<PAGE>
[LOGO]
NET.B@NK, INC.
11475 GREAT OAKS WAY
SUITE 100
ALPHARETTA, GEORGIA 30022
Dear Shareholder:
You are cordially invited to attend our 2000 Annual Meeting of Shareholders,
which will be held at the Crowne Plaza Ravinia, 4355 Ashford Dunwoody Road,
Atlanta, Georgia 30346 on April 27, 2000 at 10:00 a.m., local time. I sincerely
hope that you will be able to attend the meeting, and I look forward to seeing
you.
The attached Notice of Annual Meeting and Proxy Statement describes the
formal business to be transacted at the meeting. We also will report on our
operations during the past year and during the first quarter of fiscal 2000, as
well as on our plans for the future.
We are including with this Proxy Statement a copy of our Annual Report. It
contains information on our operations and financial performance as well as our
audited financial statements.
Please take this opportunity to become involved in the affairs of the
Company. Whether or not you expect to be present at the meeting, please
complete, date, sign and mail the enclosed proxy card in the envelope provided.
Returning the proxy card does NOT deprive you of your right to attend the
meeting and vote your shares in person. If you attend the meeting, you may
withdraw your proxy and vote your own shares.
Sincerely,
[LOGO]
D.R. Grimes
Vice Chairman and Chief Executive
Officer
<PAGE>
NET.B@NK, INC.
11475 GREAT OAKS WAY
SUITE 100
ALPHARETTA, GEORGIA 30022
(770) 343-6006
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 27, 2000
The Annual Meeting of Shareholders of Net.B@nk, Inc. (the "Company"), will
be held at the Crowne Plaza Ravinia, 4355 Ashford Dunwoody Road, Atlanta,
Georgia 30346 on Thursday, April 27, 2000, at 10:00 a.m., to consider and vote
upon the following matters:
1. To elect directors to serve for the terms indicated in the accompanying
Proxy Statement.
2. To ratify Deloitte & Touche LLP as the Company's independent auditors.
3. To transact such other business as may properly come before such meeting
or any adjournment thereof.
The Board of Directors has established the close of business on March 13,
2000 as the record date for determining the shareholders who are entitled to
notice of, and to vote at, the Annual Meeting or any adjournment.
We hope you will be able to attend the meeting. To ensure that the greatest
number of shareholders will be present either in person or by proxy, however, we
ask that you date and sign the accompanying proxy card and return it as promptly
as possible in the enclosed self-addressed envelope. No postage is required if
mailed in the United States.
If you attend the Annual Meeting in person, you may revoke your proxy at the
meeting and cast your vote in person. If you receive more than one proxy because
your shares are held in various names or accounts, you should complete and
return each proxy.
By Order of the Board of Directors:
[LOGO]
Robert E. Bowers
Secretary
March 29, 2000
<PAGE>
NET.B@NK, INC.
11475 GREAT OAKS WAY
SUITE 100
ALPHARETTA, GEORGIA 30022
(770) 343-6006
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 27, 2000
INTRODUCTION
TIME AND PLACE OF THE MEETING
The Company's Board of Directors is furnishing this Proxy Statement to
solicit proxies for use at the Annual Meeting of Shareholders to be held on
Thursday, April 27, 2000, at 10:00 a.m., at the Crowne Plaza Ravinia, 4355
Ashford Dunwoody Road, Atlanta, Georgia 30346, and at any adjournment of the
meeting.
RECORD DATE AND MAILING DATE
The close of business on March 13, 2000 is the record date for the
determination of shareholders entitled to notice of and to vote at the meeting.
We first mailed this Proxy Statement and accompanying proxy card to shareholders
on or about March 29, 2000.
NUMBER OF SHARES OUTSTANDING
As of the close of business on the Record Date, the Company had 100,000,000
shares of common stock, $.01 par value, authorized, of which 30,007,932 shares
were issued and outstanding. Each such share is entitled to one vote on all
matters to be presented at the meeting.
VOTING AT THE ANNUAL MEETING
PROCEDURES FOR VOTING BY PROXY
If you properly sign, return and do not revoke your proxy, the persons named
as proxies will vote your shares according to the instructions you have
specified on the proxy card. If you sign and return your proxy card but do not
specify how the persons appointed as proxies are to vote your shares, your proxy
will be voted FOR the election of the nominated directors, FOR ratification of
Deloitte & Touche LLP as our independent auditors and in accordance with the
best judgment of the persons appointed as proxies as to all other matters
properly brought before the meeting. You can revoke your proxy by delivering to
the Secretary of the Company, at the Company's address as listed above, either a
written revocation of your proxy or a duly executed proxy bearing a later date
or by attending the meeting and voting in person.
REQUIREMENTS FOR SHAREHOLDER APPROVAL
A quorum will be present if a majority of the outstanding shares of common
stock are present in person or by valid proxy. We will count abstentions and
broker non-votes, which are described below, in determining whether a quorum
exists. To be elected, a director must receive more votes than any other nominee
for the same seat on the Board of Directors. As a result, if you withhold your
vote as to one or more directors, it will have no effect on the outcome of the
election unless you cast that vote
1
<PAGE>
for a competing nominee. If any nominee for election to the Board of Directors
named in this Proxy Statement becomes unavailable for election for any reason,
the proxy will be voted for a substitute nominee selected by the Board of
Directors. In general, to approve any other matter presented for shareholder
approval, the number of shares voted in favor of the proposal must exceed the
number of shares voted against the proposal, provided a quorum is present.
EFFECT OF ABSTENTIONS
A shareholder who is present in person or by proxy at the Annual Meeting and
who abstains from voting on any or all proposals will be included in the number
of shareholders present at the Annual Meeting for the purpose of determining the
presence of a quorum. Abstentions do not count as votes in favor of or against a
given matter.
EFFECT OF BROKER NON-VOTES
Brokers who hold shares for the accounts of their clients may vote these
shares either as directed by their clients or in their own discretion if
permitted by the exchange or other organization of which they are members.
Companies listing their securities on the New York Stock Exchange are permitted
to vote their clients' proxies in their own discretion as to the election of
directors and the ratification of independent accountants. Proxies that brokers
do not vote on one or more proposals but that they do vote on others are
referred to as "broker non-votes" with respect to the proposal(s) not voted
upon. Broker non-votes are included in determining the presence of a quorum. A
broker non-vote, however, does not count as a vote in favor of or against a
particular proposal for which the broker has no discretionary voting authority.
Because brokers have discretion to vote on the matters we are presenting for
approval at the Annual Meeting, broker non-votes will not exist or affect the
outcome of the vote on any of the matters presented.
SOLICITATION OF PROXIES
The Company will pay the cost of proxy solicitation. Our directors, officers
and employees may, without additional compensation, solicit proxies by personal
interview, telephone, fax, or otherwise. We will direct brokerage firms or other
custodians, nominees or fiduciaries to forward our soliciting material to the
beneficial owners of common stock held of record by these institutions and will
reimburse them for the reasonable out-of-pocket expenses they incur in
connection with this process.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table lists, as of the Record Date, the number of shares of
common stock beneficially owned by (1) each current director and nominee,
(2) each current executive officer, (3) each person or entity known to us to be
the beneficial owner of more than five percent of the outstanding common stock,
and (4) all current executive officers and directors as a group.
2
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) PERCENT OF CLASS
- ------------------------ ---------------------- ----------------
<S> <C> <C>
(i) Directors and Director Nominees
Robert E. Bowers (2).................................... 485,647 1.6
Ward H. Clegg........................................... 158,064 *
Michael R. Fitzgerald (2)............................... -- 0.0
D.R. Grimes (2)......................................... 733,186 2.4
J. Stephen Heard........................................ 38,814 *
T. Stephen Johnson...................................... 878,779(3) 2.9
Robin C. Kelton......................................... 436,314 1.5
Thomas H. Muller, Jr.................................... 38,814 *
J. Joe Ricketts......................................... 9,000 *
Donald S. Shapleigh, Jr................................. 329,440 1.1
W. James Stokes......................................... 109,500 *
Mack I. Whittle......................................... 2,424,000(4) 8.1
(ii) Non-Directors, Executive Officers
Thomas L. Cable......................................... 33,000 *
Laura P. Moon........................................... -- 0.0
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENT OF CLASS
- ------------------------ ------------------ ----------------
<S> <C> <C>
(iii) Non-Directors, 5% Beneficial Owners
Carolina First Corporation ("Carolina First") 2,415,000(5) 8.0
(iv) All current Executive Officers and Directors as a Group
(14 persons) 5,674,558(6) 18.9
</TABLE>
- ------------------------
* Indicates less than one percent of the shares of common stock outstanding as
of the Record Date.
(1) Includes the following numbers of shares subject to options exercisable
within 60 days following the Record Date for the indicated reporting person:
<TABLE>
<S> <C>
Mr. Bowers............ 485,647
Mr. Kelton............ 9,000
Mr. Cable............. 33,000
Mr. Muller............ 9,000
Mr. Clegg............. 9,000
Mr. Ricketts.......... 9,000
Mr. Grimes............ 733,186
Mr. Shapleigh......... 3,000
Mr. Heard............. 9,000
Mr. Stokes............ 9,000
Mr. Johnson........... 6,000
Mr. Whittle........... 9,000
</TABLE>
- ------------------------
(2) Mr. Bowers, Mr. Fitzgerald, and Mr. Grimes are also executive officers of
the Company.
(3) Includes 438,840 shares owned of record by Mr. Johnson's spouse, Mary E.
Johnson.
(4) Mr. Whittle serves as Chairman of the Board of Carolina First. As a result,
he may be deemed to beneficially own any shares owned by Carolina First.
(5) Carolina First is located at 102 South Main Street, Greenville, South
Carolina 29601. Of the indicated shares, 240,000 are held of record by
Carolina First Investment Limited Partnership. The general partner of this
partnership is CF Technology Services Company, a wholly owned subsidiary of
Carolina First.
(6) Includes 1,323,833 shares subject to options exercisable within 60 days
following the Record Date.
3
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Board of Directors consists of 12 members and is divided into three
classes. The director nominees and directors whose terms will continue are
listed below. The terms to be served by the members of each class below will
expire at the Annual Meeting of Shareholders in the year indicated and upon the
election and qualification of their successors. Thereafter, the members of each
class will be elected for a three-year term.
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE POSITION
- ---- -------- -------------- ----------------------------------
<S> <C> <C> <C>
DIRECTOR NOMINEES
CLASS III (FOR A TERM EXPIRING IN 2003)
Robin C. Kelton....................... 65 1997 Director
Thomas H. Muller, Jr.................. 58 1997 Director
Donald S. Shapleigh, Jr............... 51 1996 Director
J. Joe Ricketts....................... 57 1999 Director
INCUMBENT DIRECTORS
Class I (For a Term Expiring in 2001)
Michael R. Fitzgerald................. 41 2000 President, Chief Operating Officer
and Director
D.R. Grimes........................... 53 1997 Vice Chairman, Chief Executive
Officer and Director
T. Stephen Johnson.................... 50 1996 Chairman of the Board
Mack I. Whittle, Jr................... 51 1997 Director
Class II (For a Term Expiring in 2002)
Robert E. Bowers...................... 43 1997 Chief Financial Officer, Corporate
Secretary and Director
Ward H. Clegg......................... 48 1997 Director
J. Stephen Heard...................... 57 1997 Director
W. James Stokes....................... 41 1997 Director
</TABLE>
T. STEPHEN JOHNSON is President of T. Stephen Johnson & Associates
("TSJ&A"), a bank consulting firm located in Roswell, Georgia. The firm
specializes in mergers, acquisitions and regulatory consulting. TSJ&A has served
as advisor and consultant in the formation of approximately 70 banks in the
southeastern United States. Mr. Johnson served in a management capacity for two
large Atlanta banks before forming TSJ&A in 1987. Mr. Johnson also serves as
Vice Chairman of Florida Banks, Inc., a bank holding company; Chairman of
Maxrate.com, Inc., an internet based financial services company; Chairman of
Directo, Inc., a card payment and processing company; Chairman of
Brightlane.com, Inc., an e-commerce company; and director of Municipaltrade.com,
Inc., an internet financial services company. In addition, he is principal owner
of Bank Assets Inc., a provider of benefit programs for directors and officers
of banks.
D.R. GRIMES has served as Vice Chairman and Chief Executive Officer of the
Company since January 1997. From March 1996 to January 1997, he was an
independent management consultant, and from 1978 to March 1996, he served in
various capacities with Servantis Systems, Inc. ("SSI"), which provides
electronic funds transfer and home banking software to the financial services
industry, including Executive Vice President of Technology and Chief Information
Officer (1995-1996); Executive Vice President of Technology and Marketing
(1993-1995); President, Treasury Products Division (1994); and President,
Financial Productions Division (1988-1993). Prior to joining SSI, Mr. Grimes
served in various technology positions with Trust Company Bank of Georgia (now
SunTrust Bank). In addition,
4
<PAGE>
Mr. Grimes also serves as a director of Brightlane.com, Inc., an e-commerce
company, and Safedepositbox.com, the company that created our virtual safe
deposit box product.
MICHAEL R. FITZGERALD joined the Company as President and Chief Operating
Officer in February 2000. From December 1993 until February 2000,
Mr. Fitzgerald was President of directbank.com, the electronic banking division
of Massachusetts-based Salem Five Cents Savings Bank. Prior to December 1993,
Mr. Fitzgerald held senior management positions at Century Bancorp, Inc., Mellon
Bank, and Merchants National Bank.
ROBERT E. BOWERS has served as Chief Financial Officer of the Company since
February 1997. In addition, Mr. Bowers has served as the Company's Corporate
Secretary since October 1999. Prior to joining the Company, Mr. Bowers, a
certified public accountant, was the Chief Financial Officer of CheckFree
Corporation, which provides electronic bill payment processing for the financial
services industry, from January 1996 through August 1996. From September 1984
until January 1996, he served as the Chief Financial Officer and a director of
SSI, which was acquired by CheckFree Corporation in January 1996. His experience
includes initial public offerings, strategic business planning and investor
relations.
WARD H. CLEGG has served as a consultant to Carolina First Bank since May
1995. In addition, he served as a consultant to the Company from February 1996
to December 1998. Prior to that Mr. Clegg was an independent banking consultant
specializing in major systems conversions, implementation of new business lines,
and integration of banking and brokerage operations. In addition, Mr. Clegg has
served as a director and member of senior management for various banks and
mortgage lenders during his 23 years in the banking industry.
J. STEPHEN HEARD has served as President of Heard Systems, Inc., which
provides information systems consulting and ATM services, since January 1, 1994.
He has also served as Area Vice President, Hartford Computer Group, Inc. and
Product Sales Executive for Vanstar Corporation. Mr. Heard is retired from IBM
after a 30-year career in marketing, sales and systems engineering.
ROBIN C. KELTON is Chairman and Chief Executive Officer of Kelton
International Ltd., an investment banking firm formed in January 1996
specializing in the banking and insurance industries. Mr. Kelton is a founder
and former Chairman and Chief Executive Officer of Fox-Pitt, Kelton Ltd. and the
Fox-Pitt, Kelton Group, and President of Fox-Pitt, Kelton, Inc. These companies
were formed in 1970 and comprise an international investment banking and
brokerage group based in London and New York. In addition, Mr. Kelton is a
director of Resource Bancshares Mortgage Group, Inc., a financial services
company.
THOMAS H. MULLER, JR. has served as the Chief Financial Officer of
SpectRx, Inc., a medical device company, since December 1996. Mr. Muller has
also served as President of Muller & Associates, a firm providing financial
management services to entrepreneurial enterprises, since 1992 and Chief
Financial Officer of Nurse On Call, Inc., a healthcare software company, from
1993 to 1996. From 1993 to 1995, Mr. Muller also served as Chief Financial
Officer of Amstel, Inc., a beverage manufacturing and marketing company. From
1984 to 1992, Mr. Muller served as Chief Financial Officer of HBO & Company, a
leading healthcare information systems company.
J. JOE RICKETTS has served as a director and as Chairman and Chief Executive
Officer of Ameritrade Holding Corp. since 1981. From 1975 to 1981, Mr. Ricketts
served in various capacities with predecessors to Ameritrade Holding Corp. Prior
to 1975, Mr. Ricketts was a registered representative with a national brokerage
firm, an investment advisor with Ricketts & Co., and a branch manager with
Dun & Bradstreet. Mr. Ricketts is a director of CSS Management and is on the
Advisory Committee of Roundtable. Mr. Ricketts currently serves as a member of
the District Committee for District 4 of the National Association of Securities
Dealers, Inc. Mr. Ricketts is a member of the Board of Trustees for Father
Flanagan's Boy's Home (Boys Town).
5
<PAGE>
DONALD S. SHAPLEIGH, JR. is Executive Vice President and Director of Sales
of Directo, Inc., a card payment and processing company. Immediately prior to
his employment with Directo, Mr. Shapleigh served as President of the Company
and the Bank from January 1996 to April 30, 1999. He has also served as a
director of the Company since its incorporation. Mr. Shapleigh has been involved
in banking since 1971, having spent 23 years in various senior positions with
BankSouth, N.A. and SouthTrust Bank. From November 1994 to December 1995,
Mr. Shapleigh served as Director of Sales for Creative Solutions Group/A BISYS
Company, an Atlanta-based company that sells its patented automated voice
response technology to retail financial service companies.
W. JAMES STOKES has served as Senior Vice President of TSJ&A since 1987. He
served as Head of Analysis, with a focus on bank mergers and acquisitions, stock
valuations, fairness opinions and regulatory assistance. In addition,
Mr. Stokes also currently serves as a director of Brightlane.com, Inc., an
e-commerce company.
MACK I. WHITTLE, JR. has served as President and Chief Executive Officer of
Carolina First since 1986. Mr. Whittle is also a director of Carolina First and
of Carolina First Bank. Mr. Whittle began his banking career in 1969 with
Bankers Trust of South Carolina. From 1969 to 1986, he served in several
capacities including Trust Officer, Vice President of Commercial Business
Development, City Executive for Myrtle Beach, and Senior Vice President and
Regional Officer. In January 1986, Bankers Trust of South Carolina merged with
NCNB Corp. Mr. Whittle resigned from NCNB Corp. in May 1986 to form Carolina
First.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Executive Committee, which has the
authority to consider and act on behalf of the Board on important matters
between scheduled director meetings unless specific Board action is required or
unless otherwise restricted by our Articles of Incorporation or Bylaws or by
action of our Board of Directors. The Executive Committee consists of Messrs.
Johnson, Grimes, Whittle, Kelton and Muller and met once during 1999.
The Board of Directors has also established a Compensation Committee, which
sets the compensation for officers of the Company, reviews management
organization and development, reviews significant employee benefit programs and
establishes and administers executive compensation programs. The Compensation
Committee consists of T. Stephen Johnson (chairman), Thomas H. Muller, Jr. and
J. Stephen Heard and met twice during 1999.
The Board of Directors has also established an Audit Committee, which
recommends to the Board of Directors the independent public accountants to be
selected to audit the Company's annual financial statements and approves any
special assignments given to the accountants. The Audit Committee also reviews
the planned scope of the annual audit, any changes in accounting principles and
the effectiveness and efficiency of the Company's internal accounting staff. The
Audit Committee currently consists of Thomas H. Muller, Jr. (chairman), W. James
Stokes and Ward H. Clegg and met four times during 1999.
The Board of Directors may from time to time establish other committees. The
Board of Directors does not have a nominating committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised of Messrs. Johnson, Heard and
Muller. Mr. Johnson serves as Chairman of the Board of Directors of the Company.
No member of the Compensation Committee has served as an executive officer of
the Company and no executive officer of the Company has served as a director or
member of the Compensation Committee of any other entity of which
Messrs. Johnson, Heard or Muller have served as an executive officer.
6
<PAGE>
DIRECTOR COMPENSATION
During 1999, our non-employee directors have received a $400 fee per board
meeting attended and $5,000 per quarter for their services as directors. We may
also reimburse directors for reasonable expenses incurred in connection with
attending meetings of the Board of Directors.
On April 22, 1999, the Compensation Committee granted all of its directors
except Messrs. Grimes, Bowers, and Shapleigh an option to purchase 3,000 shares
of common stock at an exercise price of $53.33 per share. Mr. Ricketts was
granted an additional option on that date to purchase an additional 3,000 shares
of common stock at an exercise price of $53.33 per share. All of the options
vested immediately on the date of grant.
In addition, during 1999, the Company paid $1,256,000 to Kelton
International Ltd. for underwriting discounts and commissions in conjunction
with the Company's two common stock and one debt offering in 1999. Mr. Kelton is
the Chairman and Chief Executive Officer of Kelton International Ltd.
On February 21, 2000, the Compensation Committee granted all of its
directors except Messrs. Grimes, Fitzgerald, and Bowers an option to purchase
3,000 shares of common stock at an exercise price of $16.38 per share. The
options vested immediately on the date of grant.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE DIRECTOR NOMINEES
LISTED ABOVE. PROXIES THAT WE RECEIVE WILL BE VOTED IN FAVOR OF EACH OF THE
LISTED NOMINEES UNLESS YOUR PROXY IS MARKED TO THE CONTRARY.
7
<PAGE>
EXECUTIVE OFFICERS
The following persons serve as executive officers of the Company:
<TABLE>
<S> <C>
D.R. GRIMES AGE: 53
Mr. Grimes is the Vice Chairman and Chief Executive Officer of the Company.
Please refer to the section of this Proxy Statement entitled "Election of
Directors" above for additional information regarding Mr. Grimes' experience.
MICHAEL R. FITZGERALD AGE: 41
Mr. Fitzgerald is the President and Chief Operating Officer of the Company and
the Bank and also serves as a director of the Company. Please refer to the section
of the Proxy Statement entitled "Election of Directors" above for additional
information regarding Mr. Fitzgerald's experience.
ROBERT E. BOWERS AGE: 43
Mr. Bowers is the Chief Financial Officer and Corporate Secretary of the
Company and also serves as a director of the Company. Please refer to the section
of the Proxy Statement entitled "Election of Directors" above for additional
information regarding Mr. Bowers' experience.
THOMAS L. CABLE AGE: 43
Mr. Cable has served as Chief Technology Officer of the Company and the Bank
since May 1997. From May 1996 to May 1997, he served as Vice President, Retail
Financial Services of CheckFree Corporation, and from February 1996 to May 1996, he
was responsible for CheckFree's Retail Direct Bank Product. From 1985 to
February 1996, Mr. Cable served in various capacities with Servantis Systems, Inc.
("SSI"), including Senior Vice President and Business Unit Manager for Home Banking
Products and Services, Vice President and Product Manager for Delivery Systems and
Associate and Product Manager for SSI's licensed bill payment software product.
From 1978 to 1985, he was employed by First National Bank, Louisville, Kentucky as
a Programmer and Programming Team Leader responsible for the implementation and
support of SSI's bill payment product and other bank application systems.
LAURA P. MOON AGE: 29
Ms. Moon has served as Chief Accounting Officer of the Company and the Bank
since June 1999. From January 1991 until June 1999, Ms. Moon was employed by
Deloitte & Touche LLP as a senior manager specializing in banking and mergers and
acquisitions. While employed at Deloitte & Touche, Ms. Moon served as the Company'
external audit manager from the Company's inception in 1996 until June 1999.
</TABLE>
8
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information concerning the annual and
long-term compensation for services in all capacities to the Company for the
fiscal years ended December 31, 1999, 1998 and 1997 of our Chief Executive
Officer and the four other executive officers who received a combined payment of
salary and bonus in excess of $100,000 for services rendered to the Company
during fiscal 1999. The terms of the 1999 option grants are described in the
table headed "Stock Option Grants in Fiscal 1999."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
NUMBER OF
NAME ANNUAL COMPENSATION SECURITIES
AND ------------------------------------ UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OTHER OPTIONS COMPENSATION
- ------------------------------- ---- -------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
D.R. Grimes.................... 1999 $200,000 $ 50,000 $ 0 300,000 $ 0
Vice Chairman and Chief 1998 $150,000 $ 0 $ 0 300,000 $ 0
Executive Officer 1997 $130,000 $250,000 $ 0 397,500 $ 0
Donald S. Shapleigh, Jr........ 1999 $ 40,000 $ 0 $ 0 0 $ 0
Former President and Chief 1998 $120,000 $ 0 $ 0 15,000 $ 0
Operating Officer (1) 1997 $100,000 $ 25,000 $ 0 149,061 $ 0
Robert E. Bowers............... 1999 $150,000 $ 0 $ 0 250,000 $ 0
Chief Financial Officer 1998 $120,000 $ 0 $ 0 22,500 $ 0
1997 $ 87,500 $100,000 $ 0 347,814 $ 0
Thomas L. Cable................ 1999 $120,000 $ 0 $ 0 40,000 $ 0
Chief Technology Officer 1998 $105,000 $ 0 $ 0 15,000 $ 0
1997 $ 62,500 $ 39,000 $ 0 45,000 $ 0
Jeffrey B. Watson.............. 1999 $ 70,000 $ 0 $ 0 25,000 $55,000(3)
Former Chief Lending 1998 $100,000 $ 0 $ 0 75,000 $ 0
Officer(2) 1997 $ 16,250 $ 5,000 $ 0 0 $ 0
</TABLE>
- ------------------------
(1) Mr. Shapleigh resigned as our President and Chief Operating Officer
effective as of April 30, 1999. Michael R. Fitzgerald was hired as our new
President and Chief Operating Officer effective February 14, 2000.
(2) Mr. Watson was our Chief Lending Officer from April 1999 until his
resignation effective August 30, 1999.
(3) Severance payment.
The following tables set forth certain information at December 31, 1999, and
for the fiscal year then ended, concerning stock options granted to the officers
listed in the Summary Compensation Table. Messrs. Shapleigh and Watson, who
resigned from the Company, were the only officers who exercised options to
purchase common stock of the Company during fiscal 1999. We have never granted
any stock appreciation rights, restricted stock or stock incentives other than
stock options.
9
<PAGE>
STOCK OPTION GRANTS IN FISCAL 1999
<TABLE>
<CAPTION>
INDIVIDUAL
-----------------------------------------
PERCENTAGE OF
NUMBER OF TOTAL OPTIONS POTENTIAL REALIZABLE VALUE AT
SECURITIES GRANTED TO ALL ASSUMED ANNUAL RATE OF STOCK PRICE
UNDERLYING EMPLOYEES EXERCISE APPRECIATION FOR OPTION TERM (1)
DATE OF OPTIONS IN FISCAL PRICE EXPIRATION -----------------------------------
NAME GRANT GRANTED (2) 1999 PER SHARE DATE 0% 5% 10%
- ---- -------- ----------- -------------- ---------- ---------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mr. Grimes........... 06/30/99 300,000 33.6% $35.44 06/30/09 $ 0 $6,686,408 $16,944,670
Mr. Shapleigh........ -- -- -- -- -- -- -- --
Mr. Bowers........... 04/22/99 150,000 16.8% $53.33 04/22/09 $ 0 $5,030,843 $12,749,143
06/30/99 100,000 11.2% $35.44 06/30/09 $ 0 $2,228,803 $ 5,648,223
Mr. Cable............ 06/30/99 40,000 4.5% $35.44 06/30/09 $ 0 $ 891,521 $ 2,259,289
Mr. Watson (3)....... 06/30/99 25,000 2.8% $35.44 06/30/09 $ 0 $ 557,200 $ 1,412,056
</TABLE>
- ------------------------
(1) The dollar amounts under these columns are the result of calculations at the
0%, 5% and 10% rates set by the Securities and Exchange Commission and
therefore are not intended to forecast future possible appreciation, if any,
of the price of our common stock.
(2) With the exception of the options to purchase 300,000 shares issued to
Mr. Grimes and the options to purchase 250,000 shares issued to Mr. Bowers,
which vest in three equal annual increments beginning on the date of grant,
all options shown in this table vest in five equal annual increments
beginning on the one-year anniversary of the date of grant.
(3) Mr. Watson was our Chief Lending Officer from April 1999 until his
resignation effective August 30, 1999 and these unvested options were
terminated.
AGGREGATED OPTION EXERCISES IN FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS
NUMBER OF 1999 AT DECEMBER 31, 1999(3)
SHARES ACQUIRED --------------------------- ---------------------------
NAME ON EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mr. Grimes............... 0 $ 0 733,186 314,000 $9,491,373 $1,268,400
Mr. Shapleigh............ 149,061 $2,968,798(1) 0 0 $ 0 $ 0
Mr. Bowers............... 0 $ 0 435,647 184,667 $5,844,937 $ 238,500
Mr. Cable................ 0 $ 0 33,000 67,000 $ 484,650 $ 381,450
Mr. Watson............... 8,500 $ 165,750(2) 0 0 $ 0 $ 0
15,500 $ 299,750(2)
</TABLE>
- ------------------------
(1) The closing price of our common stock, as reported by the Nasdaq Stock
Market on July 29, 1999, the date of exercise, was $23.25 per share. The
value is calculated on the basis of the difference between the option per
share exercise price and $23.25 per share, multiplied by the number of
shares of common stock underlying the option exercised.
(2) Mr. Watson exercised an option to purchase 8,500 shares on August 31, 1999
and options to purchase a total of 15,500 shares on December 1, 1999. The
closing prices of our common stock, as reported by the Nasdaq Stock Market
on August 31, 1999 and December 1, 1999, were $23.25 per share and $24.19
per share, respectively. The value is calculated on the basis of the
difference between the option per share exercise price and the closing price
as of the date of exercise, multiplied by the number of shares of common
stock underlying the option exercised
10
<PAGE>
(3) The closing price of our common stock, as reported by the Nasdaq Stock
Market on December 31, 1999 was $18.50 per share. The value is calculated on
the basis of the difference between the option per share exercise price and
$18.50 per share, multiplied by the number of shares of common stock
underlying the option.
EMPLOYMENT AGREEMENTS
During 1999, we entered into an employment agreement with our Chief
Executive Officer. The agreement has a three-year term that renews continuously
until either the Company or the CEO notifies the other that the continuous
renewal will cease. The agreement provides for: (1) an annual base salary of
$200,000, subject to discretionary increase by the Board of Directors; (ii) an
annual incentive bonus based on specific criteria relating to the Company's
financial performance; and (iii) various other benefits such as vacation, club
dues and a car allowance. In the event of termination without cause or following
a change in control, as defined in the agreement, the CEO is entitled to receive
a lump sum severance payment equal to 36 times his average monthly compensation,
as defined in the agreement, and to the extent practicable, continued benefits
as described in the agreement for its unexpired term or, if greater, a period of
12 months following the termination date. The agreement also contains 12-month
noncompetition and nonsolicitation provisions in the event of termination.
In 2000, we also entered into employment agreements with our President and
Chief Financial Officer. Each agreement has substantially the same terms and
conditions as are described above, except that the term is two years and the
severance payment is equal to 24 times the executive's average monthly
compensation.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report discusses the compensation objectives and policies applicable to
our executive officers and our policy generally with respect to the compensation
of all executive officers as a group for fiscal 1999 and specifically reviews
the compensation established for our Chief Executive Officer during fiscal 1999.
COMPENSATION PHILOSOPHY
Our executive compensation program has three objectives: (1) to align the
interests of the executive officers with those of our shareholders by basing a
significant portion of an executive's compensation on the Company's performance,
(2) to attract and retain highly talented and productive executives, and (3) to
provide incentives for superior performance by our executives. To achieve these
objectives, our executive compensation program consists of base salary,
short-term incentive compensation in the form of a bonus, and long-term
incentive compensation in the form of stock options. These compensation elements
are in addition to the general benefit programs that are offered to all of our
employees.
In determining the amount and type of compensation to be awarded to
executive officers, we study the compensation packages for executives of a peer
group of the Company's most direct publicly held competitors for executive
talent, assess the competitiveness of our executive compensation program and
review the Company's financial performance for the previous year. We also gauge
our success in achieving the compensation program's objectives in the previous
year and consider the Company's overall performance objectives.
Each element of our executive compensation program is discussed below.
BASE SALARIES
Base salaries for our executive officers for fiscal 1999 are reflected in
the Summary Compensation Table. In addition to the factors described above that
support our executive compensation program
11
<PAGE>
generally, we evaluate subjectively the responsibilities of the specific
executive position and the individual executive's experience and knowledge in
determining his or her base salary. Salaries are not based upon the achievement
of any predetermined performance targets.
BONUSES
Bonuses are intended to motivate the individual to work hard to achieve our
financial and operational performance goals or to otherwise motivate the
individual to aim for a high level of achievement in the coming year. Our Chief
Executive Officer's employment agreement set forth specific bonus criteria for
1999 based on the Company's achievement of specified deposit and earnings per
share targets. We are in the process of establishing specific bonus criteria for
our other executive officers who have employment agreements. Our executive
officers are also eligible for bonuses awarded subjectively based on a
combination of factors including the Company's historic and recent financial
performance, the individual's contribution to that performance, the individual's
performance on non-financial goals (such as ethical business conduct, client
satisfaction and the general perception of the Company and the Bank by financial
leaders and customers) and other contributions to our success. We give each of
these factors relatively equal weight without applying a rigorous formula.
LONG-TERM INCENTIVE COMPENSATION
Our long-term incentive compensation is based upon our 1996 Stock Incentive
Plan. We believe that placing a portion of executives' total compensation in the
form of stock options achieves three objectives. It aligns the interest of our
executives directly with those of our shareholders, gives executives a
significant long-term interest in the Company's success and helps us retain key
executives. In determining the number and terms of options to grant an
executive, we primarily consider subjectively the executive's past performance
(or, in the case of a new executive, his or her knowledge, and experience and
the degree to which we can recruit executives with similar skills) and the
degree to which an incentive for long-term performance would benefit the
Company. Based on our subjective evaluation of these factors, we granted the
options described in the Summary Compensation Table to the executive officers
named in that table and also granted options to our other executive officers
during 1999.
BENEFITS
We believe we must offer a competitive benefits program to attract and
retain key executives. We provide the same medical and other benefits to our
executive officers that are generally available to our other employees.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
During 1999, we entered into an employment agreement with our Chief
Executive Officer. The agreement is described under "Executive Compensation
- --Employment Agreements." We based the terms of the agreement, the amount of and
criteria for his bonus and the number and terms of his stock option awards on
our review of the compensation packages for chief executive officers of our most
direct competitors, on our subjective assessment of his experience, knowledge
and abilities, on a compensation analysis prepared by an independent consulting
firm and on the Company's earnings, asset and account growth for the year.
During 1999, the Company continued its history of profitability with net
operating income increasing 100% over 1998. At the same time, the Company under
the direction of the Chief Executive Officer exceeded all account and asset
growth targets. We believe that our Chief Executive Officer's overall
compensation for fiscal 1999 rewards these results and provides an appropriate
incentive for continued strong individual and Company performance.
12
<PAGE>
SECTION 162(M) OF THE INTERNAL REVENUE CODE
It is our responsibility to address the issues raised by Section 162(m) of
the Internal Revenue Code, as amended. The revisions to Section 162(m) made
certain non-performance based compensation in excess of $1,000,000 to executives
of public companies non-deductible to the companies beginning in 1994. We have
reviewed these issues and have determined that no portion of compensation
payable to any executive officer for fiscal 1999 is non-deductible. Our 1996
Stock Incentive Plan limits to 100,000 the number of incentive stock options
that may be awarded to any individual in a single year under that plan.
Submitted by: THE COMPENSATION
COMMITTEE
T. Stephen Johnson
J. Stephen Heard
Thomas H. Muller, Jr.
PERFORMANCE GRAPH
The following Performance Graph compares the yearly percentage change in the
cumulative total shareholder return on our common stock to the cumulative total
return on the Nasdaq Stock Market (U.S.) Index and the Nasdaq Bank Stock Index
from July 28, 1997, the effective date of the Company's initial public offering,
to December 31, 1999. The Performance Graph assumes reinvestment of dividends,
where applicable.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
JULY 28, 1997 DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
<S> <C> <C> <C> <C>
Net.B@nk, Inc. $100 $98 $229 $463
Nasdaq Stock Market (U.S.) Index $100 $99 $139 $252
Nasdaq Bank Stock Index $100 $124 $123 $119
</TABLE>
<TABLE>
<CAPTION>
JULY 28, 1997 DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1999
------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
NetBank, Inc..................... $100 $ 98 $229 $463
Nasdaq Stock Market (U.S.)
Index.......................... $100 $ 99 $139 $252
Nasdaq Bank Stock Index.......... $100 $124 $123 $119
</TABLE>
13
<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own beneficially
more than 10% of the Company's outstanding common stock to file with the
Securities and Exchange Commission initial reports of ownership and reports of
changes in their ownership of the Company's common stock. Directors, executive
officers and greater than 10% shareholders are required to furnish the Company
with copies of the forms they file. To our knowledge, based solely on a review
of the copies of these reports furnished to the Company, during the fiscal year
ended December 31, 1999, our directors, executive officers and greater than 10%
shareholders complied with all applicable Section 16(a) filing requirements.
CERTAIN TRANSACTIONS
Some of our directors, officers, principal shareholders and their associates
were customers of, or had transactions with, the Company or the Bank in the
ordinary course of business during 1999. Some of our directors are directors,
officers, trustees or principal securities holders of corporations or other
organizations that also were customers of, or had transactions with, the Company
or the Bank in the ordinary course of business during 1999.
All outstanding loans and other transactions with our directors, officers
and principal shareholders were made in the ordinary course of business on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and, when
made, did not involve more than the normal risk of collectability or present
other unfavorable features. In addition to banking and financial transactions,
we may have had additional transactions with, or used products or services of,
various organizations with which our directors were associated. The amounts
involved in these non-credit transactions have not been material in relation to
our business or to that of such other organizations. We expect to continue to
have similar transactions in the ordinary course of business with such
individuals and their associates in the future.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Unless otherwise directed by the shareholders, the persons appointed as
proxies will vote for ratification of the appointment by the Board of Directors,
upon the recommendation of the Audit Committee, of Deloitte & Touche LLP as the
Company's independent accountants for fiscal 2000. If the shareholders do not
ratify the appointment, the Audit Committee will reconsider its recommendation.
We have been informed that no member of Deloitte & Touche LLP has any direct or
material indirect financial interest in the Company or the Bank. A
representative of Deloitte & Touche LLP will be present at the Annual Meeting to
answer appropriate questions and to make a statement if he or she desires.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS
FOR FISCAL 2000.
SHAREHOLDER PROPOSALS
We must receive any shareholder proposals submitted for consideration at the
next annual meeting of shareholders no later than November 25, 2000 for those
proposals to be included in our 2001 proxy materials. A shareholder must notify
the Company before January 31, 2001 of a proposal for the 2001 Annual Meeting
that the shareholder intends to present other than by inclusion in the Company's
proxy materials. If we do not receive such notice before January 31, 2001,
proxies that our management solicits will confer discretionary authority upon
our management to vote upon any such matter.
14
<PAGE>
OTHER BUSINESS
We know of no other matters that may be brought before the meeting. If,
however, any matter other than the election of directors or a matter incident to
the election of directors properly comes before the meeting, the persons
appointed as proxies will vote on the matter in accordance with their best
judgment.
A COPY OF OUR FORM 10-K FOR THE YEAR ENDING DECEMBER 31, 1999 (EXCLUDING
EXHIBITS) FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS AVAILABLE TO
SHAREHOLDERS, WITHOUT CHARGE, UPON WRITTEN REQUEST TO NETBANK, INC., 11475 GREAT
OAKS WAY, SUITE 100, ALPHARETTA, GEORGIA 30022 (ATTN: CHIEF FINANCIAL OFFICER).
WE WILL CHARGE REPRODUCTION COST OF UP TO 25 CENTS PER PAGE FOR ANY EXHIBITS
REQUESTED.
15
<PAGE>
NET.B@NK, INC.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 2000
The undersigned shareholder of Net.B@nk, Inc. (the "Company") hereby appoints
D.R. Grimes and Robert E. Bowers as proxies with full power of substitution,
acting unanimously or by either of them if only one be present and acting, to
vote all shares of common stock of the Company which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Shareholders
(the "Meeting") to be held at the Crowne Plaza Ravinia, 4355 Ashford Dunwoody
Road, Atlanta, Georgia 30346 on Thursday, April 27, 2000 at 10:00 a.m. and at
any adjournments thereof, upon the proposals described in the accompanying
Notice of the Annual Meeting and the Proxy Statement relating to the Meeting
(the "Proxy Statement"), receipt of which is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
<TABLE>
<S> <C> <C>
PROPOSAL 1: To elect the nominees listed below to serve as Class III directors of the Company for a term expiring at the 2003
Annual Shareholders' Meeting.
Robin C. Kelton
Thomas H. Muller, Jr.
Donald S. Shapleigh, Jr.
J. Joe Ricketts
FOR all nominees listed above (except as indicated to WITHHOLD AUTHORITY to vote for all nominees listed
the contrary below.) above.
INSTRUCTION: To withhold authority for one or more individual nominees, mark "FOR" above, and write his name or their names in
the space below:
PROPOSAL 2: To ratify Deloitte & Touche LLP as the Company's independent auditors.
FOR AGAINST ABSTAIN
</TABLE>
<PAGE>
This proxy, when properly executed, will be voted as directed, but if no
direction to the contrary is indicated, it will be voted FOR Proposals 1 and 2.
Discretionary authority is hereby conferred as to all other matters which may
come before the meeting.
Dated: ________________________, 2000
(Be sure to date your Proxy)
_____________________________________
Name(s) of Shareholder(s)
_____________________________________
Signature(s) of Shareholder(s)
If stock is held in the name of more
than one person, all holders should
sign. Signatures must correspond
exactly with the name or names
appearing on the stock
certificate(s). When signing as
attorney, executor, administrator,
trustee, guardian or custodian,
please indicate the capacity in which
you are acting. If a corporation,
please sign in full corporate name by
the President or other authorized
officer. If a partnership, please
sign in name by authorized person.
Please mark, date and sign this
Proxy, and return it in the enclosed
return-addressed envelope. No postage
is necessary.
PLEASE RETURN PROXY AS SOON AS POSSIBLE
<PAGE>
NET.B@NK, INC.
PROXY
SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 27, 2000
The undersigned shareholder of Net.B@nk, Inc. (the "Company") hereby appoints
D.R. Grimes and Robert E. Bowers as proxies with full power of substitution,
acting unanimously or by either of them if only one be present and acting, to
vote all shares of common stock of the Company which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Shareholders
(the "Meeting") to be held at the Crowne Plaza Ravinia, 4355 Ashford Dunwoody
Road, Atlanta, Georgia 30346 on Thursday, April 27, 2000 at 10:00 a.m. and at
any adjournments thereof, upon the proposals described in the accompanying
Notice of the Annual Meeting and the Proxy Statement relating to the Meeting
(the "Proxy Statement"), receipt of which is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
<TABLE>
<S> <C> <C>
PROPOSAL 1: To elect the nominees listed below to serve as Class III directors of the Company for a term expiring at the 2003
Annual Shareholders' Meeting.
Robin C. Kelton
Thomas H. Muller, Jr.
Donald S. Shapleigh, Jr.
J. Joe Ricketts
FOR all nominees listed above (except as indicated to WITHHOLD AUTHORITY to vote for all nominees listed
the contrary below.) above.
INSTRUCTION: To withhold authority for one or more individual nominees, mark "FOR" above, and write his name or their names in
the space below:
PROPOSAL 2: To ratify Deloitte & Touche LLP as the Company's independent auditors.
FOR AGAINST ABSTAIN
</TABLE>
<PAGE>
This proxy, when properly executed, will be voted as directed, but if no
direction to the contrary is indicated, it will be voted FOR Proposals 1 and 2.
Discretionary authority is hereby conferred as to all other matters which may
come before the meeting.
Dated: ________________________, 2000
(Be sure to date your Proxy)
_____________________________________
Name(s) of Shareholder(s)
_____________________________________
Signature(s) of Shareholder(s)
If stock is held in the name of more
than one person, all holders should
sign. Signatures must correspond
exactly with the name or names
appearing on the stock
certificate(s). When signing as
attorney, executor, administrator,
trustee, guardian or custodian,
please indicate the capacity in which
you are acting. If a corporation,
please sign in full corporate name by
the President or other authorized
officer. If a partnership, please
sign in name by authorized person.
Please mark, date and sign this
Proxy, and return it in the enclosed
return-addressed envelope. No postage
is necessary.
PLEASE RETURN PROXY AS SOON AS POSSIBLE
