SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. 4)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED
BY RULE 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-12
NETSOL INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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NETSOL INTERNATIONAL, INC.
24025 PARK SORRENTO, SUITE 220
CALABASAS, CA 91302
June 8, 2001
Dear Fellow Stockholder:
As required by the SEC's rules, we mailed to you a proxy and consent
solicitation statement dated June 8, 2001 and NetSol Shareholders Group, LLC
mailed to you their proxy and consent solicitation statement dated June 7, 2001
related to a special meeting of our stockholders to be held on June 19, 2001 at
our principal executive offices in Calabasas, California.
NetSol Shareholders Group, LLC, or the group, is soliciting proxies to take
the following actions at the special meeting, or in the alternative, written
consents to take the following actions without a stockholders meeting: (1) to
amend our bylaws to increase the size of your eight member board of directors to
fifteen directors, and (2) to elect seven new directors to fill the vacancies
created on our board of directors by the board expansion. If the group's first
proposal, expanding the board of directors to almost twice its current size,
fails, its second proposal, electing the seven additional 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. If the group's first proposal fails, we ask that you approve
amendments to our articles of incorporation and bylaws to prevent future
insurgents, such as the group, from bringing proxy challenges which distract our
management team from its job of growing your company.
Let us tell you briefly in this letter, and in detail in the attached proxy
and consent solicitation statement, 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 of software
development for the leasing and finance industries, and it is paying off. We
curtailed our non-core businesses which will significantly reduce our operating
losses and our expenses. We are now driving our team of engineers in Lahore,
Pakistan to truly capitalize on our software cost advantages. We are ISO 9001
certified in Pakistan, and have signed contracts with three units of
Daimler-Chrysler.
2. We plan to begin introducing our Enterprise Resource Planning software
applications 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. Four
of our directors have over fifty percent of their personal wealth invested in
our common stock. Each of our current directors owns at least 50,000 shares of
our common stock. As you can see, our interests are aligned with yours in a very
serious way.
4. As mentioned in their proxy and consent statement, the group's proposed
expanded board may explore the sale of your company when valuations in the
software sector are the lowest they have been in several years.
5. Members of the group have encouraged management to consider a
transaction with Netgateway, Inc. The group's nominees include Don Danks and
Shelly Singhal, both directors of Netgateway, 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
expanded 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. According to their
biographies, the proposed slate includes a hedge fund manager, a racing car
company owner and a couple of Wall Street financiers.
NO MATTER HOW FEW SHARES YOU HOLD, PLEASE SIGN AND RETURN THE ENCLOSED WHITE
PROXY CARD AND YELLOW CONSENT 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 and consent solicitation statement to our
stockholders on or about June 8, 2001.
NETSOL INTERNATIONAL, INC.
24025 PARK SORRENTO, SUITE 220
CALABASAS, CA 91302
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NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
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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 24025 Park Sorrento, Calabasas, California,
on Tuesday, June 19, 2001, for the following purposes:
1. Consider and act on a proposal submitted by NetSol Shareholders Group, LLC
to amend our bylaws to expand your current eight member board of directors
by increasing and fixing the number of authorized directors at fifteen
directors;
AND IF THIS PROPOSAL IS SUCCESSFUL, THEN CONSIDER AND ACT ON OUR PROPOSAL TO:
2. Fill the newly created vacancies by electing the nominees of your board of
directors or the nominees of NetSol Shareholders Group, LLC.
AND IF THE FIRST PROPOSAL IS NOT SUCCESSFUL, CONSIDER AND ACT ON OUR PROPOSALS
TO:
3. Amend our articles of incorporation to remove cumulative voting in the
election of our directors;
4. Amend our articles of incorporation to provide for a classified board of
directors so each of our directors is elected for a three year term with
one-third of our board standing for election each year;
5. Amend our articles of incorporation and bylaws to provide that any action
required or permitted to be taken by the stockholders may be effected only
at an annual or special meeting of stockholders, and not by written consent
of stockholders;
6. Amend our articles of incorporation and bylaws to provide that only our
chief executive officer, president, chairman of the board or board of
directors may call a special meeting of our stockholders;
7. Amend our articles of incorporation and bylaws to provide for an advance
notice procedure for the nomination, other than by or at the direction of
the board of directors or a committee of the board of directors, of
candidates for election as directors as well as for other proposals to be
considered at meetings of stockholders;
8 Amend our articles of incorporation and bylaws to provide that our directors
may only be removed from office for cause;
9. Amend our articles of incorporation and bylaws to provide that the
affirmative vote of holders of at least 66 2/3% of our outstanding voting
stock be required to amend our bylaws or portions of our amended articles of
incorporation;
10. Amend our articles of incorporation to authorize 5,000,000 shares of
undesignated preferred stock with rights, preferences and privileges to be
designated by our board without your vote; and
11. Amend our articles of incorporation and bylaws to provide for limited
liability and indemnification for directors, officers and other agents of
your Company.
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
June 8, 2001
NETSOL INTERNATIONAL, INC.
24025 PARK SORRENTO, SUITE 220
CALABASAS, CA 91302
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PROXY AND CONSENT SOLICITATION STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
JUNE 8, 2001
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Your board of directors, not including Mr. Burch, is providing this proxy
and consent solicitation statement and the accompanying WHITE proxy card and
YELLOW consent card to you in connection with your board of directors'
solicitation of (a) proxies for use at a special meeting of our common
stockholders to be held on June 19, 2001, beginning at 9:00 a.m. (local time),
at our principal executive offices, 24025 Park Sorrento, Calabasas, California,
and any and all adjournments or postponements of the special meeting and (b)
written consents, in lieu of a special meeting, from the stockholders of NetSol
International, Inc.
The special meeting has been called solely to consider and act on the
following:
1) A proposal submitted by Netsol Shareholders Group, LLC to amend our bylaws
to increase and fix the number of authorized directors of the company at
fifteen;
AND IF THE FIRST PROPOSAL IS SUCCESSFUL:
2) The election of seven persons to fill the newly created vacancies by
electing nominees of your board named in this proxy and consent solicitation
statement or nominees of the group named in its proxy and consent statement
dated June 7, 2001, to serve as directors of your company;
AND IF THE FIRST PROPOSAL IS NOT SUCCESSFUL, CONSIDER AND ACT ON OUR PROPOSALS
TO:
3) Amend our articles of incorporation to remove cumulative voting in the
election of our directors;
4) Amend our articles of incorporation to provide for a classified board of
directors so each of our directors is elected for a three year term with
one-third of our board standing for election each year;
5) Amend our articles of incorporation and bylaws to provide that any action
required or permitted to be taken by the stockholders may be effected only
at an annual or special meeting of stockholders, and not by written consent
of stockholders;
6) Amend our articles of incorporation and bylaws to provide that only our
chief executive officer, president, chairman of the board or board of
directors may call a special meeting of stockholders;
7) Amend our articles of incorporation and bylaws to provide for an advance
notice procedure for the nomination, other than by or at the direction of
the board of directors or a committee of the board of directors, of
candidates for election as directors as well as for other proposals to be
considered at meetings of stockholders;
8) Amend our articles of incorporation and bylaws to provide that our directors
may only be removed from office for cause;
9) Amend our articles of incorporation and bylaws to provide that the
affirmative vote of holders of at least 66-2/3% of the outstanding voting
stock be required to amend our bylaws or some amendments to our articles of
incorporation;
10) Amend our articles of incorporation to authorize 5,000,000 shares of
undesignated preferred stock with rights, preferences and privileges to be
designated by our board without your vote; and
11) Amend our articles of incorporation and bylaws to provide for limited
liability and indemnification for directors, officers and other agents of
your company.
In addition to your board's solicitation of proxies for use at our June 19,
2001 special meeting, your board of directors, not including Mr. Burch, is
soliciting consents to approve and enact our proposals by an action by written
consent, in lieu of a special meeting, from stockholders holding not less than a
majority of the shares of our common stock outstanding and entitled to vote. If
consents from stockholders holding the required majority voting power are not
obtained prior to our June 19, 2001 special meeting and if the proposals are not
approved at our June 19, 2001 special meeting, your board will continue to
solicit consents to enact our proposals through August 1, 2001. See "Written
Consent Procedures" for additional important information about procedures for
taking action by written consent.
We will bear the cost of preparing and mailing the notice of the special
meeting, this proxy and consent solicitation statement, the WHITE proxy card and
YELLOW consent 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., or MacKenzie, 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 or
consents either in person, by telephone or other electronic means 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 and
consents are currently expected to total approximately $175,000 and to date are
approximately $95,000.
We are holding a special meeting of stockholders in response to an
April 27, 2001, request letter by Blue Water Master Fund, L.P. This request
conformed with our current bylaws, which allows any one or more stockholders
holding shares in the aggregate entitled to cast not less than 10% of the votes
at a meeting to call a special meeting. On the same date, the group filed its
preliminary proxy statement with the SEC. In response, on May 7, 2001, we filed
a preliminary proxy statement opposing the group's solicitation. The group's
request and proxy statement asked our stockholders to vote in favor of their
proposed amendment to our bylaws increasing the size of our board from eight to
fifteen directors and to elect new board members comprised of their hand-picked
nominees to fill the newly created vacancies.
PROPOSAL NO. 1 OF THE GROUP AND PROPOSAL NO. 2.
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. One member of the group of five dropped out so
the group is now four stockholders. Rather than risking their capital in support
of their ability to grow your company through purchasing your shares in order to
get control, they are soliciting your proxy to vote at the special meeting or,
alternatively, your written consent in lieu of the special meeting, to
(1) amend our bylaws to expand your current eight member board of directors by
increasing and fixing the number of authorized directors of the company at
fifteen directors and (2) appoint seven of their hand-picked nominees to your
board, by means of BLUE proxy cards.
YOU SHOULD NOT SIGN ANY BLUE PROXY CARD OR GREEN CONSENT CARD OR OTHER FORMS
THAT MAY BE FURNISHED TO YOU BY THE SHAREHOLDER GROUP.
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A SUMMARY OF YOUR BOARD'S PLANS FOR NETSOL
In December 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. In recent years, while
continuing our software development business, we expanded into the areas of
information technology and management consulting, systems integration and
outsourcing services. As part of its analysis, your board decided to focus on
building our software development and services business, which is now our core
business again, and to significantly scale down other business activities, such
as Internet and infrastructure businesses. In focusing on its software
development and services business, your board also adopted a plan to expand into
North America and Asia. In connection with this effort, during 2001, we scaled
down our Internet-focused and e-commerce operations in the United Kingdom and in
Germany and our Internet service provider operation in Karachi, all of which
were not tied to our core business. All that remains to be implemented under our
strategic plan outlined in our December 2000 board meeting is expanding our
software development and services business into North America and Asia.
We believe the operational performance over the past nine months of our core
competency of software development has been strong. In the past eighteen months,
we added, as customers four of our largest software customers by revenue to
date, VoiceStream Wireless USA, Daimler-Chrysler Financial Services Australia,
Daimler-Chrysler Financial Services Singapore, and Daimler-Chrysler Financial
Services Taiwan. We are continuing to target high revenue customers and grow our
customer base. Since your board refocused our company on software development in
December 2000, we added, as software customers with orders in excess of $25,000,
Wells Fargo Bank, Askari Leasing and Citibank Pakistan. We also launched new
products, including a product called our Contract Management System, or CMS,
which is our comprehensive lease asset-based application suite.
Since the April 2000 Nasdaq market decline, many technology companies have
been delisted, or worse, dissolved. We, on the other hand, are managing our way
through difficult times. Our revenues in each period this year have increased
over or stayed consistent with the same periods last year, despite the global
decrease in technology related spending. Our net sales were $1,850,249 for our
third quarter of fiscal 2001, which ended March 31, 2001. This was comparable to
net sales of $1,858,348 for the same quarter in fiscal 2000. Current
year-to-date sales are $5,761,234, a 14% increase from year-to-date sales for
the comparable period of fiscal 2000.
We announced on May 14, 2001 that we divested our German subsidiary,
Supernet AG. We took this action to continue on our plan of focusing on our core
business. A positive by-product of this action is our expectation that more than
$600,000 of liabilities will be shed. The formal agreement is scheduled to be
closed on June 15, 2001. We also announced we are moving forward on our
previously declared intention to significantly scale down our network focused
operations at our U.K. subsidiary, Network Solutions Group, which was acquired
in August 1999. As a result of this scaling down, we recorded a one-time
non-cash charge to earnings in the third quarter for impairment losses on
purchased intangible assets.
Since your board refocused our company on software development in December
2000, our Asian operations in Pakistan have reported increased revenues. In
Pakistan, our products have been validated through ISO 9001 certification.
Unfortunately, recent improvements in our business, its prospects and our
financial results have not been rewarded in the equity market. Since the market
downturn in the technology sector in April 2000, we believe our stock has, in
general, done slightly better than competitor software stocks such as Scient
Corp., Viant Corporation and iGate Capital.
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
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performance, your board of directors also examined many strategies for enhancing
stockholder value through expansion into North American and Asian markets,
acquisitions and other transactions.
Having proved our software in the Asian market by adding customers and
generating higher margin revenue, we are poised to begin introducing our
Enterprise Resource Planning software applications 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 or GREEN consent card, please sign and
date the enclosed WHITE proxy card and YELLOW consent card and return them in
the enclosed postage-paid envelope. Our special meeting will be held on
June 19, 2001, so it is important that you send in the WHITE proxy card and
YELLOW consent card today.
YOUR BOARD OF DIRECTORS UNANIMOUSLY (WITH MR. BURCH ABSTAINING) URGES YOU TO
OPPOSE THE GROUP'S SOLICITATION.
YOUR BOARD'S PROPOSALS
In addition to urging you to oppose the group's solicitation, your board of
directors, not including Mr. Burch, solicits your vote and consent to approve
proposals 3 through 11 to amend and restate our amended articles of
incorporation and bylaws to:
- remove cumulative voting in the election of directors;
- provide for a classified board of directors so each of our directors is
elected for a three year term with one-third of your board standing for
election each year;
- provide that any action to be taken by our stockholders take place only at
our annual meetings or a special meeting of our stockholders, and not by
written consent of our stockholders;
- provide that only our chief executive officer, president, chairman of the
board or board of directors may call a special meeting of stockholders;
- provide for an advance notice procedure for the nomination, other than by
your board of directors, of candidates for election as your directors as
well as for other proposals to be considered at our meetings of
stockholders;
- provide that our directors may only be removed from office for cause;
- provide that the holders of at least 66 2/3% of our outstanding voting
stock vote in favor of any amendment to our bylaws and some amendments to
our articles of incorporation;
- authorize 5,000,000 shares of undesignated preferred stock, with rights,
preferences and privileges to be designated by your board without your
vote; and
- provide for limited liability and indemnification for our directors,
officers and other agents.
We believe that, if approved, proposals 3 through 10 to amend and restate
our bylaws and articles of incorporation would provide for greater continuity,
stability and independence of your board of directors and discourage
non-negotiated takeover attempts, particularly those involving unequal treatment
of our stockholders. In addition, we believe proposal 11 to amend the bylaws and
articles of incorporation to permit our company to limit the liability of our
directors and to provide indemnification to our officers, directors, and
employees will assist us in attracting and retaining the most capable
individuals to serve as our officers and directors.
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The above descriptions are only a summary of our proposed amended and
restated articles of incorporation and bylaws and are qualified in their
entirety by reference to the full text of the proposed amended and restated
articles and bylaws, copies of which are included in this proxy and consent
solicitation statement as Appendix A and Appendix B.
See also "Overall Anti-Takeover Effect of Proposals 3--10 of your Board" and
"Purpose and Effect of Specific Board Proposals" below for additional important
information about your board's proposals.
OVERALL ANTI-TAKEOVER EFFECT OF PROPOSALS 3--10 OF YOUR BOARD
Currently, our corporate governance provisions do not provide anti-takeover
protections to discourage unsolicited attempts to take control of our company,
nor are there contractual provisions such as employment agreements or loan
agreements with material anti-takeover impacts. If adopted, the overall effect
of proposals 3 through 10 to amend our bylaws and articles of incorporation may
be to discourage or hinder proxy contests, tender offers or unsolicited merger
transactions. This may be disadvantageous to you to the extent that it has the
effect of discouraging a future takeover attempt which is not approved by your
board of directors, but which a majority of our stockholders may deem to be in
their best interests or in which our stockholders may receive a substantial
premium for their shares over the current market value or over their cost basis
in such shares. As a result of proposals 3 through 10, stockholders who might
want to participate in potential change of control transactions may not have an
opportunity to do so. In addition, to the extent that our proposals enable your
board of directors to resist a takeover or a change of control of our company,
your board could make it more difficult to remove your existing board and
management, even if removing them was beneficial to you. Other than the
amendments to our bylaws and articles of incorporation described in this proxy
and consent statement, your board of directors does not currently intend to
propose other anti-takeover measures in the future. See "Purpose and Effect of
Specific Board Proposals" below for additional information on the possible
anti-takeover effects of a specific proposal.
PURPOSE AND EFFECT OF SPECIFIC BOARD PROPOSALS
A summary of the material effects and purposes of the board's specific
proposals to amend and restate our articles of incorporation and bylaws include:
PROPOSAL NO. 3 TO ELIMINATE CUMULATIVE VOTING. Our articles of
incorporation currently allow cumulative voting. Under cumulative voting, each
of you is entitled to cast as many votes as there are directors to be elected
multiplied by the number of shares registered in your name. You may cast all of
your votes for a single nominee or may distribute them among any two or more
nominees. Without cumulative voting, the holders of a majority of the shares
present or represented at an annual meeting will be able to elect all our
directors to be elected at that meeting, and no person could be elected without
the support of a majority of the stock held by those stockholders. For example,
a person or persons holding shares or proxies representing less than a majority
of the shares present will not be able to elect any directors as they might if
cumulative voting were applicable. The elimination of cumulative voting would
prevent minority stockholder interests adverse to our company and adverse to a
majority of our stockholders from obtaining representation on our board of
directors. The absence of cumulative voting would also mean that minority
stockholders, like the group, lose a means of having their voice heard in the
management of our company.
PROPOSAL NO. 4 FOR A CLASSIFIED BOARD OF DIRECTORS. Under our current
bylaws, all your directors are elected at each annual meeting of our
stockholders and hold office until our next annual meeting. A classified board
is permitted under Nevada law if at least one fourth of a corporation's
directors are elected annually. Our proposed amended and restated articles of
incorporation will divide your board of directors into three classes. Each of
your directors will be elected to a three year term and each year
5
only one-third of the seats on your board will be up for election. If your board
is classified, at least two annual stockholders meetings, instead of one, may be
required to replace a majority of your board. The division of your board into
classes so only one-third of your board is up for election annually may have the
effect of discouraging or delaying efforts to acquire control of the your
company through a change in the composition of your board and may make it more
difficult for our stockholders to change the majority of our board even when the
reason for the change may be the performance of your board.
Our proposal to amend our articles of incorporation to create a classified
board would also permit your board of directors to fill vacancies on your board.
Individuals appointed by your board to fill vacancies on your board would hold
office for the remainder of the full term of the director for which the vacancy
was created or occurred and until the director's successor had been duly elected
and qualified. Under our current bylaws, a vacancy on your board of directors is
filled by the vote of a majority of the outstanding voting shares present or
represented and entitled to vote at a meeting of our stockholders or by the
written consent of the majority of our outstanding voting shares. This means
that any vacancy on your board would continue unfilled until our next
stockholders meeting. Currently, an elected director holds office until the next
annual meeting, which is approximately a one year term. If our proposal is
approved and a vacancy on your board occurred, an individual might be appointed
by your board who could potentially serve for as long as a director's full three
year term.
PROPOSAL NO. 5 AND NO. 6 REGARDING ACTION BY WRITTEN CONSENT; SPECIAL
STOCKHOLDER MEETINGS. Under our current bylaws, our stockholders may take any
action permitted at an annual or special meeting without a meeting if done by
written consent, and stockholders may call a special meeting of our
stockholders. Under Nevada law, stockholders' ability to take action by written
consent may be eliminated in the articles or bylaws of a corporation. If you
approve the proposed amended and restated bylaws and articles of incorporation,
the power of our stockholders to act without a meeting by written consent and to
call a special meeting of our stockholders will be eliminated.
Elimination of the ability of our stockholders to act unilaterally by
written consent and to call special meetings would mean that proposals for
stockholder action such as proposed amendments to our bylaws or removal of our
directors could be delayed until our next annual stockholders meeting. This
means your board would need to devote time and energy to stockholder proposals
only once a year, permitting them to spend the remainder of the year running
your company. Eliminating unilateral stockholder action by written consent and
the ability to call special meetings may have the effect of discouraging or
delaying efforts to acquire control of our company. Elimination of these
provisions would make more difficult or discourage a hostile merger, proxy
contest or the assumption of control of our company by a large stockholder or
group of stockholders without consent of your board. Because these provisions
may allow your board of directors to resist a takeover or change in control by
requiring that actions of our stockholders be submitted at a duly called and
convened meeting, your board has greater power in negotiating with any potential
acquiror.
PROPOSAL NO. 7 REGARDING NOTIFICATION REQUIREMENTS FOR STOCKHOLDER PROPOSALS
AND DIRECTOR NOMINATIONS. Our current bylaws do not require stockholders to
provide us with advance notice of any proposals or director nominations that
stockholders seek to make at our annual or a special meeting of our
stockholders. Our proposed amended and restated bylaws require that stockholders
seeking to make stockholder proposals must: (i) notify us of the proposal not
less than 90 nor more than 120 days before the date of the meeting;
(ii) disclose adequate information about the proposal to our board of directors;
and (iii) provide information about our stockholders making the proposal. In
addition, our proposed amended and restated bylaws would require that
stockholders' director nominations be in writing and contain adequate
information about the nominee. These prior notice provisions would give our
board of directors advance notice of possible hostile stockholder proposals and
director nominations, and provide our board of directors with additional time to
develop a response.
6
PROPOSAL NO. 8 REGARDING PROHIBITION AGAINST REMOVAL OF DIRECTORS WITHOUT
CAUSE. Our current bylaws provide that our directors may be removed without
cause from office, in accordance with Nevada law, if holders of two-thirds of
our outstanding voting stock vote for removal. If approved, the proposed
amendments to our bylaws and articles will provide that unless our board
determines that removal of a director is in the best interest of our company,
directors may only be removed from office for cause. These amendments may make a
change of control of our company more difficult, and therefore less likely which
would have the effects described above in Proposal 4. The proposed amendments
may also make the removal of directors more difficult even if beneficial to our
stockholders.
PROPOSAL NO. 9 REGARDING STOCKHOLDER APPROVAL TO AMEND BYLAWS AND
ARTICLES. Nevada law provides that stockholders holding at least a majority of
a corporation's outstanding shares may amend its articles of incorporation,
unless otherwise provided in that corporation's articles of incorporation. Our
bylaws and articles of incorporation currently permit a group of stockholders
holding at least a majority of the outstanding shares of our stock to amend our
bylaws and articles. Under our proposed amended and restated articles of
incorporation and bylaws, the vote of stockholders holding 66 2/3% of our
company's stock will be required for stockholders to amend or repeal our bylaws
and the portion of our amended and restated articles of incorporation related to
our board of directors and stockholders' meetings. These provisions will make it
more difficult for a group of insurgent stockholders to amend your bylaws and
articles of incorporation.
PROPOSAL NO. 10 TO AUTHORIZE UNDESIGNATED PREFERRED STOCK. Authorizing
undesignated preferred stock will provide your board with the flexibility to
issue up to 5,000,000 shares of preferred stock in series and with rights,
preferences and privileges, as your board may determine, without requiring your
prior vote. From time to time, your board may determine that the designation and
issuance of preferred stock with rights and preferences is necessary to serve
corporate purposes. THIS MAY INCLUDE INSTANCES, LIKE THIS CURRENT PROXY CONTEST,
INVOLVING UNSOLICITED ATTEMPTS TO TAKE OVER OUR COMPANY.
If approved, this proposal could serve as an anti-takeover measure because
your board, without requiring prior stockholder approval, could issue preferred
stock with particular rights and preferences, including preferable voting,
liquidation, dividend or other rights. Your board could authorize issuance of
the preferred stock to a party friendly to the existing management, to hinder
the efforts of those seeking to effect a merger or gain control of our company.
Shares of authorized and unissued stock could, within the limits imposed by
applicable law, be given terms or be issued in one or more transactions that
would make a takeover of our company more difficult, and therefore less likely.
The issuance of additional shares of preferred stock could also be used to
dilute the stock ownership of persons seeking to obtain control of our company
through a "poison pill." Shares of undesignated preferred stock could be used to
make acquisitions or to enter into other transactions that might frustrate
potential acquirors. This could have the effect of decreasing the market price
of our common stock. In addition, any preferred stock designated and issued
could have rights equal to or superior to those of our outstanding common stock
and could adversely affect your voting or other rights in our common stock.
Finally, any issuance of additional stock could have the effect of diluting
the earnings per share and book value per share of all outstanding shares of our
common stock, and not just diluting the stock ownership or voting rights of
persons seeking to obtain control of our company. While this proposal would
permit your management to privately place preferred stock with friendly parties
or to create a poison pill, your board currently does not intend to enter into
this type of transaction with any parties. Your board does not presently
contemplate the designation and issuance of any undesignated preferred stock.
7
PROPOSAL NO. 11 REGARDING DIRECTOR LIMITED LIABILITY AND
INDEMNIFICATION. Today our bylaws provide only limited liability and
indemnification protection to our directors. The proposed amendments to our
articles of incorporation and bylaws would eliminate any personal liability of a
director or officer to us or to our stockholders for monetary damages for breach
of fiduciary duty as a director or officer and would provide indemnification to
our directors and officers, as permitted under Nevada laws. A director or
officer could still be liable for (i) acts or omissions involving intentional
misconduct, fraud or a knowing violation of the law or (iii) the payment of
unlawful distributions to stockholders.
Our proposal will provide liability protection to our directors and officers
to the extent permitted under current applicable laws. Under our proposal, if
these laws are amended in the future to further limit the liability exposure of
directors and officers, our directors and officers may not receive the
additional protections afforded under these revised laws. If approved, our
proposal would not apply retroactively to provide our current directors
liability protection for actions taken prior to approval of this proposal.
Following approval, a current or future director or officer of our company could
not be held liable for monetary damages to our company or our stockholders for
gross negligence or lack of due care in carrying out his or her fiduciary duties
as our director or officer. Our proposal also provides our directors and
officers with indemnification to the fullest extent authorized or permitted by
law for lawsuits threatened or brought against them as a result of their service
as directors or officers.
Under our proposals, a director could still be liable if the director acted
in bad faith or in a manner he or she actually believed to be opposed to the
best interests of our company. In addition, our directors and officers could
still be liable for their actions under federal laws, including securities laws,
and our proposal would not eliminate the rights of our stockholders to pursue
equitable remedies or any other causes of action against our directors under
applicable federal and state laws.
We seek to retain the most capable individuals available to serve as our
officers and directors. Your board of directors believes that providing limited
liability protection and indemnification to our directors and officers will be a
significant factor in attracting talented individuals and in encouraging
existing directors and officers to continue to serve in these capacities and
freeing them to make corporate decisions on their own merits rather than out of
a desire to avoid personal liability. To date, we have not experienced
difficulty in attracting and retaining qualified directors but the matter of
personal liability is potentially a matter of concern in serving as a director.
You should note, however, that there may be an inherent conflict of interest in
our board of directors' recommendation of the proposed amended and restated
bylaws and charter due to the interest of the members of the board of directors
in obtaining the protection of these limited liability and indemnification
provisions.
WHAT YOU SHOULD DO NOW
- SIGN AND MAIL BACK THE WHITE PROXY CARD AND YELLOW CONSENT CARD; AND
- DO NOT SIGN OR MAIL IN THE BLUE PROXY CARD OR GREEN CONSENT 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 or GREEN consent
card, you have a right to change your vote. You may revoke your BLUE proxy card
by (1) signing and returning the 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. While Nevada law does not
expressly provide for the revocation of consents, under one interpretation of
Nevada law you may revoke your GREEN consent card or your yellow consent card by
giving written notice of your revocation to us either by mail, fax machine,
email or other transmission. See "Proxy Procedures" and "Written Consent
Procedures" below.
8
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 the WHITE proxy card and YELLOW consent card on
your behalf today.
We have retained MacKenzie Partners, Inc. to assist in communicating with
you in connection with our solicitation and to assist in our efforts to obtain
proxies and revocations of consent. If you have any questions about how to
complete or submit either your WHITE proxy card or your YELLOW consent card or
any other questions, MacKenzie Partners, Inc., will be pleased to assist you.
You can reach MacKenzie Partners, Inc. toll-free at (800) 322-2885 or at
proxy@mackenziepartners.com.
PROXY PROCEDURES
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:
- attending the special meeting, filing written notice of the termination of
the appointment with one of our officers, and voting in person;
- filing a new written subsequently dated appointment of a proxy with one of
our officers; or
- by giving written notice of your revocation by mail, fax machine, email or
other transmission.
If your revocation is received after the vote at the special meeting, it
will not be effective. Unless you revoke your proxy prior to the special
meeting, it will be:
- voted at the special meeting; and
- if you specified a choice as to how to vote your shares, the proxies will
vote for you in accordance with your choice.
All of your shares will be voted at the meeting in the manner you indicate
on your WHITE proxy card. 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 group's proposal to amend the bylaws, and if the bylaw amendment
passes, in favor of the nominees to our board of directors we describe in this
document. If the group's bylaw amendment is not approved, the proxies named in
the WHITE proxy card will also vote all shares represented by those proxies in
favor of our proposals to amend and restate our articles of incorporation and
bylaws.
The only other matters that could properly come before the meeting are
ministerial matters like adjournment. Unless you indicate otherwise on the WHITE
proxy card, the proxies named in your WHITE proxy card will have the power to
vote your shares on other matters in your proxies' discretion.
WRITTEN CONSENT PROCEDURES
Under Section 78.320 of the Nevada Revised Statutes, unless otherwise
provided in the articles of incorporation or the bylaws, any action required or
permitted to be taken at a meeting of stockholders of a Nevada corporation may
be taken without a meeting if, before or after the action, a written consent is
signed by stockholders holding at least a majority of the voting power, except
that if a different proportion of voting power is required for that action at a
meeting, then that proportion of written consents is required.
Thus, unrevoked consents of the holders of not less than a majority of the
shares of common stock outstanding and entitled to vote on the record date must
be obtained to adopt proposals 1 through 11. Since consents are required from
the holders of record of a majority of the outstanding shares of our common
stock in order for a proposal to be adopted, an abstention from voting on the
group's GREEN
9
consent card or your board's YELLOW consent card, signing and returning the
group's GREEN consent card or your board's YELLOW consent card marked to
indicate the withholding of consent to a proposal, or a broker non-vote, will
have the practical effect of a vote against that particular proposal.
On May 11, 2001, your board of directors established a record date for
shareholders entitled to consent of the close of business on May 11, 2001. As of
the record date, there were 11,545,503 shares of our common stock issued and
outstanding. Each share entitles the holder to one vote.
The group could cease the solicitation of consents for its proposals to
amend our bylaws and elect the group's nominees to our board of directors once
the group has determined that it has valid and unrevoked consents representing a
majority of the issued and outstanding shares of our common stock as of the
record date. While Nevada law does not expressly provide for the revocation of
consents, under one interpretation of Nevada law you may revoke your GREEN
consent card or your yellow consent card by giving written notice of your
revocation to us either by mail, fax machine, email or other transmission. If
you have any questions about how to submit a written revocation of consent, you
can reach MacKenzie Partners, Inc. toll free at (800) 322-2885 or at
proxy@mackenziepartners.com.
The group has indicated that it does not intend to continue soliciting
consents if sufficient consents are not received by August 1, 2001. Your board
will similarly cease the solicitation of consents if sufficient consents are not
received by August 1, 2001. The group has also indicated that cumulative voting
is not available in the context of a consent action. While Nevada law does not
expressly provide for cumulative voting in a consent solicitation, under one
interpretation of Nevada law if any stockholder requests cumulative voting, as
discussed below, the seven director nominees with the highest number of consents
will be elected. Cumulating your votes on this proposal means you may multiply
the number of shares you own as of the record date, May 11, 2001, by seven and:
- give any one candidate whose name has been placed in nomination prior to
the solicitation that total number of votes, or
- distribute your votes among as many candidates as you choose.
If any shares of our common stock that you owned on the record date were
held for you in an account with a stock brokerage firm, bank nominee or other
similar "street name" holder, you are not entitled to vote such shares directly,
but rather must give instructions to the stock brokerage firm, bank nominee or
other "street name" holder to grant or revoke consent for your shares of our
common stock held for your account. Accordingly, you should contact the person
responsible for your account and direct him or her to execute the enclosed
YELLOW consent card on your behalf. You are urged to confirm in writing your
instructions to the person responsible for your account and provide a copy of
those instructions to us in care of MacKenzie Partners, Inc. so that we will be
aware of your instructions and can attempt to ensure that your instructions are
followed.
YOUR BOARD RECOMMENDS THAT YOU (I) WITHHOLD CONSENT FOR PROPOSAL 1 BY
MARKING THE "WITHHOLD CONSENT" BOX AND (II) CONSENT TO PROPOSALS 2 THROUGH 11 BY
MARKING THE "CONSENT" BOX UNDERNEATH EACH OF PROPOSALS 2 THROUGH 11 ON THE
ACCOMPANYING YELLOW CONSENT CARD AND SIGNING, DATING AND RETURNING IT PROMPTLY
IN THE ENCLOSED ENVELOPE.
YOUR BOARD ALSO URGES YOU NOT TO SIGN ANY GREEN CONSENT CARD OR BLUE PROXY
CARD OR ANY OTHER FORMS WHICH MAY BE SENT TO YOU BY THE SHAREHOLDER GROUP.
VOTING AT OUR SPECIAL MEETING
Only our 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
10
the close of business on May 11, 2001, there were 11,545,503 shares of our
common stock outstanding. You are entitled to one vote for each share of common
stock you owned on 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 considered shares entitled to vote at
our special meeting. 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. Nevada law does not directly address the issue of whether a
broker or nominee has discretionary authority to vote shares when instructions
have not been received from the beneficial owner but it is more likely that
those shares will be broker nonvotes.
Proposal 1 of the group and our proposals 3 through 11 are all proposals
which will require amending our bylaws or articles of incorporation. Approval of
each of these proposals will require the affirmative vote of a majority of our
outstanding voting shares. For each of these proposals, abstentions and broker
non-votes will have the effect of a vote against the proposal.
For Proposal 2, the directors will be elected at the meeting by a plurality
of the votes cast. In other words, the seven director nominees with the highest
number of affirmative votes will be elected. For this proposal, abstentions and
broker non-votes will have no effect on the outcome.
You may cumulate your votes on this proposal, which means you may multiply
the number of shares you own as of the record date, May 11, 2001, by seven and:
- give any one candidate whose name has been placed in nomination prior to
the voting that total number of votes, or
- distribute your votes among as many candidates as you choose.
You may not cumulate your votes unless in accordance with Nevada law at
least one stockholder has given written notice in accordance with Nevada law,
not less than forty eight hours before our special meeting, of the intention to
cumulate votes. If any stockholder 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 AND A YELLOW
CONSENT 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:
- completed our initial public offering in 1998;
- moved our common stock to be listed on the Nasdaq Small Cap market in
1999--it was originally only quoted on the over-the-counter bulletin
board;
- completed the acquisition of Mindsources, Inc. (now NetSol USA, Inc.),
an information technology consulting service company, in August 1999;
- completed the acquisition of Network Solutions Pvt. Ltd. in Pakistan in
1998;
- completed the acquisition of Intereve of California in March 2001;
- entered into contracts with four of our largest software customers by
revenue to date:
- Daimler-Chrysler Financial Services Australia;
- Daimler-Chrysler Financial Services Singapore;
11
- Daimler-Chrysler Financial Services Taiwan; and
- VoiceStream Wireless USA;
- entered into contracts with our most recent software customers, all
within the last six months and valued in excess of $25,000:
- Askari Leasing;
- Citibank Pakistan;
- Wells Fargo Bank;
- Clinical Interaction; and
- Leverage Consulting.
Additionally, under your board's leadership, your company has completed the
development or further development and launch of new applications which together
we call our Enterprise Resource Planning software applications:
- Contract Management System, or CMS,
- Proposal Management System, or PMS,
- Settlement Management System, or SMS,
- Electronic Point of Sale, or ePOS, and
- 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 our 275 engineers and
technical team in Pakistan and 25 member team outside Pakistan have invested
hundreds of man years of engineering time in creating such applications.
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 labor costs can be as little as one-eighth of the labor costs incurred
by domestic software development houses. Our challenge is in preserving this
cost advantage by effectively 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 brought the five new applications
comprising our Enterprise Resource Planning software 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.
12
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
$1.8 million to be recognized over 1.25 years using percentage of completion
accouting rules. These three Daimler-Chrysler customers are some of our key
customers, representing approximately 15% of our revenues for the 12 months
ended March 31, 2001.
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 nine months
ended March 31, 2000 increased from approximately $5.05 million to approximately
$5.76 million for that same period in 2001, a 14% increase.
IMPROVED OPERATING EFFICIENCY. We scaled down our non-core business
activities in the United Kingdom and in Germany. We believe these changes will
improve our operating efficiency and result in an improvement in our bottom line
in the future. Our gross margin for the nine months ended March 31, 2001 was
$3.04 million, or 52.7%. This represents an increase from 48.7% and 42.9% for
the fiscal years ended 2000 and 1999, respectively.
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 TO INCREASE THE
SIZE OF OUR BOARD AND VOTE "FOR" THE BOARD'S NOMINEES IN PROPOSAL NO. 2 AND
"FOR" PROPOSALS NO. 3 THROUGH NO. 11 WITH RESPECT TO AMENDING AND RESTATING OUR
ARTICLES OF INCORPORATION AND BYLAWS BY SIGNING AND RETURNING A WHITE PROXY CARD
AND YELLOW CONSENT CARD.
YOUR BOARD ALSO URGES YOU NOT TO SIGN ANY BLUE PROXY CARD OR GREEN CONSENT
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 or GREEN
consent card, you have every right to revoke your proxy or, under one
interpretation of Nevada law, your written consent. We urge you to sign, date
and mail the enclosed WHITE proxy card and YELLOW consent card in the postage-
paid envelope provided.
WHY YOUR BOARD THINKS YOU SHOULD NOT SUBMIT A BLUE PROXY CARD OR GREEN CONSENT
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.
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 take control of our board, and has indicated to us that it wishes to
replace our current management team. Without the ability to effectively manage
cross-culturally, our software development team in Lahore would likely fall
apart. Cultural differences between the United States and Pakistan require
individuals who have working
13
relationships in Pakistan, who are able to hire and retain the strongest
employees, and who have a deep understanding of Pakistani culture. 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 CURRENT 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 who, from an examination of their
biographies in the group's proxy statement, are without operating experience.
The group also includes the chief executive officer of Netgateway as a member.
On January 10, 2001, Netgateway 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 specific plans to combine Netgateway with
us, but this is a strong possibility, given the fact that, according to its
public filings, the group and Netgateway entered into mutual, irrevocable stock
option agreements, and two Netgateway directors are included as the group's
board nominees. 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 initially
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 an entire board of directors. Your board owned, as of April 30, 2001,
41.4% of our outstanding common stock. Accordingly, there was no mathematically
possible way for the group's proposal to be approved. 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?
6. THE GROUP IS PROPOSING A BOARD SIZE THAT IS TOO LARGE TO BE
EFFECTIVE. Most likely because the group recognized its error under Nevada law,
the group is proposing to increase the board size to fifteen individuals. Under
applicable corporate law, a company is to be managed under the direction of its
board. It is difficult to imagine how a group of fifteen individuals will be
able to assemble a quorum of its members, debate corporate strategy and make
decisions effectively. Do you think we need a board bigger than that of many of
the largest publicly traded companies?
BACKGROUND INFORMATION ON THE ELECTION OF OUR DIRECTORS
Our bylaws authorize eight directors, and state that our stockholders will
elect our directors at each annual meeting. Your board is currently comprised of
eight members. Our directors are currently 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
amend our bylaws is successful, the seven nominees receiving the highest number
of affirmative votes of the shares present
14
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 card will be voted "FOR" all of your board's nominees
in the absence of instruction to the contrary. Abstentions, broker nonvotes and
instructions on the accompanying WHITE proxy card 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 MANAGEMENT NOMINEES
BIOGRAPHICAL INFORMATION. We are providing you with information about our
nominees for election to our board, each of whom has consented to serve if
elected. The business address for our nominees is c/o 24025 Park Sorrento, Suite
220, Calabasas, CA 91302.
RICK POOLE has been our corporate controller since August 2000, and our
corporate secretary since November 2000. Mr. Poole joined NetSol International
from Stonefield Josephson, Inc., where he was a senior manager in the firm's
audit and attest services division. He was responsible for the delivery of audit
and consulting services to a variety of clients in the IT, manufacturing and
professional services industries. Mr. Poole is responsible for all aspects of
our audit and tax filings, implementing and overseeing financial controls, and
compliance of all regulatory filings and requirements in coordination with our
CFO. Mr. Poole has a B.S. from California State University at Fullerton, and is
a licensed Certified Public Accountant, Certified Fraud Examiner and a member of
the American Institute of Certified Public Accountants.
FRED FIRTH has been the chief executive of Abraxas Software (now
NetSol-Abraxas) for over 20 years. Presently, Mr. Firth specializes in the sales
and marketing areas of the business. Mr. Firth's knowledge of the automotive
sales, finance and insurance industry is considerable. He designed the world's
first finance and insurance computer systems for automotive dealerships and has
led the drive towards standardization of the systems used by financiers and
insurers within Australia and New Zealand. Most of the finance software systems
used in the U.K today have been built around Mr. Firth's original designs for
the Rover Car Company's finance arm Rover Finance. Before joining Abraxas
Software, Mr. Firth held a technical sales and training position with Olivetti
U.K. and Australia.
EUGEN BECKERT is the director of Daimler-Chrysler Financial Services and
senior representative of Mercedes-Benz Finance Co. Ltd. Japan, this year having
joined Financial Services Asia/Pacific in a special effort regarding the
strategic alignment of future business in Japan. Mr. Beckert has worked with
Mercedes-Benz, Daimler-Benz, and Daimler-Chrysler for nearly 20 years. He has
been instrumental in developing major innovations in the IT of Mercedes-Benz
assembly plants, including implementation of a global IT template. He served on
the project team responsible for restructuring the headquarters of Daimler-Benz
AG in Stuttgart, Germany, and he also set up global IT strategies and
organizations for the newly formed Debis Financial Services and Financial
Services Asia/ Pacific. By 1995, Mr. Beckert was responsible for control of IT
Management in over 50 companies in over 20 countries. Mr. Beckert holds a
diploma in economics and engineering from the University of Karlsruhe, Germany.
JAMES L. ARRINGTON is the former deputy commissioner of the General Services
Administration (GSA). He directed GSA's $5 billion annual government-wide IT
contracting programs, and, during his tenure, Jim initiated the Multiple Awards
Schedule improvement project. Jim has an extensive technical background, having
served as chief of systems at GSA and managing the twelve regional data centers.
He has also served as the deputy assistant commissioner, assistant commissioner
and director of procurement services. Jim is a graduate of Howard University,
and has completed extensive graduate work at the George Washington University
and the United States Graduate School.
15
YOUR BOARD AND ITS MANAGEMENT TEAM
BIOGRAPHICAL INFORMATION. We are providing you with information about the
board of directors who you have ALREADY elected and who, other than Mr. Burch,
are participants in this solicitation. The business address for our board
members is c/o 24025 Park Sorrento, Suite 220, Calabasas, CA 91302.
DIRECTOR
NAME AND AGE 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.
16
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 association with the Science and
Technology, Finance and Commerce ministries in Pakistan, and the Human
Development Foundation of North America and American Pakistani Physicians of
North America organizations. 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.
17
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
LONG TERM
COMPENSATION AWARDS(2)
ANNUAL COMPENSATION --------------------------------
----------------------- RESTRICTED STOCK UNDERLYING
NAME AND PRINCIPLE POSITION YEAR ENDED SALARY(1) BONUS SECURITIES(3) OPTIONS(4)
----------------------------- ---------- --------- -------- ---------------- ----------
Najeeb U. Ghauri, Chief 2000 $100,000 -0- -0- 20,000(5)
Executive Officer, Director 100,000(6)
1999 $100,000 -0- -0- 450,000(7)
20,000(8)
50,000(9)
1998 91,150 -0- N/A
Naeem Ghauri, Chief 2000 $150,000 -0- -0- 20,000(5)
Operations Officer, 1999 $150,000 $30,000(10) -0- 450,000(7)
Director 1998 N/A N/A N/A N/A
Salim Ghauri, President, 2000 $100,000 -0- -0- 20,000(5)
Director 1999 $100,000 -0- -0- 450,000(7)
1998 N/A N/A N/A N/A
Syed Husain, Chief Financial 2000 $100,000 -0- -0- 50,000(11)
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) 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.
(6) 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.
(7) 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
18
vested in May 2000; and options to purchase an additional 150,000 shares at
an exercise price of $2.58 vest in May 2001.
(8) 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.
(9) 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.
(10) Naeem Ghauri received a signing bonus upon the execution of his employment
agreement dated April, 17, 1999.
(11) 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 $21 to
vest at the end of one year from February 2000. The options must be
exercised within five years from February 2000.
We sponsor a 401(k) retirement salary plan that is available to our
employees, which was effective January 1, 2000.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN FISCAL EXERCISE OR BASE PRICE
NAME GRANTED (#) YEAR ($/SH) EXPRIRATION DATE
----------------------------- ------------ ------------------- ---------------------- ----------------
Najeeb U. Ghauri, 20,000 1% $5.50/share September 2004
Chief Executive 100,000 9% $21.00/share February 2005
Officer, Director
Salim Ghauri, 20,000 1% $5.50/share September 2004
President, Director
Naeem Ghauri, 20,000 1% $5.50/share September 2004
COO, Director
Syed Husain, CFO 50,000(1) 4% $21.00/share February 2005
------------------------
(1) One year vesting period from the date of grant, February 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 June 30,
2000.
19
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF UNEXERCISED
NUMBER OF OPTIONS/SARS VALUE OF OPTIONS/SARS
SHARES ACQUIRED AT FY-END (#) AT FY-END (#)
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE(2)/UNEXERCISABLE
------------------------- --------------- -------------- ------------------------- ----------------------------
Najeeb U. Ghauri, Chief 245,000 $12,564,400 420,000/0 $11,976,000/0
Executive Officer,
Director
Salim Ghauri, President, 150,000 $ 8,463,000 320,000/0 $10,326,000/0
Director
Naeem Ghauri, COO, 150,000 $ 8,463,000 320,000/0 $10,326,000/0
Director
Syed Husain, CFO -0- -0- -0-/50,000 -0-/$ 725,000
------------------------
(2) The closing price of the stock at fiscal year end was $35.50.
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 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. We can not assure you of the
accuracy of this table. We derived this table solely from information provided
to us by our directors and executive
20
officers and from filings with the SEC. 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 as a group
(8 persons).............................................. 4,784,284 41.4%
------------------------
* 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.
(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.
21
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. The agreement is for a base term
of three years, and is renewed automatically thereafter for succeeding one-year
terms until terminated by either party. The agreement provides for a monthly
retainer of $4,000. The agreement also provides for certain covenants concerning
confidentiality and non-competition.
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. Stockholders wishing to nominate
directors or propose other business at the 2001 Annual Meeting, but not
intending to include such nomination or proposal in our proxy statement for that
meeting, must give advance written notice to us. Notice of any stockholder
nomination or proposal must be received at our principal executive offices by
October 4, 2001. If this notice is not timely, then the nomination or proposal
will not be brought before the 2001 Annual Meeting.
YOU SHOULD BE CAUTIOUS ABOUT RELYING ON OUR FORWARD LOOKING STATEMENTS IN THIS
DOCUMENT
This document 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 document.
22
APPENDIX A
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
NETSOL INTERNATIONAL, INC.
ARTICLE 1
The name of the Corporation is Netsol International, Inc.
ARTICLE 2
The total number of shares of capital stock which the Corporation shall have
authority to issue is 30,000,000 shares, divided into the following classes:
25,000,000 shares of Common Stock having a par value of $0.001 per share
(the "Common Stock"); and
5,000,000 shares of Preferred Stock, having a par value of $0.001 per share
(the "Preferred Stock").
The board of directors of the Corporation (the "Board of Directors") is
expressly authorized to provide for the issuance of all or any shares of the
Preferred Stock in one or more or series, and to fix for each such series such
voting powers, full or limited, or no voting powers, and such designations,
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such series and as may be permitted by the Nevada
Revised Statutes (as amended from time to time, the "NRS"), including, without
limitation, the authority to provide that any such class or series may be
(i) subject to redemption at any time or times and at such price or prices;
(ii) entitled to receive dividends (which may be cumulative or non-cumulative)
at such rates, on such conditions, and at such times, and payable in preference
to, or in such relation to, the dividends payable on any other class or classes
or any other series; (iii) entitled to such rights upon the dissolution of, or
upon any distribution of the assets of, the Corporation; (vi) entitled to vote
separately or together with any other series or class of stock of the
Corporation; or (v) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock, of the Corporation at such price or prices or at such rates
of exchange and with such adjustments; all as may be stated in such resolution
or resolutions.
ARTICLE 3
The following provisions are inserted for the management of the business and
the conduct of the affairs of the Corporation, and for further definition,
limitation and regulation of the powers of the Corporation and of its directors
and stockholders:
a. The business and affairs of the Corporation shall be managed by or under
the direction of the Board of Directors.
b. The directors shall have concurrent power with the stockholders to make,
alter, amend, change, add to or repeal the bylaws of the Corporation as in
effect from time to time (the "Bylaws"). In addition, the affirmative vote of
the holders of sixty six and two-thirds percent of the outstanding shares of
voting stock of the Corporation then entitled to vote on the election of
directors shall be
A-1
required for an alteration, amendment, change, addition or repeal of the Bylaws
by the stockholders of the Corporation.
c. The authorized number of directors of the Corporation shall be as set
forth in the Bylaws until changed from time to time by resolution of the Board
of Directors. Election of directors need not be by written ballot unless the
Bylaws so provide. Advance notice of stockholder nominations for the election of
directors and of any other business to be brought before any meeting of the
stockholders shall be given in the manner provided in the Bylaws.
At each annual meeting of stockholders, directors of the Corporation shall
be elected to hold office until the expiration of the term for which they are
elected, or until their successors have been duly elected and qualified; except
that if any such election shall not be so held, such election shall take place
at a stockholders' meeting called and held in accordance with the NRS and the
Bylaws.
The directors of the Corporation shall be divided into three classes as
nearly equal in size as is practicable, hereby designated Class I, and Class II
and Class III. For the purposes hereof, the initial Class I, Class II and
Class III directors shall be those directors so designated by a resolution of
the Board of Directors. At the first annual meeting of stockholders following
the closing of the initial public offering of the Common Stock, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the closing of the initial public offering of the Common
Stock, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the initial public offering of the Common
Stock, the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting. If the number of directors is hereafter changed, each director
then serving as such shall nevertheless continue as a director of the class of
which she or he is a member until the expiration of his current term and any
newly created directorships or decrease in directorships shall be so apportioned
among the classes as to make all classes as nearly equal in number as is
practicable.
Vacancies occurring on the Board of Directors for any reason may be filled
by vote of a majority of the remaining members of the Board of Directors, even
if less than a quorum, at any meeting of the Board of Directors. A person so
elected by the Board of Directors to fill a vacancy shall hold office for the
remainder of the full term of the director for which the vacancy was created or
occurred and until such director's successor shall have been duly elected and
qualified. A director may be removed from office by the affirmative vote of the
holders of sixty six and two-thirds percent of the outstanding shares of voting
stock of the Corporation entitled to vote on the election of directors, provided
that such removal may be made only for cause. Unless the Board of Directors has
made a determination that removal is in the best interests of the Corporation
(in which case the following definition shall not apply), "cause" for removal of
a director shall be deemed to exist only if (i) the director whose removal is
proposed has been convicted, or when a director is granted immunity to testify
when another has been convicted, of a felony by a court of competent
jurisdiction and such conviction is no longer subject to direct appeal; (ii)
such director has been found by the affirmative vote of a majority of the
directors then in office at any regular or special meeting of the Board of
Directors called for that purpose, or by a court of competent jurisdiction to
have been guilty of willful misconduct in the performance of his or her duties
to the Corporation in a matter of substantial importance to the Corporation; or
(iii) such director has been adjudicated by a court of competent jurisdiction to
be mentally incompetent, which mental incompetency directly affects his or her
ability as a director of the Corporation.
d. No director or officer of the Corporation shall be personally liable to
the Corporation or its stockholders for damages for breach of fiduciary duty as
a director or officer; provided, however, that
A-2
the foregoing provision does not eliminate or limit the liability of a director
or officer of the Corporation for: (i) acts or omissions which involve
intentional misconduct, fraud or a knowing violation of law; or (ii) the payment
of distributions in violation of NRS 78.300.
e. In addition to the powers and authority hereinbefore or by statute
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the provisions of the NRS, the
articles of incorporation of the Corporation as amended from time to time (the
"Articles of Incorporation"), and any Bylaws, adopted by the stockholders of the
Corporation; PROVIDED, HOWEVER, that no Bylaws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such Bylaws had not been adopted.
ARTICLE 4
Meetings of stockholders may be held within or without the State of Nevada,
as the Bylaws may provide. Special meetings of stockholders, for any purpose or
purposes may only be called by the Board of Directors. Only the business stated
in the notice of a special meeting of stockholders of the Corporation may be
transacted at any special meeting of stockholders of the Corporation. The books
of the Corporation may be kept (subject to any provision contained in the NRS)
outside the State of Nevada at such place or places as may be designated from
time to time by the Board of Directors or in the Bylaws. Any action required or
permitted to be taken by the stockholders of the Corporation may only be
effected at a duly called annual or special meeting of the stockholders of the
Corporation (and not by consent in lieu thereof).
ARTICLE 5
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Articles of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights, preferences and privileges of
whatsoever nature conferred upon stockholders, directors or any other persons
whomsoever herein are granted subject to this reservation. No amendment,
alteration, change or repeal of Article 3 or Article 4 of the Articles of
Incorporation shall be effective unless approved by sixty six and two-thirds
percent of the outstanding shares of voting stock of the Corporation then
entitled to vote on the election of directors of the Corporation.
ARTICLE 6
The Corporation shall indemnify its directors and officers to the fullest
extent authorized or permitted by law and the Bylaws, as now or hereafter in
effect, and such right to indemnification shall continue as to a person who has
ceased to be a director or officer of the Corporation and shall inure to the
benefit of his or her heirs, executors and personal or legal representatives;
PROVIDED, HOWEVER, that, except for proceedings to enforce rights to
indemnification, the Corporation shall not be obligated to indemnify any
director or officer (or his or her heirs, executors or personal or legal
representatives) in connection with a proceeding (or part thereof) initiated by
such person unless such proceeding (or part thereof) was authorized or consented
to by the Board of Directors. In addition to any other rights of indemnification
permitted by the laws of the State of Nevada or as may be provided for by the
Corporation in its Bylaws or by agreement, the expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding,
involving alleged acts or omissions of such officer or director in his or her
capacity as an officer or director of the Corporation, must be paid by the
Corporation or through insurance purchased and maintained by the Corporation or
through other financial arrangements made by the Corporation, as they are
incurred upon receipt of an undertaking by or on behalf of the director or
officer to repay the amount if it is ultimately determined by a court of
competent jurisdiction that he or she is not entitled to be indemnified by the
Corporation.
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The Corporation may, to the extent authorized from time to time by the Board
of Directors, provide rights to indemnification and to the advancement of
expenses to employees and agents of the Corporation similar to those conferred
in this Article 6 to directors and officers of the Corporation.
The rights to indemnification and to the advance of expenses conferred in
this Article 6 shall not be exclusive of any other right which any person may
have or hereafter acquire under the Articles of Incorporation, the Bylaws, any
statute, agreement, vote of stockholders or disinterested directors or
otherwise.
Any repeal or modification of this Article 6 by the stockholders of the
Corporation shall not adversely affect any rights to indemnification and to the
advancement of expenses of a director or officer of the Corporation existing at
the time of such repeal or modification with respect to any acts or omissions
occurring prior to such repeal or modification.
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APPENDIX B
AMENDED AND RESTATED BYLAWS OF
NETSOL INTERNATIONAL, INC.
ARTICLE 1
OFFICES
Section 1.1 OFFICES. Netsol International, Inc., a Nevada corporation,
(the "Corporation"), may have offices at such places both within and without the
State of Nevada as the board of directors of the Corporation (the "Board of
Directors") may from time to time determine or the business of the Corporation
may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
Section 2.1 PLACE OF MEETINGS. Meetings of the stockholders for the
election of directors or for any other purpose shall be held at such time and
place, either within or without the State of Nevada, as shall be designated from
time to time by the Board of Directors.
Section 2.2 ANNUAL MEETINGS. The annual meetings of stockholders for the
election of directors shall be held on such date and at such time as shall be
designated from time to time by the Board of Directors. Any other proper
business may be transacted at the annual meeting of stockholders.
Section 2.3 SPECIAL MEETINGS. Unless otherwise required by law or by the
articles of incorporation of the Corporation (as amended from time to time and
including any certificates of designation with respect to any preferred stock of
the Corporation, the "Articles of Incorporation"), special meetings of
stockholders, for any purpose or purposes, may only be called by the Board of
Directors pursuant to a resolution stating the purpose or purposes thereof or by
the Chairman, if there be one. Any power of stockholders of the Corporation to
call a special meeting is specifically denied. Notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called shall be given not less than ten or more than sixty
days before the date of the meeting to each stockholder entitled to vote at such
meeting. Only such business shall be conducted at a special meeting as shall be
specified in the notice of meeting (or any supplement thereto).
Section 2.4 ADJOURNMENTS. Any meeting of the stockholders may be adjourned
from time to time to reconvene at the same or some other place, and notice need
not be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than sixty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 2.5 QUORUM. Unless otherwise required by law or the Articles of
Incorporation, the presence in person or by proxy of the holders of shares of
capital stock entitled to cast a majority of all the votes which could be cast
at such meeting by the holders of all of the outstanding shares of capital stock
entitled to vote on every matter that is to be voted on at such meeting shall
constitute a quorum at all meetings of the stockholders for the transaction of
business. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less than a quorum. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the
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meeting from time to time, in the manner provided in Section 2.4, until a quorum
shall be present or represented.
Section 2.6 VOTING. Unless otherwise required by law, the Articles of
Incorporation or the bylaws of the Corporation (as amended from time to time,
the "Bylaws"), any question brought before any meeting of stockholders, other
than the election or removal of directors, shall be decided by the vote of the
holders of a majority of the votes of shares of capital stock represented and
entitled to vote thereat, voting as a single class. Every reference in the
Bylaws to a majority or other proportion of shares, or a majority or other
proportion of the votes of shares, of capital stock shall refer to such majority
or other proportion of the votes of such shares of capital stock as are then
entitled to vote on the election of directors as provided in the Articles of
Incorporation. Votes of stockholders entitled to vote at a meeting of
stockholders may be cast in person or by proxy but no proxy shall be voted on or
after six months from the date of its creation unless such proxy is coupled with
an interest, or unless the stockholder specifies in it the length of time for
which it is to continue in force, which may not exceed seven years from the date
of its creation. The Board of Directors, in its discretion, or the officer of
the Corporation presiding at a meeting of stockholders, in such officer's
discretion, may require that any votes cast at such meeting shall be cast by
written ballot. No stockholder may participate in a meeting of stockholders by
means of a telephone conference or similar method of communication. Presence in
person at such a meeting for all purposes under these Bylaws shall be by the
physical presence of the stockholder at the meeting or by proxy, only.
Section 2.7 NO CONSENT OF STOCKHOLDERS IN LIEU OF MEETING. Unless
otherwise provided in the Articles of Incorporation, any action required or
permitted to be taken by the stockholders of the Corporation may be effected
only at a duly called annual or special meeting of such holders and may not be
effected by consent by such holders in lieu of such a meeting.
Section 2.8 VOTING LIST. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, or cause a third party to prepare and
make, at least ten days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at the meeting, arranged in alphabetical
order, and showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting for a
period of at least ten days prior to the meeting: (a) on a reasonably accessible
electronic network; PROVIDED, that the information required to gain access to
such list is provided with the notice of the meeting, or (b) during ordinary
business hours, at the principal place of business of the Corporation. If the
meeting is to be held at a place, then the list shall be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present. If the meeting is to be held solely
by means of remote communication, then the list shall also be open to the
examination of any stockholder during the whole time of the meeting on a
reasonably accessible electronic network, and the information required to access
such list shall be provided with the notice of the meeting.
Section 2.9 STOCK LEDGER. The stock ledger of the Corporation shall be the
only evidence as to who are the stockholders entitled to examine the stock
ledger, the list required by Section 2.8 or the books of the Corporation, or to
vote in person or by proxy at any meeting of stockholders of the Corporation.
Section 2.10 NOMINATION OF DIRECTORS. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the Corporation, except as may be otherwise provided in the
Articles of Incorporation with respect to the right of holders of preferred
stock of the Corporation to nominate and elect a specified number of directors
in certain circumstances. Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders (a) by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (b) by any stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this Section 2.10 and on
the record date
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for the determination of stockholders entitled to vote at such annual meeting
and (ii) who complies with the notice procedures set forth in this
section 2.10.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder of the Corporation, such stockholder must have given
timely notice thereof in proper written form to the Secretary of the Corporation
(the "Secretary").
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the corporation not
less than ninety days nor more than one hundred and twenty days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
PROVIDED, HOWEVER, that if the annual meeting is called for a date that is not
within thirty days before or after such anniversary date, notice by the
stockholder in order to be timely must be so received not later than the close
of business on the tenth day following the day on which such notice of the date
of the annual meeting was mailed or such public disclosure of the date of the
annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth (a) as to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and residence address
of the person, (ii) the principal occupation or employment of the person,
(iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person that would
be required to be disclosed in a proxy statement or other filings required to be
made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Securities Exchange Act of 1934, as amended
(including the rules and regulations thereunder, the "Exchange Act"); and
(b) as to the stockholder giving the notice (i) the name and record address of
such stockholder, (ii) the class or series and number of shares of capital stock
of the Corporation which are owned beneficially or of record by such
stockholder, (iii) a description of all arrangements or understandings between
such stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made by
such stockholder, (iv) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to nominate the persons named in
such notice and (v) any other information relating to such stockholder that
would be required to be disclosed in a proxy statement or other filings required
to be made in connection with solicitations of proxies for election of directors
pursuant to Section 14 of the Exchange Act. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a nominee and to
serve as a director if elected.
No person shall be eligible for election as a director of the Corporation
unless nominated in accordance with the procedures set forth in this Section
2.10. If the chairman of the annual meeting determines that a nomination was not
made in accordance with the foregoing procedures, the chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Section 2.11 BUSINESS AT ANNUAL MEETINGS. No business may be transacted at
an annual meeting of stockholders, other than business that is either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors (or any duly authorized committee
thereof), (b) otherwise properly brought before the annual meeting by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
or (c) otherwise properly brought before the annual meeting by any stockholder
of the Corporation (i) who is a stockholder of record on the date of the giving
of the notice provided for in this Section 2.11 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (ii)
who complies with the notice procedures set forth in this Section 2.11.
In addition to any other applicable requirements for business to be properly
brought before an annual meeting by a stockholder of the Corporation, such
stockholder must have given timely notice thereof in proper written form to the
Secretary.
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To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Corporation not
less than ninety days nor more than one hundred and twenty days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
PROVIDED, HOWEVER, that in the event that the annual meeting is called for a
date that is not within thirty days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not later
than the close on the tenth day following the day on which such notice of the
date of the annual meeting was mailed or such public disclosure of the date of
the annual meeting was made, which ever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the annual
meeting (i) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (ii) the name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the Corporation which are
owned beneficially or of record by such stockholder, (iv) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business and (v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of stockholders except
business brought before the annual meeting in accordance with the procedures set
forth in this Section 2.11, PROVIDED, HOWEVER, that, once business has been
properly brought before the annual meeting in accordance with such procedures,
nothing in this Section 2.11 shall be deemed to preclude discussion by any
stockholder of any such business. If the chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 2.12 CONDUCT OF MEETINGS. The Board of Directors may adopt by
resolution such rules and regulations for the conduct of meetings of the
stockholders of the Corporation as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of the stockholders shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) the determination of when the polls
shall open and close for any given matter to be voted on at the meeting; (iii)
rules and procedures for maintaining order at the meeting and the safety of
those present; (iv) limitations on attendance at or participation in the meeting
to stockholders of record of the corporation, their duly authorized and
constituted proxies or such other persons as the chairman of the meeting shall
determine; (v) restrictions on entry to the meeting after the time fixed for the
commencement thereof; and (vi) limitations on the time allotted to questions or
comments by participants.
Section 2.13 INSPECTORS OF ELECTION. Before any meeting of stockholders of
the Corporation, the Board of Directors shall appoint an inspector or inspectors
of election to act at the meeting or its adjournment. The number of inspectors
shall be either one or three. If any person appointed as inspector fails to
appear or fails or refuses to act, then the chairman of the meeting may, and
upon the request of any stockholder or a stockholder's proxy shall, appoint a
person to fill that vacancy.
Such inspectors shall: (a) determine the number of shares outstanding and
the voting power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots; (c) hear and determine all challenges and
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questions in any way arising in connection with the right to vote; (d) count and
tabulate all votes; (e) determine the result; and (f) do any other acts that may
be proper to conduct the election or vote with fairness to all stockholders. The
inspectors of election shall perform their duties impartially, in good faith, to
the best of their ability and as expeditiously as is practical. If there are
three inspectors of election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all. Any report
or certificate made by the inspectors of election is prima facie evidence of the
facts started therein.
ARTICLE 3
DIRECTORS
Section 3.1 NUMBER. The authorized number of directors shall initially be
fixed at eight and may be changed from time to time by resolution of the Board
of Directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires. If for any
cause, the directors shall not have been elected at an annual meeting, they may
be elected as soon thereafter as convenient at a special meeting of the
stockholders of the Corporation called for that purpose in the manner provided
in the Bylaws. The number of directors may not be increased by more than one
unless approved by (a) two thirds of each class of directors or (b) two thirds
of each outstanding class or series of such class of stock of the Corporation.
Section 3.2 ELECTION AND TERM OF OFFICE OF DIRECTORS. Except as provided
in the Articles of Incorporation or the Bylaws, directors shall be classified,
with respect to the time for which they severally hold office, into three
classes, as nearly equal in number as possible, one class to be originally
elected for a term expiring at the next following annual meeting of
stockholders, another class to be originally elected for a term expiring at the
second following annual meeting of stockholders, and another class to be
originally elected for a term expiring at the third following annual meeting of
stockholders, with each class to hold office until its successor is duly elected
and qualified. At each succeeding annual meeting of stockholders, directors
elected to succeed those directors whose terms then expire shall be elected for
a term of office to expire at the third succeeding annual meeting of
stockholders after their election, with each director to hold office until such
person's successor shall have been elected and qualified or until such person's
earlier resignation or removal. Each director, including a director elected or
appointed to fill a vacancy, shall hold office until his or her successor is
elected and qualified or until his earlier resignation or removal. Directors
need not be stockholders unless so required by the Articles of Incorporation or
by the Bylaws, wherein other qualifications for directors may be prescribed.
Election of directors need not be by written ballot unless so required by the
Articles of Incorporation or by the Bylaws.
Section 3.3 DUTIES AND POWERS. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Articles of Incorporation or by the
Bylaws required to be exercised or done by the stockholders of the Corporation.
Section 3.4 MEETINGS. The Board of Directors may hold meetings, both
regular and special, either within or without the State of Nevada. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as may from time to time be determined by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman, if
there be one, the President, or by any director. Notice thereof stating the
place, date and hour of the meeting shall be given to each director either by
mail not less than forty-eight hours before the date of the meeting, by
telephone or electronic communication on twenty-four hours' notice, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
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Section 3.5 QUORUM. Except as otherwise required by law, the Articles of
Incorporation or the Bylaws, at all meetings of the Board of Directors, a
majority of the Board of Directors then in office shall constitute a quorum for
the transaction of business and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board of
Directors. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present at such meeting may adjourn the meeting from
time to time, without notice other than announcement at the meeting of the time
and place of the adjourned meeting, until a quorum shall be present.
Section 3.6 ACTIONS BY WRITTEN CONSENT OF THE BOARD. Unless otherwise
provided in the Articles of Incorporation or the Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all the members of the
Board of Directors or committee, as the case may be, consent thereto in writing
or electronic communication, and the writing, writings or paper copies of the
electronic communications are filed with the minutes of proceedings of the Board
of Directors or committee.
Section 3.7 RESIGNATION AND VACANCIES. Any director may resign effective
on giving written notice to the chairman of the board, the president, the
secretary or the board of directors, unless the notice specifies a later time
for that resignation to become effective. If the resignation of a director is
effective at a future time, the board of directors may elect a successor to take
office when the resignation becomes effective.
Unless otherwise provided in the Articles of Incorporation or the Bylaws,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors elected by all of the stockholders having the
right to vote as a single class may be filled by a majority of the directors
then in office, even if less than a quorum, or by a sole remaining director.
Each director so elected shall hold office for the remainder of the full term of
the class of directors in which the new directorship was created or the vacancy
occurred and until a successor has been elected and qualified.
Unless otherwise provided in the Articles of Incorporation or the Bylaws,
whenever the holders of any class or classes of stock or series of stock of the
Corporation are entitled to elect one or more directors by the provisions of the
Articles of Incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series of stock of the Corporation then in office,
or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders of the Corporation
solely for the purpose of electing directors in accordance with the provisions
of the Articles of Incorporation or the Bylaws, or may apply to the district
court for a decree summarily ordering an election as provided in Section 78.345
of the Nevada Revised Statutes (as it may be amended from time to time, the
"NRS").
Section 3.8 STANDING COMMITTEES. The Board of Directors, by resolution
adopted by a majority of the entire Board, shall appoint from among its members
(i) an Audit Committee and (ii) a Compensation Committee, to perform the
functions traditionally performed by such committees.
Section 3.9 COMMITTEES. The Board of Directors may designate one or more
other committees (in addition to the mandatory standing committees described in
Section 3.8), each such other committee to consist of one or more of the
directors of the Corporation. With respect to all Board committees (including,
but not limited to, the standing committees described in Section 3.8), in the
absence or disqualification of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member to replace the
absent or disqualified member, the member or members of any committee present at
any meeting and not disqualified from voting, whether or not such member or
members constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any absent or disqualified
member. Any
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committee (including, but not limited to, any standing committee described in
Section 3.8), to the extent permitted by law and subject to the resolution
establishing such committee, shall have and may exercise all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it. Each committee (including, but not
limited to, each standing committee described in Section 3.8) shall keep regular
minutes and report to the Board of Directors when required.
Section 3.10 COMPENSATION. The directors may be paid their expenses, if
any, of the attendance at each meeting of the Board of Directors and shall
receive such compensation for their services as directors as shall be determined
by the Board of Directors. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 3.11 REMOVAL. Any director or the entire Board of Directors may be
removed for cause by the affirmative vote of two-thirds of the voting power of
the issued and outstanding stock entitled to vote. Unless the Board of Directors
has made a determination that removal is in the best interests of the
Corporation (in which case the following definition shall not apply), "cause"
for removal of a director shall be deemed to exist only if (i) the director
whose removal is proposed has been convicted, or when a director is granted
immunity to testify when another has been convicted, of a felony by a court of
competent jurisdiction and such conviction is no longer subject to direct
appeal; (ii) such director has been found by the affirmative vote of a majority
of the directors then in office at any regular or special meeting of the Board
of Directors called for that purpose, or by a court of competent jurisdiction to
have been guilty of willful misconduct in the performance of his or her duties
to the Corporation in a matter of substantial importance to the Corporation; or
(iii) such director has been adjudicated by a court of competent jurisdiction to
be mentally incompetent, which mental incompetency directly affects his or her
ability as a director of the Corporation. Notwithstanding the foregoing,
whenever holders of outstanding shares of one or more series of preferred stock
of the Corporation are entitled to elect directors of the Corporation pursuant
to the provisions applicable in the case of arrearages in the payment of
dividends or other defaults contained in the resolution or resolutions of the
Board of Directors providing for the establishment of any such series, any such
director of the Corporation so elected may be removed in accordance with the
provisions of such resolution or resolutions.
ARTICLE 4
NOTICES
Section 4.1 NOTICE TO DIRECTORS AND STOCKHOLDERS. Whenever, under the
provisions of applicable law, the Articles of Incorporation or the Bylaws,
notice is required to be given to any director or stockholder, it shall not be
construed to mean personal notice, but such notice may be given in writing, by
mail, addressed to such director or stockholder, at his, her or its address as
it appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail or, to the extent permitted by law, by a
form of electronic transmission consented to by the stockholder or director to
whom notice is given. An affidavit of the Secretary or an Assistant Secretary of
the Corporation or of the transfer agent or other agent of the Corporation that
the notice has been given shall in the absence of fraud, be prima facie evidence
of the facts stated therein. Notice to directors may also be given by telephone,
facsimile, telegram or electronic transmission.
Section 4.2 WAIVER. Whenever notice is required to be given under
applicable law, the Articles of Incorporation or the Bylaws, a written waiver,
signed by the person or persons entitled to said notice, or, to the extent
permitted by law, a waiver by electronic transmission by the person entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. The written
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waiver or any waiver by electronic transmission need not specify the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE 5
OFFICERS
Section 5.1 ENUMERATION. The officers of the Corporation shall be chosen
by the Board of Directors and shall include a President, a Secretary, a
Treasurer and such other officers with such other titles as the Board of
Directors shall determine. The Board of Directors may elect from among its
members a Chairman or Chairmen of the Board and a Vice Chairman of the Board.
The Board of Directors may also choose one or more Vice Presidents and Assistant
Secretaries. Any number of offices may be held by the same person, unless the
Articles of Incorporation or the Bylaws otherwise provide.
Section 5.2 ELECTION. The Board of Directors at its first meeting after
each annual meeting of stockholders shall elect a President, a Secretary, a
Treasurer and such other officers with such other titles as the Board of
Directors shall determine.
Section 5.3 APPOINTMENT OF OTHER AGENTS. The Board of Directors may
appoint such other officers and agents as it shall deem necessary, who shall
hold their offices for such terms and shall exercise such powers and perform
such duties as shall be determined from time to time by the Board of Directors.
Section 5.4 COMPENSATION. The salaries of all officers of the Corporation
shall be fixed by the Board of Directors or a committee thereof. The salaries of
agents of the Corporation shall, unless fixed by the Board of Directors, be
fixed by the Chief Executive Officer or any Vice President of the Corporation.
Section 5.5 TENURE. The officers of the Corporation shall hold office
until their successors are elected and qualify or until such officer's earlier
resignation or removal. Any officer elected or appointed by the Board of
Directors may be removed at any time by the affirmative vote of a majority of
the directors of the Board of Directors. Any vacancy occurring in any office of
the Corporation shall be filled by the Board of Directors.
Section 5.6 CHAIRMAN OF THE BOARD AND VICE-CHAIRMAN OF THE BOARD. The
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders of the Corporation at which he or she shall be
present. The Chairman shall have and may exercise such powers as are, from time
to time, assigned to the Chairman by the Board of Directors and as may be
provided by law. In the absence of the Chairman of the Board, the Vice Chairman
of the Board, if any, shall preside at all meetings of the Board of Directors
and of the stockholders of the Corporation at which the Vice Chairman shall be
present. The Vice Chairman shall have and may exercise such powers as are, from
time to time, assigned to such person by the Board of Directors and as may be
provided by law.
Section 5.7 PRESIDENT. The President of the Corporation shall be the Chief
Executive Officer of the Corporation unless such title is assigned to another
officer of the Corporation; in the absence of a Chairman and Vice Chairman of
the Board, the President shall preside as the chairman of meetings of the
stockholders of the Corporation and the Board of Directors; and the President
shall have general and active management of the business of the Corporation and
shall see that all orders and resolutions of the Board of Directors are carried
into effect. The President or any Vice President shall execute bonds, mortgages
and other contracts requiring a seal, under the seal of the Corporation, except
where
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required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board of Directors to some other officer or agent of the Corporation.
Section 5.8 VICE PRESIDENT. In the absence of the President or in the
event of the President's inability or refusal to act, the Vice President, if any
(or in the event there be more than one Vice President, the Vice Presidents in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President, and when so acting shall have all the powers of and be subject to
all the restrictions upon the President. Each Vice President shall perform such
other duties and have such other powers as the Board of Directors may from time
to time prescribe.
Section 5.9 SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the stockholders of the Corporation and
record all the proceedings of the meetings of the Corporation and of the Board
of Directors in a book or an electronic record to be kept for that purpose and
shall perform like duties for the committees of the Board of Directors when
required. The Secretary shall give, or cause to be given, notice of all meetings
of the stockholders of the Corporation and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision the Secretary shall be
subject. The Secretary shall have custody of the corporate seal of the
Corporation and the Secretary, or an Assistant Secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it may be
attested by the Secretary's signature or by the signature of such Assistant
Secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the Corporation and to attest the affixing by such
officer's signature.
Section 5.10 ASSISTANT SECRETARY. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the Secretary or in the event of the
Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board of Directors may from time to time prescribe.
Section 5.11 TREASURER. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors and the Board of Directors may, by resolution, delegate such power of
designation to any officer or officers of the Corporation. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors or any officer of the Corporation to whom the Board of Directors may,
by resolution, delegate such power, taking proper vouchers for such
disbursements, and shall, upon request, render to the President and the Board of
Directors, an account of all such transactions and of the financial condition of
the Corporation. If required by the Board of Directors, the Treasurer shall give
the Corporation a bond (which shall be renewed every six years) in such sum and
with such surety or sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of the Treasurer's office and for the
restoration to the Corporation, in case of the Treasurer's death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in the possession or under the control of the
Treasurer that belongs to the Corporation.
ARTICLE 6
CAPITAL STOCK
Section 6.1 CERTIFICATES. The shares of capital stock of the Corporation
shall be represented by a certificate, unless and until the Board of Directors
adopts a resolution permitting shares to be
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uncertificated. Certificates for shares of capital stock of the Corporation
shall be signed by, or in the name of the Corporation by, (a) the Chairman of
the Board, the Vice Chairman of the Board, the President or any Vice President,
and (b) the Treasurer, the Secretary or an Assistant Secretary, certifying the
number of shares owned by such stockholder in the Corporation.
Section 6.2 SIGNATURE. Any of or all of the signatures on a certificate
may be facsimile or conformed. In case any officer, transfer agent or registrar
who has signed or whose facsimile or conformed signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if such person were such officer, transfer agent or registrar at
the date of issue.
Section 6.3 LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or such owner's legal representative, to advertise the same in
such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have been lost, stolen or
destroyed.
Section 6.4 TRANSFER OF STOCK. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Upon receipt of proper transfer instructions from
the registered owner of uncertificated shares such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the Corporation.
Section 6.5 RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; PROVIDED,
HOWEVER, that the Board of Directors may fix a new record date for any adjourned
meeting. The Board of Directors shall, pursuant to NRS 78.350, fix a new record
date if the meeting is adjourned to a date more than sixty days later than the
date set for the original meeting.
Section 6.6 REGISTERED STOCKHOLDERS. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of the State of Nevada.
ARTICLE 7
GENERAL PROVISIONS
Section 7.1 DIVIDENDS. The Board of Directors, subject to the applicable
provisions, if any, of the Articles of Incorporation and applicable law, may
declare and pay dividends upon the capital stock
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of the Corporation. Dividends may be paid in cash, in property or in shares of
capital stock, subject to the provisions of the Articles of Incorporation.
Before payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
from time to time, in their absolute discretion, deem proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purposes as the
Board of Directors shall deem conducive to the interests of the Corporation, and
the Board of Directors may modify or abolish any such reserve in the manner in
which it was created.
Section 7.2 CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 7.3 FISCAL YEAR. The fiscal year of the Corporation shall be
December 31, and may be changed by the Board of Directors from time to time
subject to applicable law.
Section 7.4 SEAL. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the Corporation, the year of its organization and
the words "Corporate Seal, Nevada." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
Section 7.5 LOANS. The Board of Directors of this Corporation may, without
stockholder approval, authorize loans to, or guaranty obligations of, or
otherwise assist, including, without limitation, the adoption of employee
benefit plans under which loans and guarantees may be made, any officer or other
employee of the Corporation or of any of its subsidiaries, including any officer
or employee who is a director of the Corporation or any of its subsidiaries,
whenever, in the judgment of the Board of Directors, such loan, guaranty or
assistance may reasonably be expected to benefit the Corporation. The loan,
guaranty or other assistance may be with or without interest, and may be
unsecured, or secured in such manner as the Board of Directors shall approve,
including, without limitation, a pledge of shares of stock of the Corporation.
Section 7.6 REPRESENTATION OF SHARES OF OTHER CORPORATIONS. Any officer of
the Corporation is authorized to vote, represent, and exercise on behalf of the
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the Corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
Section 7.7 CONSTRUCTION; DEFINITIONS. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in the
NRS shall govern the construction of the Bylaws. Without limiting the generality
of this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
Section 7.8 PROVISIONS ADDITIONAL TO PROVISIONS OF LAW. All restrictions,
limitations, requirements and other provisions of the Bylaws shall be construed,
insofar as possible, as supplemental and additional to all provisions of law
applicable to the subject matter thereof and shall be fully complied with in
addition to the said provisions of law unless such compliance shall be illegal.
Section 7.9 PROVISIONS CONTRARY TO PROVISIONS OF LAW. Any article,
section, subsection, subdivision, sentence, clause or phrase of these Bylaws
which upon being construed in the manner provided in Section 7.8, shall be
contrary to or inconsistent with any applicable provisions of law, shall not
apply so long as said provisions of law shall remain in effect, but such result
shall not affect the validity or applicability of any other portions of these
Bylaws, it being hereby declared that these Bylaws would have been adopted and
each article, section, subsection, subdivision, sentence, clause or phrase
thereof,
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irrespective of the fact that any one or more articles, sections, subsections,
subdivisions, sentences, clauses or phrases is or are illegal.
ARTICLE 8
INDEMNIFICATION
Section 8.1 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS OTHER THAN
THOSE BY OR IN THE RIGHT OF THE CORPORATION Subject to Section 8.3, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the administrative or investigative (other than
an action by or in the right of the Corporation) by reason of the fact that such
person is or was a director or officer of the corporation, or is or was a
director or officer of the Corporation serving at the request of the Corporation
as a director of officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such person reasonably believed to be in or not
opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that such
person's conduct was unlawful.
Section 8.2 POWER TO INDEMNIFY IN ACTIONS, SUITS OR PROCEEDINGS BY OR IN
THE RIGHT OF THE CORPORATION. Subject to section 8.3, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was a
director or officer of the corporation serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which such
applicable court shall deem proper.
Section 8.3 AUTHORIZATION OF INDEMNIFICATION. Any indemnification under
this Article 8 (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director or officer is proper in the circumstances because such person has
met the applicable standard of conduct set forth in Section 8.1 or Section 8.2,
as the case may be. Such determination shall be made, with respect to a person
who is a director or officer at the time of such determination, (i) by a
majority vote of the directors who are not parties to such action, suit or
proceeding, even though less than a quorum, or (ii) by a committee of such
directors designated by a majority vote of such directors, even though less than
a quorum, or (iii) if there are no such directors, or if such directors so
direct, by independent legal counsel in a written opinion or (iv) by the
stockholders. Such determination shall be made, with respect to former directors
and officers, by any person or persons having the authority to act on the matter
on behalf of the Corporation. To the extent, however, that a present or former
director of officer of the Corporation has
B-12
been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith, without
the necessity of authorization in the specific case.
Section 8.4 GOOD FAITH DEFINED. For purposes of any determination under
Section 8.3, a person shall be deemed to have acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe such person's conduct was
unlawful, if such person's action is based on the records or books of account of
the Corporation or another enterprise, or on information supplied to such person
by the officers of the Corporation or another enterprise in the course of their
duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the Corporation
or another enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the Corporation or
another enterprise. The term "another enterprise" as used in this Section 8.4
shall mean any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise of which such person is or was serving
at the request of the Corporation as a director, officer, employee or agent. The
provisions of this Section 8.4 Shall not be deemed to be exclusive or to limit
in any way the circumstances in which a person may be deemed to have met the
applicable standard of conduct set forth in Section 8.1 or 8.2, as the case may
be.
Section 8.5 INDEMNIFICATION BY A COURT. Notwithstanding any contrary
determination in the specific case under Section 8.3, and notwithstanding the
absence of any determination thereunder, any director or officer may apply to
the courts of the State of Nevada for indemnification to the extent otherwise
permissible under Sections 8.1 and 8.2. The basis of such indemnification by a
court shall be a determination by such court that indemnification of the
director or officer is proper in the circumstances because such person has met
the applicable standards of conduct set forth in Section 8.1 or 8.2, as the case
may be. Neither a contrary determination in the specific case under Section 8.3
nor the absence of any determination thereunder shall be a defense to such
application or create a presumption that the director or officer seeking
indemnification has not met any applicable standard of conduct. Notice of any
application for indemnification pursuant to this Section 8.5 shall be given to
the Corporation promptly upon the filing of such application. If successful, in
whole or in part, the director of officer seeking indemnification shall also be
entitled to be paid the expense of prosecuting such application.
Section 8.6 EXPENSES PAYABLE IN ADVANCE. Expenses incurred by a director
or officer in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the Corporation as incurred upon
receipt of an undertaking by or on behalf of such director or officer to repay
such amount if it shall ultimately be determined that such person is not
entitled to be indemnified by the Corporation as authorized in this Article 8.
Section 8.7 NONEXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES. The indemnification and advancement of expenses provided by or
granted pursuant to this Article 8 shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under the Articles of Incorporation, the Bylaws, agreement, vote of
stockholders or disinterested directors, applicable law or otherwise, both as to
action in such person's official capacity and as to action in another capacity
while holding such office, it being the policy of the Corporation that
indemnification of the persons specified in Sections 8.1 and 8.2 shall be made
to the fullest extent permitted by law. The provisions of this Article 8 shall
not be deemed to preclude the indemnification of any person who is not specified
in Sections 8.1 or 8.2 but whom the Corporation has the power or obligation to
indemnify under the provisions of the NRS or otherwise.
Section 8.8 INSURANCE. The Corporation may purchase and maintain insurance
on behalf of any person who is or was a director or officer of the Corporation,
or is or was a director or officer of the
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Corporation serving at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise against any liability asserted against
such person and incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the Corporation would have the
power or the obligation to indemnify such person against such liability under
the provisions of this Article 8.
Section 8.9 CERTAIN DEFINITIONS. For purposes of this Article 8 only,
references to the "Corporation" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors or officers, so that any person who is or was a director of officer of
such constituent corporation, or is or was a director of officer of such
constituent corporation serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, shall stand in
the same position under the provisions of this Article 8 with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued. For
purposes of this Article 8, references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director or officer with respect to an employee
benefit plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner such person reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the Corporation"
as referred to in this Article 8.
Section 8.10 SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article 8 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 8.11 LIMITATION ON INDEMNIFICATION. Notwithstanding anything
contained in this Article 8 to the contrary, except for proceedings to enforce
rights to indemnification (which shall be governed by Section 8.5), the
Corporation shall not be obligated to indemnify any director or officer in
connection with a proceeding (or part thereof) initiated by such person unless
such proceeding (or part thereof) was authorized or consented to by the Board of
Directors.
Section 8.12 INDEMNIFICATION OF EMPLOYEES AND AGENTS. The Corporation may,
to the extent authorized from time to time by the Board of Directors, provide
rights to indemnification and to the advancement of expenses to employees and
agents of the Corporation similar to those conferred in this Article 8 to
directors and officers of the Corporation.
ARTICLE 9
AMENDMENTS
Section 9.1 AMENDMENTS. Except as otherwise provided in the Articles of
Incorporation, the Bylaws may be altered, amended or repealed, or new Bylaws may
be adopted, by (a) the holders of two-thirds of the outstanding shares of voting
stock of the Corporation at any regular meeting of the stockholders of the
Corporation or at any special meeting of the stockholders of the Corporation or
(b) by the Board of Directors at any regular or special meeting if notice of
such alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such special meeting. The power to adopt, amend or repeal Bylaws
conferred upon the Board of Directors by the Articles of Incorporation shall not
divest or limit the power of the stockholders to adopt, amend or repeal Bylaws.
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APPENDIX C
PURCHASES, SALES AND OTHER TRANSACTIONS INVOLVING 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.
All information is taken from our directors and officers reports to us and the
group's Schedule 13D filings and we can not assure you that this information is
accurate or complete.
SHARES OTHER
NAME PURCHASED SHARES SOLD TRANSACTIONS DATE
---- --------- ----------- ------------ ----------
Najeeb U. Ghauri................................ 15,000 6/20/1999
220,000 3/15/2000
72,900 9/30/2000
9,000 2/16/2001
25,000 4/01/2001
Irfan Mustafa................................... 20,000 7/10/2000
Salim Ghauri.................................... 150,000 3/15/2000
Naeem Ghauri.................................... 150,000 3/15/2000
10,000 5/19/2000
173,084 10/30/2000
Shahab Ghauri................................... 163,084 10/30/2000
Waheed Akbar.................................... 100,000 6/15/1999
Nasim Ashraf.................................... 50,000 6/15/1999
Cary Burch
NetSol Shareholders Group, LLC.................. 100 5/10/01
NetSol Shareholders Group, LLC.................. 250 5/11/01
NetSol Shareholders Group, LLC.................. 650 5/11/01
Blue Water Master Fund, L.P..................... 1,000 6/2/99
Blue Water Master Fund, L.P..................... 23,500 6/3/99
Blue Water Master Fund, L.P..................... 1,000 6/7/99
Blue Water Master Fund, L.P..................... 2,000 6/9/99
Blue Water Master Fund, L.P..................... 1,000 6/15/99
Blue Water Master Fund, L.P..................... 1,000 6/18/99
Blue Water Master Fund, L.P..................... 2,500 6/23/99
Blue Water Master Fund, L.P..................... 9,000 6/24/99
Blue Water Master Fund, L.P..................... 15,000 6/30/99
Blue Water Master Fund, L.P..................... 3,500 7/6/99
Blue Water Master Fund, L.P..................... 1,000 7/7/99
Blue Water Master Fund, L.P..................... 4,500 7/8/99
Blue Water Master Fund, L.P..................... 2,500 7/9/99
Blue Water Master Fund, L.P..................... 10,500 7/12/99
Blue Water Master Fund, L.P..................... 22,000 2,500 7/15/99
Blue Water Master Fund, L.P..................... 6,000 5,000 7/16/99
Blue Water Master Fund, L.P..................... 5,100 7/19/99
Blue Water Master Fund, L.P..................... 10,000 7/20/99
Blue Water Master Fund, L.P..................... 5,000 7/21/99
Blue Water Master Fund, L.P..................... 13,400 7/21/99
Blue Water Master Fund, L.P..................... 5,000 7/22/99
Blue Water Master Fund, L.P..................... 1,000 7/23/99
Blue Water Master Fund, L.P..................... 3,000 7/26/99
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SHARES OTHER
NAME PURCHASED SHARES SOLD TRANSACTIONS DATE
---- --------- ----------- ------------ ----------
Blue Water Master Fund, L.P..................... 500 7/26/99
Blue Water Master Fund, L.P..................... 65,000 7/27/99
Blue Water Master Fund, L.P..................... 33,500 7/27/99
Blue Water Master Fund, L.P..................... 10,000 7/27/99
Blue Water Master Fund, L.P..................... 8,000 7/28/99
Blue Water Master Fund, L.P..................... 18,500 7/28/99
Blue Water Master Fund, L.P..................... 11,000 7/28/99
Blue Water Master Fund, L.P..................... 500 7/29/99
Blue Water Master Fund, L.P..................... 6,000 7/29/99
Blue Water Master Fund, L.P..................... 5,000 7/29/99
Blue Water Master Fund, L.P..................... 5,700 7/30/99
Blue Water Master Fund, L.P..................... 500 8/2/99
Blue Water Master Fund, L.P..................... 500 8/2/99
Blue Water Master Fund, L.P..................... 16,000 8/2/99
Blue Water Master Fund, L.P..................... 4,000 8/2/99
Blue Water Master Fund, L.P..................... 5,000 6/3/99
Blue Water Master Fund, L.P..................... 2,500 8/3/99
Blue Water Master Fund, L.P..................... 1,700 8/4/99
Blue Water Master Fund, L.P..................... 1,500 8/4/99
Blue Water Master Fund, L.P..................... 7,500 8/4/99
Blue Water Master Fund, L.P..................... 22,500 8/5/99
Blue Water Master Fund, L.P..................... 35,000 8/5/99
Blue Water Master Fund, L.P..................... 15,000 8/6/99
Blue Water Master Fund, L.P..................... 1,000 8/6/99
Blue Water Master Fund, L.P..................... 10,000 8/10/99
Blue Water Master Fund, L.P..................... 5,000 8/10/99
Blue Water Master Fund, L.P..................... 2,100 8/11/99
Blue Water Master Fund, L.P..................... 5,000 8/12/99
Blue Water Master Fund, L.P..................... 1,500 8/12/99
Blue Water Master Fund, L.P..................... 500 8/12/99
Blue Water Master Fund, L.P..................... 500 8/12/99
Blue Water Master Fund, L.P..................... 5,000 8/12/99
Blue Water Master Fund, L.P..................... 2,500 8/12/99
Blue Water Master Fund, L.P..................... 19,200 8/13/99
Blue Water Master Fund, L.P..................... 500 8/17/99
Blue Water Master Fund, L.P..................... 25,000 8/18/99
Blue Water Master Fund, L.P..................... 7,500 8/19/99
Blue Water Master Fund, L.P..................... 5,000 8/20/99
Blue Water Master Fund, L.P..................... 8,000 8/20/99
Blue Water Master Fund, L.P..................... 4,200 8/23/99
Blue Water Master Fund, L.P..................... 10,000 8/23/99
Blue Water Master Fund, L.P..................... 12,500 8/24/99
Blue Water Master Fund, L.P..................... 5,500 8/24/99
Blue Water Master Fund, L.P..................... 22,500 8/26/99
Blue Water Master Fund, L.P..................... 7,500 8/30/99
Blue Water Master Fund, L.P..................... 20,000 8/31/99
Blue Water Master Fund, L.P..................... 3,000 9/8/99
Blue Water Master Fund, L.P..................... 1,000 9/9/99
Blue Water Master Fund, L.P..................... 5,000 9/10/99
C-2
SHARES OTHER
NAME PURCHASED SHARES SOLD TRANSACTIONS DATE
---- --------- ----------- ------------ ----------
Blue Water Master Fund, L.P..................... 500 9/10/99
Blue Water Master Fund, L.P..................... 500 9/13/99
Blue Water Master Fund, L.P..................... 13,000 9/14/99
Blue Water Master Fund, L.P..................... 30,000 8/25/99
Blue Water Master Fund, L.P..................... 1,000 8/25/99
Blue Water Master Fund, L.P..................... 5,000 8/27/99
Blue Water Master Fund, L.P..................... 10,000 9/1/99
Blue Water Master Fund, L.P..................... 10,000 9/10/99
Blue Water Master Fund, L.P..................... 10,000 9/15/99
Blue Water Master Fund, L.P..................... 4,000 9/15/99
Blue Water Master Fund, L.P..................... 7,000 9/16/99
Blue Water Master Fund, L.P..................... 7,500 9/17/99
Blue Water Master Fund, L.P..................... 13,200 9/17/99
Blue Water Master Fund, L.P..................... 6,500 9/17/99
Blue Water Master Fund, L.P..................... 4,500 9/21/99
Blue Water Master Fund, L.P..................... 2,000 9/22/99
Blue Water Master Fund, L.P..................... 2,500 9/22/99
Blue Water Master Fund, L.P..................... 5,000 9/23/99
Blue Water Master Fund, L.P..................... 10,000 9/24/99
Blue Water Master Fund, L.P..................... 2,500 9/24/99
Blue Water Master Fund, L.P..................... 25,000 9/28/99
Blue Water Master Fund, L.P..................... 9,000 10/4/99
Blue Water Master Fund, L.P..................... 35,000 10/4/99
Blue Water Master Fund, L.P..................... 10,000 10/5/99
Blue Water Master Fund, L.P..................... 10,000 10/6/99
Blue Water Master Fund, L.P..................... 10,000 10/6/99
Blue Water Master Fund, L.P..................... 7,500 10/7/99
Blue Water Master Fund, L.P..................... 8,000 10/8/99
Blue Water Master Fund, L.P..................... 2,500 10/8/99
Blue Water Master Fund, L.P..................... 1,000 10/11/99
Blue Water Master Fund, L.P..................... 4,000 10/11/99
Blue Water Master Fund, L.P..................... 15,700 10/12/99
Blue Water Master Fund, L.P..................... 1,000 10/14/99
Blue Water Master Fund, L.P..................... 5,000 10/15/99
Blue Water Master Fund, L.P..................... 5,000 10/15/99
Blue Water Master Fund, L.P..................... 10,000 10/19/99
Blue Water Master Fund, L.P..................... 3,500 10/19/99
Blue Water Master Fund, L.P..................... 5,000 10/20/99
Blue Water Master Fund, L.P..................... 5,000 10/21/99
Blue Water Master Fund, L.P..................... 12,000 10/22/99
Blue Water Master Fund, L.P..................... 15,000 10/27/99
Blue Water Master Fund, L.P..................... 10,000 10/28/99
Blue Water Master Fund, L.P..................... 30,000 10/29/99
Blue Water Master Fund, L.P..................... 7,500 11/1/99
Blue Water Master Fund, L.P..................... 10,000 11/2/99
Blue Water Master Fund, L.P..................... 10,000 11/2/99
Blue Water Master Fund, L.P..................... 10,000 11/3/99
Blue Water Master Fund, L.P..................... 11,500 11/4/99
Blue Water Master Fund, L.P..................... 2,500 11/5/99
C-3
SHARES OTHER
NAME PURCHASED SHARES SOLD TRANSACTIONS DATE
---- --------- ----------- ------------ ----------
Blue Water Master Fund, L.P..................... 1,000 11/5/99
Blue Water Master Fund, L.P..................... 8,000 11/8/99
Blue Water Master Fund, L.P..................... 4,000 11/9/99
Blue Water Master Fund, L.P..................... 500 11/11/99
Blue Water Master Fund, L.P..................... 9,500 11/15/99
Blue Water Master Fund, L.P..................... 2,500 11/16/99
Blue Water Master Fund, L.P..................... 7,500 11/18/99
Blue Water Master Fund, L.P..................... 2,500 11/18/99
Blue Water Master Fund, L.P..................... 2,500 11/19/99
Blue Water Master Fund, L.P..................... 1,000 11/19/99
Blue Water Master Fund, L.P..................... 6,500 11/19/99
Blue Water Master Fund, L.P..................... 8,000 11/22/99
Blue Water Master Fund, L.P..................... 1,000 11/23/99
Blue Water Master Fund, L.P..................... 2,500 11/23/99
Blue Water Master Fund, L.P..................... 8,500 11/24/99
Blue Water Master Fund, L.P..................... 3,000 11/24/99
Blue Water Master Fund, L.P..................... 20,000 11/30/99
Blue Water Master Fund, L.P..................... 2,500 11/30/99
Blue Water Master Fund, L.P..................... 500 12/1/99
Blue Water Master Fund, L.P..................... 500 12/2/99
Blue Water Master Fund, L.P..................... 8,000 12/2/99
Blue Water Master Fund, L.P..................... 3,500 12/2/99
Blue Water Master Fund, L.P..................... 1,000 12/3/99
Blue Water Master Fund, L.P..................... 2,500 12/3/99
Blue Water Master Fund, L.P..................... 500 12/6/99
Blue Water Master Fund, L.P..................... 10,000 12/6/99
Blue Water Master Fund, L.P..................... 200 12/7/99
Blue Water Master Fund, L.P..................... 10,500 12/9/99
Blue Water Master Fund, L.P..................... 2,500 12/10/99
Blue Water Master Fund, L.P..................... 5,000 12/10/99
Blue Water Master Fund, L.P..................... 17,000 12/10/99
Blue Water Master Fund, L.P..................... 27,000 12/13/99
Blue Water Master Fund, L,P..................... 2,500 12/14/99
Blue Water Master Fund, L.P..................... 5,400 12/14/99
Blue Water Master Fund, L.P..................... 7,000 12/16/99
Blue Water Master Fund, L.P..................... 12,000 12/17/99
Blue Water Master Fund, L.P..................... 4,000 12/20/99
Blue Water Master Fund, L.P..................... 21,500 12/21/99
Blue Water Master Fund, L.P..................... 8,000 12/22/99
Blue Water Master Fund, L.P..................... 10,000 12/22/99
Blue Water Master Fund, L.P..................... 8,000 12/22/99
Blue Water Master Fund, L.P..................... 2,500 12/22/99
Blue Water Master Fund, L.P..................... 3,000 12/22/99
Blue Water Master Fund, L.P..................... 5,000 12/22/99
Blue Water Master Fund, L.P..................... 8,500 12/22/99
Blue Water Master Fund, L.P..................... 8,500 12/22/99
Blue Water Master Fund, L.P..................... 500 12/23/99
Blue Water Master Fund, L.P..................... 10,000 12/27/99
Blue Water Master Fund, L.P..................... 1,000 12/27/99
C-4
SHARES OTHER
NAME PURCHASED SHARES SOLD TRANSACTIONS DATE
---- --------- ----------- ------------ ----------
Blue Water Master Fund, L.P..................... 14,000 12/28/99
Blue Water Master Fund, L.P..................... 30,000 12/28/99
Blue Water Master Fund, L.P..................... 600 12/28/99
Blue Water Master Fund, L.P..................... 4,700 12/28/99
Blue Water Master Fund, L.P..................... 10,000 12/29/99
Blue Water Master Fund, L.P..................... 17,000 12/30/99
Blue Water Master Fund, L.P..................... 5,000 12/30/99
Blue Water Master Fund, L.P..................... 5,000 12/31/99
Blue Water Master Fund, L.P..................... 2,100 12/31/99
Blue Water Master Fund, L.P..................... 17,500 1/3/00
Blue Water Master Fund, L.P..................... 8,900 1/3/00
Blue Water Master Fund, L.P..................... 30,000 1/4/00
Blue Water Master Fund, L.P..................... 10,000 1/5/00
Blue Water Master Fund, L.P..................... 38,300 1/7/00
Blue Water Master Fund, L.P..................... 34,000 1/7/00
Blue Water Master Fund, L.P..................... 4,700 1/7/00
Blue Water Master Fund, L.P..................... 13,000 1/10/00
Blue Water Master Fund, L.P..................... 2,500 1/10/00
Blue Water Master Fund, L.P..................... 65,000 1/10/00
Blue Water Master Fund, L.P..................... 16,000 1/11/00
Blue Water Master Fund, L.P..................... 23,000 1/12/00
Blue Water Master Fund, L.P..................... 6,100 1/14/00
Blue Water Master Fund, L.P..................... 18,000 1/18/00
Blue Water Master Fund, L.P..................... 20,000 1/19/00
Blue Water Master Fund, L.P..................... 31,100 1/19/00
Blue Water Master Fund, L.P..................... 8,900 1/20/00
Blue Water Master Fund, L.P..................... 11,500 1/20/00
Blue Water Master Fund, L,P..................... 21,000 1/21/00
Blue Water Master Fund, L.P..................... 9,000 1/25/00
Blue Water Master Fund, L,P..................... 15,000 1/25/00
Blue Water Master Fund, L.P..................... 4,000 1/26/00
Blue Water Master Fund, L.P..................... 17,800 1/27/00
Blue Water Master Fund, L.P..................... 2,000 1/27/00
Blue Water Master Fund, L.P..................... 5,500 1/27/00
Blue Water Master Fund, L.P..................... 3,500 1/27/00
Blue Water Master Fund, L.P..................... 12,000 1/27/00
Blue Water Master Fund, L.P..................... 9,000 1/31/00
Blue Water Master Fund, L.P..................... 34,000 2/1/00
Blue Water Master Fund, L.P..................... 7,200 2/2/00
Blue Water Master Fund, L.P..................... 11,000 2/2/00
Blue Water Master Fund, L.P..................... 25,000 2/3/00
Blue Water Master Fund, L.P..................... 1,800 2/4/00
Blue Water Master Fund, L.P..................... 4,400 2/7/00
Blue Water Master Fund, L.P..................... 12,500 2/8/00
Blue Water Master Fund, L.P..................... 3,500 2/8/00
Blue Water Master Fund, L.P..................... 12,000 2/9/00
Blue Water Master Fund, L.P..................... 5,300 2/10/00
Blue Water Master Fund, L.P..................... 14,700 2/11/00
Blue Water Master Fund, L.P..................... 27,800 2/11/00
C-5
SHARES OTHER
NAME PURCHASED SHARES SOLD TRANSACTIONS DATE
---- --------- ----------- ------------ ----------
Blue Water Master Fund, L.P..................... 2,500 2/14/00
Blue Water Master Fund, L.P..................... 1,000 2/15/00
Blue Water Master Fund, L.P..................... 20,000 2/15/00
Blue Water Master Fund, L.P..................... 2,000 2/16/00
Blue Water Master Fund, L.P..................... 10,000 2/16/00
Blue Water Master Fund, L.P..................... 5,000 2/16/00
Blue Water Master Fund, L.P..................... 2,000 2/17/00
Blue Water Master Fund, L.P..................... 8,900 2/18/00
Blue Water Master Fund, L.P..................... 31,000 4/4/00
Blue Water Master Fund, L.P..................... 16,000 4/4/00
Blue Water Master Fund, L.P..................... 22,000 4/4/00
Blue Water Master Fund, L.P..................... 14,000 4/5/00
Blue Water Master Fund, L.P..................... 7,500 4/5/00
Blue Water Master Fund, L.P..................... 21,000 4/5/00
Blue Water Master Fund, L,P..................... 2,500 4/5/00
Blue Water Master Fund, L.P..................... 3,500 4/7/00
Blue Water Master Fund, L,P..................... 7,600 4/10/00
Blue Water Master Fund, L,P..................... 4/11/00
Blue Water Master Fund, L.P..................... 15,000 4/24/00
Blue Water Master Fund, L.P..................... 8,000 4/24/00
Blue Water Master Fund, L.P..................... 15,000 4/25/00
Blue Water Master Fund, L.P..................... 15,000 4/25/00
Blue Water Master Fund, L.P..................... 6,000 4/25/00
Blue Water Master Fund, L.P..................... 8,200 4/25/00
Blue Water Master Fund, L.P..................... 8,900 4/26/00
Blue Water Master Fund, L.P..................... 17,000 4/26/00
Blue Water Master Fund, L,P..................... 18,500 4/27/00
Blue Water Master Fund, L.P..................... 9,500 4/27/00
Blue Water Master Fund, L.P..................... 23,000 4/27/00
Blue Water Master Fund, L.P..................... 30,000 4/28/00
Blue Water Master Fund, L.P..................... 7,000 4/28/00
Blue Water Master Fund, L.P..................... 3,500 4/28/00
Blue Water Master Fund, L.P..................... 15,000 4/28/00
Blue Water Master Fund, L.P..................... 2,500 5/3/00
Blue Water Master Fund, L.P..................... 28,400 5/3/00
Blue Water Master Fund, L.P..................... 48,700 5/4/00
Blue Water Master Fund, L.P..................... 148,100 5/5/00
Blue Water Master Fund, L.P..................... 72,900 5/8/00
Blue Water Master Fund, L.P..................... 5,000 5/6/00
Blue Water Master Fund, L,P..................... 29,200 5/9/00
Blue Water Master Fund, L.P..................... 5,000 1/30/2001
Blue Water Master Fund, L.P..................... 1,000 2/01/2001
Blue Water Master Fund, L.P..................... 4,000 2/02/2001
Blue Water Master Fund, L.P..................... 500 2/22/2001
Blue Water Master Fund, L.P..................... 2,700 3/08/2001
Blue Water Master Fund, L.P..................... 1,000 3/13/2001
Blue Water Master Fund, L.P..................... 2,600 3/20/2001
Blue Water Master Fund, L.P..................... 10,800 3/21/2001
Blue Water Master Fund, L.P..................... 15,300 3/22/2001
C-6
SHARES OTHER
NAME PURCHASED SHARES SOLD TRANSACTIONS DATE
---- --------- ----------- ------------ ----------
Blue Water Master Fund, L.P..................... 16,700 3/23/2001
Blue Water Master Fund, L.P..................... 8,500 3/26/2001
Blue Water Partners II, L.P..................... 16,700 1/6/00
Blue Water Partners II, L.P..................... 5,700 1/7/00
Blue Water Partners II, L.P..................... 5,000 1/7/00
Blue Water Partners II, L.P..................... 1,200 1/7/00
Blue Water Partners II, L.P..................... 8,000 1/10/00
Blue Water Partners II, L.P..................... 2,000 1/10/00
Blue Water Partners II, L.P..................... 2,000 1/11/00
Blue Water Partners II, L.P..................... 2,000 1/12/00
Blue Water Partners II, L.P..................... 48,900 1/14/00
Blue Water Partners II, L.P..................... 2,000 1/18/00
Blue Water Partners II, L.P..................... 3,000 1/19/00
Blue Water Partners II, L.P..................... 900 1/19/00
Blue Water Partners II, L.P..................... 500 1/20/00
Blue Water Partners II, L.P..................... 1,100 1/20/00
Blue Water Partners II, L.P..................... 2,000 1/2S/00
Blue Water Partners II, L.P..................... 5,000 1/26/00
Blue Water Partners II, L.P..................... 500 1/27/00
Blue Water Partners II, L.P..................... 500 1/27/00
Blue Water Partners II, L.P..................... 2,200 1/27/00
Blue Water Partners II, L.P..................... 35,000 1/28/00
Blue Water Partners II, L.P..................... 1,000 2/l/00
Blue Water Partners II, L.P..................... 800 2/2/00
Blue Water Partners II, L.P..................... 1,000 2/2/00
Blue Water Partners II, L.P..................... 4,000 2/3/00
Blue Water Partners II, L.P..................... 200 2/4/00
Blue Water Partners II, L.P..................... 1,500 2/9/00
Blue Water Partners II, L.P..................... 2,500 2/9/00
Blue Water Partners II, L.P..................... 3,000 2/10/00
Blue Water Partners II, L.P..................... 1,000 2/11/00
Blue Water Partners II, L.P..................... 5,000 2/11/00
Blue Water Partners II, L.P..................... 2,500 2/14/00
Blue Water Partners II, L.P..................... 1,500 2/15/00
Blue Water Partners II, L.P..................... 15,000 2/15/00
Blue Water Partners II, L.P..................... 3,000 2/16/00
Blue Water Partners II, L.P..................... 500 2/16/00
Blue Water Partners II, L.P..................... 500 2/17/00
Blue Water Partners II, L.P..................... 1,100 2/18/00
Blue Water Partners II, L.P..................... 56,200 2/24/00
Blue Water Partners II, L.P..................... 5,600 2/25/00
Blue Water Partners II, L.P..................... 9,500 2/28/00
Blue Water Partners II, L.P..................... 7,500 2/29/00
Blue Water Partners II, L.P..................... 6,000 3/14/00
Blue Water Partners II, L.P..................... 2,500 3/15/00
Blue Water Partners II, L.P..................... 7,000 3/15/00
Blue Water Partners II, L.P..................... 2,300 3/16/00
Blue Water Partners II, L.P..................... 5,000 3/17/00
Blue Water Partners II, L.P..................... 13,000 3/21/00
C-7
SHARES OTHER
NAME PURCHASED SHARES SOLD TRANSACTIONS DATE
---- --------- ----------- ------------ ----------
Blue Water Partners II, L.P..................... 2,500 3/21/00
Blue Water Partners II, L.P..................... 3,500 3/21/00
Blue Water Partners II, L.P..................... 7,500 3/22/00
Blue Water Partners II, L.P..................... 6,500 3/27/00
Blue Water Partners II, L.P..................... 4,000 3/29/00
Blue Water Partners II, L.P..................... 6,000 3/29/00
Blue Water Partners II, L.P..................... 8,500 3/30/00
Blue Water Partners II, L.P..................... 4,000 4/4/00
Blue Water Partners II, L.P..................... 2,000 4/4/00
Blue Water Partners II, L.P..................... 1,100 4/26/00
Blue Water Partners II, L.P..................... 2,000 4/27/00
Jonathan Iseson................................. 32,000 32,000
Eddy Raymond Maria Verresen..................... 1,300 10/20/00
Eddy Raymond Maria Verresen..................... 2,500 10/20/00
Eddy Raymond Maria Verresen..................... 400 10/23/00
Eddy Raymond Maria Verresen..................... 800 10/24/00
Eddy Raymond Maria Verresen..................... 2,000 11/15/00
Eddy Raymond Maria Verresen..................... 1,000 2/8/01
Eddy Raymond Maria Verresen..................... 2,500 3/5/01
Eddy Raymond Maria Verresen..................... 2,500 3/5/01
Eddy Raymond Maria Verresen..................... 3,500 3/19/01
Eddy Raymond Maria Verresen..................... 1,500 3/20/01
C-8
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 the 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
24025 Park Sorrento, Calabasas, California beginning at 9:00 a.m. (local time),
on June 19, 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: (i) proposal 1 by the NetSol Shareholders
Group, LLC to amend the company's bylaws so as to increase the size of the board
of directors from eight to fifteen directors, (ii) if proposal 1 is successful,
proposal 2 regarding the election of new directors to the 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 (iii)
proposals 3 through 11 of the board of directors to amend and restate the
company's articles of incorporation and bylaws to permit the actions specified
below for each of those proposals; 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.
THE COMPANY'S BOARD OF DIRECTORS (NOT INCLUDING MR. BURCH) RECOMMENDS THAT YOU
VOTE "AGAINST" PROPOSAL NO. 1 AND "FOR" PROPOSALS NO. 3 THROUGH 11.
PROPOSAL 1. Amend the company's bylaws so as to increase the size of the board
of directors from 8 to 15 directors.
/ / AGAINST / / ABSTAIN / / FOR
PROPOSAL 2. If proposal 1 is successful, elect the following persons to serve as
members of the board of directors of NetSol International, Inc., Rick Poole,
Fred Firth, Eugen Beckert, and James L. Arrington.
/ / VOTE FOR ALL NOMINEES / / WITHHOLD AUTHORITY TO
(except as marked to the contrary below) VOTE FOR ALL NOMINEES
To vote for any individual nominee, write that nominee's name in the space
below.
________________________________________________________________________
To withhold authority for any nominee indicate such in the space below such
nominee's name on the line provided; and
To cumulate votes, place the number or percentage of votes for a nominee below
such nominee's name on the line provided:
Rick Poole, Fred Firth, Eugen Beckert, James L. Arrington
________________ ________________ ________________ ________________
PROPOSAL 3. Amend and restate the articles of incorporation to remove cumulative
voting in the election of directors.
/ / AGAINST / / ABSTAIN / / FOR
PROPOSAL 4. Amend and restate the articles of incorporation to provide for a
classified board of directors so each directors is elected for a three year term
with one-third of the board standing for election each year.
/ / AGAINST / / ABSTAIN / / FOR
(CONTINUED, AND TO BE DATED AND SIGNED ON OTHER SIDE)
PROPOSAL 5. Amend and restate the articles of incorporation and bylaws to
provide that any action required or permitted to be taken by the stockholders
may be effected only at an annual or special meeting of stockholders, and not by
written consent of stockholders.
/ / AGAINST / / ABSTAIN / / FOR
PROPOSAL 6. Amend and restate the articles of incorporation and bylaws to
provide that only the chief executive officer, president, chairman of the board
or board of directors may call a special meeting of stockholders.
/ / AGAINST / / ABSTAIN / / FOR
PROPOSAL 7. Amend and restate the articles of incorporation and bylaws to
provide for an advance notice procedure for the nomination, other than by or at
the direction of the board of directors, of candidates for election as directors
as well as for other proposals to be considered at meetings of stockholders.
/ / AGAINST / / ABSTAIN / / FOR
PROPOSAL 8. Amend and restate the articles of incorporation and bylaws to
provide that directors may only be removed from office for cause.
/ / AGAINST / / ABSTAIN / / FOR
PROPOSAL 9. Amend and restate the articles of incorporation and bylaws to
provide that the affirmative vote of holders of at least 66-2/3% vote of the
outstanding voting stock be required to amend the bylaws or articles of
incorporation.
/ / AGAINST / / ABSTAIN / / FOR
PROPOSAL 10. Amend and restate the articles of incorporation to authorize
5,000,000 shares of undesignated preferred stock with right, preferences and
privileges to be designated by the board without stockholder vote; and
/ / AGAINST / / ABSTAIN / / FOR
PROPOSAL 11. Amend and restate the articles of incorporation and bylaws to
provide for limited liability and indemnification for the directors, officers
and other agents of the company.
/ / AGAINST / / ABSTAIN / / FOR
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" THE BOARD'S
NOMINEES IN PROPOSAL NO. 2 AND "FOR" PROPOSALS NO. 3 THROUGH NO. 11.
/ / Check this box to withhold discretion to vote on other matters properly
presented.
Dated: ________________________________, 2001
________________________________________
(Signature)
________________________________________
(Second signature)
PLEASE DATE AND SIGN ABOVE exactly as your
name appears on your Stock Certificate,
indicating where appropriate, official
position or representative capacity.
WRITTEN CONSENT
NETSOL INTERNATIONAL, INC.
CONSENT IN LIEU OF SPECIAL MEETING OF STOCKHOLDERS
THIS WRITTEN CONSENT IS SOLICITED BY THE BOARD OF DIRECTORS OF NETSOL
INTERNATIONAL, INC.
Unless otherwise specified below, the undersigned hereby, with respect to
all shares of common stock of NetSol International, Inc. (the "Company") which
the undersigned may be entitled to vote, hereby withholds consent on Proposal 1
and consents to Proposals 2 through 11 with respect to all of the shares of
common stock which the undersigned is entitled to vote, to the taking of the
following actions (each a "Proposal") without a meeting of stockholders of the
Company:
THE COMPANY'S BOARD OF DIRECTORS, NOT INCLUDING MR. BURCH, RECOMMENDS THAT
YOU WITHHOLD CONSENT ON PROPOSAL 1.
PROPOSAL 1. Amend the Company's bylaws so as to increase the size of the board
of directors from 8 to 15 directors.
/ / CONSENT / / CONSENT WITHHELD
THE COMPANY'S BOARD OF DIRECTORS, NOT INCLUDING MR. BURCH, RECOMMENDS THAT
YOU CONSENT TO PROPOSAL 2.
PROPOSAL 2. If the Netsol Shareholder Group LLC's proposal to amend our bylaws
to increase the number of authorized directors is approved, elect the following
persons to serve as members of the board of directors of Netsol International,
Inc.:
1. Rick Poole 2. Fred Firth 3. Eugene Beckert 4. James L. Arrington
/ / CONSENT / / CONSENT WITHHELD
(except as marked to the contrary below)
To withhold consent to the election of any nominee, write that nominee's
name in the space below.
--------------------------------------------------------------------------------
THE COMPANY'S BOARD OF DIRECTORS, NOT INCLUDING MR. BURCH, RECOMMENDS THAT
YOU CONSENT TO ALL OF THE FOLLOWING ACTIONS.
PROPOSAL 3. Amend and restate the articles of incorporation to remove cumulative
voting in the election of directors.
/ / CONSENT / / CONSENT WITHHELD
PROPOSAL 4. Amend and restate the articles of incorporation to provide for a
classified board of directors so each directors is elected for a three year term
with one-third of the board standing for election each year.
/ / CONSENT / / CONSENT WITHHELD
PROPOSAL 5. Amend and restate the articles of incorporation and bylaws to
provide that any action required or permitted to be taken by the stockholders
may be effected only at an annual or special meeting of stockholders, and not by
written consent of stockholders.
/ / CONSENT / / CONSENT WITHHELD
PROPOSAL 6. Amend and restate the articles of incorporation and bylaws to
provide that only the chief executive officer, president, chairman of the board
or board of directors may call a special meeting of stockholders.
/ / CONSENT / / CONSENT WITHHELD
PROPOSAL 7. Amend and restate the articles of incorporation and bylaws to
provide for an advance notice procedure for the nomination, other than by or at
the direction of the board of directors, of candidates for election as directors
as well as for other proposals to be considered at meetings of stockholders.
/ / CONSENT / / CONSENT WITHHELD
PROPOSAL 8. Amend and restate the articles of incorporation and bylaws to
provide that directors may only be removed from office for cause.
/ / CONSENT / / CONSENT WITHHELD
PROPOSAL 9. Amend and restate the articles of incorporation and bylaws to
provide that the affirmative vote of holders of at least 66 2/3% of the
outstanding voting stock be required to amend the bylaws or articles of
incorporation.
/ / CONSENT / / CONSENT WITHHELD
PROPOSAL 10. Amend and restate the articles of incorporation to authorize
5,000,000 shares of undesignated preferred stock with right, preferences and
privileges to be designated by the board without stockholder vote; and
/ / CONSENT / / CONSENT WITHHELD
PROPOSAL 11. Amend and restate the articles of incorporation and bylaws to
provide for limited liability and indemnification for the directors, officers
and other agents of the company.
/ / CONSENT / / CONSENT WITHHELD
This Written Consent may be executed in counterparts.
IF YOU SIGN, DATE AND RETURN THIS YELLOW CONSENT CARD WITHOUT INDICATING YOUR
VOTE ON ONE OR MORE OF THE FOLLOWING PROPOSALS, YOU WILL BE DEEMED TO HAVE
WITHHELD CONSENT ON PROPOSAL 1 AND CONSENTED WITH RESPECT TO PROPOSALS 2 THROUGH
11.
IN WITNESS WHEREOF, the undersigned have executed this Written Consent.
When shares are held by joint tenants, both should sign. When signing as
attorney-in-fact, executor, administrator, trustee, guardian, corporate officer
or partner, please give full title as such. If a corporation, please sign in
corporate name of President or other authorized officer. If a partnership,
please sign a partnership name by authorized person.
______________________________________________
Signature(s) of Stockholder(s)
______________________________________________
Title, if any Date
______________________________________________