SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
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14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
netGuru, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
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paid previously. Identify the previous filing by registration statement
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(1) Amount Previously Paid:
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NETGURU, INC.
22700 SAVI RANCH PARKWAY
YORBA LINDA, CALIFORNIA 92887
November 12, 2004
To Our Stockholders:
You are cordially invited to attend the 2004 annual meeting of
stockholders of netGuru, Inc., which will be held at 10:00 a.m. on December 13,
2004, 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 October 22, 2004 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
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Amrit K. Das
Chief Executive Officer
NETGURU, INC.
22700 SAVI RANCH PARKWAY
YORBA LINDA, CALIFORNIA 92887
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 13, 2004
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NOTICE IS HEREBY GIVEN that the 2004 annual meeting of stockholders of
netGuru, Inc. will be held at 10:00 a.m. local time, on December 13, 2004, at
our executive offices located at 22700 Savi Ranch Parkway, Yorba Linda,
California 92887, for the following purposes:
1. To elect five nominees to our board of directors;
2. To ratify the appointment of Haskell & White LLP, independent
auditors, to audit our consolidated financial statements for
the fiscal year ending March 31, 2005; and
3. 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 October 22,
2004, 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
November 12, 2004
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
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Introduction ........................................................... 2
Proposal 1 - Election of Directors ..................................... 5
Proposal 2 - Ratification of Appointment of Independent Auditors ....... 20
Other Matters .......................................................... 22
Annual Report on Form 10-KSB ........................................... 22
Stockholder Proposals .................................................. 23
Appendix A - Amended and Restated Audit Committee Charter .............. A1
Appendix B - Amended and Restated Compensation Committee Charter... .... B1
Appendix C - Amended and Restated Nominating and Corporate
Governance Committee Charter .............................. C1
NETGURU, INC.
22700 SAVI RANCH PARKWAY.
YORBA LINDA, CALIFORNIA 92887
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PROXY STATEMENT
2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 13, 2004
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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 2004 annual meeting of our
stockholders to be held at 10:00 a.m. local time on December 13, 2004, 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 November 19, 2004 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 October 22, 2004, the record date for determining
stockholders entitled to notice of and to vote at the annual meeting, we had
issued and outstanding 18,837,154 shares of common stock held by 116 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
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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 proposal 2, 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.
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PROPOSAL 1
ELECTION OF DIRECTORS
Our bylaws provide that our board of directors shall consist of not
less than five nor more than eight directors, with the exact number of directors
that constitutes our board of directors to be set by our board of directors
subject to the provisions of our certificate of incorporation. The number of
directors on our board of directors is set at five, and there are no vacancies
on our board 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 that
we do not anticipate, the proxies held by management may be voted for a
substitute nominee or nominees, if any, as recommended by management. In no
event, however, shall the proxies be voted for a greater number of persons than
the number of nominees named. 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 58 Chairman of the Board, Chief Executive Officer, President and
Director and Director Nominee
Santanu K. Das 31 Executive Vice President, Chief Operating Officer and Director
and Director Nominee
Bruce K. Nelson 50 Chief Financial Officer
Clara Y.M. Young 50 Corporate Vice President, Chief Administrative Officer and
Secretary
Stephen W. Owen 45 Corporate Vice President, President of European Operations
Benedict A. Eazzetta (1)(2) 41 Director and Director Nominee
D. Dean McCormick III (1)(2) 51 Director and Director Nominee
Stanley W. Corbett (1) 71 Director and Director Nominee
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(1) Member of Audit Committee and member of Compensation Committee.
(2) Member of Nominating and Corporate Governance 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 and as president since November 2003. 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.
SANTANU K. DAS has served as our executive vice president and chief
operating officer and as a director since November 2003. Prior to that, he
served as corporate vice president and president of engineering and
collaborative software from April 2002 to November 2003, as our vice president
of new technology from July 1999 to November 2003 and as a director from
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September 1996 to July 2003. Prior to that, Mr. Das served as our corporate vice
president and president of engineering and animation software and ASP from
January 2001 to March 2002. Prior to that, Mr. Das served as our engineering
analyst for new technology from January 1997 until June 1999, and as a part-time
programmer for our company from 1991 to 1996. 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 K. Das is
the son of Amrit K. Das.
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 publicly 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 has 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.
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. He has also completed the University of California at Los
Angeles Executive Program.
BENEDICT A. EAZZETTA has served as president of Intergraph Public
Safety, Inc., a division of Intergraph Corporation (Nasdaq NM:INGR) since August
2004. Prior to that he served as chief operating officer of Intergraph Process
Power & Offshore, an engineering software and services business segment of
Intergraph Corporation and as executive vice president of Intergraph Corporation
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.
D. DEAN MCCORMICK III is a certified public accountant and has been
president of the consulting and accounting firm of McCormick Consulting, Inc.
since July 1993. Mr. McCormick has been a member of the Forum for Corporate
Directors since June 2003 and an advisor to the Family Business Program at the
University of Southern California since September 2003. He served as president
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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.
TERM OF OFFICE AND FAMILY RELATIONSHIPS
Our 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. Mr. Santanu K. Das, a director and
director nominee, is the son of our chairman, director and director nominee, Mr.
Amrit K. Das.
BOARD OF DIRECTORS AND COMMITTEES
Our board of directors held five meetings during the fiscal year ended
March 31, 2004, and took action by unanimous written consent on three occasions.
Our board of directors currently has an Audit Committee, a Compensation
Committee and a Nominating and Corporate Governance Committee. During the fiscal
year ended March 31, 2004, 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.
AUDIT COMMITTEE
Our Audit Committee is responsible for 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, which was amended and restated on October 7, 2004. A copy of the
amended and restated audit committee charter is attached to this proxy statement
as APPENDIX A and is available on our Internet site at the following address:
http://www.netguru.com/netGuruPolicies.asp.
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. Our board of
directors has determined that Mr. D. Dean McCormick is an "audit committee
financial expert" and meets the NASD's professional experience requirements, and
that each of the members of our Audit Committee is "independent" within the
meaning of NASD Marketplace Rule 4200(a)(15). Our Audit Committee held three
meetings during the fiscal year ended March 31, 2004.
COMPENSATION COMMITTEE
Our Compensation 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. Since July 25,
2003, our Compensation Committee has consisted of Messrs. McCormick, Eazzetta
and Corbett, with Mr. Eazzetta holding the position of chairman of that
committee. Our board of directors has determined that each member of the
Compensation Committee meets NASD independence requirements.
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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, 2004; 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, 2004. 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.
On October 7, 2004, our Compensation Committee, which had been named
"Compensation and Stock Option Committee" since July 25, 2003, was renamed
"Compensation Committee" and adopted an amended and restated charter that is
attached to this proxy statement as APPENDIX B and is available on our Internet
site at http://www.netguru.com/netGuruPolicies.asp.
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
New Nasdaq rules require that board of director nominees must be either
selected, or recommended for the board's selection, by either a nominating
committee comprised solely of independent directors or by a majority of our
independent directors. Effective as of April 30, 2004, we formed the Nominating
and Corporate Governance Committee to be composed entirely of non-employee
directors who meet Nasdaq independence standards. The committee currently is
comprised of Messrs. Eazzetta and McCormick, with Mr. Eazzetta serving as
committee chairman. The Nominating and Corporate Governance Committee assists
our board of directors with its nominating function and with reviewing and
evaluating our compliance with corporate governance requirements as described in
the committee's charter referenced below.
The committee utilizes a variety of methods for identifying and
evaluating nominees for director, including candidates that may be referred by
our stockholders. Stockholders who desire to recommend candidates for the board
for evaluation may do so by contacting us in writing, identifying the potential
candidate and providing background information. See "Security Holder
Communications with Our Board of Directors." Candidates may also come to the
attention of the committee through current board members, professional search
firms and other persons. In evaluating potential candidates, the committee will
take into account a number of factors, including among others, the following:
o independence from management;
o whether the candidate has relevant business experience;
o judgment, skill, integrity and reputation;
o existing commitments to other businesses;
o corporate governance background;
o financial and accounting background, to enable the Nominating
and Corporate Governance Committee to determine whether the
candidate would be suitable for Audit Committee membership;
and
o the size and composition of the board.
The committee operates pursuant to an amended and restated charter approved by
our board of directors and the committee. A copy of the charter is attached as
APPENDIX C to this proxy statement and is available on our Internet site at
http://www.netGuru.com/netGuruPolicies.asp.
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DIRECTORS' COMPENSATION
From July 2003 to December 2003, Messrs. McCormick, Eazzetta and
Corbett, our non-employee directors, were eligible to receive $1,000 per month,
each, in consideration for their services on our board of directors. In January
2004, this amount was increased to $1,500 per month. 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, 2004, we granted fully vested
non-qualified stock options to purchase 6,000 shares of common stock each to D.
Dean McCormick III and Benedict A. Eazzetta, upon their appointment to our
board. The options have an exercise price of $1.28 per share (which price was
the fair market value of a share of our common stock on the date of the grant),
vested immediately on the date of the grant, which was August 7, 2003, and
expire August 7, 2013.
SECURITY HOLDER COMMUNICATIONS WITH OUR BOARD OF DIRECTORS
Our board of directors has established a process to receive
communications from security holders. Security holders and other interested
parties may contact any member (or all members) of our board of directors, or
the independent directors as a group, any committee of our board of directors or
any chair of any such committee, by mail or electronically. To communicate with
our board of directors, any individual directors or any group or committee of
directors, correspondence should be addressed to our board of directors or any
such individual directors or group or committee of directors by either name or
title. All such correspondence should be sent "c/o Secretary" at 22700 Savi
Ranch Parkway, Yorba Linda, California 92887. To communicate with any of our
directors electronically, security holders should send an e-mail "c/o
Secretary," at info@netguru.com.
All communications received as set forth in the preceding paragraph
will be opened by our Secretary for the sole purpose of determining whether the
contents represent a message to our directors. Any contents that are not in the
nature of advertising, promotions of a product or service, patently offensive
material or matters deemed inappropriate for our board of directors will be
forwarded promptly to the addressee. In the case of communications to our board
of directors or any group or committee of directors, our Secretary will make
sufficient copies (or forward such information in the case of e-mail) of the
contents to send to each director who is a member of the group or committee to
which the envelope or e-mail is addressed.
POLICY WITH REGARD TO BOARD MEMBERS' ATTENDANCE AT ANNUAL MEETINGS
It is our policy that our directors are invited and encouraged to
attend all of our annual meetings. At the time of our 2003 annual meeting of
stockholders, we had five directors, all of whom were in attendance at our 2003
annual meeting of stockholders.
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CODE OF BUSINESS CONDUCT AND ETHICS
Our code of business conduct and ethics, as approved by our board of
directors, can be obtained from our Internet site at
http://www.netGuru.com/netGuruPolicies.asp.
We intend to satisfy the disclosure requirement under Item 10 of Form
8-K relating to amendments to or waivers from provisions of the code that relate
to one of more of the items set forth in Item 406(b) of Regulation S-B, by
describing on our Internet site, within five business days following the date of
a waiver or a substantive amendment, the date of the waiver or amendment, the
nature of the amendment or waiver, and the name of the person to whom the waiver
was granted.
Information on our Internet site is not, and shall not be deemed to be,
a part of this proxy statement or incorporated into any other filings we make
with the Securities and Exchange Commission.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 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, 2004 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 2004 fiscal year, all Section 16(a) filing requirements
were met, except that Mr. Peter Kellogg filed a late Form 5 to report two
transactions that occurred during fiscal 2003 and a late Form 5 to report a
transaction that occurred during fiscal 2004.
BOARD AUDIT COMMITTEE REPORT
The Audit Committee of netGuru's 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,
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 netGuru's annual report on Form 10-KSB for
the fiscal year ended March 31, 2004, for filing with the Securities and
Exchange Commission. The Audit Committee also recommended appointment of new
independent auditors, and the board of directors concurred with such selection.
AUDIT COMMITTEE:
D. Dean McCormick III, Chairman
Stanley W. Corbett
Benedict A. Eazzetta
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EXECUTIVE COMPENSATION
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
$100,000 (collectively, the "named executive officers") during fiscal 2004 shown
below. Amrit K. Das and Santanu K. Das accepted the additional positions of
President and Chief Operating Officer, respectively, when Jyoti Chatterjee
resigned from those positions in November 2003.
SUMMARY COMPENSATION TABLE
----------------------------------------------------------------------
ANNUAL COMPENSATION LONG-TERM COMPENSATION
-------------------------------- ----------------------------------
AWARDS PAYOUTS
------ -------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND FISCAL SALARY COMPENSATION (1) OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR ($) ($) (#) ($)
------------------ ---- -------------- ----------------- -------------- ----------------
Amrit K. Das 2004 330,462 --- --- 12,324 (3)
Chairman, Chief Executive 2003 335,513 34,259 (2) --- 15,524 (4)
Office, President 2002 348,923 43,024 (2) --- 18,599 (5)
Jyoti Chatterjee 2004 158,198 --- 200,000 62,799 (6)
Former President, Former 2003 214,665 --- --- 13,756 (7)
Chief Operating Officer 2002 223,062 --- --- 15,128 (8)
Clara Y.M. Young 2004 126,231 --- 12,000 3,910 (9)
Corp. Vice President, 2003 128,682 --- --- 6,340 (10)
Chief Administrative 2002 133,962 --- --- 11,305 (11)
Officer
Stephen W. Owen 2004 157,477 --- --- 767 (13)
Corporate Vice President, 2003 142,610 492 (12) --- 680 (13)
President, European 2002 169,043 5,100 (12) --- 646 (13)
Operations
Santanu K. Das 2004 121,615 --- --- 8,750 (14)
Executive Vice President, 2003 120,150 --- --- 11,242 (15)
Chief Operating Officer 2002 124,616 --- --- 15,992 (16)
- ------------
(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 $6,000 in
company contributions to the 401(k) plan.
(4) 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.
(5) 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.
(6) Includes $1,267 in premiums paid by us pursuant to a life insurance policy
established for the benefit of Jyoti Chatterjee, $4,510 in company
contributions to the 401(k) plan, and $57,022 in cash payments paid between
January 1, 2004 and June 1, 2004 in connection with Mr. Chatterjee's
separation and release agreement.
(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 $9,596 in
company contributions to the 401(k) plan.
(8) 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.
(9) Includes $400 in premiums paid by us pursuant to a long-term disability
insurance policy for the benefit of Clara Young and $3,510 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 $5,940 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 $10,905 in company
contributions to the 401(k) plan.
(12) Represents imputed interest for Stephen 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.
-11-
(14) Includes $5,150 in premiums paid by us pursuant to a life insurance policy
established for the benefit of Santanu Das and $3,600 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 $6,092 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 $10,842 in company
contributions to the 401(k) plan.
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding options granted in
fiscal 2004 to the named executive officers. We have never granted any stock
appreciation rights.
PERCENT
OF TOTAL
OPTIONS
NUMBER OF GRANTED TO
SECURITIES EMPLOYEES EXERCISE
GRANT UNDERLYING IN FISCAL PRICE PER EXPIRATION
NAME DATE OPTIONS GRANTED YEAR (1) SHARE DATE
---- ---- --------------- -------- ----- ----
Jyoti Chatterjee............ 12/19/2003 200,000 (2) 42.7% $1.07 5/31/2009
Clara Y.M. Young............ 11/17/2003 12,000 (3) 2.6% $1.44 11/17/2013
- ------------
(1) Based on options to purchase 468,300 shares granted to our employees during
fiscal 2004.
(2) The option was granted pursuant to Mr. Chatterjee's separation agreement
and vested and became exercisable in six monthly installments of 33,333
shares each, commencing January 1, 2004.
(3) The option vests and become exercisable in three equal annual installments
commencing on the date of grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides information regarding the number of shares
of our common stock underlying exercisable and unexercisable in-the-money stock
options held by the named executive officers and the values of those options at
fiscal year-end. An option is "in-the-money" if the fair market value for the
underlying securities exceeds the exercise price of the option. The named
executive officers did not hold any stock appreciation rights or exercise any
options during fiscal 2004.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED IN-THE-MONEY
SHARES AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END ($)
ACQUIRED ON VALUE --------------------------------- ----------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
Amrit K. Das --- --- 200,000 --- 308,000 ---
Jyoti Chatterjee --- --- 100,000 100,000 154,000 154,000
Clara Y.M. Young --- --- 86,000 12,000 132,440 18,480
Stephen W. Owen --- --- 92,000 --- 141,680 ---
Santanu K. Das --- --- 200,000 --- 308,000 ---
-12-
LONG-TERM INCENTIVE PLAN AWARDS
In fiscal 2004, no awards were made 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 2004.
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In June 2001, we entered into five-year employment agreements with each
of Amrit Das, our chairman, chief executive officer and president; Santanu Das,
our chief operating officer and executive vice president; and Clara Young, our
corporate vice president, chief administrative officer and secretary.
The agreements provide that Mr. Amrit Das, Mr. Santanu Das and Ms.
Young will receive minimum base annual salaries of $312,000, $120,000, and
$117,000, respectively. Each agreement also provides for the grant of an annual
bonus in the discretion of the Compensation Committee of the board of directors.
The annual salaries may be adjusted upward in the discretion of the Compensation
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.
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.
In June 2001, we entered into a five-year employment agreement with
Jyoti Chatterjee, our then President and Chief Operating Officer. The agreement
provided for a minimum base annual salary of $208,000 and contained terms
similar to the other employment agreements discussed above. Mr. Chatterjee
resigned from his positions with us effective November 12, 2003. In connection
with his resignation, we entered into a separation and release agreement
pursuant to which we made cash payments to Mr. Chatterjee aggregating $57,022
between January 1, 2004 and June 1, 2004, and we granted to Mr. Chatterjee a
non-qualified stock option as described in the above "Option Grants in Last
Fiscal Year" table. The separation and release agreement contains mutual general
releases between us and Mr. Chatterjee and a covenant by Mr. Chatterjee to not
accept employment or provide consulting services for any company that
manufactures structural software for analysis and design of structures in direct
competition with our STAAD.Pro software.
In December 2003, Amrit Das voluntarily agreed to reduce his annual
salary by $100,000, effective April 2004. The $100,000 is to be used toward the
expansion of our engineering business process outsourcing (EBPO) services, which
Mr. Das is managing from India. Every pay period, $3,846 is transferred into a
separate bank account set aside specifically for EBPO service expenses. We
anticipate that after our EBPO services reach annual targeted revenues, we may
award Mr. Das in future periods all or any portion of the amount by which his
salary has been reduced.
-13-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
GENERAL
As of the close of business on the record date, October 22, 2004,
18,837,154 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 current 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 under the Securities
Exchange Act of 1934, 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. ("Laurus") is a security holder named in the
table below. Laurus holds a warrant to purchase up to 200,000 shares of our
common stock ("2002 Warrant") and a convertible note ("2002 Note") that we
issued in December 2002. Laurus also holds a warrant to purchase up to 180,000
shares of our common stock ("2003 Warrant") and a convertible note ("2003 Note")
that we issued in July 2003 in connection with a revolving credit facility.
Each of the 2002 Warrant and the 2003 Warrant (together, the "Laurus
Warrants") is exercisable at various fixed exercise prices. The exercise prices
of and number of shares underlying the Laurus Warrants are subject to
anti-dilution adjustments in connection with mergers, acquisitions, stock
splits, dividends and the like.
-14-
Each of the 2002 Note and the 2003 Note (together, the "Laurus Notes")
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
Laurus Notes 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 balances of
the 2002 Note and the 2003 Note were $80,000 and $1,960,000, respectively. For
purposes of calculating the number of shares shown in the table as underlying
Laurus Notes, we have used a conversion price of $1.30.
Laurus is subject to various beneficial ownership and conversion volume
limitations with regard to the Laurus Notes and the Laurus Warrants. Laurus may
not on any given date exercise or convert these instruments if, and to the
extent, that the exercise or 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 exercises or 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 Laurus Notes and
the Laurus Warrants 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 Laurus Notes, 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 Laurus Notes into
or exercising the Laurus Warrants 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 Laurus Notes
or exercising the Laurus Warrants if, and to the extent, the conversion or
exercise would result in Laurus and its affiliates beneficially owning more than
3,565,514 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.
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 2,770,018 (1) 14.55%
Santanu Das 2,750,900 (2) 14.45%
Clara Young 129,372 (3) *
Stephen Owen 175,524 (4) *
D. Dean McCormick III 6,000 (5) *
Benedict A. Eazzetta 6,000 (5) *
Stanley W. Corbett 12,000 (5) *
-15-
Name and Address Amount and Nature of Beneficial Percent of Class
of Beneficial Owner Ownership of Common Stock of Common Stock
------------------- ------------------------- ---------------
Peter Kellogg 3,835,800 (6) 20.36%
Sormistha Das 1,874,924 (7) 9.93%
Laurus Master Fund, Ltd. 1,969,428 (8) 9.47%
All directors and executive
officers as a group (8
persons) 5,899,814 (9) 30.25%
- ---------------
(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 200,000 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 200,000 shares of common stock underlying options.
(3) Includes 90,000 shares of common stock underlying options.
(4) Includes 38,202 shares of common stock held indirectly through Mr. Owen's
spouse and 92,000 shares of common stock underlying options.
(5) Represents shares of common stock underlying options.
(6) The address for Mr. Kellogg is 120 Broadway, New York, New York, 10271.
(7) Includes 9,000 shares of common stock underlying options.
(8) Represents 380,000 shares of common stock underlying warrants and
1,589,428 shares of common stock underlying convertible promissory notes.
(9) Includes 656,000 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.
-16-
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
equity compensation plans that existed as of March 31, 2004. The existing equity
compensation plans include Research Engineers, Inc. 1996 Stock Option Plan (the
"1996 Plan"), Research Engineers, Inc. 1997 Stock Option Plan (the "1997 Plan"),
Research Engineers, Inc. 1998 Stock Option Plan (the "1998 Plan") netGuru, Inc.
2000 Stock Option Plan (the "2000 Plan") and netGuru, Inc. 2003 Stock Option
Plan (the "2003 Plan") (together "the option plans").
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
by security holders 1,927,000 $1.96 1,930,000
Equity compensation plans not approved
by security holders 485,000 1.20 --
---------- ------ ----------
TOTAL 2,412,000 $1.81 1,930,000
========== ====== ==========
- --------------------
(1) Number of shares is subject to adjustment for changes in capitalization for
stock splits, stock dividends and similar events.
The option plans permit grants of both incentive stock options and
non-qualified stock options. Options under all plans generally vest over 3
years, though the vesting periods may vary from option to option, and are
exercisable subject to continued employment and other conditions.
Options outstanding under equity compensation plans at March 31, 2004,
were:
WEIGHTED AVERAGE
EXERCISE PRICE
PLAN OPTIONS OUTSTANDING PER SHARE
---- ------------------- ---------
1996 298,000 $1.39
1997 267,000 $1.49
1998 442,000 $2.29
2000 920,000 $2.12
----------------- ------------------------ ---------------------
Total 1,927,000 $1.96
================= ======================== =====================
Warrants outstanding under equity compensation plans consisted of
485,000 warrants issued in December 2003 at exercise prices ranging from $1.00
to $1.50 per share and vested immediately. The warrants were issued as
consideration for strategic consulting and investor relations' services and
expire 5 years from the date of grant.
-17-
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 December 2002, we entered into a Securities Purchase
Agreement with Laurus, which was amended on August 4, 2003. Pursuant to that
amended agreement, we issued to Laurus the 2002 Note and 2002 Warrant. The net
proceeds from the note were used for general working capital. The 2002 Note, as
amended, which is being amortized over a 24-month period terminating on June 30,
2005, may be repaid, at our option, in cash or through the issuance of shares
our common stock under certain circumstances. In connection with this financing,
we paid a $200,000 fee to an affiliate of Laurus.
On July 31, 2003, we obtained a three-year, renewable, $4,000,000
revolving accounts receivable credit facility from Laurus. In connection with
this financing, we issued to Laurus the 2003 Warrant. The balances outstanding
on the 2002 Note and the 2003 Note reduce the amount available under this
revolving credit facility.
On December 4, 2003, we issued to Laurus the 2003 Note, which consisted
of $900,000 that we had borrowed under the credit facility and $500,000 in
additional borrowings. The net proceeds from the 2003 Note were used for general
working capital. The 2003 Note matures on December 3, 2006. The fixed conversion
price, upon which potential issuances of our common stock to satisfy the
obligations of the 2003 Note are based, is $1.30. The 2003 Note, which is being
amortized over a 36-month period terminating on December 4, 2006, may be repaid,
at our option, in cash or through the issuance of shares our common stock under
certain circumstances. From April 1, 2004 through November 2006, we are required
to pay monthly principal payments of $30,000 plus accrued interest. On December
1, 2006, we are required to pay the entire balance of the 2003 Note plus accrued
interest. In connection with this financing, we paid a $140,000 fee to an
affiliate of Laurus.
As a result of these transactions, Laurus became the beneficial owner
of more than 5% of our outstanding common stock if contractual beneficial
ownership and conversion limitations are disregarded.
In October 2003, we borrowed $100,000 from Mr. Amrit Das, our chief
executive officer, and issued to him a 1% interest bearing unsecured promissory
note. The proceeds were used for working capital. The principal along with the
accrued interest are due on or before March 31, 2005. As of March 31, 2004, the
total outstanding principal balance on this note was $100,000, which is included
in the current portion of our long-term debt.
In October 2003, we borrowed $155,000 from Mr. Jyoti Chatterjee, our
then president and chief operating officer, and issued to him a 1% interest
bearing unsecured promissory note. The proceeds were used to pay off the
telephone switch lease early in order for us to obtain title to the switch and
be able to sell it. As of March 31, 2004, we had repaid the entire balance of
this loan and all accrued interest in full.
In February 2002, Mr. Amrit Das and Mr. Jyoti Chatterjee pledged some
of their personal assets as collateral to finance our $500,000
telecommunications switch. In December 2003, when the telecommunications switch
was sold, the collateral restrictions on their personal assets from this
transaction were removed.
In November 2000, we entered into a non-interest bearing secured loan
agreement and promissory note for $85,000 with Mr. Stephen Owen, one of our
officers. The loan was secured by Mr. Owen's pledge of the proceeds from the
exercise and sale of his vested options. Mr. Owen repaid the balance of this
loan in full in April 2003.
-18-
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 an annual interest of 16.6% payable monthly.
The principal is payable in quarterly installments beginning June 2000 and
ending March 2005. At March 31, 2004, the balance on this loan was $263,000.
In July 2004, we granted to each of our non-employee directors an
option to purchase 10,000 shares of our common stock. In addition, we granted to
Mr. Stephen Owen, one of our officers, an option to purchase 7,500 shares of our
common stock. The options have an exercise price of $1.45 per share (which price
was the fair market value of a share of our common stock on the date of the
grant), vest in three equal annual installments commencing on the first
anniversary of the date of grant, which was July 7, 2004, and expire July 7,
2014.
In August 2003, we granted to Bruce Nelson, our chief financial
officer, an incentive stock option to purchase 30,000 shares of our common stock
of which 15,000 shares vested immediately and 15,000 shares vested over one
year. The option has an exercise price of $1.28 per share (which price was the
fair market value of a share of our common stock on the date of grant, which was
August 7, 2003). In July 2004, we granted to Mr. Nelson an incentive stock
option to purchase 20,000 shares of our common stock. The option has an exercise
price of $1.45 per share (which price was the fair market value of a share of
our common stock on the date of the grant), and vested in full on the date of
the grant, which was July 7, 2004, and expires July 7, 2014.
We are a party to employment and separation agreements with related
parties, as more particularly described above under the heading "Employment
Agreements, Termination of Employment and Change-in-Control Arrangements." In
addition, Sormistha Das, who beneficially owned 9.93% of our outstanding shares
of common stock as of October 22, 2004, serves as our assistant controller.
-19-
PROPOSAL 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Our Audit Committee and board of directors have appointed the
independent accounting firm of Haskell and White LLP ("HW") to audit our
consolidated financial statements for the fiscal year ending March 31, 2005, and
to conduct whatever audit functions are deemed necessary pursuant thereto. KPMG
LLP ("KPMG") audited our fiscal 2004 consolidated financial statements included
in our 2004 annual report to stockholders.
CHANGE IN INDEPENDENT AUDITORS
On July 20, 2004, we notified KPMG, our then independent accountants,
that we had engaged new certifying accountants, and terminated our relationship
with KPMG.
Also on July 20, 2004, we engaged HW as our new certifying accountants.
We had not consulted with HW during the two most recent fiscal years and through
July 20, 2004 regarding the application of accounting principles to a proposed
or completed specified transaction or the type of audit opinion that might be
rendered on our consolidated financial statements, where either a written report
was provided or oral advice was provided that HW concluded was an important
factor considered by us in reaching a decision as to the accounting, auditing or
financial reporting issue or as to any disagreement or reportable event as
described in Item 304(a)(1)(iv) and Item 304(a)(1)(v) of Regulation S-K under
the Securities Act of 1933.
The audit reports of KPMG on our consolidated financial statements as
of and for the years ended March 31, 2004 and 2003, did not contain any adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope, or accounting principles, except that KPMG's audit
reports on the fiscal 2004 and 2003 consolidated financial statements made
reference to the fact that we changed our method of accounting for goodwill and
other intangible assets as required by Statement of Financial Accounting
standards No. 142, "Goodwill and Other Intangible Assets" on April 1, 2002.
Our decision to change accountants was approved by our Audit Committee
and board of directors. In connection with the audits of the two fiscal years
ended March 31, 2004, and during the subsequent interim period through July 20,
2004, there were no disagreements with KPMG on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedures which disagreements, if not resolved to KPMG's satisfaction, would
have caused KPMG to make reference to the subject matter of the disagreement in
their report on the consolidated financial statements for such years. In
addition, there were no reportable events as described in Item 304(a)(1)(v) of
Regulation S-K under the Securities Act of 1933. We provided KPMG with a copy of
the disclosures we made in the required Form 8-K for July 20, 2004 and filed
with that Form 8-K KPMG's letter to the Commission dated July 27, 2004 regarding
these disclosures.
-20-
PRINCIPAL ACCOUNTING FIRM FEES
The following table presents fees for professional audit services
rendered by KPMG for the years ended March 31, 2004 and 2003.
2004 2003
---- ----
Audit Fees: (1) $235,000 $281,000
Audit-Related Fees: (2) --- ---
Tax Fees: (3) --- ---
All Other Fees: (4) --- ---
---------------------------------------
Total Fees: $235,000 $281,000
---------------------------------------
- ---------------
(1) Audit Fees: Fees for professional services performed by KPMG
for the audit of our annual financial statements and review of
financial statements included in our 10-QSB filings, and
services that are normally provided in connection with
statutory and regulatory filings or engagement, such as the
filing of Form S-3 or Form S-8.
(2) Audit-Related Fees: KPMG did not provide any audit-related
services.
(3) Tax Fees: KPMG did not provide any professional services with
respect to tax compliance, such as preparation and filing of
original and amended returns for us and our consolidated
subsidiaries, refund claims, payment planning, tax audit
assistance and tax work stemming from "Audit-Related" items.
(4) All Other Fees: KPMG did not provide other permissible work
for us that does not meet the above category descriptions.
We anticipate that a representative of HW 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. We do
not anticipate that a representative of KPMG LLP will be present at the annual
meeting.
PRE-APPROVAL POLICY
Our Audit Committee is responsible for approving all Audit,
Audit-Related, Tax and Other Non-Audit Services. The Audit Committee
pre-approves all auditing services and permitted non-audit services, including
all fees and terms to be performed for us by our independent auditor at the
beginning of the fiscal year.
Non-audit services are reviewed and pre-approved by project at the
beginning of the fiscal year. Any additional non-audit services we contemplate
after the beginning of the fiscal year are submitted to the Audit Committee
chairman for pre-approval prior to engaging the independent auditor for such
services. Such interim pre-approvals are reviewed with the full Audit Committee
at its next meeting for ratification.
-21-
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 selection of HW as our independent
auditors.
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. An additional copy 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.
-22-
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
proposals by stockholders that are intended for inclusion in our proxy statement
and proxy card and to be presented at our next annual meeting must be received
by us no later than 120 calendar days in advance of the one-year anniversary of
the date of this proxy statement in order to be considered for inclusion in our
proxy materials relating to the next annual meeting. Such proposals shall be
addressed to our Secretary at our corporate headquarters and may be included in
next year's annual meeting proxy materials if they comply with rules and
regulations of the Securities and Exchange Commission governing stockholder
proposals.
Proposals by stockholders that are not intended for inclusion in our
proxy materials may be made by any stockholder who timely and completely
complies with the notice procedures contained in our bylaws, was a stockholder
of record at the time of giving of notice and is entitled to vote at the
meeting, so long as the proposal is a proper matter for stockholder action and
the stockholder otherwise complies with the provisions of our bylaws and
applicable law. However, stockholder nominations of persons for election to our
board of directors at a special meeting may only be made if our board of
directors has determined that directors are to be elected at the special
meeting.
To be timely, a stockholder's notice regarding a proposal not intended
for inclusion in our proxy materials must be delivered to our Secretary at our
corporate headquarters not later than:
o In the case of an annual meeting, the close of business on the
45th day before the first anniversary of the date on which we
first mailed our proxy materials for the prior year's annual
meeting of stockholders. However, if the date of the current
year's meeting has changed more than 30 days from the date of
the prior year's meeting, then in order for the stockholder's
notice to be timely it must be delivered to our Secretary a
reasonable time before we mail our proxy materials for the
current year's meeting. For purposes of the preceding
sentence, a "reasonable time" coincides with any adjusted
deadline we publicly announce.
o In the case of a special meeting, the close of business on the
7th day following the day on which we first publicly announce
the date of the special meeting.
Except as otherwise provided by law, if the chairperson of the meeting
determines that a nomination or any business proposed to be brought before a
meeting was not made or proposed in accordance with the procedures set forth in
our bylaws and summarized above, the chairperson may prohibit the nomination or
proposal from being presented at the 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
November 12, 2004
-23-
APPENDIX A
AMENDED AND RESTATED CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF
NETGURU, INC.
AS AMENDED AND RESTATED OCTOBER 7, 2004
PURPOSE
The purpose of the Audit Committee (the "Audit Committee") of netGuru,
Inc. (the "Corporation") is to assist the Board of Directors of the Corporation
in fulfilling its oversight responsibilities by:
o Serving as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system;
o Reviewing and appraising the audit efforts of the
Corporation's independent accountants; and
o Providing an open avenue of communication among the
independent accountants, financial and senior management and
the Board of Directors.
COMPOSITION
The Audit Committee shall consist of three or more directors as
recommended by the Corporation's Nominating and Governance Committee and
selected by the Board of Directors, each of whom shall be independent as and to
the extent required by federal securities laws and applicable requirements of
The Nasdaq SmallCap Market or the principal exchange or system on which the
Corporation's common stock is traded, and free from any relationship that, in
the opinion of the Board of Directors, would interfere with the exercise of his
or her independent judgment as a member of the Audit Committee. Directors who
are affiliates of the Corporation, or are officers or employees of the
Corporation or of its subsidiaries, will not be considered independent.
All members of the Audit Committee must be able to read and understand
fundamental financial statements, including a corporation's balance sheet,
income statement, and cash flow statement, at least one member of the Audit
Committee is to have past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in the member's financial sophistication,
including being or having been a chief executive officer, chief financial
officer or other senior officer with financial oversight responsibilities, and
at least one member of the Audit Committee shall qualify as an "audit committee
financial expert" as defined by the Securities and Exchange Commission pursuant
to Section 407 of the Sarbanes-Oxley Act of 2002.
-A1-
The members of the Audit Committee are to be selected by the Board of
Directors and shall serve until their successors are duly elected and qualified.
Unless a Chairman of the Audit Committee is elected by the full Board of
Directors, the members of the Audit Committee may designate a Chairman by
majority vote of the full Audit Committee membership.
MEETINGS
The Audit Committee shall meet on at least a quarterly basis and shall
hold regular meetings as may be necessary and special meetings as may be called
by the Chairman of the Audit Committee. As part of its job to foster open
communication, the Audit Committee should meet at least annually with management
and the independent accountants in separate executive sessions to discuss any
matters that the Audit Committee or either of these groups believe should be
discussed privately. The Audit Committee should meet with the independent
accountants and management quarterly to review the Corporation's financial
statements.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Corporation's independent accountants are to be ultimately
accountable to the Audit Committee, and the Audit Committee shall have the
ultimate authority and responsibility to select, evaluate and, where
appropriate, replace the independent accountants (or nominate the outside
auditor to be proposed for stockholder approval in any proxy statement).
RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review and assess the adequacy of this Charter at least
annually, and otherwise as conditions dictate.
2. Review the Corporation's annual financial statements and any
reports or other financial information submitted to the
Securities and Exchange Commission or the public, including
any certification, report, opinion or review rendered by the
independent accountants.
3. Review with financial management and the independent
accountants the Corporation's filings with the Securities and
Exchange Commission on Form 10-QSB prior to their filing and
prior to the release of earnings.
4. Review and discuss with management and the independent
accountants any material financial or non-financial
arrangements of the Corporation that do not appear on the
financial statements of the Corporation.
INDEPENDENT ACCOUNTANTS
1. Select the independent accountants, considering their
independence and effectiveness, and approve the fees and other
compensation to be paid to the independent accountants.
2. At least annually, obtain from the independent accountants,
and review and discuss with the independent accountants, a
formal written statement delineating all relationships the
independent accountants and their related entities have with
the Corporation and its related entities, consistent with
Independence Standards Board Standard No. 1 (or any successor
thereto), and actively engage in a dialogue with the
independent accountants with respect to any disclosed
relationships or services that in the independent accountants'
professional judgment may reasonably be thought to bear on the
objectivity and independence of the independent accountants.
-A2-
3. At least annually, obtain written confirmation from the
independent accountants that, in the independent accountants'
professional judgment, the independent accountants are
"independent" of the Corporation within the meaning of the
federal securities laws.
4. Take or recommend that the Board of Directors take, any
appropriate action to oversee the independence of the
independent accountants.
5. Review the performance of the independent accountants and
approve any proposed discharge of the independent accountants
when circumstances warrant.
6. Periodically consult with the independent accountants out of
the presence of management about internal controls and the
fullness and accuracy of the Corporation's financial
statements.
7. Pre-approve all auditing services to be provided by the
independent accountants to the Corporation (including comfort
letters in connection with securities underwriting).
8. Pre-approve all non-audit services to be provided by the
independent accountants to the Corporation unless: (a) the
aggregate amount of all such non-audit services constitutes
not more than 5% of the total amount of revenues paid by the
Corporation to its independent accountants during the fiscal
year in which the non-audit services are provided; (b) such
services were not recognized by the Corporation at the time of
the engagement to be non-audit services; and (c) such services
are promptly brought to the attention of the Audit Committee
and approved prior to completion of the audit by the Audit
Committee or by one or more members of the Audit Committee to
whom authority to grant such approvals has been delegated by
the Audit Committee.
9. The Audit Committee shall have the authority to delegate to
one or more designated members of the Audit Committee the
authority to grant pre-approvals of audit and non-audit
services. The decisions of any such member to pre-approve such
services shall be presented to the full Audit Committee at its
scheduled meetings.
10. Discuss with any registered public accounting firm that
performs an audit for the Corporation (1) all critical
accounting policies and practices to be used, (2) all
alternative treatments of financial information within
generally accepted accounting principles that have been
discussed with management officials of the Corporation,
ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the registered
public accounting firm; and (3) other material written
communications between the registered public accounting firm
and the management of the Corporation, such as any management
letter or schedule of unadjusted differences.
FINANCIAL REPORTING PROCESSES
1. In consultation with the independent accountants, review the
integrity of the organization's financial reporting processes,
both internal and external.
-A3-
2. Consider the independent accountant's judgments about the
quality and appropriateness of the Corporation's accounting
principles as applied in its financial reporting.
3. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices
as suggested by the independent accountants or management.
4. Establish regular and separate reporting to the Audit
Committee by each of management and the independent
accountants regarding any significant judgments made in
management's preparation of the financial statements and the
view of each as to appropriateness of such judgments.
5. Following completion of the annual audit, review separately
with each of management and the independent accountants any
significant difficulties encountered during the course of the
audit, including any restrictions on the scope of work or
access to required information.
6. Review and resolve any significant disagreement among
management and the independent accountants in connection with
the preparation of the financial statements.
7. Review with the independent accountants and management the
extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have
been implemented.
8. Prior to the filing of any periodic report of the Corporation
under the Securities Exchange Act of 1934, receive
confirmation from the Corporation's principal executive and
principal accounting officers that they have disclosed to the
Corporation's independent accountants and the Audit Committee:
(1) all significant deficiencies in the design or operation of
internal controls that are reasonably likely to adversely
affect the Corporation's ability to record, process,
summarize, and report financial information; (2) any material
weaknesses in internal controls; and (3) any fraud, whether or
not material, that involves management or other employees who
have a significant role in the Corporation's internal control
over financing reporting.
9. Establish procedures for the receipt, retention and treatment
of complaints received by the Corporation regarding
accounting, internal accounting controls, or auditing matters.
10. Establish procedures for the confidential, anonymous
submission by employees of the Corporation of concerns
regarding questionable accounting or auditing matters.
ETHICAL AND LEGAL COMPLIANCE
1. Review and approve all related-party transactions after
reviewing each such transaction for potential conflicts of
interest and other improprieties.
2. The Audit Committee shall have the authority to retain and
compensate such independent counsel, experts and other
advisors as it determines necessary to carry out its duties.
3. The Audit Committee shall have the authority to conduct or
authorize investigations into any matters within its scope of
responsibilities and shall have the authority to retain
outside advisors to assist it in the conduct of any
investigation.
-A4-
4. Establish, review and update periodically one or more codes of
conduct and ethics and ensure that management has established
a system to enforce these codes.
5. Review, with the Corporation's counsel, any legal matter that
could have a significant impact on the Corporation's financial
statements.
6. Perform any other activities consistent with this Charter, the
Corporation's bylaws and governing law, as the Audit Committee
or the Board of Directors deems necessary or appropriate.
-A5-
APPENDIX B
AMENDED AND RESTATED CHARTER
OF THE
COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
OF
NETGURU, INC.
AS ADOPTED ON OCTOBER 7, 2004
PURPOSE
The purpose of the Compensation Committee of netGuru, Inc. (the
"Company") governed by this charter is to (i) act as administrator of the
Company's various stock option plans and stock plans (collectively, the "Plans")
as described in each of the Plans, (ii) review forms of compensation to be
provided to the officers and employees of the Company, including stock
compensation, (iii) grant options to purchase common stock of the Company to
employees and executive officers of the Company and (iv) review and make
recommendations to the Board of Directors regarding all forms of compensation to
be provided to the directors of the Company, including stock compensation. The
Compensation Committee has the authority to undertake the specific duties and
responsibilities listed below and will have the authority to undertake such
other specific duties as the Board of Directors from time to time prescribes.
MEMBERSHIP
The Compensation Committee shall consist solely of a minimum of three
(3) "non-employee directors" of the Company as such term is defined in Rule
16b-3(b)(3)(i) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The members of the Compensation Committee will be outside directors
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended, and will meet the independence requirements of The Nasdaq SmallCap
Market or such other principal exchange or system on which the Company's common
stock then trades. The members of the Compensation Committee are nominated by
the Nominating and Corporate Governance Committee and appointed by and serve at
the discretion of the Board of Directors.
RESPONSIBILITIES
The responsibilities of the Compensation Committee are set forth below:
o The Compensation Committee shall review and make
recommendations to the Board of Directors regarding the
compensation policy for executive officers and directors of
the Company, and such other officers of the Company as
directed by the Board of Directors.
o The Compensation Committee shall review and approve the
Company's compensation policy regarding all forms of
compensation (including, to the extent relevant, all "plan"
compensation, as such term is defined in Item 402(a)(6) of
Regulation S-B promulgated by the Securities and Exchange
Commission, and all non-plan compensation) to be provided to
the officers and employees of the Company.
-B1-
o The Compensation Committee shall review recommendations from
the Chief Executive Officer of the Company regarding all forms
of compensation (including, to the extent relevant, all "plan"
compensation, as such term is defined in Item 402(a)(6) of
Regulation S-B promulgated by the Securities and Exchange
Commission, and all non-plan compensation) to be provided to
the non-employee directors of the Company.
o The Compensation Committee shall review and make
recommendations to the Board of Directors regarding general
compensation goals and guidelines for the Company's employees
and officers and the criteria by which bonuses to the
Company's employees and officers are determined.
o The Compensation Committee shall review recommendations from
the Chief Executive Officer of the Company regarding all bonus
and stock compensation to all employees of the Company.
o The Compensation Committee shall act as administrator (as
described in each of the Plans) of the Plans within the
authority delegated by the Board of Directors. In its
administration of the Plans, the Compensation Committee may,
(i) grant stock options or stock purchase rights to
individuals eligible for such grants (including grants to
individuals subject to Section 16 of the Securities Exchange
Act of 1934 (the "Exchange Act") in compliance with Rule 16b-3
hereunder) and (ii) amend such stock options or stock purchase
rights in accordance with the terms of the Plans.
o The Compensation Committee shall review and make
recommendations to the Board of Directors with respect to
amendments to the Plans and changes in the number of shares
reserved for issuance hereunder.
o The Compensation Committee shall review and make
recommendations to the Board of Directors regarding other
plans that are proposed for adoption or adopted by the Company
for the provision of compensation to employees of, directors
of and consultants to the Company.
o The Compensation Committee shall prepare a report, if
required, (to be included in the Company's proxy statement)
that describes: (a) the criteria on which compensation paid to
the Chief Executive Officer for the last completed fiscal year
is based; (b) the relationship of such compensation to the
Company's performance; and (c) the Compensation Committee's
executive compensation policies applicable to executive
officers.
o The Compensation Committee shall review and reassess the
adequacy of this Charter annually and recommend any proposed
charges to the Board of Directors for approval.
MEETINGS
It is anticipated that the Compensation Committee will meet at least
twice each year. However, the Compensation Committee may establish its own
schedule, which it will provide to the Board of Directors in advance. At a
minimum of one of such meetings annually, the Compensation Committee will
consider stock plans, performance goals and incentive awards, and the overall
coverage and composition of the compensation package.
-B2-
MINUTES
The Compensation Committee will maintain written minutes of its
meetings, which minutes will be filed with the minutes of the meetings of the
Board of Directors.
REPORTS
The Compensation Committee will provide written reports to the Board of
Directors of the Company regarding recommendations of the Compensation Committee
submitted to the Board of Directors for action, and copies of the written
minutes of its meetings.
-B3-
APPENDIX C
AMENDED AND RESTATED CHARTER OF THE
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
OF THE BOARD OF DIRECTORS
OF
NETGURU, INC.
AS ADOPTED OCTOBER 7, 2004
PURPOSE
The primary responsibilities of the Nominating and Corporate Governance
Committee ("Committee") of the Board of Directors ("Board") of netGuru, Inc.
("Company") are to (i) identify individuals qualified to become Board members;
(ii) select, or recommend to the Board, director nominees for each election of
directors; (iii) develop and recommend to the Board criteria for selecting
qualified director candidates; (iv) consider committee member qualifications,
appointment and removal; (v) recommend corporate governance principles
applicable to the Company; and (vi) provide oversight in the evaluation of the
Board and each committee.
COMPOSITION
The Committee shall be comprised of two or more directors, each of whom
shall satisfy the independence requirements established by the rules governing
companies listed on Nasdaq or the principal exchange or system on which the
Corporation's common stock is traded. The members of the Committee shall be
appointed by the Board and shall serve until their successors are duly elected
and qualified or their earlier resignation or removal. Any member of the
Committee may be removed or replaced by the Board. Unless a chairman is elected
by the full Board, the members of the Committee may designate a chairman by
majority vote of the full Committee membership. The Committee may, from time to
time, delegate duties or responsibilities to subcommittees or to one member of
the Committee.
A majority of the members shall represent a quorum of the Committee,
and, if a quorum is present, any action approved by at least a majority of the
members present shall represent the valid action of the Committee.
The Committee shall have the authority to obtain advice or assistance
from consultants, legal counsel, accounting or other advisors as appropriate to
perform its duties hereunder, and to determine the terms, costs and fees for
such engagements. Without limitation, the Committee shall have the sole
authority to retain or terminate any search firm to be used to identify director
candidates and to determine and approve the terms, costs and fees for such
engagements. The fees and costs of any consultant or advisor engaged by the
Committee to assist the Committee in performing its duties hereunder shall be
borne by the Company.
-C1-
MEETINGS
The Committee shall meet as often as it deems necessary to fulfill its
responsibilities hereunder, and may meet with management or individual directors
at any time it deems appropriate to discuss any matters before the Committee.
The Committee shall maintain written minutes of its meetings, which
minutes will be filed with the minutes of the meetings of the Board.
Responsibilities and Authority
To fulfill its responsibilities and duties hereunder, the Committee
shall:
a. Nominating Functions
i. Evaluate and select, or recommend to the Board, director nominees
for each election of directors, except that if the Company is at any time
legally required by contract or otherwise to provide any third party with the
ability to nominate a director, the Committee need not evaluate or propose such
nomination, unless required by contract or requested by the Board.
ii. Determine criteria for selecting new directors, including desired
board skills and attributes, and identify and actively seek individuals
qualified to become directors.
iii. Consider any nominations of director candidates validly made by
stockholders.
iv. Review and make recommendations to the Board concerning
qualifications, appointment and removal of committee members.
b. CORPORATE GOVERNANCE FUNCTIONS
i. Develop, recommend for Board approval, and review on an ongoing
basis the adequacy of, the corporate governance principles applicable to the
Company. Such principles may include director qualification standards, director
responsibilities, committee responsibilities, director access to management and
independent advisors, director compensation, director orientation and continuing
education, management succession and annual performance evaluation of the Board
and committees.
ii. Provide for and review prompt disclosure to the public of any
change in, or waiver of, the Company's codes of conduct and ethics, and review
the codes periodically and recommend changes to the codes as the Committee shall
deem appropriate, and adopt procedures for monitoring and enforcing compliance
with the codes.
iii. Review, at least annually, the Company's compliance with the
corporate governance listing requirements of Nasdaq or such other principal
exchange or system on which the Company's common stock is traded, and report to
the Board regarding the same.
iv. Assist the Board in developing criteria for the evaluation of Board
and committee performance.
v. Evaluate the Committee's own performance on an annual basis.
vi. Develop orientation materials for new directors and corporate
governance-related continuing education for all Board members.
-C2-
vii. Make regular reports to the Board regarding the foregoing.
viii. Review and reassess the adequacy of this Charter as appropriate
and recommend any proposed changes to the Board for approval.
ix. Perform any other activities consistent with this Charter, the
Company's bylaws and governing law, as the Committee or the Board deems
necessary or appropriate.
-C3-
NETGURU, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
2004 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 13, 2004
The undersigned stockholder of netGuru, Inc. ("Company") hereby
constitutes and appoints Amrit K. Das and Santanu K. Das, 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 2004
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
December 13, 2004, 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)
-D1-
ANNUAL MEETING OF STOCKHOLDERS OF
NETGURU, INC.
DECEMBER 13, 2004
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.
________________________________________________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL
NOMINEES" FOR THE ELECTION OF DIRECTORS AND FOR PROPOSAL 2.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK
YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE |X|
________________________________________________________________________________
1. To elect five nominees to the board of directors as follows:
NOMINEES:
[ ] FOR ALL NOMINEES 0 Amrit K. Das
0 Santanu K. Das
[ ] WITHHOLD AUTHORITY 0 Benedict A. Eazzetta
FOR ALL NOMINEES 0 D. Dean McCormick III
0 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]
2. To consider and vote upon a proposal to ratify the appointment of Haskell &
White LLP, independent auditors, to audit the consolidated financial statements
of the Company for the fiscal year ending March 31, 2005.
IF NO DIRECTION IS PROVIDED, THIS PROXY WILL BE VOTED AS RECOMMENDED BY
THE BOARD OF DIRECTORS.
________________________________________________________________________________
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.
________________________________________________________________________________
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.
-D2-