SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
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netGuru, Inc.
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NETGURU, INC.
22700 SAVI RANCH PARKWAY
YORBA LINDA, CALIFORNIA 92887
October 10, 2003
To Our Stockholders:
You are cordially invited to attend the 2003 annual meeting of
stockholders of netGuru, Inc., which will be held at 10:00 a.m. on November 13,
2003, at our executive offices located at 22700 Savi Ranch Parkway, Yorba Linda,
California 92887. All holders of our outstanding common stock as of the close of
business on September 30, 2003 are entitled to vote at the annual meeting.
Enclosed are a copy of the notice of annual meeting of stockholders, a
proxy statement and a proxy card. A current report on our business operations
will be presented at the meeting, and stockholders will have an opportunity to
ask questions.
We hope you will be able to attend the annual meeting. Whether or not
you expect to attend, it is important that you complete, sign, date and return
the proxy card in the enclosed envelope in order to make certain that your
shares will be represented at the annual meeting.
Sincerely,
/s/ Amrit K. Das
Amrit K. Das
Chief Executive Officer
NETGURU, INC.
22700 SAVI RANCH PARKWAY
YORBA LINDA, CALIFORNIA 92887
______________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 13, 2003
______________
NOTICE IS HEREBY GIVEN that the 2003 annual meeting of stockholders of
netGuru, Inc. will be held at 10:00 a.m. local time, on November 13, 2003, at
our executive offices located at 22700 Savi Ranch Parkway, Yorba Linda,
California 92887, for the following purposes:
1. To elect five directors to our board of directors;
2. To ratify and approve the adoption of our 2003 Stock Option
Plan;
3. To ratify the appointment of KPMG LLP, independent auditors,
to audit our consolidated financial statements for the fiscal
year beginning April 1, 2003; and
4. To transact such other business as may properly come before
the annual meeting or any adjournments or postponements of the
meeting.
Our board of directors has fixed the close of business on September 30,
2003, as the record date for the determination of stockholders entitled to
notice of and to vote at the annual meeting. Only holders of our common stock at
the close of business on the record date are entitled to vote at the meeting.
A list of stockholders entitled to vote at the meeting will be
available for inspection at our executive offices. Stockholders attending the
meeting whose shares are held in the name of a broker or other nominee should
bring with them a proxy or letter from that firm confirming their ownership of
shares.
By Order of the Board of Directors
/s/ Amrit K. Das
Amrit K. Das
Chief Executive Officer
Yorba Linda, California
October 10, 2003
YOUR VOTE IS IMPORTANT
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, EVEN
IF YOU DO PLAN TO ATTEND, PLEASE PROMPTLY FILL IN, DATE, SIGN AND MAIL THE
ENCLOSED PROXY IN THE RETURN ENVELOPE FURNISHED FOR THAT PURPOSE AS PROMPTLY AS
POSSIBLE. RETURNING A SIGNED PROXY CARD WILL NOT PREVENT YOU FROM VOTING IN
PERSON AT THE MEETING, IF YOU SO DESIRE, BUT WILL HELP US SECURE A QUORUM AND
REDUCE THE EXPENSE OF ADDITIONAL PROXY SOLICITATION. IF YOU LATER DESIRE TO
REVOKE YOUR PROXY FOR ANY REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE
ATTACHED PROXY STATEMENT.
TABLE OF CONTENTS
Page
----
Introduction................................................................ 1
Proposal 1 - Election of Directors.......................................... 4
Proposal 2 - Ratification and Approval of 2003 Stock Option Plan............ 19
Proposal 3 - Ratification of Appointment of Independent Auditors............ 22
Other Matters............................................................... 23
Annual Report on Form 10-KSB................................................ 23
Stockholder Proposals....................................................... 23
Appendix A - 2003 Stock Option Plan......................................... 24
NETGURU, INC.
22700 SAVI RANCH PARKWAY.
YORBA LINDA, CALIFORNIA 92887
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 13, 2003
______________
INTRODUCTION
DATE, TIME, PLACE AND PURPOSE
This proxy statement is being furnished to holders of common stock of
netGuru, Inc., a Delaware corporation, in connection with the solicitation of
proxies by our board of directors for use at the 2003 annual meeting of our
stockholders to be held at 10:00 a.m. local time on November 13, 2003, at our
executive offices located at 22700 Savi Ranch Parkway, Yorba Linda, California
92887, and at any adjournments or postponements of the meeting. At the annual
meeting, stockholders will be asked to consider and vote upon the proposals
described in the accompanying notice of meeting and any other matters that may
properly come before the meeting. We anticipate that this proxy statement and
accompanying proxy card will first be mailed on or about October 23, 2003 to all
stockholders entitled to vote at the annual meeting.
VOTING RIGHTS AND VOTES REQUIRED FOR APPROVAL
We have one class of capital stock outstanding, common stock. At the
close of business on September 30, 2003, the record date for determining
stockholders entitled to notice of and to vote at the annual meeting, we had
issued and outstanding 17,357,154 shares of common stock held by 172 holders of
record. Each share of common stock entitles the holder of that share to one vote
on any matter coming before the annual meeting and any adjournments or
postponements of the annual meeting.
Under Delaware law and our bylaws, a majority of the shares entitled to
vote, represented in person or by proxy, will constitute a quorum at a meeting
of stockholders. Shares of our common stock represented in person or by proxy
(regardless of whether the proxy has authority to vote on all matters), as well
as abstentions and broker non-votes, will be counted for purposes of determining
whether a quorum is present at the meeting.
An "abstention" is the voluntary act of not voting by a stockholder who
is present at a meeting and entitled to vote. "Broker non-votes" are shares of
voting stock held in record name by brokers and nominees concerning which: (i)
instructions have not been received from the beneficial owners or persons
entitled to vote; (ii) the broker or nominee does not have discretionary voting
power under applicable rules or the instrument under which it serves in such
capacity; or (iii) the record holder has indicated on the proxy or has executed
a proxy and otherwise notified us that it does not have authority to vote such
shares on that matter.
Votes cast at the meeting will be tabulated by the person or persons
appointed by us to act as inspectors of election for the meeting. Directors will
be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors, which means that the five candidates receiving the highest number of
affirmative votes of the shares entitled to be voted for them will be elected.
In all matters other than the election of directors, unless otherwise expressly
provided by applicable statute or by our certificate of incorporation or bylaws,
the affirmative vote of the majority of shares present in person or represented
by proxy at the meeting and entitled to vote on the proposal will constitute the
act of the stockholders.
On proposals such as proposals 2 and 3, which require for approval the
affirmative vote of the majority of shares present in person or represented by
proxy at the meeting and entitled to vote on the proposal, abstentions but not
broker non-votes will be treated as shares present and entitled to vote on the
proposal. Applying that standard, an abstention will be counted as a vote
"against" the proposal, and a broker non-vote will reduce the absolute number
(although not the percentage) of the affirmative votes needed for approval of
the proposal. However, broker non-votes will be treated as shares present and
entitled to vote on any other proposals that are properly brought before the
meeting if applicable statutes or our certificate of incorporation or bylaws
require for approval of the proposals the affirmative vote of a majority of the
outstanding shares.
SOLICITATION OF PROXIES
The proxy card accompanying this proxy statement is solicited on behalf
of our board of directors for use at the meeting. Stockholders are requested to
complete, date and sign the accompanying proxy card and promptly return it in
the accompanying envelope or otherwise mail it to us. All proxies that are
properly executed and returned, and that are not revoked, will be voted at the
meeting in accordance with the instructions indicated on the proxies or, if no
direction is indicated, "for" each of the proposals described on the proxy card.
A stockholder who has given a proxy may revoke it at any time before it
is exercised at the meeting, by:
o delivering to our secretary (by any means, including facsimile), a
written notice, bearing a date later than the date of the proxy,
stating that the proxy is revoked;
o signing and delivering to our secretary (by any means, including
facsimile) a proxy relating to the same shares and bearing a later
date prior to the vote at the meeting; or
o attending the meeting and voting in person (although attendance at
the meeting will not, by itself, revoke a proxy).
Our board of directors does not presently intend to bring any business
before the meeting of our stockholders other than the proposals referred to in
this proxy statement and specified in the notice of meeting. So far as is known
to our board of directors, no other matters are to be brought before the
meeting. As to any business that may properly come before the meeting, however,
it is intended that shares represented by proxies held by management will be
voted in accordance with the judgment of the persons voting the shares.
We contemplate that the solicitation of proxies will be made primarily
by mail. We will make arrangements with brokerage houses and other custodians,
nominees and fiduciaries to send proxies and proxy material to the beneficial
owners of shares of our common stock and will reimburse them for their expenses
in so doing. We have no present plans to hire special employees or paid
solicitors to assist us in obtaining proxies, but we reserve the right to do so
if we believe it is necessary to secure a quorum.
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RECOMMENDATION OF OUR BOARD OF DIRECTORS
Our board of directors recommends that our stockholders vote "for" each
of the proposals described in this proxy statement and the accompanying notice
of meeting.
THE PROPOSALS TO BE VOTED UPON AT THE MEETING ARE DISCUSSED IN DETAIL
IN THIS PROXY STATEMENT. YOU ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY
THIS PROXY STATEMENT IN ITS ENTIRETY.
-3-
PROPOSAL 1
ELECTION OF DIRECTORS
Directors are elected annually and hold office until the next annual
meeting of stockholders or until their respective successors are elected and
qualified. It is intended that the proxies solicited by the board of directors
will be voted for election of the five nominees listed in this proxy statement
unless a contrary instruction is made on the proxy. If, for any reason, one or
more of these nominees is unavailable as a candidate for director, an event,
which we do not anticipate, the person named in the accompanying proxy will vote
for another nominee or nominees. All of the nominees for director are currently
directors of netGuru.
DIRECTORS, DIRECTOR NOMINEES AND EXECUTIVE OFFICERS
Set forth below is certain information regarding our directors, who are
all nominees for re-election, and our executive officers.
NAME AGE POSITION
---- --- --------
Amrit K. Das 57 Chairman of the Board, Chief Executive
Officer and Director and Director Nominee
Jyoti Chatterjee 47 President, Chief Operating Officer and
Director and Director Nominee
Bruce K. Nelson 49 Chief Financial Officer
Clara Y.M. Young 49 Corporate Vice President, Chief
Administrative Officer and Secretary
Santanu K. Das 30 Corporate Vice President, President of
Engineering and Collaborative Software,
Vice President, New Technology
Stephen W. Owen 44 Corporate Vice President, President of
European Operations
Benedict A. Eazzetta (1) 40 Director and Director Nominee
D. Dean McCormick III (1) 50 Director and Director Nominee
Stanley W. Corbett (1) 70 Director and Director Nominee
____________________
(1) Member of Audit Committee and member of Compensation and Stock Option
Committee.
AMRIT K. DAS is the founder of our company and has served as our Chief
Executive Officer and Chairman of our board of directors since our inception in
1981. Mr. Das also served as our President from our inception until March 1999.
Mr. Das holds a B.S. in Civil/Structural Engineering from Calcutta University,
India and an M.S. in Structural Engineering from the University of South
Carolina.
JYOTI CHATTERJEE has served as our President since March 1999 and as
our Chief Operating Officer and as a director since April 1990. Mr. Chatterjee
served as our Chief Financial Officer from March 2001 to March 2002, as our
Executive Vice President from April 1990 to March 1999, and as our Chief
Consulting Engineer from 1985 to 1990. Mr. Chatterjee holds a B.S. in Structural
Engineering from the Indian Institute of Technology and an M.S. in Structural
Engineering from the University of Pennsylvania.
-4-
BRUCE K. NELSON has served as our Chief Financial Officer since April
2002. Prior to joining us, Mr. Nelson served as the Chief Financial Officer of
Millennium Information Technologies, Inc. from 1997 to April 2002. From 1992 to
1997, he was a co-founder and the President of Comprehensive Weight Management,
a healthcare marketing company. From 1985 to 1992, Mr. Nelson served as the
Treasurer of Comprehensive Care Corporation, a NYSE-traded national service
company. Mr. Nelson holds a B.S. in Finance from the University of Southern
California and a M.B.A. from Bryant College in Smithfield, Rhode Island.
CLARA Y. M. YOUNG has served as our Corporate Vice President and Chief
Administrative Officer since January 2001 and as our Secretary since March 2001.
Ms. Young served as our Vice President, Administration since December 1987.
Prior to that, Ms. Young served as program analyst with The Technical Group,
Inc., from December 1982 to December 1987. Ms. Young holds a B.S. in Computer
Science from California State University, Fullerton.
SANTANU K. DAS has served as our Corporate Vice President and President
of Engineering and Collaborative Software since April 1992 and as our Vice
President, New Technology since July 1999. He served as a director of netGuru
from September 1996 to July 2003. Prior to that, Mr. Das served as our Corporate
Vice President and President, Engineering and Animation Software and ASP from
January 2001 to March 2002. Prior to that, Mr. Das served as Manager of New
Technology from May 1997 until June 1999 and as a Senior Engineering Analyst for
our company from 1991 to April 1997. Mr. Das holds a B.S. in Structural
Engineering from the University of Southern California and an M.S. in Structural
Engineering from the Massachusetts Institute of Technology. Santanu Das is the
son of our Chief Executive Officer, Amrit Das.
STEPHEN W. OWEN has served as our Corporate Vice President since
September 2001 and as President of European Operations since October 1999. He
served as a director of netGuru from September 2001 to July 2003. Prior to that,
he served as our Director of European Operations from 1987 to 1999. Mr. Owen
holds a B.S. in Civil Engineering from the University College Swansea, United
Kingdom and is a Chartered Engineer for both Civil and Marine Technology
Engineering.
STANLEY W. CORBETT has served as one of our directors since July 2002.
Mr. Corbett is a manufacturing executive in the aerospace industry. Since 1989,
Mr. Corbett has been providing consulting services for software system
implementations to first and second tier defense contractors as well as
commercial manufacturers. As a consultant, he also has provided solutions to a
large variety of manufacturing problems. Mr. Corbett holds a B.S. in Mechanical
Engineering from Lehigh University and an M.S. in Industrial Engineering from
Stanford University and has completed the University of California at Los
Angeles Executive Program.
BENEDICT A. EAZZETTA has served as chief operating officer of
Intergraph Process Power & Offshore, an engineering software and services
business segment of Intergraph Corporation or "Intergraph" (Nasdaq NM:INGR), and
executive vice president of Intergraph, since May 2001. He co-founded and then
served from January 2000 to April 2001 as vice president of product management
for Industria Solutions, a privately held software and services company. Mr.
Eazzetta served as an engineering executive at ExxonMobil from January 1996 to
January 2000. Prior to that, he served in several engineering, staff and
management positions, including downstream planning and development, economics
and planning, and various operational supervisory roles. Mr. Eazzetta earned a
B.S. degree in Nuclear Engineering and an M.S. degree in Mechanical Engineering
from Georgia Tech.
-5-
D. DEAN MCCORMICK III is a certified public accountant and has been
president of the consulting and accounting firm of McCormick Consulting, Inc.
(formerly known as McCormick & Company) since July 1993. Mr. McCormick has been
a member of the Forum for Corporate Directors since June 2003 and a member of
the Orange County Leadership Council for the University of Southern California
since September 2001. He served as president of the Orange County Chapter of the
Association for Corporate Growth from 1995 to 1996. Mr. McCormick holds a B.A.
degree in Economics from the University of Redlands and an M.B.A. from the
University of Southern California.
All directors hold office until the next annual stockholders' meeting,
until their respective successors are elected or until their earlier death,
resignation or removal. Our officers are appointed by, and serve at the
discretion of, our board of directors.
MEETINGS OF OUR BOARD OF DIRECTORS AND COMMITTEES
Our board of directors held one meeting during the fiscal year ended
March 31, 2003, and took action by unanimous written consent on three occasions.
Our board of directors currently has an Audit Committee and a Compensation and
Stock Option Committee. Our board of directors does not have a Nominating
Committee. Our entire board of directors selects board nominees. During the
fiscal year ended March 31, 2003, except for Dr. Laxmi Mall Singhvi, no
incumbent director attended fewer than 75% of the aggregate of the total number
of meetings of the board of directors held during the period for which he was a
director and the total number of meetings held by all committees of the board on
which he served during the periods that he served.
Our Audit Committee makes recommendations to our board of directors
regarding the appointment of our independent auditors, reviews the results and
scope of the audit and other services provided by our independent auditors,
reviews our consolidated financial statements for each interim period, and
reviews and evaluates our internal control functions. Our Audit Committee is
governed by a written charter, a copy of which charter was filed with the
Securities and Exchange Commission as an exhibit to our definitive proxy
statement for our annual meeting held on November 15, 2001.
Prior to July 25, 2003, our Audit Committee consisted of Stanley W.
Corbett, Garret Vreeland and Dr. Singhvi. Since July 25, 2003, our Audit
Committee has consisted of Messrs. Corbett, Eazzetta and McCormick, with Mr.
McCormick holding the position of chairman of that committee. Each of the
members of our Audit Committee is "independent" within the meaning of Rule
4200(a)(14) of the listing standards of the National Association of Securities
Dealers. Our Audit Committee held five meetings during the fiscal year ended
March 31, 2003.
Our Compensation and Stock Option Committee makes recommendations to
our board of directors concerning salaries and incentive compensation for our
employees and consultants and also selects the persons to receive options under
our stock option plans and establishes the number of shares, exercise price,
vesting period and other terms of the options granted under these plans. Our
entire board of directors also may perform these functions with regard to our
stock option plans. Since July 25, 2003, our Compensation and Stock Option
Committee has consisted of Messrs. McCormick, Eazzetta and Corbett, with Mr.
Eazzetta holding the position of chairman of that committee.
Prior to July 25, 2003, we had a Stock Option Committee that consisted
of Messrs. Amrit Das, Chatterjee and Vreeland and a Compensation Committee that
consisted of Messrs. Amrit Das, Chatterjee and Vreeland. Neither the
Compensation Committee nor the Stock Option Committee held any meetings during
the fiscal year ended March 31, 2003; however, our board of directors took
action relating to our stock option plans by written consent on two occasions
during the fiscal year ended March 31, 2003. No executive officer of netGuru has
served as a director or member of the compensation committee of any other entity
whose executive officers served as a director of netGuru.
-6-
DIRECTORS' COMPENSATION
Since July 2003, Messrs. McCormick and Eazzetta, two of our
non-employee directors, have been eligible to receive $1,000 per month, each, in
consideration for their services on our board of directors. Directors are
reimbursed for certain expenses in connection with attendance at board of
directors and committee meetings. We may also periodically award options to our
directors under our existing stock option plans and otherwise.
During the fiscal year ended March 31, 2003, we granted an option to
purchase 12,000 shares, of our common stock to Stanley W. Corbett, upon his
appointment to our board. This option has an exercise price of $2.63 per share
(which price was the fair market value of a share of our common stock on the
date of the grant), vests in three equal annual installments commencing on the
date of grant, which was July 24, 2002, and expires July 24, 2012. We did not
grant options to any of our other directors during our last fiscal year.
However, subsequent to his resignation from our board of directors, we granted
to Garret Vreeland a two-year fully-vested non-qualified option to purchase up
to 10,000 shares of our common stock at an exercise price of $1.28 per share on
August 7, 2003 (which price was equal to the closing price of a share of our
common stock on the day preceding the grant). In connection with their
appointments to our board of directors, effective as of August 7, 2003, Messrs.
McCormick and Eazzetta each received ten-year fully vested non-qualified options
to purchase up to 6,000 shares of common stock under our 2000 Stock Option Plan
at an exercise price of $1.28 per share (which price was equal to the closing
price of a share of our common stock on the day preceding the grant).
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, or
the Exchange Act, requires our executive officers and directors, and persons who
beneficially own more than 10% of a registered class of our equity securities,
to file with the Securities and Exchange Commission initial reports of ownership
and reports of changes in ownership of our equity securities and to furnish us
with copies of all Section 16(a) forms that they file.
Based solely on a review of copies of the reports furnished to us
during the fiscal year ended March 31, 2003 and thereafter, or any written
representations received by us from a director, officer or beneficial owner of
more than 10% of our equity securities that no other reports were required, we
believe that during the 2003 fiscal year, all Section 16(a) filing
requirements were complied with.
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BOARD AUDIT COMMITTEE REPORT
The Audit Committee of the board of directors reviewed and discussed
with the independent auditors all matters required by generally accepted
auditing standards, including those described in Statement on Auditing Standards
No. 61, as amended, "Communication with Audit Committees," and reviewed and
discussed the audited consolidated financial statements of netGuru, Inc., both
with and without management present. In addition, the Audit Committee obtained
from the independent auditors a formal written statement describing all
relationships between the auditors and netGuru that might bear on the auditors'
independence consistent with Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and discussed with the
auditors any relationships that may impact their objectivity and independence
and satisfied itself as to the auditors' independence. Based upon the Audit
Committee's review and discussions with management, the Audit Committee
recommended to the board of directors that the audited consolidated financial
statements of netGuru be included in its annual report on Form 10-KSB for the
fiscal year ended March 31, 2003, for filing with the Securities and Exchange
Commission. The Audit Committee also recommended reappointment of the
independent auditors, and the board of directors concurred in such
recommendation.
AUDIT COMMITTEE:
D. Dean McCormick III, Chairman
Stanley W. Corbett
Benedict A. Eazzetta
-8-
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual and
long-term compensation for services rendered during the last three fiscal years
to our company in all capacities as an employee by our Chief Executive Officer
and our other executive officers whose aggregate cash compensation exceeded
$100,000 (collectively, the "named executive officers") during the fiscal year
ended March 31, 2003.
Annual Compensation Long-Term Compensation
--------------------------------- ------------------------------
Awards Payouts
------ -------
Securities
Other Annual Underlying All Other
Name and Salary Compensation(1) Options Compensation
Principal Position Year ($) ($) (#) ($)
------------------ ---- -------- ---------------- ------------ -------------
Amrit K. Das 2003 335,513 34,259 (2) --- 15,524 (3)
Chief Executive Officer 2002 348,923 43,024 (2) --- 18,599 (4)
2001 340,615 57,414 (2) 30,000 26,068 (5)
Jyoti Chatterjee 2003 214,665 --- --- 13,756 (6)
President and Chief 2002 223,062 --- --- 15,128 (7)
Operating Officer 2001 214,292 28,325 (2) 30,000 17,926 (8)
Clara Y. M. Young 2003 128,682 --- --- 6,340 (9)
Corporate Vice President, 2002 133,962 --- --- 11,305 (10)
Chief Administrative 2001 125,192 --- 9,000 7,690 (11)
Officer
Stephen W. Owen 2003 142,610 492 (12) --- 680 (13)
Corporate Vice President, 2002 169,043 5,100 (12) --- 646 (13)
President, European 2001 150,967 7,820 (12) 12,000 672 (13)
Operations
Santanu K. Das 2003 120,150 --- --- 11,242 (14)
Corporate Vice President, 2002 124,616 --- --- 15,992 (15)
President, Engineering & 2001 124,616 --- 30,000 12,627 (16)
Collaborative Software,
Vice President,
New Technology
_________________________________________________________________________________________________________
(1) The costs of certain benefits are not included because they did not exceed,
in the case of each named executive officer, the lesser of $50,000 or 10%
of the total annual salary and bonus as reported above.
(2) Represent personal expenses paid on behalf of the named executive officer,
none of which expenses exceeded 25% of the total expenses reported.
(3) Includes $6,324 in premiums paid by us pursuant to a split-dollar life
insurance policy established for the benefit of Amrit Das and $9,200 in
company contributions to the 401(k) plan.
(4) Includes $7,499 in premiums paid by us pursuant to a split-dollar life
insurance policy established for the benefit of Amrit Das and $11,100 in
company contributions to the 401(k) plan.
(5) Includes $15,568 in premiums paid by us pursuant to a split-dollar life
insurance policy established for the benefit of Amrit Das and $10,500 in
company contributions to the 401(k) plan.
(6) Includes $2,471 in premiums paid by us pursuant to a life insurance policy
established for the benefit of Jyoti Chatterjee, $1,689 in premiums paid by
us pursuant to a long-term disability insurance policy and $9,596 in
company contributions to the 401(k) plan.
(7) Includes $2,471 in premiums paid by us pursuant to a life insurance policy
established for the benefit of Jyoti Chatterjee, $1,689 in premiums paid by
us pursuant to a long-term disability insurance policy and $10,968 in
company contributions to the 401(k) plan.
(8) Includes $5,737 in premiums paid by us pursuant to a life insurance policy
established for the benefit of Jyoti Chatterjee, $1,689 in premiums paid by
us pursuant to a long-term disability insurance policy and $10,500 in
company contributions to the 401(k) plan.
(9) Includes $400 in premiums paid by us pursuant to a long-term disability
insurance policy for the benefit of Clara Young and $5,940 in company
contributions to the 401(k) plan.
(10) Includes $400 in premiums paid by us pursuant to a long-term disability
insurance policy for the benefit of Clara Young and $10,905 in company
contributions to the 401(k) plan.
(11) Includes $400 in premiums paid by us pursuant to a long-term disability
insurance policy for the benefit of Clara Young and $7,290 in company
contributions to the 401(k) plan.
(12) Represents imputed interest for Mr. Owen's non-interest bearing loan.
(13) Represents premiums paid by us pursuant to a life insurance policy
established for the benefit of Stephen Owen.
(14) Includes $5,150 in premiums paid by us pursuant to a life insurance policy
established for the benefit of Santanu Das and $6,092 in company
contributions to the 401(k) plan.
(15) Includes $5,150 in premiums paid by us pursuant to a life insurance policy
established for the benefit of Santanu Das and $10,842 in company
contributions to the 401(k) plan.
(16) Includes $5,150 in premiums paid by us pursuant to a life insurance policy
established for the benefit of Santanu Das and $7,477 in company
contributions to the 401(k) plan.
-9-
OPTION GRANTS IN LAST FISCAL YEAR
During fiscal 2003, we did not grant any stock options to any of the
named executive officers. We have never granted any stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information regarding the number of shares
of our common stock underlying exercisable and unexercisable in-the-money stock
options held by the named executive officers and the values of those options at
fiscal year-end. An option is in-the-money if the fair market value for the
underlying securities exceeds the exercise price of the option. The named
executive officers did not hold any stock appreciation rights or exercise any
options during fiscal 2003.
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options at In-The-Money Options at
Acquired March 31, 2003 (#) March 31, 2003 ($)(1)
on Value ----------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
Amrit K. Das -- -- 190,000 10,000 319,200 16,800
Jyoti Chatterjee -- -- 246,000 10,000 413,280 16,800
Clara Young -- -- 83,000 3,000 139,440 5,040
Stephen Owen -- -- 88,000 4,000 147,840 6,720
Santanu Das -- -- 190,000 10,000 319,200 16,800
_____________________
(1) Based on the last reported sale price of underlying securities ($1.68) on
March 31, 2003 (the last trading day during our fiscal year) as reported by
Nasdaq, minus the exercise price of the options.
LONG-TERM INCENTIVE PLAN AWARDS
In fiscal 2003, no awards were given to the named executive officers
under long-term incentive plans.
REPRICING OF OPTIONS AND SARS
No adjustments to or repricing of stock options previously awarded to
the named executive officers occurred in fiscal 2003.
EMPLOYMENT AGREEMENTS
In June 2001, we entered into five-year employment agreements with each
of Amrit Das, our Chairman and Chief Executive Officer, Jyoti Chatterjee, our
President and Chief Operating Officer, Clara Young, our Corporate Vice
President, Chief Administrative Officer and Secretary, and Santanu Das, our
Corporate Vice President, President, Engineering and Collaborative Software
and Vice President, New Technology.
The agreements provide that Mr. Amrit Das, Mr. Chatterjee, Ms. Young
and Mr. Santanu Das will receive minimum base annual salaries of $312,000,
$202,800, $117,000 and $120,000, respectively. Each agreement also provides for
the grant of an annual bonus in the discretion of the Compensation and Stock
Option Committee. The annual salaries may be adjusted upward in the discretion
of the Compensation and Stock Option Committee. Each employment agreement will
terminate prior to its expiration if the employee dies or becomes permanently
disabled, if we cease to conduct business, or at our election for good cause as
defined in the agreements. If we terminate an agreement other than for good
cause, the employee shall (a) continue to be paid base salary and bonuses for
the remainder of the term of the agreement, (b) continue to receive all benefits
and perquisites which he or she had been receiving immediately prior to such
termination for the remainder of the term of the agreement, and (c) be
immediately vested in all stock options to which he or she would have been
entitled during the full term of the agreement had the termination not occurred.
-10-
Each of the agreements contains provisions for confidentiality and
assignments of intellectual property rights. In addition, each of the agreements
prohibits the employees from competing with us and from recruiting our
employees, suppliers or independent contractors within one year after
termination of the agreements.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
GENERAL
As of the record date, September 30, 2003, 17,357,154 shares of our
common stock were outstanding. The following table sets forth information as of
that date regarding the beneficial ownership of our common stock by:
o each of our directors and director nominees;
o each of our named executive officers listed in the summary
compensation table;
o all of our directors and executive officers as a group; and
o each person known by us to beneficially own 5% or more of the
outstanding shares of our common stock as of the date of the
table.
Except as indicated below, the address for each named beneficial owner
is the same as ours. The information with respect to each person is as supplied
or confirmed by such person or based upon statements filed with the Securities
and Exchange Commission. The inclusion of shares in this table as beneficially
owned is not an admission of beneficial ownership. Percentages shown as an
asterisk represent less than 1.00%.
Beneficial ownership is determined in accordance with Rule 13d-3
promulgated by the Securities and Exchange Commission, and generally includes
voting or investment power with respect to securities. Except as indicated
below, we believe each holder possesses sole voting and investment power with
respect to all of the shares of common stock shown below as owned by that
holder, subject to community property laws where applicable. In computing the
number of shares beneficially owned by a holder and the percentage ownership of
that holder, shares of common stock subject to options or warrants or underlying
notes held by that holder that are currently exercisable or convertible or are
exercisable or convertible within 60 days after the date of the table are deemed
outstanding. Those shares, however, are not deemed outstanding for the purpose
of computing the percentage ownership of any other person or group.
SHARES BENEFICIALLY OWNED BY LAURUS MASTER FUND, LTD.
Laurus Master Fund, Ltd., or Laurus, is a security holder named in the
table below. Laurus holds, among other securities described below, a warrant to
purchase up to 200,000 shares of our common stock and a 6% secured convertible
note that we issued in December 2002, which was subsequently amended on August
4, 2003 and October 2, 2003 ("Amended Note"). In connection with this financing,
we paid a $200,000 fee to an affiliate of Laurus.
-11-
The interest rate per annum on the Amended Note is equal to the greater
of 5% or the prime rate plus 1%, payable monthly in arrears. The Amended Note is
being amortized over a 24-month period commencing on August 1, 2003. The warrant
is exercisable at various fixed exercise prices as follows: up to 125,000 shares
at an exercise price of $1.76 per share, up to an additional 50,000 shares at an
exercise price of $2.08 per share, and up to an additional 25,000 shares at an
exercise price of $2.40 per share. The exercise prices and number of shares
underlying the warrant are subject to anti-dilution adjustments in connection
with mergers, acquisitions, stock splits, dividends and the like. The warrant
contains a cashless exercise feature.
The Amended Note is convertible at a fixed conversion price of $1.30
per share, subject to anti-dilution adjustments in connection with mergers,
acquisitions, stock splits, dividends and the like, and in connection with
future issuances of our common stock at prices per share below the
then-applicable conversion price. However, under certain circumstances, such as
if we are in default under the Amended Note or if a conversion occurs pursuant
to a call notice, an alternate conversion price based on a discount from the
market price of our common stock may apply. As of the date of the table, the
outstanding principal balance of the Amended Note was $1,650,000. On October 2,
2003, we made a payment that reduced the principal balance of the Amended Note
to $1,575,000. For purposes of calculating the number of shares shown in the
table as underlying the Amended Note, we have used a conversion price of $1.30.
If we are in default under the Amended Note, or the related note
purchase agreement, then the Amended Note will be convertible at a per share
conversion price equal to the lower of the fixed conversion price or 70% of the
average of the three lowest closing prices for our common stock during the
preceding 30 trading days. Also, if a conversion occurs pursuant to a call
notice as described below, then the conversion price will be equal to the lesser
of the fixed conversion price and 90% of the average of the closing prices of
our common stock during the 15 trading days preceding the date of the call
notice. At any time before the Amended Note is fully paid, Laurus may choose to
convert all or part of the accrued interest on and/or principal of the Amended
Note at the conversion price then in effect, subject to the beneficial ownership
and volume limitations described below.
At our election, and subject to certain restrictions, the monthly
payment may be made in cash or in shares of our common stock, or in any
combination of both, except that, during periods in which a registration
statement covering the resale of the shares of common stock issued or issuable
upon conversion of the Amended Note is not effective or in which we are in
default under the Amended Note, we must make payments solely in cash. If all or
part of a monthly payment is made in shares of our common stock, then the
then-effective conversion price is to be used to determine the number of shares
to be issued.
During any period when a resale registration statement remains
effective, we may issue a call notice to Laurus stating that, at least 30 days
from the date of the call notice, we wish to convert into shares of our common
stock a portion or all of the principal of and interest accrued on the Amended
Note. No more than 20% of the aggregate dollar trading volume of our common
stock for the 22 trading days preceding the date of the call notice may be
converted under any call notice. The conversion price will be equal to the
lesser of the fixed conversion price and 90% of the average of the closing
prices of our common stock during the 15 trading days preceding the date of the
call notice.
-12-
During any period when a resale registration statement remains
effective and we are not in default under the Amended Note, we will have the
right under the note purchase agreement to redeem all or any portion of the
remaining outstanding principal balance of the Amended Note. To effect a
redemption, we must issue Laurus a redemption notice that provides that we will
pay Laurus a cash redemption price that is equal to 104% of the outstanding
principal amount of the Amended Note to be redeemed, plus all accrued but unpaid
interest and other sums payable to Laurus, if any. Laurus may elect, within five
business days, to convert all or any portion of the redemption price into shares
of our common stock at the then-effective conversion price instead of receiving
cash. On or before the seventh business day after Laurus receives the redemption
notice, we must pay Laurus in cash an amount equal to the redemption price
stated in the redemption notice less any portion of the redemption price Laurus
elected to convert into shares of our common stock.
Laurus is subject to various beneficial ownership and conversion
volume limitations with regard to the Amended Note and the warrant. Laurus may
not on any given date convert the Amended Note if, and to the extent, that the
conversion would result in the issuance of a number of shares of common stock
with a dollar value that exceeds 25% of the aggregate dollar trading volume of
our common stock during the preceding 30 trading days. However, Laurus may make
a series of smaller conversions that do not exceed this limitation.
In addition, Laurus is subject to a contractual 4.99% beneficial
ownership limitation that prohibits Laurus from converting the Amended Note or
exercising the warrant if, and to the extent, that the conversion or exercise
would result in Laurus, together with its affiliates, beneficially owning more
than 4.99% of our outstanding common stock. However, this 4.99% limitation
automatically becomes void upon an event of default under the Amended Note and
can be waived by Laurus upon 75 days' advance notice to us. In addition, this
4.99% limitation does not prevent Laurus from converting the Amended Note into
or exercising the warrant for shares of common stock and then reselling those
shares in stages over time where Laurus and its affiliates do not, at any given
time, beneficially own shares in excess of the 4.99% limitation. Further, a
contractual limitation that prohibits Laurus from converting the Amended Note or
exercising the warrant if, and to the extent, the conversion or exercise would
result in Laurus and its affiliates beneficially owning more than 3,463,625
shares of our common stock, will be removed if and when we obtain stockholder
approval at Laurus' request or if an exemption from applicable Nasdaq corporate
governance rules becomes available.
On July 31, 2003, we entered into a $4,000,000 secured revolving
accounts receivable credit facility with Laurus. The amount of borrowings
available under this credit facility are based on eligible accounts receivable
and are subject to an initial interest rate per annum of the greater of 5% or
the prime rate plus 1%, with interest payable monthly in arrears. The amount of
borrowings available under this credit facility is reduced by the balance
outstanding on the Amended Note. After an initial period of three months, the
interest rate per annum will be adjusted every month based on certain conditions
and on the volume weighted average price of our common stock. The facility
provides us the flexibility to access additional amounts above what is available
based upon eligible accounts receivable. Any such additional amounts would
accrue interest at the rate of 0.6% per month, payable monthly. In connection
with this financing, we paid a $140,000 fee to an affiliate of Laurus.
-13-
The credit facility has a term of three years and will automatically
renew every three years unless cancelled in writing by us or by Laurus under
certain conditions. An early termination fee of up to $120,000 will be payable
if the facility is terminated prior to August 1, 2006.
In connection with this credit facility, we issued to Laurus a
five-year warrant to purchase up to 180,000 shares of our common stock. The
warrant is exercisable at various exercise prices based upon the then effective
fixed conversion price of this credit facility. Based on the initial
fixed conversion price of $1.30, the exercise prices would be $1.495 per share
for the purchase of up to 60,000 shares, $1.625 per share for the purchase of an
additional 60,000 shares, and $1.885 per share for the purchase of an additional
60,000 shares. The exercise prices and number of shares underlying the warrant
are subject to anti-dilution adjustments in connection with mergers,
acquisitions, stock splits, dividends and the like. The warrant contains a
cashless exercise feature. Laurus may also receive additional five-year warrants
to purchase up to 400,000 shares of our common stock at an exercise price equal
to 125% of the fixed conversion price based upon how much of the outstanding
obligation of the credit facility is converted into equity. This credit facility
is secured by a general security interest in the assets of netGuru and its
subsidiaries.
Borrowings under this credit facility may be repaid at our option in
cash or through the issuance of shares of our common stock at the then fixed
conversion price, subject to volume limitations and provided that the shares are
registered with the Securities and Exchange Commission for public resale and the
then current market price is greater than 110% of the fixed conversion price.
The initial fixed conversion price is $1.30 per share and is subject to
anti-dilution adjustments in connection with mergers, acquisitions, stock
splits, dividends and the like. For every $1 million of conversions, the fixed
conversion price will adjust upward to equal 110% of the volume weighted average
closing price for the five trading days prior to the last day of the period
during which such $1 million has been converted. As of the date of the table,
the outstanding principal balance under this credit facility was $600,000. For
purposes of calculating the number of shares shown in the table as underlying
the borrowings under this credit facility, we have used a conversion price of
$1.30.
Laurus is subject to a contractual 4.99% beneficial ownership
limitation that prohibits Laurus from converting the borrowings under the credit
facility or exercising the warrant if and to the extent that the conversion or
exercise would result in Laurus, together with its affiliates, beneficially
owning more than 4.99% of our outstanding common stock. However, this 4.99%
limitation automatically becomes void upon an event of default under the credit
facility and can be waived by Laurus upon 75 days' advance notice to us. In
addition, this 4.99% limitation does not prevent Laurus from converting the
borrowings under the credit facility into or exercising the warrant for shares
of common stock and then reselling those shares in stages over time where Laurus
and its affiliates do not, at any given time, beneficially own shares in excess
of the 4.99% limitation.
A change of control of netGuru could occur if conversions of amounts
due under either or both of these two credit facilities occur at dramatically
reduced conversion prices, such as if the fixed conversion price of the July
2003 credit facility is reset to a substantially lower price upon our issuance
of securities at a lower price or if Laurus sequentially converts portions of
the Amended Note at alternate conversion prices into shares of our common stock
and resells those shares into the market. If we are in default or we issue call
notices under the Amended Note, then an alternate conversion price based on a
discount from the market price of our common stock may apply, and the Amended
Note could become convertible into an unlimited number of additional shares of
our common stock, particularly if Laurus sequentially converts portions of the
Amended Note into shares of our common stock at alternate conversion prices and
resells those shares into the market.
-14-
If Laurus sequentially converts portions of the Amended Note into
shares of our common stock at alternate conversion prices and resells those
shares into the market, then the market price of our common stock could decline
due to the additional shares available in the market, particularly in light of
the relatively thin trading volume of our common stock. Consequently, if a
default occurs and continues, and if Laurus repeatedly converts portions of the
Amended Note at alternate conversion prices and then resells those underlying
shares into the market, a continuous downward spiral of the market price of our
common stock could occur that would benefit Laurus at the expense of other
existing or potential holders of our common stock, creating a conflict of
interest between Laurus and investors who purchase the shares of common stock
resold by Laurus following conversion of the Amended Note.
If a change of control occurs, then the stockholders who historically
have controlled our company would no longer have the ability to exert
significant control over matters that could include the election of directors,
changes in the size and composition of the board of directors, and mergers and
other business combinations involving our company. Instead, one or more other
stockholders could gain the ability to exert this type of control and may also,
through control of the board of directors and voting power, be able to control
certain decisions, including decisions regarding the qualification and
appointment of officers, dividend policy, access to capital (including borrowing
from third-party lenders and the issuance of additional equity securities), and
the acquisition or disposition of our assets.
To our knowledge, Laurus has sole voting and investment power with
respect to all shares of common stock shown as beneficially owned by it, except
that Laurus Capital Management, LLC, a Delaware limited liability company, may
be deemed a control person of the shares held by Laurus. David Grin and Eugene
Grin are the principals of Laurus Capital Management, LLC, and their address is
152 West 57th Street, New York, New York 10019.
Name and Address Amount and Nature of Beneficial Percent of Class
of Beneficial Owner Ownership of Common Stock of Common Stock
-------------------- ------------------------- ---------------
Amrit K. Das 2,760,018 (1) 15.7%
Jyoti Chatterjee 517,490 (2) 2.9%
Clara Y. M. Young 118,372 (3) *
Stephen W. Owen 171,524 (4) *
Santanu K. Das 2,740,900 (5) 15.6%
D. Dean McCormick III 6,000 (6) *
Stanley W. Corbett 8,000 (6) *
Benedict A. Eazzetta 6,000 (6) *
Peter Kellogg 3,776,500 (7) 21.8%
Sormistha Das 1,865,924 (8) 10.7%
Laurus Master Fund, Ltd. 2,128,788 (9) 10.9%
All directors and executive
officers as a group (9
persons) 6,343,304 (10) 34.9%
_______________
-15-
(1) Includes 1,279,759 shares of common stock held by the A. and P. Das
Living Trust, of which trust Amrit Das is the trustee, and 190,000 shares
of common stock underlying options. Also includes 50,000 shares of common
stock held by the Purabi Das Foundation, Inc., of which foundation Amrit
Das is the trustee. Mr. Das disclaims beneficial ownership of the shares
held by the foundation.
(2) Includes 246,000 shares of common stock underlying options.
(3) Includes 83,000 shares of common stock underlying options.
(4) Includes 38,202 shares of common stock held indirectly through Mr. Owen's
spouse and 88,000 shares of common stock underlying options.
(5) Includes 190,000 shares of common stock underlying options.
(6) Represents shares of common stock underlying options.
(7) Includes 145,000 shares of common stock held indirectly through I.A.T.
Reinsurance Syndicate, Ltd., a Bermuda corporation of which Mr. Kellogg
is the sole holder of voting stock. Mr. Kellogg disclaims beneficial
ownership of the shares held by that corporation. The address for Mr.
Kellogg is 120 Broadway, New York, New York, 10271.
(8) Includes 3,000 shares of common stock underlying options.
(9) Represents 380,000 shares of common stock underlying warrants, 1,279,663
shares of common stock underlying the Amended Note and 469,125 shares of
common stock underlying convertible borrowings under the July 2003
secured credit facility.
(10) Includes 835,000 shares of common stock underlying options, 50,000 shares
of common stock that are held indirectly by Amrit Das and as to which Mr.
Das disclaims beneficial ownership, and 38,202 shares of common stock
that are held indirectly by Mr. Owen's spouse.
EQUITY COMPENSATION PLAN INFORMATION
The following table gives information about our common stock that may
be issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of March 31, 2003, including Research
Engineers, Inc. 1996 Stock Option Plan, Research Engineers, Inc. 1997 Stock
Option Plan, Research Engineers, Inc. 1998 Stock Option Plan and netGuru, Inc.
2000 Stock Option Plan. Together, these plans are referred to in this proxy
statement as the "option plans."
-16-
Number of
Securities Remaining
Available for Future
Number of Securities Issuance Under Equity
to be Issued Upon Weighted Average Compensation Plans
Exercise of Exercise Price of (Excluding Securities
Outstanding Options Outstanding Options Reflected
Plan Category and Warrants (1) and Warrants in Column (a))
------------- ------------------- ---------------- --------------
(a) (b) (c)
Equity compensation plans approved 1,826,000 $2.18 872,000
by security holders
Equity compensation plans not approved -- -- --
by security holders
TOTAL 1,826,000 $2.18 872,000
____________________
(1) Number of shares is subject to adjustment for changes in capitalization for
stock splits, stock dividends and similar events.
The options plans permit grants of both incentive stock options and
non-qualified stock options. Options under all plans generally vest over three
years, though the vesting periods may vary from person to person, and are
exercisable subject to continued employment and other conditions.
At March 31, 2003, there were 368,000 options outstanding under the
1996 Plan at a weighted average exercise price of $1.39; 330,000 options
outstanding under the 1997 Plan at a weighted average exercise price of $1.48;
598,000 options outstanding under the 1998 Plan at a weighted average exercise
price of $2.28; and 530,000 options outstanding under the 2000 Plan at a
weighted average exercise price of $3.06.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described above under the heading "Security Ownership of Certain
Beneficial Owners and Management," we are a party to two credit facilities with,
and have issued or may become obligated to issue certain securities to, Laurus
Master Fund, Ltd.
In July 2002, Mr. Peter Kellogg, one of our major stockholders,
executed a letter of commitment to provide us with a revolving line of credit
expiring March 31, 2003, in the amount of $500,000 at annual interest rates
varying from 2.0% over prime rate to 10.0% over prime rate depending on the
outstanding balance. The revolving line of credit had no loan covenant or ratio
requirements. We did not borrow any funds under this line of credit prior to its
expiration on March 31, 2003.
In February 2002, Mr. Amrit Das and Mr. Jyoti Chatterjee pledged some
of their personal assets as collateral in connection with the financing of our
$500,000 telephony switch.
On May 3, 2001, we entered into an interest-bearing secured loan
agreement and promissory note with Mr. Santanu Das, an officer and then director
of our company, for $70,000 at an annual interest rate of 6%. The loan was
payable through payroll withholdings from August 24, 2001 through August 4,
2006. Shares of netGuru common stock owned by Mr. Das, as well as all vested but
unexercised options granted him, secured the loan. In April 2002, Mr. Das repaid
the balance of this loan in full.
In November 2000, we entered into a non-interest bearing secured loan
agreement and promissory note in the amount of $85,000 with Mr. Stephen Owen, an
officer and then director of our company, in the amount of $85,000. The loan was
secured by Mr. Owen's pledge of the proceeds from the exercise and sale of his
vested options. As of March 31, 2003, the total outstanding balance on this loan
was $7,879. Subsequent to year-end, Mr. Owen repaid the balance of this loan in
full.
-17-
In March 1999, Mr. Amrit Das personally guaranteed a term loan from a
bank in India. The term loan is secured by substantially all of our assets
located in India. The loan bears interest at an annual rate of 16.6%. Interest
is payable monthly. The principal is payable in quarterly installments beginning
June 2000 and ending March 2005. At March 31, 2003, we owed $541,000 on this
loan.
We are a party to employment agreements with related parties, as more
particularly described above under the heading "Employment Agreements." In
addition, Sormistha Das, who beneficially owned more than 10% of our outstanding
shares of common stock as of the record date, serves as our assistant
controller.
-18-
PROPOSAL 2
RATIFICATION AND APPROVAL OF 2003 STOCK OPTION PLAN
GENERAL
As described above under the heading "Equity Compensation Plan
Information," as of March 31, 2003, we had four stock option plans. As of
September 30, 2003, our board of directors approved our 2003 Stock Option Plan
(the "2003 Plan") by unanimous written consent, subject to stockholder
ratification and approval of the 2003 Plan.
The 2003 Plan is designed to enable us to offer an incentive-based
compensation system to our employees, officers and directors and to consultants
who do business with us. The 2003 Plan provides for the grant of incentive stock
options, or ISOs, and nonqualified stock options, or NQOs.
SHARES SUBJECT TO THE 2003 PLAN
To date, no options to purchase shares of common stock have been issued
under the 2003 Plan, and 1,000,000 shares were available for issuance under the
2003 Plan. On September 30, 2003, the closing sale price of a share of our
common stock on The Nasdaq National Market was $1.33. In September 2003, we
applied to transfer the listing of our common stock to The Nasdaq SmallCap
Market, since our stockholders' equity had fallen below the required minimum per
Nasdaq National Market rules as a result of the net loss we incurred in fiscal
2003, due in part to the $5.8 million write-down of goodwill for our IT services
division pursuant to a change in accounting principle under Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
The approval was granted in October and our common stock began trading on the
Nasdaq SmallCap Market on October 9, 2003, with NGRU continuing to be our ticker
symbol. Any shares of common stock that are subject to an award but are not used
because the terms and conditions of the award are not met, or any shares that
are used by participants to pay all or part of the purchase price of any option,
may again be used for awards under the 2003 Plan.
As soon as practicable following stockholder approval of this proposal,
we intend to register on Form S-8 under the Securities Act of 1933 the issuance
of our securities under the 2003 Plan. A copy of the 2003 Plan is attached as
APPENDIX A to this proxy statement and is described below.
ADMINISTRATION
The 2003 Plan is to be administered by a committee of not less than two
nor more than five persons appointed by our board of directors, each of whom
must be a director of netGuru. Our board of directors has resolved that our
Compensation and Stock Option Committee shall act as the committee that
administers the 2003 Plan. However, our board of directors also may act as the
committee that administers the 2003 Plan at any time or from time to time. It is
the intent of the 2003 Plan that it be administered in a manner such that option
grants and exercises would be "exempt" under Rule 16b-3 of the Securities
Exchange Act of 1934 (the "Exchange Act").
The committee is empowered to select those eligible persons to whom
options shall be granted under the 2003 Plan, to determine the time or times at
which each option shall be granted, whether options will be ISOs or NQOs, and
the number of shares to be subject to each option, and to fix the time and
manner in which each such option may be exercised, including the exercise price
and option period, and other terms and conditions of such options, all subject
to the terms and conditions of the 2003 Plan. The committee has sole discretion
to interpret and administer the 2003 Plan, and its decisions regarding the 2003
Plan are final.
-19-
The 2003 Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time and from time to time by our board of
directors. Our board of directors may not materially impair any outstanding
options without the express consent of the optionee or increase the number of
shares subject to the 2003 Plan, materially increase the benefits to optionees
under the 2003 Plan, materially modify the requirements as to eligibility to
participate in the 2003 Plan or alter the method of determining the option
exercise price without stockholder approval. No option may be granted under the
2003 Plan after September 30, 2013.
OPTION TERMS
ISOs granted under the 2003 Plan must have an exercise price of not
less than 100% of the fair market value of the common stock on the date the ISO
is granted and must be exercised, if at all, within ten years from the date of
grant. In the case of an ISO granted to an optionee who owns more than 10% of
the total voting securities of netGuru on the date of grant, the exercise price
may not be less than 110% of fair market value on the date of grant, and the
option period may not exceed five years. NQOs granted under the 2003 Plan must
have an exercise price of not less than 85% of the fair market value of the
common stock on the date the NQO is granted.
Options may be exercised during a period of time fixed by the
committee, except that no option may be exercised more than ten years after the
date of grant and no option shall vest at less than 20% per year over a
consecutive five-year period. In the discretion of the committee, payment of the
purchase price for the shares of stock acquired through the exercise of an
option may be made in cash, shares of netGuru common stock or a combination of
cash and shares of netGuru common stock.
FEDERAL INCOME TAX CONSEQUENCES
Holders of NQOs do not realize income as a result of a grant of the
option, but normally realize compensation income upon exercise of an NQO to the
extent that the fair market value of the shares of common stock on the date of
exercise of the NQO exceeds the exercise price paid. We will be required to
withhold taxes on ordinary income realized by an optionee upon the exercise of a
NQO. In the case of an optionee subject to the "short-swing" profit recapture
provisions of Section 16(b) of the Exchange Act, the optionee realizes income
only upon the lapse of the six-month period under Section 16(b), unless the
optionee elects to recognize income immediately upon exercise of his or her
option.
Holders of ISOs will not be considered to have received taxable income
upon either the grant or the exercise of the option. Upon the sale or other
taxable disposition of the shares, long-term capital gain will normally be
recognized on the full amount of the difference between the amount realized and
the option exercise price paid if no disposition of the shares has taken place
within either two years from the date of grant of the option or one year from
the date of exercise. If the shares are sold or otherwise disposed of before the
end of the one-year or two-year periods, the holder of the ISO must include the
gain realized as ordinary income to the extent of the lesser of the fair market
value of the option stock minus the option price, or the amount realized minus
the option price. Any gain in excess of these amounts, presumably, will be
treated as capital gain. We will be entitled to a tax deduction in regard to an
ISO only to the extent the optionee has ordinary income upon the sale or other
disposition of the option shares.
Upon the exercise of an ISO, the amount by which the fair market value
of the purchased shares at the time of exercise exceeds the option price will be
an "item of tax preference" for purposes of computing the optionee's alternative
minimum tax for the year of exercise. If the shares so acquired are disposed of
prior to the expiration of the one-year and two-year periods described above,
there should be no "item of tax preference" arising from the option exercise.
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NEW PLAN BENEFITS
Because awards under the 2003 Plan are discretionary, no future awards
under the 2003 Plan are determinable at this time.
POSSIBLE ANTI-TAKEOVER EFFECTS
Although not intended as an anti-takeover measure by the board of
directors, one of the possible effects of the 2003 Plan could be to place
additional shares, and to increase the percentage of the total number of shares
outstanding, in the hands of our directors and officers. These persons may be
viewed as part of, or friendly to, incumbent management and may, therefore,
under certain circumstances be expected to make investment and voting decisions
in response to a hostile takeover attempt that may serve to discourage or render
more difficult the accomplishment of the attempt.
In addition, options may, in the discretion of the committee, contain a
provision providing for the acceleration of the exercisability of outstanding,
but unexercisable, installments upon the first public announcement of a tender
offer, merger, consolidation, sale of all or substantially all of the assets of
netGuru, or other attempted changes in the control of netGuru. In the opinion of
our board of directors, such an acceleration provision merely ensures that
optionees under the 2003 Plan will be able to exercise their options as intended
by our board of directors and stockholders prior to any such extraordinary
corporate transaction that might serve to limit or restrict that right. Our
board of directors is, however, presently unaware of any threat of hostile
takeover involving netGuru.
REQUIRED VOTE AND BOARD RECOMMENDATION
The affirmative vote of a majority of the shares of our common stock
present in person or represented by proxy at the meeting and entitled to vote on
this proposal will constitute stockholder ratification and approval of the 2003
Plan. As noted above, the board of directors has approved the 2003 Plan.
Stockholders should be aware, however, that the board of directors may be viewed
as having a conflict of interest in approving, and recommending that
stockholders approve, the 2003 Plan.
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PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Our board of directors has appointed the independent accounting firm of
KPMG LLP to audit our consolidated financial statements for the fiscal year
beginning April 1, 2003, and to conduct whatever audit functions are deemed
necessary pursuant thereto. KPMG LLP audited our fiscal 2003 consolidated
financial statements included in our 2003 annual report to stockholders.
PRINCIPAL ACCOUNTING FIRM FEES
The following table sets forth the aggregate fees billed or expected to
be billed to us for services rendered to us during the fiscal year ended March
31, 2003 by our independent auditors, KPMG LLP:
Audit Fees $ 183,800(a)
Financial Information Systems Design and
Implementation Fees $ -0-
All Other Fees:
Audit-related fees (b) $ 97,104
Other non-audit services -0-
Total all other fees: $ 97,104
________________________
(a) Includes fees for the audit of our consolidated financial statements for
the year ended March 31, 2003, and the reviews of the condensed
consolidated financial statements included in our quarterly reports on
Forms 10-QSB for the year ended March 31, 2003.
(b) Audit-related fees consisted principally of assistance with Securities and
Exchange Commission filings.
We anticipate that a representative of KPMG LLP will be present at the
annual meeting and will be given the opportunity to make a statement, if
desired, and to respond to appropriate questions, if any, concerning their
engagement.
REQUIRED VOTE AND BOARD RECOMMENDATION
The affirmative vote of a majority of the shares of our common stock
present in person or represented by proxy at the meeting and entitled to vote on
this proposal will constitute stockholder ratification of the appointment. If
stockholder approval of this proposal is not obtained, our audit committee and
board of directors may reconsider our appointment of KPMG LLP as our independent
auditors.
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OTHER MATTERS
Our board of directors knows of no other matters to be brought before
the annual meeting. However, if other matters should properly come before the
annual meeting, it is the intention of each of the persons named in the proxy to
vote such proxy in accordance with his judgment on such matters.
ANNUAL REPORT ON FORM 10-KSB
A copy of our annual report to the Securities and Exchange Commission
on Form 10-KSB is being distributed to persons from whom the accompanying proxy
is solicited. Additional copies of our annual report (without exhibits) will be
furnished by first class mail, without charge to any person from whom the
accompanying proxy is solicited upon written or oral request to Investor
Relations Department, netGuru, Inc., 22700 Savi Ranch Parkway, Yorba Linda,
California 92887, telephone (714) 974-2500. If exhibit copies are requested, a
copying charge of $.20 per page will be made. In addition, all of our public
filings, including our annual report, can be found on the Securities and
Exchange Commission's Internet site at http://www.sec.gov.
STOCKHOLDER PROPOSALS
Under Rule 14a-8 of the Securities and Exchange Commission, proposals
by stockholders that are intended for inclusion in our proxy statement and proxy
and to be presented at our 2004 annual stockholders' meeting must be received by
us by June 12, 2004, in order to be considered for inclusion our proxy
materials. These proposals must be addressed to our Secretary and may be
included in next year's proxy materials if they comply with certain rules and
regulations of the Securities and Exchange Commission governing stockholder
proposals.
For all other proposals by stockholders to be timely, a stockholder's
notice must be delivered to, or mailed to and received by, our Secretary at our
principal executive offices not later than September 8, 2004. If a stockholder
fails to so notify us of any such proposal prior to that date, the proxies to be
solicited by the board of directors for our 2004 annual stockholders' meeting
will confer discretionary authority on the holders of the proxy to vote the
shares if the proposal is presented at our 2004 annual stockholders' meeting,
without any discussion of the proposal in our proxy statement for that meeting.
STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN PROMPTLY THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors
/s/ Amrit K. Das
Amrit K. Das
Chief Executive Officer
Yorba Linda, California
October 10, 2003
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APPENDIX A
NETGURU, INC.
2003 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of this 2003 Stock Option Plan (the
"Plan") of netGuru, Inc., a Delaware corporation (the "Company"), is to provide
the Company with a means of attracting and retaining the services of highly
motivated and qualified directors and personnel. The Plan is intended to advance
the interests of the Company by affording to directors and employees, upon whose
skill, judgment, initiative and efforts the Company is largely dependent for the
successful conduct of its business, an opportunity for investment in the Company
and the incentives inherent in stock ownership in the Company. In addition, the
Plan contemplates the opportunity for investment in the Company by consultants
that do business with the Company. For purposes of this Plan, the term Company
shall include subsidiaries, if any, of the Company.
2. LEGAL COMPLIANCE. It is the intent of the Plan that all options
granted under it ("Options") shall be either "Incentive Stock Options" ("ISOs"),
as such term is defined in Section 422 of the Internal Revenue Code of 1986, as
amended ("Code"), or non-qualified stock options ("NQOs"); provided, however,
that ISOs shall be granted only to employees of the Company. An Option shall be
identified as an ISO or an NQO in writing in the document or documents
evidencing the grant of the Option. All Options that are not so identified as
ISOs are intended to be NQOs. In addition, the Plan provides for the grant of
NQOs to consultants that do business with the Company. It is the further intent
of the Plan that it conform in all respects with the requirements of Rule 16b-3
of the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended ("Rule 16b-3"). To the extent that any aspect of the Plan or
its administration is at any time viewed as inconsistent with the requirements
of Rule 16b-3 or, in connection with ISOs, the Code, that aspect shall be deemed
to be modified, deleted, or otherwise changed as necessary to ensure continued
compliance with the Rule 16b-3 requirements.
3. ADMINISTRATION OF THE PLAN.
3.1 PLAN COMMITTEE. The Plan shall be administered by a
committee ("Committee"). The members of the Committee shall be appointed from
time to time by the Board of Directors of the Company ("Board") and shall
consist of not less than two nor more than five persons, who shall be directors
of the Company; provided, however, that if at any time the Board consists of
only a sole director, that sole director shall constitute the Committee;
provided further, however, that the Board may act as the Committee at any time
or from time to time.
3.2 GRANTS OF OPTIONS BY THE COMMITTEE. In accordance with the
provisions of the Plan, the Committee, by resolution, shall select those
eligible persons to whom Options shall be granted ("Optionees"); shall determine
the time or times at which each Option shall be granted, whether an Option is an
ISO or an NQO and the number of shares to be subject to each Option; and shall
fix the time and manner in which the Option may be exercised, the Option
exercise price, and the Option period. The Committee shall determine the form of
option agreement to evidence the foregoing terms and conditions of each Option,
which need not be identical, in the form provided for in Section 7. The option
agreement may include such other provisions as the Committee may deem necessary
or desirable consistent with the Plan, the Code and Rule 16b-3.
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3.3 COMMITTEE PROCEDURES. The Committee from time to time may
adopt whatever rules and regulations for carrying out the purposes of the Plan
as it may deem proper and in the best interests of the Company. The Committee
shall keep minutes of its meetings and records of its actions. A majority of the
members of the Committee shall constitute a quorum for the transaction of any
business by the Committee. The Committee may act at any time by an affirmative
vote of a majority of those members voting. The vote may be taken at a meeting
(which may be conducted in person or by any telecommunication medium) or by
written consent of Committee members without a meeting.
3.4 FINALITY OF COMMITTEE ACTION. The Committee shall resolve
all questions arising under the Plan and option agreements entered into pursuant
to the Plan. Each determination, interpretation, or other action made or taken
by the Committee shall be final and conclusive and binding on all persons,
including, without limitation, the Company, its stockholders, the Committee and
each of the members of the Committee, and the directors, officers and employees
of the Company, including Optionees and their respective successors in interest.
3.5 NON-LIABILITY OF COMMITTEE MEMBERS. No Committee member
shall be liable for any action or determination made by him or her in good faith
with respect to the Plan or any Option granted under it.
4. BOARD POWER TO AMEND, SUSPEND, OR TERMINATE THE PLAN. The Board may,
from time to time, make whatever changes in or additions to the Plan as it may
deem proper and in the best interests of the Company and its stockholders. The
Board may also suspend or terminate the Plan at any time, without notice, and in
its sole discretion. Notwithstanding the foregoing, no such change, addition,
suspension, or termination by the Board shall (i) materially impair any Option
previously granted under the Plan without the express written consent of the
Optionee; or (ii) materially increase the number of shares subject to the Plan,
materially increase the benefits accruing to Optionees under the Plan,
materially modify the requirements as to eligibility to participate in the Plan
or alter the method of determining the option exercise price described in
Section 8, without stockholder approval.
5. SHARES SUBJECT TO THE PLAN. For purposes of the Plan, the Committee
is authorized to grant Options for up to 1,000,000 shares of the Company's
common stock ("Common Stock"), or the number and kind of shares of stock or
other securities which, in accordance with Section 13, shall be substituted for
shares of Common Stock or to which shares of Common Stock shall be adjusted. The
Committee is authorized to grant Options under the Plan with respect to those
shares. Any or all unsold shares subject to an Option that for any reason
expires or otherwise terminates (excluding shares returned to the Company in
payment of the exercise price for additional shares), may again be made subject
to grant under the Plan.
6. OPTIONEES. Options shall be granted only to officers, directors or
employees of the Company or to consultants that do business with the Company
designated by the Committee from time to time as Optionees. Any Optionee may
hold more than one Option to purchase Common Stock, whether the Option is an
Option held pursuant to the Plan or otherwise. An Optionee who is an employee of
the Company ("Employee Optionee") and who holds an Option must remain a
continuous full or part-time employee of the Company from the time of grant of
the Option to him until the time of its exercise, except as provided in Section
10.3.
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7. GRANTS OF OPTIONS. The Committee shall have the sole discretion to
grant Options under the Plan and to determine whether any Option shall be an ISO
or NQO. The terms and conditions of Options granted under the Plan may differ
from one another as the Committee, in its absolute discretion, determines, as
long as all Options granted under the Plan satisfy the requirements of the Plan.
Upon determination by the Committee that an Option is to be granted to an
Optionee, a written option agreement evidencing the Option shall be given to the
Optionee, specifying the number of shares subject to the Option, the Option
exercise price, whether the Option is an ISO or an NQO, and the other individual
terms and conditions of the Option. The option agreement may incorporate
generally applicable provisions from the Plan, a copy of which shall be provided
to all Optionees at the time of their initial grants under the Plan. The Option
shall be deemed granted as of the date specified in the grant resolution of the
Committee, and the option agreement shall be dated as of the date specified in
the resolution. Notwithstanding the foregoing, unless the Committee consists
solely of non-employee directors, any Option granted to an executive officer,
director or 10% beneficial owner for purposes of Section 16 of the Securities
Exchange Act of 1934, as amended ("Section 16 of the 1934 Act"), shall either be
(a) conditioned upon the Optionee's agreement not to sell the shares of Common
Stock underlying the Option for at least six months after the date of grant or
(b) approved by the entire Board or by the stockholders of the Company.
8. OPTION EXERCISE PRICE. The price per share to be paid by the
Optionee at the time an ISO is exercised shall not be less than 100% of the Fair
Market Value (as hereinafter defined) of one share of the Company's Common Stock
on the date as of which the Option is granted. No ISO may be granted under the
Plan to any person who, at the time of the grant, owns (within the meaning of
Section 424(d) of the Code) stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any parent thereof,
unless the exercise price of the ISO is at least equal to 110% of Fair Market
Value on the date of grant. The price per share to be paid by the Optionee at
the time an NQO is exercised shall not be less than 85% of the Fair Market Value
on the date as of which the NQO is granted, as determined by the Committee. For
purposes of the Plan, the "Fair Market Value" of a share of the Company's Common
Stock as of a given date shall be: (i) the closing price of a share of the
Company's Common Stock on the principal exchange on which shares of the
Company's Common Stock are then trading, if any, on the day immediately
preceding that date, or, if shares were not traded on that date, then on the
next preceding trading day during which a sale occurred; or (ii) if the
Company's Common Stock is not traded on an exchange but is quoted on The Nasdaq
National Market, The Nasdaq SmallCap Market, the Over-The-Counter Bulletin Board
("OTCBB") or a successor quotation system, the last sale price for the Common
Stock on the day immediately preceding that date as reported by Nasdaq, the
OTCBB or the successor quotation system or, if shares were not traded on that
date, then on the next preceding trading day during which a sale occurred; or
(iii) if the Company's Common Stock is not publicly traded on an exchange and
not quoted on Nasdaq or a successor quotation system, the closing representative
bid price for the Common Stock on that date as determined in good faith by the
Committee; or (iv) if the Company's Common Stock is not publicly traded, the
fair market value established by the Committee acting in good faith. In
addition, with respect to any ISO, the Fair Market Value on any given date shall
be determined in a manner consistent with any regulations issued by the
Secretary of the Treasury for the purpose of determining fair market value of
securities subject to an ISO plan under the Code.
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9. CEILING OF ISO GRANTS. The aggregate Fair Market Value (determined
at the time any ISO is granted) of the Common Stock with respect to which an
Optionee's ISOs, together with incentive stock options granted under any other
plan of the Company and any parent, are exercisable for the first time by such
Optionee during any calendar year shall not exceed $100,000. If an Optionee
holds ISOs that become first exercisable (including as a result of acceleration
of exercisability under the Plan) in any one year for shares having a Fair
Market Value at the date of grant in excess of $100,000, then the most recently
granted of the ISOs, to the extent that they are exercisable for shares having
an aggregate Fair Market Value in excess of the limit, shall be deemed to be
NQOs.
10. DURATION, EXERCISABILITY, AND TERMINATION OF OPTIONS.
10.1 OPTION PERIOD. The Option period shall be determined by
the Committee with respect to each Option granted. In no event, however, may the
Option period exceed ten years from the date on which the Option is granted, or
five years in the case of a grant of an ISO to an Optionee who is a 10%
stockholder on the date as of which the Option is granted as described in
Section 8.
10.2 EXERCISABILITY OF OPTIONS. Each Option shall be
exercisable in whole or in consecutive installments, cumulative or otherwise,
during its term as determined in the discretion of the Committee; provided,
however, that each Option granted to an Optionee who is not an officer, director
or consultant of the Company or of a Company affiliate shall provide for the
right to exercise at the rate of at least 20% per year over five years from the
date the Option is granted, subject to reasonable conditions such as continued
employment.
10.3 TERMINATION OF OPTIONS DUE TO TERMINATION OF EMPLOYMENT,
DISABILITY, OR DEATH OF OPTIONEE; TERMINATION FOR "CAUSE," OR RESIGNATION IN
VIOLATION OF AN EMPLOYMENT AGREEMENT. All Options granted under the Plan to any
Employee Optionee shall terminate and may no longer be exercised if the Employee
Optionee ceases, at any time during the period between the grant of the Option
and its exercise, to be an employee of the Company; provided, however, that the
Committee may alter the termination date of the Option if the Optionee transfers
to an affiliate of the Company or under other appropriate circumstances as
determined by the Committee in its sole discretion, consistent with applicable
laws, rules and regulations. Notwithstanding the foregoing, (i) if the Employee
Optionee's employment with the Company terminates for any reason (other than
involuntary dismissal for "cause" or voluntary resignation in violation of any
agreement to remain in the employ of the Company, including, without limitation,
any such agreement pursuant to Section 14), he or she may, at any time before
the expiration of three months after termination or before expiration of the
Option, whichever first occurs, exercise the Option (to the extent that the
Option was exercisable by him or her on the date of the termination of his or
her employment); (ii) if the Employee Optionee's employment terminates due to
disability (as defined in Section 22(e)(3) of the Code and subject to such proof
of disability as the Committee may require), the Option may be exercised by the
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Employee Optionee (or by his guardian(s), or conservator(s), or other legal
representative(s)) before the expiration of twelve months after termination or
before expiration of the Option, whichever first occurs (to the extent that the
Option was exercisable by him or her on the date of the termination of his or
her employment); (iii) in the event of the death of the Employee Optionee, an
Option exercisable by him or her at the date of his or her death shall be
exercisable by his or her legal representative(s), legatee(s), or heir(s), or by
his or her beneficiary or beneficiaries so designated by him or her, as the case
may be, within twelve (12) months after his or her death or before the
expiration of the Option, whichever first occurs (to the extent that the Option
was exercisable by him or her on the date of his or her death); and (iv) if the
Employee Optionee's employment is terminated for "cause" or in violation of any
agreement to remain in the employ of the Company, including, without limitation,
any such agreement pursuant to Section 14, his or her Option shall terminate
immediately upon termination of employment, and the Option shall be deemed to
have been forfeited by the Optionee. For purposes of the Plan, "cause" may
include, without limitation, any illegal or improper conduct that (1) injures or
impairs the reputation, goodwill, or business of the Company; or (2) involves
the misappropriation of funds of the Company, or the misuse of data, information
or documents acquired in connection with employment by the Company that results
in material harm to the Company. A termination for "cause" may also include any
resignation in anticipation of discharge for "cause" or resignation accepted by
the Company in lieu of a formal discharge for "cause."
11. MANNER OF OPTION EXERCISE; RIGHTS AND OBLIGATIONS OF OPTIONEES.
11.1 WRITTEN NOTICE OF EXERCISE. An Optionee may elect to
exercise an Option in whole or in part, from time to time, subject to the terms
and conditions contained in the Plan and in the agreement evidencing the Option,
by giving written notice of exercise to the Company at its principal executive
office.
11.2 CASH PAYMENT FOR OPTIONED SHARES. If an Option is
exercised for cash, the exercise notice shall be accompanied by a cashier's or
personal check, or money order, made payable to the Company for the full
exercise price of the shares purchased.
11.3 STOCK SWAP FEATURE. At the time of the Option exercise,
and subject to the discretion of the Committee to accept payment in cash only,
the Optionee may determine whether the total purchase price of the shares to be
purchased shall be paid solely in cash or by transfer from the Optionee to the
Company of previously acquired shares of Common Stock, or by a combination
thereof. If the Optionee elects to pay the total purchase price in whole or in
part with previously acquired shares of Common Stock, the value of the shares
shall be equal to their Fair Market Value on the date of exercise, determined by
the Committee in the same manner used for determining Fair Market Value at the
time of grant for purposes of Section 8.
11.4 INVESTMENT REPRESENTATION FOR NON-REGISTERED SHARES AND
LEGALITY OF ISSUANCE. The receipt of shares of Common Stock upon the exercise of
an Option shall be conditioned upon the Optionee (or any other person who
exercises the Option on his or her behalf as permitted by Section 10.3)
providing to the Committee a written representation that, at the time of such
exercise, it is the intent of that person(s) to acquire the shares for
investment only and not with a view toward distribution. The certificate for
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unregistered shares issued for investment shall be restricted by the Company as
to transfer unless the Company receives an opinion of counsel satisfactory to
the Company to the effect that the restriction is not necessary under then
pertaining law. The providing of the representation and the restrictions on
transfer shall not, however, be required upon any person's receipt of shares of
Common Stock under the Plan if, at the time of grant of the Option relating to
such receipt or upon receipt, whichever is the appropriate measure under
applicable federal or state securities laws, the shares subject to the Option
are: (i) covered by an effective and current registration statement under the
Securities Act of 1933, as amended; and (ii) either qualified or exempt from
qualification under applicable state securities laws. The Company shall,
however, under no circumstances be required to sell or issue any shares under
the Plan if, in the opinion of the Committee: (i) the issuance of the shares
would constitute a violation by the Optionee or the Company of any applicable
law or regulation of any governmental authority; or (ii) the consent or approval
of any governmental body is necessary or desirable as a condition of, or in
connection with, the issuance of the shares.
11.5 STOCKHOLDER RIGHTS OF OPTIONEE. Upon exercise, the
Optionee (or any other person who exercises the Option on his or her behalf as
permitted by Section 10.3) shall be recorded on the books of the Company as the
owner of the shares, and the Company shall deliver to the record owner one or
more duly issued stock certificates evidencing such ownership. No person shall
have any rights as a stockholder with respect to any shares of Common Stock
covered by an Option granted pursuant to the Plan until that person has become
the holder of record of the shares. Except as provided in Section 13, no
adjustments shall be made for cash dividends or other distributions or other
rights as to which there is a record date preceding the date that person becomes
the holder of record of the shares.
11.6 HOLDING PERIODS FOR TAX PURPOSES. The Plan does not
provide that an Optionee must hold shares of Common Stock acquired under the
Plan for any minimum period of time. Optionees are urged to consult with their
own tax advisors with respect to the tax consequences to them of their
individual participation in the Plan.
12. SUCCESSIVE GRANTS. Successive grants of Options may be made to any
Optionee under the Plan.
13. ADJUSTMENTS.
(a) Except to the extent already contemplated by Section 5, if
the outstanding Common Stock is hereafter increased or decreased, or changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation, by reason of a recapitalization,
reclassification, reorganization, merger, consolidation, share exchange, or
other business combination in which the Company is the surviving parent
corporation, stock split-up, combination of shares, or dividend or other
distribution payable in capital stock or rights to acquire capital stock,
appropriate adjustment shall be made by the Committee in the number and kind of
shares for which Options may be granted under the Plan. In addition, the
Committee shall make appropriate adjustment in the number and kind of shares as
to which outstanding and unexercised Options shall be exercisable, to the end
that the proportionate interest of the holder of the Option shall, to the extent
practicable, be maintained as before the occurrence of the event. The adjustment
in outstanding Options shall be made without change in the total price
applicable to the unexercised portion of the Option but with a corresponding
adjustment in the exercise price per share.
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(b) Upon the dissolution or liquidation of the Company, any
outstanding and unexercised Options shall terminate as of a future date to be
fixed by the Committee.
(c) Upon a Reorganization (as hereinafter defined),
(i) If there is no plan or agreement with respect to
the Reorganization ("Reorganization Agreement"), or if the Reorganization
Agreement does not specifically provide for the adjustment, change, conversion,
or exchange of the outstanding and unexercised Options for cash or other
property or securities of another corporation, then any outstanding and
unexercised Options shall terminate as of a future date to be fixed by the
Committee; or
(ii) If there is a Reorganization Agreement, and the
Reorganization Agreement specifically provides for the adjustment, change,
conversion, or exchange of the outstanding and unexercised Options for cash or
other property or securities of another corporation, then the Committee shall
adjust the shares under the outstanding and unexercised Options, and shall
adjust the shares remaining under the Plan which are then available for the
issuance of Options under the Plan if the Reorganization Agreement makes
specific provisions therefor, in a manner not inconsistent with the provisions
of the Reorganization Agreement for the adjustment, change, conversion, or
exchange of the Options and shares.
(d) The term "Reorganization" as used in this Section 13 means
any reorganization, merger, consolidation, share exchange, or other business
combination pursuant to which the Company is not the surviving parent
corporation after the effective date of the Reorganization, or any sale or lease
of all or substantially all of the assets of the Company. Nothing herein shall
require the Company to adopt a Reorganization Agreement, or to make provision
for the adjustment, change, conversion, or exchange of any Options, or the
shares subject thereto, in any Reorganization Agreement that it does adopt.
(e) The Committee shall provide to each Optionee then holding
an outstanding and unexercised Option not less than 30 calendar days' advanced
written notice of any date fixed by the Committee pursuant to this Section 13
and of the terms of any Reorganization Agreement providing for the adjustment,
change, conversion, or exchange of outstanding and unexercised Options. Except
as the Committee may otherwise provide, each Optionee shall have the right
during that period to exercise his or her Option only to the extent that the
Option was exercisable on the date the notice was provided to the Optionee.
Any adjustment to any outstanding ISO pursuant to this Section
13, if made by reason of a transaction described in Section 424(a) of the Code,
shall be made so as to conform to the requirements of that Section and the
regulations thereunder. If any other transaction described in Section 424(a) of
the Code affects the Common Stock subject to any unexercised ISO theretofore
granted under the Plan ("old option"), the Board or the board of directors of
any surviving or acquiring corporation may take such action as it deems
appropriate, in conformity with the requirements of that Code Section and the
regulations thereunder, to substitute a new option for the old option, in order
to make the new option, as nearly as may be practicable, equivalent to the old
option, or to assume the old option.
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(f) No modification, extension, renewal, or other change in
any Option granted under the Plan may be made, after the grant of the Option,
without the Optionee's consent, unless it is permitted by the provisions of the
Plan and the option agreement. In the case of an ISO, Optionees are hereby
advised that certain changes may disqualify the ISO from being considered as
such under Section 422 of the Code, or constitute a modification, extension, or
renewal of the ISO under Section 424(h) of the Code.
(g) All adjustments and determinations under this Section 13
shall be made by the Committee in good faith in its sole discretion.
14. CONTINUED EMPLOYMENT. As determined in the sole discretion of the
Committee at the time of grant and if so stated in a writing signed by the
Company, each Option may have as a condition the requirement of an Employee
Optionee to remain in the employ of the Company, or of its affiliates, and to
render to it his or her exclusive service, at such compensation as may be
determined from time to time by it, for a period not to exceed the term of the
Option, except for earlier termination of employment by or with the express
written consent of the Company or on account of disability or death. The failure
of any Employee Optionee to abide by this agreement as to any Option under the
Plan may result in the termination of all of his or her then outstanding Options
granted pursuant to the Plan. Neither the creation of the Plan nor the granting
of Option(s) under it shall be deemed to create a right in an Employee Optionee
to continued employment with the Company, and each such Employee Optionee shall
be and shall remain subject to discharge by the Company as though the Plan had
never come into existence.
15. TAX WITHHOLDING. The exercise of any Option granted under the Plan
is subject to the condition that if at any time the Company determines, in its
discretion, that the satisfaction of withholding tax or other withholding
liabilities under any federal, state or local law is necessary or desirable as a
condition of, or in connection with, the exercise or a later lapsing of time or
restrictions on or disposition of the shares of Common Stock received upon the
exercise, then in that event, the exercise of the Option shall not be effective
unless the withholding has been effected or obtained in a manner acceptable to
the Company. When an Optionee is required to pay to the Company an amount
required to be withheld under applicable income tax laws in connection with the
exercise of any Option, the Optionee may, subject to the approval of the
Committee, which approval shall not have been disapproved at any time after the
election is made, satisfy the obligation, in whole or in part, by electing to
have the Company withhold shares of Common Stock having a value equal to the
amount required to be withheld. The value of the Common Stock withheld pursuant
to the election shall be determined by the Committee, in accordance with the
criteria set forth in Section 8, with reference to the date the amount of tax to
be withheld is determined. The Optionee shall pay to the Company in cash any
amount required to be withheld that would otherwise result in the withholding of
a fractional share. The election by an Optionee who is an officer of the Company
within the meaning of Section 16 of the 1934 Act, to be effective, must meet all
of the requirements of Section 16 of the 1934 Act.
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16. TERM OF PLAN.
16.1 EFFECTIVE DATE. Subject to stockholder approval, the Plan
was adopted by the Board as of September 30, 2003. The Board intends to obtain
stockholder approval for the Plan at the Company's 2003 annual meeting of
stockholders.
16.2 TERMINATION DATE. Except as to Options granted and
outstanding under the Plan prior to that time, the Plan shall terminate at
midnight on September 30, 2013, and no Option shall be granted after that time.
Options then outstanding may continue to be exercised in accordance with their
terms. The Plan may be suspended or terminated at any earlier time by the Board
within the limitations set forth in Section 4.
17. NON-EXCLUSIVITY OF THE PLAN. Nothing contained in the Plan is
intended to amend, modify, or rescind any previously approved compensation
plans, programs or options entered into by the Company. This Plan shall be
construed to be in addition to and independent of any and all other
arrangements. Neither the adoption of the Plan by the Board nor the submission
of the Plan to the stockholders of the Company for approval shall be construed
as creating any limitations on the power or authority of the Board to adopt,
with or without stockholder approval, such additional or other compensation
arrangements as the Board may from time to time deem desirable.
18. GOVERNING LAW. The corporate laws of the State of Delaware shall
govern all issues concerning the relative rights of the Company and its
stockholders under the Plan. All other questions and obligations under the Plan
shall be construed and enforced in accordance with the internal laws of the
State of California, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of California or any other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the State of California. In any action, dispute, litigation or other
proceeding concerning the Plan (including arbitration), exclusive jurisdiction
shall be with the courts of California, with the County of Orange being the sole
venue for the bringing of the action or proceeding.
19. INFORMATION TO OPTIONEES. Optionees under the Plan who do not
otherwise have access to financial statements of the Company will receive the
Company's financial statements at least annually.
20. TRANSFERABILITY OF OPTIONS. Options granted under the Plan are
nontransferable other than by will, by the laws of descent and distribution, by
instrument to an inter vivos or testamentary trust in which the Options are to
be passed to beneficiaries upon the death of the trustor (settlor), or by gift
to immediate family. The term "immediate family" means any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, and
also includes adoptive relationships.
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ANNUAL MEETING OF STOCKHOLDERS OF
NETGURU, INC.
NOVEMBER 13, 2003
Please date, sign and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" FOR THE ELECTION OF
DIRECTORS AND "FOR" PROPOSALS 2 AND 3.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR
VOTE IN BLUE OR BLACK INK AS SHOWN HERE [X]
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1. To elect five directors as follows:
NOMINEES:
[ ] FOR ALL NOMINEES O Amrit K. Das
O Jyoti Chatterjee
[ ] WITHHOLD AUTHORITY O Benedict A. Eazzetta
FOR ALL NOMINEES O D. Dean McCormick III
O Stanley W. Corbett
[ ] FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here:[X]
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2. To consider and vote upon a proposal to ratify and approve the Company's 2003
Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To consider and vote upon a proposal to ratify the appointment of KPMG LLP,
independent auditors, to audit the consolidated financial statements of the
Company for the fiscal year beginning April 1, 2003.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
IF NO DIRECTION IS PROVIDED, THIS PROXY WILL BE VOTED AS RECOMMENDED BY THE
BOARD OF DIRECTORS.
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To change the address on your account, please check the box at right and [ ]
indicate your new address in the address space above. Please note that
changes to the registered name(s) on the account may not be submitted
via this method.
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Signature of Stockholder ______________________________ Date: _________________
Signature of Stockholder ______________________________ Date: _________________
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate
name by duly authorized officer, giving full title as such. If signer is
a partnership, please sign in partnership name by authorized person.
NETGURU, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of netGuru, Inc. ("Company") hereby
constitutes and appoints Amrit K. Das and Jyoti Chatterjee, and either of them
individually, with the power to appoint his substitution, as attorney, agent and
proxy, to appear, attend and vote all of the shares of common stock of the
Company standing in the name of the undersigned on the record date at the 2003
Annual Meeting of Stockholders of the Company to be held at the Company's
offices located at 22700 Savi Ranch Parkway, Yorba Linda, California 92887, on
November 13, 2003, at 10:00 a.m. local time, and at any adjournments and
postponements thereof, upon the proposals listed on the reverse side and in the
discretion of the proxy holder on such other business as may properly come
before the meeting, or any adjournments or postponements thereof.
(Continued and to be signed on the reverse side)