of directors had two meetings
during fiscal year 2000.
EXECUTIVE COMPENSATION. The summary compensation table shows certain
compensation information for services rendered in all capacities during each of
the last three fiscal years by the officers of the company who received
compensation in excess of $100,000 during the fiscal year ended June 30, 2000.
The following information for the officers includes the dollar value of base
salaries, bonus awards, the number of stock options granted and certain other
compensation, if any, whether paid or deferred.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS (2)
RESTRICTED STOCK UNDERLYING
NAME AND PRINCIPLE POSITION YEAR ENDED SALARY (1) BONUS SECURITIES (3) OPTIONS (4)
--------------------------- ---------- ---------- ----- ---------------- -------------
Najeeb U. Ghauri, Chief Executive 2000 $100,000 -0- 735,000(5) 20,000(6)
Officer, Director
100,000(7)
1999 $100,000 -0- 705,000 450,000(8)
20,000(9)
50,000(10)
1998 91,150 -0- 250,000
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Naeem Ghauri, Chief Operations 2000 $150,000 -0- 1,376,416 20,000(6)
Officer, Director 1999 $150,000 $30,000(11) 1,157,666 450,000(8)
1998 N/A N/A N/A N/A
Salim Ghauri, President, Director 2000 $100,000 -0- 1,386,416 20,000(6)
1999 $100,000 -0- 1,170,666 450,000(8)
1998 N/A N/A N/A N/A
Syed Husain, Chief Financial 2000 $100,000 -0- -0- 50,000(12)
Officer 1999 N/A N/A N/A N/A
1998 N/A N/A N/A N/A
(1) No officers received or will receive any bonus or other annual
compensation other than salaries during fiscal 2000, nor any benefits
other than those available to all other employees that are required to
be disclosed.
(2) No officers received or will receive any long-term incentive plan
(LTIP) payouts or other payouts during fiscal 1999.
(3) All stock awards are shares of our common stock.
(4) All securities underlying options are shares of our common stock.
(5) Mr. Najeeb Ghauri pledged 448,750 of his shares as collateral to obtain
a margin loan. The financial institution provided the loan under the
condition that the stock price not fall below $20 per share. Should it
fall below $20, then the financial institution would force sale of the
shares to recover the loan amount. Due to a decline in NetSol's stock
price, the financial institution demanded the entire loan be paid back.
Mr. Ghauri returned the majority portion of the loan; however, between
September 15 and September 30, 2000, the financial institution sold
72,900 shares to cover the loan.
(6) Includes options to purchase 20,000 shares of our common stock granted
to each of our directors for the 1999-2000 term at an exercise price of
$5.50, which vested at the end of the 1999-2000 term. Options must be
exercised within five years after the September 1999 date of grant.
(7) Includes options to purchase 100,000 shares of our common stock granted
to Najeeb Ghauri as an officer of the company in February 2000 with an
exercise price of $21.00 per share, exercisable immediately from the
date of grant. The options must be exercised within five years from the
date of grant.
(8) Includes options to purchase 450,000 shares of our common stock granted
under an employment contract with the company. Options to purchase
150,000 shares at an exercise price of $1.58 vested in May 1999;
options to purchase an additional 150,000 shares at an exercise price
of $2.58 vested in May 2000; and options to purchase an additional
150,000 shares at an exercise price of $2.58 vest in May 2001.
(9) Includes options to purchase 20,000 shares of our common stock granted
to each of our directors for the 1998-1999 term at an exercise price of
$1.58, which vested at the end of the 1998 term. Options must be
exercised within five years after November 18, 1998.
(10) Includes options to purchase 50,000 shares of our common stock granted
in July 1999, at an exercise price of $1.01, vesting immediately upon
grant. Options must be exercised within five years after July 18, 1998.
(11) Naeem Ghauri received a signing bonus upon the execution of his
employment agreement dated April, 17, 1999.
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(12) Includes options to purchase 50,000 shares of our common stock granted
to Mr. Husain as part of his compensation with an exercise price of $21
to vest at the end of one year from February 2000. The options must be
exercised within five years from February 2000.
We sponsor a 401(k) retirement salary plan that is available to our
employees, which was effective January 1, 2000.
OPTION EXERCISES AND HOLDINGS. The following table sets forth
information concerning each exercise of a stock option during the fiscal year
ended June 30, 2000 by each of our named executive officers and the number and
value of unexercised options held by each of our named executive officers on
October 23, 2000.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF UNEXERCISED
OPTIONS/SARS AT VALUE OF OPTIONS/SARS
NUMBER OF SHARES FY-END (#) AT FY-END (#)
ACQUIRED ON EXERCISABLE/ EXERCISABLE(2)/
NAME EXERCISE VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---------------------------- ---------------- -------------- ---------------------- -----------------------
Najeeb U. Ghauri, Chief 220,000 $12,490,900 295,000/150,000 $7,875,250
Executive Officer, Director
Salim Ghauri, President, 150,000 $8,463,000 170,000/150,000 $5,538,000
Director
Naeem Ghauri, COO, Director 150,000 $8,463,000 170,000/150,000 $5,538,000
Syed Husain, CFO -0- -0- -0-/50,000 -0-/$725,000
(2) The closing price of the stock at fiscal year end was $35.50.
On May _____, 2001, Messrs. __________, __________, and __________
exercised options to purchase __________, __________, __________ shares,
respectively, of our common stock.
COMPENSATION OF DIRECTORS; OUR 1999 STOCK OPTION PLAN. We may reimburse
each of our directors for out-of-pocket expenses incurred in connection with
their attendance at meetings. In addition, our 1999 Incentive and Nonstatutory
Stock Option Plan provides for the grant of stock options to our non-employee
directors without any action on the part of your board of directors, upon the
terms and conditions set forth in the 1999 Stock Option Plan. The exercise price
of these options is 100 percent of the fair market value of the shares of our
common stock subject to the option on the date on which those options are
granted. Each option is subject to the other provisions of the 1999 Incentive
and Nonstatutory Stock Option Plan.
We do not separately pay our directors who are not our employees or
consultants. Our directors received 25,000 options at an exercise price of $5.00
per share, restricted under Rule 144 for the 2000-2001 term served for their
services. We reimburse our directors for their expenses incurred during their
term as a director directly relating to their position as a director.
BENEFICIAL OWNERSHIP OF OUR COMMON STOCK
The following table sets forth, as of April 30, 2001, certain
information regarding the ownership of our common stock by (a) each person who
is known to us to own, of record or beneficially, more than five percent of our
common stock, (b) each of our directors and director nominees and (c) all
directors and executive officers as a
13
group. Where the persons listed have the right to acquire additional shares of
our common stock through the exercise of options or warrants within 60 days,
those additional shares are deemed to be outstanding for the purpose of
computing the percentage of outstanding shares owned by such persons, but are
not deemed to be outstanding for the purpose of computing the percentage
ownership interests of any other person. Unless otherwise indicated, each of the
stockholders shown in the table below has sole voting and investment power with
respect to the shares beneficially owned.
NAME OF BENEFICIAL OWNER NUMBER OF SHARES (1) PERCENTAGE OWNED
- ------------------------------------------- -------------------- ----------------
Najeeb Ghauri 735,000 (2) 6.4%
Naeem Ghauri 1,134,436 (3) 9.8%
Irfan Mustafa 120,000 (4) 1.0%
Salim Ghauri 1,386,416 (3) 12.0%
Shahab Ghauri 1,258,432 (6) 10.9%
Cary Burch 0 *
Waheed Akbar 100,000 (5) *
Nasim Ashraf 50,000 *
NetSol Shareholders Group, LLC (7) 3,007,740 26.0%
All directors and executive officers 4,784,284 41.4%
as a group (8 persons)
* Less than one percent
(1) Except as otherwise indicated, we believe that the beneficial owners of
our common stock listed below, based on information furnished by such
owners, have sole investment and voting power with respect to such
shares, subject to any applicable community property laws. Beneficial
ownership is determined in accordance with the rules of the Securities
and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of our common stock subject to
options or warrants currently exercisable, or exercisable within 60
days, are deemed outstanding for purposes of computing the percentage
of the person holding those options or warrants, but are not deemed
outstanding for purposes of computing the percentage of any other
person.
(2) Excludes 150,000 options granted under his employment contract at an
exercise price of $2.58 vested in April 2000 and another 150,000
granted to him at an exercise price of $3.58 vested in April 2001;
includes 20,000 options granted to each director at an exercise price
of $5.13 for five years from September 1999 for their services during
the 1999-2000 term;
(3) Excludes 150,000 options granted under his employment contract at an
exercise price of $2.58 vested in April 2000 and another 150,000
granted to him at an exercise price of $3.58 vested in April 2001;
includes 20,000 options granted to each director at an exercise price
of $5.00 for five years from September 1999 for their services during
the 1999-2000 term. For those directors that are 10% stockholders, the
exercise price is $5.50.
(4) Includes 20,000 options granted to each director for the term 1997-1998
at an exercise price of $.01 for five years from May 12, 1997; includes
20,000 options granted to each director for the term 1998-1999 at an
exercise price of $1.44 for five years from May 18, 1999; includes
25,000 options granted as chairman of your board at an exercise price
of $1.44 for five years from May 18, 1999.
(5) Excludes 20,000 options granted to each director for the term 1999-2000
at an exercise price of $5.00 for five years from September 1999.
(6) Excludes 20,000 Options granted to officers of NetSol UK in August
1999, at an exercise price of $5.00 to vest one year from the date of
grant. Options are for a term of five years from August 1999; Includes
20,000 options granted to each director for the term 1999-2000 at an
exercise price of $5.00 for five years from September 1999. For those
directors that are 10% stockholders, the exercise price is $5.50.
14
(7) As reported in Blue Water Master Fund LP's Schedule 13D/A as filed
with the Securities and Exchange Commission on April 27, 2001.
PURCHASES, SALES AND OTHER TRANSACTIONS INVOLVING OF OUR SECURITIES BY OUR
DIRECTORS AND MEMBERS OF THE GROUP IN THE LAST TWO YEARS
The table below sets forth purchases, sales and other transactions in
our common stock by our directors and members of the group over the last two
years:
SHARES OTHER
NAME PURCHASED SHARES SOLD TRANSACTIONS DATE
Najeeb U. Ghauri
Irfan Mustafa
Salim Ghauri
Naeem Ghauri
Shahab Ghauri
Waheed Akbar
Nasim Ashraf
Cary Burch
Blue Water Master
Fund, L.P.
Blue Water Partners
II, L.P.
PSM International
Robert and Susan Harmond
Dr. Henry Vogel
CERTAIN RELATIONSHIPS AND TRANSACTIONS
In September 1999, we entered into a consulting contract with one of
our directors, Irfan Mustafa, for Mr. Mustafa to develop and advise us on
marketing strategies, develop investor relations and develop strategic
alliances. In addition, Mr. Mustafa is to assist the board of directors in
mergers, acquisitions and other business combinations.
We believe that the terms of these transactions are no less favorable
to us than would have been obtained from an unaffiliated third-party in similar
transactions. All future transactions with affiliates will be on terms no less
favorable than could be obtained from unaffiliated third parties, and will be
approved by a majority of the disinterested directors.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR OUR 2001 ANNUAL MEETING
The rules of the Securities and Exchange Commission permit our
stockholders, after notice to us, to present proposals for stockholder action in
our annual meeting proxy statement where such proposals are consistent with
applicable law, pertain to matters appropriate for stockholder action and are
not properly omitted by our action in accordance with the proxy rules published
by the Securities and Exchange Commission. Our next annual meeting of
stockholders is expected to be held on or about November 15, 2001, and proxy
materials in connection with that meeting are expected to be mailed on or about
September 28, 2001. We must receive stockholder proposals prepared in accordance
with the proxy rules on or before June 1, 2001.
YOU SHOULD BE CAUTIOUS ABOUT RELYING ON OUR FORWARD LOOKING STATEMENTS IN THIS
PROXY
This proxy statement contains forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and other
securities laws. The words "believe," "expect," "anticipate," "intend,"
variations of those words, and similar expressions identify forward looking
statements, but their absence does not mean that the statement is not
forward-looking. These statements are not guarantees of future performance and
are subject to risks, uncertainties and assumptions that are difficult to
predict. Factors that could affect our actual results include the progress and
costs of the development of products and services and the timing of the market
acceptance, and other factors described in our filings with the Securities and
Exchange Commission , including our annual report on Form 10-K and quarterly
reports on Form 10-Q. You are cautioned not to place undue reliance on our
forward-looking statements, which speak only as of the date of this proxy
statement.
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FORM OF PROXY CARD
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Najeeb U. Ghauri, with full power of
substitution, as its, his or her Proxy to represent and vote, as designated
below, all of the shares of common stock of NetSol International, Inc.,
registered in the name of the undersigned at the close of business on May 11,
2001 with the powers the undersigned would possess if personally present at the
special meeting of stockholders of NetSol to be held at NetSol's offices at
Y-126 Comm DHA, Lahore, Pakistan beginning at 9:00 a.m. (local time), on June 1,
2001 and at any adjournment or postponement thereof, hereby revoking any proxy
or proxies previously given; and to vote the shares of the undersigned at such
meeting with respect to (1) a proposal to remove the entire existing board of
directors and, if this proposal is successful, (2) the election of new directors
to any newly created vacancies, including the right in his discretion to
cumulate and distribute the aggregate cumulative votes in respect of such shares
as he chooses among the nominees as to whom the undersigned has not withheld
authority; and, unless the undersigned indicates otherwise, with discretionary
authority to act on matters as may properly come before the special meeting or
any adjournments or postponements thereof.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL NO. 1
AND A VOTE FOR THE "FOR" THE BOARD'S NOMINEES IN PROPOSAL NO. 2.
1. A proposal to remove all existing members of the board of directors of
Net Sol International, Inc.
[ ] AGAINST [ ] ABSTAIN [ ] FOR
2. A proposal to elect the following persons to serve as members of the
board of directors of Net Sol International, Inc. Najeeb Ghauri, Naeem Ghauri,
Salim Ghauri, Shahab Ghauri, Irfan Mustafa, Waheed Akbar, M.D., Nasim Ashraf,
M.D., Cary Burch
[ ] VOTE FOR ALL NOMINEES (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY TO VOTE FOR ALL NOMINEES
To vote for any individual nominee, write that nominee's name in the space
below.
To withhold authority for any individual nominee, indicate so in the space below
such nominee's name on the line provided.
To cumulate votes, place the number or percentage of votes for a nominee below
such nominee's name on the line provided.
Najeeb Ghauri Naeem Ghauri Salim Ghauri Waheed Akbar, M.D
- ------------ ------------ ------------ ------------
Shahab Ghauri Irfan Mustafa Nasim Ashraf, M.D. Cary Burch
- ------------ ------------ ------------ ------------
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS GIVEN, THE PROXY WILL BE VOTED "AGAINST" PROPOSAL NO. 1 AND "FOR" EACH OF THE
NOMINEES IN PROPOSAL NO. 2.
|_| Check this box to withhold discretion to vote on other matters properly
presented.
Dated: __________________________, 2001
---------------------------------------------
(Signature)
---------------------------------------------
(Second signature if shares are held jointly)
PLEASE DATE AND SIGN ABOVE exactly as your
name appears on your Stock Certificate,
indicating where appropriate, official
position or representative capacity.