<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant / /
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
- --------------------------------------------------------------------------------
(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)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE>
[LETTERHEAD]
November 29, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
HFNC Financial Corp. The meeting will be held at the Radisson Plaza Hotel,
located at Two NationsBank Plaza, Charlotte, North Carolina on Monday,
December 30, 1996 at 10:00 a.m., Eastern Time. The matters to be considered
by stockholders at the Special Meeting are described in the accompanying
materials.
The Board of Directors of HFNC Financial Corp. has determined that the
matters to be considered at the Special Meeting are in the best interests of
the Company and its shareholders. FOR THE REASONS SET FORTH IN THE PROXY
STATEMENT, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" EACH MATTER
TO BE CONSIDERED.
It is very important that your shares be voted at the Special Meeting
regardless of the number you own or whether you are able to attend the
meeting in person. We urge you to mark, sign, and date your proxy card today
and return it in the envelope provided, even if you plan to attend the Special
Meeting. This will not prevent you from voting in person, but will ensure that
your vote is counted if you are unable to attend.
On behalf of the Board of Directors and all of the employees of the
Company and the Association, I thank you for your continued interest and
support.
Sincerely,
H. Joe King, Jr.
President and Chief Executive Officer
<PAGE>
HFNC FINANCIAL CORP.
139 SOUTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28202
(704) 373-0400
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 30, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders
("Special Meeting") of HFNC Financial Corp. (the "Company") will be held at the
Radisson Plaza Hotel, located at Two NationsBank Plaza, Charlotte, North
Carolina on Monday, December 30, 1996 at 10:00 a.m., Eastern Time, for the
following purposes, all of which are more completely set forth in the
accompanying Proxy Statement:
(1) To consider and approve the adoption of the Company's Stock
Option Plan;
(2) To consider and approve the adoption of the Company's
Recognition and Retention Plan and Trust; and
(3) To transact such other business as may properly come before
the meeting or any adjournment thereof. Management is not aware of any other
such business.
The Board of Directors has fixed November 20, 1996 as the voting
record date for the determination of stockholders entitled to notice of and to
vote at the Special Meeting and at any adjournment thereof. Only those
stockholders of record as of the close of business on that date will be
entitled to vote at the Special Meeting or at any such adjournment.
By Order of the Board of Directors
Ann G. Benton
Corporate Secretary
Charlotte, North Carolina
November 29, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE
NUMBER YOU OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN
THE ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING, YOU MAY VOTE
EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY
YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF.
<PAGE>
HFNC FINANCIAL CORP.
PROXY STATEMENT
SPECIAL MEETING OF STOCKHOLDERS
DECEMBER 30, 1996
This Proxy Statement is furnished to holders of common stock,
$.01 par value per share ("Common Stock"), of HFNC Financial Corp. (the
"Company"). The Company acquired all of the stock of Home Federal Savings and
Loan Association (the "Association") issued in connection with the
Association's conversion from mutual to stock form in December 1995 (the
"Conversion"). Proxies are being solicited on behalf of the Board of Directors
of the Company to be used at the Special Meeting of Stockholders ("Special
Meeting") to be held at the Radisson Plaza Hotel, located at Two NationsBank
Plaza, Charlotte, North Carolina, on Monday, December 30, 1996 at 10:00 a.m.,
Eastern Time, and at any adjournment thereof for the purposes set forth in the
Notice of Special Meeting of Stockholders. This Proxy Statement is first being
mailed to stockholders on or about November 29, 1996.
The proxy solicited hereby, if properly signed and returned to
the Company and not revoked prior to its use, will be voted in accordance
with the instructions contained therein. If no contrary instructions are
given, each proxy received will be voted FOR the matters described below and
upon the transaction of such other business as may properly come before the
meeting in accordance with the best judgment of the persons appointed as
proxies. Any stockholder giving a proxy has the power to revoke it at any
time before it is exercised by (i) filing with the Secretary of the Company
written notice thereof (Ann G. Benton, Corporate Secretary, HFNC Financial
Corp., 139 South Tryon Street, Charlotte, North Carolina 28202); (ii)
submitting a duly-executed proxy bearing a later date; or (iii) appearing at
the Special Meeting and giving the Corporate Secretary notice of his or her
intention to vote in person. Proxies solicited hereby may be exercised only
at the Special Meeting and any adjournment thereof and will not be used for
any other meeting.
VOTING
Only stockholders of record of the Company at the close of
business on November 20, 1996 ("Voting Record Date") are entitled to notice of
and to vote at the Special Meeting and at any adjournment thereof. On the
Voting Record Date, there were 17,192,500 shares of Common Stock of the Company
issued and outstanding and the Company had no other class of equity securities
outstanding. Each share of Common Stock is entitled to one vote at the Special
Meeting on all matters properly presented at the Special Meeting. The
affirmative vote of the holders of a majority of the total votes present in
person or by proxy at the Special Meeting is required for approval of the
proposals to approve the Company's Stock Option Plan ("Stock Option Plan") and
the Company's Recognition and Retention Plan and Trust ("Recognition Plan").
Because of the required votes, abstentions will have the same effect as a vote
against the proposals with respect to the Stock Option Plan and the Recognition
Plan. The proposals to approve the Stock Option Plan and the Recognition Plan
are considered "non-discretionary" for which brokers may not vote if they have
not received instructions from the beneficial owner. Because all of the
proposals at the Special Meeting are non-discretionary, there will be no "broker
non-votes" at the Special Meeting.
<PAGE>
2
BENEFICIAL OWNERSHIP OF COMMON STOCK
BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the Voting Record Date,
certain information as to the Common Stock beneficially owned by (i) each
person or entity, including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934 ("1934 Act"), who or which was
known to the Company to be the beneficial owner of more than 5% of the issued
and outstanding Common Stock, (ii) the directors of the Company, (iii) those
executive officers of the Company whose salary and bonus exceeded $100,000 in
fiscal 1996, and (iv) all directors and executive officers of the Company and
the Association as a group.
Common Stock
Beneficially Owned as of
Name of Beneficial Owner November 20, 1996(1)
- ------------------------------------------ ------------------------
No. %
------------- -----
Home Federal Savings and Loan Association 900,000(2) 5.2%
Employee Stock Ownership Trust
139 South Tryon Street
Charlotte, North Carolina 28202
The Shelton Companies 929,583(3) 5.4%
301 S. College Street
3600 One First Union Center
Charlotte, North Carolina 28202
Mid-Atlantic Investors 876,500(4) 5.1%
P.O. Box 7574
Columbia, South Carolina 29202
Directors:
H. Joe King, Jr. 60,000(5) *
J. Harold Barnes, Jr. 80,560(6) *
Ray W. Bradley, Jr. 5,000(7) *
Joe M. Logan 10,800(8) *
John M. McCaskill 2,000 *
Lewis H. Parham, Jr. 55,000(9) *
Willie E. Royal 8,500 *
Certain other executive officers:
A. Burton Mackey, Jr. 26,750(10) *
All directors and executive officers 248,610(2) 1.4%
of the Company and the Association
as a group (8 persons)
(FOOTNOTES ON FOLLOWING PAGE)
<PAGE>
3
- -------------
* Represents less than 1% of the outstanding Common Stock.
(1) Based upon information provided by the respective beneficial
owners and filings with the Securities and Exchange Commission
("SEC") made pursuant to the 1934 Act. For purposes of this
table, pursuant to rules promulgated under the 1934 Act, an
individual is considered to beneficially own shares of Common
Stock if he or she directly or indirectly has or shares (1)
voting power, which includes the power to vote or to direct the
voting of the shares; or (2) investment power, which includes the
power to dispose or direct the disposition of the shares. Unless
otherwise indicated, an individual has sole voting power and sole
investment power with respect to the indicated shares.
(2) The Home Federal Savings and Loan Association Employee Stock
Ownership Trust ("Trust") was established pursuant to the Home
Federal Savings and Loan Association Employee Stock Ownership
Plan ("ESOP") by an agreement between the Association and Messrs.
King and Bradley, directors of the Association, and Richard J.
Brown, Vice President of the Association, who act as trustees of
the plan ("Trustees"). As of the Voting Record Date, no shares
held in the Trust had been allocated to the accounts of
participating employees. Under the terms of the ESOP,
unallocated shares held in the ESOP will be voted by the ESOP
Trustees in accordance with their fiduciary duties as trustees.
In future years, the Trustees must vote the allocated shares held
in the ESOP in accordance with the instructions of the
participating employees and allocated shares for which employees
do not give instructions will be voted in the same ratio on any
matter as to those shares or which instructions are given. The
amount of Common Stock beneficially owned by directors who serve
as trustees of the ESOP and by all directors and executive
officers as a group does not include the unallocated shares held
by the Trust.
(3) Based upon information contained in a Schedule 13D filed with the
SEC by The Shelton Companies, a North Carolina general
partnership, Third Set, Inc., a North Carolina corporation, and
each of Charles M. Shelton, Sr., Sandra G. Shelton, Amanda S.
Houser, Charles M. Shelton, Jr., R. Edwin Shelton, Dorothy M.
Shelton, Jennifer S. Egues, Winifred L. Shelton, Lydia S. Surles,
Mark C. Surles and Reid S. Surles. As set forth in the Schedule
13D and based upon an agreement among the parties thereto which
is included therein, the reporting entities and individuals are
reflected as a group which, in the aggregate, beneficially own
929,583 shares or 5.4% of the outstanding Common Stock.
(4) Based upon information contained in a Schedule 13D filed with the
SEC by Mid-Atlantic Investors, Mid-Atlantic Partners, L.P., Jerry
Zucker and H. Jerry Shearer. Messrs. Zucker and Shearer are the
partners of Mid-Atlantic Investors and Mid-Atlantic Investors is
the general partner of Mid-Atlantic Partners, L.P. As set forth
in the Schedule 13D, Mid-Atlantic Investors, Mid-Atlantic
Partners, L.P., Mr. Zucker and Mr. Shearer together beneficially
own 875,000 shares, or 5.1% of the Company's Common Stock, over
which they share voting, investment and dispositive power. Mr.
Shearer beneficially owns another 1,500 shares of the Company's
Common Stock. Mr. Shearer has sole voting, investment and
dispositive power with respect to such 1,500 shares. As a group,
Mid-Atlantic Investors, Mid-Atlantic Partners, L.P., Mr. Shearer
and Mr. Zucker beneficially own 876,500 shares or 5.1% of the
Common Stock.
(5) Includes 60,000 shares held by the Home Federal Savings and Loan
Association Savings Plan ("Savings Plan").
(FOOTNOTES CONTINUED ON FOLLOWING PAGE)
<PAGE>
4
- ----------
(6) Includes 60,360 shares held by the Savings Plan, 2,500 shares
held by Mr. Barnes' daughter, 15,000 shares held by Mr. Barnes'
wife and 2,700 shares held by Mr. Barnes' son.
(7) Includes 1,000 shares held by Mr. Bradley's wife.
(8) Includes 3,100 shares held by Mr. Logan's wife.
(9) Includes 5,000 shares held by Mr. Parham's wife.
(10) Includes 25,000 shares held by the Savings Plan and 1,750 shares
held by Mr. Mackey's wife.
PROPOSAL TO ADOPT THE STOCK OPTION PLAN
GENERAL
The Board of Directors has adopted the Stock Option Plan which
is designed to attract and retain qualified personnel in key positions, provide
directors, officers and key employees with a proprietary interest in the Company
as an incentive to contribute to the success of the Company and reward key
employees for outstanding performance. The Stock Option Plan is also designed
to retain qualified directors for the Company. The Stock Option Plan provides
for the grant of incentive stock options intended to comply with the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code") ("incentive stock options"), non-qualified or compensatory stock
options and stock appreciation rights (collectively "Awards"). Awards will be
available for grant to directors and key employees of the Company and any
subsidiaries, except that directors will be eligible to receive only
non-incentive stock options. If stockholder approval is obtained, options to
acquire shares of Common Stock will be awarded to key employees of the Company
and the Association and directors of the Company with an exercise price equal
to the fair market value of the Common Stock on the date of grant.
DESCRIPTION OF THE STOCK OPTION PLAN
The following description of the Stock Option Plan is a summary
of its terms and is qualified in its entirety by reference to the Stock Option
Plan, a copy of which is attached hereto as Appendix A.
ADMINISTRATION. The Stock Option Plan is administered and
interpreted by a committee of the Board of Directors ("Committee") that is
composed solely of two or more "Non-Employee Directors."
STOCK OPTIONS. Under the Stock Option Plan, the Board of
Directors or the Committee determines which directors, officers and key
employees will be granted options, whether such options will be incentive or
compensatory options, the number of shares subject to each option, whether
such options may be exercised by delivering other shares of Common Stock and
when such options become exercisable. The per share exercise price of a stock
option shall be equal to the fair market value of a share of Common Stock
on the date the option is granted.
All options granted to participants under the Stock Option Plan
shall become vested and exercisable at the rate determined by the Board of
Directors or the Committee when making an award. Notwithstanding the foregoing,
no vesting shall occur on or after a participant's employment with the Company
is terminated for any reason other than his death, disability or retirement.
Unless the Committee shall specifically state otherwise at
<PAGE>
5
the time an option is granted, all options granted to participants shall become
vested and exercisable in full on the date an optionee terminates his
employment with or service to the Company or a subsidiary company because of
his death, disability or retirement. In addition, all stock options will become
vested and exercisable in full in the event that there is a change in control
of the Company, as defined in the Stock Option Plan.
Each stock option or portion thereof shall be exercisable at any
time on or after it vests and is exercisable until the earlier of ten years
after its date of grant or three months after the date on which the optionee's
employment or service as a non-employee director terminates, unless extended by
the Committee to a period not to exceed five years from such termination.
However, failure to exercise incentive stock options within three months after
the date on which the optionee's employment terminates may result in adverse
tax consequences to the optionee. If an optionee dies while serving as an
employee or a non-employee director or terminates his service as an employee
or a non-employee director as a result of disability or retirement without
having fully exercised his options, the optionee's executors, administrators,
legatees or distributees of his estate shall have the right to exercise such
options during the twelve-month period following the earlier of his death or
termination due to disability or retirement, provided no option will be
exercisable more than ten years from the date it was granted. Stock options
are non-transferable except by will or the laws of descent and distribution.
Notwithstanding the foregoing, an optionee who holds non-qualified options may
transfer such options to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit or one or more of
these individuals. Options so transferred may thereafter be transferred only
to the optionee who originally received the grant or to an individual or trust
to whom the optionee could have initially transferred the option. Options
which are so transferred shall be exercisable by the transferee according to
the same terms and conditions as applied to the optionee.
Payment for shares purchased upon the exercise of options may be
made either in cash, by certified or cashier's check or, if permitted by the
Committee or the Board, by delivering shares of Common Stock (including shares
acquired pursuant to the exercise of an option) with a fair market value equal
to the total option price, by withholding some of the shares of Common Stock
which are being purchased upon exercise of an option, or any combination of the
foregoing. To the extent an optionee already owns shares of Common Stock prior
to the exercise of his or her option, such shares could be used (if permitted by
Committee or the Board) as payment for the exercise price of the option. If the
fair market value of a share of Common Stock at the time of exercise is greater
than the exercise price per share, this feature would enable the optionee to
acquire a number of shares of Common Stock upon exercise of the option which is
greater than the number of shares delivered as payment for the exercise price.
In addition, an optionee can exercise his or her option in whole or in part and
then deliver the shares acquired upon such exercise (if permitted by the
Committee or the Board) as payment for the exercise price of all or part of his
options. Again, if the fair market value of a share of Common Stock at the time
of exercise is greater than the exercise price per share, this feature would
enable the optionee to either (1) reduce the amount of cash required to receive
a fixed number of shares upon exercise of the option or (2) receive a greater
number of shares upon exercise of the option for the same amount of cash that
would have otherwise been used. Because options may be exercised in part from
time to time, the ability to deliver Common Stock as payment of the exercise
price could enable the optionee to turn a relatively small number of shares into
a large number of shares.
STOCK APPRECIATION RIGHTS. Under the Stock Option Plan, the
Board of Directors or the Committee is authorized to grant stock appreciation
rights to optionees under which an optionee may surrender any exercisable
incentive stock option or compensatory stock option or any portion thereof in
return for payment by the Company to the optionee of cash or Common Stock in an
amount equal to the excess of the fair market value of the shares of Common
Stock subject to option, or portion thereof, at the time over the exercise price
of the option with respect to such shares, or a combination of cash and Common
Stock. A stock appreciation right may be granted concurrently with the stock
option to which it relates or at any time thereafter which is prior to the
exercise or expiration of such option.
<PAGE>
6
NUMBER OF SHARES COVERED BY THE STOCK OPTION PLAN. A total of
1,719,250 shares of Common Stock has been reserved for issuance pursuant to
the Stock Option Plan, which is 10% of the Common Stock issued in connection
with the Conversion. In the event of a stock split, reverse stock split or
stock dividend, the number of shares of Common Stock under the Stock Option
Plan, the number of shares to which any Award relates and the exercise price
per share under any option or stock appreciation right shall be adjusted to
reflect such increase or decrease in the total number of shares of Common
Stock outstanding. In addition, in the event the Company declares a special
cash dividend or return of capital in an amount per share which exceeds 10% of
the fair market value of a share of Common Stock as of the date of declaration,
the per share exercise price of all previously granted Awards which remain
unexercised as of the date of such declaration shall be proportionately
adjusted to give effect to such special cash dividend or return of capital as
of the date of payment of such special cash dividend or return of capital,
subject to certain limitations.
AMENDMENT AND TERMINATION OF THE STOCK OPTION PLAN. Unless
sooner terminated, the Stock Option Plan shall continue in effect for a period
of ten years from the date the Stock Option Plan was adopted by the Board and
became effective by its terms. Termination of the Stock Option Plan shall not
affect any previously granted Awards.
FEDERAL INCOME TAX CONSEQUENCES. Under current provisions of the
Code, the federal income tax treatment of incentive stock options and
compensatory stock options is different. As regards incentive stock options,
an optionee who meets certain holding period requirements will not recognize
income at the time the option is granted or at the time the option is
exercised, and a federal income tax deduction generally will not be available
to the Company at any time as a result of such grant or exercise. With
respect to compensatory stock options, the difference between the fair market
value on the date of exercise and the option exercise price generally will be
treated as compensation income upon exercise, and the Company will be entitled
to a deduction in the amount of income so recognized by the optionee. Upon the
exercise of a stock appreciation right, the holder will realize income for
federal income tax purposes equal to the amount received by him, whether in
cash, shares of stock or both, and the Company will be entitled to a deduction
for federal income tax purposes in the same amount.
Section 162(m) of the Code generally limits the deduction for
certain compensation in excess of $1 million per year paid by a publicly-traded
corporation to its chief executive officer and the four other most highly
compensated executive officers ("covered executive"). Certain types of
compensation, including compensation based on performance goals, are excluded
from the $1 million deduction limitation. In order for compensation to qualify
for this exception: (i) it must be paid solely on account of the attainment of
one or more preestablished, objective performance goals; (ii) the performance
goal must be established by a compensation committee consisting solely of two or
more outside directors, as defined; (iii) the material terms under which the
compensation is to be paid, including performance goals, must be disclosed to
and approved by stockholders in a separate vote prior to payment; and (iv) prior
to payment, the compensation committee must certify that the performance goals
and any other material terms were in fact satisfied (the "Certification
Requirement").
Final Treasury regulations issued in December 1995 provide that
compensation attributable to a stock option or stock appreciation right is
deemed to satisfy the requirement that compensation be paid solely on account of
the attainment of one or more performance goals if: (i) the grant is made by a
compensation committee consisting solely of two or more outside directors, as
defined; (ii) the plan under which the option or stock appreciation right is
granted states the maximum number of shares with respect to which options or
stock appreciation rights may be granted during a specified period to any
employee; and (iii) under the terms of the option or stock appreciation right,
the amount of compensation the employee could receive is based solely on an
increase in the value of the stock after the date of grant or award. The
Certification Requirement is not necessary if these other requirements are
satisfied.
<PAGE>
7
The Option Plan has been designed to meet the requirements of
Section 162(m) of the Code and, as a result, the Company believes that
compensation attributable to stock options and stock appreciation rights granted
under the Option Plan in accordance with the foregoing requirements will be
fully deductible under Section 162(m) of the Code. If the non-excluded
compensation of a covered executive exceeded $1 million, however, compensation
attributable to other awards, such as restricted stock, may not be fully
deductible unless the grant or vesting of the award is contingent on the
attainment of a performance goal determined by a compensation committee meeting
specified requirements and disclosed to and approved by the stockholders of the
Company.
The above description of tax consequences under federal law is
necessarily general in nature and does not purport to be complete. Moreover,
statutory provisions are subject to change, as are their interpretations, and
their application may vary in individual circumstances. Finally, the
consequences under applicable state and local income tax laws may not be the
same as under the federal income tax laws.
ACCOUNTING TREATMENT. Stock appreciation rights will, in most
cases, require a charge against the earnings of the Company each year
representing appreciation in the value of such rights over periods in which they
become exercisable. Such charge is based on the difference between the exercise
price specified in the related option and the current market price of the Common
Stock. In the event of a decline in the market price of the Common Stock
subsequent to a charge against earnings related to the estimated costs of stock
appreciation rights, a reversal of prior charges is made in the amount of such
decline (but not to exceed aggregate prior charges).
Neither the grant nor the exercise of an incentive stock option
or a non-qualified stock option under the Stock Option Plan currently requires
any charge against earnings under generally accepted accounting principles. In
October 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," which is effective for transactions entered into after December
15, 1995. This Statement establishes financial accounting and reporting
standards for stock-based employee compensation plans. This Statement defines a
fair value method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost for those plans using the
intrinsic value method of accounting prescribed by APB Opinion No. 25,
"Accounting for Stock Issued to Employees." Under the fair value method,
compensation cost is measured at the grant date based on the value of the award
and is recognized over the service period, which is usually the vesting period.
Under the intrinsic value method, compensation cost is the excess, if any, of
the quoted market price of the stock at grant date or other measurement date
over the amount an employee must pay to acquire the stock. The Company
anticipates that it will use the intrinsic value method, in which event pro
forma disclosure will be included in the footnotes to the Company's financial
statements to show what net income and earnings per share would have been if the
fair value method had been utilized. If the Company elects to utilize the fair
value method, its net income and earnings per share may be adversely affected.
STOCKHOLDER APPROVAL. No Awards will be granted under the Stock
Option Plan unless the Stock Option Plan is approved by stockholders.
Stockholder ratification of the Stock Option Plan will satisfy certain Nasdaq
market listing and tax requirements.
<PAGE>
8
AWARDS TO BE GRANTED. The Board of Directors of the Company
adopted the Stock Option Plan and the Committee intends to grant options to
directors, executive officers and employees of the Company and the Association
in one or more series of awards promptly after the date of stockholder approval
of the Stock Option Plan with a per share exercise price equal to the fair
market value of a share of Common Stock on the date of grant. It is currently
anticipated that no individual officer will receive an award of more than 25% of
the shares available for grant under the Stock Option Plan and that no
non-employee director will receive an award of more than 5% of the shares
available for grant and that non-employee directors as a group will not receive
awards of more than 30% of the shares available for grant under the Stock Option
Plan. The following table sets forth certain information with respect to the
estimated amounts of such grants in the aggregate.
<TABLE>
<CAPTION>
Estimate of Number of
Name of Individual or Shares to be Subject
Number of Persons in Group Title to Stock Options
-------------------------- ----- ---------------------
<S> <C> <C>
H. Joe King, Jr. President and Chief Executive 429,812
Officer
J. Harold Barnes, Jr. Executive Vice President 257,887
A. Burton Mackey, Jr. Vice President and Treasurer 85,962
All executive officers as --- 773,661
a group (3 persons)
All non-employee directors --- 429,812
as a group (5 persons)
All employees, not including --- 400,000
executive officers, as a
group (100 persons)
</TABLE>
It is currently anticipated that one-third of the aggregate
number of options granted to officers and directors will be vested and
exercisable on the date of grant promptly after approval of the Stock Option
Plan and that one-third of the aggregate number of options granted will vest and
become exercisable on each of the first two annual anniversary dates thereafter.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ADOPTION OF THE STOCK OPTION PLAN.
<PAGE>
9
PROPOSAL TO ADOPT THE RECOGNITION
AND RETENTION PLAN AND TRUST
GENERAL
The Board of Directors of the Company has adopted the Recognition
Plan, the objective of which is to retain qualified personnel in key positions,
provide officers, key employees and directors with a proprietary interest in the
Company as an incentive to contribute to its success and reward key employees
for outstanding performance. Officers and key employees of the Company who are
selected by the Board of Directors of the Company or a committee thereof, as
well as non-employee directors of the Company, will be eligible to receive
benefits under the Recognition Plan. If stockholder approval is obtained,
shares will be granted to employees and to non-employee directors as described
below.
DESCRIPTION OF THE RECOGNITION PLAN
The following description of the Recognition Plan is a summary of
its terms and is qualified in its entirety by reference to the Recognition Plan,
a copy of which is attached hereto as Appendix B.
ADMINISTRATION. The Recognition Plan is administered and
interpreted by a committee of the Board of Directors ("Committee") that is
composed solely of two or more "Non-Employee Directors." The members of the
Committee will be Messrs. Ray W. Bradley, Jr. and Lewis H. Parham, Jr., who will
also serve as trustees of the trust established pursuant to the Recognition Plan
("Trust"). The trustees will have the responsibility to invest all funds
contributed by the Company to the Trust.
Upon stockholder approval of the Recognition Plan, the Company
will acquire Common Stock on behalf of the Recognition Plan, in an amount
necessary to purchase the number of shares of Common Stock equal to 4% of the
Common Stock issued in the Conversion, or 687,700 shares. It is anticipated
that these shares will be acquired through open market purchases.
GRANTS. Shares of Common Stock granted pursuant to the
Recognition Plan will be in the form of restricted stock payable over a
period as determined by the Committee or the Board of Directors. A recipient
will be entitled to all voting and other stockholder rights with respect to
shares which have been earned and allocated under the Recognition Plan.
However, until such shares have been earned and allocated, they may not be
sold, pledged or otherwise disposed of and are required to be held in the
Recognition Plan Trust. In addition, any cash dividends or stock dividends
declared in respect of unvested share awards will be held by the Recognition
Plan Trust for the benefit of the recipients and such dividends, including
any interest thereon, will be paid out proportionately by the Recognition
Plan Trust to the recipients thereof as soon as practicable after the share
awards become earned. Any cash dividends or stock dividends declared in
respect of each vested share held by the Recognition Plan Trust will be paid
by the Recognition Plan Trust as soon as practicable after the Trust's
receipt thereof to the recipient on whose behalf such share is then held by
the Trust. The Recognition Plan provides that cash held by the Trust
pursuant to receipt of dividends, including a special dividend or return of
capital, on the Common Stock held by the Trust and unallocated to
participants may be used to purchase additional shares of Common Stock.
If a recipient terminates employment for reasons other than
death, disability or retirement, the recipient will forfeit all rights to the
allocated shares under restriction. All shares subject to an award held by a
recipient whose employment with or service to the Company or any subsidiary
terminates due to death or Disability, as defined in the Recognition Plan, shall
be deemed earned as of the recipient's last day of employment with or service to
the Company or any subsidiary and shall be distributed as soon as practicable
thereafter. In addition, in the event that a recipient's employment with or
service to the Company or any subsidiary terminates due to retirement, as
defined in the Recognition Plan, all shares subject to an award held by a
recipient shall be deemed earned as of the recipient's last day of employment
with or service to the Company or any subsidiary and shall be distributed as
soon as practicable thereafter. All shares subject to an award held by a
recipient also shall be deemed to be earned in the event of a change in control
of the Company, as defined in the Recognition Plan.
<PAGE>
10
During the lifetime of the recipient, shares subject to an award
may only be earned by and paid to the recipient, provided that shares subject to
an award and rights to such shares shall be transferable by a recipient to his
or her spouse, lineal ascendants, lineal descendants, or to a duly established
trust. Shares subject to an award so transferred may not again be transferred
other than to the recipient who originally received the grant or to an
individual or trust to whom such recipient could have transferred shares subject
to an award. Shares subject to awards which are transferred shall be subject to
the same terms and conditions as would have applied to such shares subject to
awards in the hands of the recipient who originally received the grant.
FEDERAL INCOME TAX CONSEQUENCES. Pursuant to Section 83 of the
Code, recipients of Recognition Plan awards will recognize ordinary income in an
amount equal to the fair market value of the shares of Common Stock granted to
them at the time that the shares vest and become transferable. A recipient of a
Recognition Plan award may also elect, however, to accelerate the recognition of
income with respect to his or her grant to the time when shares of Common Stock
are first transferred to him or her, notwithstanding the vesting schedule of
such awards. The Company will be entitled to deduct as a compensation expense
for tax purposes the same amounts recognized as income by recipients of
Recognition Plan awards in the year in which such amounts are included in
income.
ACCOUNTING TREATMENT. For a discussion of SFAS No. 123, see
"Proposal to Adopt the Stock Option Plan - Accounting Treatment." Under the
intrinsic value method, the Company will also recognize a compensation expense
as shares of Common Stock granted pursuant to the Recognition Plan best. The
amount of compensation expense recognized for accounting purposes is based upon
the fair market value of the Common Stock at the date of grant to recipients,
rather than the fair market value at the time of vesting for tax purposes.
STOCKHOLDER APPROVAL. No shares will be granted under the
Recognition Plan unless the Recognition Plan is approved by stockholders.
Stockholder ratification of the Recognition Plan will satisfy certain Nasdaq
market listing and tax requirements.
SHARES TO BE GRANTED. The Board of Directors of the Company
adopted the Recognition Plan and the Committee intends to grant awards to
directors, executive officers and employees of the Company and the Association
in one or more series of awards promptly after the date of stockholder approval
of the Recognition Plan. It is currently anticipated that no individual officer
will receive an award of more than 25% of the shares available for grant under
the Recognition Plan and that no non-employee director will receive an award of
more than 5% of the shares available for grant and that non-employee directors
as a group will not receive awards of more than 30% of the shares available for
grant under the Recognition Plan. The following table sets forth certain
information with respect to the estimated amounts of such grants in the
aggregate.
Estimate of
Name of Individual or Number of Shares
Number of Persons in Group Title to Be Awarded
- -------------------------- ----- ----------------
H. Joe King, Jr. President and Chief Executive 171,925
Officer
J. Harold Barnes, Jr. Executive Vice President 103,455
A. Burton Mackey, Jr. Vice President and Treasurer 34,385
All executive officers --- 309,765
as a group (3 persons)
All non-employee --- 171,925
directors as a group
(5 persons)
All employees, not --- 150,000
including executive
officers as a group
(100 persons)
<PAGE>
11
It is currently anticipated that 20% of the aggregate number of
shares granted to officers and directors will be vested on the date of grant
promptly after approval of the Recognition Plan and that 20% of the aggregate
number of shares granted will vest on each of the first four annual anniversary
dates thereafter.
In the event that the Company declares a special cash dividend or
return of capital prior to the award of all shares under the Recognition Plan
such amount could be used to purchase additional shares of Common Stock and
those shares would be available for grant to directors and employees under the
Recognition Plan, which could increase the number of shares awarded as described
above.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR
ADOPTION OF THE RECOGNITION AND RETENTION PLAN AND TRUST.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of certain information
concerning the compensation paid by the Association for services rendered in all
capacities during the years ended June 30, 1996 and 1995 to the President and
Chief Executive Officer of the Association and the other executive officers of
the Association and its subsidiary whose total compensation during the fiscal
year exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------- ----------------------------
Awards Payouts
-------------------- -------
Name and Fiscal Other Annual Stock Number of LTIP All Other
Principal Position Year Salary(1) Bonus Compensation(2) Grants Options Payouts Compensation(3)
- -------------------- --------- ------------- -------- --------------- -------- ------------ ------- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
H. Joe King, Jr. 1996 $277,400 $47,500 $ -- $ -- -- -- $ 3,861
President and Chief 1995 $259,900 $10,370 -- -- -- -- 30,000
Executive Officer
J. Harold Barnes, Jr. 1996 $167,000 $27,000 $ -- $ -- -- -- $ 2,214
Executive Vice 1995 $157,600 $6,595 -- -- -- -- 23,132
President
A. Burton Mackey, Jr. 1996 $107,860 $15,600 $ -- $ -- -- -- $ 1,595
Vice President and 1995 $101,860 $12,505 -- -- -- -- 29,870
Treasurer
</TABLE>
(1) Includes directors' fees from the Association and its wholly
owned subsidiary, Home Federal Savings Service Corporation
("Service Corporation") with respect to Messrs. King and Barnes
and director's fees from the Service Corporation with respect to
Mr. Mackey.
(2) Does not include amounts attributable to miscellaneous benefits
received by the named executive officers. In the opinion of
management of the Association, the costs to the Association of
providing such benefits to the named executive officer during the
indicated periods did not exceed the lesser of $50,000 or 10% of
the total of annual salary and bonus reported for the individual.
(3) Represents matching contributions on behalf of such individuals
under the Savings Plan in fiscal 1996 and contributions on behalf
of such individuals under the Money Purchase Pension Plan in
fiscal 1995.
<PAGE>
12
DIRECTORS' FEES
Members of the Board of Directors of the Association receive
$1,500 for each regular monthly meeting of the Board of Directors attended.
Directors are permitted one excused absence per year and otherwise receive
one-half of the normal monthly payment for each unexcused absence thereafter.
Members of the Board serving on committees do not receive any additional
compensation for serving on such committees. Members of the Board of Directors
of the Company are not separately compensated for attendance at meetings of the
Board of the Company.
EMPLOYMENT AGREEMENTS
In connection with the Conversion, the Company and the
Association (the "Employers") entered into employment agreements with each of
Messrs. King and Barnes (the "Executives"). The Employers have agreed to employ
the Executives for a term of three years, in each case in their current
respective positions. The Executives' compensation and expenses shall be paid
by the Company and the Association in the same proportion as the time and
services actually expended by the Executives on behalf of each respective
Employer. The employment agreements will be reviewed annually by the Boards of
Directors of the Employers, and the term of the Executives' employment
agreements shall be extended each year for a successive additional one-year
period upon approval of the Employers' Board of Directors, unless either party
elects, not less than 30 days prior to the annual anniversary date, not to
extend the employment term.
Each of the employment agreements are terminable with or
without cause by the Employers. The officer has no right to compensation or
other benefits pursuant to the employment agreement for any period after
voluntary termination or termination by the Employers for cause, disability
or retirement. The agreements provide for certain benefits in the event of
the Executives' death. In the event that (i) the officer terminates his
employment because of failure of the Employers to comply with any material
provision of the employment agreement or the Employers change the officers'
title or duties or (ii) the employment agreement is terminated by the
Employers other than for cause, disability, retirement or death or by the
officer as a result of certain adverse actions which are taken with respect
to the officer's employment following a change in control of the Company, as
defined, the employee will be entitled to a cash severance amount equal to
three times the employee's base salary, as defined.
A change in control is generally defined in the employment
agreements to include any change in control of the Company required to be
reported under the federal securities laws, as well as (i) the acquisition by
any person of 25% or more of the Company's outstanding voting securities and
(ii) a change in a majority of the directors of the Company during any two-year
period without the approval of at least two-thirds of the persons who were
directors of the Company at the beginning of such period.
Each employment agreement provides that in the event that any of
the payments to be made thereunder or otherwise upon termination of employment
are deemed to constitute "excess parachute payments" within the meaning of
Section 280G of the Code, then such payments and benefits received thereunder
shall be reduced, in the manner determined by the Executive, by the amount, if
any, which is the minimum necessary to result in no portion of the payments and
benefits being non-deductible by the Employers for federal income tax purposes.
Excess parachute payments generally are payments in excess of three times the
recipient's average annual compensation from the employer includable in the
recipient's gross income during the most recent five taxable years ending before
the date on which a change in control of the employer occurred. Recipients of
excess parachute payments are subject to a 20% excise tax on the amount by which
such payments exceed the base amount, in addition to regular income taxes, and
payments in excess of the base amount are not deductible by the employer as
compensation expense for federal income tax purposes.
Although the above-described employment agreements could increase
the cost of any acquisition of control of the Company, management of the Company
does not believe that the terms thereof would have a significant anti-takeover
effect.
<PAGE>
13
BENEFITS
PROFIT SHARING PLAN. The Association maintains the Savings Plan,
which was converted from a Money Purchase Pension Plan to a 401(k) Profit
Sharing Plan effective November 30, 1995. Employees are eligible to participate
on the first day of January of any year after completing one year of service
with the Association. The Savings Plan permits participants, subject to the
limitations imposed by Section 401(k) of the Code, and the satisfaction of
certain other legal requirements, to make voluntary tax deferred contributions
in an amount up to 9% of their annual base compensation. The Association may
also contribute to the Savings Plan additional amounts in its discretion. The
Association's matching contributions charged to expense for the year ended June
30, 1996 was approximately $69,000.
Discretionary contributions made by the Association to the
Savings Plan are allocated to the accounts of plan participants in proportion to
each participant's compensation for the plan year. Benefits from the plan are
payable upon a participant's death, disability, retirement at age 65 or early
retirement (as defined therein), at which time the participant who separates
from service prior to one of those events will be entitled to a portion of his
benefits. All amounts deferred by employees are 100% vested. Vesting of
matching and discretionary contributions is 100% after five years of service.
The Savings Plan also provides for payment of benefits prior to separation from
service to a participant experiencing financial hardship, as determined under
the terms of the Savings Plan. The payment of benefits under the Savings Plan
may be made in a single cash payment, in installments or by the purchase of an
annuity.
NON-EMPLOYEE DIRECTORS' RETIREMENT PLAN. The Association adopted
a Non-Employee Directors' Retirement Plan ("Directors' Plan") during fiscal 1994
for the benefit of non-employee directors. Upon the later of retirement or
attaining the age of 65, a director who has completed ten years of continuous
service as a non-employee director is entitled to receive for a period of up to
ten years an annual benefit of up to 100% of the total amount of annual
directors' fees during the twelve months preceding retirement. The Director's
Plan also provides a death benefit to a surviving spouse. During fiscal 1996,
the Association accrued approximately $25,000 related to the Directors' Plan.
SUPPLEMENTAL INCOME AGREEMENTS. The Association has entered into
Supplemental Income Agreements (the "Agreements") with certain of its key
employees in recognition of their past service and to encourage future
performance. The Agreements provide for a monthly benefit to certain key
employees following their retirement, which commences with the month of
retirement and ends on the later of the month in which the employee dies or the
180th monthly payment. The Agreements further provide that all 180 monthly
payments will be made to the employees, or their respective designated
beneficiaries or estate in the event of premature death. The amount of the
monthly benefit varies among each of the employees who are parties to the
Agreements. The Agreements for Messrs. King, Barnes and Mackey provide for
monthly retirement benefits of $3,600, $2,000 and $1,500, respectively. The
Association is providing for the present value of such benefits over the
estimated remaining period of employment. The agreements are to be funded by
life insurance policies owned by the Association on such employees. Deferred
compensation expense was approximately $31,000, $115,000 and $115,000 for fiscal
1996, 1995 and 1994, respectively.
RETIREMENT PAYMENT AGREEMENT. The Association entered into a
Retirement Payment Agreement (the "Retirement Agreement") with Mr. King, in
1985, which was amended and restated in 1992. The Retirement Agreement provides
a monthly retirement benefit to Mr. King in the amount of $2,345 commencing with
the month he retires and ending on the later of the month he dies or the 180th
monthly payment of such amount. The Retirement Agreement further provides that
all 180 monthly payments will be made to Mr. King's designated beneficiary or
his estate in the event of his premature death.
<PAGE>
14
EMPLOYEE STOCK OWNERSHIP PLAN. The Association has established
the ESOP for employees of the Association. Employees of the Association who
have been credited with at least 1,000 hours of service during a twelve month
period are eligible to participate in the ESOP.
In connection with the Conversion, the ESOP borrowed $9.0 million
from HFNC Investment Corp., a wholly-owned, Delaware-based subsidiary of the
Company, to purchase Common Stock issued in the Conversion. The loan to the
ESOP is being repaid principally from the Association's contributions to the
ESOP over a period of 15 years, and the collateral for the loan is the Common
Stock purchased by the ESOP. The interest rate on the loan is 8.75%. The
Association may, in any plan year, make additional discretionary contributions
for the benefit of plan participants in either cash or shares of Common Stock,
which may be acquired through the purchase of outstanding shares in the market
or from individual stockholders, upon the original issuance of additional shares
by the Company or upon the sale of treasury shares by the Company. Such
purchases, if made, would be funded through additional borrowing by the ESOP or
additional contributions from the Association. The timing, amount and manner of
future contributions to the ESOP will be affected by various factors, including
prevailing regulatory policies, the requirements of applicable laws and
regulations and market conditions.
Shares purchased by the ESOP with the proceeds of the loan are
held in a suspense account and released on a pro rata basis as debt service
payments are made. Discretionary contributions to the ESOP and shares released
from the suspense account are allocated among participants on the basis of
compensation. Forfeitures will be reallocated among remaining participating
employees and may reduce any amount the Association might otherwise have
contributed to the ESOP. Participants become vested in their right to receive
their account balances within the ESOP upon completion of their fifth year of
service. In the case of a "change in control," as defined, however,
participants will become immediately fully vested in their account balances,
subject to certain tax considerations. Benefits may be payable upon retirement,
early retirement, disability or separation from service. The Association's
contributions to the ESOP are not fixed, so benefits payable under the ESOP
cannot be estimated.
Generally accepted accounting principles require that any third
party borrowing by the ESOP be reflected as a liability on the Company's
statement of financial condition. Since the ESOP has borrowed from HFNC
Investment Corp., such obligation is not treated as a liability, but is excluded
from stockholders' equity.
TRANSACTIONS WITH CERTAIN RELATED PERSONS
All loans or extensions of credit to executive officers and
directors must be made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
the general public and must not involve more than the normal risk of repayment
or present other unfavorable features.
The Association's policy provides that all loans made by the
Association to its directors and officers are made in the ordinary course of
business, on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons. The Association's policy provides that such loans may not
involve more than the normal risk of collectibility or present other unfavorable
features. As of June 30, 1996, mortgage and consumer loans to employees
aggregated $4.5 million or 1.83% of the Company's stockholders' equity as of
such date. All such loans were made by the Association in accordance with the
aforementioned policy.
<PAGE>
15
STOCKHOLDER PROPOSALS
Any proposal which a stockholder wishes to have included in the proxy
materials of the Company relating to the next annual meeting of stockholders of
the Company, which is scheduled to be held in October 1997, must be received at
the principal executive offices of the Company, 139 South Tryon Street,
Charlotte, North Carolina 28202, Attention: Ann G. Benton, Corporate
Secretary, no later than April 28, 1997. If such proposal is in compliance with
all of the requirements of Rule 14a-8 under the 1934 Act, it will be included in
the proxy statement and set forth on the form of proxy issued for such annual
meeting of stockholders. It is urged that any such proposals be sent by
certified mail, return receipt requested.
Stockholder proposals which are not submitted for inclusion in the
Company's proxy materials pursuant to Rule 14a-8 under the 1934 Act may be
brought before an annual meeting pursuant to Article 8.C. of the Company's
Articles of Incorporation, which provides that business at an annual meeting of
stockholders must be (a) properly brought before the meeting by or at the
direction of the Board of Directors, or (b) otherwise properly brought before
the meeting by a stockholder. For business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Company. To be timely a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Company not later than ninety (90) days prior
to the anniversary date of the mailing of proxy materials by the Company in
connection with the immediately preceding annual meeting of stockholders of the
Company. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting, (b)
the name and address, as they appear on the Company's books, of the stockholder
proposing such business, (c) the class and number of shares of the Company which
are beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. The chairman of an annual meeting shall, if the
facts warrant, determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the provisions of such
Article 8, Section C, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted. This provision is not a limitation on any other applicable laws
and regulations.
OTHER MATTERS
Management is not aware of any business to come before the
Special Meeting other than the matters described above in this Proxy Statement.
However, if any other matters should properly come before the meeting, it is
intended that the proxies solicited hereby will be voted with respect to those
other matters in accordance with the judgment of the persons voting the proxies.
The cost of the solicitation of proxies will be borne by the
Company. The Company has retained Regan & Associates, Inc., a professional
proxy solicitation firm, to assist in the solicitation of proxies. Such firm
will be paid a fee of $4,500, plus reimbursement for out-of-pocket expenses.
The Company will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending the proxy
materials to the beneficial owners of the Company's Common Stock. In addition
to solicitations by mail, directors, officers and employees of the Company may
solicit proxies personally or by telephone without additional compensation.
<PAGE>
APPENDIX A
HFNC FINANCIAL CORP.
STOCK OPTION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
HFNC Financial Corp. (the "Corporation") hereby establishes this
Stock Option Plan (the "Plan") upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
The purpose of this Plan is to improve the growth and
profitability of the Corporation and its Subsidiary Companies by providing
Employees and Non-Employee Directors with a proprietary interest in the
Corporation as an incentive to contribute to the success of the Corporation and
its Subsidiary Companies, and rewarding those Employees for outstanding
performance. All Incentive Stock Options issued under this Plan are intended to
comply with the requirements of Section 422 of the Code, and the regulations
thereunder, and all provisions hereunder shall be read, interpreted and applied
with that purpose in mind.
ARTICLE III
DEFINITIONS
3.01 "Association" means Home Federal Savings and Loan
Association, the wholly-owned subsidiary of the Corporation.
3.02 "Award" means an Option or Stock Appreciation Right
granted pursuant to the terms of this Plan.
3.03 "Board" means the Board of Directors of the Corporation
or of the Association.
3.04 "Change in Control of the Corporation" shall be deemed to
have occurred if: (i) any "person" as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Corporation and any trustee or other
fiduciary holding securities under any employee benefit plan of the
Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; (ii) during any period of two
consecutive years (not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the Board of
Directors, and any new director whose election by the Board of Directors or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the stockholders
of the Corporation approve a merger or consolidation of the Corporation with any
other corporation, other than a merger or consolidation that would result in the
voting securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Corporation outstanding immediately
after such merger or consolidation; or (iv) the stockholders of the Corporation
approve a plan of complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets. If any of the events enumerated in clauses (i) through
(iv) occur, the Board shall determine the effective date of the Change in
Control resulting therefrom for purposes of the Plan.
<PAGE>
3.05 "Code" means the Internal Revenue Code of 1986, as
amended.
3.06 "Committee" means a committee of two or more directors
appointed by the Board pursuant to Article IV hereof, each of whom shall be a
Non-Employee Director as defined in Rule 16b-3(b)(3)(i) of the Exchange Act.
3.07 "Common Stock" means shares of the common stock, $.01 par
value per share, of the Corporation.
3.08 "Disability" means any physical or mental impairment
which qualifies an Employee for disability benefits under the applicable
long-term disability plan maintained by the Corporation or a Subsidiary Company,
or, if no such plan applies, which would qualify such Employee for disability
benefits under the Federal Social Security System.
3.09 "Effective Date" means the day upon which the Board
approves this Plan.
3.10 "Employee" means any person who is employed by the
Corporation or a Subsidiary Company, or is an Officer of the Corporation or a
Subsidiary Company, but not including directors who are not also Officers of or
otherwise employed by the Corporation or a Subsidiary Company.
3.11 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
3.12 "Fair Market Value" shall be equal to the fair market
value per share of the Corporation's Common Stock on the date an Award is
granted. For purposes hereof, the Fair Market Value of a share of Common Stock
shall be the closing sale price of a share of Common Stock on the date in
question (or, if such day is not a trading day in the U.S. markets, on the
nearest preceding trading day), as reported with respect to the principal market
(or the composite of the markets, if more than one) or national quotation system
in which such shares are then traded, or if no such closing prices are reported,
the mean between the high bid and low asked prices that day on the principal
market or national quotation system then in use, or if no such quotations are
available, the price furnished by a professional securities dealer making a
market in such shares selected by the Committee.
3.13 "Incentive Stock Option" means any Option granted under
this Plan which the Board intends (at the time it is granted) to be an incentive
stock option within the meaning of Section 422 of the Code or any successor
thereto.
3.14 "Non-Employee Director" means a member of the Board who
is not an Officer or Employee of the Corporation or any Subsidiary Company and
shall include any individual who, at the date of adoption of the Plan or any
time thereafter, serves the Board in an advisory or emeritus capacity.
3.15 "Non-Qualified Option" means any Option granted under
this Plan which is not an Incentive Stock Option.
3.16 "Offering" means the offering of Common Stock to the
public pursuant to the Plan of Conversion adopted by the Association.
3.17 "Officer" means an Employee whose position in the
Corporation or Subsidiary Company is that of a corporate officer, as determined
by the Board.
3.18 "Option" means a right granted under this Plan to
purchase Common Stock.
3.19 "Optionee" means an Employee or Non-Employee Director or
former Employee or Non-Employee Director to whom an Option is granted under the
Plan.
A-2
<PAGE>
3.20 "Retirement" means a termination of employment upon or
after attainment of age sixty-five (65) or such earlier age as may be specified
in any applicable plans or policies maintained by the Corporation or a
Subsidiary Company.
3.21 "Stock Appreciation Right" means a right to surrender an
Option in consideration for a payment by the Corporation in cash and/or Common
Stock, as provided in the discretion of the Committee in accordance with Section
8.11.
3.22 "Subsidiary Companies" means those subsidiaries of the
Corporation, including the Association, which meet the definition of "subsidiary
corporations" set forth in Section 425(f) of the Code, at the time of granting
of the Option in question.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 DUTIES OF THE COMMITTEE. The Plan shall be administered
and interpreted by the Committee, as appointed from time to time by the Board
pursuant to Section 4.02. The Committee shall have the authority to adopt,
amend and rescind such rules, regulations and procedures as, in its opinion, may
be advisable in the administration of the Plan, including, without limitation,
rules, regulations and procedures which (i) deal with satisfaction of an
Optionee's tax withholding obligation pursuant to Section 12.02 hereof, (ii)
include arrangements to facilitate the Optionee's ability to borrow funds for
payment of the exercise or purchase price of an Award, if applicable, from
securities brokers and dealers, and (iii) include arrangements which provide for
the payment of some or all of such exercise or purchase price by delivery of
previously-owned shares of Common Stock or other property and/or by withholding
some of the shares of Common Stock which are being acquired. The interpretation
and construction by the Committee of any provisions of the Plan, any rule,
regulation or procedure adopted by it pursuant thereto or of any Award shall be
final and binding in the absence of action by the Board of Directors.
4.02 APPOINTMENT AND OPERATION OF THE COMMITTEE. The members
of the Committee shall be appointed by, and will serve at the pleasure of, the
Board. The Board from time to time may remove members from, or add members to,
the Committee, provided the Committee shall continue to consist of two or more
members of the Board, each of whom shall be a non-employee director as defined
in Rule 16b-3(b)(3)(i) of the Exchange Act or any successor thereto. In
addition, each member of the Committee shall be an "outside director" within the
meaning of Section 162(m) of the Code and regulations thereunder at such times
as is required under such regulations. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express provisions
and limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. It may
appoint one of its members to be chairman and any person, whether or not a
member, to be its secretary or agent. The Committee shall report its actions
and decisions to the Board at appropriate times but in no event less than one
time per calendar year.
4.03 REVOCATION FOR MISCONDUCT. The Board of Directors or the
Committee may by resolution immediately revoke, rescind and terminate any
Option, or portion thereof, to the extent not yet vested, or any Stock
Appreciation Right, to the extent not yet exercised, previously granted or
awarded under this Plan to an Employee who is discharged from the employ of the
Corporation or a Subsidiary Company for cause, which, for purposes hereof, shall
mean termination because of the Employee's personal dishonesty, incompetence,
willful misconduct, breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule, or regulation (other than traffic violations or similar offenses) or final
cease-and-desist order. Options granted to a Non-Employee Director who is
removed for cause pursuant to the Corporation's Articles of Incorporation shall
terminate as of the effective date of such removal.
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4.04 LIMITATION ON LIABILITY. Neither the members of the
Board of Directors nor any member of the Committee shall be liable for any
action or determination made in good faith with respect to the Plan, any rule,
regulation or procedure adopted pursuant thereto or for any Awards granted
hereunder. If any members of the Board of Directors or a member of the
Committee is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of anything done or not done by him
in such capacity under or with respect to the Plan, the Corporation shall,
subject to the requirements of applicable laws and regulations, indemnify such
member against all liabilities and expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in the best interests of the
Corporation and its Subsidiary Companies and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful.
4.05 COMPLIANCE WITH LAW AND REGULATIONS. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required. The Corporation shall not be required to issue or deliver any
certificates for shares of Common Stock prior to the completion of any
registration or qualification of or obtaining of consents or approvals with
respect to such shares under any federal or state law or any rule or regulation
of any government body, which the Corporation shall, in its sole discretion,
determine to be necessary or advisable. Moreover, no Option or Stock
Appreciation Right may be exercised if such exercise would be contrary to
applicable laws and regulations.
4.06 RESTRICTIONS ON TRANSFER. The Corporation may place a
legend upon any certificate representing shares acquired pursuant to an Award
granted hereunder noting that the transfer of such shares may be restricted by
applicable laws and regulations.
ARTICLE V
ELIGIBILITY
Awards may be granted to such Employees or Non-Employee Directors
of the Corporation and its Subsidiary Companies as may be designated from time
to time by the Board of Directors or the Committee. Awards may not be granted
to individuals who are not Employees or Non-Employee Directors of either the
Corporation or its Subsidiary Companies. Non-Employee Directors shall be
eligible to receive only Non-Qualified Options.
ARTICLE VI
COMMON STOCK COVERED BY THE PLAN
6.01 OPTION SHARES. The aggregate number of shares of Common
Stock which may be issued pursuant to this Plan, subject to adjustment as
provided in Article IX, shall be 1,719,250 shares, which is equal to 10.0% of
the shares of Common Stock issued in the Offering. None of such shares shall be
the subject of more than one Award at any time, but if an Option as to any
shares is surrendered before exercise, or expires or terminates for any reason
without having been exercised in full, or for any other reason ceases to be
exercisable, the number of shares covered thereby shall again become available
for grant under the Plan as if no Awards had been previously granted with
respect to such shares. Notwithstanding the foregoing, if an Option is
surrendered in connection with the exercise of a Stock Appreciation Right, the
number of shares covered thereby shall not be available for grant under the
Plan.
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6.02 SOURCE OF SHARES. The shares of Common Stock issued
under the Plan may be authorized but unissued shares, treasury shares, shares
purchased by the Corporation on the open market or from private sources for use
under the Plan, or, if applicable, shares held in a grantor trust created by the
Corporation.
ARTICLE VII
DETERMINATION OF
AWARDS, NUMBER OF SHARES, ETC.
7.01 DETERMINATION OF AWARDS. The Board of Directors or the
Committee shall, in its discretion, determine from time to time which Employees
and Non-Employee Directors will be granted Awards under the Plan, the number of
shares of Common Stock subject to each Award, whether each Option will be an
Incentive Stock Option or a Non-Qualified Stock Option and the exercise price of
an Option. In making determinations with respect to Employees there shall be
taken into account the duties, responsibilities and performance of each
respective Employee, his present and potential contributions to the growth and
success of the Corporation, his salary and such other factors as the Board of
Directors or the Committee shall deem relevant to accomplishing the purposes of
the Plan.
7.02 MAXIMUM AWARDS TO EMPLOYEES. Notwithstanding anything
contained in this Plan to the contrary, the maximum number of shares of Common
Stock to which Awards may be granted to any Employee in any calendar year shall
be 429,812.
ARTICLE VIII
OPTIONS AND STOCK APPRECIATION RIGHTS
Each Option granted hereunder shall be on the following terms and
conditions:
8.01 STOCK OPTION AGREEMENT. The proper Officers on behalf of
the Corporation and each Optionee shall execute a Stock Option Agreement which
shall set forth the total number of shares of Common Stock to which it pertains,
the exercise price, whether it is a Non-Qualified Option or an Incentive Stock
Option, and such other terms, conditions, restrictions and privileges as the
Board of Directors or the Committee in each instance shall deem appropriate,
provided they are not inconsistent with the terms, conditions and provisions of
this Plan. Each Optionee shall receive a copy of his executed Stock Option
Agreement.
8.02 AWARDS TO EMPLOYEES AND NON-EMPLOYEE DIRECTORS. Specific
Awards to Employees and Non-Employee Directors shall be made to such persons and
in such amounts as are determined by the Board of Directors or the Committee.
8.03 OPTION EXERCISE PRICE.
(A) INCENTIVE STOCK OPTIONS. The per share price at which
the subject Common Stock may be purchased upon exercise of an Incentive Stock
Option shall be no less than one hundred percent (100%) of the Fair Market Value
of a share of Common Stock at the time such Incentive Stock Option is granted,
except as provided in Section 8.10(b), and subject to any applicable adjustment
pursuant to Article IX hereof.
(B) NON-QUALIFIED OPTIONS. The per share price at which the
subject Common Stock may be purchased upon exercise of a Non-Qualified Option
shall be no less than one hundred percent (100%) of the Fair Market Value of a
share of Common Stock at the time such Non-Qualified Option is granted, and
subject to any applicable adjustment pursuant to Article IX hereof.
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8.04 VESTING AND EXERCISE OF OPTIONS.
(A) GENERAL RULES. Incentive Stock Options and Non-Qualified
Options granted hereunder shall become vested and exercisable at the rate, to
the extent and subject to such limitation as may be specified by the Board or
the Committee. Notwithstanding the foregoing, no vesting shall occur on or
after an Employee's employment with the Corporation and all Subsidiary Companies
is terminated for any reason other than his death, Disability or Retirement. In
determining the number of shares of Common Stock with respect to which Options
are vested and/or exercisable, fractional shares will be rounded up to the
nearest whole number if the fraction is 0.5 or higher, and down if it is less.
(B) ACCELERATED VESTING. Unless the Committee shall
specifically state otherwise at the time an Option is granted, all Options
granted hereunder shall become vested and exercisable in full on the date an
Optionee terminates his employment with or service to the Corporation or a
Subsidiary Company because of his death or Disability. In addition, all
options hereunder shall become immediately vested and exercisable in full on
the date an Optionee terminates his employment or service to the Corporation
or a Subsidiary Company due to Retirement. Further, all outstanding options
shall become immediately vested and exercisable in the event that there is a
Change in Control of the Corporation.
8.05 DURATION OF OPTIONS.
(A) GENERAL RULE. Except as provided in Sections 8.05(b) and
8.10, each Option or portion thereof granted to Employees and Non-Employee
Directors shall be exercisable at any time on or after it vests and becomes
exercisable until the earlier of (i) ten (10) years after its date of grant or
(ii) three (3) months after the date on which the Optionee ceases to be employed
(or in the service of the Board of Directors in the case of Non-Employee
Directors) by the Corporation and all Subsidiary Companies, unless the Board of
Directors or the Committee in its discretion decides at the time of grant or
thereafter to extend such period of exercise upon termination of employment or
service from three (3) months to a period not exceeding five (5) years.
(B) EXCEPTIONS. If an Employee dies while in the employ of
the Corporation or a Subsidiary Company or terminates employment with the
Corporation or a Subsidiary Company as a result of Disability or Retirement
without having fully exercised his Options, the Optionee or the executors,
administrators, legatees or distributees of his estate shall have the right,
during the twelve-month period following the earlier of his death or termination
due to Disability or Retirement, to exercise such Options. If a Non-Employee
Director dies while serving as a Non-Employee Director or terminates his service
to the Corporation or a Subsidiary Company as a result of Disability or
Retirement without having fully exercised his Options, the Non-Employee Director
or the executors, administrators, legatees or distributees of his estate shall
have the right, during the twelve-month period following the earlier of his
death or termination due to Disability or Retirement, to exercise such Options.
In no event, however, shall any Option be exercisable more than ten (10) years
from the date it was granted.
8.06 NONASSIGNABILITY. Options shall not be transferable by
an Optionee except by will or the laws of descent or distribution, and during an
Optionee's lifetime shall be exercisable only by such Optionee or the Optionee's
guardian or legal representative. Notwithstanding the foregoing, or any other
provision of this Plan, an Optionee who holds Non-Qualified Options may transfer
such Options to his or her spouse, lineal ascendants, lineal descendants, or to
a duly established trust for the benefit of one or more of these individuals.
Options so transferred may thereafter be transferred only to the Optionee who
originally received the grant or to an individual or trust to whom the Optionee
could have initially transferred the Option pursuant to this Section 8.06.
Options which are transferred pursuant to this Section 8.06 shall be exercisable
by the transferee according to the same terms and conditions as applied to the
Optionee.
8.07 MANNER OF EXERCISE. Options may be exercised in part or
in whole and at one time or from time to time. The procedures for exercise
shall be set forth in the written Stock Option Agreement provided pursuant to
Section 8.01.
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8.08 PAYMENT FOR SHARES. Payment in full of the purchase
price for shares of Common Stock purchased pursuant to the exercise of any
Option shall be made to the Corporation upon exercise of such Option. All
shares sold under the Plan shall be fully paid and nonassessable. Payment for
shares may be made by the Optionee in cash or, at the discretion of the Board of
Directors or the Committee in the case of Awards to Employees, by delivering
shares of Common Stock (including shares acquired pursuant to the exercise of an
Option) or other property equal in Fair Market Value to the purchase price of
the shares to be acquired pursuant to the Option, by withholding some of the
shares of Common Stock which are being purchased upon exercise of an Option, or
any combination of the foregoing. Notwithstanding the foregoing, payment may
also be made by delivering a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Corporation the
amount of sale or loan proceeds to pay the exercise price.
8.09 VOTING AND DIVIDEND RIGHTS. No Optionee shall have any
voting or dividend rights or other rights of a stockholder in respect of any
shares of Common Stock covered by an Option prior to the time that his name is
recorded on the Corporation's stockholder ledger as the holder of record of such
shares acquired pursuant to an exercise of such Option.
8.10 ADDITIONAL TERMS APPLICABLE TO INCENTIVE STOCK OPTIONS.
All Options issued under the Plan as Incentive Stock Options will be subject, in
addition to the terms detailed in Sections 8.01 to 8.09 above, to those
contained in this Section 8.10.
(A) Notwithstanding any contrary provisions contained
elsewhere in this Plan and as long as required by Section 422 of the Code, the
aggregate Fair Market Value, determined as of the time an Incentive Stock Option
is granted, of the Common Stock with respect to which Incentive Stock Options
are exercisable for the first time by the Optionee during any calendar year,
under this Plan and stock options that satisfy the requirements of Section 422
of the Code under any other stock option plan or plans maintained by the
Corporation (or any parent or Subsidiary Company), shall not exceed $100,000.
(B) LIMITATION ON TEN PERCENT STOCKHOLDERS. The price at
which shares of Common Stock may be purchased upon exercise of an Incentive
Stock Option granted to an individual who, at the time such Incentive Stock
Option is granted, owns, directly or indirectly, more than ten percent (10%) of
the total combined voting power of all classes of stock issued to stockholders
of the Corporation or any Subsidiary Company, shall be no less than one hundred
and ten percent (110%) of the Fair Market Value of a share of the Common Stock
of the Corporation at the time of grant, and such Incentive Stock Option shall
by its terms not be exercisable after the earlier of the date determined under
Section 8.04 or the expiration of five (5) years from the date such Incentive
Stock Option is granted.
(C) NOTICE OF DISPOSITION; WITHHOLDING; ESCROW. An Optionee
shall immediately notify the Corporation in writing of any sale, transfer,
assignment or other disposition (or action constituting a disqualifying
disposition within the meaning of Section 421 of the Code) of any shares of
Common Stock acquired through exercise of an Incentive Stock Option within two
(2) years after the grant of such Incentive Stock Option or within one (1) year
after the acquisition of such shares, setting forth the date and manner of
disposition, the number of shares disposed of and the price at which such shares
were disposed of. The Corporation shall be entitled to withhold from any
compensation or other payments then or thereafter due to the Optionee such
amounts as may be necessary to satisfy any withholding requirements of federal
or state law or regulation and, further, to collect from the Optionee any
additional amounts which may be required for such purpose. The Committee may,
in its discretion, require shares of Common Stock acquired by an Optionee upon
exercise of an Incentive Stock Option to be held in an escrow arrangement for
the purpose of enabling compliance with the provisions of this Section 8.10(c).
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8.11 STOCK APPRECIATION RIGHTS.
(A) GENERAL TERMS AND CONDITIONS. The Board of Directors or
the Committee may, but shall not be obligated to, authorize the Corporation, on
such terms and conditions as it deems appropriate in each case, to grant rights
to Optionees to surrender an exercisable Option, or any portion thereof, in
consideration for the payment by the Corporation of an amount equal to the
excess of the Fair Market Value of the shares of Common Stock subject to the
Option, or portion thereof, surrendered over the exercise price of the Option
with respect to such shares (any such authorized surrender and payment being
hereinafter referred to as a "Stock Appreciation Right"). Such payment, at the
discretion of the Board of Directors or the Committee, may be made in shares of
Common Stock valued at the then Fair Market Value thereof, or in cash, or partly
in cash and partly in shares of Common Stock.
The terms and conditions set with respect to a Stock Appreciation
Right may include (without limitation), subject to other provisions of this
Section 8.11 and the Plan, the period during which, date by which or event upon
which the Stock Appreciation Right may be exercised (which shall be on the same
terms as the Option to which it relates pursuant to Section 8.04 hereunder); the
method for valuing shares of Common Stock for purposes of this Section 8.11; a
ceiling on the amount of consideration which the Corporation may pay in
connection with exercise and cancellation of the Stock Appreciation Right; and
arrangements for income tax withholding. The Board of Directors or the
Committee shall have complete discretion to determine whether, when and to whom
Stock Appreciation Rights may be granted.
(B) TIME LIMITATIONS. If a holder of a Stock Appreciation
Right terminates service with the Corporation, the Stock Appreciation Right may
be exercised only within the period, if any, within which the Option to which it
relates may be exercised. Notwithstanding the foregoing, any election by an
Optionee to exercise the Stock Appreciation Rights provided in this Plan shall
be made during the period beginning on the third business day following the
release for publication of quarterly or annual financial information required to
be prepared and disseminated by the Corporation pursuant to the requirements of
the Exchange Act and ending on the twelfth business day following such date.
The required release of information shall be deemed to have been satisfied when
the specified financial data appears on or in a wire service, financial news
service or newspaper of general circulation or is otherwise first made publicly
available.
(C) EFFECTS OF EXERCISE OF STOCK APPRECIATION RIGHTS OR
OPTIONS. Upon the exercise of a Stock Appreciation Right, the number of shares
of Common Stock available under the Option to which it relates shall decrease by
a number equal to the number of shares for which the Stock Appreciation Right
was exercised. Upon the exercise of an Option, any related Stock Appreciation
Right shall terminate as to any number of shares of Common Stock subject to the
Stock Appreciation Right that exceeds the total number of shares for which the
Option remains unexercised.
(D) TIME OF GRANT. A Stock Appreciation Right granted in
connection with an Incentive Stock Option must be granted concurrently with the
Option to which it relates, while a Stock Appreciation Right granted in
connection with a Non-Qualified Option may be granted concurrently with the
Option to which it relates or at any time thereafter prior to the exercise or
expiration of such Option.
(E) NON-TRANSFERABLE. The holder of a Stock Appreciation
Right may not transfer or assign the Stock Appreciation Right otherwise than by
will or in accordance with the laws of descent and distribution, and during a
holder's lifetime a Stock Appreciation Right may be exercisable only by the
holder.
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ARTICLE IX
ADJUSTMENTS FOR CAPITAL CHANGES
The aggregate number of shares of Common Stock available for
issuance under this Plan, the number of shares to which any outstanding Award
relates, the maximum number of shares that can be covered by Awards to each
Employee and each Non-Employee Director and the exercise price per share of
Common Stock under any outstanding Option shall be proportionately adjusted for
any increase or decrease in the total number of outstanding shares of Common
Stock issued subsequent to the effective date of this Plan resulting from a
split, subdivision or consolidation of shares or any other capital adjustment,
the payment of a stock dividend, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Corporation. If,
upon a merger, consolidation, reorganization, liquidation, recapitalization or
the like of the Corporation, the shares of the Corporation's Common Stock shall
be exchanged for other securities of the Corporation or of another corporation,
each recipient of an Award shall be entitled, subject to the conditions herein
stated, to purchase or acquire such number of shares of Common Stock or amount
of other securities of the Corporation or such other corporation as were
exchangeable for the number of shares of Common Stock of the Corporation which
such optionees would have been entitled to purchase or acquire except for such
action, and appropriate adjustments shall be made to the per share exercise
price of outstanding Options. In the event the Corporation declares a special
cash dividend or return of capital in an amount per share which exceeds 10% of
the fair market value of a share of Common Stock as of the date of declaration,
the per share exercise price of all previously granted Awards which remain
unexercised as of the date of such declaration shall be proportionately adjusted
to give effect to such special cash dividend or return of capital as of the date
of payment of such special cash dividend or return of capital; provided that the
adjustments to the per shares exercise price shall satisfy the criteria set
forth in Emerging Issues Task Force 90-9 (or any successor thereto) so that the
adjustments do not result in compensation expense, and provided further that if
such adjustment with respect to incentive stock options would be treated as a
modification of the outstanding incentive stock options with the effect that,
for purposes of Section 422 and 425(h) of the Code, and the rules and
regulations thereunder, new incentive stock options would be deemed to be
granted, then no adjustment to the per share exercise price of outstanding
incentive stock options shall be made.
ARTICLE X
AMENDMENT AND TERMINATION OF THE PLAN
The Board may, by resolution, at any time terminate or amend the
Plan with respect to any shares of Common Stock as to which Awards have not
been granted, subject to any applicable regulatory requirements and any
required stockholder approval or any stockholder approval which the Board may
deem to be advisable for any reason, such as for the purpose of obtaining or
retaining any statutory or regulatory benefits under tax, securities or other
laws or satisfying any applicable stock exchange listing requirements. The
Board may not, without the consent of the holder of an Award, alter or impair
any Award previously granted or awarded under this Plan as specifically
authorized herein.
ARTICLE XI
EMPLOYMENT RIGHTS
Neither the Plan nor the grant of any Awards hereunder nor any
action taken by the Committee or the Board in connection with the Plan shall
create any right on the part of any Employee or Non-Employee Director of the
Corporation or a Subsidiary Company to continue in such capacity.
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ARTICLE XII
WITHHOLDING
12.01 TAX WITHHOLDING. The Corporation may withhold from any
cash payment made under this Plan sufficient amounts to cover any applicable
withholding and employment taxes, and if the amount of such cash payment is
insufficient, the Corporation may require the Optionee to pay to the Corporation
the amount required to be withheld as a condition to delivering the shares
acquired pursuant to an Award. The Corporation also may withhold or collect
amounts with respect to a disqualifying disposition of shares of Common Stock
acquired pursuant to the exercise of an Incentive Stock Option, as provided in
Section 8.10(c).
12.02 METHODS OF TAX WITHHOLDING. The Board of Directors or
the Committee is authorized to adopt rules, regulations or procedures which
provide for the satisfaction of an Optionee's tax withholding obligation by the
retention of shares of Common Stock to which the Employee would otherwise be
entitled pursuant to an Award and/or by the Optionee's delivery of
previously-owned shares of Common Stock or other property.
ARTICLE XIII
EFFECTIVE DATE OF THE PLAN; TERM
13.01 EFFECTIVE DATE OF THE PLAN. This Plan shall become
effective on the Effective Date, and Awards may be granted hereunder as of or
after the Effective Date and prior to the termination of the Plan, provided that
no Incentive Stock Option issued pursuant to this Plan shall qualify as such
unless this Plan is approved by the requisite vote of the holders of the
outstanding voting shares of the Corporation at a meeting of stockholders of the
Corporation held within twelve (12) months of the Effective Date.
13.02 TERM OF PLAN. Unless sooner terminated, this Plan shall
remain in effect for a period of ten (10) years ending on the tenth anniversary
of the Effective Date. Termination of the Plan shall not affect any Awards
previously granted and such Awards shall remain valid and in effect until they
have been fully exercised or earned, are surrendered or by their terms expire or
are forfeited.
ARTICLE XIV
MISCELLANEOUS
14.01 GOVERNING LAW. To the extent not governed by federal
law, this Plan shall be construed under the laws of the State of North Carolina.
14.02 PRONOUNS. Wherever appropriate, the masculine pronoun
shall include the feminine pronoun, and the singular shall include the plural.
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APPENDIX B
HFNC FINANCIAL CORP.
RECOGNITION AND RETENTION PLAN AND TRUST AGREEMENT
ARTICLE I
ESTABLISHMENT OF THE PLAN AND TRUST
1.01 HFNC Financial Corp. (the "Corporation") hereby
establishes a Recognition and Retention Plan (the "Plan") and Trust (the
"Trust") upon the terms and conditions hereinafter stated in this Recognition
and Retention Plan and Trust Agreement (the "Agreement").
1.02 The Trustee hereby accepts this Trust and agrees to hold
the Trust assets existing on the date of this Agreement and all additions and
accretions thereto upon the terms and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to retain personnel of
experience and ability in key positions by providing Employees and Non-Employee
Directors of the Corporation and of Home Federal Savings and Loan Association
(the "Association") with a proprietary interest in the Corporation as
compensation for their contributions to the Corporation, the Association, and
any other Subsidiaries and as an incentive to make such contributions in the
future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Agreement with
an initial capital letter, unless the context clearly indicates otherwise, shall
have the meanings set forth below. Wherever appropriate, the masculine pronouns
shall include the feminine pronouns and the singular shall include the plural.
3.01 "Beneficiary" means the person or persons designated by a
Recipient to receive any benefits payable under the Plan in the event of such
Recipient's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Recipient's surviving spouse, if any,
or if none, his estate.
3.02 "Board" means the Board of Directors of the Corporation
or of the Association.
3.03 "Change of Control of the Corporation"shall be deemed to
have occurred if: (i) any "person" as such term is used in Sections 13(d) and
14(d) of the Exchange Act (other than the Corporation and any trustee or other
fiduciary holding securities under any employee benefit plan of the
Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting power of the
Corporation's then outstanding securities; (ii) during any period of two
consecutive years (not including any period prior to the adoption of the Plan),
individuals who at the beginning of such period constitute the Board of
Directors, and any new director whose election by the Board of Directors or
nomination for election by the Corporation's stockholders was approved by a vote
of at least two-thirds of the directors then still in office who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board of Directors; (iii) the stockholders
of the Corporation approve a merger or consolidation of the Corporation with any
other corporation, other than a merger or consolidation that would result in the
voting securities of the Corporation outstanding immediately
<PAGE>
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) more than 50%
of the combined voting power of the voting securities of the Corporation
outstanding immediately after such merger or consolidation; or (iv) the
stockholders of the Corporation approve a plan of complete liquidation of the
Corporation or an agreement for the sale or disposition by the Corporation of
all or substantially all of the Corporation's assets. If any of the events
enumerated in clauses (i) through (iv) occur, the Board shall determine the
effective date of the Change in Control resulting therefrom for purposes of
the Plan.
3.04 "Code" means the Internal Revenue Code of 1986, as
amended.
3.05 "Committee" means the committee appointed by the Board
pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock, $.01 par
value per share, of the Corporation.
3.07 "Disability" means any physical or mental impairment
which qualifies an Employee for disability benefits under the applicable
long-term disability plan maintained by the Corporation or any Subsidiary or, if
no such plan applies, which would qualify such Employee for disability benefits
under the Federal Social Security System.
3.08 "Effective Date" means the day upon which the Board
approves this Plan.
3.09 "Employee" means any person who is employed by the
Corporation, the Association, or any Subsidiary, or is an officer of the
Corporation, the Association, or any Subsidiary, including officers or other
employees who may be directors of the Corporation.
3.10 "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
3.11 "Non-Employee Director" means a member of the Board who
is not an Employee, and shall include any individual who, at the date of
adoption of the Plan or any time thereafter, serves the Board in an advisory or
emeritus capacity.
3.12 "Plan Shares" or "Shares" means shares of Common Stock
held in the Trust which may be distributed to a Recipient pursuant to the Plan.
3.13 "Plan Share Award" or "Award" means a right granted under
this Plan to receive a distribution of Plan Shares upon completion of the
service requirements described in Article VII.
3.14 "Recipient" means an Employee or Non-Employee Director
who receives a Plan Share Award under the Plan.
3.15 "Retirement" means a termination of employment upon or
after attainment of age sixty-five (65) or such earlier age as may be specified
in applicable plans or policies of the Corporation, a Subsidiary or in a
Recipient's Plan Share Award.
3.16 "Subsidiary" means Home Federal Savings and Loan
Association and any other subsidiaries of the Corporation or the Association
which, with the consent of the Board, agree to participate in this Plan.
3.17 "Trustee" means such firm, entity or persons approved by
the Board of Directors to hold legal title to the Plan for the purposes set
forth herein.
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ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE OF THE COMMITTEE. The Plan shall be administered
and interpreted by the Committee, which shall consist of two or more members of
the Board, each of whom shall be a Non-Employee Director as defined in
Rule 16b-3(b)(3)(i) of the Exchange Act. The Committee shall have all of the
powers allocated to it in this and other Sections of the Plan. The
interpretation and construction by the Committee of any provisions of the Plan
or of any Plan Share Award granted hereunder shall be final and binding in the
absence of action by the Board of Directors. The Committee shall act by vote or
written consent of a majority of its members. Subject to the express provisions
and limitations of the Plan, the Committee may adopt such rules, regulations and
procedures as it deems appropriate for the conduct of its affairs. The
Committee shall report its actions and decisions with respect to the Plan to the
Board at appropriate times, but in no event less than one time per calendar
year.
4.02 ROLE OF THE BOARD. The members of the Committee and the
Trustee shall be appointed or approved by, and will serve at the pleasure of,
the Board. The Board may in its discretion from time to time remove members
from, or add members to, the Committee, and may remove or replace the Trustee,
provided that any directors who are selected as members of the Committee shall
be Non-Employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or the
Committee shall be liable for any determination made in good faith with respect
to the Plan or any Plan Shares or Plan Share Awards granted under it. If a
member of the Board or the Committee is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of anything
done or not done by him in such capacity under or with respect to the Plan, the
Corporation shall, subject to the requirements of applicable laws and
regulations, indemnify such member against all liabilities and expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in the best interests of the Corporation and any Subsidiaries and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
4.04 COMPLIANCE WITH LAWS AND REGULATIONS. All Awards granted
hereunder shall be subject to all applicable federal and state laws, rules and
regulations and to such approvals by any government or regulatory agency as may
be required.
ARTICLE V
CONTRIBUTIONS
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall
determine the amount (or the method of computing the amount) and timing of any
contributions by the Corporation and any Subsidiaries to the Trust established
under this Plan. Such amounts may be paid in cash or in shares of Common Stock
and shall be paid to the Trust at the designated time of contribution. No
contributions by Employees or Directors shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; NUMBER OF PLAN
SHARES. Subject to Section 8.02 hereof, the Trustee shall invest all of the
Trust's assets primarily in Common Stock. The aggregate number of Plan Shares
available for distribution pursuant to this Plan shall be 687,700 shares of
Common Stock, which shares shall be purchased from the Corporation and/or from
stockholders thereof by the Trust with funds contributed by the Corporation. In
the event that the Trust receives cash pursuant to receipt of dividends on
Common Stock held by the Trust and unallocated to participants, including the
receipt of a special cash dividend or return of capital, then such funds may be
used by the Trust to purchase additional shares of Common Stock available for
future award under
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this Plan or the Committee or Board may distribute such cash received by the
Trust along with the Common Stock upon which it was earned upon the award of
such previously unallocated shares.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 AWARDS TO NON-EMPLOYEE DIRECTORS. Plan Share Awards to
Non-Employee Directors shall be made to such persons and in such amounts as
determined by the Board of Directors of the Committee.
6.02 AWARDS TO EMPLOYEES. Plan Share Awards may be made to
such Employees as may be selected by the Board of Directors or the Committee.
In selecting those Employees to whom Plan Share Awards may be granted and the
number of Shares covered by such Awards, the Committee or the Board shall
consider the duties, responsibilities and performance of each respective
Employee, his present and potential contributions to the growth and success of
the Corporation, his salary and such other factors as shall be deemed relevant
to accomplishing the purposes of the Plan. The Board of Directors or the
Committee may but shall not be required to request the written recommendation of
the Chief Executive Officer of the Corporation other than with respect to Plan
Share Awards to be granted to him.
6.03 FORM OF ALLOCATION. As promptly as practicable after a
determination is made pursuant to Sections 6.01 or 6.02 that a Plan Share Award
is to be issued, the Board of Directors or the Committee shall notify the
Recipient in writing of the grant of the Award, the number of Plan Shares
covered by the Award, and the terms upon which the Plan Shares subject to the
Award shall be distributed to the Recipient. The date on which the Board of
Directors or the Committee makes the determination with respect to Plan Share
Awards shall be considered the date of grant of the Plan Share Award. The Board
of Directors or the Committee shall maintain records as to all grants of Plan
Share Awards under the Plan.
6.04 ALLOCATIONS NOT REQUIRED TO ANY SPECIFIC EMPLOYEE.
Notwithstanding anything to the contrary in Section 6.02 hereof, no Employee
shall have any right or entitlement to receive a Plan Share Award hereunder,
such Awards being at the total discretion of the Board of Directors or the
Committee.
ARTICLE VII
EARNING AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Subject to the terms hereof, Plan Share
Awards shall be earned by a Recipient at the rate as determined by the Board or
the Committee pursuant to Article VI hereof. If the employment of an Employee
or service as a Non-Employee Director is terminated prior to date such awards
are vested for any reason (except as specifically provided in subsections (b),
(c) and (d) below), the Recipient shall forfeit the right to any Shares subject
to the Award which have not theretofore been earned. In the event of a
forfeiture of the right to any Shares subject to an Award by an Employee, such
forfeited Shares shall become available for allocation pursuant to this Plan as
if no Award had been previously granted with respect to such Shares. No
fractional shares shall be distributed pursuant to this Plan.
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH, DISABILITY OR
RETIREMENT. Notwithstanding the general rule contained in Section 7.01(a), all
Plan Shares subject to a Plan Share Award held by a Recipient whose employment
with or service to the Corporation or any Subsidiary terminates due to death,
Disability or Retirement shall be deemed earned as of the Recipient's last day
of employment with or service to the Corporation or any Subsidiary and shall be
distributed as soon as practicable thereafter.
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(c) EXCEPTION FOR TERMINATIONS AFTER A CHANGE IN CONTROL OF
THE CORPORATION. Notwithstanding the general rule contained in Section 7.01(a),
all Plan Shares subject to a Plan Share Award held by a Recipient shall be
deemed to be earned in the event of a Change in Control of the Corporation.
(d) REVOCATION FOR MISCONDUCT. Notwithstanding anything
hereinafter to the contrary, the Board may by resolution immediately revoke,
rescind and terminate any Plan Share Award, or portion thereof, previously
awarded under this Plan, to the extent Plan Shares have not been distributed
hereunder, whether or not yet earned, in the case of an Employee who is
discharged from the employ of the Corporation or any Subsidiary for cause (as
hereinafter defined). Termination for cause shall mean termination because of
the Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. Plan Share
Awards granted to a Non-Employee Director who is removed for cause pursuant to
the Corporation's Articles of Incorporation shall terminate as of the effective
date of such removal.
7.02 DISTRIBUTION OF DIVIDENDS. Any cash dividends (including
special large and nonrecurring dividends including one that has the effect of a
return of capital to the Corporation's stockholders) or stock dividends declared
in respect of each unvested Plan Share Award will be held by the Trust for the
benefit of the Recipient on whose behalf such Plan Share Award is then held by
the Trust and such dividends, including any interest thereon, will be paid out
proportionately by the Trust to the Recipient thereof as soon as practicable
after the Plan Share Awards become earned. Any cash dividends or stock
dividends declared in respect of each vested Plan Share held by the Trust will
be paid by the Trust, as soon as practicable after the Trust's receipt thereof,
to the Recipient on whose behalf such Plan Share is then held by the Trust. In
the event that the Trust receives cash pursuant to receipt of dividends on
Common Stock held by the Trust and unallocated to participants (including the
receipt of a special cash dividend or return of capital) then such funds may be
used by the Trust to purchase additional shares of Common Stock available for
future award under this Plan or the Committee or Board may distribute such cash
received by the Trust along with the Common Stock upon which it was earned upon
the award of such previously unallocated shares.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Plan Shares
shall be distributed to the Recipient or his Beneficiary, as the case may be, as
soon as practicable after they have been earned.
(b) FORM OF DISTRIBUTIONS. All Plan Shares, together with
any Shares representing stock dividends, shall be distributed in the form of
Common Stock. One share of Common Stock shall be given for each Plan Share
earned and distributable. Payments representing cash dividends shall be made in
cash.
(c) WITHHOLDING. The Trustee may withhold from any cash
payment or Common Stock distribution made under this Plan sufficient amounts to
cover any applicable withholding and employment taxes, and if the amount of a
cash payment is insufficient, the Trustee may require the Recipient or
Beneficiary to pay to the Trustee the amount required to be withheld as a
condition of delivering the Plan Shares. The Trustee shall pay over to the
Corporation or any Subsidiary which employs or employed such Recipient any such
amount withheld from or paid by the Recipient or Beneficiary.
(d) RESTRICTIONS ON SELLING OF PLAN SHARES. Plan Share
Awards may not be sold, assigned, pledged or otherwise disposed of prior to the
time that they are earned and distributed pursuant to the terms of this Plan.
Following distribution, the Board of Directors or the Committee may require the
Recipient or his Beneficiary, as the case may be, to agree not to sell or
otherwise dispose of his distributed Plan Shares except in accordance with all
then applicable federal and state securities laws, and the Board of Directors or
the Committee may cause a legend to be placed on the stock certificate(s)
representing the distributed Plan Shares
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in order to restrict the transfer of the distributed Plan Shares for such
period of time or under such circumstances as the Board of Directors or the
Committee, upon the advice of counsel, may deem appropriate.
7.04 VOTING OF PLAN SHARES. After a Plan Share Award has been
made, the Recipient shall be entitled to direct the Trustee as to the voting of
the Plan Shares which are covered by the Plan Share Award and which have not yet
been earned and distributed to him, subject to rules and procedures adopted by
the Committee for this purpose. All shares of Common Stock held by the Trust
which have not been awarded under a Plan Share Award and shares which have been
awarded as to which Recipients have not directed the voting shall be voted by
the Trustee in the same proportion as voted by the Trustee for shares allocated
and which the Trustee receives directions for such vote by Recipients.
ARTICLE VIII
TRUST
8.01 TRUST. The Trustee shall receive, hold, administer,
invest and make distributions and disbursements from the Trust in accordance
with the provisions of the Plan and Trust and the applicable directions, rules,
regulations, procedures and policies established by the Board of Directors or
the Committee pursuant to the Plan.
8.02 MANAGEMENT OF TRUST. It is the intent of this Plan and
Trust that the Trustee shall have complete authority and discretion with respect
to the arrangement, control and investment of the Trust, and that the Trustee
shall invest all assets of the Trust in Common Stock to the fullest extent
practicable, except to the extent that the Trustee determine that the holding of
monies in cash or cash equivalents is necessary to meet the obligations of the
Trust. In performing their duties, the Trustee shall have the power to do all
things and execute such instruments as may be deemed necessary or proper,
including the following powers:
(a) To invest up to one hundred percent (100%) of all Trust
assets in Common Stock without regard to any law now or hereafter in force
limiting investments for trustees or other fiduciaries. The investment
authorized herein may constitute the only investment of the Trust, and in making
such investment, the Trustee is authorized to purchase Common Stock from the
Corporation or from any other source, and such Common Stock so purchased may be
outstanding, newly issued, or treasury shares.
(b) To invest any Trust assets not otherwise invested in
accordance with (a) above, in such deposit accounts, and certificates of
deposit, obligations of the United States Government or its agencies or such
other investments as shall be considered the equivalent of cash.
(c) To sell, exchange or otherwise dispose of any property at
any time held or acquired by the Trust.
(d) To cause stocks, bonds or other securities to be
registered in the name of a nominee, without the addition of words indicating
that such security is an asset of the Trust (but accurate records shall be
maintained showing that such security is an asset of the Trust).
(e) To hold cash without interest in such amounts as may in
the opinion of the Trustee be reasonable for the proper operation of the Plan
and Trust.
(f) To employ brokers, agents, custodians, consultants and
accountants.
(g) To hire counsel to render advice with respect to their
rights, duties and obligations hereunder, and such other legal services or
representation as the Trustee deems desirable.
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(h) To hold funds and securities representing the amounts to
be distributed to a Recipient or his Beneficiary as a consequence of a dispute
as to the disposition thereof, whether in a segregated account or held in common
with other assets of the Trust.
Notwithstanding anything herein contained to the contrary, the
Trustee shall not be required to make any inventory, appraisal or settlement or
report to any court, or to secure any order of court for the exercise of any
power herein contained, or give bond.
8.03 RECORDS AND ACCOUNTS. The Trustee shall maintain
accurate and detailed records and accounts of all transactions of the Trust,
which shall be available at all reasonable times for inspection by any legally
entitled person or entity to the extent required by applicable law, or any other
person determined by the Board of Directors or the Committee.
8.04 EXPENSES. All costs and expenses incurred in the
operation and administration of this Plan shall be borne by the Corporation, or
in the discretion of the Corporation, the Trust.
8.05 INDEMNIFICATION. Subject to the requirements of
applicable laws and regulations, the Corporation shall indemnify, defend and
hold the Trustee harmless against all claims, expenses and liabilities arising
out of or related to the exercise of the Trustee's powers and the discharge of
its duties hereunder, unless the same shall be due to the Trustee's gross
negligence or willful misconduct.
ARTICLE IX
MISCELLANEOUS
9.01 ADJUSTMENTS FOR CAPITAL CHANGES. The aggregate number of
Plan Shares available for distribution pursuant to the Plan Share Awards and the
number of Shares to which any Plan Share Award relates shall be proportionately
adjusted for any increase or decrease in the total number of outstanding shares
of Common Stock issued subsequent to the effective date of the Plan resulting
from any split, subdivision or consolidation of shares or other capital
adjustment, or other increase or decrease in such shares effected without
receipt or payment of consideration by the Corporation.
9.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by
resolution, at any time amend or terminate the Plan and the Trust (including
amendments which may result in the merger of the Plan or the Trust with and into
other plans or trusts of the Corporation or successor thereto), subject to any
applicable regulatory requirements and any required stockholder approval or any
stockholder approval which the Board may deem to be advisable for any reason,
such as for the purpose of obtaining or retaining any statutory or regulatory
benefits under tax, securities or other laws or satisfying any applicable stock
exchange listing requirements. The Board may not, without the consent of the
Recipient, alter or impair his Plan Share Award except as specifically
authorized herein. Upon termination of the Plan, the Recipient's Plan Share
Awards shall be distributed to the Recipient in accordance with the terms of
Article VII hereof.
9.03 NONTRANSFERABLE. During the lifetime of the Recipient,
Plan Shares may only be earned by and paid to the Recipient who was notified in
writing of the Award pursuant to Section 6.03, provided that Plan Share Awards
and rights to Plan Shares shall be transferable by a Recipient to his or her
spouse, lineal ascendants, lineal descendants, or to a duly established trust.
Plan Share Awards so transferred may not again be transferred other than to the
Recipient who originally received the grant of Plan Share Awards or to an
individual or trust to whom such Recipient could have transferred Plan Share
Awards pursuant to this Section 9.03. Plan Share Awards which are transferred
pursuant to this Section 9.03 shall be subject to the same terms and conditions
as would have applied to such Plan Share Awards in the hands of the Recipient
who originally received the grant of such Plan Share Award. No Recipient or
Beneficiary shall have any right in or claim to any assets of the Plan or Trust,
nor shall the Corporation or any Subsidiary be subject to any claim for benefits
hereunder.
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9.04 EMPLOYMENT OR SERVICE RIGHTS. Neither the Plan nor any
grant of a Plan Share Award or Plan Shares hereunder nor any action taken by the
Trustee, the Committee or the Board in connection with the Plan shall create any
right on the part of any Employee or Non-Employee Director to continue in such
capacity.
9.05 VOTING AND DIVIDEND RIGHTS. No Recipient shall have any
voting or dividend rights or other rights of a stockholder in respect of any
Plan Shares covered by a Plan Share Award, except as expressly provided in
Sections 7.02 and 7.04 above, prior to the time said Plan Shares are actually
earned and distributed to him.
9.06 GOVERNING LAW. To the extent not governed by federal
law, the Plan and Trust shall be governed by the laws of the State of North
Carolina.
9.07 EFFECTIVE DATE. This Plan shall be effective as of the
Effective Date, and Awards may be granted hereunder as of or after the Effective
Date and as long as the Plan remains in effect. Notwithstanding the foregoing
or anything to the contrary in this Plan, the implementation of this Plan and
any Awards granted pursuant hereto are subject to the receipt of any applicable
regulatory approvals or non-objections and approval of the Corporation's
stockholders.
9.08 TERM OF PLAN. This Plan shall remain in effect until the
earlier of (1) ten (10) years from the Effective Date, (2) termination by the
Board, or (3) the distribution to Recipients and Beneficiaries of all assets of
the Trust.
9.09 TAX STATUS OF TRUST. It is intended that the trust
established hereby be treated as a Grantor Trust of the Corporation under the
provisions of Section 671 ET SEQ. of the Code, as the same may be amended from
time to time.
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IN WITNESS WHEREOF, the Corporation has caused this Agreement to
be executed by its duly authorized officers and the corporate seal to be affixed
and duly attested, and the initial Trustee established pursuant hereto have duly
and validly executed this Agreement, all on this 25th day of November 1996.
HFNC FINANCIAL CORP.
By: /s/ H. Joe King, Jr.
---------------------------------------
H. Joe King, Jr.
President and Chief Executive Officer
ATTEST:
By: /s/ Ann G. Benton
--------------------
Ann G. Benton
Corporate Secretary
TRUSTEES
By: /s/Ray W. Bradley, Jr.
--------------------------
Ray W. Bradley, Jr.
Trustee
By: /s/Lewis H. Parham, Jr.
--------------------------
Lewis H. Parham, Jr.
Trustee
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