Netgatewat/SINGHAL dissident shareholders in battle for Netsol. Help Mr Wizzard Help!! ha ha ha Netsol.
NetSol Dissidents Find Proxy Fight Must Be Waged in Pakistan
2001-05-23 11:06 (New York)
NetSol Dissidents Find Proxy Fight Must Be Waged in Pakistan
Washington, May 23 (Bloomberg) -- When NetSol International
Inc.'s biggest investors demanded a special shareholders meeting
on whether to oust the business software company's board, they had
no inkling how far the proxy fight would take them.
Almost 8,000 miles farther than they suspected, it turns out.
The software-design company, based near Los Angeles in
Calabasas, California, held its last three shareholder meetings in
that state. This time, NetSol decided the battle over its future
would take place almost half a world away in the ancient walled
city of Lahore, Pakistan.
``I don't think anybody contemplated that somebody would try
to do something like this,'' said John Kirkland, a lawyer for the
dissidents who contends that the meeting site -- 650 miles
northeast of Karachi, Pakistan -- was picked to make the proxy
fight as hard as possible. ``It's a bizarre anomaly.''
NetSol Chairman Irfan Mustafa wouldn't discuss the meeting
when contacted in Dubai, where he works for Tricon Global
Restaurants Inc. Other NetSol officials didn't return calls to the
company's California headquarters. Lahore is home to NetSol's
software development facility.
The bid to replace NetSol's seven-person board is being
spearheaded by Blue Water Partners LLC, a Manhasset, New York,
hedge fund manager that owns 21 percent of the company's stock,
which has plunged 94 percent from a March 2000 high of $80.
NetSol is by no means the first U.S. company accused of
seeking an out-of-the-way location for a shareholder meeting.
Faced with a proxy fight in 1999, Maxxam Inc., a producer of metal
and semi-fabricated aluminum products, scheduled a meeting at 8:30
a.m. at the Waterwood National Resort and Conference Center near
Huntsville, Texas, about 70 miles from Houston.
Jill Ratner, a participant in the Maxxam proxy battle, said
getting to Waterwood was tough, in part because the resort, once
owned by the company, didn't have rooms available for
shareholders. Yet Ratner, president of the Rose Foundation for
Communities and the Environment, was more impressed by NetSol's
site selection.
``They make Maxxam look like pikers,'' Ratner said. Maxxam is
holding its annual shareholders meeting today and company
officials couldn't be reached immediately for comment.
If Blue Water succeeds in replacing NetSol's board, the hedge
fund manager says it will bring in new management and hire an
investment bank to explore a possible sale of the company. Two
people on Blue Water's slate sit on the board of Netgateway Inc.,
a Utah Web business software developer that has an agreement
giving it options to buy some NetSol stock from members of the
Blue Water group, while giving the investors options to buy
Netgateway shares.
Opposition
NetSol Chief Executive Najeeb Ghauri issued a statement
earlier this month saying Blue Water's proposed slate doesn't
``have the skills required to execute the NetSol business plan.''
Blue Water rode a 250 percent jump in NetSol's stock during
the first three months of 2000 to a ranking as the best-performing
hedge fund group of last year's first quarter. The NetSol stake
more recently has been a headache in more ways than one for the
firm and portfolio manager Jonathan Iseson.
Blue Water paid an average of $20.35 a share for the bulk of
its NetSol stake, according to the most recent figures in
regulatory filings, only to see the stock fall to less than $5.
Blue Water investors have sued Iseson, alleging Blue Water
didn't reveal that it has had as much as two-thirds of its assets
in NetSol stock. And last year, Blue Water had to pay NetSol $1.4
million for violating a securities law that prohibits major
shareholders from seeking so-called short-swing profits by selling
stock less than six months after it was purchased. Violators are
required to turn over to the company any profits from short-swing
stock sales.
Pakistan Connection
NetSol formerly operated as Mirage Holdings Inc., an importer
of fashions from Pakistan and India. Mirage changed businesses
through the 1999 acquisition of Network Solutions (Pvt) Ltd., a
software development company incorporated in Lahore that was
founded by Salim Ghauri, NetSol's current president.
NetSol's products include a system for managing vehicle lease
contracts that is being used by Daimler Chrysler Financial
Services, according to the company's most recent annual report.
Because Blue Water owns at least 10 percent of NetSol's
common shares, the investor had the right to request a special
shareholder meeting. In documents filed with the Securities and
Exchange Commission in late April, Blue Water said it had asked
NetSol to schedule a meeting at the company headquarters in
Calabasas ``or such other location as is designated by the
board.''
Several weeks later, NetSol disclosed that it would host the
meeting at the company's Lahore software development facility.
``We invite you to attend the meeting and see our development
team,'' NetSol said in the filing, providing an address of Y-126
Comm DHA, Lahore.
Nevada Laws
The meeting must be run according to the laws of Nevada, the
state in which NetSol is incorporated, legal experts say. That
said, most state laws don't require a company to hold its annual
meeting in the state of incorporation.
``There is usually no limitation on where a company can meet
unless it's self-imposed,'' said Cornish Hitchcock, a lawyer who
represents shareholder activists.
NetSol shareholders won't have to attend the meeting to cast
their vote in the contested election. Rather, shareholders can
submit a proxy by mail in which they give management or the
dissident investors authority to cast their votes.
The Blue Water group is seeking written consents from
shareholders for election to the board seats. Short of getting
consents from investors holding two-thirds of the stock, the
dissidents must physically deliver proxies they receive to the
meeting. NetSol's management owned 41 percent of shares
outstanding as of April 30.
--Miles Weiss in Washington (202) 624-1879 or at
mweiss@bloomberg.net with reporting by David Evans in Los Angeles/
bd/rp
Story Illustration: to chart the recent performance of NetSol
shares, type: {NTWK US <Equity> GPO D <GO>}.
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