<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
<TABLE>
<S> <C>
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
FINET.COM, INC.
-----------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
</TABLE>
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<S> <C> <C>
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
----------------------------------------------------------
(2) Aggregate number of securities to which transaction
applies:
----------------------------------------------------------
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
----------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
</TABLE>
<PAGE>
FINET.COM, INC.
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 2000
------------------------
TO THE STOCKHOLDERS OF
FiNET.COM, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
FiNet.com, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, May 24, 2000 at 10:00 a.m., local time, at the San Ramon Marriott,
2600 Bishop Drive, San Ramon, California 94583 for the following purposes:
1. To elect directors to serve until the next annual meeting of
stockholders and until their successors are duly elected and qualified.
2. To ratify the appointment of Ernst & Young LLP as independent auditors
of the Company for the fiscal year ending December 31, 2000.
3. To transact such other business as may properly come before the meeting
or any adjournments thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on March 29, 2000 are
entitled to notice of, and to vote at, the meeting and any adjournments thereof.
All stockholders are cordially invited to attend the meeting in person. The
presence in person and/or the representation by proxy of the holder of a
majority on the issued and outstanding shares of stock entitled to vote is
necessary and sufficient to constitute a quorum. Accordingly, if you do not
expect to be present at the meeting, you may vote your share of stock by phone
or by executing the accompanying proxy and returning it promptly in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder previously signed and
returned a proxy.
For the Board of Directors
San Ramon, California
April 17, 2000
[/S/ RICK COSSANO]
------------------------------------------------------------------
Rick Cossano,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE VOTE YOUR SHARES OF
STOCK BY PHONE OR COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT
PROMPTLY IN THE ENCLOSED ENVELOPE
<PAGE>
FINET.COM, INC.
----------------
PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited on behalf of the Board of Directors (the
"Board") of FiNet.com, Inc. (the "Company") for use at the Company's Annual
Meeting of Stockholders (the "Annual Meeting") to be held Wednesday, May 24,
2000 at 10:00 a.m., local time, or at any adjournments or postponements thereof,
for the purposes set forth herein and in the accompanying Notice of Annual
Meeting of Stockholders. The Annual Meeting will be held at the San Ramon
Marriott, 2600 Bishop Drive, San Ramon, California 94583.
The Company's principal executive offices are located at 2527 Camino Ramon,
Suite 200, San Ramon, California 94583. The telephone number at that address is
(925) 242-6550.
These proxy solicitation materials were mailed on or about April 17, 2000 to
all stockholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND OUTSTANDING SHARES
Stockholders of record at the close of business on March 29, 2000 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. On
the Record Date, approximately 95,007,585 shares of the Company's Common Stock,
$0.01 par value per share (the "Common Stock"), were issued, outstanding and
entitled to vote at the Annual Meeting.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the Annual Meeting and voting in person. Mere attendance at
the Annual Meeting will not serve to revoke a proxy.
VOTING AND SOLICITATION
Holders of Common Stock are entitled to one vote for each share of Common
Stock held. In order to constitute a quorum for conduct of business at the
Annual Meeting, a majority of the outstanding shares of Common Stock outstanding
on the Record Date must be represented at the Annual Meeting.
Solicitation of proxies may be made by directors, officers and other
employees of the Company by personal interview, telephone, facsimile or other
method. No additional compensation will be paid for any such services. Costs of
solicitation, including preparation, assembly, printing and mailing of this
proxy statement, the proxy and any other information furnished to the
stockholders, will be borne by the Company. The Company may reimburse the
reasonable charges and expenses of brokerage houses or other nominees or
fiduciaries for forwarding proxy materials to, and obtaining authority to
execute proxies from, beneficial owners for whose account they hold shares of
Common Stock.
QUORUM; ABSTENTIONS AND BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the shares of Common Stock outstanding on the Record Date. Broker
non-votes and shares held by persons abstaining will be counted in determining
whether a quorum is present at the Annual Meeting. However, abstentions are
counted as votes against a proposal for purposes of determining whether or not a
proposal has been approved, whereas broker non-votes are not counted for
purposes of determining whether a proposal has been approved.
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
The Bylaws of the Company provide for a Board consisting of not fewer than
four nor more than fifteen directors. The number of directors is currently set
at six. Six directors are to be elected at the Annual Meeting. Unless otherwise
instructed, the proxy holders will vote the proxies they receive for the six
nominees named below. All of the nominees named below, are incumbent directors.
All of the incumbent directors of the Company were elected to their present
terms by the stockholders of the Company, except that Mr. Cossano was appointed
to the Board in February 2000. The present term of each of the directors
continues until the Annual Meeting and until his successor has been elected and
qualified. In the event that any nominee is unable or declines to serve as a
director at the time of the Annual Meeting, the proxies will be voted for any
nominee who shall be designated by the present Board to fill the vacancy. The
Board has no reason to believe that any of the persons named below will be
unable or unwilling to serve as a director if elected.
The term of office of each person elected as a director will continue until
the next Annual Meeting of Stockholders and until his successor has been elected
and qualified.
The name of and certain other information regarding each nominee are set
forth in the table below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION SINCE
- --------------- -------- -------------------------------------- --------
<S> <C> <C> <C>
Rick Cossano.......................... 44 President and Chief Executive Officer 2000
L. Daniel Rawitch..................... 41 Vice Chairman of the Board 1995
Stephen J. Sogin, Ph.D................ 58 Venture Capitalist 1990
S. Lewis Meyer........................ 56 President and Chief Executive Officer, 1997
Imatron Inc.
Richard E. Wilkes..................... 54 President and Chief Executive Officer, 1998
IMX, Inc.
Antonio P. Falcao..................... 28 Chief Financial Officer, A. Amorim 1999
Group affiliated companies
</TABLE>
There is no family relationship between any of the directors or executive
officers of the Company. The Certificate of Incorporation and Bylaws of the
Company contain provisions eliminating or limiting the personal liability of
directors for violations of a director's fiduciary duty to the extent permitted
by the Delaware General Corporation Law.
RICK COSSANO has served as President, Chief Executive Officer and a member
of the Board since February 2000. Prior to joining FiNet.com, Mr. Cossano was
the President and Chief Operating Officer of LandSafe Title, Inc. from 1996 to
2000 and the Executive Vice President of the Wholesale Lending Division and
Consumer Markets Division for Countrywide Home Loans from 1993 to 1996.
L. DANIEL RAWITCH has served as Vice Chairman of the Board since May 1999.
He also served the Company in various other positions, including as President of
the Company from October 1998 to May 1999 and as its Chief Executive Officer
from May 1995 to October 1998. Prior to joining the Company, he served as Chief
Executive Officer of Residential Pacific Mortgage, Inc., from 1989 until it was
acquired by the Company in August 1994. In January 2000, Mr. Rawitch became
Chairman of @Work Venture Group, Inc., a technology venture fund.
STEPHEN J. SOGIN has served as a director since March 1990 and served as the
Company's interim Chief Executive Officer in January 2000. Dr. Sogin is a
venture capitalist. From December 1984 until January 1995, he was a general
partner of Montgomery Medical Ventures. In July 1997, Dr. Sogin
2
<PAGE>
consented to a cease and desist order issued by the SEC involving his late
filing of Forms 3, 4 and 5 which he was required to file in his capacity as a
general partner of Montgomery Medical Ventures II. None of the SEC's findings
involve charges that Dr. Sogin received improper gains or personal benefits as a
result of these violations. Dr. Sogin has advised the Company that the trades in
question were conducted by the partnership (Montgomery Medical Ventures II) and
none of these trades were executed by him personally. Dr. Sogin is also a
director of Osteotech, Inc. Dr. Sogin received his B.S., M.S. and Ph.D. degrees
in microbiology from the University of Illinois.
S. LEWIS MEYER has served as a director since January 1997. Since
June 1993, Dr. Meyer has served as President and Chief Executive Officer of
Imatron, Inc., a company engaged in designing, manufacturing and marketing a
high performance electron beam tomography scanner. From April 1991 until joining
Imatron, Dr. Meyer was Vice President, Operations of Otsuka Electronics
(U.S.A.), Inc. From August 1990 to April 1991, he was a founding partner of
Medical Capital Management, a company engaged in providing consulting services
to medical equipment manufacturers, imaging services providers and related
medical professionals. Before that, he was Founder, President and Chief
Executive Officer of American Health Services Corp. (now Insight Health
Services), a developer and operator of diagnostic imaging and treatment centers.
Dr. Meyer is also a director of BSD Medical Corporation. Dr. Meyer received his
B.S. degree in Physics from the University of the Pacific and his M.S. and Ph.D.
degrees in physics from Purdue University.
RICHARD E. WILKES has served as a director since November 1998. Since
April 1999 he has been President and Chief Executive Officer of IMX, Inc., a
company engaged in the business of electronic trading of mortgages. Prior to
that he was a principal in Mortgage Outsource Services, a provider of pre- and
post-closing services to the residential mortgage industry. In October 1995,
Mr. Wilkes founded Group Millennium, a consulting company specializing in
mergers and acquisitions and strategic planning for the mortgage banking
industry. From 1989 to 1995, Mr. Wilkes was employed by MacAndrews and Forbes
Holdings, Inc.
ANTONIO P. FALCAO has served as a director since February 1999. Since 1994,
Mr. Falcao has been the Chief Financial Officer for several companies of the A.
Amorim Group, a business group based in Portugal that owns Banco Nacional de
Credito Imobiliario, a Portuguese real estate bank. The A. Amorim Group, which
is affiliated with Americo Ferreira Amorim, one of the Company's largest
stockholders, also has interests in the cork, textile, hotel, oil, finance and
telecommunications industries. Mr. Falcao received his degree in finance and
economics from the University of Oporto.
REQUIRED VOTE
The six nominees receiving the highest number of affirmative votes of the
shares present or represented and entitled to be voted for them will be elected
as directors.
THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE ELECTION OF EACH OF
THE NOMINATED DIRECTORS
BOARD MEETINGS AND COMMITTEES
The Board held a total of six meetings during the calendar year ended
December 31, 1999. Each of the directors attended at least 75% of the aggregate
of all meetings of the Board and of the committees, if any, upon which such
director served. The Board has an Audit Committee and Compensation Committee but
no Nominating Committee.
The purpose of the Audit Committee is to: (1) make recommendations to the
full Board concerning the appointment of independent auditors; (2) review the
scope of the audit and related fees; (3) review audit findings and
recommendations with independent auditors to determine the adequacy and
effectiveness of internal controls; (4) review the appropriateness of accounting
principles
3
<PAGE>
and financial disclosure practices with independent auditors and financial
management; (5) review legal affairs of the Company with General Counsel and
other appropriate legal officers; and (6) review the Company's quarterly
financial statements prior to filing with the Securities and Exchange
Commission. The Audit Committee which held two meetings during calendar 1999,
currently consists of Messrs. Wilkes and Falcao and Dr. Meyer.
The purpose of the Compensation Committee is to: (1) review and approve the
total compensation of senior management including the Chief Executive Officer;
(2) assure that the Company's annual and long-term incentive plans are
administered in a manner consistent with the Company's compensation strategy;
(3) grant stock options and stock bonuses under the Company's stock based plans;
(4) review the Company's employee benefit programs including equity-based
programs; and (5) approve annual retainers and meeting fees for members of the
Board and committees of the Board. The Compensation Committee currently consists
of Drs. Meyer and Sogin and Mr. Wilkes. The Compensation Committee held three
meetings during calendar 1999.
COMPENSATION OF DIRECTORS
Directors who are full-time employees of the Company are not separately
compensated for their service on the Board. Directors who are not employees of
or full-time consultants to the Company or any subsidiary of the Company
("Non-employee Directors") receive $15,000 annually for their services and
attendance at regular Board meetings, and $1,000 for each additional Board or
committee meeting attended. Non-employee Directors are also reimbursed for
expenses related to their attendance at meetings.
Upon being appointed to the Board, each Non-employee Director receives a
fully vested option to purchase 40,000 shares of Common Stock under the
Company's 1998 Non-employee Directors' Stock Option Plan (the "Directors'
Plan"). Shares of Common Stock acquired upon exercise of such options are
subject to a right of repurchase in favor of the Company, which lapses in four
equal annual installments, beginning on the first anniversary of the date of
grant. In addition, each Non-employee Director receives an automatic option
grant to purchase 60,000 shares of Common Stock on January 1 of each year, which
vests in four equal annual installments, commencing on the first anniversary of
the date of grant. The exercise price of options granted under the Directors'
Plan is 85% of the fair market value of the Common Stock on the date of grant.
4
<PAGE>
MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Common Stock as of the Record Date by (i) each person the
Company knows to own beneficially more than 5% of the Common Stock, (ii) each
director of the Company, (iii) each nominee for director of the Company,
(iv) each of the executive officers named in the Summary Compensation Table and
(v) all of the Company's directors and executive officers as a group. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. In computing the number of shares beneficially owned by a
person and the percentage of ownership of that person, shares subject to options
or warrants held by that person that are currently exercisable or exercisable
within 60 days of the Record Date 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 stockholder is
based on 95,007,585 shares of Common Stock outstanding as of the Record Date.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
-----------------------------------------
NUMBER ISSUABLE
TOTAL WITHIN 60 DAYS OF
NAME OF BENEFICIAL OWNER NUMBER THE RECORD DATE PERCENT
- ------------------------ ---------- ----------------- --------
<S> <C> <C> <C>
Banco Espirito Santo de Investimento, S.A. .......... 11,180,800(1) 1,949,867 11.5%
Rua Tierro Galvan
Torre 3, 14th Floor
1099-028 Lisbon, Portugal
Jose Maria Salema Garcao ............................ 9,290,000 6,150,000 9.2
Quinta Da Marinha, Lote
CT-14, 2750 Cascais, Portugal
Americo Ferreira Amorim ............................. 8,000,000(2) 1,000,000 8.3
Edificio Amorim II
Meladas--Apartado 47
4536 Mozzelos VFR, Portugal
Cumberland Associates LLC ........................... 5,740,000 -- 6.1
1114 Avenue of Americas
New York, NY 10036
L. Daniel Rawitch.................................... 1,458,206 833,333 1.5
S. Lewis Meyer....................................... 1,325,000 1,325,000 1.4
Mark L. Korell....................................... 1,051,031 926,031 1.1
Rick Cossano......................................... 500,000 -- *
Stephen J. Sogin..................................... 175,317 175,317 *
Gary A. Palmer....................................... 140,000 140,000 *
Christos Skeadas..................................... 100,000 100,000 *
Richard E. Wilkes.................................... 50,000 10,000 *
Antonio P. Falcao.................................... 40,000 40,000 *
Michael G. Conway.................................... 15,000 15,000 *
All directors and executive officers as a group (10 4,854,554 4,049,681 4.9%
persons)...........................................
</TABLE>
- ------------------------
* Less than 1% of the outstanding shares of Common Stock.
5
<PAGE>
(1) Includes the security holdings of the entities listed below, all of which
are affiliated with Banco Espirito Santo de Investimento:
<TABLE>
<CAPTION>
NUMBER OF
OUTSTANDING
ENTITY SHARES
- ------ -----------
<S> <C>
Banco Espirito Santo de Investimento, S.A................... 2,736,076
Banco Espirito Santo e Comercial de Lisboa, S.A............. 2,442,159
ESAF--Espirito Santo Fundos de Pensoes, S.A................. 2,666,666
Espirito Santo Dealer, S.A.................................. 871,893
Espirito Santo Financial Group, S.A......................... 514,139
</TABLE>
(2) Includes 600,000 shares held by Fondation Pamalu, a foundation of which
Mr. Amorim is the beneficiary.
EXECUTIVE COMPENSATION
Effective November 9, 1999, the Company changed its fiscal year end from
April 30 to December 31. The following table provides certain summary
information concerning the compensation received for services rendered to the
Company during the calendar year ended December 31, 1999 and during the fiscal
years ended April 30, 1999, 1998 and 1997 by the Company's Chief Executive
Officer and the four other most highly compensated executive officers whose
aggregate compensation for the year ending December 31,1999 exceeded $100,000.
These people are referred to as the "Named Executive Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------------- UNDERLYING ALL OTHER
NAME AND POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ----------------- ------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Mark L. Korell ........................ Calendar 1999 $366,667 $30,000 3,096,527 $ 8,625(2)
Chairman of the Board, President and Fiscal 1999 183,563 -- 3,676,291 72,625(3)
Chief Executive Officer(1)
L. Daniel Rawitch ..................... Calendar 1999 162,500 -- -- 6,497(5)
Vice Chairman(4) Fiscal 1999 154,000 -- -- 53,795(5)
Fiscal 1998 150,000 -- -- --
Fiscal 1997 150,000 58,341 -- 35,000(6)
Gary A. Palmer ........................ Calendar 1999 193,501 -- -- 20,000(2)
Executive Vice President, Chief Fiscal 1999 62,667 -- 350,000 10,167(2)
Financial Officer
Michael G. Conway ..................... Calendar 1999 187,500 -- 67,500 --
Executive Vice President, Capital Fiscal 1999 90,234 9,840 367,500 --
Markets(7)
Christos Skeadas ...................... Calendar 1999 138,436 -- 600,000 22,063(2)
Executive Vice President, Chief Fiscal 1999 -- -- 350,000 --
Technology Officer(8)
</TABLE>
- ------------------------
(1) Mr. Korell retired effective January 15, 2000.
(2) Car/commute allowance.
6
<PAGE>
(3) Value of 125,000 shares of Common Stock compensation.
(4) Mr. Rawitch served as Chief Executive Officer of the Company from May 1995
until October 1998 and as President of the Company from October 1998 to
May 1999.
(5) Represents deferred compensation.
(6) During fiscal 1997, prior to the Company's acquisition of its Monument
Mortgage, Inc. subsidiary, Mr. Rawitch was employed by an affiliate of
Monument Mortgage on a part-time basis, for which Mr. Rawitch received
compensation of $35,000.
(7) Mr. Conway was terminated by the Company effective January 31, 2000.
(8) Mr. Skeadas resigned effective March 3, 2000.
OPTION GRANTS IN 1999
The following table provides certain summary information regarding stock
options granted to the Named Executive Officers during the calendar year ending
December 31, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER OF PERCENT OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED(#) FISCAL YEAR(1) ($/SHARE) DATE 5% 10%
- ---- ---------- ---------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Korell(3).................. 86,990 1.0% $3.313 08/20/09 181,246 459,313
345,921 3.8 4.125 06/28/09 897,385 2,274,150
39,602 0.4 7.625 05/20/09 189,904 481,255
247,723 2.7 9.125 05/10/09 1,421,599 3,602,611
2,001,291 22.1 1.031 02/03/09 1,297,618 3,288,418
375,000 4.1 1.031 02/03/09 243,146 616,181
L. Daniel Rawitch.................. -- -- -- -- -- --
Gary A. Palmer..................... -- -- -- -- -- --
Michael G. Conway.................. 67,500 0.7 1.031 02/03/09 43,766 110,913
Christos Skeadas................... 250,000 2.8 2.563 10/15/09 402,964 1,021,190
350,000 3.9 2.250 03/02/09 495,255 1,255,072
</TABLE>
- ------------------------
(1) Based on 9,075,295 options issued to employees during 1999.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price.
(3) Pursuant to Mr. Korell's retirement, the aggregate number of unvested
options canceling in fiscal 2000 is 2,662,812.
AGGREGATED OPTION EXERCISES IN CALENDAR YEAR 1999 AND 1999 YEAR END OPTION
VALUES
The following table provides certain summary information concerning the
value of unexercised options held by each of the Named Executive Officers as of
December 31, 1999 and the value realized
7
<PAGE>
on exercise of options in 1999. Value of unexercised options is considered to be
the difference between exercise price and market price of $1.312 on
December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1999 DECEMBER 31, 1999
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark L. Korell.................... 10,000 $15,930 1,597,065 2,789,462 $671,246 $966,369
L. Daniel Rawitch................. -- -- -- -- -- --
Gary A. Palmer.................... -- -- 70,000 280,000 39,410 157,640
Michael G. Conway................. -- -- 148,125 219,375 90,990 125,145
Christos Skeadas.................. -- -- 150,000 450,000 -- --
</TABLE>
The Company did not make any awards during the calendar year ended
December 31, 1999 to any of the Named Executive Officers under any long-term
incentive plan providing compensation intended to serve as incentive for
performance to occur over a period longer than one fiscal year, excluding stock
options.
EMPLOYMENT AGREEMENTS
In February 2000, the Company entered into a three-year employment agreement
with W. Robert Snow, its Executive Vice President--Business to Business. The
agreement provides for an annual salary of $182,000, monthly bonuses based on
business-to-business revenues and an annual bonus of up to $50,000 for 2000.
Pursuant to the agreement, Mr. Snow received an option to purchase 500,000
shares of Common Stock at an exercise price of $1.281 per share, 100,000 of
which vested on the date of grant and the remainder of which vests in four equal
annual installments commencing on December 31, 2000.
In December 1999, the Company entered into a 3-year employment agreement
with Rick Cossano, its President and Chief Executive Officer. The agreement
provides for an annual salary of $375,000 and an annual bonus of up to $400,000.
Pursuant to the agreement, Mr. Cossano received an option to purchase 3,000,000
shares of Common Stock at an exercise price of $1.031 per share, 500,000 of
which vested on the date of grant, 250,000 of which vest on August 1, 2000,
250,000 of which vest on February 1, 2001, 1,000,000 of which vest on
February 1, 2002 and 1,000,000 of which vest on February 1, 2003. The agreement
provides that in the event of a change in control, Mr. Cossano's options are
subject to accelerated vesting and he is entitled to receive his base salary
through the remainder of the term of the agreement.
The Company entered into a four-year employment agreement with Mr. Korell,
as President and Chief Executive Officer, in October 1998, which was amended in
February 1999 and May 1999. The agreement, as amended, provided: (i) an annual
salary of $350,000 in the first year with annual $25,000 increases in subsequent
years; (ii) an annual bonus equal to 2% of the Company's pre-tax profits;
(iii) a bonus based on revenue growth; and (iv) a bonus for the successful
completion of major equity raising efforts. In addition, Mr. Korell received
(i) 125,000 shares of Common Stock; (ii) a stock option to purchase 1,300,000
shares of Common Stock at an exercise price of $0.56 per share, and (iii) a
stock option to purchase 375,000 shares of Common Stock at an exercise price of
$1.03 per share. The agreement also had an anti-dilution provision pursuant to
which Mr. Korell was granted an option to purchase 2,001,291 shares of Common
Stock at an exercise price of $1.031 per share in February 1999, an option to
purchase 247,723 shares of Common Stock at an exercise price of $9.125 per share
in May 1999, an option to purchase 39,602 shares of Common Stock at an exercise
price of $7.625 per share in May 1999, an option to purchase 345,921 shares of
Common Stock at $4.125 per share in June 1999 and an option to purchase 86,990
shares of Common Stock at $3.313 per share in
8
<PAGE>
August 1999. All of the options were scheduled to become exercisable in five
equal annual installments commencing on the date of grant. Mr. Korell retired
effective January 15, 2000.
In connection with his retirement from the Company, the Company and
Mr. Korell entered into an agreement pursuant to which Mr. Korell will receive
his base salary and health coverage for six months following his retirement. In
addition, Mr. Korell's options to purchase the Company's common stock will
continue to vest for six months following his retirement.
The Company entered into an 18-month employment agreement with Mr. Rawitch
in October 1998, which provided for an annual base salary of $150,000 and an
annual bonus equal to 2% of the Company's pre-tax profits. Pursuant to an
amendment in February 1999, the Company sold Mr. Rawitch a warrant to purchase
600,000 shares of Common Stock at an exercise price of $1.03 per share for
$15,000. The shares are subject to a right of repurchase in favor of the Company
in the event that Mr. Rawitch's employment is terminated for cause. If
Mr. Rawitch's employment is terminated without just cause, the Company is
required to pay his compensation under the agreement until the later of the
termination date of the agreement or 12 months after his termination. In
October 1999, the agreement was again amended to provide for a base salary in
the amount of $102,000 annually with a performance bonus of $20,000 per quarter
and to reduce his hourly commitment to the Company to a maximum of 25 hours per
week.
The Company entered into a four-year employment agreement with Michael G.
Conway, as Executive Vice President--Capital Markets, in October 1998, which was
amended in February 1999. The agreement, as amended, provided for an annual
salary of $187,500 and an annual bonus equal to 1% of the Company's pre-tax
profits. Pursuant to the agreement, Mr. Conway received (i) 15,000 shares of
Common Stock, (ii) an option to purchase 300,000 shares of Common Stock at an
exercise price of $0.66 per share, 75,000 of which vested on the date of grant
and the remainder of which were scheduled to vest in four equal annual
installments commencing on the first anniversary of the date of grant and
(iii) an option to purchase 67,500 shares of Common Stock at an exercise price
of $1.03 per share, which were scheduled to vest in four equal annual
installments commencing on the first anniversary of the date of grant.
Mr. Conway was terminated by the Company effective January 31, 2000.
The Company entered into a two-year employment agreement with Gary Palmer,
its Executive Vice President--Chief Financial Officer, in February 1999. The
agreement provides for an annual salary of $187,000. In December 1998, in
connection with consulting services provided to the Company prior to, and
contingent upon, becoming an employee, Mr. Palmer received an option to purchase
350,000 shares of Common Stock at an exercise price of $0.75 per share, 70,000
of which vested on the date of grant and the remainder of which vests in four
equal annual installments commencing on the first anniversary of the date of
grant.
The Company entered into a one-year employment agreement with Thomas Porter,
as Executive Vice President--Administration, in August 1998, which was amended
in September 1998. The agreement, as amended, provided for an annual base salary
of $150,000. Pursuant to the agreement, Mr. Porter received 40,000 shares of
Common Stock and an option to purchase 200,000 shares of Common Stock at an
exercise price of $0.75 per share, 50,000 of which vested on the date of grant
and the remainder of which was to vest in six equal installments commencing on
the first anniversary of the date of grant. In October 1998, Mr. Porter received
an option to purchase 100,000 shares of Common Stock at an exercise price of
$0.66 per share, 25,000 of which vested immediately and the remainder of which
was to vest in four equal annual installments commencing on the first
anniversary of the date of grant. Mr. Porter resigned effective February 29,
2000.
In connection with his resignation from the Company, Mr. Porter and the
Company entered into an agreement pursuant to which Mr. Porter received six
months base salary.
9
<PAGE>
The Company entered into a 21-month employment agreement with Kevin
Gillespie, as Executive Vice President--Sales and Marketing, in March 1999. The
agreement provided for an annual salary of $150,000 and a quarterly bonus equal
to .0005% of the Company's monthly loan closings over $80 million. Pursuant to
the agreement, Mr. Gillespie also received an option to purchase 350,000 shares
of Common Stock at an exercise price of $1.97 per share, 70,000 of which vested
on the date of grant, and the remainder of which were scheduled to vest in four
equal annual installments commencing on the first anniversary of the date of
grant. Mr. Gillespie resigned effective December 20, 1999.
The Company entered into a 21-month employment agreement with Christos
Skeadas, as Executive Vice President--Chief Technology Officer, in April 1999.
The agreement provided for an annual salary of $185,000. In March 1999, while
employed as a technical advisor, Mr. Skeadas received an option to purchase
350,000 shares of Common Stock at an exercise price of $2.25 per share, 100,000
of which vested on May 2, 1999, 100,000 shares of which were to vest on
March 2, 2000 and 50,000 shares of which were to vest on each of March 2, 2002,
2003 and 2004. Mr. Skeadas resigned effective March 3, 2000.
In connection with his resignation from the Company, Mr. Skeadas and the
Company entered into an agreement pursuant to which Mr. Skeadas will receive
payments equal to six months' of his base salary.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
This report is provided by the Compensation Committee of the Board to assist
stockholders in understanding the Compensation Committee's objectives and
procedures in establishing the compensation of the Company's Chief Executive
Officer, and other executive officers. The Compensation Committee, which is
composed of Non-employee Directors, is responsible for establishing and
administering the Company's executive compensation program.
The Company's executive compensation program consists primarily of salary
and the award of stock options. The program is designed to motivate, reward and
retain the management talent needed to achieve the Company's business objectives
and maintain its competitiveness in the on-line mortgage industry. The program
seeks to achieve these goals by utilizing competitive base salaries that reflect
a philosophy of career continuity, stock options that link compensation to
increases in stockholder value as measured by the trading price of the Common
Stock and rewards for exceptional performance and accomplishments that
contribute to the Company's success.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The philosophical basis of the compensation program is to reward performance
and the level of responsibility associated with an individual's position. The
Compensation Committee finds greatest value in executives who possess the
ability to implement the Company's business plans as well as to react to
unanticipated external factors that can have a significant impact on corporate
performance. Compensation decisions for all executives, including the Named
Executive Officers, are based on the same criteria. These criteria include
quantitative factors that directly improve the Company's short-term financial
performance and qualitative factors that strengthen the company of the long
term, such as demonstrated leadership skills and the ability to deal quickly and
effectively with difficulties which sometimes arise.
The Compensation Committee believes that compensation of the Company's key
executives should:
- link rewards to business results and stockholder returns;
- encourage creation of stockholder value and achievement of strategic
objectives;
10
<PAGE>
- maintain an appropriate balance between base salary and short-term and
long-term incentive opportunity;
- attract and retain, on a long-term basis, highly qualified executive
personnel; and
- provide total compensation opportunity that is competitive with that
provided by competitors in the on-line mortgage industry, taking into
account relative company size and performance as well as individual
responsibilities and performance.
KEY ELEMENTS OF EXECUTIVE COMPENSATION
The Company's executive compensation programs consists of three elements:
base salary, short-term incentives and long-term incentives. Short-term
incentives depend on corporate performance measured against annual objectives
and overall performance. Long-term incentives depend on the performance of the
Common Stock, both in absolute and relatives terms.
BASE SALARY. A competitive base salary is crucial to support the philosophy
of management development and career orientation of executives. Salaries are
targeted to pay levels of the Company's competitors and companies having similar
capitalization and revenues, among other attributes. Executive salaries are
reviewed annually.
SHORT-TERM INCENTIVES. Short-term awards to executives are made in cash and
in stock to recognize contributions to the Company's business during the past
year. The bonus an executive receives is dependent upon the individual's
performance and level of responsibility. Assessment of an individual's relative
performance is made annually based on a number of factors which include
initiative, business judgement, technical expertise and management skills.
STOCK BONUS INCENTIVE PLAN. In 1998, the stockholders approved the adoption
of the 1998 Stock Bonus Incentive Plan. Under the terms of the Stock Bonus Plan,
the Compensation Committee may award shares of Common Stock to employees,
including executive officers. No awards have been made under the Stock Bonus
Plan.
LONG-TERM INCENTIVES. Long-term incentive awards provided by
stockholder-approved compensation programs are designed to develop and maintain
strong management through share ownership and incentive awards.
STOCK OPTION PLAN. In 1998, the stockholders approved the adoption of the
Company's 1998 Stock Option Plan (the "1998 Plan"). In 1999, the stockholders
approved an increase in the number of shares reserved under the 1998 Plan from
4,000,000 to 10,000,000 shares. The Compensation Committee believes that
equity-based compensation provides the greatest performance incentive and the
greatest alignment of executives and stockholder interest. At the sole
discretion of the Compensation Committee, eligible officers and employees will
periodically receive options to purchase shares of the Common Stock pursuant to
the 1998 Plan. The value of the options increases with the market price of the
Common Stock.
EMPLOYEE STOCK PURCHASE PLAN. In 1999, the stockholders approved the
Company's 1999 Employee Stock Purchase Plan (the "Stock Purchase Plan") under
which all employees, including executive officers, may purchase shares of Common
Stock at a discount of the market price in order to encourage broad-based
employee ownership of the Common Stock, thereby aligning the interests of all
participants and stockholders.
1999 CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Korell's compensation was determined under his employment agreement
which was entered into in October 1998 and amended in February 1999. The
agreement, as amended, provided for (i) an
11
<PAGE>
annual salary of $350,000 in the first year with annual $25,000 increases in
subsequent years and (ii) an annual bonus equal to 2% of the Company's pre-tax
profits. In addition, Mr. Korell received (i) 125,000 shares of Common Stock and
(ii) 1,675,000 options to purchase Common Stock. The agreement also had an
anti-dilution provision pursuant to which Mr. Korell had the right to maintain
an equity position in the Company. In connection with the anti-dilution
provision of the agreement, Mr. Korell was granted 2,721,527 additional options
to purchase Common Stock. In May 1999, the Compensation Committee amended
Mr. Korell's compensation package to include a cash bonus based on revenue
growth and a cash bonus for the successful completion of major equity raising
efforts. The Compensation Committee believed that the base salary and other
terms and conditions of his employment were consistent with the foregoing
philosophy and objectives and reflected the scope and level of his
responsibilities.
Members of the Compensation
Committee
S. Lewis Meyer
Stephen J. Sogin
Richard E. Wilkes
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1999, the Company loaned Mr. Rawitch, its Vice Chairman, $95,000;
the loan accrued interest at an annual rate of 7%. In April 1999, Mr. Rawitch
repaid the loan in full, including all accrued interest.
In February 1999, the Company entered into a letter agreement with Jan C.
Hoeffel, a then director of the Company and its former President, concerning the
termination of his employment as a corporate officer. Pursuant to the agreement,
(i) Mr. Hoeffel's employment terminated as of February 28, 1999,
(ii) Mr. Hoeffel received 300,000 restricted shares of Common Stock and
(iii) Mr. Hoeffel forfeited all anti-dilution rights previously granted him, and
surrendered to the Company a warrant to purchase 300,000 shares of Common Stock.
The Company has also agreed to continue to make car lease payments on an
automobile provided to Mr. Hoeffel for as long as he serves as a director.
Mr. Hoeffel's term as director ended September 30, 1999.
In April 1999, the Company entered into a Lender Subscriber Agreement with
IMX, Inc., of which Richard E. Wilkes, one of the Company's current directors,
is President and Chief Executive Officer and of which Mark Korell, the Company's
former President and Chief Executive Officer, is a minority stockholder.
Pursuant to the agreement, IMX will provide the Company with software and
brokerage services.
In June 1999, the Company issued 7,712,081 shares of Common Stock in a
private placement to accredited investors for an aggregate purchase price of
$30,000,000 including 5,064,267 shares of Common Stock to entities affiliated
with Banco Espirito Santo de Investimento, which beneficially owns more than
five percent of the Company's Common Stock.
In November 1999, the Company made a fixed rate, fifteen year second
mortgage loan in the amount of $223,000 to Christos Skeadas, a then executive
officer of the Company. The loan carries an interest rate of 11.5% and matures
on November 14, 2014.
In November 1999, the Company made a fixed rate, third mortgage loan in the
amount of $20,000 to Chris Skeadas, a then executive officer of the Company. The
loans carries an interest rate of 7%. The principal amount and all accrued
interest are due in a single payment on November 12, 2000.
In December 1999, the Company made an adjustable rate, first mortgage loan
in the amount of $356,000 to Michael G. Conway, a then executive officer of the
Company. The loan carries an initial
12
<PAGE>
interest rate of 7.25% and is secured by a second residence. The loan was sold
in the secondary market.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
Based solely on review of the copies of such forms furnished to the Company,
or written representations that no Forms 5 were required, the Company believes
that during the calendar year ended December 31, 1999, all Section 16(a) filing
requirements applicable to its officers, directors and greater than 10%
beneficial owners were complied with.
STOCK PRICE PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Common Stock from January 1, 1995 to December 31, 1999 with cumulative total
returns on the Russell 2000 Index and Hambrecht & Quist Internet Index over the
same period. The graph assumes the investment of $100, and the reinvestment of
all dividends, in each of the Common Stock and the Russell 2000 Index and the
Hambrecht & Quist Internet Index on January 1, 1995.
The Common Stock has traded on the Nasdaq SmallCap Market since
November 1997. Prior to that, the Common Stock traded on the OTC Bulletin Board.
COMPARATIVE FIVE-YEAR TOTAL RETURNS
FINET.COM, RUSSELL 2000 INDEX AND HAMBRECHT & QUIST INTERNET INDEX
(PERFORMANCE RESULTS THROUGH DECEMBER 31, 1999)
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
HAMBRECHT & QUIST
FINET.COM RUSSELL 2000 INTERNET
<S> <C> <C> <C>
5/1/1994 $100 $100 $100
4/95 117 107 123
4/96 9 143 236
4/97 43 143 160
4/98 59 203 368
4/99 153 184 1,156
12/99 23 184 2,093
</TABLE>
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<PAGE>
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board has selected Ernst & Young LLP, independent auditors, to audit the
financial statements of the Company for the fiscal year ending December 31,
2000. Ernst & Young LLP has audited the Company's financial statements since
1999. Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and will have the opportunity to make a statement if they desire
to do so, and are expected to be available to respond to appropriate questions.
REQUIRED VOTE
The affirmative vote of the holders of a majority of the shares of the
Common Stock voting in person or by proxy on this proposal at the Annual Meeting
is required to ratify the appointment of the independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
at the Company's 2001 meeting of stockholders must be received by the Secretary
of the Company no later than December 12, 2001 in order to be included in the
proxy soliciting material relating to that meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted at the Annual Meeting.
If any other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote the shares they
represent as the Board may recommend.
THE BOARD OF DIRECTORS
Dated: April 17, 2000
14
<PAGE>
PROXY
FINET.COM, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
MAY 24, 2000
The undersigned stockholder of FiNet.com, Inc. (the "Company") hereby
appoints Rick Cossano and Gary A. Palmer, and each of them with full power of
substitution to each, the true and lawful attorneys, agents and proxyholders of
the undersigned, and hereby authorizes them to represent and vote, as specified
herein, all of the shares of Common Stock of the Company held of record by the
undersigned on March 29, 2000, at the Annual Meeting of Stockholders of the
Company to be held on May 24, 2000 (the "Annual Meeting") at 10:00 a.m. at the
San Ramon Marriot, 2600 Bishop Drive, San Ramon, California 94583 and any
adjournments or postponements thereof.
CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE
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<PAGE>
{X} Please mark votes as in this example
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN THE MANNER
DIRECTED. IN THE ABSENCE OF DIRECTION, THE SHARES WILL BE VOTED FOR THE
PROPOSALS.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS RELATING TO THE ANNUAL MEETING.
<TABLE>
<S> <C>
1. To elect as directors to serve until the next annual Vote FOR all the nominees (except as directed to the
meeting of stockholders and until their successors contrary) {_}
are duly elected and qualified, the six (6) nominees
listed below:
Vote WITHHELD from all nominees {_}
Rick Cossano
L. Daniel Rawitch
Stephen J. Sogin, Ph.D.
S. Lewis Meyer
Richard E. Wilkes
Antonio P. Falcao
</TABLE>
INSTRUCTIONS: To withhold vote for any individual nominee, write the nominee's
name in the space provided below:
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
2. To ratify the appointment of Ernst & Young LLP as For Against Abstain
independent auditors of the Company for the fiscal {_} {_} {_}
year ending December 31, 2000.
MARK HERE FOR ADDRESS CHANGE AND
NOTE AT LEFT Please sign exactly as name appears hereon. Joint owners
{_} should each sign. Trustees and others acting in a representative
capacity should indicate the capacity in which they sign and give
their full title. If a corporation, please have an authorized officer
sign and indicate the full corporate name. If a partnership, please
sign in partnership name by an authorized person.
Please mark, sign and date this proxy and return it promptly whether
you plan to attend the meeting or not. If you do attend, you may
vote in person if you desire.
Signature: Date: Signature: Date:
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</TABLE>
16
