Exhibit 10.1

UWHARRIE CAPITAL CORP

2006 INCENTIVE STOCK OPTION PLAN

Uwharrie Capital Corp (the “Company”) hereby adopts this 2006 INCENTIVE STOCK
OPTION PLAN (the “Plan”) as further described herein.

ARTICLE I

PURPOSE AND SCOPE OF PLAN

 

1.1 Purpose.

The purpose of the Plan is to encourage the continued service of key employees
of the Company or any company which is a direct or indirect subsidiary of the
Company (a “Subsidiary”), and to provide an additional incentive for such
employees to expand and improve the profits and prosperity of the Company and
its Subsidiaries, by granting them options to purchase shares of the Company’s
common stock. The Plan also will assist the Company and its subsidiaries in
recruiting and retaining key employees to serve as employees of the Company and
its Subsidiaries.

 

1.2 Stock Subject to Plan.

Pursuant to and in accordance with the terms of the Plan, options (“Options”)
may be granted from time to time to purchase shares of the Company’s common
stock, $1.25 par value per share (“Common Stock”).

The aggregate number of shares of Common Stock which may be sold upon the
exercise of Options granted under the Plan is 153,132 shares, which maximum
number is subject to adjustment as provided in Paragraph 6.1 hereof. Shares of
Common Stock sold by the Company upon the exercise of Options granted hereunder,
at the sole discretion of the Company, may be issued from the Company’s
authorized but unissued shares, or be issued and outstanding shares purchased by
the Company on the open market or in private transactions. In the event an
Option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, then, to the extent the Plan shall remain in
effect, the shares of Option Stock covered by the unexercised portion of such
Option shall again be available for purposes of this Plan.

 

1.3 Effective Date; Termination Date.

The Plan shall be subject to approval by a vote of the holders of a majority of
the shares of the Company’s Common Stock present or represented, in person or by
proxy, and entitled to vote at a meeting of the Company’s shareholders held in
accordance with North Carolina law. Subject to such approval, the Plan shall
become effective as of May 16, 2006 (the “Effective Date,” which is the date of
adoption of the Plan by the Company’s Board of Directors) and, unless sooner
terminated as provided herein, shall terminate at 5:00 P.M. on May 16, 2016 (the
“Termination Date”). Following the Termination Date, no further Options may be
granted under the Plan, but such termination shall not effect any Option granted
prior to the Termination Date.

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ARTICLE II

DEFINITIONS

2.1 Board. “Board” refers to the Company’s Board of Directors.

2.2 Committee. The “Committee” shall refer to the committee of and appointed or
designated by the Board to administer the Plan as described in Article III
below.

2.3 Common Stock. “Common Stock” is the common stock of the Company, par value
$1.25 per share.

2.4 Date of Grant. The “Date of Grant” of an Option refers to the effective date
of action by the Committee granting such Option.

2.5 Employee. An “Employee” includes any person who is a full-time employee of
the Company or of any of its Subsidiaries.

2.6 Exercise Price. The “Exercise Price” is the price per share to be paid by an
Optionee for the purchase of Option Stock upon the exercise of an Option.

2.7 Expiration Date. “Expiration Date” refers to the date set by the Committee
at which time any unexercised portion of such Option automatically will
terminate and be of no further force or effect.

2.8 Modification, Extension or Renewal. “Modification” refers to any change in
an Option which alters or modifies the original terms, conditions or benefits of
the Option granted to the Optionee. “Extension” refers to the granting to the
Optionee of an additional period of time within which to exercise the Option
beyond the Expiration Date originally prescribed in the Option Agreement.
“Renewal” refers to the granting of an Option to the Optionee with the same
rights and privileges and on the same terms and conditions as contained in an
original Option after expiration or termination of the original Option.

2.9 Option. An “Option” is a right granted by the Company pursuant to the Plan
to an Employee to purchase shares of Common Stock at the Exercise Price set by
the Committee for such Option and on the terms and conditions set forth herein
and in the Option Agreement relating to such Option.

2.10 Option Agreement. An “Option Agreement” is a formal written agreement
executed between the Company and an Optionee setting forth the terms and
conditions of an Option.

2.11 Option Stock. “Option Stock” refers to the shares of Common Stock covered
by an Option and which may be purchased by the Optionee upon the exercise, in
whole or in part, of such Option.

2.12 Optionee. An “Optionee” is an Employee to whom an Option is granted.

 

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ARTICLE III

PLAN ADMINISTRATION

 

3.1 General.

The Plan shall be administered by the Committee which shall be composed of not
less than three members of the Board of Directors who (i) are not employees of
the Company and who are not, during the one year prior to service as members of
the Committee, granted or awarded any equity securities of the Company pursuant
to the Plan or any other plan of the Company or any of its affiliates, and who
(ii) otherwise qualify as “disinterested administrators’ as defined in Rule
16b-3 (c) (2) (i) under the Securities Exchange Act of 1934. Members of the
Committee shall serve at the pleasure of the Board, and the Board of Directors,
from time to time and at its discretion, may remove members from (with or
without cause) or add members to the Committee or fill any vacancies on the
Committee, however created.

 

3.2 Duties.

In its administration of the Plan, the Committee shall have the following
authority, powers and duties:

 

(a) to make any and all determinations regarding persons who are eligible to
receive Options under the Plan;

 

(b) to construe and interpret the terms and provisions of the Plan and any and
all Option Agreements entered into pursuant to the Plan;

 

(c) to make, adopt, amend, rescind, and interpret such rules and regulations not
inconsistent with the Plan or law as it from time to time deems reasonable and
necessary for the interpretation and administration of the Plan;

 

(d) to prescribe the form or forms of the instruments evidencing any Options
granted under the Plan and of any other instruments required under the Plan and
to change such forms from time to time;

 

(e) to determine:

 

  (i) the Employees to whom Options shall be granted pursuant to the Plan and
the timing of such grant or grants, and to cause Options to be granted to
Employees it selects;

 

  (ii) the number of shares of Option Stock to be covered by each Option
granted;

 

  (iii) the Exercise Price to be paid for Option Stock upon exercise of the
Option as set forth in the Option Agreement and as determined in accordance with
Paragraph 4.3 hereof;

 

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  (iv) the Expiration Date of each Option granted, and the period within which
any such Option may be exercised;

 

  (v) any other term and/or condition of each Option (which need not be
identical from Option to Option) so long as not inconsistent with the Plan; and,

 

(f) to make all other determinations and take all other actions provided for
herein or deemed by it, in its discretion, to be necessary or advisable to
administer the Plan in a proper and effective manner.

 

3.3 Meetings and Voting.

The Committee shall select one of its members as Chairman and shall hold
meetings at such times and places as it shall deem necessary or desirable. A
majority of the members of the Committee shall constitute a quorum for all
matters with respect to administration of the Plan, and acts of a majority of
the members of the Committee present at meetings at which a quorum is present,
or acts reduced to and approved in writing by all of the members of the
Committee without a meeting, shall be valid acts of the Committee.

 

3.4 Choice of Form of Option.

The Committee shall have the discretion to cause any Option granted pursuant to
this Plan to be granted with the intent that it qualify for treatment as an
“Incentive Stock Option” (an “ISO”) as defined in § 422 of the Internal Revenue
Code of 1986, as amended (the “Code”), or with the intent that it be treated as
a “Nonqualified Stock Option” (a “NSO”) (ISOs and NSOs shall collectively be
referred to herein as “Options” unless reference is specifically made only to
one or the other, and, in the case of any such reference only to one, such
reference shall be deemed to be made to the exclusion of the other.)

 

3.5 Effect of Committee Action.

All actions, decisions and determinations of the Committee in connection with
the administration of the Plan, and in connection with the interpretation and
construction of, or questions or other matters concerning, the Plan or any
Option granted, shall (i) be made consistent and in accordance with the terms of
the Plan and, with respect to an ISO, shall be designed to cause the Plan and
each such ISO to continue to comply with applicable provisions of the Code, and
(ii) shall be final, conclusive and binding on all persons, including the
Company, its shareholders, Optionees and any other person claiming any interest
in any Option; provided, however, that any action, decision, interpretation or
determination, other than those respecting the actual grant of Options, shall be
subject to review by the Board of Directors either on its own initiative, at the
request of the Committee or on application of any aggrieved party. In such a
case, the determination of the Board of Directors on such review shall be final
and binding on all affected parties.

 

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3.6 Indemnification.

To the extent permitted by applicable law, and in addition to such other rights
of indemnification members of the Committee may have as Directors of the
Company, the members of the Committee shall be indemnified by the Company
against the reasonable expenses, including attorneys’ fees, actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal thereof, to which they or any of
them may be a party by reason of any action taken or omitted in good faith under
or in connection with administration of the Plan or any Option granted hereunder
and against all amounts paid by them in settlement thereof (provided such
settlement is approved by independent legal counsel selected by the Company) or
paid by them in satisfaction of a judgment in any such action, suit or
proceeding, except in relation to matters as to which it shall be adjudged in
such action, suit or proceeding that any such Committee member is liable for
gross negligence or misconduct in the performance of his duties; provided,
however, that within sixty (60) days after institution of any such action, suit
or proceeding, such Committee member(s) shall in writing offer the Company the
opportunity, at its own expense, to handle and defend same.

ARTICLE IV

GRANT AND TERMS OF OPTIONS

 

4.1 Authorization to Grant Options.

Pursuant to the Plan, from time to time prior to the Termination Date the
Company may grant Options to Employees to purchase shares of Common Stock.
Options may only be granted by action of the Committee, and no person shall have
any rights under the Plan or with respect to any Option except pursuant to such
action of the Committee.

 

4.2 Number of Shares.

The number of shares of Option Stock covered by each Option shall be set by the
Committee at the time such Option is granted and shall be specified in the
Option Agreement relating to such Option. The number of shares of Option Stock
covered by each Option shall be subject to adjustment in the manner described in
Paragraph 6.1 below.

 

4.3 Exercise Price.

At the time an Option is granted, the Committee shall set the Exercise Price
applicable to such Option. The Exercise Price shall be determined by the
Committee in the manner described below and shall be specified in the Option
Agreement evidencing the Option. The Exercise Price applicable to each Option
shall be subject to adjustment in the manner described in Paragraph 6.1 below.

The Exercise Price for each share of Option Stock covered by an Option shall not
be less than one hundred percent (100%) of the fair market value of one share of
the Common Stock on the Date of Grant of such Options (the “Fair Market Value”).
The Fair Market Value of a share of the Company’s outstanding Common Stock on
any particular date shall be, (i) if the Common

 

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Stock is not then listed on the Nasdaq Stock Market, the fair market value of a
share of the Common Stock as determined by the Committee in its sole discretion
in such manner as it shall deem to be reasonable and appropriate, or, (ii) if
the Common Stock is listed on the Nasdaq Stock Market, the average of the bid
and asked prices for a share of the Common Stock as quoted by Nasdaq on such
date.

Notwithstanding anything contained herein to the contrary, in the case of an ISO
being granted to an Employee who owns, immediately before the ISO is granted,
more than ten percent (10%) of the total combined voting power of all classes of
Common Stock of the Company, the Exercise Price per share with respect to such
ISO, as determined by the Committee and stated in the Option Agreement, shall
not be less than one hundred ten percent (110%) of the Fair Market Value per
share of the Company’s outstanding Common Stock as of the Date of Grant of the
ISO.

 

4.4 Option Agreements.

Each Option granted under the Plan shall be evidenced by an Option Agreement
which shall be executed and delivered by or on behalf of the Company and the
Optionee and which shall (i) specify whether such Option is intended to be an
ISO or an NSO, (ii) contain such other information as is provided or permitted
herein to be contained in the Option Agreement, and (iii) not contain any
provisions inconsistent with the Plan. Following the execution of an Option
Agreement evidencing an Option, such Option shall be effective as of the Date of
Grant of such Option.

 

4.5 Limit on Grant of ISOs.

The aggregate Fair Market Value (determined as of the Date of Grant of the
Option) of the Option Stock for which an Optionee may be granted ISOs
exercisable for the first time in any calendar year (including ISOs granted
under all option plans of the Company or any of its Subsidiaries) shall not
exceed $100,000. This $100,000 limitation shall not apply to the grant of NSOs.

ARTICLE V

EXERCISE OF OPTIONS

 

5.1 Waiting Period.

No Option may be exercised unless and until the Optionee shall have completed
one full year (or such other or longer period as shall be specified by the
Committee) of continuous, full time service in the employment of the Company or
any of its Subsidiaries following the Date of Grant of the Option, but
thereafter may be exercised as provided herein and in the Option Agreement
evidencing such Option. The waiting period provided herein shall not operate to
extend the Expiration Date or maximum period for exercise of an Option set forth
or referred to in Paragraph 5.2 below.

 

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5.2 Term; Conditions on Exercise; Expiration or Termination.

The Expiration Date of each Option shall be set by the Committee at the time the
Option is granted and shall be specified in the Option Agreement evidencing the
Option. However, (i) the Expiration Date of an ISO granted to an Employee who
owns, immediately before the ISO is granted, more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company, shall not be
more than 5 years following the Date of Grant of the ISO, and (ii) the
Expiration Date of any Option shall not be more than ten (10) years following
the Date of Grant of the Option.

Subject to the other terms and conditions contained in the Plan, each Option may
be exercised by the Optionee at such times or intervals and on such other terms
and conditions (if any) as are determined by the Committee and specified in the
Option Agreement evidencing the Option.

Notwithstanding anything contained herein or in any Option Agreement to the
contrary, to the extent that an Option shall not previously have been exercised
in the manner required by the Plan, it shall expire and terminate at 5:00 P.M.
on its Expiration Date. In addition to the termination provisions set forth
above, Options granted pursuant to the Plan shall terminate or may be terminated
as provided in Paragraphs 5.7 and 6.1 below. Upon the expiration or termination
of all or any portion of an Option, such Option or portion thereof shall,
without any further act by the Company, expire and no longer be exercisable or
confer any rights to any person to purchase shares of Common Stock under the
Plan.

 

5.3 Notice of Exercise.

To exercise an Option in whole or in part, the Optionee or other person then
entitled to exercise the Option or portion thereof shall notify the Company by
delivering written notice of such exercise (a “Notice of Exercise”) to the
President, Chief Executive Officer or Executive Vice President-Investor
Relations of the Company. Such written notice shall be substantially in the form
attached hereto as Exhibit A and shall specify the number of shares of Option
Stock to be purchased. A Notice of Exercise shall not be effective (and the
Company shall have no obligation to sell any Option Stock to the Optionee
pursuant to such Notice) unless it satisfies the terms and conditions set forth
herein and actually is received by the Company as provided above prior to the
Expiration Date of the Option to be exercised.

In the event an Option or portion thereof is being exercised by a person other
than the Optionee (as provided in Paragraph 5.7(c) below), the Notice of
Exercise shall be accompanied by appropriate proof of the right of such
person(s) to exercise the Option.

 

5.4 Payment Upon Exercise.

The Exercise Price of Option Stock being purchased upon the exercise of an
Option (in part or in whole) shall be paid by the Optionee in full at the time
of such exercise. Such payment may be made (i) in cash, (ii) by bank check or by
bank money order, (iii) subject to the consent of the Committee, by delivery to
the Company of previously-acquired Common Stock (in proper form for transfer to
the Company) and having a Fair Market Value (determined by the Committee as

 

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of the business day immediately preceding the date of exercise of the Option)
equal to the purchase price of the shares of Option Stock being purchased, or,
(iv) in the discretion of the Committee, by a combination thereof. No Option
Stock shall be issued or delivered until full payment of the Exercise Price
therefor has been made.

 

5.5 Restrictions.

With respect to any Option, the Committee shall have the authority, in its sole
discretion, to impose restrictions of any nature on the exercise of such Option
and on the Option Stock acquired by the Optionee upon such exercise. Without
limiting the generality of the foregoing, the Committee may impose conditions
restricting absolutely the transferability of Option Stock acquired through
exercise of any Options for such periods as the Committee may determine. Any
such restrictions imposed by the Committee shall be specified in the Option
Agreement.

 

5.6 Nontransferability.

Options granted to an Eligible Employee hereunder shall not be assignable or
transferable except by will or by the laws of descent and distribution, and,
during the lifetime of the Eligible Employee, may be exercised only by him. More
particularly, but without limiting the generality of the foregoing, an Option
may not be sold, assigned, transferred (except as noted herein) pledged or
hypothecated in any way and shall not be subject to execution, attachment or
similar process.

 

5.7 Termination of Employment.

 

(a) In the event an Optionee’s employment with the Company or any Subsidiary
shall terminate or be terminated prior to the Expiration Date of his or her
Option for any reason other than his or her death, “Disability” (as defined
below) or “Retirement” (as defined below), then the Optionee’s Option
immediately shall terminate at the times specified below. Authorized leaves of
absence and transfers of employment by an Optionee between the Company and a
Subsidiary, or between two Subsidiaries, without a break in service, shall not
constitute terminations of employment for purposes of the Plan. The Committee
shall determine whether any other absence for military or government service or
for any other reasons shall constitute a termination of employment for purposes
of the Plan, and the Committee’s determination shall be final.

 

  (i) If, prior to the Expiration Date of his or her Option, an Optionee
voluntarily terminates his or her employment with the Company or any of its
Subsidiaries (other than as a result of “Retirement” (as defined below), then,
to the extent it shall not previously have been exercised in the manner required
by the Plan, any Option previously granted to the Optionee which remains
outstanding and in effect immediately shall terminate and be of no further force
or effect on the effective date of such termination of employment.

 

  (ii)

If, prior to the Expiration Date of his or her Option, an Optionee’s employment
with the Company or any of its Subsidiaries is terminated as a result of

 

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“Retirement” (as defined below) with the consent of the Company, the Eligible
Employee shall have the right to exercise his rights pursuant to his Option
within ninety (90) days following the date of such Retirement, but not later
than the Expiration Date of the Option, in accordance with the terms of the
Plan.

The termination of an Optionee’s employment with the Company or any of its
Subsidiaries which is treated as a “retirement” under the terms of the Company’s
Employee Savings Plus and Profit Sharing Plan, or the termination of an
Optionee’s employment at such earlier time or under such other circumstances as
the Committee shall agree in writing to treat as “Retirement” for purposes of
the Plan, shall be deemed to be a “Retirement” with the consent of the Company.

 

  (iii) If, prior to the Expiration Date of his or her Option, an Optionee’s
employment is terminated by the Company or any of its Subsidiaries other than
for “Cause” (as defined below), then, to the extent it shall not previously have
been exercised in the manner required by the Plan, any Option previously granted
to the Optionee which remains outstanding and in effect shall terminate and be
of no further force or effect on the date ninety (90) days following the
effective date of such termination of employment.

 

  (iv) If, prior to the Expiration Date of his or her Option, an Optionee’s
employment is terminated by the Company or any of its Subsidiaries for Cause,
then, to the extent it shall not previously have been exercised in the manner
required by the Plan, any Option previously granted to the Optionee which
remains outstanding and in effect immediately shall terminate and be of no
further force or effect on the earlier of the effective date of such termination
of employment or the date of a determination by the Company or any of its
Subsidiaries to terminate the Optionee’s employment for Cause.

For purposes of this Paragraph 5.7(a), the Company or its Subsidiary shall have
“Cause” to terminate an Optionee’s employment upon:

 

  (i) A determination by the Company or its Subsidiary, in good faith, that the
Optionee (A) has failed in any material respect to perform or discharge his
duties or responsibilities of employment, or (B) is engaging or has engaged in
willful misconduct or conduct which is detrimental to the business prospects of
the Company or its Subsidiary or which has had or likely will have a material
adverse effect on the Company’s or its Subsidiary’s business or reputation;

 

  (ii)

The violation by the Optionee of any applicable federal or state law, or any
applicable rule, regulation, order or statement of policy promulgated by any
governmental agency or authority having jurisdiction over the Company or its
Subsidiaries (a “Regulatory Authority”), including but not limited to the
Federal Deposit Insurance Corporation, the North Carolina Commissioner of Banks,
the North Carolina State Banking Commission, the Federal Reserve Board or any
other regulator, which results from the Eligible Employee’s gross negligence,

 

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willful misconduct or intentional disregard of such law, rule, regulation, order
or policy statement and results in any substantial damage, monetary or
otherwise, to Company or any of its Subsidiaries or to its reputation;

 

  (iii) The commission in the course of the Optionee’s employment of an act of
fraud, embezzlement, theft or proven personal dishonesty, or the Optionee’s
being charged with any felony or other crime involving moral turpitude (whether
or not such act or charge involves the Company or its assets or results in
criminal indictment, charges, prosecution or conviction)

 

  (iv) The conviction of the Optionee of any felony or any criminal offense
involving dishonesty or breach of trust, or the occurrence of any event
described in Section 19 of the Federal Deposit Insurance Act or any other event
or circumstance which disqualifies the Optionee from serving as an employee or
executive officer of, or a party affiliated with, the Company or any of its
Subsidiaries; or, in the event the Optionee becomes unacceptable to, or is
removed, suspended or prohibited from participating in the conduct of the
Company’s or any of its Subsidiaries’ affairs (or if proceedings for that
purpose are commenced), by any Regulatory Authority;

 

  (v) The exclusion of the Optionee by the carrier or underwriter from coverage
under the Company’s then current “blanket bond” or other fidelity bond or
insurance policy covering its or its Subsidiaries’ directors, officers or
employees, or the occurrence of any event which the Company or any of its
Subsidiaries believes, in good faith, will result in the Optionee being excluded
from such coverage, or having coverage limited as to the Optionee as compared to
other covered officers or employees, pursuant to the terms and conditions of
such “blanket bond” or other fidelity bond or insurance policy; or,

 

  (vi) Optionee’s excessive use of any addictive drug or use of any controlled
substance, as defined at 21 U.S.C. § 802 or listed on Schedules I through V of
21 U.S.C. § 812, as revised from time to time, and as defined by other federal
laws and regulations, use of legal drugs that have not been obtained legally or
are not being taken as prescribed by a licensed physician, or use of alcohol in
a manner that adversely affects the performance of his or her employment duties,
prevents him or her from performing his or her employment duties safely or
creates a risk to the safety of others at the workplace.

For purposes of this Plan, the determination of whether any termination of an
Optionee’s employee was for Cause shall be within the sole discretion of the
Committee.

 

(b)

Disability of Optionee: If, prior to the Expiration Date of his or her Option,
an Optionee becomes “Disabled” (as defined below) and his or her employment with
the Company or any of its Subsidiaries is terminated as a result, then, to the
extent it shall not previously have been exercised in the manner required by the
Plan, any Option previously granted to the Optionee which remains outstanding
and in effect shall terminate and be of no further force or effect on the date
ninety (90) days following the effective date of such

 

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termination of employment. For purposes of this Paragraph 5.7(b), an Optionee
shall be considered “Disabled” at such time as he or she is determined to be
permanently disabled such as would qualify the Optionee for benefits under the
Company’s long term disability insurance plan which is applicable to the
Optionee.

 

(c) Death of Optionee: If an Optionee shall die while employed by the Company or
a Subsidiary and prior to the Expiration Date of an Option held by him or her,
then, to the extent the Option held by the Optionee at the time of his or her
death remains in effect and could be exercised by the Optionee under the terms
of the Plan and the Option Agreement relating to it, his designated beneficiary
(determined either by will or other writing delivered to the Committee in
advance), or if no designated beneficiary, the personal representative of his
estate, shall have the right to exercise such Optionee’s rights pursuant to his
Option following the date of his death, but not later than the Expiration Date
of the Option, in accordance with the terms of the Plan. Any references herein
to an Optionee shall be deemed to include any person entitled to exercise an
Option after the death of such Optionee under the terms of this Plan.

 

5.8 Modification, Extension and Renewal of Options.

Subject to the provisions of Paragraph 6.1 below, any Option may be Modified,
Extended or Renewed (as those terms are defined in Article II) only upon the
agreement of the Committee and the Optionee. Any such agreement shall be in the
form of a written amendment to the Option Agreement evidencing the Option being
Modified, Extended or Renewed and which shall set forth the terms of any such
Modification, Extension or Renewal.

 

5.9 Other Provisions.

In addition to the items required to be in the Option Agreement evidencing an
Option, such Option Agreement shall contain such other terms, conditions and
provisions applicable to such Option or the exercise thereof (including any and
all limitations or restrictions as shall be necessary to comply with any
applicable federal and state securities laws and regulations) as the Committee
shall, at its sole discretion, deem necessary or advisable; provided, however,
that the Committee may not impose any such terms, conditions or provisions that
are inconsistent with any provisions of the Plan.

 

5.10 Issuance of Option Stock.

A stock certificate representing the number of shares of Option Stock purchased
by the Optionee upon the proper exercise of an Option shall be issued and
delivered by the Company as soon as practicable after receipt of a valid and
effective Notice of Exercise and full payment of the Exercise Price relating to
those shares. Such certificate shall be delivered to or on the written order of
the person exercising the Option.

 

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ARTICLE VI

GENERAL PROVISIONS

 

6.1 Adjustment of Options.

 

(a) Changes in Capitalization; Stock Splits and Dividends. In the event of
(i) any dividend payable by the Company in shares of Common Stock, or (ii) any
recapitalization, reclassification, split, consolidation or combination of, or
other change in or offering of rights to the holders of, Common Stock, or
(iii) an exchange of the outstanding shares of Common Stock for a different
number or class of shares of stock or other securities of the Company in
connection with a merger, consolidation or other reorganization of or involving
the Company (provided the Company shall be the surviving or resulting
corporation in any such merger or consolidation) then the Committee may, in such
a manner as it shall determine in its sole discretion, appropriately adjust the
number and class or kind of shares which may be issued under the Plan and of the
securities which shall be subject to outstanding Options and/or the Exercise
Price applicable to any outstanding Option. However, in no event shall any such
adjustment change the aggregate Exercise Price for Option Stock to be purchased
upon the exercise of any Option.

Subject to review by the Board of Directors of the Company, any such adjustments
made by the Committee shall be consistent with changes in the Company’s
outstanding Common Stock resulting from the above events and, when made, shall
be final, conclusive and binding on all persons, including, without limitation,
the Company, its shareholders and each Optionee or other person having any
interest in any Option so adjusted. Any fractional shares resulting from any
such adjustment shall be eliminated. However, notwithstanding anything contained
herein to the contrary, no Option which is intended to be an ISO shall be
adjusted in a manner that causes the Option to fail to continue to qualify as an
ISO.

 

(b)

Dissolution; Merger or Consolidation; Sale of Assets. In the event of a
dissolution or liquidation of the Company, the sale of substantially all the
Company’s assets, or a merger or consolidation of the Company with or into any
other corporation or entity (or any other such reorganization or similar
transaction) in which the Company is not the surviving or resulting corporation
(and if a provision is not made in such transaction for the continuance of this
Plan or the assumption of Options by any successor to the Company or for the
substitution for Options of new options covering shares of any successor
corporation or a parent or subsidiary thereof) then, in such event, all rights
of Optionees pursuant to all outstanding Options shall terminate and be of no
further effect to the extent such Options have not been exercised prior to the
effective time of such dissolution, liquidation, sale, merger, consolidation or
other reorganization (or at such other time and pursuant to such rules and
regulations as the Committee shall determine and promulgate to the Optionees).
However, to the extent such Options shall not previously have been exercised,
and notwithstanding any provisions of the Plan or any Option Agreement to the
contrary, each such Option shall be exercisable in full immediately prior to the
effective time of any such event. The Committee shall give each

 

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Optionee at least thirty (30) days prior written notice of the effective time of
an event which gives rise to an immediate purchase right under this Paragraph
6.1.

 

(c) Miscellaneous. The grant of an Option shall not affect in any way the right
or power of the Company to (i) make or authorize any adjustment,
recapitalization, reclassification, reorganization or any other change in the
Company’s capital or business structure or its business, (ii) to merge or
consolidate, or to dissolve, liquidate, sell or transfer all or any part of its
business or assets, or (iii) to issue bonds, debentures, preferred or other
preference stock ahead of or affecting Common Stock or the rights thereof.

 

6.2 Rights as a Shareholder.

Neither an Optionee nor any other person shall have any rights as a stockholder
with respect to any shares of Option Stock covered by an Option until such
Option shall have been validly exercised in the manner described herein and in
the Option Agreement relating to such Option, full payment of the Exercise Price
has been made for such shares, and a stock certificate representing the Option
Stock purchased upon such exercise shall have been registered on the Company’s
stock records in the name of and delivered to such person. Except to the extent
of adjustments made pursuant to Paragraph 6.1 above, no adjustment on behalf of
the Optionee shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property), distributions or other rights for which the
record date for determining the shareholders entitled to receive the same is
prior to the date of registration and delivery of the stock certificate(s)
representing the Option Stock.

 

6.3 No Right to Employment.

Neither the Plan nor the grant of an Option, nor any Option Agreement evidencing
any such Option, is intended or shall be deemed or interpreted to constitute an
employment agreement or to confer upon an Optionee any right of employment with
the Company or any of its Subsidiaries, including without limitation any right
to continue in the employ of the Company or any of its Subsidiaries, or to
interfere with, restrict or otherwise limit in any way the right of the
Corporation or any Subsidiary to discharge or terminate the employment of any
Optionee at any time for any reason whatsoever, with or without cause.

 

6.4 Legal Restrictions.

If in the opinion of legal counsel for the Company the issuance or sale of any
shares of Option Stock pursuant to the exercise of an Option would not be lawful
without registration under the Securities Act of 1933 (the “1933 Act”) or
without some other action being taken or for any other reason, or would require
the Company to obtain approval from any governmental authority or regulatory
body having jurisdiction deemed by such counsel to be necessary to such issuance
or sale, then the Company shall not be obligated to issue or sell any Option
Stock pursuant to the exercise of any Option to any Optionee or to any other
authorized person unless a registration statement that complies with the
provisions of the 1933 Act in respect of such shares is in effect at the time
thereof, or all other required or appropriate action has been taken under and
pursuant to the terms and provisions of the 1933 Act or other applicable law, or
the Company receives

 

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evidence satisfactory to such counsel that the issuance and sale of such shares,
in the absence of an effective registration statement or other action, would not
constitute a violation of the 1933 Act or other applicable law, or unless any
such required approval shall have been obtained. The Company is in no event
obligated to register any such shares, to comply with any exemption from
registration requirements or to take any other action which may be required in
order to permit, or to remedy or remove any prohibition or limitation on, the
issuance or sale of such shares to any Employee or other authorized person.

The Committee, as a condition of the grant of an Option and/or the exercise
thereof, may require that the Optionee execute one or more undertakings in such
form as the Committee shall prescribe to the effect that such shares are being
acquired for investment purposes only and not with a view to the distribution or
resale thereof.

Notwithstanding anything contained herein to the contrary, it is understood and
agreed that neither the Company nor any of its Subsidiaries (or any of their
successors in interest) shall be required to take any action under this Plan or
any Option granted hereunder if:

 

(a) the Company is declared by any Regulatory Authority to be insolvent, in
default or operating in an unsafe or unsound manner; or,

 

(b) in the opinion of counsel to the Company, such payment or action:

 

  (i) would be prohibited by or would violate any provision of state or federal
law applicable to the Company or any of its Subsidiaries, including without
limitation the Federal Deposit Insurance Act as now in effect or hereafter
amended;

 

  (ii) would be prohibited by or would violate any applicable rules,
regulations, orders or statements of policy, whether now existing or hereafter
promulgated, of any Regulatory Authority; or,

 

  (iii) otherwise would be prohibited by any Regulatory Authority.

 

6.5 No Obligation to Purchase Shares.

The granting of an Option pursuant to the Plan shall impose no obligation on the
Optionee to purchase any shares covered by such Option.

 

6.6 Payment of Taxes.

Each Optionee shall be responsible for all federal, state, local or other taxes
of any nature as shall be imposed pursuant to any law or governmental regulation
or ruling on any Option or the exercise thereof or on any income which an
Optionee is deemed to recognize in connection with an Option. If the Committee
shall determine to its reasonable satisfaction that the Company or any of its
Subsidiaries is be required to pay or withhold the whole or any part of any
estate, inheritance, income, or other tax with respect to or in connection with
any Option or the exercise thereof, then the Company or such Subsidiary shall
have the full power and authority to withhold

 

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and pay such tax out of any shares of Common Stock being purchased by the
Optionee or from the Optionee’s salary or any other funds otherwise payable to
the Optionee, or, prior to and as a condition of exercising such Option, the
Company may require that the Optionee pay to it in cash the amount of any such
tax which the Company, in good faith, deems itself required to withhold.

 

6.7 Choice of Law.

The validity, interpretation and administration of the Plan and of any rules,
regulations, determinations or decisions made thereunder, and the rights of any
and all persons having or claiming to have any interest therein or thereunder,
shall be determined exclusively in accordance with the laws of the State of
North Carolina. Without limiting the generality of the foregoing, the period
within which any action in connection with the Plan must be commenced shall be
governed by the laws of the State of North Carolina, without regard to the place
where the act or omission complained of took place, the residence of any party
to such action, or the place where the action may be brought or maintained.

 

6.8 Modification of Plan.

The Board, upon recommendation of the Committee, may, from time to time, amend,
modify, suspend, terminate or discontinue the Plan at any time without notice,
provided, however, that no such action by the Board shall adversely affect any
Optionee’s rights under any then outstanding Options without such Optionee’s
prior written consent; and, provided further that, except as shall be required
to comport with changes in the Code, any modification or amendment of the Plan
that (a) increases the aggregate number of shares of Common Stock which may be
issued upon the exercise of Options (other than as provided in Paragraph 6.1
above), (b) changes the formula by which the Exercise Price is determined,
(c) changes the provisions of the Plan with respect to the determination of
Employees to whom Options may be granted or, (d) otherwise materially increases
the benefits accruing to Optionees under the Plan shall be subject to the
approval of the Company’s shareholders. In the event the Board shall terminate
or discontinue the Plan, such action shall not operate to deprive any Optionee
of any rights theretofore acquired by him or her under the Plan, and any Options
outstanding as of the date of any such termination shall remain in full force
and effect according to their terms as though the Plan had not been terminated.

 

6.9 Application of Funds.

The proceeds received by the Company from the sale of Common Stock pursuant to
Options granted under the Plan will be used for general corporate purposes.

 

6.10 Notices.

Except as otherwise provided herein, any notice which the Company or an Optionee
may be required or permitted to give to the other under this Plan shall be in
writing and shall be deemed duly given when delivered personally or deposited in
the United States mail, first class postage prepaid, and properly addressed.
Notice, if to the Company, shall be sent to its Executive Vice
President-Investor Relations at the following address:

 

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Uwharrie Capital Corp

Post Office Box 338

Albemarle, North Carolina 28002-0338

Any notice sent by mail by the Company to an Optionee shall be sent to the most
current address of the Optionee as reflected on the records of the Company or
its Subsidiaries as of the time said notice is required. In the case of a
deceased Optionee, any notice shall be given to the Optionee’s personal
representative if such representative has delivered to the Company evidence
satisfactory to the Company of such representative’s status as such and has
informed the Company of the address of such representative by notice pursuant to
this Paragraph 6.10.

 

6.11 Conformity With Applicable Laws and Regulations.

With respect to persons who are subject to Section 16 of the 1934 Act, the Plan
and each Option granted and transaction under it are intended to satisfy
applicable conditions of Rule 16b-3 of the Securities and Exchange Commission
(as such Rule may be modified, amended or superseded from time to time). To the
extent any provision of the Plan or any Option Agreement, or any action by the
Committee or the Board, shall fail to so comply, then, to the extent permitted
by law and deemed advisable by the Committee, such provision or action shall be
deemed null and void.

 

6.12 Successors and Assigns.

Subject to Paragraph 5.6 above, this Plan shall bind and inure to the benefit of
the Company, any Optionee, and their respective successors, assigns, personal or
legal representatives and heirs.

 

6.13 Severability.

It is intended that each provision of this Plan shall be viewed as separate and
divisible, and in the event that any provision hereof shall be held to be
invalid or unenforceable, the remaining provisions shall continue to be in full
force and effect.

 

6.14 Titles.

Titles of Articles and Paragraphs are provided herein for convenience only, do
not modify or affect the meaning of any provision herein, and shall not serve as
a basis for interpretation or construction of this Plan.

 

6.15 Gender and Number.

As used herein, the masculine gender shall include the feminine and neuter, the
singular number the plural, and vice versa, whenever such meanings are
appropriate.

 

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