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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
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:
________________________________________________________________________________
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
________________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________________
5) Total fee paid:
________________________________________________________________________________
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
[TSFG LOGO OMITTED]
102 SOUTH MAIN STREET
GREENVILLE, SOUTH CAROLINA 29601
(864) 255-7900
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 2002
To the Shareholders of The South Financial Group:
The Annual Meeting of Shareholders (the "Annual Meeting") of The South
Financial Group, Inc. ("TSFG") will be held on April 30, 2002 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 17 and to elect 6 Directors to hold
office until their respective terms expire or until their successors
are duly elected and qualified;
2. To approve TSFG's Amended and Restated Long-Term Incentive Plan;
3. To amend TSFG's Amended and Restated Stock Option Plan to increase the
shares available for issuance by 1,200,000;
4. To amend TSFG's Amended and Restated Restricted Stock Agreement Plan
to increase the shares available for issuance by 250,000;
5. To ratify the appointment of KPMG LLP as independent auditors of TSFG
for fiscal year 2002; and
6. 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, 2002
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 22, 2002
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 30, 2002
This Notice of Annual Meeting, Proxy Statement and Proxy (these "Proxy
Materials") are being furnished to the shareholders of The South Financial
Group, Inc. ("TSFG") in connection with a solicitation of proxies by TSFG'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 30, 2002. These Proxy
Materials are being mailed on approximately March 22, 2002.
Who is Entitled to Vote; Other Voting Matters
Shareholders of record as of the close of business on March 1, 2002 of
TSFG'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, 41,305,910
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, 2002 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.
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
TSFG 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. However, TSFG has also engaged the
firm of Georgeson Shareholder Communications, Inc. ("Georgeson") as proxy
solicitors to assist TSFG in this proxy solicitation. Employees of Georgeson may
contact shareholders by mail, by telephone or through personal solicitation.
TSFG expects to pay Georgeson approximately $6,500, plus expense reimbursements,
in connection with such services. Proxies may also be solicited by telephone or
through personal solicitation conducted by regular employees of TSFG. 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 TSFG 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 number of directors is currently set at 18
persons. Management proposes to set the number of TSFG directors at 17 persons.
The Board of Directors is divided into three classes. At each annual
meeting, TSFG's shareholders elect the members of one of the three classes to
three-year terms. At this Annual Meeting, five directors in the class whose term
is expiring at this Annual Meeting are being nominated for re-election.
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 6 persons
listed as Nominees in the table below. Each of the Nominees is currently serving
as a Director, except for William R. Timmons III. 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 person 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
TSFG 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 TSFG DIRECTOR SINCE
- ------------------------------- --- ---------------------------- --------------
FOR TERMS EXPIRING IN 2005
William S. Hummers III 56 Executive Vice President, Vice 1990
Chairman, and Secretary
Charles B. Schooler 73 Director 1996
Edward J. Sebastian 55 Director 2001(1)
Eugene E. Stone IV 63 Director 1996
William R. Timmons III 50 - -
Mack I. Whittle, Jr. 53 President, Chief Executive Officer 1986
- -------------
(1) Mr. Sebastian previously served as a Director for a portion of 1996 before
resigning and was named a Director again in 2001 by the Board of Directors.
2
DIRECTORS CONTINUING IN OFFICE
NAME AGE POSITION OR OFFICE WITH TSFG DIRECTOR SINCE
- ------------------------------ --- ---------------------------- --------------
FOR TERMS EXPIRING IN 2003
M. Dexter Hagy 57 Director 1993
W. Gairy Nichols III 50 Director 2000
H. Earle Russell, Jr. 60 Director 1997
John C. B. Smith, Jr. 57 Director 2001
William R. Timmons, Jr. 78 Chairman of the Board of Directors 1986
Samuel H. Vickers 66 Director 1999
FOR TERMS EXPIRING IN 2004
William P. Brant 55 Director 2001
Judd B. Farr 76 Director 1994
C. Claymon Grimes, Jr. 79 Director 1990
Thomas J. Rogers 65 Director 2000
David C. Wakefield III 58 Director 1997
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THESE NOMINEES.
Meetings and Committees of the Board of Directors
The Board held six meetings in 2001. 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 assists the Board in fulfilling
its oversight responsibilities by reviewing: the financial reports and other
financial information provided by TSFG to any governmental body or the public;
TSFG's systems of internal controls regarding finance, accounting, legal
compliance and ethics that management and the Board have established; and TSFG's
auditing, accounting and financial reporting processes generally. The Audit
Committee is currently comprised of Mr. Grimes, Mr. Nichols, Dr. Russell, Dr.
Schooler, Mr. Sebastian, Mr. Vickers and Mr. Wakefield. The Audit Committee met
five times during 2001.
The Board has a Compensation Committee, which reviews TSFG's
compensation policies and makes recommendations regarding senior management
compensation. Its report is set forth herein. The Compensation Committee is
currently comprised of Mr. Brant, Mr. Farr, Mr. Hagy, Mr. Rogers, Mr. Smith and
Mr. Stone. The Compensation Committee met five times during 2001.
The Board has a Nominating Committee comprised of Mr. Hagy, Mr.
Timmons, Jr. and Mr. Whittle. The Nominating Committee met one time during 2001.
The Nominating Committee will consider nominees recommended by shareholders.
Any such recommendations should be made in writing and delivered to TSFG's
principal offices before December 1 of the year before the applicable annual
meeting of shareholders.
The Board has an Executive Committee comprised of Mr. Hagy, Mr.
Timmons, Jr., Mr. Vickers and Mr. Whittle. It met six times in 2001. The
Executive Committee has the authority to review, guide and take any permissible
actions with respect to the business and affairs of TSFG 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 TSFG's accounting functions and internal
controls. The Audit Committee is composed of seven 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.
Management is responsible for TSFG's internal controls and financial
reporting process. The independent accountants are responsible for performing an
independent audit of TSFG's consolidated financial statements in accordance with
auditing standards generally accepted in the United States of America 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 and reviewed and discussed the
December 31, 2001 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 the 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 TSFG's Annual Report on Form 10-K for the year ended December 31,
2001, 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 Edward J. Sebastian
Samuel H. Vickers
AUDITING AND RELATED FEES
AUDIT FEES
KPMG LLP billed TSFG an aggregate of $759,000 for professional services
rendered for the audit of TSFG's annual financial statements for the year ended
December 31, 2001 and reviews of the financial statements included in TSFG's
Forms 10-Q for that year.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For fiscal year 2001, KPMG LLP billed TSFG no fees for professional
services associated with financial information systems design and
implementation.
ALL OTHER FEES
For fiscal year 2001, KPMG LLP billed TSFG an aggregate of $1,547,000
for all other fees. These fees included $448,000 for audit-related fees and
$1,099,000 for other non-audit services. Audit-related fees consisted
principally of letters to underwriters, information technology internal audit
co-sourcing services, audits of financial statements of employee benefit plans
and review of registration statements. Other non-audit fees consisted primarily
of tax compliance and tax consulting services.
4
EXECUTIVE OFFICERS
TSFG'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 TSFG.
NAME AGE TSFG OFFICES CURRENTLY HELD TSFG OFFICER SINCE
- ---- --- --------------------------- ------------------
Mack I. Whittle, Jr. 53 President and Chief Executive Officer 1986
Andrew B. Cheney 52 President, Citrus Bank 2000
John C. DuBose 50 Executive Vice President 1998
William S. Hummers III 56 Executive Vice President, 1988
Vice Chairman & Secretary
Michael W. Sperry 55 Executive Vice President 1998
James W. Terry, Jr. 54 President, Carolina First Bank 1991
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
Mr. Brant is a partner in the law firm of Brant, Abraham, Reiter and
McCormick 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. DuBose joined TSFG in December 1998 as Executive Vice President and
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 Co., 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 TSFG in June 1988 in his present capacity. He is
also a director of World Acceptance Corporation.
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.
Dr. Russell is a surgeon in Greenville, South Carolina.
Dr. Schooler is an optometrist in Georgetown, South Carolina.
Mr. Sebastian is founder and served as Chairman and CEO of Resource
Bancshares Corporation, a financial services company, and Chairman and CEO of
Resource Bancshares Mortgage Group, Inc., a company engaged in mortgage banking
operations from 1986 to 1999. Currently, Mr. Sebastian is a private equity
investor and serves in the advisory capacity for several private equity
entities.
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.
5
Mr. Sperry joined TSFG 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. Stone currently serves as CEO of Stone International, LLC, an
apparel manufacturer. He formerly served as Chairman of Umbro International,
Inc. (formerly Stone Manufacturing), a manufacturer of apparel and sports goods.
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. William R. Timmons, Jr. is Chairman of Canal Insurance Company, a
nationwide insurer of commercial motor vehicles headquartered in Greenville,
South Carolina. Mr. Timmons is the father of William R. Timmons III.
Mr. William R. Timmons III is Senior Vice President, Secretary and
Treasurer of Canal Insurance Company, a nationwide insurer of commercial motor
vehicles headquartered in Greenville, South Carolina. Mr. Timmons is the son of
William R. Timmons, Jr.
Mr. Vickers is Chairman and CEO of Design Containers, Inc., a packaging
system manufacturer located in Jacksonville, Florida.
Mr. Wakefield has served as 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 TSFG
following TSFG's acquisition of First Southeast Financial Corporation ("First
Southeast"). Mr. Wakefield served as President and CEO of First Southeast from
its formation in 1993 and President and CEO of First Federal Savings and Loan
Association of Anderson, a subsidiary of First Southeast, from 1991.
Mr. Whittle has been President and CEO of TSFG 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 2001, each non-officer Director's total compensation was valued
at approximately $30,000, assuming that the Director attended all meetings and
depending on the committees that the Director served on during the year. Meeting
fees were $500 for each Board of Directors' meeting and committee meeting
attended. Fees for committee chairmen were $1,000 per committee meeting. A total
of 60% of each Director's total compensation was paid in the form of options to
purchase Common Stock, which was valued based on the Black-Scholes valuation
method. The balance was paid in cash.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth information concerning all compensation
paid by TSFG during the fiscal years ended December 31, 2001, 2000 and 1999, to
TSFG's CEO, to each of the four most highly compensated executive officers other
than the CEO who were executive officers at December 31, 2001, and one former
executive officer (collectively the "Named Executive Officers") for services
rendered in all capacities to TSFG and its subsidiaries. For purposes of the
table, all bonus and incentive plan award amounts listed for a particular year
(including annual bonus compensation and long-term compensation payments) were
actually paid or issued in February or March of the following year. For example,
bonus payments for 2001 were made in February 2002, but are listed as 2001
compensation, because the awards were earned as of December 31, 2001.
6
Long-Term Compensation
---------------------------------
Annual Compensation Awards Payouts
---------------------------------- ---------------------------------
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name and Salary Bonus Compen- Awards Options/ Payouts Compensation
Principal Position Year ($) ($) sation ($) SARs (#) ($) ($)
------------------ ---- -------- -------- -------- ------------ ---------- -------- -------------
Mack I. Whittle, Jr. 2001 467,555 301,500 (1) 81,000 30,686 -- 65,094 (2)
President, Chief Executive 2000 388,130 96,080 (1) -- 16,400 -- 77,432
Officer 1999 346,600 -- (1) 293,825 83,581 81,170 99,650
Andrew B. Cheney 2001 229,880 90,000 (1) 33,336 9,004 -- 11,644 (3)
President, Citrus Bank 2000 180,833 39,417 (1) -- 25,000 -- 8,400
Stephen L. Chryst 2001 546,000 307,650 (1) -- 16,400 -- 64,575 (4)
2000 520,008 273,000 (1) -- -- -- 67,294
John C. DuBose 2001 221,800 125,000 (1) 31,662 10,585 -- 31,644 (5)
Executive Vice President 2000 278,667 46,808 (1) -- 5,000 -- 32,281
1999 208,380 -- (1) 89,425 10,700 24,704 31,900
William S. Hummers III 2001 251,190 150,000 (1) 37,494 11,614 -- 39,144 (6)
Executive Vice President 2000 250,200 55,431 (1) -- 5,000 -- 50,885
1999 212,260 -- (1) 89,425 10,700 24,704 54,400
James W. Terry, Jr. 2001 228,695 90,000 (1) 33,336 10,879 -- 26,644 (7)
President, 2000 227,300 49,272 (1) -- 5,000 -- 31,290
Carolina First Bank 1999 203,280 -- (1) 89,425 10,700 24,704 37,700
- ------------
<FN>
(1) Certain amounts may have been expended by TSFG 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) $10,200 contributed by TSFG to its 401(k)
on behalf of Mr. Whittle to match fiscal 2001 pre-tax deferral
contributions, all of which was vested, (ii) $1,444 contributed to TSFG's
Employee Stock Ownership Plan (the "ESOP"), and (iii) $53,450 in premiums
paid by TSFG on behalf of Mr. Whittle with respect to insurance not
generally available to all TSFG employees.
(3) This amount is comprised of (i) $10,200 contributed by TSFG to its
401(k) on behalf of Mr. Cheney to match fiscal 2001 pre-tax deferral
contributions, of which 40% was vested, and (ii) $1,444 contributed to
the ESOP.
(4) This amount is comprised of (1) $10,200 contributed by TSFG to its 401(k)
on behalf of Mr. Chryst to match fiscal 2001 pre-tax deferral
contributions, all of which was vested, and (ii) $54,375 in premiums paid
on behalf of Mr. Chryst with respect to insurance not generally available
to all TSFG employees.
(5) This amount is comprised of (i) $10,200 contributed by TSFG to its 401(k)
on behalf of Mr. DuBose to match fiscal 2001 pre-tax deferral
contributions, of which 60% was vested, (ii) $1,444 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 TSFG employees.
(6) This amount is comprised of (i) $10,200 contributed by TSFG to its 401(k)
on behalf of Mr. Hummers to match fiscal 2001 pre-tax deferral
contributions, all of which was vested, (ii) $1,444 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 TSFG employees.
(7) This amount is comprised of (i) $10,200 contributed by TSFG to its 401(k)
on behalf of Mr. Terry to match fiscal 2001 pre-tax deferral
contributions, of which all was vested, (ii) $1,444 contributed to the
ESOP, and (iii) $15,000 in premiums paid on behalf of Mr. Terry with
respect to insurance not generally available to all TSFG employees.
</FN>
STOCK OPTIONS
The following table sets forth information regarding option grants with
respect to Common Stock made by TSFG to the Named Executive Officers for 2001
performance.
7
OPTION GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------------
Individual Grants
Number of % of Total Fair Market
Securities Options Value per Share
Underlying Granted to of Common Exercise
Options Granted Employees Stock at Time Price Expiration Grant Date
Name (#) in 2001 of Grant($/Sh)(1) ($/Sh) Date (2) Valuation($)(3)
- --------------------------------------- -------------- ----------------- ---------- --------- ---------------
Mack I. Whittle, Jr. 16,400 2.23% 18.73 18.73 8/15/11 97,214
14,286 1.95% 18.00 18.00 1/2/12 81,012
Andrew B. Cheney 3,125 0.43% 18.73 18.73 8/15/11 18,524
5,879 0.80% 18.00 18.00 1/2/12 33,338
Stephen L. Chryst 16,400 2.23% 18.73 18.73 8/15/11 97,214
John C. DuBose 5,000 0.68% 18.73 18.73 8/15/11 29,639
5,585 0.76% 18.00 18.00 1/2/12 31,671
William S. Hummers III 5,000 0.68% 18.73 18.73 8/15/11 29,639
6,614 0.90% 18.00 18.00 1/2/12 37,506
James W. Terry, Jr. 5,000 0.68% 18.73 18.73 8/15/11 29,639
5,879 0.80% 18.00 18.00 1/2/12 33,338
- -------------
<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 2.60%, expected volatility of
38%, risk-free interest rate of 4.62% and expected lives of 5 years.
</FN>
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
2001. 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. This table
excludes any stock option grants awarded subsequent to December 31, 2001.
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
Options at 2001 Fiscal at 2001 Fiscal
Shares Value Year-End (#) Year-End ($) (1)
Acquired on Realized ------------------------- -------------------------
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ -------- ------------------------- -------------------------
Mack I. Whittle, Jr. - - 124,067 111,359 94,052 56,457
Andrew B. Cheney - - 5,250 22,875 14,378 51,773
Stephen L. Chryst 65,625 983,076 76,794 16,400 1,021,790 --
John C. DuBose - - 31,600 14,100 5,738 17,213
William S. Hummers III - - 69,914 41,753 40,437 17,213
James W. Terry, Jr. - - 52,367 21,604 30,506 17,213
- -------------
<FN>
(1) The indicated value is based on exercise prices ranging from $4.44 to
$31.26 per share and a per share value of $17.75, which was the closing
market price of a share of TSFG's Common Stock on December 31, 2001 as
reported by the Nasdaq National Market.
</FN>
8
EMPLOYMENT CONTRACTS
TSFG has entered into Noncompetition, Severance and Employment
agreements with certain current or former executive officers of TSFG, including
Andrew B. Cheney, 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 TSFG or from TSFG'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 TSFG Reasons" generally
means (i) "cause," (ii) if the executive becomes "disabled," or (iii) upon the
executive's death. "Legitimate Executive Reasons" generally means (i) TSFG's
uncured breach of the agreement, (ii) a Voluntary Termination, or (iii) an
Involuntary Termination.
Andrew B. Cheney. Under his agreement, Mr. Cheney is given duties and
authority typical of similar executives, and TSFG is obligated to pay him an
annual salary determined by the Board. In addition, the Board may pay Mr. Cheney
an additional incentive cash bonus pursuant to TSFG's incentive compensation
plans and certain other typical executive benefits. Mr. Cheney's agreement has a
rolling term of three years and extends automatically. Either party may give
written notice to the other, at which point the term is fixed at two years from
the date of notice, terminating on the expiration of such term. Mr. Cheney may
terminate the agreement for Legitimate Executive Reasons. If Mr. Cheney
terminates his employment other than for Legitimate Executive Reasons, TSFG's
obligations under the agreement cease as of the date of such termination. If Mr.
Cheney terminates his employment as a result of clauses (i) or (iii) of the
Legitimate Executive Reasons and there has been a change in control, he is
entitled to receive his base salary and other benefits through his date of
termination and to receive a lump sum amount equal to three times his annual
total compensation. If Mr. Cheney terminates his employment pursuant to clause
(i) of the Legitimate Executive Reasons in the absence of a change in control,
he is entitled to receive a lump sum amount equal to one times his annual total
compensation. If Mr. Cheney terminates his employment pursuant to clause (ii) of
the Legitimate Executive Reasons, he is entitled to receive a lump sum amount
equal to one times his annual compensation and will also be entitled to receive
his base salary and other benefits due to him through his termination date. TSFG
may terminate the agreement at any time for Legitimate TSFG Reasons or without
cause. If TSFG terminates Mr. Cheney's employment for Legitimate TSFG Reasons,
TSFG's obligations under the agreement cease as of the date of termination.
However, if Mr. Cheney is terminated for cause after a change in control, then
such termination shall be treated as a Voluntary Termination. If TSFG terminates
Mr. Cheney without cause, and there has been a change in control, he will be
entitled to receive as severance a lump sum payment equal to three times his
total annual compensation. If TSFG terminates Mr. Cheney without cause in the
absence of a change in control, he will be entitled to receive as severance a
lump sum payment equal to the compensation and benefits that would be provided
to him for the remaining term of the contract. In the event of termination by
Mr. Cheney for a Legitimate Executive Reason, or in the event of termination by
TSFG without cause, he will become vested in all TSFG share grants or options,
and be deemed to be retired and credited with TSFG service for the remaining
term of the agreement for the purposes of TSFG's benefit plans. In the event
that Mr. Cheney's employment is terminated by him as a result of clauses (i) or
(iii) of the Legitimate Executive Reasons or by TSFG without cause or by TSFG as
a result of clause (i) of the Legitimate TSFG Reasons, then he may not, for a
period of three years following such termination of employment, compete against
TSFG as provided in the agreement. If Mr. Cheney's employment is terminated for
any reason following a change in control, there will be no limitation on any
activity of Mr. Cheney. If the covenant not to compete is triggered, Mr. Cheney
will receive, in addition to any other payments, a total of three times his
annual cash compensation. All amounts paid to Mr. Cheney will be grossed up by
the taxes payable by him in respect of such amounts.
9
Stephen L. Chryst. Under his agreement, as amended by the first
amendment thereto, Mr. Chryst's duties are those as may be assigned him by the
Chief Executive Officer, and TSFG is obligated to pay him an annual salary as
provided in the agreement and determined by the Board, such incentive
compensation as may become payable to him under TSFG's incentive compensation
plans, and certain other typical executive benefits. Mr. Chryst's agreement is
for a term of eight 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 prior to
the fourth anniversary of the effective date, TSFG'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 remaining term of the contract. 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. TSFG may terminate
the agreement at any time for Legitimate TSFG Reasons or without cause. If TSFG
terminates Mr. Chryst's employment as a result of Legitimate TSFG Reasons prior
to the fourth anniversary of the agreement, TSFG'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 TSFG are insufficient to fund TSFG's obligations as if he were not
disabled, TSFG 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 TSFG 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 TSFG terminates Mr. Chryst for disability or death after the fourth
anniversary of the agreement, TSFG'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 TSFG are insufficient to fund TSFG's obligations
under the agreement as if Mr. Chryst were not disabled, TSFG will fund the
difference. If TSFG 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 TSFG without cause, he will
become vested in all TSFG share grants or options, and will be deemed to be
retired and credited with TSFG service for the remaining term of the agreement
for the purposes of TSFG'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 TSFG,
then Mr. Chryst may not, for a period of five years following such termination
of employment, compete against TSFG as described in the agreement.
John C. DuBose. Under his agreement, Mr. DuBose is given duties and
authority typical of similar executives, and TSFG 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 TSFG's incentive compensation
plans and certain other typical executive benefits. Mr. DuBose's agreement has a
rolling term of five years and extends automatically until he turns sixty, at
which point the term is converted into a five year fixed term which terminates
upon its expiration. Either party may give written notice to the other, at which
point the term is fixed at five years from the date of notice, terminating on
the expiration of such term. Mr. DuBose may terminate the agreement for
Legitimate Executive Reasons. If Mr. DuBose terminates his employment other than
for Legitimate Executive Reasons, TSFG's obligations under the agreement cease
as of the date of such termination. If Mr. DuBose 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 will also be entitled to receive his base salary, bonus, and
other benefits and allowances due to him through his termination date. If Mr.
DuBose terminates his employment pursuant to clause (ii) of the Legitimate
Executive Reasons following a change of control, he is entitled to receive a
lump sum amount equal to one times his annual compensation and will also be
entitled to receive his base salary and other benefits due to him through his
termination date. TSFG may terminate the agreement at any time for Legitimate
TSFG Reasons or without cause. If TSFG terminates Mr. DuBose's employment for
cause, TSFG's obligations under the agreement cease as of the date of
termination. However, if Mr. DuBose 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 TSFG
do not become vested or released from all conditions and restrictions and Mr.
10
DuBose is not deemed to be retired or credited with TSFG service for the
remaining term of the agreement for the purposes of TSFG's benefit plans. If
TSFG terminates Mr. DuBose pursuant to clauses (ii) or (iii) of the Legitimate
Business Reasons, TSFG's obligations under the agreement generally cease as of
the date of termination. If TSFG terminates Mr. DuBose 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. DuBose for a
Legitimate Executive Reason, or in the event of termination by TSFG without
cause, he will become vested in all TSFG share grants or options, and be deemed
to be retired and credited with TSFG service for the remaining term of the
agreement for the purposes of TSFG's benefit plans. In the event that Mr.
DuBose's employment is terminated by him as a result of clauses (i) or (iii) of
the Legitimate Executive Reasons or by TSFG without cause, then he may not, for
a period of five years following such termination of employment compete against
TSFG as provided in the agreement. If the covenant not to compete is triggered,
Mr. DuBose will receive, in addition to any other payments, a total of five
times his annual cash compensation. TSFG will also continue to provide certain
other benefits for five years following the commencement of the non-compete
period. The amount paid to Mr. DuBose under this covenant not to compete will be
grossed up for taxes payable by him. If Mr. DuBose terminates his employment for
other than a Legitimate Executive Reason or as a result of clause (ii) of the
Legitimate Executive Reasons, he may not, for a period of one year following
such termination of employment, compete against or interfere with TSFG as
provided in the agreement and receives no additional compensation as detailed
above. Notwithstanding the foregoing, if Mr. DuBose voluntarily or involuntarily
terminates the agreement after a change in control, he shall not enter into any
employment or consulting relationship for general banking activities with a
Competitor during the Noncompete Period, but may enter into a consulting
relationship limited to information and technology services with a Competitor
outside the State of South Carolina.
William S. Hummers III. Under his agreement, Mr. Hummers is given
duties and authority typical of similar executives, and TSFG is obligated to pay
him an annual salary determined by the Board, such incentive compensation as may
become payable to him under TSFG'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, which terminates upon its expiration.
Either party may give written notice to the other, at which point the term is
fixed at five years from the date of notice, terminating on the expiration of
such term. Mr. Hummers may terminate the agreement for Legitimate Executive
Reasons. If Mr. Hummers terminates his employment other than for Legitimate
Executive Reasons, TSFG'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 and
allowances due him through his termination date. If Mr. Hummers terminates his
employment pursuant to clause (ii) of the Legitimate Executive Reasons following
a change in control, 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 TSFG
terminates Mr. Hummers' employment for cause, TSFG'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 TSFG do not become vested or released from all
conditions and restrictions, and Mr. Hummers is not deemed to be retired or
credited with TSFG service for the remaining term of the agreement for the
purposes of TSFG's benefit plans. If TSFG terminates Mr. Hummers pursuant to
clauses (ii) or (iii) of the Legitimate TSFG Reasons, TSFG's obligations under
the agreement generally cease as of the date of termination. If TSFG 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 TSFG without cause, he will become vested in all TSFG share
grants or options, and be deemed to be retired and credited with TSFG service
for the remaining term of the agreement for the purposes of TSFG's benefit
plans. In the event that Mr. Hummers' employment is terminated voluntarily by
11
him as a result of a Legitimate Executive Reason or by TSFG without cause, then
he may not, for a period of five years following such termination of employment
compete against TSFG 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 or voluntarily under clause (ii) of the Legitimate
Executive Reasons, TSFG'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 TSFG as provided in
the agreement, and receives no additional compensation as detailed above.
James W. Terry, Jr. Under his agreement, Mr. Terry is given duties and
authority typical of similar executives, and TSFG is obligated to pay him an
annual salary determined by the Board, such incentive compensation as may become
payable to him under TSFG'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 written notice to the
other, at which point the term is fixed at three years from the date of notice,
terminating on the expiration of such term. Mr. Terry may terminate the
agreement for Legitimate Executive Reasons. If Mr. Terry terminates his
employment other than for Legitimate Executive Reasons, TSFG's obligations under
the agreement cease as of the date of such termination. If Mr. Terry terminates
his employment as a result of clause (i) and there has been a change in control,
or clause (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 as a
result of clause (i) of the Legitimate Executive Reasons in absence of a change
in control, he is entitled to receive a lump sum amount equal to one times his
total annual compensation. If Mr. Terry terminates his employment pursuant to
clause (ii) of the Legitimate Executive Reasons following a change in control,
he is entitled to receive an amount generally equal to one year's compensation
and benefits, and he will also be entitled to receive his base salary and other
benefits due him through his termination date. If TSFG terminates Mr. Terry's
employment as a result of the Legitimate TSFG Reasons, TSFG'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 TSFG terminates Mr. Terry without cause
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 TSFG terminates him without cause 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
TSFG without cause, he will become vested in all TSFG share grants or options,
and credited with TSFG service for the remaining term of the agreement for the
purposes of TSFG's benefit plans. In the event that Mr. Terry's employment is
terminated by him as a result of clause (i) or by TSFG without cause, then he
may not, for a period of three years following such termination of employment,
compete against TSFG as described in the agreement. If for any reason Mr.
Terry's employment is terminated following a change in control, there will be no
limitation on any activity of Mr. Terry.
Mack I. Whittle, Jr. Under his agreement, Mr. Whittle is given duties
and authority typical of similar executives, and TSFG is obligated to pay him an
annual salary determined by the Board, such incentive compensation as may become
payable to him under TSFG's incentive compensation plans, 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. Either
party may give written notice to the other, at which point the term is fixed at
ten years from the date of notice, terminating on the expiration of such term.
Mr. Whittle may terminate the agreement for Legitimate Executive Reasons. If Mr.
Whittle terminates his employment other than for Legitimate Executive Reasons,
TSFG's obligations under the agreement cease as of the date of such termination.
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 following a change
in control, 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 his termination date. If TSFG terminates Mr. Whittle
for Legitimate TSFG Reasons, TSFG's obligations under the agreement generally
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 TSFG share grants or
options, nor will he be deemed to be retired or credited with TSFG service for
12
the remaining term of the agreement for purposes of TSFG's benefit plans. If
TSFG 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 TSFG without cause, Mr. Whittle will become
vested in all TSFG share grants or options, and be deemed to be retired and
credited with TSFG service for the remaining term of the agreement for the
purposes of TSFG'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 TSFG without
cause, then Mr. Whittle may not, for a period of five years following such
termination of employment, compete against TSFG 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. TSFG 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 voluntarily under clause (ii) of the Legitimate
Executive Reasons, TSFG'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 TSFG as described in the agreement and receives no
additional compensation as detailed above.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
TSFG has instituted a Supplemental Executive Retirement Plan ("SERP"),
which is a non-qualified executive benefit plan in which TSFG agrees to pay the
executive additional benefits in the future, usually at retirement, in return
for continued satisfactory performance by the executive. TSFG 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 TSFG 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. TSFG has currently entered into
SERP contracts with approximately 12 senior level managers, five of whom 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 $317,581 15 years
Andrew B. Cheney 1950 65 64,360 15 years
John C. DuBose 1951 65 108,457 15 years
William S. Hummers III 1945 65 128,553 15 years
James W. Terry, Jr. 1948 65 99,162 15 years
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 TSFG management in establishing the
underlying philosophy and principles of TSFG'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 TSFG's compensation programs that were in effect during 2001 and
which will be applicable in 2002.
OUR GUIDING PRINCIPLES
The Compensation Committee of TSFG is committed to administering a
compensation program that espouses TSFG's values, drives corporate results, and
supports the long- and short-term goals of TSFG. Our compensation philosophy is
grounded by three principles:
13
- tying pay to performance,
- aligning executive and shareholder interests, and
- 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 TSFG performance.
Tying Pay To Performance
We believe that strong performance deserves higher pay than average
performance, and TSFG's fixed and variable compensation programs for 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 paid through TSFG'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 or upon stock price
appreciation. These plans provide the necessary balance between meeting current
performance objectives, while simultaneously building a foundation for long-term
success. While on average approximately 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. TSFG encourages
all of its executive officers to hold a significant amount of TSFG 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 TSFG, 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 TSFG 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 TSFG. In determining performance goals, the
Committee gives significant and careful consideration to the historical and
projected performance of TSFG's 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 TSFG 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. TSFG focuses on the following areas of
performance:
- earnings per share,
- asset quality (i.e., nonperforming assets as a percent of total loans
and net charge-offs as a percent of average loans), and
- certain strategic incentives.
The relative weighting of these measures is customized on an individual
basis to reflect specific roles, responsibilities, and objectives.
The Short-Term Incentive Plan establishes a point system, which
determines cash incentive awards based on the extent to which TSFG meets
performance goals. Each goal is considered separately. If one goal falls below
14
threshold, the other 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
TSFG achieves 125% of a performance goal, the cash incentive will be 150% of the
targeted incentive.
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, which is payable if 100% of the performance
goals are met. The Board of Directors approves each of the measures and target
incentives. TSFG communicates threshold, target, and superior award
opportunities to each eligible executive officer.
After fiscal year end: Corporate financial statements are generated,
and TSFG determines whether it was successful in achieving its performance
measures.
LONG-TERM INCENTIVE PLAN
The primary objective of the Long-Term Incentive Plan is to link a
significant portion of executive compensation to TSFG performance achievements
annually and over a multi-year period. The Long-Term Incentive Plan focuses on
strategic financial success factors, which are intended to align the interest of
TSFG's executives and shareholders. The Long-Term Incentive Plan consists of two
components: stock options and performance shares. The Long-Term Incentive Plan
provides for the grant of stock options to participants perceived to have a
direct impact on TSFG's success, as evaluated annually, and for the award of
performance shares based on the performance of TSFG, as measured annually and
over a three-year "performance cycle" against targets set by the Compensation
Committee each year. The stock option and performance share awards provide a
long-term incentive opportunity targeted at the top quartile of the 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.
Stock Option Element
The Long-Term Incentive Plan provides for the grant of stock options
annually under TSFG's Amended and Restated Stock Option Plan. 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 TSFG, the amount of TSFG stock held by the participant, and the desired mix
of long-term incentive vehicles. The exercise price will reflect fair market
value or greater at the time of grant. Executives will only realize value from
the options if the share price appreciates during the option term.
TSFG's policy is not to reprice stock options.
Performance Share Element
The Compensation Committee also awards shares of common stock under
TSFG's Amended and Restated Restricted Stock Agreement Plan to Long-Term
Incentive Plan participants that will be earned only if TSFG performance goals
are achieved annually and over the three-year performance period. The number of
shares awarded is based on performance achievements. If TSFG 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
superior level of performance is achieved (i.e., maximum), 150% of the targeted
15
reward will be given. Grants of performance shares are made on an annual basis
with an additional bonus grant at the end of the performance cycle, if earned.
The Compensation Committee, with input from management, establishes performance
goals for each year.
DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code of 1986 stipulates that
publicly held companies are denied a deduction for compensation to any Named
Executive Officer in excess of $1,000,000 in any year, unless such compensation
is performance based. Currently, it is TSFG'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, TSFG 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 2001 compensation consisted of base salary, cash
incentives, stock options, restricted stock, and certain perquisites (which did
not exceed 10% of base salary and bonus). The Compensation Committee determined
Mr. Whittle's base salary of $390,000 at the beginning of 2001 and increased it
to $486,000 effective August 1, 2001. 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
$37,555. 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 $301,500 for 2001.
Compensation Committee:
Thomas J. Rogers, Chairman William P. Brant Judd B. Farr
M. Dexter Hagy John C. B. Smith, Jr. Eugene E. Stone IV
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The following directors currently serve on the Compensation Committee
of TSFG's Board of Directors: Thomas J. Rogers, William P. Brant, Judd B. Farr,
M. Dexter Hagy, John C. B. Smith, Jr. and Eugene E. Stone IV. Members of the
Compensation Committee are non-employee directors of TSFG.
16
PERFORMANCE GRAPH
The following graph sets forth the performance of TSFG's Common Stock
for the five year period ended December 31, 2001 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, 1996 and that all subsequent dividends
were reinvested in additional shares.
[GRAPH OMITTED]
12/31/96 12/31/97 12/31/98 12/31/99 12/31/00 12/31/01
-------- -------- -------- -------- -------- --------
The South Financial Group $100.00 $134.86 $160.43 $118.95 $ 90.46 $121.05
S&P SmallCap 600 Index 100.00 125.58 123.95 139.32 155.76 165.94
SNL Southeast Bank Index 100.00 151.59 161.38 127.00 127.52 158.86
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
COMMON STOCK. The following table sets forth as of March 1, 2002
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 TSFG 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 TSFG 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 5,704 (2) *
Andrew B. Cheney 9,250 (3) *
Stephen L. Chryst 289,602 (4) *
John C. DuBose 46,059 (5) *
Judd B. Farr 151,989 (6) *
C. Claymon Grimes, Jr. 74,803 (6) *
M. Dexter Hagy 23,604 (6) *
William S. Hummers III 131,303 (7) *
W. Gairy Nichols III 131,763 (8) *
Thomas J. Rogers 67,327 (9) *
H. Earle Russell, Jr. 20,436 (6) *
Charles B. Schooler 40,815 (10) *
Edward J. Sebastian 1,244 (11) *
John C. B. Smith, Jr. 78,254 (12) *
Michael W. Sperry 19,610 (13) *
Eugene E. Stone IV 12,682 (14) *
James W. Terry, Jr. 83,758 (15) *
William R. Timmons, Jr. 407,695 (16) *
William R. Timmons III 290,517 (17) *
Samuel H. Vickers 20,094 (18) *
David C. Wakefield III 83,143 (19) *
Mack I. Whittle, Jr. 225,471 (20) *
All Directors/Executive officers as a Group (22 persons) 1,930,394 4.62%
- --------------
<FN>
* Less than 1%.
(1) The calculation is based on 41,305,910 shares that 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 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 5,704 shares issuable pursuant to options granted under the
Directors' Stock Option Plan (the "Directors' Plan").
(3) This includes 9,250 shares issuable under outstanding options.
(4) This includes 76,794 shares issuable under outstanding options, 11,988
shares owned by his spouse and 2,340 shares owned by children.
(5) This includes 31,600 shares issuable under outstanding options.
(6) This includes 14,482 shares issuable pursuant to options granted under the
Directors' Plan.
(7) This includes 69,914 shares issuable under outstanding options and 10,030
shares owned by his spouse.
(8) This includes 3,704 shares issuable pursuant to options granted under the
Directors' Plan, 6,361 shares held in an IRA, 6,205 shares owned by his
spouse and 4,371 shares owned by children.
(9) This includes 3,704 shares issuable pursuant to options granted under the
Directors' Plan, 26,819 shares held in an IRA and 6,551 shares owned by
his spouse.
(10) This includes 13,852 shares issuable pursuant to options granted under the
Directors' Plan.
(11) This includes 1,000 shares issuable pursuant to options granted under the
Directors' Plan.
(12) This includes 7,326 shares issuable pursuant to options granted under the
Directors' Plan and 6,467 shares owned by a child.
(13) This includes 14,562 shares issuable under outstanding options.
(14) This includes 11,962 shares issuable pursuant to options granted under the
Directors' Plan.
(15) This includes 52,367 shares issuable under outstanding options.
(16) This includes 284,729 shares owned by Canal Insurance Company, of which
Mr. Timmons is the Chairman, and 14,482 shares issuable pursuant to
options granted under the Directors' Plan.
(17) This includes 284,729 shares owned by Canal Insurance Company, of which
Mr. Timmons is an officer, and 3,000 shares issuable pursuant to options
granted under the Directors' Plan.
(18) This includes 8,356 shares issuable pursuant to options granted under the
Directors' Plan and 10,000 shares owned by a company, of which Mr. Vickers
is an officer.
(19) This includes 9,762 shares issuable pursuant to options granted under the
Directors' Plan and 3,551 shares owned by his spouse, of which Mr.
Wakefield disclaims beneficial ownership.
(20) This includes 124,067 shares issuable under outstanding options.
</FN>
18
APPROVAL OF THE COMPANY'S
AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
(ITEM 2 ON THE PROXY)
The Board of Directors recommends that the shareholders approve
adoption by TSFG of the Amended and Restated Long-Term Incentive Plan (the
"Long-Term Plan"). The Long-Term Plan was created to give senior management and
executives incentives to foster financial performance achievement of TSFG over
multi-year periods and to align the interests of TSFG executives with those of
TSFG's shareholders. The amendments restructure the Long-Term Plan to allow the
award of stock option grants annually, performance shares annually, and
performance shares over a three-year performance cycle. The Long-Term Plan is
structured to provide 50% of the total award opportunity in stock options and
50% in performance shares.
The Long-Term Plan is summarized below. However, this summary is
qualified in its entirety by reference to the text of the Long-Term Plan, a copy
of which may be obtained, without charge, by written request to TSFG, 102 South
Main Street, Greenville, South Carolina 29601, Attention: William S. Hummers
III.
ADMINISTRATION AND ELIGIBILITY. The Long-Term Plan generally provides
that the Board or a committee selected by the Board (the "Committee") consisting
of at least two members who are "disinterested persons" within the meaning of
Section 16 of the Exchange Act may grant performance shares and stock options to
such employees as the Board or Committee determines. Currently, the Board has
delegated the plan administration to the Compensation Committee. For purpose of
Item 2 of this Proxy Statement, reference to the Board shall mean either the
Board or the Committee. Non-employee Board members are not eligible to acquire
stock under the Long-Term Plan. The Board is also empowered to administer,
interpret, amend or terminate the Long-Term Plan and to take all such actions as
may be necessary thereunder.
The Chief Executive Officer and the Compensation Committee review
eligibility and make recommendations to the Board regarding participants in the
Long-Term Plan. For the grant of stock options, the Board shall consider the
employee's direct impact on TSFG's success, competitive grant practices, the
participant's level of responsibility, amount of TSFG stock held by the
participant, and TSFG's perception of the participant's ability to influence the
future performance of TSFG. The award of performance shares shall be based on
achievement of incentive award levels, which tie to performance goals of TSFG.
In awarding performance shares, the Board also shall consider competitive grant
practices, level of responsibility with TSFG, amount of TSFG stock held by the
participant, and TSFG's perception of the participant's ability to influence
future TSFG performance.
Awards are generally but not exclusively made to officers (including
nonexecutive officers) of TSFG. In 2001, 47 persons conditionally received stock
option awards and performance share awards under the Long-Term Plan. These
awards are conditioned on shareholder approval of the Long-Term Plan.
OPTION AWARDS. All stock options granted under the Long-Term Plan are
options provided through and subject to the Amended and Restated Stock Option
Plan, and must be non-incentive stock options. For a summary of the Amended and
Restated Stock Option Plan, see the discussion in Item 3 of this Proxy Statement
(approval of the amendment of the Amended and Restated Stock Option Plan).
PERFORMANCE SHARE AWARDS. All performance shares awarded under the
Long-Term Plan are shares provided through and subject to the Amended and
Restated Restricted Stock Agreement Plan. For a summary of the Amended and
Restated Restricted Stock Agreement Plan, see the discussion in Item 4 of this
Proxy Statement (approval of the amendment of the Amended and Restated
Restricted Stock Agreement Plan). All performance shares awarded under the
Long-Term Plan shall vest one-third at the time of award and one-third on each
anniversary of the award until fully vested if the participant remains a full
time employee of TSFG on such anniversary dates.
ASSIGNABILITY. Options granted and performance shares awarded under
the Long-Term Plan are assignable only by will or the laws of descent and
distribution.
19
AMENDMENT. The Board may amend or terminate the Long-Term Plan in its
sole discretion, subject to any shareholder approval required by applicable law,
TSFG's articles of incorporation, or the Bylaws of the National Association of
Securities Dealers (the "NASD").
EFFECTIVE DATE. Assuming shareholder approval is received at the Annual
Meeting, the effective date of the Long-Term Plan is January 1, 2001. If such
approval is not received, the Long-Term Plan will continue unamended.
VOTE REQUIRED. Approval of the amendment to the Long-Term Plan by
holders of a majority of the total votes cast on the proposal is required under
the Bylaws of the NASD, to which TSFG is subject because its Common Stock is
traded on the Nasdaq National Market. Abstentions and broker non-votes will not
be considered and do not constitute negative votes.
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE PLANS. The
following discussion is intended only as a brief summary of the federal income
tax rules relevant to non-incentive stock options and restricted stock awards.
The laws governing the tax aspects of awards are highly technical and such laws
are subject to change.
Non-Incentive Stock Options. The grant of a non-incentive stock option
will not by itself result in taxable income to the participant; however, upon
exercise of the option, a participant will be deemed to have received ordinary
income in an amount equal to the excess of (a) the value of the shares received
upon exercise of the option over (b) the purchase price of the shares received
upon exercise of the option. Subject to certain exceptions relating to
"cashless/same day sale" exercises, the value of the shares received upon
exercise of the option will be the fair market value of the shares on the date
of exercise of the option. Generally, TSFG does not receive a deduction at the
time of grant, but does receive a deduction for the amount the participant
reports as ordinary income arising from the exercise of the option.
Restricted Shares. For restricted shares awarded, the participant will
realize taxable income, for federal income tax purposes, when the award (or
portion of the award) vests in an amount equal to the fair market value of the
covered shares on the date the award (or portion of the award) vests. At the
same time, TSFG should generally be allowed a tax deduction equivalent to the
participant's taxable income arising from that vesting.
PLAN BENEFITS. Set forth below is information concerning stock option
grants and awards of performance shares made to date through the Long-Term Plan,
pursuant to the Amended and Restated Stock Option Plan and the Amended and
Restated Restricted Stock Agreement Plan, as well as grants of stock options
under the Amended and Restated Stock Option Plan and awards of performance
shares under the Amended and Restated Restricted Stock Agreement Plan, but not
through the Long-Term Plan. The table notes the stock option grants and
performance share awards that have been made under the Long-Term Plan
conditioned upon shareholder approval of the Long-Term Plan.
20
NEW PLAN BENEFITS
AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN
AMENDED AND RESTATED STOCK OPTION PLAN AND
AMENDED AND RESTATED RESTRICTED STOCK AGREEMENT PLAN
AMENDED AND RESTATED STOCK OPTION PLAN DATA (1)
Shares
Covered by Aggregate Number of
Shares Options Market Value Shares Shares Value of
Covered by Exercised in Excess of Covered by Underlying Unexercised
Options Since Exercise Options Unexercised In-The-Money
Granted Inception Price of Terminated Options at Options at
Since Through Exercised Since 2001 Fiscal 2001 Fiscal
Name and Position Inception(2) 12/31/01 Options ($)(3) Inception Year-End(#)(4) Year-End ($)(4)
----------------- ---------- ---------- -------------- ---------- --------------- ---------------
Mack I. Whittle, Jr. 249,712 -- -- -- 235,426 150,509
President and CEO
Andrew B. Cheney 34,004 -- -- -- 28,125 66,151
President, Citrus Bank
Stephen L. Chryst (5) 16,400 -- -- -- 16,400 --
John C. DuBose 51,285 -- -- -- 45,700 22,951
Executive Vice President
William S. Hummers III 118,281 -- -- -- 111,667 57,650
Executive V.P., Secretary
James W. Terry, Jr. 79,850 -- -- -- 73,971 47,719
Pres., Carolina First Bank
Current Executive Officers as 572,393 -- -- -- 528,859 367,930
a Group
All Employees, Excluding 2,297,716 132,598 1,075,625 419,828 1,601,215 4,245,672
Executive Officers, as a
Group
- -------------
<FN>
(1) This table reflects options granted pursuant to the Amended and Restated
Stock Option Plan, including direct grants under the plan and indirect
grants under the Long-Term Incentive Plan.
(2) Includes January 2, 2002 grants for 2001 performance totaling 14,286 for
Mr. Whittle; 5,879 for Mr. Cheney; 5,585 for Mr. DuBose; 6,614 for Mr.
Hummers; 5,879 for Mr. Terry; 43,534 for current executive officers as a
group; and 144,074 for all employees, excluding executive officers, as a
group, all of which are dependent upon shareholder approval of Item 2 of
this Proxy Statement. All option grants referenced are at an exercise price
of $18.00 per share, and none of the options are vested.
(3) Fair market value determined as of exercise date.
(4) The value is determined using a per share value of $17.75, which was the
closing price of a share of TSFG's Common Stock on December 31, 2001 as
reported by the Nasdaq National Market. This excludes any stock option
grants awarded subsequent to December 31, 2001.
(5) The information provided in this table for Mr. Chryst reflects options
awarded to Mr. Chryst under the Amended and Restated Stock Option Plan. In
addition to the options shown here, Mr. Chryst also holds options granted
under an option plan previously provided and administered by Anchor
Financial Corporation prior to the merger of Anchor Financial Corporation
with and into TSFG. See "Compensation of Directors and Executive Officers -
Summary of Cash and Certain Other Compensation" table.
</FN>
21
AMENDED AND RESTATED RESTRICTED STOCK AGREEMENT PLAN DATA
Since the inception of the Amended and Restated Restricted Stock
Agreement Plan, originally adopted in 1986, TSFG has awarded 434,437 shares,
which includes 59,097 shares dependent on shareholder approval under this Item 2
of this Proxy Statement. At December 31, 2001, there were 29,470 shares of
unvested restricted stock outstanding with a market value of approximately
$523,000. Since December 31, 2001, 28,385 shares of the unvested restricted
shares have vested. In addition, a grant of 59,097 shares was made in 2002 for
2001 performance, which included 19,701 shares that vested immediately. The
following table provides information on awards under the Amended and Restated
Restricted Stock Agreement Plan to Named Executive Officers and other groups of
employees of TSFG, including direct awards under the plan and indirect awards
under the Long-Term Incentive Plan.
Dollar Value
Unvested of Unvested 2001 Restricted
Shares Shares Stock Awards Granted
Outstanding at Outstanding at on January 2, 2002 (#)(2)
December 31, December 31, ----------------------------
2001 2001 ($) (1) Vested Unvested
---- ------------ ------ --------
Mack I. Whittle, Jr. 5,369 95,300 1,500 3,000
Andrew B. Cheney - - 617 1,235
Stephen L. Chryst - - - -
John C. DuBose 1,634 29,004 586 1,173
William S. Hummers 1,634 29,004 694 1,389
James W. Terry, Jr. 1,634 29,004 617 1,235
Current Executive Officers 11,905 211,314 4,570 9,143
as a Group
All Employees, Excluding 17,565 311,779 15,131 30,253
Executive Officers, as a
Group
- -------------
<FN>
(1) The value is determined using a per share value of $17.75, which was the
closing price of a share of TSFG's Common Stock on December 31, 2001 as
reported by the Nasdaq National Market.
(2) These grants for 2001 performance are dependent upon shareholder approval
of Item 2 of this Proxy Statement.
</FN>
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDED AND
RESTATED LONG-TERM INCENTIVE PLAN.
22
AMENDMENT OF THE COMPANY'S
AMENDED AND RESTATED STOCK OPTION PLAN
(ITEM 3 ON THE PROXY)
The Board of Directors recommends that the shareholders approve
adoption by TSFG of Amendment 4 to the Amended and Restated Stock Option Plan
(the "Option Plan"). The proposed amendment increases the number of shares of
TSFG's Common Stock that may be issued pursuant to options granted under the
Option Plan from an aggregate of 2,500,000 to an aggregate of 3,700,000. The
Board recommends approval of the proposed amendment because it believes that the
Option Plan is an effective component of management compensation. Except as set
forth above, the Option Plan would remain unaltered in all material respects.
The Option Plan is summarized below. However, this summary is qualified
in its entirety by reference to the text of the Option Plan, a copy of which may
be obtained, without charge, by written request to TSFG, 102 South Main Street,
Greenville, South Carolina 29601, Attention: William S. Hummers III.
ADMINISTRATION AND ELIGIBILITY. The Option Plan generally provides that
a committee of the Board (the "Committee") comprised solely of members thereof
who are "disinterested persons" within the meaning of Section 16 of the Exchange
Act may grant either incentive stock options or nonqualified options to such
employees as the Committee has determined to have the greatest impact on TSFG's
long-term performance. Non-employee Board member are not eligible to acquire
stock under the Option Plan. The Committee is also empowered to administer the
Option Plan and to take all such actions as may be necessary thereunder.
In making any determination as to the employees to whom options shall
be granted thereunder and as to the number of shares to be subject thereto, the
Committee must take into account, in each case, the level and responsibility of
the person's position, the level of the person's performance, the person's level
of compensation, the assessed potential of the person and such additional
factors as the Committee shall deem relevant to the accomplishment of the
purposes of the Option Plan. The Committee may also utilize guidelines set forth
in other compensation plans of TSFG, including the Long-Term Incentive Plan, in
determining any matters related to the grant of options under the Option Plan.
The stock option awards are generally but not exclusively made to officers
(including nonexecutive officers) of TSFG. For 2001 performance, 309 persons
received options under the Option Plan.
EXERCISE AND DURATION OF OPTIONS. The exercise price of such options
shall be equal to the fair market value per share (as defined in the Option
Plan) of TSFG's Common Stock on the date the option is granted. Unless the
Committee expressly states otherwise, options shall be exercisable on a
cumulative basis for 20% of the shares covered thereby on each of the first five
anniversaries of the grant thereof. Option periods are generally ten years from
the date of grant, except that options may not be exercised after an optionee's
termination of employment (except in certain instances involving death,
disability, voluntary retirement, or if the Committee expressly states
otherwise, at the time of grant). Subject to certain limited exceptions, options
granted under the Option Plan may generally be exercised, if otherwise timely,
within three months after retirement resulting from disability or retirement for
any reason after age 60. Subject to certain exceptions in cases of disability or
death (where options become fully exercisable), the option may not be exercised
for more than the number of shares, if any, as to which it was exercisable by
the optionee immediately before such retirement. In general, if an optionee dies
while employed by TSFG or within three months after retirement, such option may
be exercised to the extent that the optionee would have been entitled to do so
at the date of his death by the legatees or personal representatives within one
year of the date of the optionee's death.
In the event that TSFG is involved in a "change in control," the
expiration date and the dates on which any part of the option shall be
exercisable for all of the shares covered thereby may be accelerated, but the
effectiveness of such acceleration, and any exercise of the option pursuant
thereto in excess of the number of shares for which it would have been
exercisable in the absence of such acceleration, shall be conditioned upon the
consummation of the transaction resulting in the change in control. A "change in
control" is generally deemed to occur as a result of any of the following
transactions: (i) the shareholders of TSFG immediately prior to such event hold
less than 50% of the outstanding voting securities of TSFG or its survivor or
successor after such event, (ii) persons holding less than 20% of TSFG's stock
immediately prior to such event own more than 50% of the outstanding voting
securities of TSFG or its survivor or successor after such event, or (iii)
persons constituting a majority of the Board were not directors for at least the
24 preceding months.
23
ASSIGNABILITY. Options granted under the Option Plan are assignable
only in limited instances in accordance with applicable law.
AMENDMENT. The Committee may modify and amend the Option Plan subject
to any shareholder approval required by applicable law, TSFG's articles of
incorporation, or the Bylaws of the NASD, but it may not increase the maximum
number of shares for which options may be granted under the Option Plan, reduce
the minimum exercise prices established under the Option Plan, or extend the
period or periods during which options may be granted or exercised.
EFFECTIVE DATE. The original effective date of the Option Plan was the
date of its adoption by the Board in 1986. The effective date of the amendment
to the Option Plan shall be April 30, 2002, assuming shareholder approval is
received at the Annual Meeting. If such approval is not received, the Option
Plan will continue in effect, unchanged by the Amendment 4.
VOTE REQUIRED. Approval of the amendment to the Option Plan by holders
of a majority of the total votes cast on the proposal is required under the
Bylaws of the NASD, to which TSFG is subject because its Common Stock is traded
on the Nasdaq National Market. Abstentions and broker non-votes will be
considered negative votes.
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE PLAN. For a brief
summary of the federal income tax rules relevant to non-incentive stock options,
see the discussion of "Federal Income Tax Consequences Associated with the Plan"
in connection with Item 2 of the Proxy (approval of the Amended and Restated
Long-Term Incentive Plan). Below is a brief summary of the federal income tax
rules relevant to incentive stock options.
Incentive Stock Options. TSFG is not allowed a deduction at any time in
connection with, and the participant is not taxed upon either the grant or the
exercise of, an incentive stock option. The difference between the exercise
price of the option and the market value of the shares of common stock at the
date of exercise, however, constitutes a tax preference item for the participant
in the year of exercise for alternative minimum tax purposes. Among other
requirements, the stock acquired by the participant must be held for at least
two years after the option is granted and for at least one year after the option
is exercised for the option to qualify as an incentive stock option. If the
participant satisfies these holding period requirements, the participant will be
taxed only upon any gain realized upon disposition of the stock. The
participant's gain will be equal to the difference between the sales price of
the stock and the exercise price. If the participant disposes of the shares of
stock acquired pursuant to the exercise of an option before meeting the
requirements for treatment as an incentive stock option, the participant
recognizes ordinary income in the taxable year of the disposition equal to the
excess of (i) the lower of the fair market value at date of exercise or such
value at the time of disposition over (ii) the exercise price, and TSFG receives
a deduction in an equal amount.
PLAN BENEFITS. See the Amended and Restated Stock Option Plan Data
table provided above in "Plan Benefits" in connection with Item 2 of this Proxy
(approval of the Amended and Restated Long-Term Incentive Plan).
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE
AMENDED AND RESTATED STOCK OPTION PLAN.
24
AMENDMENT OF THE COMPANY'S
AMENDED AND RESTATED RESTRICTED STOCK AGREEMENT PLAN
(ITEM 4 ON THE PROXY)
The Board of Directors recommends that the shareholders approve
adoption by TSFG of Amendment 2 to the Amended and Restated Restricted Stock
Agreement Plan (the "Restricted Plan"). The proposed amendment increases the
number of shares of TSFG's Common Stock that may be issued under the plan from
an aggregate of 500,000 shares to an aggregate of 750,000 shares. The Board
recommends approval of the proposed amendment because it believes that the
Restricted Plan is an effective component of employee compensation. Except as
set forth above, the Restricted Plan would remain unaltered in all material
respects.
The Restricted Plan is summarized below. However, this summary is
qualified in its entirety by reference to the text of the Restricted Plan, a
copy of which may be obtained, without charge, by written request to TSFG, 102
South Main Street, Greenville, South Carolina 29601, Attention: William S.
Hummers III.
ADMINISTRATION AND ELIGIBILITY. The Restricted Plan generally provides
that the Board or a committee selected by the Board (the "Committee") comprised
solely of members thereof who are "disinterested persons" within the meaning of
Section 16 of the Exchange Act (if the Board is not composed of disinterested
persons) may grant shares to such employees as the Board or Committee determines
based on a number of factors, including performance, position, potential, and
compensation. Non-employee Board members are not eligible to acquire stock under
the Restricted Plan. The Board or Committee is also empowered to administer and
interpret the Restricted Plan and to take all such actions as may be necessary
thereunder.
In making any determination as to the employees to whom shares shall be
granted thereunder and as to the number of shares to be so granted, the
Committee must take into account, in each case, the level and responsibility of
the person's position, the level of the person's performance, the person's level
of compensation, the assessed potential of the person and such additional
factors as the Committee shall deem relevant to the accomplishment of the
purposes of the Restricted Plan. The Committee may also utilize guidelines set
forth in other compensation plans of TSFG, including the Long-Term Incentive
Plan, in determining any matters related to the award of shares under the
Restricted Plan. The awards are exclusively made to officers and key employees
(including nonexecutive officers) of TSFG. For 2001 performance, 47 persons
received awards under the Restricted Plan.
TRANSFERABILITY AND FORFEITURE. Employees shall acquire shares upon
meeting the terms of the Restricted Stock Agreements. The Committee anticipates
that the services provided by the employee will be adequate consideration and
cash payments will not be required to acquire the shares. Unless otherwise
specified by the Committee, restricted shares shall become freely transferable
and not subject to the risk of forfeiture at a rate of one third of the total
shares awarded on each anniversary of the award, beginning with the first
anniversary. If the employee is terminated for reasons other than death or a
total and permanent disability, all shares still restricted at the time of
termination shall be cancelled and returned to TSFG. If employee is terminated
because of death or a total and permanent disability, all restricted shares
shall immediately become freely transferable and not subject to risk of
forfeiture.
In the event that TSFG is involved in a "change in control," the risk
of forfeiture shall lapse. A "change in control" is generally deemed to occur as
a result of any of the following transactions: (i) the shareholders of TSFG
immediately prior to such event hold less than 50% of the outstanding voting
securities of TSFG or its survivor or successor after such event, (ii) persons
holding less than 20% of TSFG's stock immediately prior to such event own more
than 50% of the outstanding voting securities of TSFG or its survivor or
successor after such event, or (iii) persons constituting a majority of the
Board were not directors for at least the 24 preceding months.
ASSIGNABILITY. Shares granted under the Restricted Plan are assignable
only in limited instances in accordance with applicable law.
AMENDMENT. The Committee may modify and amend the Restricted Plan
subject to any shareholder approval required by applicable law, TSFG's articles
of incorporation, or the Bylaws of the NASD, and it may not amend the Restricted
25
Plan without the consent of any employee whose rights are affected by such
amendment.
EFFECTIVE DATE. The original effective date of the Restricted Plan was
the date of its adoption by the Board in 1986. The effective date of the
amendment to the Restricted Plan shall be April 30, 2002, assuming shareholder
approval is received at the Annual Meeting. If such approval is not received,
the Restricted Plan will continue in effect, unchanged by Amendment 2.
VOTE REQUIRED. Approval of the amendment to the Restricted Plan by
holders of a majority of the total votes cast on the proposal is required under
the Bylaws of the NASD, to which TSFG is subject because its Common Stock is
traded on the Nasdaq National Market. Abstentions and broker non-votes will not
be considered and do not constitute negative votes.
FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH THE PLAN. For a brief
summary of the federal income tax rules relevant to restricted stock awards, see
the discussion of "Federal Income Tax Consequences Associated with the Plan" in
connection with Item 2 of the Proxy (approval of the Amended and Restated
Long-Term Incentive Plan).
PLAN BENEFITS. See the Amended and Restated Restricted Stock Agreement
Plan Data table provided above in "Plan Benefits" in connection with Item 2 of
this Proxy (approval of the Amended and Restated Long-Term Incentive Plan).
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE
AMENDED AND RESTATED RESTRICTED STOCK AGREEMENT PLAN.
26
RATIFICATION OF APPOINTMENT OF
KPMG LLP AS INDEPENDENT AUDITORS
(ITEM 5 ON THE PROXY)
The Board of Directors recommends the ratification of the appointment of
KPMG LLP, independent certified public accountants, as auditors for TSFG and its
subsidiaries for fiscal year 2002 and to audit and report to the shareholders
upon the financial statements of TSFG as of and for the period ending December
31, 2002.
KPMG LLP currently serves as TSFG's independent auditors and was engaged by
TSFG pursuant to approval by the Board of Directors, as principal accountants
for TSFG starting with the 1995 fiscal year.
Representatives of KPMG LLP will be present at the Annual Meeting and such
representatives will have the opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions that the
shareholders may have. Neither the firm nor any of its members has any relation
with TSFG except in the firm's capacity as auditors or as advisors.
The appointment of auditors is approved annually by the Board of Directors
and, commencing with fiscal year 2002, subsequently submitted to the
shareholders for ratification. The decision of the Board is based on the
recommendation of the Audit Committee.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF KPMG LLP AS INDEPENDENT AUDITORS.
27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TSFG's directors and officers and their associates have had, and TSFG
expects them to have in the future, banking transactions in the ordinary course
of business with TSFG'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 $29,973,000 at December 31, 2001. During 2001, new loans of
approximately $9,145,000 were made, and repayments of principal totaled
approximately $8,126,000.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires TSFG's
directors and executive officers, and persons who own more than ten percent of a
registered class of TSFG'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 of TSFG. Executive officers, directors and
greater than ten-percent shareholders are required by SEC regulations to furnish
TSFG with copies of all Section 16(a) forms filed. To TSFG's knowledge, based
solely on a review of the copies of such reports furnished to TSFG and written
representations that no other reports were required, during 2001 all required
Section 16(a) filings applicable to its executive officers, directors and
greater than 10% beneficial owners were made.
PROPOSALS BY SHAREHOLDERS
A shareholder who wishes to present a proposal for inclusion in the
proxy materials relating to TSFG's Annual Meeting of Shareholders to be held for
2003 should submit his or her proposal on or before November 20, 2002, to the
Secretary of TSFG, 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 TSFG 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 TSFG 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 TSFG'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 TSFG 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 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 TSFG. A copy of the Bylaws is available upon
request to the Secretary of TSFG at the address indicated above.
FINANCIAL INFORMATION
TSFG's 2001 Annual Report and its Annual Report on Form 10-K (without
exhibits) for the year ended December 31, 2001 are being mailed to shareholders
contemporaneously with these Proxy Materials.
28
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 22, 2002
Greenville, South Carolina
29