SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
The South Financial Group, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed pursuant
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4) Date Filed:
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[TSFG LOGO OMITTED]
102 SOUTH MAIN STREET
GREENVILLE, SOUTH CAROLINA 29601
March 15, 2001
Dear Shareholder:
On behalf of the Board of Directors, I am pleased to invite you to attend the
Annual Meeting of Shareholders of The South Financial Group, Inc. to be held in
the Gunter Theatre, at the Peace Center for the Performing Arts, 300 South Main
Street, Greenville, South Carolina, on Wednesday, April 18, 2001 at 10:30 a.m.
The attached Notice of the Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. During the Annual
Meeting, we will report on the operations of The South Financial Group and its
subsidiaries. Directors and officers of The South Financial Group, Inc. and its
subsidiaries, as well as representatives of KPMG LLP, our independent auditors,
will be present to respond to any questions shareholders may have.
To ensure proper representation of your shares at the Annual Meeting, please
sign, date and return the enclosed proxy as soon as possible, even if you
currently plan to attend the Annual Meeting. This will not prevent you from
voting in person, but will ensure that your vote will be counted if you are
unable to attend.
Sincerely,
/s/ Mack I. Whittle, Jr.
Mack I. Whittle, Jr.
President and Chief Executive Officer
[TSFG LOGO OMITTED]
102 South Main Street
Greenville, South Carolina 29601
(864) 255-7900
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 18, 2001
To the Shareholders of The South Financial Group:
The Annual Meeting of Shareholders (the "Annual Meeting") of The South Financial
Group, Inc. (the "Company") will be held on April 18, 2001 at 10:30 a.m.,
Greenville time, in the Gunter Theatre, at the Peace Center for the Performing
Arts, 300 South Main Street, Greenville, South Carolina for the following
purposes:
1. To set the number of Directors at 18 and to elect 10 Directors to hold
office until their respective terms expire or until their successors are
duly elected and qualified.
2. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only shareholders of record at the close of business on March 1, 2001 will be
entitled to vote at the Annual Meeting.
By Order of the Board of Directors,
/s/ William S. Hummers III
William S. Hummers III
Secretary
Greenville, South Carolina
March 15, 2001
PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE POSTAGE-PAID
ENVELOPE WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU WISH, YOU
MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES IN PERSON AT THE ANNUAL MEETING.
[TSFG LOGO OMITTED]
102 South Main Street
Greenville, South Carolina 29601
----------------------
PROXY STATEMENT
----------------------
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 18, 2001
This Notice of Annual Meeting, Proxy Statement and Proxy (these "Proxy
Materials") are being furnished to the shareholders of The South Financial
Group, Inc. (the "Company") in connection with a solicitation of proxies by the
Company's Board of Directors. This solicitation is being made in connection with
the Annual Meeting of Shareholders (the "Annual Meeting") to be held in the
Gunter Theatre, at the Peace Center for the Performing Arts, 300 South Main
Street, Greenville, South Carolina at 10:30 a.m. on April 18, 2001. These Proxy
Materials are being mailed on approximately March 15, 2001.
Who is Entitled to Vote; Other Voting Matters
Shareholders of record as of the close of business on March 1, 2001 of the
Company's $1.00 par value per share common stock ("Common Stock") will be
entitled to vote at the Annual Meeting. At the close of business on that day,
42,554,668 shares of Common Stock were outstanding. Holders of Common Stock are
entitled to one vote per share on each matter presented at the Annual Meeting.
Shares of Common Stock may be voted in person or by proxy. The presence, either
in person or by proxy, of holders of shares representing a majority of the
outstanding Common Stock on March 1, 2001 is necessary to constitute a quorum at
the Annual Meeting. Abstentions and broker non-votes are each included in the
determination of the number of shares present and voting. In connection with the
election of directors, abstentions and broker non-votes are not counted in
determining the votes cast for directors.
Availability of Voting by Proxy; Revocability of Proxies
Shares represented by a properly executed proxy (such as the form of proxy
included with these Proxy Materials) will be voted in accordance with the
instructions on such proxy. If a returned proxy does not specify otherwise, the
shares represented thereby will be voted in favor of all proposals set forth
herein. Proxies may be revoked at any time prior to their being voted at the
Annual Meeting by oral or written notice to William S. Hummers III at The South
Financial Group, 102 South Main Street, Greenville, South Carolina 29601, (864)
255-7913, or by execution and delivery of a subsequent proxy, or by attendance
and voting in person at the Annual Meeting.
Solicitation of Proxies
The Company makes this proxy solicitation, and it will bear the cost associated
with this solicitation, including the cost of preparing, handling, printing and
mailing these Proxy Materials. Proxies will be solicited principally through
these Proxy Materials. Proxies may also be solicited by telephone or through
personal solicitation conducted by regular employees of the Company. Employees
and officers will be reimbursed for the actual out-of-pocket expenses incurred
in connection with such solicitation. Banks, brokers and other custodians are
requested to forward these Proxy Materials to their customers where appropriate,
and the Company will reimburse such banks, brokers and custodians for their
reasonable out-of-pocket expenses incurred in sending these Proxy Materials to
beneficial owners of the shares.
1
ELECTION OF DIRECTORS
(Item 1 on the Proxy)
General Information Regarding Election of Directors
The number of directors is being set by the shareholders, but may be amended by
the Board of Directors between annual meetings to the extent permitted by South
Carolina law. The Board is currently comprised of 16 persons. Management
proposes to set the number of Company directors at 18 persons.
The Board of Directors is divided into three classes. At each annual meeting,
the Company's shareholders elect the members of one of the three classes to
three-year terms. At this Annual Meeting, three directors in the class whose
term is expiring at this Annual Meeting are being nominated for re-election. The
five directors who joined the Board through the acquisition of Anchor Financial
Corporation in June 2000 are also being nominated for various terms. Two other
persons are being nominated to provide representation from different market
areas of the Company.
Directors will be elected by a plurality of votes cast at the Annual Meeting.
Abstentions and broker non-votes with respect to Nominees will not be considered
to be either affirmative or negative votes. Shareholders do not have cumulative
voting rights with respect to the election of directors.
Identification of Nominees
Management proposes to nominate to the Board of Directors the 10 persons listed
as Nominees in the table below. Each of the Nominees is currently serving as a
Director, except for William P. Brandt and John C.B. Smith, Jr. If elected, each
Nominee will serve until the expiration of his respective term and until his
successor is duly qualified. Unless authority to vote for one or more Nominees
is "WITHHELD," the persons named in the accompanying Proxy intend to vote "FOR"
the election of these Nominees. Management believes that all such Nominees will
be available and able to serve as Directors. However, should any Nominee become
unable to accept election, the person named in the Proxy intends to vote for the
election of such other persons as management may recommend.
The following table sets forth the names and ages of the Nominees for Directors
and the Directors continuing in office, the positions and offices with the
Company held by each such person, and the period that each such person has
served as a Director.
NOMINEES FOR DIRECTORS
NAME AGE POSITION OR OFFICE WITH THE COMPANY DIRECTOR SINCE
- ------------------------------ --- ----------------------------------- --------------
FOR TERMS EXPIRING IN 2002
Mason A. Chrisman 63 Director 2000
Albert A. Springs III 61 Director 2000
FOR TERMS EXPIRING IN 2003
W. Gairy Nichols III 49 Director 2000
John C. B. Smith, Jr. 56 - -
FOR TERMS EXPIRING IN 2004
William P. Brant 54 - -
Stephen L. Chryst 54 Chairman and COO, Carolina First Bank 2000
Judd B. Farr 75 Director 1994
C. Claymon Grimes, Jr. 78 Director 1990
Thomas J. Rogers 64 Director 2000
David C. Wakefield III 57 Director 1997
2
DIRECTORS CONTINUING IN OFFICE
NAME AGE POSITION OR OFFICE WITH THE COMPANY DIRECTOR SINCE
- ------------------------------ --- ----------------------------------- --------------
FOR TERMS EXPIRING IN 2002
William S. Hummers III 55 Executive Vice President, Secretary 1990
Charles B. Schooler 72 Director 1996
Eugene E. Stone IV 62 Director 1996
Mack I. Whittle, Jr. 52 President, Chief Executive Officer 1986
FOR TERMS EXPIRING IN 2003
M. Dexter Hagy 56 Director 1993
H. Earle Russell, Jr. 59 Director 1997
William R. Timmons, Jr. 77 Chairman of the Board of Directors 1986
Samuel H. Vickers 65 Director 1999
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THESE NOMINEES.
---
Meetings and Committees of the Board of Directors
The Board held seven meetings in 2000. No Director attended less than 75%
of the aggregate of these board meetings and meetings for committees on which
such Director served.
The Board has an Audit Committee, which reviews the audit plan, the results
of the audit engagement of the Company's accountants, the scope and results of
the Company's procedures for internal auditing and internal control, and the
internal audit reports of the Company's subsidiaries. The Audit Committee was
responsible for reviewing the Company's Year 2000 issues. The Audit Committee is
currently comprised of Mr. Grimes, Mr. Nichols, Dr. Russell, Dr. Schooler, Mr.
Vickers and Mr. Wakefield. The Audit Committee met four times during 2000. All
current members were present at each of the meetings.
The Board has a Compensation Committee, which reviews the Company's
compensation policies and makes recommendations regarding senior management
compensation. Its report is set forth herein. The Compensation Committee is
currently comprised of Mr. Farr, Mr. Hagy, Mr. Rogers and Mr. Stone. The
Compensation Committee met six times during 2000. All members were present at
all meetings. No members of the Compensation Committee are officers or employees
of the Company or its subsidiaries.
The Board has a Nominating Committee comprised of Mr. Hagy, Mr. Timmons and
Mr. Whittle. The Nominating Committee did not meet in 2000. The Nominating
Committee will consider nominees recommended by security holders. Any such
recommendations should be made in writing and delivered to the Company's
principal offices before December 1 of each year.
The Board has an Executive Committee comprised of Mr. Chryst, Mr. Hagy, Mr.
Timmons, Mr. Vickers and Mr. Whittle. It met three times in 2000. No member
missed any meetings. The Executive Committee has overall responsibility for all
corporate actions, plans and programs of the Company that are within the
corporate power or authority of the Board of Directors, subject to certain legal
exceptions. In particular, the Executive Committee has the authority to review,
guide and take any permissible actions with respect to the business and affairs
of the Company as usually taken by the Board of Directors when the Executive
Committee determines that it is appropriate to act prior to the next Board of
Directors' meeting.
3
REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Company's accounting functions and internal controls.
The Audit Committee is composed of six directors, each of whom is independent as
defined by the National Association of Securities Dealers' listing standards.
The Audit Committee operates under a written charter approved by the Board of
Directors. A copy of the charter is attached to this Proxy Statement as Appendix
A.
Management is responsible for the Company's internal controls and financial
reporting process. The independent accountants are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and to issue a report
thereon. The Audit Committee's responsibility is to monitor and oversee these
processes.
In connection with these responsibilities, the Audit Committee met with
management and the independent accountants to review and discuss the December
31, 2000 consolidated financial statements. The Audit Committee also discussed
with the independent accountants the matters required by Statement on Auditing
Standards No. 61 (Communication with Audit Committees). The Audit Committee also
received written disclosures from the independent accountants required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees), and the Audit Committee discussed with the independent accountants
that firm's independence. In particular, the Audit Committee considered whether
the provision of the services set forth below in "Auditing and Related
Fees-Financial Information Systems Design and Implementation Fees" and "Auditing
and Related Fees-All Other Fees" is compatible with maintaining the independence
of the auditors and determined that no independence issues arose as a result of
such services.
Based upon the Audit Committee's discussions with management and the
independent accountants, and the Audit Committee's review of the representations
of management and the independent accountants, the Audit Committee recommended
that the Board of Directors include the audited consolidated financial
statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 2000, filed with the Securities and Exchange Commission.
The Audit Committee
David C. Wakefield III, Chairman C. Claymon Grimes, Jr. W. Gairy Nichols III
H. Earle Russell, Jr. Charles B. Schooler Samuel H. Vickers
AUDITING AND RELATED FEES
AUDIT FEES
For fiscal year 2000, KPMG LLP billed the Company an aggregate of $563,000
for professional services rendered for the audit of the Company's annual
financial statements for the year ended December 31, 2000 and reviews of the
financial statements included in the Company's Forms 10-Q for that year.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For fiscal year 2000, KPMG LLP billed the Company an aggregate of $920,000
for professional services associated with financial information systems design
and implementation.
ALL OTHER FEES
For fiscal year 2000, KPMG LLP billed the Company an aggregate of
$4,203,000 for other fees. These fees included services for general ledger
reconciliation assistance, process improvement services, merger-related
projects, tax matters and other services.
4
EXECUTIVE OFFICERS
The Company's executive officers are appointed by the Board of Directors
and serve at the pleasure of the Board. The following persons serve as executive
officers of the Company.
Name Age Company Offices Currently Held Company Officer Since
- ---- --- ------------------------------ ---------------------
Andrew B. Cheney 51 President, Citrus Bank 2000
Stephen L. Chryst 54 Chairman and COO, Carolina First Bank 2000
John C. DuBose 49 Executive Vice President 1998
William S. Hummers III 55 Executive Vice President, Secretary 1988
William J. Moore 66 Executive Vice President 1998
Michael W. Sperry 54 Executive Vice President 1998
James W. Terry, Jr. 53 President of Carolina First Bank 1991
Mack I. Whittle, Jr. 52 President and Chief Executive Officer 1986
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
Mr. Brant is a partner in the law firm of Brant, Moore, Macdonald & Wells,
P.A., Jacksonville, Florida.
Mr. Cheney has served as President of Citrus Bank since January 2000. Prior
to joining Citrus, he was Market President for Jacksonville and Commercial
Banking Executive for North Florida for Bank of America.
Mr. Chrisman has served as Chairman of Harbor Equities, Inc., Charleston,
South Carolina, a private venture capital investment firm, since 1983. Mr.
Chrisman was Chairman of ComSouth Bankshares prior to its acquisition by Anchor
Financial Corporation in 1998.
Mr. Chryst has served as Chairman and COO of Carolina First Bank since June
2000. He served as Chairman, President and CEO of Anchor Financial Corporation,
Myrtle Beach, South Carolina prior to its acquisition by the Company in 2000.
Mr. DuBose joined the Company in December 1998 as Executive Vice President
and Chief Operations Officer/Chief Technology Officer. From 1991 to 1998, Mr.
DuBose was Director of Technology Services for Barnett Bank in Jacksonville,
Florida.
Mr. Farr is the owner and President of Greenco Beverage, Inc., a
distributorship headquartered in Greenville, South Carolina. Mr. Farr has served
as its President since its opening in 1965.
Mr. Grimes is an attorney in private practice in Georgetown, South
Carolina.
Mr. Hagy is a principal of Vaxa Capital Management, LLC, an investment
management firm formed in 1995 and headquartered in Greenville, South Carolina.
Mr. Hummers joined the Company in June 1988 in his present capacity. He is
also a director of World Acceptance Corporation.
Mr. Moore joined the Company in July 1998 as Executive Vice President. In
December 1995, he retired from his position as Senior Vice President for Sun
Trust Banks, Inc. where he was President and Chief Executive Officer of SunTrust
Bank Cards, N.A., a special purpose credit card bank. Upon retirement, Mr. Moore
formed a private consulting practice, which was terminated upon his employment
with the Company.
Mr. Nichols has been a partner in Dunes Realty, Inc. since 1975. Dunes
Realty, Inc. is a real estate firm located in Garden City Beach and Litchfield
Beach, South Carolina.
Mr. Rogers has been Secretary and Treasurer of Strand Media Group of Myrtle
Beach, South Carolina since 1985. Strand Media Group is an advertising company.
Mr. Rogers is also an owner and director of Computer Dimension, Inc.
5
Dr. Russell is a surgeon in Greenville, South Carolina.
Dr. Schooler is an optometrist in Georgetown, South Carolina.
Mr. Smith is owner of John C.B. Smith Real Estate and is Of Counsel to and
past partner in the law firm of Nexsen Pruet Jacobs & Pollard, LLP, Columbia,
South Carolina. He served on the Board of Directors of ComSouth Bankshares prior
to its acquisition by Anchor Financial Corporation in 1998.
Mr. Sperry joined the Company in November 1998 as Executive Vice President
and Chief Credit Officer. From 1996 to 1998, he was Senior Executive Vice
President and Manager of Commercial Loan Administration for BB&T Corporation in
Winston-Salem, NC. From 1990 to 1995, Mr. Sperry was Executive Vice President
and Chief Credit Officer of Southern National Corporation in Winston-Salem, NC.
Mr. Springs is the owner of H. B. Springs Company, Inc. of Myrtle Beach,
South Carolina.
Mr. Stone currently serves as CEO of Stone International, LLC. He formerly
served as Chairman of Umbro International, Inc. (formerly Stone Manufacturing).
Mr. Stone is a director of Liberty Corporation.
Mr. Terry has served as President and Director of Carolina First Bank since
1991. From 1986 to 1991, Mr. Terry was Senior Vice President and Regional
Executive for First Union National Bank of SC.
Mr. Timmons is Chairman of Canal Insurance Company, a nationwide insurer of
commercial motor vehicles headquartered in Greenville, South Carolina.
Mr. Vickers is Chairman and CEO of Design Containers, Inc., a packaging
system manufacturer located in Jacksonville, Florida.
Mr. Wakefield has served President of Wakefield Enterprises, LLC, a real
estate development company in Anderson SC, since 1998. From November 1997 to
December 1998, Mr. Wakefield served as an independent consultant to the Company
following the Company's acquisition of First Southeast Financial Corporation
("First Southeast"). Mr. Wakefield served as President and CEO of First
Southeast since its formation in 1993 and President and CEO of First Federal
Savings and Loan Association of Anderson, a subsidiary of First Southeast, since
1991.
Mr. Whittle has been President and CEO of the Company since its
organization in 1986. From 1986 until 1991, Mr. Whittle also served as President
of Carolina First Bank and is currently Chief Executive Officer of Carolina
First Bank. Mr. Whittle is also a director of Net.B@nk, Inc.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
COMPENSATION OF DIRECTORS
During 2000, each non-officer Director's total compensation was valued at
$30,000, assuming that the Director attended all meetings. Meeting fees were
$500 for each Board of Directors' meeting and committee meeting attended. Fees
for committee chairmen were $1,000 per committee meeting. A total of 60% of each
Director's total compensation was paid in the form of options to purchase Common
Stock, which was valued based on the Black-Scholes valuation method. The balance
was paid in cash.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning all compensation paid
by the Company during the fiscal years ended December 31, 2000, 1999 and 1998,
to the Company's CEO and to each of the four most highly compensated executive
officers other than the CEO (collectively the "Named Executive Officers") for
services rendered in all capacities to the Company and its subsidiaries. For
purposes of the table, all bonus and incentive plan award amounts listed for a
particular year (including annual bonus compensation and Long Term Compensation
payments) were actually paid in February of the following year. For example, the
6
restricted stock awards for 1999 were made in February 2000, but are listed as
1999 compensation, because the awards were earned as of December 31, 1999.
Compensation in 2000 for Mr. Chryst includes compensation paid to him by Anchor
Financial Corporation prior to its acquisition by the Company in June 2000.
Prior to June 2000 Mr. Chryst was employed by Anchor Financial Corporation and
was not with the Company.
Long Term Compensation
Annual Compensation Awards Payouts
--------------------------------- ----------------------------------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compen- Awards Options/ Payouts Compensation
Principal Position Year ($) ($) sation ($) SARs (#) ($) ($)
------------------ ---- ------- ------- ------- ------- --------- ------- ------------
Mack I. Whittle, Jr. 2000 388,130 96,080 (1) -- 16,400 -- 77,432 (2)
President, Chief Executive 1999 346,600 -- (1) 293,825 83,581 81,170 99,650
Officer 1998 325,382 205,440 (1) -- 72,583 -- 65,467
Stephen L. Chryst 2000 520,008 273,000 (1) -- -- -- 67,294 (3)
Chairman, COO
Carolina First Bank
William S. Hummers III 2000 250,200 55,431 (1) -- 5,000 -- 50,885 (4)
Executive Vice President 1999 212,260 -- (1) 89,425 10,700 24,704 54,400
1998 192,550 120,430 (1) -- 31,889 56,967
James W. Terry, Jr. 2000 227,300 49,272 (1) -- 5,000 -- 31,290 (5)
President 1999 203,280 -- (1) 89,425 10,700 24,704 37,700
Carolina First Bank 1998 191,600 79,249 (1) -- 10,969 -- 29,467
John C. DuBose 2000 278,667 46,808 (1) -- 5,000 -- 32,281 (6)
Executive Vice President 1999 208,380 -- (1) 89,425 10,700 24,704 31,900
1998 65,000 -- (1) -- 25,000 -- --
- ------------
<FN>
(1) Certain amounts may have been expended by the Company that may have had
value as a personal benefit to the executive officer. However, the total
value of such benefits did not exceed the lesser of $50,000 or 10% of the
annual salary and bonus of such executive officer.
(2) This amount is comprised of (i) $9,600 contributed by the Company to its
401(k) on behalf of Mr. Whittle to match fiscal 2000 pre-tax deferral
contributions, all of which was vested, (ii) $14,382 contributed to the
Company's Employee Stock Ownership Plan (the "ESOP"), and (iii) $53,450 in
premiums paid by the Company on behalf of Mr. Whittle with respect to
insurance not generally available to all Company employees.
(3) This amount is comprised of (1) $9,600 contributed by the Company to its
401(k) on behalf of Mr. Chryst to match fiscal 2000 pre-tax deferral
contributions, all of which was vested, (ii) $3,319 contributed to the
ESOP, and (iii) $54,375 in premiums paid on behalf of Mr. Chryst with
respect to insurance not generally available to all Company employees.
(4) This amount is comprised of (i) $9,600 contributed by the Company to its
401(k) on behalf of Mr. Hummers to match fiscal 2000 pre-tax deferral
contributions, all of which was vested, (ii) $13,785 contributed to the
ESOP, and (iii) $27,500 in premiums paid on behalf of Mr. Hummers with
respect to insurance not generally available to all Company employees.
(5) This amount is comprised of (i) $9,600 contributed by the Company to its
401(k) on behalf of Mr. Terry to match fiscal 2000 pre-tax deferral
contributions, of which all was vested, (ii) $6,690 contributed to the
ESOP, and (iii) $15,000 in premiums paid on behalf of Mr. Terry with
respect to insurance not generally available to all Company employees.
(6) This amount is comprised of (i) $9,600 contributed by the Company to its
401(k) on behalf of Mr. DuBose to match fiscal 2000 pre-tax deferral
contributions, of which 40% was vested, (ii) $2,681 contributed to the
ESOP, and (iii) $20,000 in premiums paid on behalf of Mr. DuBose with
respect to insurance not generally available to all Company employees.
</FN>
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, which is composed
solely of non-officer directors, works with Company management in establishing
the underlying philosophy and principles of the Company's compensation system.
These principles and philosophy are then reviewed and approved by the full Board
of Directors. This Report discusses the philosophy, principles, and policies
underlying the Company's compensation programs that were in effect during 2000
and which will be applicable in 2001.
7
OUR GUIDING PRINCIPLES
The Compensation Committee of the Company is committed to administering a
compensation program that espouses the Company's values, drives corporate
results, and supports the long and short-term goals of the Company. Our
compensation philosophy is grounded by three principles: (1) tying pay to
performance, (2) aligning executive and shareholder interests, and (3)
challenging executives through "stretch goals."
This program is intended to result in competitive compensation packages,
which we believe will attract and retain the talent needed to generate
outstanding Company performance.
Tying Pay To Performance
We believe that strong performance deserves higher pay than average
performance, and the Company's fixed and variable compensation programs to
executives reflect this principle. Fixed compensation is in the form of base
salaries, which are targeted at the median of national financial services market
surveys.
Variable compensation is obtained through the Company's Short and Long-Term
Incentive Plans. Both plans provide for compensation that can be earned only by
meeting or exceeding pre-determined performance goals. These plans provide the
necessary balance between meeting current performance objectives, while
simultaneously building a foundation for long-term success. While on average 60%
of executive pay is variable, the actual amount of incentive pay is subject to
performance.
Aligning Executive and Shareholder Interests
The Compensation Committee believes that one of the best ways to align
executive and shareholder interest is through stock ownership. Although the
Company does not currently have stock ownership guidelines for executives, the
Company encourages all of its executive officers to hold a significant amount of
Company stock and promotes this goal through the long-term incentive programs
where incentives are paid in stock options and performance stock. By holding a
significant ownership stake in the Company, executives are placed in the same
position as shareholders - they will only realize value when shareholders
realize value, through stock price appreciation.
Challenging Executives Through "Stretch" Goals
The Compensation Committee believes that by setting high performance
standards for executives, a high performance culture will develop which will
lead to sustained Company achievement. To challenge executives, the incentive
compensation programs emphasize "stretch goals." Both the Short and Long-Term
Incentive Plans focus on reaching and exceeding established performance goals,
which are set by the Compensation Committee and approved by the Board of
Directors. The goals are developed to reflect what the Committee considers will
be superior performance for the Company. In determining performance goals, the
Committee gives significant and careful consideration to the historical and
projected performance of the Company's performance peer group.
SHORT-TERM INCENTIVE PLAN
The Short-Term Incentive Plan is designed to reward executives for
performance contributions that have impacted the overall success of the Company
or its operating units during the fiscal year. The Short-Term Incentive Plan is
intended to motivate employees and direct their efforts toward achievement of
key annual performance objectives. The Company focuses on the following areas of
performance: (1) earnings per share, (2) asset quality (i.e., nonperforming
assets as a percent of total loans and net charge-offs as a percent of average
loans), and (3) certain strategic incentives (such as the successful integration
of Anchor Financial Corporation after the merger). The relative weighting of
these measures is customized on an individual basis to reflect specific roles,
responsibilities, and objectives.
8
The Short-Term Incentive Plan establishes a point system, which determines
cash incentive awards based on the extent to which the Company meets performance
goals. Each goal is considered separately. If one goal falls below threshold,
the other three goals are evaluated on their own merit. The threshold level of
performance is 85% of a particular performance goal. At this level, executives
receive only 35% of the targeted incentive for that goal. Any performance less
than the threshold level will result in no cash incentive. If the Company
achieves 125% of a performance goal, the cash incentive will be 150% of target.
In addition, a corporate profitability modifier allows Short-Term Incentive Plan
awards to be adjusted up or down based on overall corporate financial
performance. The modifier can reduce incentive plan awards if overall
performance falls below expectations or increase awards if overall corporate
performance exceeds expectations.
Before the fiscal year begins: As part of the planning process, the
Compensation Committee establishes superior standards of performance consistent
with the "stretch-goal" philosophy of the Committee. A target incentive is
created for each eligible executive. This target ranges from 35% to 50% of base
salary, depending on the executive, if 100% of the performance goals are met.
The Board of Directors approves each of the measures and target incentives. The
Company communicates threshold, target, and superior award opportunities to each
eligible executive officer.
After fiscal year end: Corporate financial statements are generated, and
the Company determines whether it was successful in achieving its performance
measures. For 2000, the Board determined that a number of expenses arising from
the Anchor Financial Corporation merger should be excluded from the calculation
of earnings per share. This resulted in the payout under the Short-Term
Incentive Plan at a 49% level.
LONG-TERM INCENTIVE PLAN
The primary objective of the Long-Term Incentive Plan is to link a
significant portion of executive compensation to Company performance
achievements over a multi-year period. The Long-Term Incentive Plan focuses on
strategic financial success factors, which are intended to align the interest of
the Company's executives and shareholders. The Long-Term Incentive Plan is
structured with three-year "performance cycles" and consists of two components:
stock options and performance shares. The stock option and performance share
awards provide a long-term incentive opportunity targeted at the top quartile of
the performance peer group. The Long-Term Incentive Plan is structured to
provide 50% of the total award opportunity in stock options and 50% in
performance shares if the target goals are met exactly.
As the situation warrants, the Compensation Committee may consider
additional forms of long-term compensation (e.g., restricted stock, performance
units, direct equity participation in joint ventures, etc.) to appropriately
reward those executives for being entrepreneurial and innovative in creating
value for the Company.
Stock Option Element
The Long-Term Incentive Plan provides for the grant of stock options over
the three-year performance period. At the beginning of the performance period
the Compensation Committee determines the grant size for each executive. The
number of options granted is based on a number of factors, including competitive
grant practices from national financial services surveys, the participant's
level of responsibility, the ability of the participant to influence future
performance of the Company, and the desired mix of long-term incentive vehicles.
Each year the executive receives a fixed stock option grant based on one-third
of the executive's total grant (for the performance period). The exercise price
will reflect fair market value at the time of grant. Executives will only
realize value from the options if the share price appreciates during the option
term. The Company's policy is not to reprice stock options.
Performance Share Element
The Compensation Committee also awards shares of common stock to Long-Term
Incentive Plan participants that will be earned only if Company performance
goals are achieved during the three-year performance period. The number of
shares awarded is based on performance achievements. If Company performance does
not reach threshold levels, no performance shares will be distributed; if only
threshold performance is achieved, 25% of the targeted award will be given. If a
9
superior level of performance is achieved (i.e., maximum), 150% of the targeted
reward will be given. Grants of performance shares are made on a biennial basis
for overlapping three-year performance cycles. Therefore, an overlapping
1999-2001 cycle followed the 1997-1999 performance cycle. The Compensation
Committee may establish different performance goals for each cycle.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986 stipulates that
publicly held companies are denied a deduction for compensation in excess of
$1,000,000, unless such compensation is performance based. Currently, it is the
Company's policy not to pay compensation in excess of the amount referenced in
Section 162(m). However, in the event the compensation was to exceed this limit,
the Company will review its compensation plans to determine the appropriateness
of changing the compensation plan to comply (so that compensation payable under
such plans remains deductible).
CEO COMPENSATION
Mr. Whittle's 2000 compensation consisted of base salary, cash incentives,
stock options, and certain perquisites (which did not exceed 10% of base salary
and incentives). The Compensation Committee determined Mr. Whittle's base salary
of $350,000 at the beginning of the year. The Committee established Mr.
Whittle's base salary by analyzing compensation levels of other chief executive
officers of comparable size banks based on national financial services surveys.
In addition to base salary, Mr. Whittle received an automobile allowance of
$38,130. Mr. Whittle's cash incentive was determined in accordance with the
Short- Term Plan and was targeted at 50% of base salary if all performance
measures were achieved. Under the Short-term Incentive Plan, Mr. Whittle
received $96,080 for 2000.
Compensation Committee:
Thomas J. Rogers, Chairman Judd B. Farr M. Dexter Hagy Eugene E. Stone IV
STOCK OPTIONS
The following table sets forth information regarding option grants with
respect to Common Stock made by the Company to the Named Executive Officers
during 2000.
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
Number of % of Total Fair Market
Securities Options Value per Share
Underlying Granted to of Common Exercise
Options Granted Employees Stock at Time Price Expiration Grant Date
Name (#) in 2000 of Grant (1) ($/Sh) Date(2) Valuation(3)
- ---- --------------- ---------- ---------------- --------- ---------- ------------
Mack I. Whittle, Jr. 16,400 2.35 % $13.16 $13.16 08/16/10 $96,785
William S. Hummers III 5,000 0.71 % $13.16 $13.16 08/16/10 $29,508
James W. Terry, Jr. 5,000 0.71 % $13.16 $13.16 08/16/10 $29,508
John C. DuBose 5,000 0.71 % $13.16 $13.16 08/16/10 $29,508
Stephen L. Chryst -- -- -- -- -- --
<FN>
- -------------
(1) The number shown is the average of the closing bid and ask prices of a
share of Common Stock as quoted on the Nasdaq National Market on the date
of grant.
(2) The plan pursuant to which the options were granted sets forth certain
earlier expiration dates upon the option holder's termination of
employment.
(3) Calculated by using the Black-Scholes option-pricing model with the
following assumptions: dividend yield of 2.50%, expected volatility of 55%,
risk-free interest rate of 6.13% and expected lives of 5 years.
</FN>
10
OPTION EXERCISES
The following table sets forth information with respect to options to
purchase shares of Common Stock held by the Named Executive Officers and the
number of shares covered by both exercisable and unexercisable stock options in
2000. Also reported are the values for the "in-the-money" options which
represent the positive spread between the exercise price of any such existing
stock option and the year-end fair market value of the Common Stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Value Options at 2000 Fiscal at 2000 Fiscal
Acquired on Realized Year-End (#) Year-End ($) (1)
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------- -------- ------------------------- -------------------------
Mack I. Whittle, Jr. -- -- 91,407 / 127,619 -- / $1,476
William S. Hummers III -- -- 53,911 / 52,756 -- / 450
James W. Terry, Jr. -- -- 40,098 / 28,873 -- / 450
John C. DuBose -- -- 27,675 / 13,025 -- / 450
Stephen L. Chryst 32,625 225,266 142,419 / -- $1,310,334 / --
- -------------
<FN>
(1) The indicated value is based on exercise prices ranging from $2.72 to
$31.26 per share and a per share value of $13.25, which was the closing
market price of a share of the Company's Common Stock on December 31, 2000
as reported by the Nasdaq National Market.
</FN>
EMPLOYMENT CONTRACTS
The Company has entered into Noncompetition, Severance and Employment
agreements with certain executive officers of the Company, including Stephen L.
Chryst, John C. DuBose, William S. Hummers III, James W. Terry, Jr. and Mack I.
Whittle, Jr. The agreements are summarized below. However, this summary is
qualified in its entirety by reference to the agreements themselves, copies of
which are available from the Company or from the Company's public filings with
the Securities and Exchange Commission. Defined terms in the various agreements
are substantially similar but vary in certain respects from agreement to
agreement. Reference is again made to the agreements themselves. An "Involuntary
Termination" generally occurs when the executive terminates his employment due
to (i) a change in his responsibilities, position or authority, (ii) a change in
the terms or status of the agreement, (iii) a reduction in his compensation or
benefits, (iv) his forced relocation outside his area, or (v) a significant
increase in his travel requirements. A "Voluntary Termination" occurs when the
executive terminates his employment following a "change in control" not the
result of items constituting an Involuntary Termination. Non-capitalized terms
that are in quotes and used in the descriptions below are as defined in the
respective agreements. "Legitimate Company Reasons" generally means (i) "cause",
(ii) if the executive becomes "disabled," or (iii) upon the executive's death.
"Legitimate Executive Reasons" generally means (i) the Company's uncured breach
of the agreement, (ii) a Voluntary Termination, or (iii) an Involuntary
Termination.
Stephen L. Chryst. Under his agreement, Mr. Chryst is given duties and
authority typical of similar executives, and the Company is obligated to pay him
an annual salary determined by the Board, such incentive compensation as may
become payable to him under the Company's incentive compensation plans, and
certain other typical executive benefits. Mr. Chryst's agreement is for a term
of seven years commencing on January 10, 2000. Mr. Chryst may terminate the
agreement for Legitimate Executive Reasons. If Mr. Chryst terminates his
employment other than for Legitimate Executive Reasons, the Company's
obligations under the agreement cease as of the date of such termination. If Mr.
Chryst terminates his employment for a Legitimate Executive Reason or at any
time after the fourth anniversary of the agreement, he is entitled to receive
his compensation and benefits provided under the agreement for the remainder of
11
the term. He is also entitled to certain supplemental retirement benefits
beginning on the earlier of his 65th birthday or his death and continuing for 15
years. Further, Mr. Chryst, his spouse, and dependent children are entitled to
medical and dental benefits for the lives of Mr. Chryst and his spouse. The
Company may terminate the agreement at any time for Legitimate Company Reasons
or without cause. If the Company terminates Mr. Chryst's employment as a result
of Legitimate Company Reasons prior to the fourth anniversary of the agreement,
the Company's obligations under the agreement cease as of the date of
termination, except that if Mr. Chryst's termination is due to disability and
the proceeds of the disability policy purchased by the Company are insufficient
to fund the Company's obligations as if he were not disabled, the Company will
fund the difference. If Mr. Chryst is terminated for "cause" after a "change in
control", then such termination shall be treated as a Voluntary Termination. If
the Company terminates Mr. Chryst for "cause" after the fourth anniversary of
the agreement, he is entitled to receive as severance the compensation and
benefits provided under the agreement for the remainder of the term. If the
Company terminates Mr. Chryst for disability or death after the fourth
anniversary of the agreement, the Company's obligations cease as of the date of
termination except that Mr. Chryst is entitled to certain supplemental
retirement benefits beginning on the earlier of his 65th birthday or his death
and continuing for 15 years. Further, Mr. Chryst, his spouse, and dependent
children are entitled to medical and dental benefits for the lives of Mr. Chryst
and his spouse, and if Mr. Chryst becomes disabled and the proceeds of the
disability policy purchased by the Company are insufficient to fund the
Company's obligations under the agreement as if Mr. Chryst were not disabled,
the Company will fund the difference. If the Company terminates Mr. Chryst
without "cause", he will be entitled to receive as severance his aggregate
compensation and benefits for the remainder of the term. In the event of
termination by Mr. Chryst for a Legitimate Executive Reason, or in the event of
termination by the Company without "cause", he will become vested in all Company
share grants or options, and will be deemed to be retired and credited with
Company service for the remaining term of the agreement for the purposes of the
Company's benefit plans. All amounts paid to Mr. Chryst will be "grossed up" for
taxes payable by him. In the event that Mr. Chryst's employment is terminated by
him as a result of a Legitimate Executive Reason or by the Company, then Mr.
Chryst may not, for a period of five years following such termination of
employment, compete against the Company as described in the agreement.
John C. DuBose. Under his agreement, Mr. DuBose is given duties and
authority typical of similar executives, and the Company is obligated to pay him
an annual salary determined by the Board. In addition, the Board may pay Mr.
DuBose an additional incentive cash bonus pursuant to the Company's incentive
compensation plans and certain other typical executive benefits. Mr. DuBose's
agreement has a rolling term of one year and extends automatically until either
party gives notice to the other, at which point the term becomes fixed to one
year from the date of the notice. Mr. DuBose may terminate the agreement within
12 months of a "change of control" for Legitimate Executive Reasons. If Mr.
DuBose terminates his employment other than for Legitimate Executive Reasons or
if there is a Voluntary Termination in the absence of a "change in control", the
Company's obligations under the agreement cease as of the date of such
termination. If, within 12 months of a "change in control", Mr. DuBose
terminates his employment as a result of clauses (ii) or (iii) of the Legitimate
Executive Reasons, he is entitled to receive a lump sum amount generally equal
to two times his base salary and bonus and will also be entitled to receive his
base salary, bonus, and other benefits due to him through his termination date.
In addition, he will be entitled to ongoing benefits for up to two years as
though he continued to be employed. If Mr. DuBose terminates his employment
pursuant to clause (i) of the Legitimate Executive Reasons, the Company's
obligations to him will terminate on the date of the termination. The Company
may terminate the agreement at any time for Legitimate Company Reasons, in which
case, the Company's obligations under the agreement cease as of the date of
termination, except that if he is terminated for "cause" after a "change in
control", then such termination shall be treated as a Voluntary Termination. If
the Company terminates Mr. DuBose for any other reason and there has been a
change of control in the prior 12 months, he is entitled to his base salary, and
bonus and all other benefits due him through his termination date, reduced pro
rata for the portion of the fiscal year not completed. He is also entitled to
receive as severance a lump sum amount generally equal to two times his base
salary and bonus. In addition, he will be entitled to ongoing benefits for up to
two years as though he continued to be employed. If the Company terminates Mr.
DuBose without a Legitimate Company Reason in the absence of a change of
control, he will be entitled to receive immediately in a lump sum as severance
his salary, bonus, and benefits for the remainder of the term of the agreement.
In the event of termination by Mr. DuBose for a Legitimate Executive Reason, or
12
in the event of termination by the Company other than for Legitimate Company
Reasons and in the absence of a "change in control", he will become vested in
all Company share grants or options and will be deemed to be credited with
Company service for the remaining term of the agreement for the purposes of the
Company's benefit plans. All amounts paid to Mr. DuBose will be grossed up by
the taxes payable by him in respect of such amounts. In the event that Mr.
DuBose's employment is terminated before a "change in control" by him
voluntarily or by the Company for "cause", then he may not, for a period of one
year following such termination of employment, compete against the Company as
described in the agreement.
William S. Hummers III. Under his agreement, Mr. Hummers is given duties
and authority typical of similar executives, and the Company is obligated to pay
him an annual salary determined by the Board, such incentive compensation as may
become payable to him under the Company's incentive compensation plans, and
certain other typical executive benefits. Mr. Hummers' agreement has a rolling
term of five years and extends automatically until he turns 60, at which point
the term is converted into a 5 year fixed term. Mr. Hummers may terminate the
agreement for Legitimate Executive Reasons. If Mr. Hummers terminates his
employment other than for Legitimate Executive Reasons, the Company's
obligations under the agreement cease as of the date of such termination. If Mr.
Hummers terminates his employment as a result of clauses (i) or (iii) of the
Legitimate Executive Reasons, he is entitled to receive a lump sum amount equal
to three times his annual total compensation, and he will also be entitled to
receive his base salary and other benefits due him through his termination date.
If Mr. Hummers terminates his employment pursuant to clause (ii) of the
Legitimate Executive Reasons, he is entitled to receive an amount generally
equal to one year's total compensation, and he will also be entitled to receive
his base salary and other benefits due him through his termination date. If the
Company terminates Mr. Hummers' employment for "cause", the Company's
obligations under the agreement cease as of the date of termination. However, if
Mr. Hummers is terminated for "cause" after a "change in control", then such
termination shall be treated as a Voluntary Termination except that all his
rights pursuant to share grants or options granted by the Company do not become
vested or released from all conditions and restrictions, and Mr. Hummers is not
deemed to be retired or credited with Company service for the remaining term of
the agreement for the purposes of the Company's benefit plans. If the Company
terminates Mr. Hummers pursuant to clauses (ii) or (iii) of the Legitimate
Business Reasons, the Company's obligations under the agreement generally cease
as of the date of termination. If the Company terminates Mr. Hummers without
"cause", he will be entitled to receive as severance a lump sum payment equal to
three times his total annual compensation. In the event of termination by Mr.
Hummers for a Legitimate Executive Reason, or in the event of termination by the
Company without "cause", he will become vested in all Company share grants or
options, and be deemed to be retired and credited with Company service for the
remaining term of the agreement for the purposes of the Company's benefit plans.
In the event that Mr. Hummers' employment is terminated voluntarily by him as a
result of a Legitimate Executive Reason or by the Company without "cause", then
he may not, for a period of five years following such termination of employment
compete against the Company as provided in the agreement. If the covenant not to
compete is triggered, Mr. Hummers will receive, in addition to any other
payments, a total of five times his annual cash compensation. The amount paid to
Mr. Hummers under this covenant not to compete will be grossed up for taxes
payable by him. However, if Mr. Hummers terminates his employment for other than
a Legitimate Executive Reason, the Company's obligations under the agreement
cease as of his termination date and he may not, for a period of one year
following such termination of employment, compete against or interfere with the
Company as provided in the agreement.
James W. Terry, Jr. Under his agreement, Mr. Terry is given duties and
authority typical of similar executives, and the Company is obligated to pay him
an annual salary determined by the Board, such incentive compensation as may
become payable to him under the Company's incentive compensation plans and
certain other typical executive benefits. Mr. Terry's agreement has a rolling
term of three years and extends automatically until either party gives notice to
the other, at which point the term is fixed at three years from the date of
notice. Mr. Terry may terminate the agreement for Legitimate Executive Reasons.
If Mr. Terry terminates his employment other than for Legitimate Executive
Reasons, the Company's obligations under the agreement cease as of the date of
such termination. If Mr. Terry terminates his employment as a result of clauses
(i) or (iii) of the Legitimate Executive Reasons, he is entitled to receive a
lump sum amount equal to three times his total annual compensation and benefits,
and he will also be entitled to receive his base salary and other benefits due
him through his termination date. If Mr. Terry terminates his employment
pursuant to clause (ii) of the Legitimate Executive Reasons, Mr. Terry is
entitled to receive an amount generally equal to one year's compensation and
13
benefits, and he will also be entitled to receive his base salary and other
benefits due him through his termination date. If the Company terminates Mr.
Terry's employment as a result of the Legitimate Company Reasons, the Company's
obligations under the agreement cease as of the date of termination, except that
if he is terminated for cause after a "change in control", then such termination
shall be treated as a Voluntary Termination. If the Company terminates Mr. Terry
without a Legitimate Company Reason and there has been a change of control, he
will be entitled to receive as severance a lump sum payment equal to three times
his total annual compensation and benefits. If the Company terminates him
without a Legitimate Company Reason in the absence of a change of control, he
will be entitled to receive as severance his compensation and benefits for the
remaining term of the agreement. In the event of termination by Mr. Terry for a
Legitimate Executive Reason, or in the event of termination by the Company other
than for Legitimate Company Reasons, he will become vested in all Company share
grants or options, and credited with Company service for the remaining term of
the agreement for the purposes of the Company's benefit plans. All severance
benefits conditioned on a "change in control" become null and void unless he
exercises them within three years following a "change in control". All amounts
paid to Mr. Terry will be grossed up for taxes payable by him. In the event that
Mr. Terry's employment is terminated before a "change in control" voluntarily by
him or by the Company for "cause", then he may not, for a period of one year
following such termination of employment, compete against the Company as
described in the agreement.
Mack I. Whittle, Jr. Under his agreement, Mr. Whittle is given duties and
authority typical of similar executives, and the Company is obligated to pay him
an annual salary determined by the Board, such incentive compensation as may
become payable to him under the Company's Short-Term Incentive Compensation Plan
and Long-Term Incentive Compensation Plan, and certain other typical executive
benefits. Mr. Whittle's agreement has a rolling term of ten years and extends
automatically until he turns 55, at which point the term is converted into a
fixed term of 10 years, expiring on his 65th birthday. Mr. Whittle may terminate
the agreement for Legitimate Executive Reasons. If Mr. Whittle terminates his
employment other than for Legitimate Executive Reasons, the Company's
obligations under the agreement cease as of the date of such termination, and he
becomes subject to certain non-competition provisions described generally below.
If Mr. Whittle terminates his employment as a result of clauses (i) or (iii) of
the Legitimate Executive Reasons, he is entitled to receive a lump sum amount
equal to three times his total annual compensation and benefits, and he will
also be entitled to receive his base salary and other benefits due him through
the termination date of the agreement. If Mr. Whittle terminates his employment
pursuant to clause (ii) of the Legitimate Executive Reasons, he is entitled to
receive an amount generally equal to one year's compensation, and he will also
be entitled to receive his base salary and other benefits due him through the
termination date of the agreement. Mr. Whittle also becomes subject to certain
non-competition provisions described generally below. If the Company terminates
Mr. Whittle's for "cause", the Company's obligations under the agreement cease
as of the date of termination. However, if Mr. Whittle is terminated for cause
after a "change in control", then such termination shall be treated as a
Voluntary Termination, but he will not become vested in Company share grants or
options, nor will he be deemed to be retired or credited with Company service
for the remaining term of the agreement for purposes of the Company's benefit
plans. If the Company terminates Mr. Whittle without "cause", he will be
entitled to receive as severance a lump sum payment equal to three times his
total annual compensation. In the event of termination by Mr. Whittle for a
Legitimate Executive Reason, or in the event of termination by the Company
without "cause", Mr. Whittle will become vested in all Company share grants or
options, and be deemed to be retired and credited with Company service for the
remaining term of the agreement for the purposes of the Company's benefit plans.
In the event that Mr. Whittle's employment is terminated before a "change in
control" voluntarily by Mr. Whittle as a result of clauses (i) or (iii) of the
Legitimate Executive Reasons or by the Company without "cause", then Mr. Whittle
may not, for a period of five years following such termination of employment,
compete against the Company as described in the agreement. If the covenant not
to compete is triggered, Mr. Whittle will receive, in addition to any other
payments, a total of ten times his annual cash compensation. The Company will
also continue to provide certain other benefits for ten years following the
commencement of the non-compete period. The amount paid to Mr. Whittle under
this covenant not to compete will be grossed up for taxes payable by him.
However, if Mr. Whittle terminates his employment for other than a Legitimate
Executive Reason or if there is a Voluntary Termination, the Company's
obligations under the agreement cease as of his termination date and he may not,
for a period of one year following his date of termination, compete against the
Company as described in the agreement.
14
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company has instituted a Supplemental Executive Retirement Plan
("SERP"), which is a non-qualified executive benefit plan in which the Company
agrees to pay the executive additional benefits in the future, usually at
retirement, in return for continued satisfactory performance by the executive.
The Company selects the key executives who participate in the SERP. The SERP is
an unfunded plan, which means there are no specific assets set aside by the
Company in connection with the establishment of the plan. The executive has no
rights under the agreement beyond those of a general creditor of the bank. The
Company has currently entered into SERP contracts with approximately 12 senior
level managers, four of which are Named Executive Officers. The benefits
associated with such persons are as follows:
Year of Retirement Annual Retirement Duration of
Name Birth Age Benefit Retirement Benefit
- ------------------------------------------ ------------ ------------- ------------------------- ----------------------
Mack I. Whittle, Jr. 1948 65 $ 485,266 15 years
William S. Hummers III 1945 65 162,187 15 years
James W. Terry, Jr. 1948 65 119,819 15 years
John C. DuBose 1951 65 133, 751 15 years
PERFORMANCE GRAPH
The following graph sets forth the performance of the Company's Common
Stock for the five year period ended December 31, 2000 as compared to the
Standard and Poor's SmallCap 600 Index and the SNL Southeast Bank Index. The
graph assumes $100 originally invested on December 31, 1995 and that all
subsequent dividends were reinvested in additional shares.
[GRAPH OMITTED]
12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
-------- -------- -------- -------- -------- --------
The South Financial Group $100.00 $112.20 $150.29 $178.24 $132.90 $101.78
S&P SmallCap 600 Index 100.00 121.32 152.36 150.37 169.02 188.96
SNL Southeast Bank Index 100.00 137.27 208.09 221.53 174.32 175.04
15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK. The following table sets forth as of March 1, 2001
information with respect to the Common Stock owned beneficially or of record by
each of the Directors and Nominees individually, by the Named Executive Officers
and by all Directors and executive officers of the Company as a group. Unless
otherwise noted, each person has sole voting power and sole investment power
with respect to the shares listed. There are no persons known to the Company to
own beneficially 5% or more of the Common Stock.
AMOUNT AND NATURE OF PERCENT
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS (1)
- ------------------------ -------------------- ------------
William P. Brant 4,000 (2) *
Andrew B. Cheney 4,000 (3) *
Mason A. Chrisman 94,339 (4) *
Stephen L. Chryst 317,036 (5) *
John C. DuBose 42,224 (6) *
Judd B. Farr 144,758 (7) *
C. Claymon Grimes, Jr. 69,932 (7) *
M. Dexter Hagy 18,233 (7) *
William S. Hummers III 117,888 (8) *
William J. Moore 1,000 *
W. Gairy Nichols III 204,586 (9) *
Thomas J. Rogers 63,623 (10) *
H. Earle Russell, Jr. 12,853 (7) *
Charles B. Schooler 37,111 (11) *
John C. B. Smith, Jr. 80,050 (12) *
Michael W. Sperry 12,977 (13) *
Albert A. Springs III 93,576 (14) *
Eugene E. Stone IV 8,978 (15) *
James W. Terry, Jr. 71,511 (16) *
William R. Timmons, Jr. 395,369 (17) *
Samuel H. Vickers 11,390 (18) *
David C. Wakefield III 75,932 (19) *
Mack I. Whittle, Jr. 192,603 (20) *
All Directors/Executive
Officers as a Group (23 persons) 2,073,969 4.83%
- --------------
* Less than 1%.
(1) The calculation is based on 42,554,668 shares of Common Stock which is the
actual number of shares outstanding as of the record date. Pursuant to Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended,
percentages of total outstanding shares have been computed on the
assumption that shares of Common Stock that can be acquired within 60 days
upon the exercise of options by a given person or group are outstanding,
but no other shares similarly subject to acquisition by other persons are
outstanding.
(2) This includes 2,000 shares of Common Stock issuable pursuant to options
granted under the Directors' Plan.
(3) This includes 4,000 shares of Common Stock issuable under outstanding
options.
(4) This includes 6,430 shares in an IRA, 5,893 shares owned by his spouse and
1,500 shares issuable under outstanding options.
(5) This includes 6,788 shares owned by his spouse, 1,782 owned by children and
109,794 in options.
(6) This includes 1,634 shares of Common Stock owned by Mr. DuBose through the
Restricted Stock Plan and 27,675 shares of Common Stock issuable under
outstanding options.
(7) This includes 10,778 shares of Common Stock issuable pursuant to options
granted under the Directors' Plan.
(8) This includes 1,634 shares of Common Stock owned by Mr. Hummers through the
Restricted Stock Plan, 53,911 shares of Common Stock issuable under
outstanding options and 10,030 shares of Common Stock owned by his spouse.
(9) This includes 6,361 shares of Common Stock in an IRA, 6,205 shares owned by
his spouse and 4,170 shares owned by children.
(10) This includes 26,819 shares in an IRA and 6,551 shares owned by his spouse.
(11) This includes 10,148 shares of Common Stock issuable pursuant to options
granted under the Directors' Plan.
(12) This includes 7,736 shares owned by his spouse, 5,242 shares of which Mr.
Smith is the custodian, and 3,622 shares issuable under outstanding
options.
(13) This includes 1,634 shares of Common Stock owned by Mr. Sperry through the
Restricted Stock Plan and 7,929 shares of Common Stock issuable under
outstanding options.
(14) This includes 6,525 shares held in an IRA.
(15) This includes 8,258 shares of Common Stock issuable pursuant to options
granted under the Directors' Plan.
(16) This includes 1,634 shares of Common Stock owned by Mr. Terry through the
Restricted Stock Plan and 40,008 shares of Common Stock issuable under
outstanding options.
(17) This includes 277,107 shares of Common Stock owned by Canal Insurance
Company, of which Mr. Timmons is the Chairman, and 10,778 shares of Common
Stock issuable to Mr. Timmons pursuant to options granted under the
Directors' Plan.
(18) This includes 4,652 shares of Common Stock issuable pursuant to options
granted under the Directors' Plan and 5,000 shares owned by a company of
which Mr. Vickers is an officer.
(19) This includes 6,058 shares of Common Stock issuable pursuant to options
granted under the Directors' Plan.
(20) This includes 5,747 shares of Common Stock owned by Mr. Whittle through the
Restricted Stock Plan and 91,407 shares of Common Stock issuable under
outstanding options.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company's directors and officers and their associates have had, and the
Company expects them to have in the future, banking transactions in the ordinary
course of business with the Company's banking subsidiaries. These transactions
are on the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unrelated third parties.
Such loans have not involved more than normal risks of collectibility nor have
they presented any other unfavorable features. Under banking regulations
applicable to state banks, any loan made by such a bank to any of its officers
or Directors must be collaterally secured. The aggregate dollar amount of these
loans was approximately $28,954,000 at December 31, 2000. During 2000, new loans
of approximately $13,556,000 were made, and payments totaled approximately
$7,262,000.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
Directors and executive officers, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission (the "SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Executive officers, Directors and greater than ten-percent shareholders are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms filed. To the Company's knowledge, based solely on a review of the
copies of such reports furnished to the Company and written representations that
no other reports were required, during 2000 all required Section 16(a) filings
applicable to its executive officers, Directors and greater than 10% beneficial
owners were made.
INDEPENDENT PUBLIC ACCOUNTANTS
KPMG LLP served as the Company's independent public accountants for the
2000 current fiscal year. KPMG LLP has indicated that it plans to have a
representative present at the Annual Meeting. Such representative will have the
opportunity to make a statement and will be available to respond to appropriate
questions from shareholders. The Board of Directors has selected KPMG LLP as the
independent public accountants for the Company for the 2001 fiscal year.
PROPOSALS BY SHAREHOLDERS
A shareholder who wishes to present a proposal for inclusion in the proxy
materials relating to the Company's Annual Meeting of Shareholders to be held
for 2002 should submit his or her proposal on or before November 16, 2001, to
the Secretary of the Company, 102 S. Main Street, Greenville, South Carolina
29601. After that date, the proposal will not be considered timely. Shareholders
submitting proposals for inclusion in the proxy statement and form of proxy must
comply with the proxy rules under the Securities Exchange Act of 1934, as
amended, and all shareholders submitting proposals must comply with the Bylaw
requirements described below.
The Bylaws of the Company require timely advance written notice of
shareholder nominations of director candidates and of any other proposals to be
presented at an annual meeting of shareholders. In the case of director
nominations by shareholders, the Bylaws require that a shareholder's notice be
delivered to the principal executive offices of the Company during the period of
time from the 30th day to the 60th day prior to the annual meeting of
shareholders at which directors are to be elected, unless such requirement is
expressly waived in advance of the meeting by formal action of the Board of
Directors. In the case of other proposals by shareholders at an annual meeting,
the Bylaws require that advance written notice be delivered to the Company's
Secretary (at the address indicated above). To be timely, a shareholder's notice
must be delivered to or mailed and received at the principal executive offices
of the Company between the 60th and 90th days prior to the first anniversary of
the preceding year's annual meeting. However, in the event that the date of the
annual meeting is more than 30 days before or more than 60 days after such
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anniversary date, such shareholder notice must be so delivered between the 60th
and 90th days prior to such annual meeting or within 10 days following the day
on which public announcement of the date of such meeting is first made by the
Company. A copy of the Bylaws is available upon request to the Secretary of the
Company at the address indicated above.
FINANCIAL INFORMATION
The Company's 2000 Annual Report and its Annual Report on Form 10-K
(without exhibits) for the year ended December 31, 2000 are being mailed to
shareholders contemporaneously with these Proxy Materials.
OTHER MATTERS
Management is not aware of any other matter to be brought before the Annual
Meeting. If other matters are brought before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote on such matters in
accordance with their judgment.
By order of the Board of Directors,
/s/ William S. Hummers III
William S. Hummers III
Secretary
March 15, 2001
Greenville, South Carolina
APPENDIX A
THE SOUTH FINANCIAL GROUP
CHARTER OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing: the financial reports
and other financial information provided by The South Financial Group (the
"Company") to any governmental body or the public; the Company's systems of
internal controls regarding finance, accounting, legal compliance and ethics
that management and the Board have established; and the Company's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the Company's policies, procedures and practices at
all levels. The Audit Committee's primary duties and responsibilities are to:
* Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
* Review and appraise the audit efforts of the Company's independent
accountants and internal audit department.
* Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter. This Charter is
designed to comply with the guidelines promulgated in the Report and
Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of
Corporate Audit Committees, in 1999.
II. COMPOSITION
The Audit Committee shall be comprised of three or more directors as
determined by the Board, each of whom shall be independent directors, and free
from any relationship that, in the opinion of the Board, would interfere with
the exercise of his or her independent judgment as a member of the Committee.
The Company's definition of independence precludes the following from audit
committee eligibility:
* Directors employed by the Company during the past three years
* Directors closely related to a current executive officer or any
executive officer during the past three years
* Directors who serve as executive officers of other corporations in
which one of the Company's executive officers serves on the
compensation committee
* Directors receiving compensation from the Company, other than
customary board fees, in excess of $60,000 per year
* Directors who are partners, controlling shareholders or executive
officers of businesses to which the company made or received payments
that exceeded $200,000 during the past three years.
All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the Committee shall have
accounting or related financial management expertise. Committee members may
enhance their familiarity with finance and accounting by participating in
educational programs conducted by the Company or an outside consultant.
The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified.
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III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet with management, the director of the internal auditing
department and the independent accountants in separate executive sessions to
discuss any matters that the Committee or each of these groups believe should be
discussed privately. In addition, the Committee should meet with the independent
accountants and management quarterly to review the Company's financials
consistent with IV.4 below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties of the Audit Committee shall:
Documents/Reports Review
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the organization's annual financial statements and any reports or
other financial information submitted to any governmental body, or the
public, including any certification, report, opinion, or review rendered by
the independent accountants.
3. Review the regular internal reports to management prepared by the internal
auditing department and management's response.
4. Review with financial management and the independent accountants the 10-Q
prior to its filing. The Chair shall review with financial management and
the independent accountants the release of quarterly earnings prior to
their release.
5. Review reports of examination made by federal and state banking examiners
and ascertain that all operational deficiencies set forth in such exams are
adequately corrected.
Independent Accountants
6. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness, and approve the
fees and other compensation to be paid to the independent accountants. On
an annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Corporation to determine the accountants' independence.
7. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
8. Periodically, consult with the independent accountants out of the presence
of management about internal controls and the fullness and accuracy of the
organization's financial statements.
Financial Reporting Processes
9. In consultation with the independent accountants and the internal auditors,
review the integrity of the organization's financial reporting processes,
both internal and external.
10. Consider the independent accountants' judgments about the quality and
appropriateness of the Company's accounting principles as applied in its
financial reporting.
11. Consider and approve, if appropriate, major changes to the Company's
auditing and accounting principles and practices as suggested by the
independent accountants, management, or the internal auditing department.
Process Improvement
12. Establish regular and separate systems of reporting to the Audit Committee
by each of management, the independent accountants and the internal
auditors regarding any significant judgments made in management's
preparation of the financial statements and the view of each as to
appropriateness of such judgments.
13. Following completion of the annual audit, review separately with each of
management, the independent accountants and the internal auditing
department any significant difficulties encountered during the course of
the audit, including any restrictions on the scope of work or access to
required information.
14. Review any significant disagreement among management and the independent
accountants or the internal auditing department in connection with the
preparation of the financial statements.
15. Review with the independent accountants, the internal auditing department
and management the extent to which changes or improvements in financial or
accounting practices, as approved by the Audit Committee, have been
implemented, (This review should be conducted at any appropriate of time
subsequent to implementation of changes or improvements, as decided by the
Committee.
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Ethical and Legal Compliance
16. Establish, review and update periodically a Code of Ethical Conduct and
insure that management has established a system to enforce this Code.
17. Review management's monitoring of the Company's compliance with the
organization's Ethical Code, and ensure that management has the proper
review system in place to ensure that Company's financial statements,
reports and other financial information disseminated to governmental
organizations, and the public satisfy legal requirements.
18. Review activities, organizational structure, and qualifications of the
internal audit department.
19. Review, with the organization's counsel, legal compliance matters including
corporate securities trading policies.
20. Review, with the organization's counsel, any legal matter that could have a
significant impact on the organization's financial statements.
21. Perform any other activities consistent with this Charter, the Company's
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate.
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