As filed with the Securities and Exchange Commission on August 2, 1999
--Registration No. 333-____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
FiNET.COM, INC.
(Exact name of issuer specified in its charter)
Delaware 94-3115180
(State of incorporation) (I.R.S. Employer Identification No.)
3021 Citrus Circle, Suite 150
Walnut Creek, California 94598
(Address of Principal Executive Offices)
1989 STOCK OPTION PLAN, AS AMENDED 1999 EMPLOYEE STOCK PURCHASE PLAN
1998 STOCKBONUS INCENTIVE PLAN THOMAS L. PORTER 1999 EMPLOYMENT
AGREEMENT
1998 NON-EMPLOYEE DIRECTOR' STOCK MICHAEL G. CONWAY 1998 EMPLOYMENT
OPTION PLAN, AS AMENDED AGREEMENT, AS AMENDED
MARK L. KORELL 1998 EMPLOYMENT DANIEL L. RAWITCH 1998 EMPLOYMENT
CONTRACT, AS AMENDED CONTRACT, AS AMENDED
1999 JAN C. HOEFFEL EMPLOYMENT
TERMINATION AGREEMENT
(Full Titles of the Plans)
Mark L. Korell, Chief Executive Officer
3021 Citrus Circle, Suite 150Walnut Creek, California 94598
(925) 988-6550
(Name and Address and Telephone Number of Agent of Service)
Copies To:
Roger S. Mertz, Esq.
Severson & Werson
One Embarcadero Center, 26th Floor
San Francisco, California 94111
(415) 398-3344
<PAGE>
CALCULATION OF REGISTRATION FEE
==============================================================================
Proposed Proposed
Title of Maximum Maximum Amount of
Securities to Amount to Be Offering Price Aggregate Registra-
Be Registered Registered(1) Per Share Offering Price tion Fee
Common Stock,
$0.01par value,
subject to
outstanding options
or warrants with
fixed exercise
prices under the:
FiNet.com, Inc. 442,041 $0.06(2) $26,522 $7.00
1989 Stock Option 160,000 0.50(2) 80,000 22.00
Plan, as amended 75,000 0.65(2) 49,200 14.00
80,000 0.7190(2) 57,520 16.00
649,105 0.75(2) 486,829 135.00
25,000 0.875(2) 21,875 6.00
10,812 0.9375(2) 10,136 3.00
2,813 1.00(2) 2,813 1.00
32,500 1.0310(2) 33,508 9.00
50,000 1.0630(2) 53,150 15.00
7,500 1.1250(2) 8,438 2.00
75,000 4.50(2) 337,500 94.00
40,000 5.50(2) 220,000 61.00
------- --------- ------- ------
FiNet.com, Inc. 40,000 $0.06375 $ 2,550 $ 1.00
1998 120,000 1.0625 127,500 33.00
Non-Employee 40,000 2.0723 82,892 23.00
Directors' Stock ------- -------- ------- -----
Option Plan
Common Stock
Mark L. Korell 375,000 $1.03(2) $ 386,250 $107.00
1998 Employment 2,001,291 1.03(2) 2,061,330 573.00
Agreement as 247,723 9.125(2) 2,260,472 628.00
amended 39,602 7.625(2) 301,965 84.00
345,921 4.25(2) 1,470,164 409.00
--------- -------- --------- -------
L. Daniel Rawitch 600,000 $1.03(2) $618,000 $172.00
1998 Employment --------- -------- -------- -------
Agreement, as
amended
Michael G. Conway 300,000 $0.66(2) $198,000 $55.00
1998 Employment 67,500 1.03(2) 69,525 19.00
Agreement, as --------- -------- -------- ------
amended
Gary A. Palmer 350,000 $0.75(2) $262,500 $73.00
1998 Employment --------- -------- -------- ------
Agreement
Thomas A. Porter 200,000 $0.75(2) $150,000 $42.00
1999 Employment 100,000 0.66(2) 66,000 18.00
Agreement -------- -------- -------- ------
Kevin Gillespie 350,000 $1.97(2) $689,500 $192.00
1999 Employment -------- -------- -------- -------
Agreement
Christos Skeadas 350,000 $2.25(2) $787,500 $219.00
1999 Employment -------- -------- -------- -------
Agreement
Common Stock,
$0.01 par value,
not subject to
outstanding
options or not
having fixed
exercise, grant
or purchase
prices under the:
FiNet.com, Inc. 875,000 $3.23(3) $2,826,250 $786.00
1998 Stock Bonus ------- -------- ---------- -------
Incentive Plan
Common Stock
FiNet.com, Inc. 800,000 $3.23(3) $2,584,000 $718.00
1998 ------- -------- ---------- -------
Non-Employee
Directors' Stock
Option Plan
Common Stock, as
amended
Mark L. Korell 125,000 $3.23(3) $403,750 $112.00
1998 Employment ------- -------- -------- -------
Agreement, as
amended
Michael G. Conway 15,000 $3.23(3) $48,450 $13.00
1998 Employment ------- -------- ------- ------
Agreemment, as
amended
Thomas A. Porter 40,000 $3.23(3) $129,200 $36.00
1999 Employment ------- -------- -------- ------
Agreement
Jan C. Hoeffel 300,000 $3.23(3) $969,000 $269.00
1999 Employment ------- -------- -------- -------
Termination
Agreement
FiNet.com, Inc. 500,000 $3.23(3) $1,615,000 $449.00
1999 Employee ------- -------- ---------- -------
Stock Purchase Plan
- -------------------------------------------
(1) Based on shares subject to outstanding options or reserved for future
issuance pursuant to the specified equity compensation plans as of
July 28, 1999. This Registration Statement shall also cover any
additional shares of Common Stock which become issuable under the
specified equity compensation plans in order to adjust the number of
shares reserved for issuance as the result of any future stock split,
stock dividend, or similar adjustment of the Registrant;s outstanding
Common Stock.
(2) Computed pursuant to Rule 457(h) under the Securities Act of 1933, as
amended, based upon the exercise prices of options granted as of the
filing date of this Registration Statement.
(3) Estimated pursuant to Rules 457(c) and 457(h) under the Securities Act
of 1933, as amended, solely for purposes of calculating the amount of
the registration fee, based on the average of the bid and asked sale
prices of the Registrant's Common Stock as reported on the Nasdaq
SmallCap Market on July 28, 1999.
<PAGE>
REOFFER PROSPECTUS
FiNet.com, Inc.
5,009,323 Shares
Common Stock
-------------------------
The selling shareholders identified in this prospectus are offering
5,009,323 shares of common stock. FiNet.com will not receive any of the proceeds
from the sale of shares by the selling shareholders.
FiNet.com's common stock is traded on the Nasdaq SmallCap Market under
the symbol "FNCM." On July 28, 1999, the last reported sale price for the common
stock on the Nasdaq SmallCap Market was $3.25 per share.
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 5.
-------------------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-------------------------
The date of this Prospectus is August 2, 1999
<PAGE>
AVAILABLE INFORMATION
FiNet.com, Inc. files annual, quarterly, and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information on file at
the Commission's public reference room in Washington, D.C. You can request
copies of those documents, upon payment of a duplicating fee, by writing to the
Commission.
We have filed a registration statement on Form S-8 with the Commission.
This prospectus, which forms a part of that registration statement, does not
contain all the information set forth in the registration statement. Certain
information is omitted and you should refer to the registration statement and
its exhibits. Statements contained in this prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete
and you should refer in each instance to the copy of such contract, agreement or
other document filed as an exhibit to the registration Statement, each statement
being qualified in all respects by such reference. You may read and copy all or
any portion of the registration statement or any reports, statements or other
information we file with the Commission at the Commission's public reference
room at 450 Fifth Street, N.W, Washington, D.C. 20549, and at the Commission's
following regional offices: Northeast Regional Office, 7 World Trade Center,
Suite 1300, New York, New York 10048; and Midwest Regional Office, Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Our SEC filings and the registration statement can also be reviewed by
accessing the Commission's Internet site at http://www.sec.gov.
We will provide without charge to each person to whom a prospectus is
delivered upon written or oral request of such person, a copy of any document
incorporated herein by reference (not including exhibits to the document that
have been incorporated by reference unless such exhibits are specifically
incorporated by reference in the document which this prospectus incorporates).
Requests should be directed to: Chief Financial Officer, FiNet.com, Inc., 3021
Citrus Circle, Suite 150, Walnut Creek, California 94598, telephone (925)
988-6550.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by us with the Commission (File No.
0-18108) are incorporated by reference herein and shall be deemed to be a part
hereof:
(a) Annual Report on Form 10-K for the fiscal year ended April 30, 1999;
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the end of the fiscal year covered by the
Annual Report referred to in (a) above; and
(c) The description of the common stock contained in our Registration
Statement on Form 8-A filed with the Commission on November 9, 1989.
All documents subsequently filed by us pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date of this
prospectus and prior to the termination of this offering will be
incorporated by reference in this prospectus and be a part hereof from
the date of the filing of such documents. Any statement contained in a
document incorporated by reference will be deemed to be modified or
superseded for purposes of this prospectus to the extent that a
statement contained herein or in any other subsequently filed
incorporated document modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
Upon written or oral request of any person to whom a prospectus is delivered,
including any beneficial owner, we will provide, without charge, a copy of the
documents which have been incorporated by reference in this prospectus (other
than exhibits thereto unless such exhibits are specifically incorporated by
reference in any such document that this prospectus incorporates). Requests for
such documents should be directed to: Chief Financial Officer, FiNet.com, Inc.,
3021 Citrus Circle, Suite 150, Walnut Creek, California 94598, telephone
(925) 988-6550.
<PAGE>
SUMMARY
This prospectus relates to the offer and sale from time to time by (i)
certain of our executive officers and non-employee directors, and (ii) certain
of our employees and former employees (collectively, the "selling shareholders")
of an aggregate of 5,009,323 shares of common stock (the "Shares"), par value
$0.01 per share. The Shares offered hereby are shares of common stock that have
been or may be acquired by the Selling Stockholders: i) upon exercise of stock
options granted to the Selling Stockholders pursuant to various FiNet stock
option plans; ii) pursuant to our 1999 Employee Stock Purchase and 1998 Stock
Bonus Incentive Plan; and iii) upon exercise of stock options or common stock
purchase warrants granted to the Selling Stockholders pursuant to written
employment contracts (collectively, the "Plans").
The Company
FiNet.com is a full service, on-line mortgage banker that offers an
easy-to-use, one-stop mortgage source for consumers and mortgage brokers. We
operate one of the first sites on the Internet that enables the consumer to
apply for and receive credit approval on-line, and to electronically search,
analyze and select from a wide variety of mortgage loan products and rates
offered by us and other lenders. We make the mortgage process easier and more
understandable, while maintaining quality service by controlling the consumer's
entire mortgage lending experience. We also provide on-line and e-commerce
technologies and loan process management tools to mortgage broker businesses to
enable them to compete more effectively with on-line and other national lenders
and brokers and help their customers make better informed borrowing decisions.
We generate revenues by providing services to two primary customer
groups: consumers and mortgage broker businesses. We market or intend to market
our mortgage services to consumers primarily through:
branded arrangements, where our services are offered through
rapidly growing websites such as X00M.com and Ask.com, using our
Interloan.com brand;
co-branded arrangements, where our services are offered through
specialty real estate websites such as Homeseekers.com and
Homehunter.com, using both our brand and our partner's brand; and
private label arrangements, where we plan to design and operate
electronic mortgage centers for third party websites using our
partner's brand.
We provide our consumers with a fast and easy to use on-line method to
get their loans approved through our award-winning iQualify.com technology.
Consumers can then use our Interloan.com website technology to search, analyze
and select from a wide variety of mortgage loan products and rates offered by
leading lenders, including our Monument Mortgage subsidiary. We allow each
consumer to choose between automated service and personalized assistance at any
time in the loan process. Consumers are assisted by our mortgage professionals
throughout the loan application process. We recently began offering our
consumers additional choice by allowing them to submit their processed mortgage
loan applications for auction to interested lenders. We refer to these services
to consumers as our business-to-consumer channel.
We offer mortgage broker businesses the opportunity to use the on-line
technology and automated underwriting systems of our full service mortgage
banking operation to expand and improve service to their local customers and
compete with on-line mortgage originators, while maintaining the flexibility to
control their own businesses. As a full service mortgage banker, we fund loans
originated by mortgage brokers, which we then sell to institutional investors in
the secondary mortgage market. We also plan to design private label websites for
mortgage broker businesses that will emphasize user-friendly access to on-line,
automated underwriting systems and other e-commerce services. We refer to these
services to mortgage brokers as our business-to-business channel.
We were incorporated under the laws of the State of Delaware in 1989.
Our principal executive offices are located at 3021 Citrus Circle, Walnut Creek,
California 94598, and our telephone number is (925) 988-6550.
FiNet.com, iQualify.com and Interloan.com are trademarks of FiNet.com.
All other brand names or trademarks appearing in this prospectus are the
property of their respective holders.
RISK FACTORS
You should carefully consider the risks described below before making a
decision to buy our common stock. The risks described below are not the only
ones we face. Additional risks not presently known to us or that we currently
consider immaterial may also materially impair our business operations. If any
of the following risks actually occur, our business, financial condition or
results of operations could be materially adversely affected. In such case, the
trading price of our common stock could decline, and you may lose all or part of
your investment. You should also refer to the other information set forth in
this prospectus, including our consolidated financial statements incorporated
herein by reference.
If we continue to experience losses in the future, our business, financial
condition and growth prospects could be materially adversely affected.
We have had net losses in each fiscal year since fiscal 1997, and we
expect that we will continue to incur losses for the foreseeable future on both
an annual and quarterly basis. We expect to continue to incur losses because of
our plans to invest over the near term in information systems, sales and
marketing, recruiting and training, customer support and administrative
infrastructure. Because of these expected losses, we may not be able to
implement our business plans, and our business, results of operations, financial
condition and growth prospects could be materially adversely affected.
As of April 30, 1999, we had an accumulated deficit of approximately
$47.9 million. Prior to December 31, 1995, our year-end financial statements
contained a qualification from our independent accountants regarding the
uncertainty of our ability to continue as a going concern. We believe that it is
likely that we will experience losses and accumulate deficits for the
foreseeable future.
We may incur additional losses from the discontinued businesses of Coastal
Federal Mortgage and Mical Mortgage.
In April 1998, we acquired Coastal Federal Mortgage Company, and in May
1998, we acquired Mical Mortgage Inc., both of which have incurred losses since
we acquired them. In April 1999, we discontinued our Coastal and Mical business
units, and we substantially liquidated their assets. We recorded a special
charge to operations of approximately $4.2 million associated with these
discontinued units. We reported a net loss associated with their acquisition and
operation of $16.9 million in fiscal 1999. We may incur additional unanticipated
losses in connection with these discontinued business units.
If our new management is not able to improve and expand our operations, our
business could suffer.
We recently replaced most of our management team by hiring, among
others, Mark Korell, our President and Chief Executive Officer, Gary Palmer, our
Executive Vice President-Chief Financial Officer, Michael Conway, our Executive
Vice President-Capital Markets, Thomas Porter, our Executive Vice
President-Administration, Kevin Gillespie, our Executive Vice President-Sales
and Marketing, and Chris Skeadas, our Executive Vice President-Chief Technology
Officer. These employees have not previously worked together, and we cannot be
sure that they will be able to work together effectively to improve and expand
our operations. If these employees are not able to improve and expand our
operations, our financial condition, profitability and growth prospects could be
materially adversely affected.
The loss of any of our executive officers or key personnel would likely have an
adverse effect on our business.
We believe that our future success will depend to a significant extent
on the continued services of our senior management and other key personnel,
including, among others: Mark Korell, Gary Palmer, Michael Conway, Thomas
Porter, Kevin Gillespie and Chris Skeadas. We do not maintain "key person" life
insurance for any of our personnel. The loss of the services of any of these
employees, or other key employees, could have a material adverse effect on our
business, results of operations and financial condition.
If we are unable to retain and attract qualified personnel, our business could
suffer.
Our ability to grow and our future success depend on our ability to
identify, attract, hire, train, retain and motivate other highly skilled
technical, managerial, sales and marketing, customer service and professional
personnel. Competition for such employees is intense, especially in the
e-commerce sector, and there is a risk that we will not be able to successfully
attract, assimilate or retain sufficiently qualified personnel. If we fad to
retain and attract the necessary technical, managerial, sales and marketing,
customer service personnel and experienced professionals, our business, results
of operations and financial condition could be materially adversely effected.
If consumers and mortgage broker businesses do not embrace on-line mortgage
financing and sales, our business will be materially adversely affected.
Our success depends upon the acceptance of on-line mortgage financing
by consumers, mortgage brokers and other real estate service providers. If these
groups do not embrace our model for mortgage finance, our business, results of
operations and financial condition will be materially adversely affected. The
market for electronic mortgage financing, particularly over the Internet, is at
an early stage of development and is evolving rapidly. Rapid growth in the use
of and interest in the Internet is a recent development and we cannot be sure
Internet usage will continue to grow or that a sufficiently broad base of
consumers and businesses will adopt, and continue to use, the Internet as a
medium by which to communicate and obtain services traditionally provided in
person-to-person and paper transactions. Our business prospects must be
considered in light of the risks, expenses and difficulties frequently
encountered by companies in the new and rapidly evolving market for Internet
products and services.
We believe that acceptance of our products and services will depend on
the following factors, among others:
the growth of the Internet as a medium for commerce generally,
and as a market for financial products and services in
particular;
development of the necessary Internet network infrastructure to
support new technologies and handle the demands placed upon the
Internet;
government regulation of the Internet;
our ability to successfully and efficiently develop on-line
products and services that are attractive to a sufficiently large
number of consumers and mortgage brokers; and
a change in the perception among many consumers and real estate
service providers that obtaining a mortgage on-line is less
dependable than obtaining a mortgage through a more traditional
method.
There is a risk that on-line mortgage financing will not gain market
acceptance and that consumers will not significantly increase their use of the
Internet for obtaining loans. If the market for on-line mortgage financing fails
to develop, or develops more slowly than expected, our business, results of
operations and financial condition would be materially adversely affected. In
addition, if there are insufficient communications services to support the
Internet, it could result in slower response times which would adversely affect
usage of the Internet. Even if the Internet gains acceptance, we may be unable,
for technical or other reasons, to develop and introduce new products and
services or enhancements of existing products and services in a timely manner,
and such products and services and enhancements may not gain widespread market
acceptance. Any of these factors could have a material adverse effect on our
business, results of operations and financial condition.
In addition, because the market for on-line mortgage lending is at an
early stage of development, the volume of loans that we originate or sell in any
given period is difficult to predict. If the volume of loans that we originate
or sell falls below our expectations or the expectations of financial analysts,
our business, results of operation and financial condition could be materially
adversely affected.
If there is a recession, natural disaster or other disruption in the California
economy, our business could be materially adversely affected.
Approximately 87% of Monument's loans that we have originated and/or
funded in fiscal 1999 were for properties located in California. No other state
represented more than 6% of our loan volume during such period. Because a high
concentration of our business is in California, we are particularly vulnerable
to recessions and conditions affecting the economy of California. Although we
seek to originate more loans in other states, we are likely to continue to be
dependent on originating loans for properties located in California for the
foreseeable future. There have been times in the past, most recently in 1991 and
1992, when the California economy suffered a recession more severe than the rest
of the country. If such a recession were to occur again, our business, results
of operations and financial condition would be materially adversely affected.
In addition, California historically has been vulnerable to natural
disasters, such as earthquakes and mudslides, which are not typically covered by
standard hazard insurance policies that homeowners typically maintain. Uninsured
disasters may reduce a borrower's ability to repay the mortgage loans we close
and sell. A sustained period of increased delinquencies or defaults resulting
from natural disasters could adversely affect the pricing of our future loan
sales and our overall ability to sell loans. The occurrence of any such natural
disasters in California could have a material adverse effect on our business,
results of operations and financial condition.
If there is a decrease in the demand for mortgages, our business could suffer.
Demand for mortgages is typically adversely affected by periods of
economic slowdown or recession, which can be accompanied by rising interest
rates and declining demand for consumer credit, home sales, real estate values
and ability of borrowers to make loan payments. These factors tend to decrease
demand for mortgage loans of the types we originate and could increase the rates
of delinquencies and foreclosures on loans we hold. These changes would likely
have a material adverse effect on our business, results of operations and
financial condition.
Over the last several years we have operated in an environment of
relatively low interest rates, relatively high demand for consumer credit and
increasing home sales and real estate values. We cannot be sure that we will be
able to grow our business in an atmosphere of higher interest rates, lower
consumer credit demand and real estate value and fewer home sales.
If interest rates rise, our results of operations could be materially adversely
affected.
Our residential mortgage business depends upon overall levels of sale
and refinancing of residential real estate as well as on mortgage loan interest
rates. Any fluctuation in interest rates or an adverse change in residential
real estate or general economic conditions, both of which are outside our
control, could have a material adverse effect on our business, results of
operations and financial condition. The residential real estate industry is
highly cyclical. Shifts in the economy and residential real estate values
generally affect the number of home sales and new housing starts. The demand for
mortgage loan financing increases as the number of home sales increases.
Declining interest rates generally increase mortgage loan financing activity
because homeowners refinance existing mortgage loans to obtain more favorable
interest rates. Rising interest rates, in contrast, discourage refinancing
activities and generally reduce the number of home sales that occur.
Approximately 69% of the loans we originated and/or funded in fiscal
1999 were loans to refinance mortgage debt. The effect of interest rate changes
tends to be greater on the market for refinancing loans than it is on the market
for purchase loans, since refinancing a mortgage loan is voluntary and motivated
primarily by a homeowner's desire to lower financing costs, whereas new home
purchasers are motivated by a need or desire for a new home. Accordingly, the
annual volume of new mortgage refinance loans is quite volatile. We cannot
predict future interest rate trends, their impact on our business, or our
ability to manage this business mix.
The value of the loans we make is based, in part, on market interest
rates, and our business, results of operations and financial condition may be
materially adversely affected if interest rates change rapidly or unexpectedly.
If interest rates rise after we fix a price for a loan but before we sell the
loan into the secondary market, the value of that loan will decrease. If we
delay in selling our loans into the secondary market, our interest rate exposure
increases and we could incur a loss on the sale. While we use various hedging
strategies to provide some protection against interest rate risks, no hedging
strategy can protect us completely. The nature and timing of hedging
transactions influences the effectiveness of hedging strategies and poorly
designed strategies or improperly executed transactions may increase rather than
decrease risk. In addition, hedging strategies involve transaction and other
costs. There is a risk that our hedging strategy and the hedges that we make
will not adequately offset the risks of interest rate volatility and that our
hedges will result in losses.
If we are unable to differentiate ourselves from competition in our
industry, our business prospects could be harmed.
The e-commerce market is new, rapidly evolving and intensely
competitive. We expect competition to intensify in the future. Barriers to entry
are minimal, so our competitors can launch new Internet sites at relatively low
cost. In addition, the residential mortgage loan business is highly competitive.
We currently compete with a variety of other companies offering mortgage
services, including:
various on-line mortgage brokers, including E-LOAN Inc., iOwn.com,
Mortgage.com, Quicken Mortgage.com and Keystroke Financial;
mortgage companies that offer products through on-line search
engines, such as Yahoo! and Microsoft Corporation's Home Advisor
website;
mortgage banking companies, commercial banks, savings
associations, credit unions and other financial institutions which
still originate the vast majority of mortgage loans; and
mortgage brokers.
Many of our mortgage banking and mortgage brokerage competitors have
longer operating histories or significantly greater financial, technical,
marketing and other resources than we do. Some of our on-line competitors are
spending substantial funds on mass marketing and branding their mortgage
services. In addition, some of our competitors offer a wider range of services
and financial products to customers and have the ability to respond more quickly
to new or changing opportunities. As a result, many have greater name
recognition and more extensive customer bases and can offer more attractive
terms to customers and adopt more aggressive loan pricing policies. We cannot be
sure that we will be able to compete successfully against current and future
competitors. If we are unable to do so it will have a material adverse effect on
our business, results of operations and financial condition.
If our quarterly revenues and operating results fluctuate significantly, the
price of our common stock is likely to be volatile.
Our quarterly revenues and operating results are likely to continue to
vary substantially from quarter to quarter. Fluctuation in our quarterly results
may cause the price of our common stock to be volatile. We believe that the
following factors, among others, could affect our quarterly results:
fluctuations in mortgage loan interest rates;
seasonal or other economic factors affecting demand for mortgage
credit;
the volume of our mortgage loan originations;
the size and timing of our loan sales;
our ability to offer competitive mortgage rates;
changes in our pricing policies or our competitors' pricing
policies for mortgage origination and processing fees;
the proportion of our mortgage originations which are used to purchase
homes or refinance existing debt;
the introduction of new products and services by us or our competitors;
the level of consumer interest and confidence in the Internet as a
means of accessing financial products and services;
the timing of releases of enhancements to our products and services;
our ability to upgrade and develop our information systems and
operational infrastructure to accommodate growth;
the timing and rate at which we increase our expenses to support
projected growth;
the cost of compliance with federal and state government laws and
regulations, including any changes in our historic business
practices that could result from legal interpretations;
any termination or restructuring of any strategic alliances or
agreements with key service providers, such as the Federal
National Mortgage Association, commonly known as Fannie Mae, or
the Federal Home Loan Mortgage Corporation, commonly known as
Freddie Mae;
our announcement of new marketing initiatives or strategic
alliances with other Internet-based companies, or termination of
any such initiative or alliance;
the volume of business resulting from collaborative marketing efforts
with our strategic partners;
technical difficulties or service interruptions affecting our Internet
websites or operational data processing systems;
changes in our operating expenses and investment in our infrastructure;
general economic conditions in the United States and economic
conditions which particularly affect e-commerce industries; and
additions or departures of key executives and operating personnel.
These factors make a substantial decline in our stock price possible at
any time. For example, our common stock traded between $0.41 and $18.25 per
share between May 1, 1998 and June 30, 1999.
In addition, the trading prices of Internet and e-commerce stocks have
recently experienced extreme price and volume fluctuations. These fluctuations
often appear to be unrelated or disproportionate to the operating performance of
Internet and e-commerce companies. The valuations of many Internet and
e-commerce stocks are extraordinarily high based on conventional valuation
standards such as price-to-earnings and price-to-sales ratios. These trading
prices and valuations may not be sustained. Any negative change in the public's
perception of the prospects of Internet or e-commerce companies could depress
our stock price regardless of our results. In the past, securities class action
litigation often has been brought against companies following declines in the
market price of their securities. If litigation of this type were brought
against us, it could be very costly and could divert management's attention and
resources from our business plan.
We anticipate that as the on-line mortgage origination industry
matures, our business will also be increasingly susceptible to the same seasonal
and cyclical factors that affect the mortgage industry as a whole. Accordingly,
we believe period-to-period comparisons of our operating results are not
meaningful and our results for any period should not be relied upon as an
indication of future performance. Our operating results may fail to meet our
expectations or those of analysts who follow us. Any such failure could cause
our stock price to decline substantially.
We are aware that from time to time chat groups may develop on the
Internet and that participants in those groups may post statements about us.
These statements may influence the market price of our common stock. We do not
monitor statements about us that appear on the Internet, except for authorized
statements made by us. We undertake no obligation of any kind whatsoever to
monitor, correct, comment on or respond to statements on the Internet or
elsewhere by others, and it is our policy not to monitor, correct, comment on or
respond to such statements.
If we are unable to manage growth in our business, our results of operations may
not improve.
We anticipate that we will need to rapidly expand our employee base,
facilities and infrastructure in order to be able to compete successfully and
take advantage of market opportunities. We expect this expansion to place
significant strain on our management, operational and financial resources. Our
current personnel, systems, procedures and controls are not adequate to support
anticipated growth of our operations. To manage this expected growth, we will
need to improve our mortgage processing, operational and financial systems,
information processing capacity, procedures and controls. We may be unable to
hire, train, retain or manage necessary personnel, or to identify and take
advantage of existing and potential strategic relationships and market
opportunities. If we are unable to manage expansion of our business effectively,
our business, results of operations and financial condition may not improve and
could deteriorate.
Problems and risks related to potential acquisitions and alliances may harm our
business.
Our growth strategy includes acquisitions of or alliances with
companies with complementary services, technologies and businesses. In
connection with any such acquisition, we may fail to successfully integrate the
operations of the acquired company. For example, as described more completely
above under "We may incur additional losses from the discontinued businesses of
Coastal Federal Mortgage and Mical Mortgage," we incurred significant losses
following our acquisitions of Mical and Coastal, and have discontinued their
operations. Any future acquisitions or alliances we pursue may not be completed
or successful. Also, acquisitions or alliances could divert our management's
attention from other business matters, or we could lose key employees of
acquired companies or alliance businesses.
If we lose key mortgage lender relationships, our business could be materially
adversely affected.
We rely on lenders to make loans in cases where we act as a broker.
These lenders are under no obligation to continue their relationships with us or
to make a loan to any potential borrower we present to them. Approximately 65%
of the loans we originated in fiscal 1999 were closed by five lenders. Our
reliance on a small group of lenders makes our origination volume more
susceptible to changes in the rates, services and products such lenders offer.
The loss of our relationship with any of these lenders, or the failure of these
lenders to offer competitive terms, could have a material adverse effect on our
business, results of operations and financial condition.
The discontinuation of federal programs that purchase loans or any change in our
eligibility to participate such programs would have a material adverse effect on
our business.
We fund our mortgage loan operations in part by selling the mortgage
loans that we fund to entities such as Fannie Mae, Freddie Mac and the
Government National Mortgage Association, commonly known as Ginnie Mae, which
pool those mortgage loans into mortgage-backed securities. Our ability to sell
mortgage loans depends upon the continuation of programs administered by these
entities, as well as our continued eligibility to participate in these programs.
If these programs, or our eligibility to participate in them, were terminated or
significantly curtailed, our business, results of operations and financial
condition would be materially adversely affected. In addition, the mortgage
products offered under these federal programs may change from time to time. The
profitability of specific mortgage products may vary depending on a number of
factors, including our administrative costs of originating these products.
We also depend upon private mortgage investors, such as GMAC/RFC, GE
Capital Mortgage and IndyMac, to purchase mortgage loans that we originate which
do not qualify for inclusion in the federal programs described above. If private
investors reduce their purchases of these mortgage loans, the market and price
for such mortgage loans will be adversely affected, which would have a material
adverse effect on our business, results of operations and financial condition.
We depend on automated underwriting and other services offered by
government sponsored and other mortgage investors, including Fannie Mae's
Desktop Underwriter, or DU, Freddie Mac's Loan Prospector, GMAC/RFC's AssetWise
and GE Capital Mortgage's Good Decisions. These services help ensure that our
mortgage services can be offered efficiently and timely. We currently have an
agreement with Fannie Mae that allows us to use their automated underwriting
services and enables us to sell qualified first mortgages to Fannie Mae. During
fiscal 1999, approximately 66% of our loans funded by Monument Mortgage, Inc.
were sold to Fannie Mae. We expect to continue to process a significant portion
of our conforming loans using the Fannie Mae system. However, our agreements
with Fannie Mae and other mortgage investors can be terminated by either party
immediately upon the delivery of a written termination notice. There is a risk
that we will not remain in good standing with Fannie Mae and other mortgage
investors or that Fannie Mae and other mortgage investors will terminate our
relationship. The termination of our agreement with Fannie Mae would materially
adversely impact our ability to originate loans.
If our new marketing relationships are unsuccessful, our loan originations could
suffer.
We have entered into a majority of our marketing relationships within
the past four months. We expect our new marketing relationships to direct a
significant number of prospective customers to our websites. Our agreements with
marketing partners are typically short term, lasting as little as 90 days, and,
in some cases, can be unilaterally terminated by either party. If any of these
agreements were terminated or lapsed without extension, we could lose an
important new source of loan applications.
Among our new marketing relationships are those with Ask.com,
CoxInteractive, GetSmart.com, Homehunter, Homeseekers and XOOM.com. If our
relationship with these marketing partners or future marketing partners are not
successful, or if they are successful but are discontinued for any reason, we
could experience a material reduction in the number of loans we are able to
originate. We cannot predict whether any or all of these agreements will be
terminated or will be renewed or extended past their current expiration dates.
In addition, if we fail to establish relationships with future website operators
or to anticipate and make adjustments in our marketing strategy to access other
potential customers, our business, results of operations and financial condition
could be materially adversely affected.
If we have to repurchase loans originated for or sold to lenders, our operating
results could be materially adversely affected.
Under agreements with some of our lenders, they may require us to
repurchase loans that we originate for them, or they purchase from us, in the
event of material misrepresentations by us or inaccuracies in the borrowers'
loan documents. In fiscal 1999, we were required to repurchase approximately $0,
$9.9 million and $124,000 principal amount of loans sold by Coastal, Mical and
Monument Mortgage, respectively. It is possible that future demands will be made
to repurchase loans sold by these subsidiaries. There is a risk that we will not
have sufficient funds to repurchase loans upon demand or that such repurchases
will have a material adverse effect on our business, results of operations and
financial condition.
As a result of repurchases, we occasionally are required to hold
foreclosed residential real estate in inventory until it can be resold. If
interest rates rise and the economy declines, the rate of mortgage loan
foreclosures may rise. Depending on the circumstances of the transaction, we may
or may not be able to sell the property for more than the outstanding loan
balance. As of April 30, 1999, our Mical Mortgage subsidiary held approximately
$1 million aggregate principal amount of loans in foreclosure. Future
foreclosures could have a material adverse effect on our business, results of
operations and financial condition.
If we lose access to credit facilities to finance our mortgage lending
activities, our growth prospects could be severely limited.
We act as a lender for many of the loans we originate. Because we are
not a bank, we are dependent upon specialized mortgage credit facilities from
other lenders to finance our mortgage lending activities. We previously
maintained warehouse credit facilities with Residential Funding Corporation, and
at times, we have defaulted under such lines of credit. These warehouse lines
have expired; however, we were granted monthly extensions on one of these lines.
The current monthly extension under this line ends on July 31, 1999.
We cannot assure you that financing will continue to be available on
favorable terms or at all. To the extent that we are unable to access adequate
capital to fund loans, we may have to curtail or cease our loan funding
activities entirely. This would have a material adverse effect on our ability to
execute our growth and operating strategies as well as on our business, results
of operations and financial condition.
If there are interruptions or delays in obtaining appraisal, credit reporting,
title searching and other underwriting services from third parties, we may
experience customer dissatisfaction and difficulties closing loans.
We rely on other companies to perform certain aspects of the loan
underwriting process, including appraisals, credit reporting and title searches.
If the provision of these ancillary services were interrupted or delayed, it
could cause delays in the processing and closing of loans for our customers. The
value of the service we offer and the ultimate success of our business are
dependent on our ability to secure the timely provision of these ancillary
services by the third parties with whom we have business relationships. If we
are unsuccessful in securing the timely delivery of these ancillary services we
will likely experience increased customer dissatisfaction and our business,
results of operations and financial condition could be materially adversely
affected.
If we fail to comply with extensive federal and state laws regulating our
industry, we could be subject to penalties, disqualifications, lawsuits or
enforcement actions that could have a material adverse affect our business.
Our operations are subject to extensive regulation by federal and state
authorities. For example, the United States Department of Housing and Urban
Development, or HUD, regulates certain aspects of the mortgage lending business,
as do the Federal Reserve Board and the Federal Trade Commission. The Real
Estate Settlement Procedures Act of 1974, or RESPA, the Truth in Lending Act and
federal statutes require that certain disclosures, such as good faith estimates
of settlement charges, a Truth-in-Lending Statement and a HUD-1 settlement
statement be provided to borrowers and that certain information, such as the HUD
Settlement Costs booklet, also be provided to borrowers. The Federal Fair
Housing Act and the Equal Credit Opportunity Act prohibit discrimination and
various state statutes prohibit unfair and deceptive trade practices, and impose
disclosure and other requirements in connection with the mortgage loan
origination process. If we fail to comply with such regulations, possible
consequences could include loss of approved status, demands for indemnification,
class action lawsuits, and administrative enforcement actions.
In addition, RESPA contains certain prohibitions regarding the giving
or taking of a fee, kickback, or anything of value for the referral of business
to any specific person or organization. However, the payment of reasonable
compensation for the provision of goods, services and facilities is generally
not prohibited.
In September 1998, HUD cited Mical for various alleged violations of
HUD/FHA regulations. Thereafter, HUD withdrew Mical's HUD/FHA Title I & II
approvals and imposed a civil penalty against Mical in the amount of $500,000.
In California, regulation and licensing of mortgage brokers and lenders
falls under the California Department of Real Estate or the California
Department of Corporations. Other than banking industry employees and other
persons who are exempt from California Department of Real Estate and California
Department of Corporations licensing requirements, individuals engaged directly
in the origination of loans or the dissemination of certain information are
required to be licensed by the California Department of Real Estate or the
California Department of Corporations. We and some of our subsidiaries are also
required to be licensed in other states in which we have offices or operate.
Although we have the licenses required in California and several other states
and believe that we will be able to obtain licenses required in other states
from time to time, we cannot be sure that we will successfully comply with the
many government regulations and licensing requirements to which we are subject.
If we fail to comply adequately, it could have a material adverse effect on our
business, results of operations and financial condition.
If legislation or regulation surrounding the use of the Internet restricts our
ability to originate mortgages over the Internet, our business would be
materially adversely affected.
Laws and regulations directly applicable to the Internet and e-commerce
may become more prevalent in the future. In the event the Federal Trade
Commission or other governmental authorities adopt or modify laws or regulations
relating to the Internet, our business, results of operations and financial
condition could be materially adversely affected. Such legislation and
regulation could dampen the growth in Internet usage generally and decrease the
acceptance of the Internet as a commercial medium. The laws and regulations
governing the Internet remain largely unsettled, even in areas where there has
been some legislative or regulatory action. It may take years to determine
whether and how existing laws and regulations such as those governing
intellectual property, privacy and taxation apply to the Internet. In addition,
the growth and development of the market for e-commerce may prompt calls for
more stringent consumer protection laws and regulations, both in the United
States and abroad, that may impose additional burdens on companies conducting
business over the Internet.
If we are unable to respond to rapid technological change in e-commerce and
improve our products and services, our business could be materially adversely
affected.
The Internet and e-commerce are characterized by rapid technological
change, changes in user and customer requirements and preferences, frequent new
product and service introductions embodying new technologies and the emergence
of new industry standards and practices that could render existing technology
and systems obsolete. To remain competitive, we must continue to enhance and
improve the responsiveness, functionality and features of our on-line services.
We have little proprietary computer software, information databases or
applications. We cannot be sure that others will not develop and offer superior
products and services, or, if so offered, that they will not gain a greater
acceptance among potential customers. Our success will depend, in part, on our
ability to both license and internally develop leading technologies useful in
our business, enhance our existing services, develop new services and technology
that address the increasingly sophisticated and varied needs of our customers,
and respond to technological advances and emerging industry standards and
practices on a cost-effective and timely basis.
The development of websites and other proprietary technology entails
significant technical and business risks. There can be no assurance that we will
successfully use new technologies effectively or adapt our websites, technology
and transaction-processing systems to customer requirements or emerging industry
standards. If we are unable, for technical, legal, financial or other reasons,
to adapt in a timely manner to changing market conditions, customer requirements
or emerging industry standards, our business, results of operations and
financial condition could be materially adversely affected.
If our computer systems fail, our business would be materially adversely
affected.
A key element of our strategy is to generate a high volume of traffic
on, and use of, our websites. Accordingly, the satisfactory performance,
reliability and availability of our websites, transaction-processing systems and
network infrastructure are critical to our reputation and ability to attract and
retain customers and maintain adequate customer service levels. Our revenues
depend in part on the number of potential customers who visit our websites. Any
system interruption that results in the unavailability of our websites would
reduce the volume and attractiveness of our product and service offerings. Our
communications hardware and some of our other computer hardware operations are
located at our facilities in Walnut Creek, California. The hardware for our
internal loan and product database, as well as our loan processing operations,
is also maintained in our Walnut Creek facility. Fires, floods, earthquakes,
power losses, telecommunications failures, breaches and similar events could
damage these systems. Computer viruses, electronic breaches or other similar
disruptive problems could also adversely affect our websites. Our business,
results of operations and financial condition could be adversely affected if our
systems were affected by any of these occurrences. Our insurance policies may
not adequately compensate us for losses that may occur in the event of a failure
of our computer systems or other interruptions in our business.
Our websites must accommodate a high volume of traffic and deliver
frequently updated information, the accuracy and timeliness of which is critical
to our business. In the past, we have experienced periodic system interruptions,
which we believe will continue to occur from time to time. Any substantial
increase in the volume of traffic on our websites will require us to expand and
upgrade further our technology, transaction-processing systems and network
infrastructure. We cannot be sure that we will be able to accurately project the
rate or timing of increases, if any, in the use of our websites or expand and
upgrade our systems and infrastructure to accommodate such increases in a timely
manner. In addition, our users depend on Internet service providers, on-line
service providers and other website operators for access to our websites. Many
of them have experienced significant outages in the past, and could experience
outage delays and other difficulties due to system failures unrelated to our
systems. Moreover, the Internet infrastructure may not be able to support
continued growth in its use. Any of these problems would materially adversely
affect our business, results of operations and financial condition.
If our electronic security devices are breached, our business would be
materially adversely affected.
The secure transmission of confidential information through e-commerce
is critical to our underwriting process. We rely on certain encryption and
authentication technology licensed from third parties to provide secure
transmission of confidential information, such as consumers' financial
statements. There can be no assurance that advances in computer capabilities,
new discoveries in the field of cryptography, or other events or developments
will not result in a compromise or breach of the algorithms we use to protect
customer transaction data. If any such compromise were to occur, it could have a
material adverse effect on our business, results of operations and financial
condition.
We may be required to spend significant capital and other resources to
protect against such security breaches or to alleviate problems caused by such
breaches. Concerns over the security of transactions conducted on the Internet
and the privacy of users may also inhibit the growth of the Internet generally,
and e-commerce in particular. To the extent that our activities involve the
storage and transmission of proprietary information, such as consumers'
financial statements and profile information, security breaches could damage our
reputation and expose us to a risk of loss or litigation and possible liability.
There can be no assurance that our security measures will prevent security
breaches or that a failure to prevent such security breaches will not have a
material adverse effect on our business, financial condition and results of
operations.
If we are unable to successfully address Year 2000 issues, our business could be
materially adversely affected.
Many currently installed computer systems and software programs only
accept two digits to identify the year in any date. Any system or program which
cannot accept four digits to identify the year in any date may not distinguish
dates falling on or after January 1, 2000 from dates falling before January 1,
2000. As a result, many computer systems and software programs may need to
upgraded or replaced to ensure they comply with Year 2000 requirements.
The actual cost we incur to become Year 2000 compliant is subject to
certain risks and uncertainties including, among others, our ability to timely
identify all affected business-critical systems, and the readiness of service
providers, vendors and suppliers, and our financial institutions and significant
customers. If we are unsuccessful in correcting our business-critical systems
and processes affected by the Year 2000 issue, our, business, results of
operations and financial condition could be materially affected. In addition, if
our service providers, vendors and suppliers or our financial institutions and
significant customers are adversely affected by the Year 2000 issue, our
operations could face substantial interruptions and our business, results of
operations and financial condition could be materially and adversely affected.
These third party risks include possible interruptions in our ability to fund
loans utilizing our warehouse facilities, our ability to sell loans to Fannie
Mae and other investors, originate mortgages over the Internet and our hedging
systems' ability to link to financial data.
For additional information regarding Year 2000 issues, see
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."
If previously unregistered shares of our common stock are sold into the market,
it could cause the market price of our common stock to drop.
As of June 30, 1999, we had approximately 90.3 million shares of common
stock, and warrants to purchase approximately 16.6 million shares of common
stock, issued and outstanding. Prior to this offering, we had approximately 27.4
million shares of freely tradable stock outstanding. This prospectus covers
substantially all of the shares of our common stock subject to registration
rights which could not otherwise currently be sold pursuant to Rule 144 of the
Securities Act. Accordingly, the number of shares freely tradable in the open
market following the effective date of this prospectus will increase
significantly. If the holders of these shares sell large numbers of the shares
in the open market, the market price of our common stock could fall sharply. In
addition, the perception that such sales could occur may cause the market price
of our common stock to remain relatively low indefinitely. These factors could
also make it more difficult for us to raise funds through future offerings of
common stock.
Future issuances of additional securities will be dilutive to existing
shareholders.
Pursuant to contractual obligations to file a registration statement
with the SEC covering shares of common stock held by some of our existing
shareholders, we may be obligated to issue additional shares to such
shareholders for failing to file the registration statement within the time
specified in the agreements under which the shares were purchased. If we are
required to issue such additional shares, it will result in dilution to the
interests of our other shareholders.
In addition, Mr. Korell's employment agreement has an anti-dilution
provision pursuant to which he has the right to maintain a four percent equity
position in FiNet.com. The issuance of options to Mr. Korell pursuant to this
provision will result in dilution to the interests of our other shareholders.
We do not intend to pay dividends.
We have not paid any dividends on our common stock since fiscal 1997
and we do not anticipate paying dividends on our common stock in the foreseeable
future. You should take this into account when deciding whether to buy our
stock.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus that are
subject to risks and uncertainties. Forward-looking statements include
information concerning our possible or assumed future results of operations.
Also, when we use such words as "believe," "expect," "anticipate," "plan,"
"could," "intend" or similar expressions, we are making forward-looking
statements. You should note that an investment in our securities involves
certain risks and uncertainties that could affect our future financial results.
Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth in "Risk Factors" and elsewhere in this prospectus.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The risk factors listed
above, as well as any cautionary language in this prospectus, provide examples
of risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in these risk factors and elsewhere in this prospectus
could materially and adversely affect our business, results of operations and
financial condition.
<PAGE>
SELLING SHAREHOLDERS
The Shares are shares of common stock that have been or may be acquired
by the selling shareholders pursuant to the Plans. Each selling shareholder will
receive all of the net proceeds from the sale of his or her respective Shares.
There is no assurance that any of the selling shareholders will sell any or all
of the Shares.
The following table sets forth (i) the name of each selling
shareholder, (ii) the nature of his or her position, office or material
relationship with FiNet.com within the past three years, (iii) the number of
shares of common stock beneficially owned by each selling shareholder as of June
30, 1999, (iv) the number of Shares offered by each selling shareholder
hereunder, and (v) the number of shares and (if one percent or more) the
percentage of common stock to be beneficially owned by each selling shareholder
after this offering. In computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares subject to options or
warrants held by that person that are currently exercisable or exercisable
within 60 days of June 30, 1999 are deemed outstanding. Such shares, however,
are not deemed outstanding for the purpose of computing the percentage ownership
of each other person. Applicable percentage of ownership for each shareholder is
based on 90,312,005 shares of common stock outstanding as of June 30, 1999.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Shares Owned
Number of after Offering
Relationship Number Shares
Name with the Company of Shares Offered
Owned Hereby Number %
- ----------------------------------------------------------------------------------------------
Barbanica, Kristine A. Employee 5,000 625 4,375 *
Bays, Montgomery Former employee 712 712 0 *
Conway, Michael Executive Vice 90,000 15,000 75,000 *
President-Capital
Markets
Cosio-Barron, Joseph Employee 3,167 3,167 0 *
Falcao, Antonio Director 40,000 40,000 0 *
Garcao, Jose Maria Salema Greater Than 5% 9,330,000 40,000 9,290,000 *
Bene. Owner
Guedes, Jose Filipe Nobre Former Director 520,000 65,000 455,000 *
Hoeffel, Jan C. Director 1,564,075 525,241 1,038,834 1.2
Johnson, Linda, C. Employee 3,750 469 3,281 *
Kimura, Regina Employee 3,750 469 3,281 *
Korell, Mark Chairman, 976,909 3,134,537 0 *
President & CEO
Meyer S. Lewis Director 1,165,000 145,000 1,020,000 1.1%
Porter, Thomas Executive Vice 40,000 40,000 0 *
President-Admin.
Rawitch, L. Daniel Vice Chairman of 1,358,206 748,000 610,206 *
the Board
Smith, Helen G. Employee 3,750 469 3,281 *
Sogin, Stephen J. Director 170,634 170,634 0 *
Richard E. Wilkes Director 80,000 80,000 0 *
- ----------------------
* Less than 1% of the outstanding shares of common stock
Sales under this prospectus may also be made by certain unnamed persons who are
employees of, but not directors, officers or controlling persons, of FiNet.com
who hold the lesser of (i) 1,000 Shares of common stock, or (ii) 1% of the
Shares issuable under any of the Plans to be offerered under this prospectus
(the "De Minimus Amount"). The amount of Shares that may be sold be each of such
unnamed persons under this prospectus may not exceed the De Minimus Amount.
</TABLE>
USE OF PROCEEDS
We will not receive any proceeds from the sale of common stock by the
selling shareholders except for the exercise price of the options and common
stock purchase warrants underlying certain of the Shares offered under this
prospectus. We intend to use any proceeds from the exercise of the options and
warrants for general corporate purposes.
PLAN OF DISTRIBUTION
The selling shareholders may offer their Shares at various times in
one or more of the following transactions:
on the Nasdaq SmallCap Market(or any other exchange on which the
shares may be listed);
in the over-the-counter market;
in negotiated transactions other than on such exchanges;
by pledge to secure debts and other obligations;
in connection with the writing of non-traded and exchange-traded call
options, in hedge transactions, in covering previously established
short positions and in settlement of other transactions in
standardized or over-the-counter options; or
in a combination of any of the above transactions.
The selling shareholders may sell their shares at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices. The selling shareholders may
use broker-dealers to sell their shares. The broker-dealers will either receive
discounts or commissions from the selling shareholders, or they will receive
commissions from purchasers of Shares.
Under certain circumstances the selling shareholders and any
broker-dealers that participate in the distribution may be deemed to be
"underwriters" within the meaning of the Securities Act. Any commissions
received by such broker-dealers and any profits realized on the resale of Shares
by them may be considered underwriting discounts and commissions under the
Securities Act. The selling shareholders may agree to indemnify such
broker-dealers against certain liabilities, including liabilities under the
Securities Act. In addition, FiNet.com has agreed to indemnify the selling
shareholders with respect to the shares offered hereby against certain
liabilities, including certain liabilities under the Securities Act.
Under the rules and regulations of the Exchange Act, any person engaged
in the distribution or the resale of Shares may not simultaneously engage in
market making activities with respect to the FiNet.com's common stock for a
period of two business days prior to the commencement of such distribution. The
selling shareholders will also be subject to applicable provisions of the
Exchange Act and regulations under the Exchange Act which may limit the timing
of purchases and sales of shares of FiNet.com's common stock by the selling
shareholders.
The selling shareholders will pay all commissions, transfer taxes, and
other expenses associated with the sale of securities by them. The Shares
offered hereby are being registered pursuant to contractual obligations of
FiNet.com, and FiNet.com has paid the expenses of the preparation of this
prospectus. We have not made any underwriting arrangements with respect to the
sale of Shares offered hereby.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed on for
us by Severson & Werson, San Francisco, California.
EXPERTS
Our consolidated financial statements at April 30, 1999 and for the
year in the period ended April 30, 1999 included in our Annual Report on Form
10-K for the fiscal year ended April 30, 1999, and incorporated by reference in
this prospectus and Registration Statement, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report which is herein
incorporated by reference, and are incorporated in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
Our consolidated financial statements, except with respect to Coastal
Federal Mortgage, for the fiscal years ended April 30, 1998 and 1997 were
audited by Reuben E. Price & Co., independent certified accountants, as set
forth in their report which is herein incorporated by reference, and are
incorporated in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
<PAGE>
<TABLE>
<S> <C>
===================================================== ===============================================
You may rely on the information contained
in this prospectus. We have not authorized anyone
to provide information different from that
contained in this prospectus. Neither the delivery
of this prospectus nor sale of common stock means
that information contained in this prospectus is 5,009,323 Shares
correct after the date of this prospectus. This
prospectus is not an offer to sell or solicitation
of an offer to buy these shares of common stock in
any circumstances under which the solicitation is Common Stock
unlawful.
------------------------- -------------------------
TABLE OF CONTENTS PROSPECTUS
-------------------------
Page
Available Information..........................2
Incorporation of Certain Documents
by Reference..............................2 August 2, 1999
Summary........................................4
Risk Factors...................................5
Selling Shareholders..........................21
Use of Proceeds...............................22
Plan of Distribution..........................22
Legal Matters.................................23
Experts.......................................23
===================================================== ===============================================
</TABLE>
<PAGE>
FINET.COM, INC.
REGISTRATION STATEMENT ON FORM S-8
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 9. Incorporation Of Documents By Reference.
The following documents are incorporated by reference in this Registration
Statement:
A. Registrant's Annual Report on Form 10-K for the fiscal year ended April
30, 1999, filed pursuant to Section 13(a) of the Securities Exchange Act of
1934, as amended (the "Exchange Act");
B. All other reports, if any, filed by the Company pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 since the end of the
fiscal year ended April 30, 1999;
C. The description of the Company's Common Stock contained in the
Registration Statement on Form 8-A filed with the Commission on November 9, 1989
under Section 12(g) of the Exchange Act, including any amendment or report filed
for the purpose of updating such description.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934 after the date of this
Registration Statement and prior to the filing of a post-effective amendment to
this Registration Statement which indicates that all securities offered
hereunder have been sold, or which deregisters all securities then remaining
unsold under this Registration Statement, shall be deemed to be incorporated by
reference in this Registration Statement and to be a part hereof from the date
of filing of such documents.
Item 10. Description of Securities.
Not applicable.
Item 11. Interests of Named Experts and Counsel.
Not applicable.
Item 12. Indemnification of Directors and Officers.
Pursuant to the General Corporation Law of Delaware (the "DGCL"), the
Company's Certificate of Incorporation excludes personal liability on the part
of its directors to the Company for monetary damages based upon any violation of
their fiduciary duties as directors, except as to liability for any breach of
the duty of loyalty, acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, acts in violation of
Section 174 of the General Corporation Law of Delaware, or any transaction from
which a director receives an improper personal benefit. This exclusion of
liability does not limit any right which a director may have to be indemnified.
The Company's Certificate of Incorporation and its Bylaws provide for
indemnification of directors and officers of the Company to the fullest extent
permitted by the DGCL for claims against them in their official capacities,
including stockholders' derivative actions.
Insofar as indemnification for liabilities arising under the Securities
Act, as amended, may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the SEC, such indemnification is against
the public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Item 13. Exemption From Registration Claimed.
With respect to the 5,461,248 restricted shares of Common Stock being
reoffered by the selling stockholders pursuant to this Registration Statement,
the issuance of these shares by the Company to the selling stockholders was
effected in reliance upon an exemption from this registration under Section 4(2)
of the Securities Act as transactions by an issuer not involving a public
offering.
Item 14. Exhibits.
Exhibit
Number Footnote Description of Document
- ------ -------- -----------------------
5 Opinion of Severson & Werson, A Professional Corporation
23.1 Consent of Ernst & Young LLP
23.2 Consent of Reuben E. Price & Co.
23.3 Consent of Richard A. Eisner & Company LLP
23.4 Consent of Counsel (contained in Exhibit 5)
24 Power of Attorney (see page II-5)
99.1 FiNet.com, Inc. 1989 Stock Option Plan, as amended
99.2 Form of Stock Option Agreement for use with the FiNet.com
Inc. 1989 Stock Option Plan, as amended
99.3 (1) FiNet.com, Inc. 1998 Stock Bonus Incentive Plan
99.4 FiNet.com, Inc. 1998 Non-Employee Directors' Stock Option
Plan, as amended
99.5 Form of Stock Option Agreement for use with the FiNet.com,
Inc. 1998 Non-Employee Directors' Stock Option Plan,
as amended
99.6 (1) FiNet.com, Inc. 1999 Employee Stock Purchase Plan
99.7 (1) Employment Agreement between the Registrant and Mark L.
Korell, as amended to date
99.8 (1) Employment Agreement between the Registrant and L. Daniel
Rawitch, as amended to date
99.9 (1) Employment Agreement between the Registrant and Michael G.
Conway, as amended to date
99.10 (1) Employment Agreement between the Registrant and Thomas A.
Porter, as amended to date
99.11 (1) Employment Termination Agreement between the Registrant and
Jan C. Hoeffel, dated February 3, 1999
(1) filed as an Exhibit to the Company's Registration Statement on Form S-1
filed with the Commission on July 2, 1999 and incorporated herein by
reference.
Item 9. Undertakings.
A. Rule 415 Offering.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. Filings Incorporating Subsequent Exchange Act Documents By Reference.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offering therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Regulation S-K Item 512(h) Undertaking for Registration Statement on
Form S-8.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act, and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Walnut Creek, State of California, on August 2, 1999.
FINET.COM.INC.
By: /s/ Mark L. Korell
--------------------------
Mark L. Korell
Chief Executive Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mark L. Korell and Gary A. Palmer, and
each of them, his true and lawful attorney-in-fact and agent, each with full
power of substitution for him in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the SEC, hereby ratifying and confirming all that
each of said attorneys-in-fact or his substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Mark L. Korell Chairman of the Board, August 2, 1999
Mark L. Korell President & Chief
Executive Officer
(Principal Executive
Officer)
/s/ L. Daniel Rawitch Vice Chairman August 2, 1999
L. Daniel Rawitch
/s/ Gary A. Palmer Executive Vice President- August 2, 1999
Gary A. Palmer Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Jan C. Hoeffel Director August 2, 1999
Jan C. Hoeffel
/s/ S. Lewis Meyer Director August 2, 1999
S. Lewis Meyer
/s/ Stephen J. Sogin Director August 2, 1999
Stephen J. Sogin
/s/ Richard E. Wilkes Director August 2, 1999
Richard E. Wilkes
/s/ Antonio P. Falcao Director August 2, 1999
Antonio P. Falcao
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Footnote Description of Document
- ------ -------- -----------------------
5 Opinion of Severson & Werson, A Professional Corporation
23.1 Consent of Ernst & Young LLP
23.2 Consent of Reuben E. Price & Co.
23.3 Consent of Richard A. Eisner & Company, LLP
23.4 Consent of Counsel (contained in Exhibit 5)
24 Power of Attorney (see page II-5)
99.1 FiNet.com, Inc. 1989 Stock Option Plan, as amended
99.2 Form of Stock Option Agreement for use with the FiNet.com,
Inc. 1989 Stock Option Plan, as amended
99.3 (1) FiNet.com, Inc. 1998 Stock Bonus Incentive Plan
99.4 FiNet.com, Inc. 1998 Non-Employee Directors' Stock Option
Plan, as amended
99.5 Form of Stock Option Agreement for use with the FiNet.com,
Inc. 1998 Non-Employee Directors' Stock Option Plan,
as amended
99.6 (1) FiNet.com, Inc. 1999 Employee Stock Purchase Plan
99.7 (1) Employment Agreement between the Registrant and Mark L.
Korell, as amended to date
99.8 (1) Employment Agreement between the Registrant and L. Daniel
Rawitch, as amended to date
99.9 (1) Employment Agreement between the Registrant and Michael G.
Conway, as amended to date
99.10 (1) Employment Agreement between the Registrant and Thomas A.
Porter, as amended to date
99.11 (1) Employment Termination Agreement between the Registrant and
Jan C. Hoeffel, dated February 3, 1999
- ---------------------
(1) Filed as an Exhibit to the Company's Registration Statement on Form S-1
filed with the Commission on July 2, 1999 and incorporated herein by
reference.
EXHIBIT 5
SEVERSON & WERSON
A PROFESSIONAL CORPORATION
One Embarcadero Center, Suite 2600
San Francisco, CA 94111
Telephone: (415) 398-3344
Facsimile: (415) 956-0439
July 29, 1999
FiNet.com, Inc.
3021 Citrus Circle, Suite 150
Walnut Creek, California 94598
Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the filing by FiNet.com, Inc. (the "Company") of a Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission covering the registration of 9,831,808 shares of the
Company's Common Stock (the "Shares") which may be issued pursuant to the
Company's 1989 Stock Option Plan, as amended, the 1998 Stock Bonus Incentive
Plan, the 1998 Non-Employee Directors' Stock Option Plan, as amended, the 1999
Employee Stock Purchase Plan, and various written compensation contracts between
the Company and its directors and officers.
In connection with this opinion, we have examined and relied upon the
Registration Statement, the Company's Certificate of Incorporation and Bylaws,
as amended, and such other records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below. We have assumed the genuineness and
authenticity of all documents submitted to us as originals, the conformity to
originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
We are admitted to practice law in the State of California. Our opinion is
rendered solely with respect to California law, Delaware General Corporation
Law, and federal law. On the basis of the foregoing, and in reliance thereon, we
are of the opinion that the additional Shares of Common Stock of the Company to
be issued pursuant to the terms of the Plan are validly authorized and,
assuming: (a) no change occurs in the applicable law or the pertinent facts: (b)
the pertinent provisions of such Blue Sky securities laws as may be applicable
have been complied with; (c) the Shares are issued in accordance with the terms
of the Plan; and (d) the Shares have been duly delivered against payment
therefor as contemplated by the Plan, the Shares of Common Stock issuable will
be validly issued, fully paid and nonassessable.
This opinion is intended solely for your benefit and is not to be made
available to or be relied upon by any other person, firm or entity without our
prior written consent. We consent to the filing of this opinion as an Exhibit to
the Registration Statement.
SEVERSON & WERSON
A Professional Corporation
By: /s/ Roger S. Mertz
----------------------------
Roger S. Mertz
A Member of the Firm
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8 No. 333-xxxxx) pertaining to the 1989 Stock
Option Plan (as amended), the 1998 Stock Bonus Incentive Plan, the 1998
Non-Employee Directors' Stock Option Plan (as amended), the 1998 employment
agreement of Mark Korell (as amended), the 1999 employment termination agreement
of Jan C. Hoeffel, the 1999 Employee Stock Purchase Plan, the 1999 employment
agreement of Thomas L. Porter, the 1998 employment agreement of Michael G.
Conway (as amended), and the 1998 employment agreement of L. Daniel Rawitch (as
amended) of FiNet.com, Inc. and subsidiaries and to the incorporation by
reference therein of our report dated June 11, 1999 (except Note 19, as to which
the date is June 28, 1999), with respect to the consolidated financial
statements and schedules of FiNet.com, Inc. and subsidiaries included in its
Form 10-K for the year ended April 30, 1999, filed with the Securities and
Exchange Commission.
/s/ ERNST & YOUNG LLP
San Francisco, California
July 29, 1999
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8 No. 333-xxxxx) pertaining to the 1989 Stock
Option Plan (as amended), the 1998 Stock Bonus Incentive Plan, the 1998
Non-Employee Directors' Stock Option Plan (as amended), the 1998 employment
agreement of Mark Korell (as amended), the 1999 employment termination agreement
of Jan C. Hoeffel, the 1999 Employee Stock Purchase Plan, the 1999 employment
agreement of Thomas L. Porter, the 1998 employment agreement of Michael G.
Conway (as amended), and the 1998 employment agreement of L. Daniel Rawitch (as
amended) of FiNet.com, Inc. and subsidiaries and to the incorporation by
reference therein of our report dated August 12, 1998 with respect to the
consolidated financial statements and schedules of FiNet.com, Inc. and
subsidiaries included in its Form 10-K for the year ended April 30, 1999, filed
with the Securities and Exchange Commission.
/s/ REUBEN E. PRICE & CO.
San Francisco, California
July 29, 1999
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Form S-8 Registration
Statement, relating to the registration of shares of common stock under the
FiNet.com, Inc. 1989 Stock Option Plan, 1998 Stock Bonus Incentive Plan, 1999
Employee Stock Purchase Plan, 1998 Non-Employee Directors' Stock Option Plan,
Thomas L. Porter 1999 Employment Agreement, Michael G. Conway 1998 Employment
Agreement, Mark L. Korell 1998 Employment Contract, Daniel L. Rawitch 1998
Employment Contract and 1999 Jan C. Hoeffel Employment Termination Agreement, of
our report dated July 9, 1998 (with respect to Note C July 31, 1998) with
respect to our audit of the financial statements (not included in the
registration statement) of Coastal Federal Mortgage Company, a wholly owned
subsidiary of FiNet.com, Inc., as of and for each of the years in the two year
period ended April 30, 1998.
/s/ RICHARD A. EISNER & COMPANY, LLP
Florham Park, New Jersey
July 29, 1999
EXHIBIT 99.1
FINET HOLDINGS CORPORATION
1989 STOCK OPTION PLAN
(as amended)
1. Purpose and Scope. The purposes of the Finet Holdings Corporation Stock
Option Plan is to enable the Company to grant to key employees and directors an
opportunity to acquire Stock, thereby providing them with an inducement to
remain in the service of the Company and contribute to its success, and to aid
in attracting other capable personnel. Some or all of the options granted to
employees under the Plan may be intended to qualify as "incentive stock options"
under Section 422A of the Internal Revenue Code.
2. Definitions. As used in this Plan:
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the Stock Option Committee, if any appointed by
the Board from among its members. If no committee has been appointed,
"Committee" shall refer to the Board, unless the context indicates otherwise.
(c) "Company" means Finet Holdings Corporation, a Delaware corporation
and any parent or majority-owned subsidiary corporation.
(d) "Plan" means the Finet Holdings Corporation 1989 Stock Option
Plan, as amended from time to time.
(e) "Stock" means the common stock of the Company.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have the
sole authority to determine:
(i) the persons to whom options to purchase shares of Stock shall
be granted;
(ii) the number of shares to be optioned to each optionee;
(iii) the price to be paid for the shares upon the exercise of
each option;
(iv) the period within which each option may be exercised,
including any vesting requirements; and,
(v) the terms and conditions of each stock option agreement to be
entered into between Company and the
optionee.
(b) Grants to Board or Committee Members; Formula Options for Outside
Directors. The Committee may not grant an option to any member of the Board or
the Committee. An option may be granted to a director or a member of the
Committee only by action of the Board, with a majority of the Board and a
majority of the directors acting in the matter being disinterested persons
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934.
Directors who are not full-time employees of the Company will, in
addition to any other compensation payable (including other stock options which
may be granted) to directors for their services, automatically and without
action by the Board or Committee, be granted under the Plan: (a) an immediately
exercisable five year option to purchase 40,000 shares of Stock upon initial
appointment or election as a director; and (b) commencing on the first
anniversary date of becoming a director and for each of the next three years of
service as a director, a five year option to purchase 25,000 shares of Stock.
Each such 25,000 share option shall become exercisable during the year
immediately following grant at a rate of 6,250 shares per quarter, subject to
continuing service as a director. Options granted pursuant to this paragraph
shall be exercisable only during the time the optionee remains a director or
within one year thereafter (but only to the extent vested on the date of
termination of service as a director and not beyond expiration of the five year
option term). The exercise price of each of the above grants shall be the fair
market value of the Company's common stock at the time of each grant.
(c) Rules and Regulations. The Committee shall have full and complete
authority to promulgate such rules and regulations as it deems necessary or
desirable for administering and interpreting the Plan. Any determination,
decision, computation, or interpretation of the Plan by the Committee shall be
conclusive as to any interested person.
(d) Incentive Stock Option Status. The determination of whether
options granted to employees under the Plan are intended to qualify as incentive
stock options shall be made by the Committee at the time the option is granted.
If an option is intended to so qualify, that fact shall be indicated in the
stock option agreement for that option.
4. Eligibility. The class of person of the Company eligible to be granted
option to purchase Stock hereunder shall be key employees and directors of the
Company so designated by the Committee.
5. Stock Subject to the Plan. There shall be a total of 1,750,000 shares of
Stock subject to purchase upon the exercise of options granted under the Plan,
as adjusted in accordance with Section 8. For options outstanding under the
Plan, shares of Stock will be reserved for issuance from the Company's
authorized but unissued Stock. If any option granted under the Plan shall expire
or terminate for any reason without having been exercised in full, the
unpurchased shares shall again be available for the purposes of the Plan;
provided, however, that no options will be granted under the Plan if, including
the shares which are the subject of a proposed option, the total number of
shares called for by all outstanding options under this Plan would cause the
limit set forth in Rule 260.140.45 of the California Commissioner of
Corporations, as in effect on November 14, 1989, to be exceeded.
6. Terms and Conditions of Options. Each option granted under the Plan
shall be evidenced by a stock option agreement between the optionee and the
Company and shall be subjected to the following terms and conditions and to such
other terms and conditions not inconsistent therewith as the Committee may deem
appropriate in each case:
(a) Option Price. The price to be paid for shares of Stock upon the
exercise of an option shall be determined by the Committee at the time the
option is granted, but shall in no event be less than one hundred percent (100%)
of the fair market value of the shares of Stock on the date the option is
granted (110% of the fair market value if the optionee is an employee who owns
Stock possessing more than ten percent of the total combined voting power or
value of all classes of stock of the Company), as determined by the Committee
or, if a trading market exists for the Stock, the fair market value of the
shares of Stock shall not be less than the closing price for the Stock as
reported by the principal trading market for the Stock on the date the option is
granted (or if there was no trade on such date, then the closing price on the
most recent date on which trading in the Stock occurred).
(b) Period of Option. The period or periods within which an option may
be exercised shall be determined by the Committee at the time the option is
granted but shall in no event exceed ten years from the date the option is
granted (five years if the optionee is an employee who owns Stock possessing
more than ten percent of the total combined voting power or value of all classes
of stock of the Company).
(c) Payment for Stock. Payment for each share of Stock purchased under
an option shall be made at the time of purchase: (i) in cash, (ii) in shares of
Stock, in good form for transfer, owned by the optionee, (iii) by a combination
of such Stock and cash; unless the Committee in its sole discretion requires
that payment be made in cash, or (iv) by dividing the net gain per share (the
positive difference in value, if any, between the exercise price per share and
the fair market value upon exercise ) by the fair market value upon exercise,
with the quotient issued in shares of Stock. No share of Stock shall be issued
until full payment therefor has been made. No Stock acquired within six months
preceding the payment date pursuant to any Company stock option, stock purchase
or other stock incentive plan shall be used in payment hereunder. An optionee's
payment of income tax withholding upon exercise of an option, if required, may
be made as set forth in (I), (ii), or (iii) above.
(d) Stock Appreciation Rights. The Committee, in its discretion, may
provide that any option by its terms may permit the participant, upon exercise
of an option, to elect, in lieu of payment for Stock, to receive payment from
the Company of any of the following:
(i) cash equal to the excess of the value of one share over the
option price times the number of shares as to which the option is exercised;
(ii) the number of full shares having an aggregate value equal to
the cash amount calculated under alternative (i); or
(iii) any combination of cash and Stock having an aggregate value
equal to the cash amount calculated under alternative (i).
(e) Nontransferability. An option shall be nontransferable, except by
will or the laws of descent and distribution, and shall be exercisable during
the optionee's lifetime only by the optionee.
(f) Not an Employment Agreement. Nothing in this Plan or in any option
granted hereunder shall affect the right of the Company to terminate at any time
and for any reason the employment of any employee to whom an option has been
granted hereunder.
(g) Value Limitation. The aggregate fair market value (determined as
of the time the option is granted) of all shares of Stock subjected to incentive
stock options granted to any employee under this Plan and any other option plan
of the Company in any calendar year shall not exceed the limits set forth in the
Internal Revenue Code, as such may be amended from time to time.
(h) Effective Date of Grant. The date of grant of options hereunder
shall be deemed to be the date of the action by the Committee, notwithstanding
that, the issuance of the option may be conditioned on the execution of a stock
option agreement.
7. Stock Issuance and Rights as Shareholder. Notwithstanding any other
provision of the Plan, no optionee shall have any right as a shareholder of the
Company until the date he is issued a stock certificate.
8. Adjustment of Shares.
(a) Stock Dividends, etc. In the event of changes in the outstanding
Stock of the company by reason of stock dividends, split-ups, consolidations,
recapitalizations, reorganizations, spin-offs or like events (as determined by
the Committee), an appropriate adjustment shall be made by the Committee in the
number of shares of Stock reserved under the Plan and in the number of shares of
Stock and the option price per share specified in any stock option agreement
with respect to any unpurchased shares. The determination of the Committee as to
what adjustments shall be made shall be conclusive.
(b) Mergers, etc. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, the option granted hereunder shall be assumed
or an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation. In the event that such
successor corporation refuses to assume the option granted hereunder or to
substitute an equivalent option, the Board shall, in lieu of such assumption or
substitution, provide for the optionee to have the right to exercise the option
granted hereunder as to all of the optioned Stock, including shares of Stock as
to which the option granted hereunder would not otherwise be exercisable. If the
Board makes an option fully exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Board shall notify the optionee
that the option shall be fully exerciseable for a period of thirty (30) days
from the date of such notice, and the option will terminate upon the expiration
of such period.
9. Securities Law Requirements.
(a) Investment Representation. The Committee may require any person,
as a condition of either grant or the exercise of an option pursuant to this
Plan, to represent and establish to the satisfaction of the Committee that all
shares of Stock acquired upon the exercise of such option will be acquired for
investment and not for distribution.
(b) Registration Requirements. No shares of Stock shall be issued upon
the exercise of any option if counsel for the company determines that there has
not been met any applicable registration requirements under the Securities Act
of 1933 or the Securities Exchange Act of 1934, any applicable listing
requirement of any stock exchange on which the Stock is listed, any state
securities law or any other applicable provision of state or federal law.
(c) Information to Optionee. The Company shall provide to each
optionee, during the period for which he has one or more options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
10. Amendment. The Board may amend the Plan at any time, except that
without the approval by vote or written consent of the holders of a majority of
the Company's issued and outstanding shares:
(a) The number of shares of Stock that may be made available under the
Plan shall not be increased..
(b) The class of persons eligible to be granted options hereunder
shall not be changed.
This Section 10 may not be amended so as to defeat its purpose.
11. Shareholder Approval. This Plan is subject to the approval of the
shareholders of the Company on or before June 5, 1990, and any stock option
agreement entered into under this Plan before that approval shall contain a
provision to the effect that the exercise of that option is subject to
shareholder approval.
12. Termination. This Plan shall expire on June 5, 1999 and no options
shall be granted hereunder after that date. The Board may terminate this Plan at
any time, and no option hereunder shall be granted thereafter. Expiration or
termination of the plan shall not affect the validity of any option then
outstanding.
13. Effective Date. Options may be granted hereunder beginning immediately,
subject to Section 11.
EXHIBIT 99.2
FINET HOLDINGS CORPORATION
FORM OF STOCK OPTION AGREEMENT
PURSUANT TO
1989 STOCK OPTION PLAN, AS AMENDED
1. Grant of Option. Finet Holdings Corporation, a Delaware corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase a total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1989 Stock Option Plan (the
"Plan") adopted by the Company, which is incorporated herein by reference.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise of Option. This Option shall be exercisable during its term in
accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Section 6 of the Plan as follows:
(a) Right to Exercise.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in subsection
2(a)(iii).
(iii) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(b) Method of Exercise. This Option shall be exercisable by written
notice (in the form attached as Exhibit A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements as to the
holder's investment intent with respect to such shares of Common Stock as may be
required by the Company pursuant to the provisions of the Plan. Such written
notice shall be signed by the Optionee and shall be delivered in person or by
certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable pursuant
to the exercise of this Option have not been registered under the Securities Act
of 1933, as amended, at the time this Option is exercised, Optionee shall, if
required by the Company, concurrently with the exercise of all or any portion of
this Option, deliver to the Company his investment representations in the form
attached hereto as Exhibit B, and shall read the applicable rules of the
Commissioner of Corporations attached to such Investment Representation
Statement, if any.
4. Method of Payment. Payment of the Exercise Price shall be by any of the
methods described in Section 6(c) of the Plan, at the election of the Optionee.
However, unless specifically included in the Notice of Grant or, in the
discretion of the Board, approved upon written request of the Optionee at the
time of exercise, the methods of payment described in Sections 6(c) (iv) or 6(d)
of the Plan shall not be presumed to be available as methods of payment.
5. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of Optionee's
consulting relationship or status as an Employee, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not entitled to exercise this Option at
the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's status as an Employee as a
result of total and permanent disability (as defined in Section 22(e)(3) of the
Code), Optionee may, but only within twelve (12) months from the date of
termination of employment (but in no event later than the date of expiration of
the term of this Option as set forth in Section 10 below), exercise the Option
to the extent otherwise so entitled at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option (to the extent
otherwise so entitled) within the time specified herein, the Option shall
terminate.
8. Death of Optionee. Notwithstanding the provisions of Section 6 above, in
the event of the death of Optionee, the Option may be exercised at any time
within twelve (12) months following the date of death (but in no event later
than the date of expiration of the term of this Option as set forth in Section
10 below), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 6 of the Plan regarding Options granted to more than ten percent
(10%) shareholders shall apply to this Option.
11. Tax Consequences. Set forth below is a brief summary as of the date of
this Option of some of the federal and California tax consequences of exercise
of this Option and disposition of the Shares.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISOR BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock option (ISO). If this Option qualifies
as an ISO, there will be no regular federal income tax liability or California
income tax liability upon the exercise of the Option, although the excess, if
any, of the fair market value of the Shares on the date of exercise over the
Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject the Optionee to the alternative minimum
tax in the year of exercise.
(b) Exercise of Non-Qualified Stock Option ("NSO"). If this Option
does not qualify as an ISO, there may be a regular federal income tax liability
and a California income tax liability upon the exercise of the Option. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the fair market value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(c) Disposition of Shares. In the case of an NSO, if Shares are held
for at least one year after exercise, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal and California
income tax purposes. In the case of an ISO, if Shares transferred pursuant to
the Option are held for at least one year after exercise and are disposed of at
least two years after the Date of Grant, any gain realized on disposition of the
Shares will also be treated as long-term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within
such one-year period or within two years after the Date of Grant, any gain
realized on such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price.
(d) Notice of Disqualifying Disposition of ISO Shares. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (i) the date two years after the Date of Grant, or (ii) the date one
year after transfer of such Shares to the Optionee upon exercise of the ISO, the
Optionee shall immediately notify the Company in writing of such disposition.
Optionee agrees that Optionee may be subject to income tax withholding by the
Company on the compensation income recognized by the Optionee from the early
disposition by payment in cash or out of the current earnings paid to the
Optionee.
12. Repurchase on Termination.
(a) Definitions. Except as otherwise defined in this Agreement, for
purposes of this Section 12:
"Affiliate" shall mean another company controlling, controlled by or
under common control with the Company.
"Repurchase Date" shall mean the date on which the Company exercises a
Repurchase Option.
"Repurchase Option" shall mean the Company's right in accordance with
Section 12 of this Agreement to repurchase Shares bought under this Agreement.
"Termination Date" shall mean the date on which Optionee's employment
or consulting service contract with the Company is terminated.
(b) Repurchase Rights. If the Optionee's employment or consulting
service contract with the Company or a subsidiary of the Company is terminated
for any reason other than death or total disability, the Shares issued or
issuable to Optionee under this Agreement, may, at the sole option and
discretion of the Company, be repurchased, either in whole or in part, by the
Company within 90 days after the Termination Date in accordance with this
Agreement.
(c) Repurchase Price. The repurchase price per Share repurchased in
accordance with this Section 12 shall be the original per Share purchase price
set forth in the accompanying Notice of Stock Option Grant. Such repurchase
price shall be paid in cash in a lump sum on the Repurchase Date. The Company's
right to repurchase any and all vested Shares under the Option, whether
exercised or not, at such original per share purchase price, lapses at the rate
of 20% per year (from the date the Option is granted) of the total number of
Shares granted. To the extent the right to repurchase any Shares issued or
issuable under this Agreement at the original per Share purchase price has
lapsed, the repurchase price shall be the fair market value of the Shares on the
Termination Date. Thus, for example, if the Company grants an Option for 400
shares vesting over 4 years from the date of grant, and after one year 100
shares have vested, the Company's repurchase right is as follows: i) 20% of the
400 total shares granted will be repurchasable at their fair market value on the
Termination Date, and ii) the remaining 80% may be repurchased at the original
per share purchase price.
(d) Death or Disability. There shall be no Repurchase Right upon the
Optionee's death or total disability.
(e) Repurchase Right as to Other Shares. The Repurchase Right of the
Company shall apply as well to all shares or other securities issued in
connection with any stock split, reverse stock split, stock dividend,
recapitalization, reclassification, spin-off, split-off, merger, consolidation
or reorganization ("Other Shares") but such right shall expire on the earliest
to occur of the following: (i) the date on which shares of the same class of
stock as such Other Shares first become publicly traded; or (ii) the occurrence
of any event or transaction upon which the Option terminates.
FINET HOLDINGS CORPORATION,
a Delaware corporation
By:
-------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 1989 STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this option subject to all of the
terms and provisions thereof. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.
Dated:
-------------------- -----------------------------------
[Optionee Signature]
EXHIBIT 99.4
FINET HOLDINGS CORPORATION
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN, AS AMENDED
Date of Board Approval: February 18, 1998
Date of Shareholder Approval: November 24, 1998
Amendment Approved by the Board: May 19, 1999
Amendment Approved by the Shareholders: __________
1. PURPOSE OF THE PLAN. This Finet Holdings Corporation 1998
Non-Employee Directors' Stock Option Plan (the "Plan") is adopted for the
benefit of the directors of Finet Holdings Corporation, a Delaware corporation
(the "Company") who, at the time of their service, are not employees of the
Company or any of its subsidiaries (the "Non-Employee Directors"). The purposes
of the Plan are to advance the interests of the Company by providing the
Non-Employee Directors with additional incentive to serve the Company by
increasing their proprietary interest in the success of the Company.
2. ADMINISTRATION OF THE PLAN. (a) The Plan shall be administered by
the Board of Directors of the Company (the "Board"). The Board may delegate
administration of the Plan to a committee ("Committee") comprised of not less
than two (2) members of the Board. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers possessed by the Board, subject to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the committee at any time and revest in
the Board the administration of the Plan. (b) The Board shall have the authority
to adopt, alter and repeal such administrative rules, guidelines and practices
governing the Plan as it shall, from time to time, deem advisable; to interpret
the terms and provisions of the Plan and any Option granted under the Plan (and
any agreements relating thereto); and to otherwise supervise the administration
of the plan, and to exercise such powers and perform such acts as the Board
deems necessary or expedient to promote the bests interests of the Company. The
Board may correct any defect, supply any omission or reconcile any inconsistency
in the Plan or in any Option in the manner and to the extent it shall deem
necessary to carry the Plan into effect. (c) All actions taken and all
interpretations and determinations made by the Board in good faith shall be
final and binding upon all Non-Employee Directors, the Company, and all other
interested persons. (d) No member of the Board shall be personally liable for
any action, determination, or interpretation made in good faith with respect to
the Plan; and all members of the Board shall be fully protected by the Company
in respect of any such action, determination, or interpretation.
3. STOCK SUBJECT TO AND RESERVED FOR THE PLAN. (a) The total number of
shares of the Company's Common Stock, $0.01 par value (the "Common Stock"), with
respect to which Options may be granted under the Plan, shall not exceed the
aggregate of 1,000,000 shares; provided, however, that the class and aggregate
number of shares which may be subject to the Options granted hereunder shall be
subject to adjustment in accordance with the provisions of Section 14 of this
Plan. Such shares may be treasury shares, reacquired shares or authorized but
unissued shares. (b) The Company shall reserve for issuance pursuant to this
Plan such number of shares of Common Stock as may from time to time be subject
to Options granted hereunder. If any Option expires or is canceled prior to its
exercise in full, the shares theretofore subject to such Option may again be
made subject to an Option under the Plan. (c) All Options granted under the Plan
will constitute nonstatutory stock options (i.e., stock options which do not
qualify under Sections 422 or 423 of the Internal Revenue Code of 1986 (the
"Code")) (the "Option").
4. ELIGIBILITY. Options shall be granted only to Non-Employee
Directors of the Company.
5. NON-DISCRETIONARY GRANT OF OPTIONS.
(a) Non-Employee Directors Elected After the Effective Date of
the Plan: Initial Grant. For so long as this Plan is in effect and shares are
available for the grant of Options hereunder, each person who is elected as a
Non-Employee Director of the Company for the first time after the effective date
of the Plan, and who is not and has not been an employee of the Company or any
of the Company's subsidiaries (as defined in Section 424(f) of the Code (a "New
Director") shall be granted a one-time Option ("Initial Option") to purchase
40,000 shares of Common Stock at a per share exercise price equal to 85% of the
Fair Market Value (defined below) of a share of Common Stock on such date
(subject to the adjustments provided in Section 14 hereof), except that the
price shall be 110% of the Fair Market Value in the case of any person who owns
stock possessing more than 10% of the total combined voting power of all classes
of stock of the Corporation or its subsidiaries. This Section 5(a) shall only
apply to a New Director the first time he or she is elected a director of the
Company after the effective date of this Plan.
(b) Annual Option Grant to Non-Employee Directors ("Annual
Option"). In addition, for so long as (i) this Plan is in effect, and (ii) there
are shares available for the grant of Options hereunder, each person serving as
an elected Non-Employee Director as of the effective date of this Plan and each
New Director (together "Eligible Director") shall be granted automatically, on
January 1st of each year (or the next day on which the Company's Common Stock is
traded should the Company's Common Stock not trade on such date, commencing as
of January 1, 1998 and subject to the adjustments provided in Section 14
hereof), an Option to purchase 60,000 shares of Common Stock at a per share
exercise price equal to 85% of the Fair Market Value (defined below) of a share
of Common Stock), except that the price shall be 110% of the Fair Market Value
in the case of any person who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation or its
subsidiaries. The foregoing notwithstanding, such Eligible Director must have
served as a Non-Employee Director continuously for at least thirty (30) days
immediately preceding the first day of January of any given year, in order to be
eligible for grant of an Annual Option as of January 1st of that year.
(c) Option Price. For the purposes of this Section 5, the "Fair
Market Value" as of any particular date shall mean (i) the closing sales price
on the immediately preceding business day of a share of Common Stock as reported
on the principal securities exchange on which shares of Common Stock are then
listed or admitted to trading or (ii) if not so reported, the average of the
closing bid and asked prices for a share of Common Stock on the immediately
preceding business day as quoted on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or (iii) if not quoted on NASDAQ,
the average of the closing bid and asked prices for a share of Common Stock as
quoted by the National Quotation Bureau's "Pink Sheets" or the National
Association of Securities Dealers' OTC Bulletin Board System. If the price of a
share of Common Stock shall not be so reported, the Fair Market Value of a share
of Common Stock shall be determined by the Board in its absolute discretion.
6. OPTION AGREEMENT. Each Option granted under the Plan shall be
evidenced by an agreement, in a form approved by the Board, which shall be
subject to the terms and conditions of the Plan. Any agreement may contain such
other terms, provisions and conditions as may be determined by the Board and
that are not inconsistent with the Plan.
7. VESTING AND TERM OF OPTIONS. (a) Each Option granted under this
Plan shall be subject to vesting pursuant to one of two schedules: (i) vesting
in full on the date of grant; or (ii) vesting in four (4) equal installments
commencing on the first anniversary of the date of grant; provided, however,
that each such Option, regardless of the manner of vesting, shall be subject to
termination as provided in Section 9 hereof. The schedule of vesting, whether
vesting in full or in installments, shall be determined by the Board as part of
and at the time of the grant; provided however, that any Option granted under
this Plan which vests in full on the date of grant as set forth in subsection
(i) above, shall be subject, as a condition of such Option grant, to the
Company's right to repurchase as provided in Section 16 hereof. (b) Each Option
agreement shall also provide that the Option shall expire ten years from the
date of grant, unless sooner terminated pursuant to Section 9 hereof.
8. EXERCISE OF OPTIONS. Options shall be exercisable at any time after
their appropriate vesting date, subject to termination as provided in Section 9
hereof and to the Company's right to repurchase as provided in Section 16
hereof. Options shall be exercised by written notice to the Company setting
forth the number of shares with respect to which the Option is being exercised
and specifying the address to which the certificates representing such shares
are to be mailed. Such notice shall be accompanied by cash or certified check,
bank draft, or postal or express money order payable to the order of the
Company, for an amount equal to the product obtained by multiplying the exercise
price of the Option by the number of shares of Common Stock with respect to
which the Option is then being exercised. As promptly as practicable after
receipt of such written notification and payment, the Company shall deliver to
the Eligible Director a certificate or certificates representing the number of
shares of Common Stock with respect to which such Option has been so exercised,
issued in the Eligible Director's name, provided, however, that such delivery
shall be deemed effected for all purposes when the Company's transfer agent
shall have deposited such certificates in the United States mail, addressed to
the Eligible Director, at the address specified pursuant to this Section 8.
9. TERMINATION OF OPTIONS. Except as may be otherwise expressly
provided in this Plan or otherwise determined by the Board, each Option, to the
extent it shall not have been exercised previously, shall terminate on the
earliest of the following: (i) on the last day of the three-month period
commencing on the date on which the Eligible Director ceases to be a member of
the Board for any reason other than the death or total disability (within the
meaning of Section 22(e)(3) of the Internal Revenue Code) of the Eligible
Director, in which case the option may be exercised at any time within eighteen
(18) months following termination of such directorship or service, during which
period the Eligible Director shall be entitled to exercise all Options held by
the Eligible Director on the date on which the Eligible Director ceased to be a
member of the Board that could have been exercised on such date; or (ii) ten
years after the date of grant of such Option.
10. TRANSFERABILITY OF OPTIONS. During the term of an Option, the
Option shall not be assignable or otherwise transferable except by will or by
the laws of descent and distribution. Each Option shall be exercised during the
Eligible Director's lifetime only by the Eligible Director.
11. NO RIGHTS AS STOCKHOLDER. No Eligible Director shall have any
rights as a stockholder with respect to shares covered by an Option until the
date of issuance of a stock certificate or certificates representing such
shares. Except as provided in Section 14 hereof, no adjustment for dividends or
otherwise shall be made if the record date therefor is prior to the date of
issuance of certificates representing shares of Common Stock purchased pursuant
to exercise of this Option.
12. INVESTMENT REPRESENTATIONS. Whether or not the Options and shares
covered by the Plan have been registered under the Securities Act of 1933, as
amended, each person exercising an option under the Plan may be required by the
Company to give a representation in writing that such person is acquiring such
shares for investment and not with a view to, or for sale in connection with,
the distribution of any part thereof. The Company will endorse any necessary
legend referring to the foregoing restriction upon the certificate or
certificates representing any shares issued or transferred to the Eligible
Director upon the exercise of any Option granted under the Plan.
13. AMENDMENT OR TERMINATION. The Board may amend, modify, revise or
terminate this Plan at any time and from time to time. All Options granted under
this Plan shall be subject to the terms and provisions of this Plan and any
amendment, modification or revision of this Plan shall be deemed to amend,
modify or revise all Options outstanding under this Plan at the time of such
amendment, modification or revision. If this Plan is terminated by action of the
Board, all outstanding Options may be terminated.
14. CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The existence of
outstanding Options shall not affect in any way the right or power of the
Company or its stockholders to make or authorize the dissolution or liquidation
of the Company, any sale or transfer of all or any part of the Company's assets
or business, any reorganization or other corporate act or proceeding, whether of
a similar character or otherwise, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, any merger or consolidation of the Company, or any issuance of bonds,
debentures, preferred or prior preference stock senior to or affecting the
Common Stock or the rights thereof; provided, however, that if (i) the
outstanding shares of Common Stock of the Company shall be subdivided into a
greater number of shares or (ii) the outstanding shares of Common Stock shall be
combined into a smaller number of shares thereof, then (a) the number of shares
of Common Stock available for the grant of Options under the Plan shall be
proportionally adjusted to equal the product obtained by multiplying such number
of available shares remaining by a fraction, the numerator of which is the
number of outstanding shares of Common Stock after giving effect to such
combination or subdivision and the denominator of which is that number of
outstanding shares of Common Stock prior to such combination or subdivision, (b)
the exercise price of any Option then outstanding under the Plan shall be
proportionately adjusted to equal the product obtained by multiplying such
exercise price by a fraction, the numerator of which is the number of
outstanding shares of Common Stock prior to such combination or subdivision and
the denominator of which is that number of outstanding shares of Common Stock
after giving effect to such combination or subdivision, and (c) the number of
shares of Common Stock issuable on the exercise of any Option then outstanding
under the Plan or thereafter granted under the Plan shall be proportionately
adjusted to equal the product obtained by multiplying such number of shares of
Common Stock by a fraction, the numerator of which is the number of outstanding
shares of Common Stock after giving effect to such combination or subdivision
and the denominator of which is that number of outstanding shares of Common
Stock prior to such combination or subdivision.
15. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. (a) The Plan, the
grant and exercise of Options thereunder, and the obligation of the Company to
sell and deliver shares acquirable on exercise of such Options, shall be subject
to all applicable federal and state laws, rules and regulations and to such
approvals by any governmental or regulatory agency or national securities
exchange as may be required. The Company shall not be required to sell or issue
any shares on exercise of any Option if the issuance of such shares shall
constitute a violation by the Non-Employee Director or the Company of any
provisions of any law or regulation of any governmental authority. (b) Each
Option granted under this Plan shall be subject to the requirement that, if at
any time the Board shall determine that (i) the listing, registration or
qualification of the shares subject thereto on any securities exchange or under
any state or federal law of the United States or of any other country or
governmental subdivision thereof, (ii) the consent or approval of any
governmental regulatory body, or (iii) the making of investment or other
representations, are necessary or desirable in connection with the issue or
purchase of shares subject thereto, no such Option may be exercised in whole or
in part unless such listing, registration, qualification, consent, approval or
representation shall have been effected or obtained, free of any conditions not
acceptable to the Board. (c) These provisions do not obligate the Company to
register either the Plan, any option granted under the Plan, or any stock issued
or issuable pursuant to any such Option, under any state or federal law of the
United States or of any other country or governmental subdivision thereof. (d)
Any determination by the Board in connection with any of the above
determinations shall be final, binding and conclusive.
16. REPURCHASE RIGHT OF THE COMPANY.
(a) General. Shares of stock issued or issuable upon exercise of
an option grant with immediate vesting, as set forth in Section 7(a)(i), are
subject to a right of repurchase by the Company. If the service of a
Non-Employee Director to the Company or a subsidiary of the Company is
terminated for any reason other than by death or total disability, except as
otherwise described in Section 16(d), the Company (or any subsidiary designated
by it) shall have the option for 90 days after the termination of service by the
Non-Employee Director to repurchase all or any part of his stock issued or
issuable upon exercise of the option, as provided in this Section 16.
(b) Notice. Within 30 days of receiving notice from a
Non-Employee Director or his representative of the termination of the director's
service to the Company or a subsidiary of the Company, the Company must give
notice to the director of the Company's decision whether or not to exercise its
repurchase right.
(c) Repurchase Price. The repurchase price per share repurchased
in accordance with this Section 16 shall be the original per share purchase
price set forth in the accompanying Notice of Stock Option Grant. The Company's
repurchase right at this price lapses at the rate of 25% per year, starting with
the first anniversary of the Option Grant, and continues over 4 years, without
reference to the date the Option was exercised or became exercisable.
(d) Shares Acquired Through Exercise of Option After Termination
of Services. If the Non-Employee Director exercises in whole or in part his
option after termination of his services to the Company for any reason other
than death or total disability, the Company shall have, for 90 days after the
exercise, the right to repurchase the shares so acquired upon written notice to
the Non-Employee Director. The purchase price and terms of payment will be
governed by Sections 16(c) and (e) of this Plan.
(e) Payment of the Purchase Price. The Company's right to
repurchase must be exercised for cash or cancellation of purchase money
indebtedness for the shares within 90 days of termination of service by the
Non-Employee Director (or in the case of securities issued upon exercise of
Options after the date of termination, within 90 days after the date of
exercise).
(f) Death or Total Disability. There shall be no right of
repurchase by the Company upon the Non-Employee Directors' death or total
disability. The foregoing notwithstanding, the provisions of this Section 16(g)
do not extend or otherwise affect the termination of any Option which shall not
have been exercised, as otherwise set forth in Section 9 herein.
(g) Repurchase Right as to Other Shares. The repurchase right of
the Company shall apply as well to all shares or other securities issued in
respect to any Option due to any stock split, reverse stock split, stock
dividend, recapitalization, reclassification, spin-off, split-off, merger,
consolidation or reorganization ("Other Shares") but such right shall expire on
the occurrence of any event or transaction upon which the Option terminates.
17. INDEMNIFICATION OF BOARD OF DIRECTORS. The Company shall, to the
fullest extent permitted by law, indemnify, defend and hold harmless any person
who at any time is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) in any way relating to or arising out
of this Plan or any Options granted hereunder by reason of the fact that such
person is or was at any time a director of the Company against judgments, fines,
penalties, settlements and reasonable expenses (including attorneys' fees)
actually incurred by such person in connection with such action, suit or
proceeding. This right of indemnification shall inure to the benefit of the
heirs, executors and administrators of each such person and is in addition to
all other rights to which such person may be entitled by virtue of the bylaws of
the Company or as a matter of law, contract or otherwise.
18. ADDITIONAL PROVISIONS. (a) Nothing in the Plan, or in any
instrument executed pursuant thereto, shall confer upon any Non-Employee
Director either the right or the obligation to continue acting as a director of
(or to employment by) the Company, nor shall any Plan provision or instrument
executed pursuant thereto affect any right of the Company, its Board and/or its
shareholders to terminate the directorship (or employment) of any Non-Employee
Director with or without cause. (b) In connection with each option granted
pursuant to the Plan, each Non-Employee Director shall make arrangements
satisfactory to the Company to insure that the amount of any federal or other
withholding tax required to be withheld with respect to such sale or transfer is
made available to the Company for timely payment of such tax.
19. EFFECTIVE DATE OF THE PLAN. This Plan shall become effective,
subject to stockholder approval, on February 18, 1998. No Option shall be
granted pursuant to this Plan on or after February 18, 2008.
20. GOVERNING LAW. The Plan shall be governed by, and all questions
arising hereunder, shall be determined in accordance with the laws of the State
of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within California.
EXHIBIT 99.5
FINET HOLDINGS CORPORATION
FORM OF NON-STATUTORY STOCK OPTION AGREEMENT
PURSUANT TO
1998 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN, AS AMENDED
1. Grant of Option. Finet Holdings Corporation, a Delaware corporation
(the "Company"), hereby grants to the Optionee named in the Notice of Stock
Option Grant (the "Optionee"), an option (the "Option") to purchase the total
number of shares of Common Stock (the "Shares") set forth in the Notice of
Grant, at the exercise price per share also set forth in the Notice (the
"Exercise Price") subject to the terms, definitions and provisions of the 1998
Non-Employee Directors' Stock Option Plan (the "Plan") adopted by the Company,
which is incorporated herein by reference. Unless otherwise defined herein, the
terms defined in the Plan shall have the same defined meanings in this Option.
The Option granted hereunder will be a nonstatutory stock option for federal tax
purposes.
2. Exercise of Option. This Option shall be exercisable during its
term in accordance with the Exercise Schedule set out in the Notice of Grant,
subject to shareholder approval of the Plan by or before February 18, 1999, as
follows:
(a) Right to Exercise.
(i) This Option may not be exercised for a fraction of a
share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in
subsection 2(a)(iii).
(iii) In no event may this Option be exercised after the date
of expiration of the term of this Option as set forth in the Notice of Grant.
(b) Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised, and such other
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
Price. This Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his investment
representations in a form acceptable to the Company.
4. Method of Payment. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check; or
(c) surrender of other shares of Common Stock of the Company
which (i) either have been owned by the Optionee for more than six (6) months on
the date of surrender or were not acquired directly or indirectly, from the
Company and (ii) have a fair market value on the date of surrender equal to the
Exercise Price of the Shares as to which the Option is being exercised.
5. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation. As a condition to the
exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
6. Termination of Relationship. In the event of termination of
Optionee's relationship or status as a Non-Employee Director, Optionee may, to
the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to exercise
this Option at the date of such termination, or if Optionee does not exercise
this Option within the time specified herein, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's status as a Non-Employee
Director as a result of total and permanent disability (as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended), Optionee may, but
only within twelve (12) months from the date of termination of service (but in
no event later than the date of expiration of the term of this Option as set
forth in Section 10 below), exercise the Option to the extent otherwise so
entitled at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
8. Death of Optionee. Notwithstanding the provisions of Section 6
above, in the event of the death of Optionee, the Option may be exercised at any
time within twelve (12) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee could exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option.
11. Terms of the Plan. The Optionee understands that the Plan includes
important terms and conditions that apply to this Option. Those terms include,
without limitation: important conditions to the ability of the Optionee to
transfer the Option or to transfer Shares received upon exercise of the Option
and early termination of the Option following the occurrence of certain events,
including the Optionee no longer being a Non-Employee Director of the Company or
any subsidiary thereof.
12. Governing Law. This Agreement shall be governed by the laws of the
State of California.
FINET HOLDINGS CORPORATION,
a Delaware corporation
By:
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Optionee acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the
terms and provisions thereof. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.
Dated:
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[Optionee Signature]
