UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Pursuant to
[_] Confidential, For Use of the SS.240.14a-11(c) or SS.240.14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
HomeSeekers.com, Incorporated
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
________________________________________________________________________________
<PAGE>
HomeSeekers.com LOGO
HomeSeekers.com, Incorporated
6490 S. McCarran Blvd., Suite D-28
Reno, Nevada 89509
May 1, 2000
Dear Stockholder:
We cordially invite you to attend the Annual Meeting of Stockholders to
be held on Wednesday, May 24, 2000 at 9:00 a.m., Pacific time, at the Atlantis
Resort, 3800 South Virginia Street, Reno, Nevada 89502.
The following pages include a formal notice of the meeting and the
Proxy Statement. The Proxy Statement describes various matters on the agenda for
the meeting. After we conclude the formal part of the meeting, we will discuss
the Company's financial performance last year, the progress made in meeting
important strategic objectives and other items of general interest. We will be
pleased to answer any questions that you might wish to raise at the meeting.
We encourage you to attend in person. If that is not possible, please
sign and return the enclosed proxy card as soon as possible. Otherwise, your
vote cannot be counted.
Sincerely,
HomeSeekers.com LOGO
Gregory L. Costley
Chairman and Chief Executive Officer
<PAGE>
HomeSeekers.com, Incorporated
6490 S. McCarran Blvd., Suite D-28
Reno, Nevada 89509
Notice of Annual Meeting of Stockholders
To Be Held May 24, 2000
To the Stockholders of HomeSeekers.com, Incorporated (the "Company"):
Notice is hereby given that the Annual Meeting of Stockholders of the
Company (the "Annual Meeting") will be held at the Atlantis Resort, 3800 South
Virginia Street, Reno, Nevada, 89502, on Wednesday, May 24, 2000 at 9:00 a.m.,
Pacific time, for the following purposes:
1. To elect three directors to serve two years and until
their successors are elected;
2. To ratify the appointment of Ernst & Young LLP as the
Company's independent public auditors for the fiscal
year ending June 30, 2000;
3. To approve an amendment to the HomeSeekers.com,
Incorporated Amended and Restated 1996 Stock Option
Plan increasing the number of shares of the Company's
Common Stock reserved for issuance thereunder from
5,500,000 to 11,500,000 shares;
4. To approve certain option grants to employees and
officers of the Company; and
5. To transact such other business as may properly come
before the meeting.
Only stockholders of record at the close of business on April 14, 2000
are entitled to notice of, and to vote at, the annual meeting and any
postponements or adjournments thereof. If you do not expect to attend the
meeting in person, please sign and return the accompanying proxy card in the
enclosed postage prepaid envelope. If you later find that you can be present or
for any other reason desire to revoke your proxy, you can do so at any time
before the voting.
By order of the Board of Directors,
HomeSeekers.com LOGO
Gregory L. Costley
Secretary
Reno, Nevada
May 1, 2000
<PAGE>
HomeSeekers.com, Incorporated
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of the Company from the holders of the
Company's common stock, $.001 par value (the "Common Stock"), in connection with
the Annual Meeting and all postponements or adjournments thereof. This notice of
the Annual Meeting and proxy statement, the accompanying proxy card and the
Company's Annual Report on Form 10-KSB are first being mailed to stockholders on
or about May 1, 2000 for the purposes set forth in the notice of the Annual
Meeting. The Company's Annual Report on Form 10-KSB contains the information
required by Rule 14a-3 under the Securities Exchange Act of 1934 (the "Exchange
Act").
GENERAL
Only holders of record of shares of Common Stock at the close of
business on April 14, 2000 (the "Record Date") are entitled to notice of, and to
vote at, the Annual Meeting or any postponements or adjournments thereof. At the
close of business on the Record Date, there were 18,400,456 shares of Common
Stock outstanding, each of which is entitled to one vote on each matter to be
acted upon at the Annual Meeting. A majority of these shares will constitute a
quorum for the transaction of business at the Annual Meeting.
If the accompanying proxy card is properly signed and returned to the
Company and is not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the proxy card will vote: (i) for the election as
director of all of the nominees proposed by the Board of Directors; (ii) for
ratification of the appointment of Ernst & Young LLP, as the Company's
independent public auditors for the fiscal year ending June 30, 2000; (iii) to
approve an amendment to the HomeSeekers.com, Incorporated Amended and Restated
1996 Stock Option Plan increasing the number of shares of Common Stock reserved
for issuance thereunder from 5,500,000 to 11,500,000 shares; and (iv) for the
approval of certain option grants to employees and officers of the Company.
Because the Company did not receive notice of any matter intended to be raised
by a stockholder at the Annual Meeting a reasonable time before mailing the
proxy materials, the persons designated as proxy holders in the proxy card will
vote the shares represented thereby, with regard to all other matters, as
recommended by the Company's Board of Directors or, if no such recommendation is
given, in their own discretion. Proxy cards that are properly signed and
returned in a timely manner with no other marking will be voted in accordance
with the recommendation of the Company's Board of Directors. Each stockholder
may revoke a previously granted proxy at any time before it is voted by filing
with the Secretary of the Company a revoking instruction or a duly executed
proxy bearing a later date. The powers of the proxy holders will also be
suspended if the person executing the proxy attends the Annual Meeting and
requests to vote in person. Attendance at the Annual Meeting will not, in
itself, constitute revocation of a previously granted proxy.
The Company will bear the cost of soliciting proxies in the enclosed
form. The Company will also request brokerage firms, banks, nominees, custodians
and fiduciaries to forward proxy materials to the beneficial owners of shares of
Common Stock as of the Record Date and will reimburse the cost of forwarding the
proxy materials in accordance with customary practice.
Votes cast in person or by proxy at the Annual Meeting will be
tabulated by a representative of the Company, who will determine whether or not
a quorum is present. Votes may be cast for, against or as abstentions. Because
abstentions will be counted for purposes of determining the shares present or
represented at the Annual Meeting and entitled to vote, abstentions will have
the same effect as a vote against the proposal to which such abstention applies.
Broker/dealers who hold their customers' shares in street name may, under the
applicable rules of the exchange and other self-regulatory organizations of
which the broker/dealers are members, sign and submit proxies for such shares
and may vote such shares on routine matters, which typically include the
election of directors, but broker/dealers may not vote such shares on certain
other matters, which typically include transactions related to mergers, without
specific instructions from the customer who owns such shares. Proxies signed and
submitted by broker/dealers that have not been voted on certain matters as
described above in the previous sentence are referred to as broker non-votes.
Broker non-votes on a particular matter are not deemed to be shares present and
entitled to vote on such matter and, assuming presence of a quorum, will not
affect whether any proposal is approved at the Annual Meeting.
1
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Certificate of Incorporation and Bylaws of the Company provide that
the Company's Board of Directors is to be divided into two classes of directors,
each of which holds office for a term of two years. Shares represented by the
accompanying proxy will be voted for election of the three nominees recommended
by the Board of Directors, unless the proxy is marked in such a manner as to
withhold authority to vote or as to vote for one or more alternate candidates.
If any nominee for any reason is unable to serve or will not serve, the proxies
may be voted for such substitute nominee as the proxyholder may determine. The
Company is not aware of any nominee who will be unable to or for good cause will
not serve as a director.
Three nominees are named in this Proxy Statement. If elected, the
directors will serve two-year terms expiring at the Annual Meeting of
Stockholders following the fiscal year ending June 30, 2001 or until their
successors have been duly elected and qualified or such director's earlier
resignation or removal. The Board of Directors has nominated three incumbent
directors, Greg Johnson, Douglas Swanson, and John Giaimo, for election to the
Board. Mr. Johnson has served as a director since 1988, Mr. Swanson has served
as a director since 1996, and Mr. Giaimo has served as a director since 1996.
The following sets forth information concerning the age and terms of
service of each of the nominees and directors continuing in office:
Nominees for Election for Two-Year Term
Name Age Director Since
- ---- --- --------------
Greg Johnson.......................... 47 1988
Douglas Swanson....................... 57 1996
John Giaimo........................... 46 1996
Directors Whose Terms Expire at the Annual Meeting Following the
Fiscal Year Ending June 30, 2000
Name Age Director Since
- ---- --- --------------
Bradley N. Rotter..................... 44 1999
David Holmes ......................... 44 1999
Gregory L. Costley.................... 46 1999
Required Vote
Directors are elected by a plurality of votes cast. Votes withheld and
broker non-votes are not counted towards a nominee's total.
The Board of Directors recommends a vote
for the election of each of the nominated directors.
2
<PAGE>
Overview of the Board of Directors
Gregory L. Costley joined the Company as Chairman of the Board, Chief
Executive Officer, Secretary and Treasurer in August 1999. Mr. Costley was
previously employed for eleven years by the Dole Food Company, Inc. ("Dole"), an
international producer and marketer of food and related products. From September
1996 to August 1999, he served as President of Dole's North American Fruit
Operations group. Mr. Costley is Mr. Swanson's brother-in-law.
John Giaimo has served as President and Chief Operating Officer and a
Director since August 1996. He was the President and CEO of Visual Listings,
Inc., an Internet real estate content provider, from July 1990 to its
acquisition by HomeSeekers.com, in May 1996. Mr. Giaimo filed for personal
bankruptcy under Chapter 7 of the U.S. Bankruptcy Code that became final in
September 1996 and involved three computer stores where he was the sole
proprietor.
David Holmes has served as a director of HomeSeekers.com since March
1999. Mr. Holmes has served as President and CEO of Nevada Agency and Trust, a
manager of taxable individual and trust assets, since October 1999. He served as
Vice President and Portfolio Manager of Whittier Trust Company of Nevada Inc.
from 1995 to October 1999. From 1990 to 1994, Mr. Holmes managed assets for high
net worth individuals for Morgan Stanley & Co. Incorporated, a diversified
financial services company.
Greg Johnson currently serves as Chief Technology Officer. Mr. Johnson
founded the Company, and has served as a Director since 1988. He served as
Chairman of the Board from August 1996 to August 1999, Chief Executive Officer
from September 1996 to August 1999 and President from 1988 to August 1996. He
has been involved in all phases of the Company's management. Mr. Johnson is a
licensed real estate broker/agent in Nevada and has extensive experience in
marketing and selling real estate.
Bradley N. Rotter has served as a director of HomeSeekers.com since
March 1999. Since 1992, Mr. Rotter has served as Chairman of the Board of Point
West Capital Corporation ("Point West"), a specialty financial services company.
Mr. Rotter is also the managing member of The Echelon Group of Companies, LLC,
which provides investment and financial services. He was the principal
shareholder of The Echelon Group Inc., a financial services company that was
merged into Point West in 1995, and served as Chairman of the Board of that
company from 1988 until the merger with Point West.
Douglas Swanson has served as Vice Chairman of the Board and Executive
Vice President of the Company since October 1995. From September 1990 to October
1995, Mr. Swanson served as Chairman of Remington-Fox, Inc. a company he formed
that was engaged in the business of medical transcribing. Remington-Fox Inc.
filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy code in
June 1996 and is no longer in operation. Because of personal guarantees
associated with Remington-Fox, Mr. Swanson filed for personal bankruptcy
protection under Chapter 11 in June 1996. Mr. Swanson is Mr. Costley's
brother-in-law.
Compensation of Directors
Directors are entitled to reimbursement for reasonable travel and other
out-of-pocket expenses incurred in connection with attendance at Board of
Director's meetings, but receive no set fees or benefits as directors. An
independent director may receive certain warrants upon acceptance of the
position as a director. Mr. Rotter and Mr. Holmes were each granted a warrant to
purchase 150,000 shares upon becoming directors on March 15, 1999. The warrants
vest and become exercisable to the extent of one-third of the shares covered
thereby on each of the first three anniversaries of March 15, 1999. The exercise
price for the warrants is $4.00 per share, which was the fair market value of
the Common Stock on March 15, 1999.
Committees and Meetings
The Company has standing Audit and Compensation Committees. The Company
does not have a Nomination Committee.
Audit Committee. The Audit Committee was established on May 4, 1999 and
is currently comprised of Messrs. Swanson, Rotter and Holmes. The functions of
the Audit Committee are to recommend annually to the Company's Board of
Directors the appointment of the independent public auditors of the Company,
discuss and
3
<PAGE>
review the scope and the fees of the prospective annual audit, review the
results thereof with the Company's independent public auditors, review
compliance with existing major accounting and financial policies of the Company,
review the adequacy of the financial organization of the Company, review
management's procedures and policies relative to the adequacy of the Company's
internal accounting controls and compliance with federal and state laws relating
to accounting practices, and review and approve (with the concurrence of a
majority of the independent directors of the Company) transactions, if any, with
affiliated parties.
Compensation Committee. The Compensation Committee was established on
May 4, 1999 and is currently comprised of Messrs. Rotter, Holmes and Johnson.
The functions of the Compensation Committee are to review and approve annual
salaries and bonuses for all of the Company's executive officers and other key
management employees, review, approve and recommend to the Company's Board of
Directors the terms and conditions of all employee benefit plans or changes
thereto and administer the Company's stock option and incentive equity plans.
During fiscal 1999, six meetings of the Board of Directors were held,
no meetings of the Audit Committee were held (the Audit Committee was
established on May 4, 1999) and no meetings of the Compensation Committee were
held (the Compensation Committee was established on May 4, 1999). All directors
attended at least 75%, in the aggregate, of the number of meetings of the Board
of Directors and the committees of which they were members during their periods
of service as directors and committee members in fiscal 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors and holders of 10% or more of the outstanding
Common Stock (collectively, "Reporting Persons") to file an initial report of
ownership (Form 3) and reports of changes of ownership (Forms 4 and 5) of Common
Stock with the SEC. Such persons are required to furnish the Company with copies
of all Section 16(a) reports that they file. Based solely upon a review of
Section 16(a) reports furnished to the Company for fiscal 1999 and written
representations from Reporting Persons that no other reports were required, the
Company believes that all the Reporting Persons complied with all applicable
filing requirements during fiscal 1999 with the exception of Mr. Rotter and Mr.
Holmes who filed their Form 3's late.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock as of February 29, 2000 by (a) persons
owning of record or known to the Company to be the beneficial owner of more than
five percent of the outstanding shares of Common Stock, (b) each director, (c)
each of the Named Executive Officers (as defined under "Executive Compensation"
below) and (d) all current directors and executive officers of the Company as a
group. All information with respect to beneficial ownership has been furnished
by the respective director, executive officer or stockholder, as the case may
be, or has been derived from documents filed with the Securities and Exchange
Commission (the "SEC"). Unless otherwise indicated, the address of each
beneficial owner of more than five percent of the Common Stock is 6490 S.
McCarran Blvd., Suite D-28, Reno, Nevada 89509
<TABLE>
<CAPTION>
Shares
Beneficially Percentage
Name Owned (1) Beneficially Owned
- ---- --------- ------------------
<S> <C> <C>
Kern Capital Management, LLC ...................................... 911,300 5.1%
114 West 47th Street,
Suite 1926 NY, NY 10036
Gregory L. Costley (2)............................................. 108,818 *
John Giaimo (3).................................................... 795,807 4.4%
David Holmes (4)................................................... 50,000 *
Greg Johnson (5)................................................... 1,386,907 7.7%
Bradley N. Rotter (6).............................................. 383,333 2.1%
Douglas Swanson (7)................................................ 1,325,835 7.4%
All directors and executive officers
as a group (7 persons)............................................ 4,070,700 22.6%
(Footnotes on next page)
</TABLE>
4
<PAGE>
(Footnotes from previous page)
- ----------------
* Less than one percent.
(1) Unless otherwise indicated in these footnotes, each stockholder has
sole voting and investment power with respect to the shares of Common
Stock beneficially owned. All share amounts reflect beneficial
ownership determined pursuant to Rule 13d-3 under the Exchange Act.
(2) Mr. Costley became Chairman of the Board and Chief Executive Officer of
the Company on August 23, 1999. Includes options to purchase 100,375
shares.
(3) Mr. Giaimo is President, Chief Operating Officer and a Director of the
Company. Includes options to purchase 610,014 shares. Includes 61,833
shares and options owned by Melinda Giaimo, the wife of Mr. Giaimo and
an employee, and 5,315 shares owned by the children of Mr. Giaimo.
(4) Mr. Holmes was elected Director of the Company on March 15, 1999.
Includes warrants to purchase 50,000 shares.
(5) Mr. Johnson was Chairman of the Board and Chief Executive Officer of
the Company until August 23, 1999. At that time, Mr Johnson became
Chief Technology Officer and remains a Director. Includes options to
purchase 915,345 shares.
(6) Mr. Rotter was elected Director of the company on March 15, 1999.
Includes warrants to purchase 50,000 shares. Mr. Rotter is the Chairman
of Point West Ventures, L.P., which is beneficial owner of 246,500
shares. Mr. Rotter disclaims beneficial ownership of all such shares
except to the extent of his pecuniary interest therein.
(7) Mr. Swanson is Vice Chairman of the Board and Executive Vice President
of the company. Includes options to purchase 1,051,306 shares. Includes
5,000 shares owned by Derek Swanson, the son of Mr. Swanson.
5
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table provides information relating to compensation for
the fiscal years ended June 30, 1999, 1998 and 1997 for the Company's chief
executive officer and the other most highly compensated executive officers of
the Company whose total salary and bonus (as determined pursuant to SEC rules)
exceeded $100,000 (determined by reference to fiscal year 1999) (collectively,
the "Named Executive Officers"). The amounts shown include compensation for
services in all capacities provided to the Company.
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
--------------------------------------- ---------------------
(1) Other Annual Securities Underlying All Other
Year Salary ($) Bonus ($) Compensation ($) Options Compensation
---- ---------- --------- ---------------- --------------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Greg Johnson (2)........... 1999 177,047 - - 204,000 -
Chief Executive Officer, 1998 141,546 - - - -
Treasurer and Secretary 1997 90,769 - - 200,000 -
John Giaimo................ 1999 174,047 - - 204,000 -
President and Chief 1998 141,546 - - - -
Operating Officer 1997 90,769 50,000 - 200,000 -
Douglas F. Swanson......... 1999 177,047 - - 404,000 -
Executive Vice President 1998 141,546 - - 250,000 -
1997 91,503 - - 200,000 -
</TABLE>
- --------------------
(1) This amount includes a monthly automobile allowance for each officer
of $600.
(2) Mr. Johnson was Chairman of the Board and Chief Executive Officer of
the Company until August 23, 1999. At that time, Mr. Johnson became
Chief Technology Officer and remains a Director.
Subsequent to Year End
On August 23, 1999, Gregory L. Costley joined the Company as Chairman
of the Board, Chief Executive Officer, Secretary and Treasurer. On September 15,
1999, James A. Dykstra joined the Company as Chief Financial Officer. The terms
of their compensation may be found in the employment agreements section.
Stock Option Grants in Last Fiscal Year
The table below provides information regarding stock options granted to
the Named Executive Officers during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
Number of Percent of Total Potential Realizable
Securities Options Value at Assumed
Underlying Granted to Exercise or Annual Rates of Stock
Options Employees in Base Price Expiration Price Appreciation for
Granted (#) Fiscal Year (%) (per share) ($) Date Option Term (1)
------------- ---------------- --------------- ---------- ------------------------
5% 10%
--------- ---------
<S> <C> <C> <C> <C> <C> <C>
Greg Johnson................... 100,000(2) 7.9% 5.31 6/22/04 $146,706 $324,181
100,000(2) 7.9% 2.38 9/24/03 $65,755 $145,301
4,000(3) 0.3% 8.81 (4) $8,702 $19,101
John Giaimo.................... 100,000(2) 7.9% 5.31 6/22/04 $146,706 $324,181
100,000(2) 7.9% 2.38 9/24/03 $65,755 $145,301
4,000(3) 0.3% 8.81 (4) $8,702 $19,101
Douglas F. Swanson............. 100,000(2) 7.9% 5.31 6/22/04 $146,706 $324,181
300,000(2) 23.7% 2.38 9/24/03 $197,265 $435,904
4,000(3) 0.3% 8.81 (4) $8,702 $19,101
(Footnotes on next page)
</TABLE>
6
<PAGE>
(Footnotes from previous page)
- ------------------
(1) Based on applicable option terms and annual compounding, the 5% and 10%
calculations are set forth in compliance with SEC rules. The
appreciation calculations are not intended to forecast the future
appreciation, if any, of the Common Stock.
(2) These options vest immediately.
(3) These options vest one-twelfth each quarter over three years.
(4) These options expire three years after the quarter in which they vest.
Aggregated Option/SAR Exercises In Last Fiscal Year and Fiscal Year End Option/
SAR Values
The following table sets forth information with respect to the exercise
of options to purchase shares of common stock during the fiscal year ended June
30, 1999 by each person named in the Summary Compensation table and the
unexercised options held as of June 30, 1999.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised In-the-Money
Options At Fiscal Options at Fiscal
Year End (#) Year End ($)(1)
Shares Value Exercisable/ Exercisable/
Acquired (#) Realized ($) Unexercisable Unexercisable
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Greg Johnson 11,988 37,463 914,012/8,000 2,578,959/0
John Giaimo 7,918 24,744 667,082/8,000 1,769,029/0
Douglas Swanson 91,970 306,156 1,309,030/4,000 3,692,618/0
</TABLE>
- --------------------
(1) Value is calculated by multiplying the number of shares of Common Stock
underlying the stock option by the difference between the closing price of
a share of Common Stock on June 30, 1999 on The Nasdaq SmallCap Stock
Market ($4.75 per share) and the exercise price of the stock option.
Employment Agreements
The Company entered into employment agreements with Greg Johnson, Chief
Technology Officer, Douglas Swanson, Vice Chairman of the Board and Executive
Vice President, and John Giaimo, President. Each agreement became effective on
March 9, 1999 and has a term ending on March 8, 2004. The agreements provide for
automatic renewal by mutual agreement of the parties. The agreements also
provide that each of these officers will be nominated for election as a member
of the board of directors during the term of the agreements. Under the
agreements, each of these executive officers is entitled to:
- a base salary of $144,000 per year;
- an annual cash bonus in an amount equal to four percent of pre-tax
earnings as stated in the annual audit;
- additional compensation as determined by the compensation committee
designated by the Board of Directors;
- an annual grant of an option to purchase shares of our common stock
in an amount equal to four percent of pre-tax earnings as stated in
the annual audit, at a price equal to the closing bid price for the
common stock at the time of grant;
- a grant of an option to purchase 500,000 shares of Common Stock at
an exercise price equal to the closing bid price for the Common
Stock on June 23, 1999, of $5.31 per share. The option vests
100,000 on the date of the grant, and thereafter annually on June
23 for the next four years. Proposal No. 4 includes 400,000 shares
related to this grant for each of these executive officers;
- compensation equal to that received by other directors for any
period during which that employee serves as a director;
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<PAGE>
- medical benefits equal to those received by other employees;
- a monthly automobile allowance of $600; and
- certain reimbursable expenses.
Under the agreements, each executive officer may terminate his
employment voluntarily for any reason, at which time all salary and other
benefits provided to that employee will terminate. The agreement also provides
that if the Company terminates the employee's employment prior to expiration for
any reason other than a "change-in-control," the Company must pay that employee
a termination or severance salary equal to five years of the annual base salary
earned by that employee immediately prior to termination and the terminated
employee may, in his sole discretion, accelerate the termination or severance
payment. Each agreement provides that if a change-in-control occurs, the Company
must pay the employee his highest annual salary during the term of his
employment plus the largest amount awarded to that employee as a cash bonus,
multiplied by five, if he:
- is terminated involuntarily for any reason other than for "cause,"
death, disability or attainment of the normal retirement date; or
- voluntarily terminates his employment because of a change in his
duties, position, salary or location, a reduction in responsibility
or a good faith determination by the employee that he cannot
effectively perform his duties due to the "change-in-control."
Under the agreements, a "change-in-control" is deemed to have occurred
when:
- a third person, including a "group" as defined in Section 13(d)(3)
of the Securities Exchange Act of 1934, becomes the beneficial
owner of shares having more than fifty percent of the total number
of votes that may be cast by holders of the Company's capital stock
upon any corporate action proposed to the shareholders for approval
or adoption; or
- as a result of, or in connection with, any cash tender or
securities exchange offer, merger, or other business combination,
sale of assets or contested election, or any combination of the
foregoing, the persons who were directors before the transaction no
longer constitute a majority of the Company's Board of Directors or
the board of the successor.
The Company has also entered into an employment agreement with Gregory
L. Costley that became effective on August 23, 1999 for a term ending on August
22, 2002. The agreement provides that Mr. Costley will serve as the Chief
Executive Officer and will be nominated for election as the Chairman of the
Board of Directors during the term of the agreement. Under his agreement, Mr.
Costley is entitled to:
- a base salary of $200,000 per year;
- a signing bonus of $40,000 within two weeks of establishing Nevada
residence, as required by the agreement;
- additional bonus payments as the Board of Directors may see fit;
- reasonable moving expenses in an amount not to exceed $45,000;
- a grant of an option to purchase 300,000 shares of common stock at
an exercise price per share equal to the closing bid price for the
Common Stock on the date that Mr. Costley's agreement became
effective ($7.94), which vests and becomes exercisable to the
extent of one-third of the shares covered as of the date of the
agreement and the next two anniversaries of the date of grant,
except that the option will vest immediately upon an involuntary
termination or a "change-in-control," which term has the same
definition as under the employment agreements for Messrs. Swanson,
Johnson and Giaimo;
- an additional option to purchase 100,000 shares of common stock (to
be priced at $17.94, $27.94 etc.) for every $10 increase in stock
price from the closing bid price on the date Mr. Costley's
agreement became effective ($7.94) that stays at the higher level
for a period of 90 days thereafter, with a term of three years from
the date of grant;
- compensation equal to that received by other directors for any
period during which Mr. Costley serves as a director;
8
<PAGE>
- medical benefits equal to those received by other employees;
- a monthly automobile allowance of $600; and
- certain reimbursable expenses.
Under his agreement, Mr. Costley may terminate his employment
voluntarily for any reason, at which time all salary and other benefits provided
to Mr. Costley will terminate. The agreement also provides that if the company
terminates Mr. Costley's employment prior to expiration for any reason other
than for change-in-control, the Company must pay Mr. Costley a termination or
severance salary equal to one year of the annual base salary earned by Mr.
Costley immediately prior to termination, which termination or severance payment
may be accelerated in Mr. Costley's sole discretion upon termination. If a
change-in-control occurs, the Company must pay Mr. Costley his highest annual
salary during the term of his employment plus the largest aggregate amount
awarded to Mr. Costley as a cash bonus, if he:
- is terminated involuntarily for any reason other than for "cause,"
death, disability or attainment of the normal retirement date; or
- voluntarily terminates his employment because of a change in his
duties, position, salary or location, a reduction in responsibility
or a good faith determination by Mr. Costley that he cannot
effectively perform his duties due to the change in control.
The Company has also entered into an employment agreement with James A.
Dykstra, our Chief Financial Officer. The agreement became effective on
September 15, 1999 for a term that ends on September 14, 2001. Under the
agreement, Mr. Dykstra is entitled to:
- a base salary of $86,200 per year;
- an option to purchase 60,000 shares of common stock at an exercise
price per share equal to the closing bid price per share on the
date that Mr. Dykstra's agreement became effective ($11.81), with a
term of three years from the date of grant. The option vests 20,000
shares on the date of the agreement, 20,000 shares on the first
anniversary of the agreement, and 20,000 shares on the second
anniversary of the agreement;
- welfare and retirement benefits to the extent provided to peer
employees;
- various reimbursable expenses.
Under the agreement, the Company has the right to terminate Mr.
Dykstra's employment upon disability and for "cause." In addition, the Company
may terminate Mr. Dykstra's employment for any reason upon 30 days written
notice. Upon termination, the Company will be obligated to pay to Mr. Dykstra,
if we have not already done so:
- the prorated portion of his salary through the date of termination;
- earned and accrued bonus or incentive payments;
- any reimbursable expenses to which Mr. Dykstra is entitled under
the agreement.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee currently consists of Messrs. Rotter, Holmes
and Johnson. Mr. Johnson is an officer of the Company. None of the executive
officers of the Company has served on the Board of Directors or on the
compensation committee of any other entity, any of whose officers served either
on the Board of Directors or on the Compensation Committee of the Company.
Compensation Committee Report On Executive Compensation
The Compensation Committee of the Board of Directors (the "Committee")
was comprised of Messrs. Rotter, Holmes and Johnson during fiscal year 1999. The
Board of Directors has delegated to the Committee the authority to determine the
compensation of the Company's executive officers and other key management
employees.
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<PAGE>
The Committee's primary objective is to ensure that the Company's
compensation policies attract, motivate and retain qualified managers in a
manner consistent with maximization of stockholder value. The Company's
compensation is structured philosophically on a "pay for performance" foundation
and thus recognizes the desirability of compensation directed specifically to
motivate and reward executive managers for achieving both short-term and
long-term performance objectives. Compensation is comprised of three major
components: base salary, incentive bonus and stock options.
Base Salary
Base salaries are determined in the context of an individual's
responsibilities and competitive benchmarking. Base salaries are reviewed
annually on employment anniversary dates and adjusted on the basis of individual
performance and competitive considerations. In making base salary adjustments,
the Committee considers an individual's performance, especially the effective
discharge of assigned responsibilities and the leadership and motivation
provided to subordinates.
During 1999, base salaries for executive officers were increased an
average of 24%. In making salary decisions for 1999, consideration was given to
the effects of inflation and certain subjective criteria, including competitive
market conditions for executive compensation and the Committee's evaluation of
each executive officer's performance of his duties since the officer's last
evaluation.
Incentive Bonus Compensation
During 1999, no incentive bonuses were paid to executive officers.
Stock Option Grants
The Committee seeks to ensure that the executive officers of the
Company focus attention on long-term objectives, including maximization of value
for stockholders. The Committee believes that stock options are an appropriate
compensation tool to motivate and reward executive managers for long-term
performance. The Committee believes that the Common Stock price is an
appropriate index of long-term value creation by the management group. Stock
options are generally granted to each individual who becomes an executive
officer. These stock options have generally been granted pursuant to various
stock option plans maintained by the Company. See "Stock Option/SAR Grants."
From time to time, the Committee grants stock options to key employees
as an incentive for long-term performance. During the fiscal year ended June 30,
1999, Mr. Johnson was awarded option grants covering a total of 204,000 shares;
Mr. Giaimo was awarded option grants covering a total of 204,000 shares; and Mr.
Swanson was awarded option grants covering a total of 404,000 shares (See "Stock
Option/SAR Grants" for additional information).
Compensation of Chief Executive Officer
Mr. Johnson served as the Company's Chief Executive Officer during
1999, and through August 23, 1999. At that date, Mr. Costley joined the Company
as Chairman and Chief Executive Officer. The Company is obligated to pay Mr.
Costley a minimum annual base salary of $200,000 pursuant to his employment
agreement. Mr. Costley also received an option to purchase 300,000 shares of
Common Stock in August 1999 as an incentive for long-term performance. Please
refer to the "Employment Agreements" section for a description of Mr. Costley's
employment agreement.
Compensation of Current Chief Executive Officer
In connection with Mr. Costley's agreeing to become Chief Executive
Officer, Treasurer, and Secretary in August 1999, The Board of Directors
approved his employment agreement, the terms of which are described above under
the caption "Employment Agreements." In negotiating Mr. Costley's employment
agreement, representatives of the Board reviewed information and recommendations
provided to the Board by an executive search firm retained to assist the Company
in its search for a Chief Executive Officer, market data regarding comparable
chief executive officer compensation (such information having been provided to
the Board by the
10
<PAGE>
executive search firm or otherwise known to individual members
of the Board), the Board's subjective perception of Mr. Costley's leadership
potential and various issues raised by Mr. Costley during negotiations.
Limitations on Deductibility
In 1993, changes were made to the federal corporate income tax law that
limit the ability of public companies to deduct compensation in excess of $1
million paid annually to each of the chief executive officer and the other four
most highly compensated executive officers. There are exemptions from this
limit, including compensation that is based on the attainment of performance
goals that are established by the Committee and approved by the Company's
stockholders. It is the Committee's policy to seek to qualify executive
compensation for deductibility where practicable and to the extent that such
policy is consistent with the Company's overall objectives in attracting,
motivating and retaining its executives. The Company believes that, based upon
current compensation levels, compensation paid in 1999 should be fully
deductible.
Submitted by:
Greg Johnson
Bradley N. Rotter
David Holmes
11
<PAGE>
Performance Graph
The Company's Common Stock began trading publicly on December 23, 1994.
The following graph compares the cumulative total return to holders of Common
Stock (no dividends have been paid) with that of the Nasdaq-USA Index and that
of the Nasdaq-Computer and Data Processing Services Stocks Index from December
23, 1994 to June 30, 1999. The graph assumes a $100 investment at December 23,
1994 and reinvestment of dividends for the indices indicated.
GRAPH OMMITTED
Other Transactions
Webquest International, Inc.
In January 1997 the Company entered into a Licensing and Marketing
Agreement for technical support with WebQuest International, Inc. ("WebQuest"),
a company related by common shareholders. The Company was to receive royalties
at varying rates based upon actual sales, $58,333 per month for licensing fees,
$20,000 per month for day-to-day management and operations, management
consulting at $125 per hour, and customer service at $.50 per customer call. The
revenues earned under this agreement totaled $700,000 as of September 1998. At
that time, the Company agreed to accept 700,000 shares of WebQuest stock in
payment of the outstanding balance.
In March 1999 the Company sold 400,000 shares of WebQuest stock at
$1.50 per share in a private transaction.
In May 1999 the Company received 100,000 shares valued at $1.00 per
share to terminate the Licensing Agreement and for the purchase of the
technology rights.
In October 1999 the Company received 400,000 shares of WebQuest stock
as payment for $153,500 in accounts receivable for custom programming, repayment
of a $50,000 note receivable plus $3,797 of accrued interest, and $192,703 as a
fee to terminate the royalty provision of the previous contract. These shares
were valued at $1.00 per share.
During March 2000 the Company sold 54,300 shares of Webquest stock at
an average price of $1.72 per share realizing $100,396 of net proceeds.
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<PAGE>
Loans to Management
In May 1999 the Company loaned John Giaimo, the President, $50,000 at
12% interest per annum. The note was due July, 2000. The $50,000 principal
amount was repaid on February 11, 2000, and the interest was forgiven. On April
18, 2000, the Company loaned Mr. Giaimo $70,000 at 12% interest per annum due
June 30, 2000.
In March 2000 the Company advanced Douglas Swanson, the Executive Vice
President, $319,637 for the payment of tax withholding on option exercises at
12% interest per annum.
Loans from Management
Greg Johnson, the Company's Chief Executive at the time, loaned the
Company $100,000 during December 1998 at 12% interest per annum. The loan and
accrued interest were repaid to Mr. Johnson during January 1999.
William Tomerlin, formerly an owner of more than 5% of the Company's
outstanding common stock, loaned the Company $40,000 during September 1998,
$195,000 during December 1998, and $150,000 during January 1999 all at 12%
interest per annum. The entire $385,000 including accrued interest was repaid to
Mr. Tomerlin during January 1999.
Loan from Point West Ventures, L.P.
Bradley N. Rotter, a Director of the Company since March 1999, is the
Chairman of Point West Ventures, L.P. ("Point West"). In September 1998, Point
West lent the Company $250,000. The annual interest rate for this indebtedness
was 14% and amounts outstanding under the loan were collateralized by 700,000
shares of Webquest stock held by the Company. In connection with the loan, the
Company granted Point West an initial warrant to purchase 50,000 shares of
Common Stock at an exercise price of $2.47 per share. The Company also agreed to
grant Point West additional warrants to purchase 50,000 shares of Common Stock
at an exercise price of $2.47 per share at the end of each of the Company's
fiscal quarters if any principal or interest on the loan remained outstanding at
the end of any such quarter.
The Company repaid $245,000 of principal in January 1999 and the remaining
$5,000 of principal in June 1999. The Company paid Point West an aggregate of
$9,059 in interest under the loan and granted Point West warrants to purchase an
aggregate of 250,000 shares of Common Stock at an exercise price of $2.47 per
share in connection with this transaction.
PROPOSAL NO. 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Company has appointed Ernst & Young LLP as the Company's
independent auditors for the fiscal year ending June 30, 2000. Prior to this
appointment, the Company's independent auditors were Albright, Persing &
Associates, Ltd.; Reno, Nevada. Services to be provided to the Company and its
subsidiaries by Ernst & Young LLP with respect to the 2000 fiscal year will
include consultations on various tax and information services matters.
Representatives of Ernst & Young LLP are expected to be present at the Annual
Meeting to respond to appropriate questions and to make such statements as they
may desire.
In the event stockholders do not ratify the appointment of Ernst &
Young LLP as the Company's independent auditors for fiscal 2000, such
appointment will be reconsidered by the Audit Committee and the Board of
Directors.
Required Vote
The ratification of the selection of Ernst & Young LLP requires the
affirmative vote of the holders of a majority of the shares of Common Stock
present or represented and entitled to vote at the Annual Meeting. Abstentions
and broker non-votes will be counted as present for purposes of determining
whether a quorum is present, and broker non-votes will not be treated as
entitled to vote on this matter at the Annual Meeting.
The Board of Directors recommends a vote for the
Ratification of the selection of Ernst & Young LLP.
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<PAGE>
PROPOSAL NO. 3
AMENDMENT TO THE HOMESEEKERS.COM, INCORPORATED AMENDED AND
RESTATED 1996 STOCK OPTION PLAN
At the Annual Meeting, the stockholders are being asked to approve the
adoption of an amendment to the HomeSeekers.com, Incorporated Amended and
Restated 1996 Stock Option Plan, adopted by the Board on April 24, 2000, which
increases the number of shares reserved for issuance thereunder by a total of
6,000,000 shares of Common Stock.
Required Vote
Approval of the adoption of the amendment to the HomeSeekers.com,
Incorporated Amended and Restated 1996 Stock Option Plan ("the Plan") requires
the affirmative vote of the holders of a majority of shares of Common Stock
present or entitled to vote at the Annual Meeting. Abstentions and broker
non-votes will be counted as present for purposes of determining whether a
quorum is present, and broker non-votes will not be treated as entitled to vote
on this matter at the Annual Meeting.
The Board of Directors recommends a vote for approval of
the amendment to the Plan
Plan Activity
As of April 24, 2000, options to purchase an aggregate of 923,985
shares issued under the Plan had been exercised, and options to purchase
4,369,738 shares were outstanding. Without taking into account the proposed
amendment to the Plan or the additional shares discussed in Proposal No. 4,
206,277 shares remained available for future grants as of April 24, 2000.
Description of the Plan and Option Terms
The following is a summary of the principal provisions of the Plan, but
it is not intended to be a complete description of all of the terms and
provisions of the Plan. A copy of the Plan will be furnished to any stockholders
upon written request to the Secretary of the Company at the principal executive
offices of the Company in Reno, Nevada.
History. The Plan was adopted by the Company's Board of Directors on
October 9, 1996 and was approved by the Company's stockholders on December 18,
1996 with a current total of 5,500,000 shares of Common Stock reserved for
issuance thereunder.
Purpose. The purpose of the Plan is to provide additional compensation
and incentive to eligible employees, officers, directors, advisors and
consultants whose present and potential contributions are important to the
continued success of the Company and its subsidiaries, to afford such persons an
opportunity to acquire a proprietary interest in the Company and to enable the
Company and its subsidiaries to continue to enlist and retain the best available
talent for the successful conduct of its business.
Administration. The Plan is currently administered by the Board.
Subject to the terms of the Plan, the Board determines the persons who are to
receive awards, the number of shares subject to each award, the terms of such
awards and the dates of grants. The Board also has the authority to construe and
interpret any of the provisions of the Plan or any options granted thereunder.
Such interpretations are binding on the Company and the participants.
Eligibility. All directors, officers and employees who have been
employed by the Company for a continuous period of at least 60 days, advisors
and consultants of the Company (or any subsidiary of the Company) are eligible
to receive awards under the Plan. The Company may also grant options under the
Plan in connection with its assumption or replacement of options issued by
another company if the optionee would have been eligible to receive an option
under the Plan had the other company applied the rules of the Plan in granting
such option. As of April 24, 2000, approximately 306 full-time employees were
eligible to receive options under the Plan, except those who are not eligible
due to local laws.
14
<PAGE>
Option Awards. Both incentive stock options ("ISOs"), as defined in
Section 422 of the Internal Revenue Code (the "Code"), and nonqualified stock
options ("NQSOs"), may be granted under the Plan. The Board determines whether
an option granted under the Plan will be an ISO or a NQSO; provided, however,
that only persons who have been employed by the Company or one of its
subsidiaries for a continuous period of at least 60 days are eligible to receive
ISOs. The Plan limits the aggregate fair market value (determined as of the time
the option is granted) of the shares with respect to which ISOs are exercisable
for the first time by the optionee during any calendar year to note more than
$100,000. There is no similar limit on NQSOs granted under the Plan.
Terms of the Options. Each option granted pursuant to the Plan is
evidenced by a stock option grant (the "Grant") issued by the Company. An
exercise notice and agreement (the "Exercise Notice") is to be completed by the
optionee at the time the option is exercised. The Company does not receive any
consideration from an optionee at the time an option is granted. The forms of
Grant and the Exercise Notice may be amended by the Board from time to time,
subject to the terms of the Plan.
Subject to the provisions of the Plan, the Board may determine the
vesting schedule of each option and the other terms and conditions of
exercisability. Options granted under the Plan typically vest quarterly or
annually over three to five years starting from the date of grant, although
vesting of an option may be accelerated by the Board. The Board also has the
discretion to modify, extend or renew outstanding awards and to issue new awards
in exchange for the surrender of outstanding awards. The Board also may cause
the Company to purchase for cash or shares of Common Stock any option issued
under the Plan.
Generally, ISOs and NQSOs granted under the Plan must be exercised
within ten years of the option grant date. Any ISO granted to a person owning
10% or more of the total combined voting power of all classes of stock of the
Company or of any subsidiary of the Company (a "Ten Percent Stockholder") must
be exercised within five years of the option grant date.
The Board determines the exercise price of each option granted, which
is set forth in the Grant. Under the Plan, the exercise price of a NQSO granted
to an employee may be no less than 75% of the fair market value per share of the
Common Stock on the date the option is granted. In the case of an ISO, the price
shall be no less than 100% of the fair market value of a share of Common Stock;
provided that, in the case of an ISO granted to a Ten Percent Stockholder, the
price shall be no less than 110% of the fair market value of the Common Stock on
the date the option is granted. The exercise price of options granted under the
Plan, including all applicable withholding taxes, must be paid (1) in cash; (2)
by surrender of shares of Common Stock owned by the optionee (or, in the case of
withholding taxes, by having the Company withhold from the shares to be issued
upon exercise); (3) where permitted by applicable law and approved by the Board,
in its sole discretion, in property having a value equal to such purchase price;
or (4) by any combination of the foregoing, where approved by the Board in its
sole discretion.
Nontransferability and Termination of Options. Options granted under
the Plan may not be transferred by the optionee other than by will or by the
laws of descent and distribution. During the lifetime of the optionee, an option
may be exercised only by the optionee.
If an optionee's employment or other association with the Company or a
subsidiary is terminated for any reason other than death or disability, any
outstanding option, to the extent (and only to the extent) that it was
exercisable on the date of such termination, must be exercised by the optionee
by the earlier of three months following such termination or the expiration date
of the option. If termination is on account of disability, any outstanding
option, to the extent exercisable on the termination date, must be exercised by
the earlier of one year following such date or the expiration date of the
option. If termination is on account of the optionee's death, any outstanding
option must be exercised to the extent the option would have been exercisable
had the optionee continued his or her relationship with the Company by the
earlier of one year after the optionee's death or the expiration date of the
option.
Capital Changes. If the number of outstanding shares of Common Stock is
changed by a stock dividend, stock split, reverse stock split, combination,
reclassification or a similar change in the capital structure of the Company
without consideration, the number of shares of Common Stock available for option
grants under the
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<PAGE>
Plan, the number of shares and the exercise price per share for each outstanding
option will be proportionately adjusted, subject to any required action by the
Board or stockholders of the Company.
In general, in the event of the proposed dissolution or liquidation of
the Company, a proposed sale of all or substantially all of the assets of the
Company or a merger or tender offer for the Common Stock, the Board shall
declare that each option granted under the Plan shall terminate as of a date to
be fixed by the Board; provided that not less than 30 days' written notice of
the date so fixed (the "Notice Period") shall be given to each optionee, and
each such optionee shall have the right, during the Notice Period, to exercise
his or her option as to all or any part of the shares of Common Stock covered
thereby, including shares of Common Stock as to which such option would not
otherwise be exercisable. Notwithstanding the foregoing, in no event shall the
term set for purchasing shares of Common Stock set forth in any option be
extended.
Amendment and Termination. The Board may amend or terminate the Plan at
any time and in any respect, except that the Board cannot, without the approval
of the stockholders of the Company, amend the Plan to increase the aggregate
number of shares of Common Stock subject to the Plan or change the categories of
persons to whom options may be granted pursuant to the Plan. No amendment to the
Plan may adversely affect any outstanding option or unexercised portion thereof
without the optionee's written consent. Subject to the specific terms of the
Plan, the Board may accelerate any option, reduce any applicable exercise price
or waive any conditions or restrictions pursuant to such option at any time.
Certain United States Federal Income Tax Information
General. The following is a general summary as of the date of this
Proxy Statement of the United States federal income tax consequences associated
with participation in the Plan. The federal tax laws may change and the federal,
state and local tax consequences for any participant will depend upon his or her
individual circumstances. All participants have been and are encouraged to seek
the advice of a qualified tax advisor regarding the tax consequences of
participants in the Plan.
Tax Treatment of the Optionee
Nonqualified Stock Options. An optionee will not recognize any taxable
income at the time a NQSO is granted. However, upon exercise of a NQSO the
optionee will include in income as compensation an amount equal to the
difference between the fair market value of the shares on the date of exercise
(in most cases) and the optionee's purchase price. The included amount will be
treated as ordinary income and reported on an employee's W-2 form, or in the
case of a non-employee, on a 1099 form and will be subject to income tax and
FICA withholding by the Company (either by payment in cash or withholding out of
the optionee's salary) if the optionee is an employee. Upon the sale of the
shares by the optionee, any subsequent appreciation or depreciation in the value
of the shares will be treated as short-term or long-term capital gain or loss
depending upon whether or not the optionee held the shares for more than one
year following exercise of the NQSO.
Incentive Stock Options. The optionee will recognize no income upon
grant of an ISO and incur no tax on its exercise unless the optionee is subject
to the alternative minimum tax described below. If the optionee holds the stock
acquired upon exercise of an ISO (the "ISO Shares") for more than one year after
the date the option was exercised and for more than two years after the date the
option was granted, the optionee generally will realize long-term capital gain
or loss (rather than ordinary income or loss) upon disposition of the ISO
Shares. This gain or loss will be equal to the difference between the amount
realized upon such disposition and the amount paid for the ISO Shares.
If the optionee disposes of ISO Shares prior to the expiration of
either of the above required holding periods (a "disqualifying disposition"),
the gain realized upon such disposition, up to the difference between the fair
market value of the ISO Shares on the date of exercise and the option exercise
price, will be treated as ordinary income and reported on the employee's W-2
form. Income tax withholding on this income is optional. Any additional gain or
loss will be long-term or short-term capital gain or loss, depending upon
whether or not the ISO Shares were held for more than one year following the
date of exercise by the optionee. A disposition of ISO Shares for this purpose
includes not only a sale or exchange, but also a gift or other transfer of legal
title (with certain exceptions). Long-term capital gain is taxed at a maximum
federal income tax rate of 20% rather than the 39.6% maximum rate applicable to
other income.
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Alternative Minimum Tax. Generally, the difference between the fair
market value of stock purchased by exercise of an ISO (generally measured as of
the date of exercise) and the amount paid for that stock upon exercise of the
ISO is an adjustment to income for purposes of the alternative minimum tax. An
alternative minimum tax adjustment applies unless a disqualifying disposition of
the ISO Shares occurs in the same calendar year as exercise of the ISO. The
alternative minimum tax (imposed to the extent it exceeds the taxpayer's regular
tax) is 26% of an individual taxpayer's alternative minimum taxable income for
alternative minium taxable income up to $175,000 and 28% thereafter. Alternative
minimum taxable income is determined by adjusting regular taxable income for
certain items, increasing that income by certain tax preference items and
reducing this amount by the applicable exemption amount ($45,000 in the case of
a joint return, subject to reduction under certain circumstances).
Tax Treatment of the Company. The Company will be entitled to a
deduction in connection with the exercise of a NQSO by an optionee to the extent
that the optionee recognizes ordinary income provided that the deduction is not
disallowed under the provisions of Section 162(m) of the Code. The Company will
be entitled to a deduction in connection with the disposition of ISO Shares only
to the extent that the optionee recognizes ordinary income on a disqualifying
disposition of the ISO Shares and will not be entitled to any deduction upon
exercise of an ISO.
ERISA. The Company believes that the Plan is not subject to any of the
provisions of the Employee Retirement Income Security Act of 1974.
17
<PAGE>
PROPOSAL NO. 4
OPTION GRANTS TO EMPLOYEES AND OFFICERS
At the Annual Meeting, the stockholders are being asked to approve the
grant of options to purchase an aggregate of 2,307,000 shares of Common Stock.
As indicated in the table below, the Board of Directors made stock option awards
to certain executive officers named in the Summary Compensation Table and to
certain other officers and key employees during fiscal 1999 and 2000. These
options are subject to approval of the amendment to the HomeSeekers.com,
Incorporated Amended and Restated 1996 Stock Option Plan at the Annual Meeting.
This means that approval of Proposal No. 4 by the stockholders at the Annual
Meeting will have no effect if the stockholders do not also approve Proposal No.
3 at the Annual Meeting. Approval of these grants will result in a non-cash
expense in the Company's earnings amounting to the difference between the
exercise price and the closing market price of the Company's common stock on the
approval date multiplied by the applicable shares, which have exercise prices
under the closing market price. This amount will be charged to earnings over the
vesting periods of the underlying stock options.
Option Grants Under the Plan Subject to Stockholder Approval
<TABLE>
<CAPTION>
Underlying Weighted Average
Name and Position Shares Exercise Price
----------------- ------ --------------
<S> <C> <C>
Greg Johnson - Chief Technology Officer 400,000 $5.31
John Giaimo - Chief Operating Officer 400,000 $5.31
Douglas Swanson - Executive Vice President 400,000 $5.31
All executive officers as a group (3 persons) 1,200,000 $5.31
Non-executive employees as a group 1,107,000 $12.15
</TABLE>
Required Vote
Approval of the option grants to employees and officers requires the affirmative
vote of the holders of a majority of shares of Common Stock present or entitled
to vote at the Annual Meeting. Abstentions and broker non-votes will be counted
as present for purposes of determining whether a quorum is present, and broker
non-votes will not be treated as entitled to vote on this matter at the Annual
Meeting.
The Board of Directors recommends a vote for
approval of the option grants to employees and officers.
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<PAGE>
OTHER MATTERS
As of the date of this Proxy Statement, the Company knows of no
business that will be presented for consideration at the Annual Meeting other
than the items referred to above. Because the Company did not receive notice of
any matter intended to be raised by a stockholder a reasonable time before
mailing these proxy materials, proxies in the enclosed form will be voted in
respect of any other matters as may properly come before the Annual Meeting in
accordance with the recommendation of the Board of Directors or, if no such
recommendation is given, in the discretion of the person or persons voting the
proxies.
STOCKHOLDER PROPOSALS FOR THE FISCAL 2000 ANNUAL MEETING
The Company intends to hold its next annual meeting of stockholders
(the "Fiscal 2000 Meeting") in November 2000. Accordingly, any proposal of a
stockholder intended to be presented at the Fiscal 2000 Meeting and to be
considered for inclusion in the Company's proxy and proxy statement related to
the Fiscal 2000 Meeting must be received by the Secretary of the Company by
August 15, 2000, which the Company believes is a reasonable period of time
before the Company begins to print and mail its proxy materials for the Fiscal
2000 Meeting in accordance with Rule 14a-8 under the Exchange Act.
Any stockholder intending to propose any matter at the Fiscal 2000
Meeting but not intending for the Company to include the matter in its proxy
statement and proxy for the Fiscal 2000 Meeting must notify the Company by
September 15, 2000 of such intention, which the Company believes is a reasonable
period of time before it intends to mail its proxy materials for the Fiscal 2000
Meeting in accordance with Rule 14a-4 under the Exchange Act. If the Company
does not receive such notice by that date, the notice will be considered
untimely. The Company's proxy for the Fiscal 2000 Meeting will grant
discretionary authority to the persons named therein to exercise their voting
discretion with respect to any matter of which the Company does not receive
notice by September 15, 2000.
Notices regarding stockholder proposals should be directed to:
Secretary, HomeSeekers.com, Incorporated, 6490 S. McCarran Boulevard, Suite
D-28, Reno, Nevada 89509.
By order of the Board of Directors,
HOMESEEKERS.COM LOGO
Gregory L. Costley
Secretary
May 1, 2000
19
<PAGE>
This Proxy Is Solicited By and On Behalf Of The Board Of Directors
HomeSeekers.com, Incorporated
Proxy - Annual Meeting of Stockholders - May 24, 2000
The undersigned, revoking all previous proxies, hereby appoint(s)
Gregory L. Costley and John Giaimo as Proxies, with full power of substitution,
to represent and to vote all Common Stock of HomeSeekers.com, Incorporated owned
by the undersigned at the Annual Meeting of Stockholders to be held at the
Atlantis Resort located at 3800 South Virginia Street, Reno, Nevada, on May 24,
2000 at 9:00 A.M., including any original or subsequent adjournment thereof,
with respect to the proposals set forth in the Notice of Annual Meeting and
Proxy Statement. No business other than matters described below is expected to
come before the meeting, but should any other matter requiring a vote of
stockholders arise, the persons named herein will vote thereon in accordance
with their best judgment. All powers may be exercised by said Proxies. Receipt
of the Notice of Annual Meeting and Proxy Statement is hereby acknowledged.
The Board Of Directors Recommends Approval Of Each Of The Following:
1. Election of Directors
Nominees: Greg Johnson For Against
Douglas Swanson For Against
John Giaimo For Against
2. To ratify the appointment of Ernst & Young LLP as independent auditors
For Against
3. To amend the HomeSeekers.com, Incorporated Amended and Restated 1996 Stock
Option Plan
For Against
4. To approve certain option grants to employees and officers
For Against
<PAGE>
The shares represented by this proxy will be voted as directed. IF NO SPECIFIC
DIRECTION IS GIVEN, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED FOR THE
NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSALS 2, 3 AND 4.
The undersigned stockholder hereby acknowledges receipt of the Notice
of Annual Meeting and Proxy Statement and hereby revokes any proxy or proxies
heretofore given. This proxy may be revoked at any time prior to the Annual
Meeting. If you receive more than one proxy card, please date, sign and return
all cards in the accompanying envelope.
Please sign exactly as name appears below.
When shares are held by joint tenants, both
should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give
full title as such. If a corporation, please
sign in the corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized person.
Dated: _________________________________, 2000
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Signature
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Signature if held jointly
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(Please print name)
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(Number of shares subject to proxy)
Please sign, date and return promptly in the enclosed envelope.
