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SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(c)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14c-5(d)(2))
[ ] Definitive Information Statement
STARNET FINANCIAL, INC.
(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 the table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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STARNET FINANCIAL, INC.
17000 PRESTON ROAD, SUITE 250
DALLAS, TEXAS 75248
INFORMATION STATEMENT
**WE ARE NOT ASKING FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY**
INTRODUCTION
This Information Statement is being furnished to the stockholders of record of
StarNet Financial, Inc. (the "Company") as of December 15, 1999, in connection
with the proposed adoption of an Amended and Restated Certificate of
Incorporation (the "Amended and Restated Certificate") and the 1999 Stock Option
Plan (the "Plan") by the written consent of the holders of a majority in
interest of the Company's voting capital stock consisting of the Company's
outstanding Common Stock, $0.01 par value (the "Common Stock"). On October 29,
1999, the Company's Board of Directors approved and recommended that the
Certificate of Incorporation be amended and restated in order to reflect current
developments in Delaware law, to provide for the exculpation of directors, to
address interested party transactions, and to increase the number of authorized
shares of Common Stock and preferred stock, $0.01 par value (the "Preferred
Stock"). The Amended and Restated Certificate was approved by the written
consent of the stockholders owning a majority of the outstanding Common Stock on
December 30, 1999, and the Amended and Restated Certificate was filed and
accepted by the Delaware Secretary of State on January 12, 2000, with a delaying
provision that it will not become effective until February 11, 2000.
The Company's Board of Directors also approved and recommended that the Company
adopt the Plan which was previously approved by the Board of Directors on
October 4, 1999. Stockholders owning a majority of the outstanding Common Stock
approved the Plan by written consent, without a meeting, on December 30, 1999.
The elimination of the need for a special meeting of stockholders to approve the
Amended and Restated Certificate is made possible by Section 228 of the Delaware
General Corporation Law (the "DGCL"), which provides that the written consent of
the holders of outstanding shares of voting stock, having not less than the
minimum number of votes which would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted, may be substituted for such a special meeting. Pursuant to Section
242 of the DGCL, a majority of the outstanding shares of voting stock entitled
to vote thereon is required in order to amend the Company's Certificate of
Incorporation. In order to eliminate the costs and time involved in holding a
special meeting and in order to effect the Amended and Restated Certificate as
early as possible in order to accomplish the purposes of the Company as
hereafter described, the Board of Directors of the Company voted to utilize the
written consent of the holders of a majority in interest of the voting stock of
the Company.
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On December 15, 1999, there were 14,876,473 outstanding shares of Common Stock
and approximately 430 holders of record of Common Stock. The approval of the
Amended and Restated Certificate requires the written consent of the holders of
a majority of the outstanding shares of Common Stock, and each share of Common
Stock was entitled to one vote with respect to the approval of the Amended and
Restated Certificate. By written consent in lieu of a meeting, holders of
7,509,767 shares of our Common Stock, representing approximately 50.5% of our
outstanding voting power, have approved the listed corporate actions.
Under applicable federal securities laws, the Amended and Restated Certificate
cannot be effected until at least 20 calendar days after this information
statement is sent or given to the stockholders of the Company. The approximate
date on which this information statement is first being sent or given to
stockholders is January 21, 2000.
AMENDED AND RESTATED CERTIFICATE OF AMENDMENT
In October 1999, the Board of Directors approved, subject to the approval of the
Company's stockholders, the Amended and Restated Certificate, which amends
certain provisions of the Certificate of Incorporation to reflect current
developments in the law, to provide for the exculpation of directors, to address
interested party transactions, and to increase the Company's authorized capital
from 20,000,000 million shares to 60,000,000 shares of Common Stock and from
1,000,000 shares to 3,000,000 shares of Preferred Stock. In December 1999,
stockholders owning a majority of the outstanding Common Stock approved the
Amended and Restated Certificate. The Company wishes to restate the Certificate
of Incorporation so that all amendments to date will be contained in one
document. A copy of the Amended and Restated Certificate is attached to this
document as Exhibit A.
Current Use of Shares
As of December 15, 1999, 14,876,473 shares of Common Stock were issued and
outstanding and 300,000 shares of Common Stock were subject to an outstanding
warrant and reserved for future issuance. As a result, the Company has
approximately 4,823,527 authorized but unissued shares of Common Stock available
for future issuance. An additional 5,000,000 shares will be reserved for future
issuance in conjunction with the approval of the Plan.
As of December 15, 1999, the Company also had authorized 1,000,000 shares of
Preferred Stock, none of which were outstanding.
Rights of Additional Stock
The additional Common Stock to be authorized by the Restated and Amended
Certificate will have rights identical to currently outstanding Common Stock.
The Restated and Amended Certificate will not affect the rights of the holders
of currently outstanding Common Stock, except for effects identical to
increasing the number of shares of Common Stock outstanding upon any issuance of
these additional shares.
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In connection with the Restated and Amended Certificate, the Board of Directors
may issue the Preferred Stock in one or more series with such voting powers,
designations, and preferences as the Board of Directors may determine.
Effect of the Amended and Restated Certificate
After the Amended and Restated Certificate becomes effective, the increased
number of authorized shares of Common Stock and Preferred Stock will be
available for issuance, from time to time, for such purposes and consideration
and on such terms as the Board may approve, and no further vote of the Company's
stockholders will be sought except as required by applicable law and, when and
if the Company is listed on Nasdaq, the regulations thereof.
The existence of additional authorized shares of Common Stock and Preferred
Stock could have the effect of rendering it more difficult or discouraging
hostile takeover attempts. The Board of Directors is not aware of any existing
or planned effort to accumulate material amounts of the Company's Common Stock,
or to acquire the Company by means of a merger, tender offer, solicitation of
proxies in opposition to management, or otherwise, or to change the Company's
management. Nor is the Board of Directors aware of any person having made any
offer to acquire the Company's Common Stock or assets.
Reason for the Amended and Restated Certificate
The increase in authorized Common Stock to be effected by the Amended and
Restated Certificate is necessary to enable the Company to reserve enough shares
for the Plan as well as complete a future private placement of the Common Stock.
Furthermore, the Board of Directors believes that the limited number of
currently authorized but unissued shares of Common Stock and Preferred Stock
unduly restricts the Company's ability to respond to business needs and
opportunities that may arise in the future. The Amended and Restated Certificate
will afford the Company added flexibility by increasing the number of authorized
but unissued shares of Common Stock, as well as Preferred Stock, for financing
requirements, stock splits or other corporate purposes.
1999 STOCK OPTION PLAN
On October 4, 1999, the Board of Directors approved, subject to the approval of
the Company's stockholders, a stock option plan called the 1999 Stock Option
Plan (the "Plan"). In December 1999, stockholders owning a majority of the
outstanding Common Stock approved the Plan. A copy of the Plan is attached
hereto as Exhibit B.
The Plan reserves an aggregate of 5,000,000 shares of the Company's Common Stock
for issuance pursuant to the exercise of stock options which may be granted to
key employees and non-employee directors of the Company and independent
contractors and consultants to the Company. The Board of Directors has
determined that the Plan will increase the proprietary interest in the Company
of key employees, non-employee directors, and independent contractors and
consultants and will align more closely their interests with the interests of
the Company. The Plan will also increase the Company's
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ability to attract and retain the services of experienced and highly qualified
employees and non-employee directors.
The Plan will be administered by a committee whose members shall be selected by
the Board (the "Committee"), or in the absence of such committee, the Plan shall
be administered by the entire Board. The Committee or the Board of Directors
will determine, without limitation, the persons who will be granted options
under the Plan, the type of option to be granted and the number of shares
subject to each option and the option price. The Committee or the Board of
Directors also may determine the time or times when an option becomes
exercisable, the duration of the exercise period for options, and the form or
forms of the instruments evidencing options granted under the Plan. The
Committee or the Board of Directors may adopt, amend, and rescind such rules and
regulations as in its opinion may be advisable for the administration of the
Plan. The Committee or the Board of Directors may amend or rescind the Plan
without stockholder approval, except when an amendment would (a) materially
increase the number of securities that may be issued under the Plan or (b)
materially modify the requirements of eligibility for participation in the Plan.
Options granted under the Plan may either be options qualifying as incentive
stock options ("Incentive Options") under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or options that do not so qualify
("Nonqualified Options," collectively with Incentive Options, the "Options").
Any Incentive Option granted under the Plan must provide for an exercise price
of not less than 100% of the fair market value of the underlying shares on the
date of such grant, but the exercise price of any Incentive Option granted to an
eligible employee owning more than 10% of the Company's Common Stock must be at
least 110% of such fair market value as determined on the date of the grant. The
exercise price of Nonqualified Options shall be determined by the Committee or
the Board of Directors.
Key employees and non-employee directors of the Company and independent
contractors or consultants for the Company and its subsidiaries are eligible to
receive Nonqualified Options under the Plan. Only key employees are eligible to
receive Incentive Options.
At the Board of Directors' option, the Plan allows for the proportionate
adjustment of the number of shares for outstanding options and the option price
per share in the event of stock dividends, recapitalizations resulting in stock
splits or combinations or exchanges of shares, but any such adjustment shall not
change the total purchase price payable upon the exercise in full of options
granted under the Plan.
Options granted under the Plan are nonassignable and nontransferrable, except by
will or the laws of descent and distribution. Except in the case of death or
disability of an optionee, options granted may be exercised only by the
optionee. The expiration date of an option is determined by the Committee at the
time of the grant and is set forth in the applicable stock option agreement. In
no event may an option be exercisable after ten years from the date it is
granted.
If an optionee dies or becomes disabled (within the meaning of Section 22(e)(3)
of the Code) prior to termination of his right to exercise an option in
accordance with the provisions of his option agreement, the option agreement may
provide that the option may be exercised, to the extent of the shares with
respect to which the option could have been exercised by the optionee on the
date of his
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death or disability, (i) in the case of death, by the optionee's estate or by
the person who acquired the right to exercise the option by bequest or
inheritance or by reason of the death of the optionee or (ii) in the case of
disability, by the optionee or his personal representative, provided the option
is exercised prior to the date of its expiration or not more than one year from
the date of the optionee's death or disability, whichever first occurs. The date
of disability of an optionee shall be determined by the Committee.
Federal Income Tax Consequences
Incentive Options. Under the Code, an optionee generally is not subject to
ordinary income tax upon the grant or exercise of an Incentive Option. However,
an employee who exercises an Incentive Option by delivering shares of Common
Stock previously acquired pursuant to the exercise of an Incentive Option is
treated as making a Disqualifying Disposition (defined below) of these shares if
the employee delivers the shares before the expiration of the holding period
applicable to these shares. The applicable holding period is the longer of two
years from the date of grant or one year from the date of exercise. The effect
of this provision is to prevent "pyramiding" the exercise of an Incentive Option
(i.e., the exercise of the Incentive Option for one share and the use of that
share to make successive exercise of the Incentive Option until it is completely
exercised) without the imposition of current income tax.
The amount by which the fair market value of the shares acquired at the time of
exercise of an Incentive Option exceeds the purchase price of the shares under
such Option will be treated as an adjustment to the Optionee's alternative
minimum taxable income for purposes of the alternative minimum tax. If, however,
there is a Disqualifying Disposition in the year in which the Option is
exercised, the maximum amount of the item of adjustment for such year is the
gain on the disposition of the shares. If there is Disqualifying Disposition in
a year other than the year of exercise, the dispositions will not result in an
adjustment for the other year.
If, subsequent to the exercise of an Incentive Option (whether paid for in cash
or in shares), the Optionee holds the shares received upon exercise for a period
that exceeds (a) two years from the date such Incentive Option was granted or,
if later, (b) one year from the date of exercise (the "Required Holding
Period"), the difference (if any) between the amount realized from the sale of
such shares and their tax basis to the holder will be taxed as long-term capital
gain or loss. If the holder is subject to the alternative minimum tax in the
year of disposition, the holder's tax basis in his or her shares will be
increased for purposes of determining his alternative minimum tax for that year,
by the amount of the item of adjustment recognized with respect to such shares
in the year the Option was exercised.
In general, if, after exercising an Incentive Option, an employee disposes of
the acquired shares before the end of the Required Holding Period (a
"Disqualifying Disposition"), an Optionee would be deemed to receive ordinary
income in the year of the Disqualifying Disposition, in an amount equal to the
excess of the fair market value of the shares at the date the Incentive Option
was exercised over the exercise price. If the Disqualifying Disposition is a
sale or exchange which would permit a loss to be recognized under the Code (were
a loss in fact to be sustained), and the sales proceeds are less than the fair
market value of the shares on the date of exercise, the Optionee's ordinary
income would be limited to the gain (if any) from the sale. If the amount
realized upon
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disposition exceeds the fair market value of the shares on the date of exercise,
the excess would be treated as short-term or long-term capital gain, depending
on whether the holding period for such shares exceeded one year.
The Company is not allowed an income tax deduction for the grant or exercise of
an Incentive Option or the disposition, after the Required Holding Period, of
shares acquired upon exercise. In the event of a Disqualifying Disposition, the
Company will be allowed to deduct an amount equal to the ordinary income to be
recognized by the Optionee, provided that such amount is an ordinary and
necessary business expense to the Company and is reasonable, and would satisfy
the Company's withholding obligation for this income.
Nonqualified Options. An Optionee granted a Nonqualified Option under the Plan
will generally recognize, at the date of exercise of such Nonqualified Option,
ordinary income equal to the difference between the exercise price and the fair
market value of the shares of Common Stock subject to the Nonqualified Option.
This taxable ordinary income will be subject to Federal income tax withholding.
The Committee or the Board of Directors may establish such rules and procedures
as it considers desirable in order to satisfy any obligation of the Company to
withhold the statutory prescribed minimum amount of federal income taxes or
other taxes with respect to the exercise of any Option granted under the Plan.
If the Common Stock is traded in the over-the-counter market or upon any
securities exchange, such rules and procedures may provide that the withholding
obligation shall be satisfied by the Company withholding shares of Common Stock
otherwise issuable upon exercise of an Option in shares of Common Stock in an
amount equal to the statutory prescribed minimum withholding applicable to the
ordinary income resulting from the exercise of that Option.
If an Optionee exercises a Nonqualified Option by delivering other shares, the
Optionee will not recognize gain or loss with respect to the exchange of such
shares, even if their then fair market value is different from the Optionee's
tax basis. The Optionee, however, will be taxed as described above with respect
to the exercise of the Nonqualified Option as if he had paid the exercise price
in cash, and the Company will generally be entitled to an equivalent tax
deduction. Provided a separate identifiable stock certificate is issued
therefor, the Optionee's tax basis in that number of shares received on such
exercise which is equal to the number of shares surrendered on such exercise
will be equal to his tax basis in the shares surrendered and his holding period
for such number of shares received will include his holding period for the
shares surrendered. The Optionee's tax basis and holding period for the
additional shares received on exercise of a Nonqualified Option paid for, in
whole or in part, with shares will be the same as if the Optionee had exercised
the Nonqualified Option solely for cash.
The above discussion is based on federal income tax laws and regulations in
effect as of the date hereof. It does not purport to be a complete description
of the federal income tax consequences of the Plan, nor does it describe the
consequences of state, local or foreign tax laws which may be applicable.
Accordingly, any person receiving a grant under the Plan should consult his own
tax advisor.
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SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth information concerning the beneficial ownership
of the Company's Common Stock as of December 15, 1999, by (i) each person who is
known by the Company to own beneficially more than 5% of the Common Stock, (ii)
each director of the Company, (iii) each of the executive officers of the
Company, and (iv) all directors and executive officers of the Company as a
group.
<TABLE>
<CAPTION>
Shares Beneficially Owned (1), (2) Number Percent
---------------------------------- ------ -------
<S> <C> <C>
Daniel L. Jackson (3)
17000 Preston Road, Suite 350 3,157,421 21.2%
Dallas, Texas 75248
Oslin Nation Trust
8150 North Central Highway, Suite 1700
Dallas, Texas 75206 3,107,421 20.9%
Rea Capital Corporation
4751 West Park Boulevard, Suite 106-422
Plano, Texas 75903 2,209,800 14.9%
Sarkis J. Kechejian (4)
421 East Airport Freeway
Irving, Texas 75062 2,142,546 14.4%
Bradley M. Pence 100,000 *
Edward P. Rea -- --
Kenneth F. Urbanus 45,000 *
Edward P. Dayton -- --
Tom Deutsch 35,000 *
Jennifer Salsbury -- --
Michael J. Gulinson -- --
All directors and executive officers as a group (8 persons) 3,337,421 22.4%
</TABLE>
- -------------------
* Less than 1%.
(1) The rules of the SEC provide that, for the purposes hereof, a person is
considered the "beneficial owner" of shares with respect to which the
person, directly or indirectly, has or shares the voting or investment
power, irrespective of his economic interest in the shares. Unless
otherwise noted, each person identified possesses sole voting and
investment power over the shares listed, subject to community property
laws.
(2) Based on 14,876,473 shares outstanding on December 15, 1999.
(3) Includes 3,107,421 shares held by the Oslin Nation Trust, for which Mr.
Jackson serves as trustee.
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(4) Includes 500,143 held by the Sarkis J. Kechejian Trust, which is revocable
by Mr. Kechejian. Includes 200,000 shares held by the Kechejian Trust,
which an irrevocable trust for which Mr. Kechejian serves as trustee.
Includes 200,000 shares held by the Kechejian Foundation, which Mr.
Kechejian controls.
OTHER MATTERS
The information contained in this document is to the best knowledge of the
Company, and the information contained herein with respect to the directors,
executive officers and principal shareholders is based upon information, which
these individuals have provided to us.
By Order Of The Board Of Directors,
Kenneth F. Urbanus
President
Dallas, Texas
January 21, 2000
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EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
STARNET FINANCIAL, INC.
UNDER SECTION 245
OF THE
DELAWARE GENERAL CORPORATION LAW
StarNet Financial, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
ARTICLE ONE
The present name of the corporation is StarNet Financial, Inc. The name
under which the corporation was originally incorporated was Sarkis Capital, Inc.
The Certificate of Incorporation of the corporation was originally filed with
the Secretary of State of Delaware on March 18, 1987.
ARTICLE TWO
This Restated Certificate of Incorporation was duly adopted by the
directors and the stockholders of the corporation in accordance with Section 242
and Section 245 of the Delaware General Corporation Law.
ARTICLE THREE
This Restated Certificate of Incorporation restates and integrates
previous provisions and also further amends the corporation's existing
Certificate of Incorporation to increase the number of authorized shares of
common stock, to grant the corporation's board of directors the authority to
create and issue series of Preferred Stock, to address interested director and
officer transactions, and to provide for the exculpation of directors.
ARTICLE FOUR
The following amendments to the Certificate of Incorporation were
adopted by the corporation as of December 30, 1999:
A. Article 4 of the Certificate of Amendment is hereby amended to read
in its entirety as follows:
"4.
Section 1. Capitalization. The corporation is authorized to issue
sixty-three million (63,000,000) shares of capital stock. Sixty million
(60,000,000) of the authorized shares shall be common stock, $0.01 par value per
share ("Common Stock"), and three million (3,000,000) of the authorized shares
shall be preferred stock, $0.01 par value per share ("Preferred Stock").
Section 2. Preferred Stock.
A. The Preferred Stock may, from time to time, be divided into
and issued in one or more series, with each series to be so designated
as to distinguish the shares thereof from
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the shares of all other series. The shares of each series may have such
powers, designations, preferences, relative rights, qualifications,
limitations or restrictions as are stated herein and in one or more
resolutions providing for the issue of such series adopted by the Board
of Directors of the corporation (the "Board") as provided below in this
Section 2.
B. To the extent that this Certificate of Incorporation does
not fix and determine the variations in the relative rights and
preferences of the Preferred Stock, both in relation to the Common
Stock and as between series of Preferred Stock, the Board is expressly
vested with the authority to divide the Preferred Stock into one or
more series and, within the limitations set forth in this Certificate
of Incorporation, to fix and determine the relative rights and
preferences of the shares of any series so established and, with
respect to each such series, to fix by one or more resolutions
providing for the issue of such series, the following:
(i) The distinctive designation of, and the number of
shares of Preferred Stock which shall constitute, the series,
which number may be increased or decreased (but not below the
number of shares thereof then outstanding) from time to time
by action of the Board.
(ii) The dividend rate, if any, on the shares of such
series and the date or dates from which dividends shall
commence to accrue or accumulate, the terms and conditions
upon which dividends, if any, on the shares of such series
shall be paid, and whether or in what circumstances such
dividends shall be cumulative.
(iii) The price at and the terms and conditions on
which the shares of such series may be redeemed, including
(without limitation) the time during which shares of the
series may be redeemed and the premium, if any, over and above
the par value thereof that the holders of shares of such
series shall be entitled to receive upon the redemption
thereof, which premium may vary at different dates and may
also be different with respect to shares redeemed through the
operation of any retirement or sinking fund.
(iv) The liquidation preference, if any, over and
above the par value thereof that the holders of shares of such
series shall be entitled to receive upon the voluntary or
involuntary liquidation, dissolution or winding-up of the
affairs of the corporation.
(v) Whether or not the shares of such series shall be
subject to the operation of a retirement or sinking fund, and,
if so, the extent and manner in which any such retirement or
sinking fund shall be applied to the purchase or redemption of
the shares of such series for retirement or for other
corporate purposes, and the terms and provisions of such
retirement or sinking fund.
(vi) The terms and conditions, if any, on which the
shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of
capital stock of the corporation or any series of any other
class or classes, or of any other series of the same class,
including (without limitation) the price or prices or the
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rate or rates of conversion or exchange and the method, if
any, of adjusting the same; provided, that shares of such
series may not be convertible into shares of a series or class
that has prior or superior rights and preferences as to
dividends or distribution of assets of the corporation upon
voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the corporation.
(vii) The voting rights, if any, on the shares of
such series (in addition to voting rights provided by law).
(viii) Any or all other preferences and relative,
participating, optional or other special rights, or
qualifications, limitations or restrictions thereof, as shall
not be inconsistent with the law or with this Article 4.
C. All shares of any one series of Preferred Stock shall be
identical with each other in all respects, except that shares of any
one series issued at different times may differ as to the dates from
which dividends thereon, if any, shall commence to accrue or
accumulate; and all series shall rank equally and be identical in all
respects, except as permitted by this Section 2.
D. Except as provided in the resolution or resolutions adopted
by the Board providing for the issue of the series of Preferred Stock,
no vote or consent of the holders of outstanding shares of that series
shall be required for the issue by the Board of any other series of
Preferred Stock, whether or not the rights and preferences of any such
other series shall be fixed by the Board as senior to, or on a parity
with, the rights and preferences of that outstanding series.
Section 3. Common Stock.
A. Each share of Common Stock shall entitle the holder thereof
to one vote on each matter submitted to a vote of holders of shares of
Common Stock.
B. Subject to the prior rights and preferences of the
Preferred Stock set forth in any resolution or resolutions providing
for the issue of a series of Preferred Stock, and to the extent
permitted by the laws of the State of Delaware, the holders of Common
Stock shall be entitled to receive such cash dividends as may be
declared and made payable by the Board.
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C. After payment shall have been made in full to the holders
of any series of Preferred Stock having preferred liquidation rights,
upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the corporation, the remaining assets and
funds of the corporation shall be distributed among the holders of the
Common Stock according to their respective shares.
Section 4. Consideration. Shares of capital stock may be issued by the
corporation from time to time for such consideration as may lawfully be fixed by
the Board.
Section 5. No Cumulative Voting. Cumulative voting for the election of
directors or any other purpose is prohibited.
Section 6. No Preemptive Rights. No stockholder shall, solely by reason
of his holding shares of any class or series of capital stock of the
corporation, have a preemptive or preferential right to purchase or subscribe to
any additional, unissued or treasury shares of any class or series of capital
stock of the corporation, or any notes, debentures, bonds, warrants, rights,
options or other securities of the corporation, whether now or hereafter
authorized, other than such rights, if any, as the Board, in its discretion, may
fix."
B. Article 5 of the Certificate of Incorporation is hereby amended to
read in its entirety as follows:
"5. The Board shall have the power to make, alter or repeal the By-Laws
of the corporation, subject to such restrictions upon the exercise of such power
as may be imposed by the stockholders."
C. Article 7 of the Certificate of Incorporation is hereby amended to
read in its entirety as follows:
"7. No contract or other transaction between the corporation and any
other corporation, firm or other entity or individual shall be affected or
invalidated by the fact that any one or more of the directors or officers of the
corporation is or are interested in or is a director or officer of such other
corporation, a member of such firm, or a partner or member of such other entity;
and any director or officer, individually or jointly, may be a party to or may
be interested in any contract or transaction with the corporation or in which
the corporation is interested."
D. Article 8 of the Certificate of Incorporation is hereby amended to
read in its entirety as follows:
"8. To the fullest extent permitted by Delaware statutory or decisional
law, as the same exists or may hereafter be amended or interpreted, including
(without limitation) Section 102(b)(7) of the Delaware General Corporation Law
or any successor provision, a director of the corporation shall not be liable to
the corporation or its stockholders for any act or omission in such director's
capacity as a director. Any repeal or amendment of this Article 8, or adoption
of any other provision of this Certificate of Incorporation inconsistent with
this Article 8, by the stockholders of the corporation shall be prospective only
and shall not adversely affect any limitation on the liability to
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the corporation or its stockholders of a director of the corporation existing at
the time of such repeal, amendment or adoption of an inconsistent provision."
ARTICLE FIVE
The Certificate of Incorporation and all amendments thereto are hereby
superseded by the following Restated Certificate of Incorporation:
1. The name of the corporation is StarNet Financial, Inc.
2. The address of its registered office in the State of Delaware is
Corporation Trust Center No. 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is THE
CORPORATION TRUST COMPANY.
3. The nature of the business or purposes to be conducted or promoted
is: To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
4.
Section 1. Capitalization. The corporation is authorized to issue
sixty-three million (63,000,000) shares of capital stock. Sixty million
(60,000,000) of the authorized shares shall be common stock, $0.01 par value per
share ("Common Stock"), and three million (3,000,000) of the authorized shares
shall be preferred stock, $0.01 par value per share ("Preferred Stock").
Section 2. Preferred Stock.
A. The Preferred Stock may, from time to time, be divided into
and issued in one or more series, with each series to be so designated
as to distinguish the shares thereof from the shares of all other
series. The shares of each series may have such powers, designations,
preferences, relative rights, qualifications, limitations or
restrictions as are stated herein and in one or more resolutions
providing for the issue of such series adopted by the Board of
Directors of the corporation (the "Board") as provided below in this
Section 2.
B. To the extent that this Certificate of Incorporation does
not fix and determine the variations in the relative rights and
preferences of the Preferred Stock, both in relation to the Common
Stock and as between series of Preferred Stock, the Board is expressly
vested with the authority to divide the Preferred Stock into one or
more series and, within the limitations set forth in this Certificate
of Incorporation, to fix and determine the relative rights and
preferences of the shares of any series so established and, with
respect to each such series, to fix by one or more resolutions
providing for the issue of such series, the following:
(i) The distinctive designation of, and the number of
shares of Preferred Stock which shall constitute, the series,
which number may be increased or decreased (but not below the
number of shares thereof then outstanding) from time to time
by action of the Board.
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(ii) The dividend rate, if any, on the shares of such
series and the date or dates from which dividends shall
commence to accrue or accumulate, the terms and conditions
upon which dividends, if any, on the shares of such series
shall be paid, and whether or in what circumstances such
dividends shall be cumulative.
(iii) The price at and the terms and conditions on
which the shares of such series may be redeemed, including
(without limitation) the time during which shares of the
series may be redeemed and the premium, if any, over and above
the par value thereof that the holders of shares of such
series shall be entitled to receive upon the redemption
thereof, which premium may vary at different dates and may
also be different with respect to shares redeemed through the
operation of any retirement or sinking fund.
(iv) The liquidation preference, if any, over and
above the par value thereof that the holders of shares of such
series shall be entitled to receive upon the voluntary or
involuntary liquidation, dissolution or winding-up of the
affairs of the corporation.
(v) Whether or not the shares of such series shall be
subject to the operation of a retirement or sinking fund, and,
if so, the extent and manner in which any such retirement or
sinking fund shall be applied to the purchase or redemption of
the shares of such series for retirement or for other
corporate purposes, and the terms and provisions of such
retirement or sinking fund.
(vi) The terms and conditions, if any, on which the
shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of
capital stock of the corporation or any series of any other
class or classes, or of any other series of the same class,
including (without limitation) the price or prices or the rate
or rates of conversion or exchange and the method, if any, of
adjusting the same; provided, that shares of such series may
not be convertible into shares of a series or class that has
prior or superior rights and preferences as to dividends or
distribution of assets of the corporation upon voluntary or
involuntary liquidation, dissolution or winding-up of the
affairs of the corporation.
(vii) The voting rights, if any, on the shares of
such series (in addition to voting rights provided by law).
(viii) Any or all other preferences and relative,
participating, optional or other special rights, or
qualifications, limitations or restrictions thereof, as shall
not be inconsistent with the law or with this Article 4.
C. All shares of any one series of Preferred Stock shall be
identical with each other in all respects, except that shares of any
one series issued at different times may differ as to the dates from
which dividends thereon, if any, shall commence to accrue or
accumulate; and all series shall rank equally and be identical in all
respects, except as permitted by this Section 2.
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D. Except as provided in the resolution or resolutions adopted
by the Board providing for the issue of the series of Preferred Stock,
no vote or consent of the holders of outstanding shares of that series
shall be required for the issue by the Board of any other series of
Preferred Stock, whether or not the rights and preferences of any such
other series shall be fixed by the Board as senior to, or on a parity
with, the rights and preferences of that outstanding series.
Section 3. Common Stock.
A. Each share of Common Stock shall entitle the holder thereof
to one vote on each matter submitted to a vote of holders of shares of
Common Stock.
B. Subject to the prior rights and preferences of the
Preferred Stock set forth in any resolution or resolutions providing
for the issue of a series of Preferred Stock, and to the extent
permitted by the laws of the State of Delaware, the holders of Common
Stock shall be entitled to receive such cash dividends as may be
declared and made payable by the Board.
C. After payment shall have been made in full to the holders
of any series of Preferred Stock having preferred liquidation rights,
upon any voluntary or involuntary liquidation, dissolution or
winding-up of the affairs of the corporation, the remaining assets and
funds of the corporation shall be distributed among the holders of the
Common Stock according to their respective shares.
Section 4. Consideration. Shares of capital stock may be issued by the
corporation from time to time for such consideration as may lawfully be fixed by
the Board.
Section 5. No Cumulative Voting. Cumulative voting for the election of
directors or any other purpose is prohibited.
Section 6. No Preemptive Rights. No stockholder shall, solely by reason
of his holding shares of any class or series of capital stock of the
corporation, have a preemptive or preferential right to purchase or subscribe to
any additional, unissued or treasury shares of any class or series of capital
stock of the corporation, or any notes, debentures, bonds, warrants, rights,
options or other securities of the corporation, whether now or hereafter
authorized, other than such rights, if any, as the Board, in its discretion, may
fix.
5. The Board shall have the power to make, alter or repeal the By-Laws
of the corporation, subject to such restrictions upon the exercise of such power
as may be imposed by the stockholders.
6. The corporation is to have perpetual existence.
7. No contract or other transaction between the corporation and any
other corporation, firm or other entity or individual shall be affected or
invalidated by the fact that any one or more of the directors or officers of the
corporation is or are interested in or is a director or officer of such
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other corporation, a member of such firm, or a partner or member of such other
entity; and any director or officer, individually or jointly, may be a party to
or may be interested in any contract or transaction with the corporation or in
which the corporation is interested.
8. To the fullest extent permitted by Delaware statutory or decisional
law, as the same exists or may hereafter be amended or interpreted, including
(without limitation) Section 102(b)(7) of the Delaware General Corporation Law
or any successor provision, a director of the corporation shall not be liable to
the corporation or its stockholders for any act or omission in such director's
capacity as a director. Any repeal or amendment of this Article 8, or adoption
of any other provision of this Certificate of Incorporation inconsistent with
this Article 8, by the stockholders of the corporation shall be prospective only
and shall not adversely affect any limitation on the liability to the
corporation or its stockholders of a director of the corporation existing at the
time of such repeal, amendment or adoption of an inconsistent provision.
9. The corporation reserves the right to amend, alter, change or repeal
any provision contained in the Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
ARTICLE SIX
This Restated Certificate of Incorporation shall be effective on February 11,
2000.
IN WITNESS WHEREOF, StarNet Financial, Inc., has caused this Restated
Certificate of Incorporation to be signed by Kenneth F. Urbanus, its President,
as of the 30th day of December, 1999.
STARNET FINANCIAL, INC.
By: /s/ Kenneth F. Urbanus
-------------------------------
Kenneth F. Urbanus, President
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EXHIBIT B
STARNET FINANCIAL, INC.
1999 STOCK OPTION PLAN
On October 4, 1999, the Board of Directors of StarNet Financial, Inc.
adopted the following 1999 Stock Option Plan:
1. PURPOSE. The purpose of the Plan is to provide Key Employees,
non-employee directors, independent contractors and consultants with a
proprietary interest in the Company through the granting of Options which will:
(a) increase the interest of the Key Employees, non-employee directors,
independent contractors and consultants in the Company's welfare;
(b) furnish an incentive to the Key Employees, non-employee directors,
independent contractors and consultants to continue their services for the
Company; and
(c) provide a means through which the Company may attract able persons
to enter its employ, serve on its Board and render services to it.
2. ADMINISTRATION. The Plan will be administered by the Committee.
3. PARTICIPANTS. The Committee may, from time to time, select the
particular Key Employees, non-employee directors, independent contractors and
consultants of the Company and its Subsidiaries to whom Options are to be
granted, and who will, upon such grant, become Participants in the Plan. The
Committee has the authority, in its complete discretion, to grant Options to
Participants. A Participant may be granted more than one Option under the Plan,
and Options may be granted at any time or times during the term of the Plan.
<PAGE> 19
4. STOCK OWNERSHIP LIMITATION. No Incentive Option may be granted to an
Employee who owns more than 10% of the voting power of all classes of stock of
the Company or its Parent or Subsidiaries. This limitation will not apply if the
Option price is at least 110% of the fair market value of the Common Stock at
the time the Incentive Option is granted and the Incentive Option is not
exercisable more than five years from the date it is granted.
5. SHARES SUBJECT TO PLAN. The Committee may not grant Options under
the Plan for more than 5,000,000 shares of Common Stock and may not grant
Options to any Participant for more than 5,000,000 shares of Common Stock, but
these numbers may be adjusted to reflect, if deemed appropriate by the
Committee, any stock dividend, stock split, share combination, recapitalization
or the like of or by the Company. Shares to be optioned and sold may be made
available from either authorized but unissued Common Stock or Common Stock held
by the Company in its treasury. Shares that by reason of the expiration of an
Option or otherwise are no longer subject to purchase pursuant to an Option
granted under the Plan may be re-offered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value (determined at
the date of grant) of the shares of Common Stock which any Key Employee is first
eligible to purchase in any calendar year by exercise of Incentive Options
granted under the Plan and all incentive stock option plans (within the meaning
of Section 422 of the Code) of the Company or its Parent or Subsidiaries shall
not exceed $100,000. For this purpose, the fair market value (determined at the
date of grant of each option) of the stock purchasable by exercise of an
Incentive Option (or an installment thereof) shall be counted against the
$100,000 annual limitation for a Key Employee only for the calendar year such
stock is first purchasable under the terms of the Incentive Option.
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7. ALLOTMENT OF SHARES. The Committee shall determine the number of
shares of Common Stock to be offered from time to time by grant of Options to
Key Employees, non-employee directors, independent contractors and consultants
of the Company or its Subsidiaries. The grant of an Option to an individual
shall not be deemed either to entitle the individual to, or to disqualify the
individual from, participation in any other grant of Options under the Plan.
8. GRANT OF OPTIONS. The Committee is authorized to grant Incentive
Options, Nonqualified Options, or a combination of both, under the Plan;
provided, however, Incentive Options may be granted only to Key Employees. The
grant of Options shall be evidenced by Option Agreements containing such terms
and provisions as are approved by the Committee, but not inconsistent with the
Plan, including (without limitation) provisions that may be necessary to assure
that any Option that is intended to be an Incentive Option will comply with
Section 422 of the Code. The Company shall execute Option Agreements upon
instructions from the Committee. Except as provided otherwise in Sections 5 and
14 of the Plan, the terms of any Option Agreement executed by the Company shall
not be amended, modified or changed without the written consent of the Company
and the Participant.
An Option Agreement may provide that the Participant may request
approval from the Committee to exercise an Option or a portion thereof by
tendering Qualifying Shares at the fair market value per share on the date of
exercise in lieu of cash payment of the Option price.
The Plan shall be submitted to the Company's shareholders for approval.
Options may be granted under the Plan before the shareholders of the Company
approve the Plan, and those Options will be effective when granted; but if for
any reason the shareholders of the Company do not approve the plan before one
year from the date of adoption of the Plan by the Board (the "Shareholder
Approval Deadline"), all Incentive Options granted under the Plan before the
Shareholder Approval
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Deadline will be deemed to have been granted as Nonqualified Options. No Option
granted before shareholder approval may be exercised, in whole or in part,
before approval of the Plan by the shareholders of the Company.
9. OPTION PRICE. The Option price for an Incentive Option shall not be
less than 100% of the fair market value per share of the Common Stock (or 110%
of such amount as required by Section 4 of the Plan), and at least the par value
per share of Common Stock, on the date the Option is granted. The Option price
for a Nonqualified Option shall be, as determined by the Committee, any price
per share of the Common Stock that is greater than par value per share of the
Common Stock. For purposes of the Plan, the fair market value of a share of the
Common Stock shall be (i) if the Common Stock is traded in the over-the-counter
market or on any securities exchange, the closing price or, if applicable, the
average of the closing bid and ask prices per share of such Common Stock for the
last business day immediately before the date the Option is granted, and (ii) if
the Common Stock is not so traded, an amount determined by the Committee in good
faith using any reasonable valuation method and based on such factors as it
deems relevant to such determination.
10. OPTION PERIOD. The Option Period will begin on the date the Option
is granted, which will be the date the Committee authorizes the Option unless
the Committee specifies a later date. No Option may terminate later than ten
years (or five years as required by Section 4 of the Plan) from the date the
Option is granted. The Committee may provide for the exercise of Options in
installments and, subject to the provisions hereof, upon such terms, conditions
and restrictions as it may determine. The Committee may provide for termination
of the Option in the case of termination of employment, directorship or
independent contractor or consultant relationship, or any other reason.
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11. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a Participant dies or
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
termination of his right to exercise an Option in accordance with the provisions
of his Option Agreement, the Option Agreement may provide that it may be
exercised, to the extent of the shares with respect to which the Option could
have been exercised by the Participant on the date of his death or disability,
(i) in the case of death, by the Participant's estate or by the person who
acquired the right to exercise the Option by bequest or inheritance or by reason
of the death of the Participant, or (ii) in the case of disability, by the
Participant or his personal representative, provided the Option is exercised
prior to the date of its expiration or not more than one year from the date of
the Participant's death or disability, whichever first occurs. The date of
disability of a Participant shall be determined by the Committee.
12. PAYMENT. Full payment for shares purchased upon exercising an
Option shall be made in cash or by check or, if the Option Agreement so permits
and no legal or regulatory requirement imposed on the Company or covenant made
by the Company is violated, by tendering Qualifying Shares at the fair market
value per share at the time of exercise, or on such other terms as are set forth
in the applicable Option Agreement. If the Common Stock is traded in the
over-the-counter market or upon any securities exchange, the Committee may
permit a Participant exercising an Option to simultaneously exercise the Option
and sell a portion of the shares acquired, pursuant to a brokerage or similar
arrangement approved in advance by the Committee, and use the proceeds from the
sale as payment of the Option price of the Common Stock being acquired by
exercise of the Option. In addition, the Participant shall tender payment of the
amount as may be requested by the Company, if any, for the purpose of satisfying
its statutory liability to withhold federal, state or local income or other
taxes incurred by reason of the exercise of an Option. No shares may be issued
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until full payment of the purchase price therefor has been made, and a
Participant will have none of the rights of a shareholder with respect to those
shares until those shares are issued to him.
13. EXERCISE OF OPTION. Options granted under the Plan may be exercised
during the Option Period, at such times, in such amounts, in accordance with
such terms and subject to such restrictions as are set forth in the applicable
Option Agreements. In no event may an Option be exercised or shares be issued
pursuant to an Option if any requisite action, approval or consent of any
governmental authority of any kind having jurisdiction over the exercise of
Options shall not have been taken or secured.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS.
(a) The number of shares of Common Stock covered by each
outstanding Option granted under the Plan and the Option price may be adjusted
to reflect, as deemed appropriate by the Board, any stock dividend, stock split,
share combination, exchange of shares, recapitalization, merger, consolidation,
separation, reorganization, liquidation or the like of or by the Company that is
effected without receipt of consideration by the Company. For this purpose, the
term "effected without receipt of consideration" shall not include conversion or
exchange of any convertible or exchangeable securities of the Company.
(b) In the event of the proposed dissolution or liquidation of
the Company, the Board shall notify the Participant at least 20 days prior to
such proposed action. To the extent that an Option has not been previously
exercised, such Option shall terminate immediately before consummation of such
proposed dissolution or liquidation.
(c) If (i) the Company shall sell all or substantially all of
its assets to an entity that is not an "affiliate," as defined in Rule 405
promulgated under the Securities Act of 1933, as amended, of the Company
immediately before that sale, (ii) the Company consummates a merger,
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<PAGE> 24
consolidation, share exchange, or reorganization with another corporation or
other entity and, as a result of such merger, consolidation, share exchange, or
reorganization, less than a majority of the combined voting power of the
outstanding securities of the surviving entity (whether the Company or another
entity) immediately after such transaction is held in the aggregate by the
holders of securities of the Company that were entitled to vote generally in the
election of directors of the Company (or its successor) ("Voting Stock")
immediately before such transaction, or (iii) when the Common Stock is traded in
the over-the-counter market or on any securities exchange, pursuant to a tender
offer or exchange offer for securities of the Company, or in any other manner,
any person or group within the meaning of the Securities Exchange Act of 1934,
as amended (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or any of its affiliates), acquires beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of more than 50% of the Voting Stock (the
surviving corporation or purchaser described in this paragraph, the "Purchaser,"
and any such event described in this paragraph, a "Change of Control"), then the
Company shall negotiate in good faith to reach an agreement with the Purchaser
that the Purchaser will either assume the obligations of the Company under the
outstanding Options or convert the outstanding Options into options of at least
equal value as to capital stock of the Purchaser; but if such an agreement is
not reached, then the Options shall become fully vested and exercisable and the
Company shall notify each Participant, not later than 20 days before the
effective date of such Change of Control (except that in the case of a Change of
Control under clause (iii), notice shall be given as soon as practicable after
the Change of Control), that his Option has become fully vested and exercisable,
whether or not such Option shall then be exercisable under the terms of his
Option Agreement. Any such arrangement relating to Incentive Options shall
comply with the requirements of Section 422 of the Code and the
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regulations thereunder. To the extent that the Participants exercise the Options
before or on the effective date of the Change of Control, the Company shall
issue all Common Stock purchased by exercise of those Options, and those shares
of Common Stock shall be treated as issued and outstanding for purposes of the
Change of Control. Upon a Change of Control, where the outstanding Options are
not assumed by the surviving corporation or the acquiring corporation, the Plan
shall terminate, and any unexercised Options outstanding under the Plan at that
date shall terminate.
15. TAX WITHHOLDING. The Committee may establish such rules and
procedures as it considers desirable in order to satisfy any obligation of the
Company to withhold the statutorily prescribed minimum amount of federal income
taxes or other taxes with respect to the exercise of any Option granted under
the Plan. If the Common Stock is traded in the over-the-counter market or upon
any securities exchange, such rules and procedures may provide that the
withholding obligation shall be satisfied by the Company withholding shares of
Common Stock otherwise issuable upon exercise of an Option in shares of Common
Stock in an amount equal to the statutorily prescribed minimum withholding
applicable to the ordinary income resulting from the exercise of that Option.
16. NON-ASSIGNABILITY. Unless otherwise permitted by the Code and Rule
16b-3 under the Securities Exchange Act of 1934, as amended (if applicable), and
expressly permitted in the Option Agreement, an Option may not be transferred
other than by will or by the laws of descent and distribution. Except in the
case of the death or disability of a Participant, Options granted to a
Participant may be exercised only by the Participant.
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17. INTERPRETATION. The Committee shall interpret the Plan and shall
prescribe such rules and regulations in connection with the operation of the
Plan as it determines to be advisable for the administration of the Plan. The
Committee may rescind and amend its rules and regulations.
18. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or discontinued
by the Board or the Committee without the approval of the shareholders of the
Company, except that any amendment that would either materially increase the
number of securities that may be issued under the Plan or materially modify the
requirements of eligibility for participation in the Plan must be approved by
the shareholders of the Company.
19. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of
the Board or the Committee shall be deemed to give any Employee, non-employee
director, independent contractor or consultant any right to be granted an Option
to purchase Common Stock or any other rights except as may be evidenced by the
Option Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and on the terms
and conditions expressly set forth therein. The existence of the Plan and the
Options granted hereunder shall not affect in any way the right of the Board,
the Committee or the shareholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of bonds, debentures, or shares of preferred stock ahead of or
affecting Common Stock or the rights thereof, the dissolution or liquidation of
the Company or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding. Nothing contained in the
Plan or in any Option Agreement shall confer upon any Employee, non-employee
director, independent contractor or consultant any right to (i) continue in the
employ of the Company or any of its Subsidiaries, or continue as a director,
independent contractor or consultant to the
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Company or any of its Subsidiaries, or (ii) interfere in any way with the right
of the Company or any of its Subsidiaries to terminate his employment,
directorship or independent contractor or consultant relationship at any time.
20. TERM. Unless sooner terminated by action of the Board, this Plan
will terminate on October 3, 2009. The Committee may not grant Options under the
Plan after that date, but Options granted before that date will continue to be
effective in accordance with their terms.
21. DEFINITIONS. For the purpose of the Plan, unless the context
requires otherwise, the following terms shall have the meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee of the Board appointed to
administer the Plan or, in the absence of such a Committee, means the Board.
(d) "Common Stock" means the Common Stock which the Company is
currently authorized to issue or may in the future be authorized to issue (as
long as the common stock varies from that currently authorized, if at all, only
in amount of par value).
(e) "Company" means StarNet Financial, Inc., a Delaware corporation.
(f) "Employee" means an individual who is employed, within the meaning
of Section 3401 of the Code, by the Company or by a Subsidiary. The Committee
shall determine when an Employee's period of employment terminates and when such
period of employment is deemed to be continued during an approved leave of
absence.
(g) "Incentive Option" means an Option granted under the Plan which
meets the requirements of Section 422 of the Code.
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(h) "Key Employee" means any Employee whose performance and
responsibilities are determined by the Committee to have a direct and
significant effect on the performance of the Company and its Subsidiaries.
(i) "Nonqualified Option" means an Option granted under the Plan which
is not intended to be an Incentive Option.
(j) "Option" means an option granted pursuant to the Plan to purchase
shares of Common Stock, whether granted as an Incentive Option or as a
Nonqualified Option.
(k) "Option Agreement" means, with respect to each Option granted to a
Participant, the signed written agreement between the Participant and the
Company setting forth the terms and conditions of the Option.
(l) "Option Period" means the period during which an Option may be
exercised.
(m) "Parent" means any corporation in an unbroken chain of corporations
ending with the Company if, at the time of granting of the Option, each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain.
(n) "Participant" means an individual to whom an Option has been
granted under the Plan.
(o) "Plan" means this StarNet Financial, Inc. 1999 Stock Option Plan,
as set forth herein and as it may be amended from time to time.
(p) "Qualifying Shares" means shares of Common Stock which either (i)
have been owned by the Participant for more than six months and have been "paid
for" within the meaning of Rule 144 promulgated under the Securities Act of
1933, as amended, or (ii) were obtained by the Participant in the public market.
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(q) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the granting of the
Option, each of the corporations other than the last corporation in the unbroken
chain owns stock possessing 80% or more of the total combined voting power of
all classes of stock in one of the other corporations in the chain, and
"Subsidiaries" means more than one of any of such corporations.
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