Shelly Singhal,->NETSOL INTERNATIONAL, INC.
(Name of Registrant as Specified in Charter)
NETSOL SHAREHOLDERS GROUP, LLC
BACKGROUND OF THE PROXY SOLICITATION
The Common Stock has declined precipitously from a high of $75.00 per share on March 3, 2000 to a low of $1.38 on April 5, 2001. On April 24, 2001, BW Master Fund, engaged legal counsel and initiated oral communication with a limited number of fellow Stockholders pursuant to Rule 14a-2(b)(2), for the purpose of discussing their views on the management and performance of the Company. As a major Stockholder of the Company, BW Master Fund has similar concerns as other Stockholders with the Company's recent poor financial performance and falling stock price. On April 25, 2001, BW Master Fund and certain other Stockholders formed the Group for the purpose of exploring available options. The Group had oral discussions with Donald Danks and Shelly Singhal, directors of Netgateway, Inc. (OTC BB: NGWY.OB) concerning a possible strategic fit between Netgateway and the Company. The Group members entered into a Stock Option Agreement with Netgateway pursuant to which Netgateway was granted an option to purchase up to 300,000 of the Group Members' shares in the Company, and the Group Members were given warrants to purchase up to 300,000 shares of in Netgateway common stock. BW Master Fund, Blue Water Partners II, L.P., Dr. Henry Vogel and Netgateway each signed the Stock Option Agreement. Although listed as parties to the Stock Option Agreement, Robert and Susan Harman did not sign it. On April 26, 2001, the Group filed a Schedule 13D with the SEC and issued a press release announcing the formation of the Group. The Group attempted to initiate contact with management of the Company. Management refused to accept the Group's telephone calls. The Group thereafter decided to initiate a proxy contest. On April 27, 2001, BW Master Fund called a Special Meeting of the Stockholders for June 1, 2001, by written request to the Chairman of the Board of the Company. BW Master Fund currently holds approximately 18.5% of the outstanding shares entitled to vote. Section 3.1 of Article IV of the Bylaws authorizes one or more Stockholders, holding in the aggregate at least 10% of the shares entitled to vote at any such meeting, to call a Special Meeting for any purpose or purposes whatsoever. Pursuant to Section 3.2 of Article IV of the Bylaws, the officer receiving such a request shall forthwith cause notice to be given to the Stockholders entitled to vote, that a meeting will be held at the time requested by the Stockholder or Stockholders calling the meeting. On April 27, 2001, the Group also filed a preliminary proxy statement with the SEC, and issued a press release announcing the initiation of a proxy contest. Counsel for the Group thereafter spoke with counsel for the Company in an attempt to initiate discussions. Neither the Company nor its counsel responded. The Company has since stated that "there is no room for compromise at this point in time," and that "there was never any intent to negotiate with the Group." On May 7, 2001, the Company filed a preliminary proxy statement with the SEC stating that it would hold the Special Meeting on June 1, 2001, as requested by BW Master Fund. The Company has designated that the Special Meeting take place in Lahore, Pakistan. On May 9, 2001, BW Master Fund revised its Special Meeting request to include the proposed amendment of the Bylaws to increase the Board to fifteen (15) Directors and the election of seven (7) Nominees of the Group as the New Directors. Donald Danks, Chairman and Chief Executive Officer of Netgateway, has stated that "I believe this is an excellent opportunity for two complimentary companies to explore a wide range of strategic options to help maximize the value of the products, services, infrastructures and assets of both companies." The Group believes that there may be a strategic fit between the two companies, such as the possibility that the Company could provide programming outsourcing for Netgateway. However, neither the Group nor Netgateway has yet fully analyzed or determined whether this is the case, no agreement has been reached between the Group (or any Group Members) and Netgateway other than the Stock Option Agreement, and there have been no specific negotiations concerning any acquisition, merger or other potential transaction involving the Company and Netgateway. In opposition to the current Board, the Group is seeking to solicit the proxies and consents of Stockholders to be used to amend the current Bylaws so as to increase the size of the Board from eight (8) directors to fifteen (15) directors and to elect the Nominees as New Directors of the Company by written consent, or alternatively at the Special Meeting. The Nominees, if elected, intend to engage an investment bank and actively pursue acquiring, merging with or being acquired by another public company. The Group believes that one or more current directors of the Company, including Cary Burch, will vote in favor of this plan. The Nominees plan to change the existing management and operations of the Company to effectuate this plan. Each of the Nominees has consented, if so elected, to serve as a director and is fully committed, if elected, to take such action as the Nominees deem advisable and in the best interest of the Stockholders and which they believe will maximize stockholder value and improve the Company's future viability and growth. The Group believes that the adoption of this strategy will make the Company a far more attractive company. |
