SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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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.
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(Name of Registrant as Specified In Its Charter)
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(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):
________________________________________________________________________________
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________________________________________________________________________________
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________________________________________________________________________________
[_] Fee paid previously with preliminary materials:
________________________________________________________________________________
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount previously paid:
________________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
________________________________________________________________________________
3) Filing Party:
________________________________________________________________________________
4) Date Filed:
________________________________________________________________________________
102 South Main Street
Greenville, South Carolina 29601
March 17, 2003
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders
of The South Financial Group, Inc. to be held in the Gunter Theatre, Peace
Center for the Performing Arts, 300 South Main Street, Greenville, South
Carolina, on Tuesday, April 29, 2003 at 10:30 a.m.
The attached Notice of the Annual Meeting and Proxy Statement describe
the formal business to be transacted at the Annual Meeting. At the Annual
Meeting, we will also report on the operations of The South Financial Group and
its subsidiaries. Our directors and officers, as well as representatives of KPMG
Peat Marwick LLP, our independent auditors, will be present to respond to any
questions that you may have.
To ensure proper representation of your shares at the Annual Meeting,
please sign, date and return the enclosed proxy card as soon as possible, even
if you plan to attend the Annual Meeting. This will not prevent you from voting
in person, but will ensure that your vote will be counted if you are unable to
attend.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Mack I. Whittle, Jr.
Mack I. Whittle, Jr.
President and Chief Executive Officer
TSFG LOGO
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NOTICE OF 2003 ANNUAL MEETING OF SHAREHOLDERS
APRIL 29, 2003
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The 2003 Annual Meeting of Shareholders of The South Financial Group,
Inc. ("TSFG") will be held at The Gunter Theatre, 300 South Main Street,
Greenville, South Carolina, on Tuesday, April 29, 2003, at 10:30 a.m. for the
following purposes:
(1) To set the number of Directors at 17 persons and elect six
Directors;
(2) To approve TSFG's Amended and Restated Management Incentive
Compensation Plan;
(3) To amend TSFG's Amended and Restated Restricted Stock Agreement
Plan to increase the shares available for issuance by 125,000;
(4) To approve TSFG's 2004 Long-Term Incentive Plan;
(5) To ratify the appointment of KPMG LLP as independent auditors of
TSFG for fiscal year 2003; and
(6) To transact any other business that may properly come before the
Annual Meeting and any adjournment.
Common shareholders of record at the close of business on March 5, 2003
are entitled to notice of, and to vote at, the Annual Meeting.
By order of the Board of Directors,
/s/ William P. Crawford, Jr.
William P. Crawford, Jr.
Executive Vice President, General Counsel
and Secretary
Greenville, South Carolina
March 17, 2003
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SHAREHOLDERS ARE URGED TO SIGN AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY IN THE ENVELOPE PROVIDED.
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TSFG LOGO
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PROXY STATEMENT
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For the Annual Meeting of Shareholders
to be held on April 29, 2003, at 10:30 a.m.
at The Gunter Theatre, 300 South Main Street, Greenville, SC 29601
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GENERAL INFORMATION
- ------------------------------------
This Proxy Statement and the enclosed proxy materials relate to the
Annual Meeting of Shareholders of The South Financial Group, Inc. ("TSFG") to be
held on April 29, 2003, at 10:30 a.m. at The Gunter Theatre, 300 South Main
Street, Greenville, South Carolina. These proxy materials are being furnished by
TSFG in connection with a solicitation of proxies by TSFG's Board of Directors
(the "Board") and are being mailed on or about March 21, 2003.
Who May Vote at the Annual Meeting
These proxy materials are provided to holders of TSFG's common stock
who were holders of record on March 5, 2003 (the "Record Date"). Only TSFG
common shareholders of record on the Record Date are entitled to vote at the
Annual Meeting. On the Record Date, 47,372,827 shares of TSFG common stock were
outstanding.
Voting and Proxy Procedures
Each share of TSFG common stock outstanding on the Record Date will be
entitled to one vote at the Annual Meeting. Proxy cards are enclosed to
facilitate voting. Execution of the enclosed proxy card will not affect a
shareholder's right to attend the Annual Meeting. Shares of TSFG common stock
represented by proxy cards in the accompanying form will be voted in accordance
with the shareholder's instructions.
If no contrary instruction is indicated, shares represented by the
proxy cards will be voted:
(1) for setting the number of Directors at 17 and electing the six
nominees named below;
(2) for approval of TSFG's Amended and Restated Management Incentive
Compensation Plan;
(3) for an amendment to TSFG's Amended and Restated Restricted Stock
Agreement Plan to increase the shares available for issuance by
125,000;
(4) for approval of TSFG's 2004 Long-Term Incentive Plan;
(5) for ratification of the appointment of KPMG LLP as independent
auditors of TSFG for fiscal year 2003; and
(6) in the discretion of the proxy holders on any other business that
may properly come before the Annual Meeting and any adjournment.
Should any nominee for Director become unable or unwilling to accept
nomination or election, the persons acting under the proxy intend to vote for
the election of another person recommended by the Nominating and Corporate
1
Governance Committee of the Board of Directors and nominated by the Board. TSFG
has no reason to believe that any of the six nominees will be unable or
unwilling to serve if elected to office.
Aside from the five Items listed above, TSFG does not know of any other
matters that will be presented at the Annual Meeting. However, if any other
matters properly come before the Annual Meeting and any adjournment, the proxy
holders will vote them in accordance with their best judgment.
Revocation of Proxies
Any TSFG common shareholder giving a proxy has the right to revoke it
by giving written notice of revocation to TSFG's Secretary at any time before
the proxy is voted, or by executing and delivering to TSFG a later-dated proxy
at any time before the earlier proxy is voted, or by attending the Annual
Meeting and voting his or her shares in person (although attendance at the
Annual Meeting will not, in and of itself, revoke a proxy). No notice of
revocation or later-dated proxy will be effective until received by TSFG's
Secretary at or prior to the Annual Meeting.
Quorum
Holders representing a majority of the outstanding shares of TSFG
common stock, present in person or by proxy, are necessary to constitute a
quorum. Broker non-votes (which occur when a broker or other nominee holding
shares for a beneficial owner reports those shares as present but does not vote
on a proposal) are included for purposes of determining whether or not a quorum
exists.
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TABLE OF CONTENTS
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General Information ........................................................................................... 1
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Table of Contents.............................................................................................. 2
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Item No. 1 - Election of Directors............................................................................. 3
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Board and Committee Meetings................................................................................... 5
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Report of the Audit Committee of the Board of Directors........................................................ 6
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Audit Fees..................................................................................................... 6
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Stock Ownership................................................................................................ 7
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Compensation Committee Report on Executive Compensation........................................................ 8
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Total Shareholder Return....................................................................................... 11
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Executive Officers............................................................................................. 11
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Executive Compensation......................................................................................... 12
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Summary Compensation Table..................................................................................... 12
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Stock Option Grants............................................................................................ 13
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Stock Option Exercises......................................................................................... 13
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Director Compensation.......................................................................................... 14
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Employment and Change in Control Agreements.................................................................... 14
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Supplemental Executive Retirement Plan......................................................................... 17
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Item No. 2 - Approval of TSFG's Amended and Restated Management Incentive Compensation Plan.................... 18
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Item No. 3 - Approval of Amendment to TSFG's Amended and Restated Restricted Stock Agreement Plan.............. 20
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Item No. 4 - Approval of TSFG's 2004 Long-Term Incentive Plan.................................................. 22
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Item No. 5 - Ratification of KPMG LLP as Auditors for 2003..................................................... 27
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Related Party Transactions..................................................................................... 27
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Householding of Proxy Statement, Form 10-K and Annual Report to Shareholders................................... 27
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Expenses of Solicitation....................................................................................... 27
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Proposals by Shareholders...................................................................................... 28
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Section 16(a) Beneficial Ownership Reporting Compliance........................................................ 28
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Financial Information.......................................................................................... 28
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Appendix A - Management Incentive Compensation Plan ........................................................... A-1
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Appendix B - 2004 Long-Term Incentive Plan..................................................................... B-1
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2
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ITEM NO. 1 - ELECTION OF DIRECTORS
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GENERAL INFORMATION REGARDING ELECTION OF DIRECTORS
The number of Directors is being set by the shareholders, but may be
amended by the Board between annual meetings as 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. 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.
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. In
addition, Gordon W. Campbell, who was appointed to the Board in connection with
the TSFG's acquisition of Gulf West Banks, Inc. and whose term is slated to
expire at the 2005 Annual Meeting, must be voted upon by TSFG's shareholders.
INFORMATION ON NOMINEES AND DIRECTORS
Management proposes to nominate to the Board the six persons listed as
Nominees below. Each Nominee is currently serving as a Director. Unless
authority to vote for one or more Nominees is "WITHHELD," the persons named in
the accompanying proxy card 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 attached proxy card intends to vote for the election of such
other person as management may recommend.
The following table sets forth certain information regarding the
Nominees and continuing Directors, including their name and age, the period they
have served as a Director, and their occupation over the past five years.
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NOMINEES FOR DIRECTOR TO BE ELECTED AT THE 2003 ANNUAL MEETING OF SHAREHOLDERS
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GORDON W. CAMPBELL Mr. Campbell is a consultant to TSFG and Vice Chairman of Mercantile Bank. From
Age: 70 1992 until 2002, Mr. Campbell served as the President and CEO of Gulf West Banks,
Director since: 2002 Inc., a bank holding company headquartered in St. Petersburg, Florida (recently
Term Expiring: 2005 acquired by TSFG). Mr. Campbell presently serves as Vice Chairman of Templeton
Funds Annuity Company and as a director of Fiduciary Trust International of the
South and Opus South Corporation.
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M. DEXTER HAGY Mr. Hagy is a principal of Vaxa Capital Management, LLC, an investment management
Age: 58 firm formed in 1995 and headquartered in Greenville, South Carolina.
Director since: 1993
Term Expiring: 2006
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H. EARLE RUSSELL, JR. Dr. Russell is a surgeon in Greenville, South Carolina, with Greenville Surgical
Age: 61 Associates.
Director since: 1997
Term Expiring: 2006
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JOHN C. B. SMITH, JR. Mr. Smith is owner of John C.B. Smith Real Estate and is Of Counsel and a past
Age: 58 partner in the law firm of Nexsen Pruet Jacobs & Pollard, LLP, Columbia, South
Director since: 2001 Carolina.
Term Expiring: 2006
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WILLIAM R. TIMMONS, JR. Mr. Timmons, Jr. is Chairman of Canal Insurance Company, a nationwide insurer of
Age: 79 commercial motor vehicles headquartered in Greenville, South Carolina. He
Director since: 1986 currently serves as Chairman of TSFG's Board of Directors. Mr. Timmons is the
Term Expiring: 2006 father of William R. Timmons III, who is a Board member.
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SAMUEL H. VICKERS Mr. Vickers is Chairman and CEO of Design Containers, Inc., a packaging system
Age: 67 manufacturer located in Jacksonville, Florida.
Director since: 1999
Term Expiring: 2006
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3
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DIRECTORS WHOSE TERMS END AT THE 2004 ANNUAL MEETING OF SHAREHOLDERS
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WILLIAM P. BRANT Mr. Brant is a partner in the law firm of Brant, Abraham, Reiter and McCormick P.A.,
Age: 56 Jacksonville, Florida.
Director since 2001
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JUDD B. FARR Mr. Farr is the owner and President of Greenco Beverage Co., Inc., a distributorship
Age: 77 headquartered in Greenville, South Carolina. Mr. Farr has served as its President
Director since 1994 since its opening in 1965.
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C. CLAYMON GRIMES, JR. Mr. Grimes is an attorney in private practice in Georgetown, South Carolina.
Age: 80
Director since 1990
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THOMAS J. ROGERS Mr. Rogers has been Secretary and Treasurer of Strand Media, Inc., an advertising
Age: 66 company in Myrtle Beach, South Carolina, since 1985. Mr. Rogers is also an owner and
Director since 2000 director of Computer Dimension, Inc.
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DAVID C. WAKEFIELD III Mr. Wakefield has served as President of Wakefield Enterprises, LLC, a real estate
Age: 59 development and specialty products company in Anderson SC, since 1998. From November
Director since 1997 1997 to December 1998, Mr. Wakefield served as an independent consultant to TSFG
following TSFG's acquisition of First Southeast Financial Corporation. Prior to its
acquisition, Mr. Wakefield served as President and CEO of First Southeast and its
subsidiary, First Federal Savings and Loan Association of Anderson.
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DIRECTORS WHOSE TERMS END AT THE 2005 ANNUAL MEETING OF SHAREHOLDERS
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WILLIAM S. HUMMERS III Mr. Hummers joined TSFG in June 1988 in his present capacity as an executive officer
Age: 57 and principal financial officer. He is also a director of World Acceptance
Director since 1990 Corporation.
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CHARLES B. SCHOOLER Dr. Schooler is a retired optometrist in Georgetown, South Carolina and a past
Age: 74 chairman of the South Carolina State Board of Education.
Director since 1990
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EDWARD J. SEBASTIAN Mr. Sebastian is a private investor and serves in an advisory capacity for several
Age: 56 private entities. From 1986 to 1999, Mr. Sebastian served as Chairman and CEO of
Director since 2001 Resource Bancshares Corporation, a financial services company, and Chairman and CEO of
Resource Bancshares Mortgage Group, Inc., a company engaged in mortgage banking
operations.
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EUGENE E. STONE IV Mr. Stone serves as CEO of Stone International, LLC, an apparel manufacturer. He
Age: 64 formerly served as Chairman of Umbro International, Inc. (formerly Stone
Director since 1996 Manufacturing), a manufacturer of apparel and sports goods. Mr. Stone is a director of
Liberty Corporation.
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WILLIAM R. TIMMONS III Mr. William R. Timmons III is Executive Vice President, Secretary and Treasurer of
Age: 51 Canal Insurance Company, a nationwide insurer of commercial motor vehicles
Director since 2002 headquartered in Greenville, South Carolina. Mr. Timmons is the son of William R.
Timmons, Jr., who is a Board member.
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MACK I. WHITTLE, JR. Mr. Whittle has been President and CEO of TSFG since its organization in 1986. From
Age: 54 1986 until 1991, Mr. Whittle also served as President of Carolina First Bank and is
Director since 1986 currently Chairman of the Board of Directors of Carolina First Bank and Mercantile
Bank.
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4
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BOARD AND COMMITTEE MEETINGS
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COMMITTEE MEMBERSHIP
The following table sets forth the membership of the standing
committees of TSFG's Board of Directors.
---------------------------------------- ----------------- ------------------- ------------------- -----------------
DIRECTOR AUDIT COMPENSATION NOMINATING EXECUTIVE
---------------------------------------- ----------------- ------------------- ------------------- -----------------
William P. Brant X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
Gordon W. Campbell
---------------------------------------- ----------------- ------------------- ------------------- -----------------
Judd B. Farr X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
C. Claymon Grimes, Jr. X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
M. Dexter Hagy X X X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
William S. Hummers III
---------------------------------------- ----------------- ------------------- ------------------- -----------------
Thomas J. Rogers X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
H. Earle Russell, Jr. X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
Charles B. Schooler X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
Edward J. Sebastian X X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
John C.B. Smith, Jr. X X X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
Eugene E. Stone IV X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
William R. Timmons, Jr. X X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
William R. Timmons III X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
Samuel H. Vickers X X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
David C. Wakefield III X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
Mack I. Whittle, Jr. X
---------------------------------------- ----------------- ------------------- ------------------- -----------------
DESCRIPTION OF BOARD COMMITTEES
Audit Committee. The Audit Committee 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. For further
information concerning the work of the Audit Committee, see "Report of the Audit
Committee of the Board of Directors" on page 6 of this Proxy Statement and the
Audit Committee Charter attached as Appendix A to TSFG's Proxy Statement
associated with its Annual Meeting held in April 2001. The Committee met four
times in 2002.
Compensation Committee. The Compensation Committee sets TSFG's
compensation policies and makes recommendations regarding senior management
compensation. The Committee met four times in 2002.
Executive Committee. 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. The Executive Committee met five times in 2002.
Nominating and Corporate Governance Committee. The Nominating and
Corporate Governance Committee was formerly known as the "Nominating Committee".
It recommends nominees for election to the Board and addresses issues of
corporate governance. This Committee will consider recommendations for Director
nominees from shareholders. Shareholders who wish to recommend Director nominees
proposed for election at the 2004 Annual Meeting should comply with the
procedure described in "Proposals by Shareholders" below. Mr. Whittle served on
the Nominating Committee in 2002, but subsequently resigned in order to make the
Committee comprised entirely of independent Directors. The Committee met once in
2002.
BOARD MEETINGS
The Board of Directors met eight times during 2002. All members
attended at least 75% of the Board meetings and 75% of the meetings of
committees on which they served.
5
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REPORT OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
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The following report does not constitute soliciting material and is not
considered filed or incorporated by reference into any other filing by TSFG
under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended.
The Board's Audit Committee is responsible for providing independent,
objective oversight of TSFG's accounting functions and internal controls. The
Audit Committee is composed of eight 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, 2002 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 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 "Financial
Information Systems Design and Implementation Fees" and "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 its review of the representations of management and
the independent accountants, the Audit Committee recommended that the Board
include the audited consolidated financial statements in TSFG's Annual Report on
Form 10-K for the year ended December 31, 2002, filed with the Securities and
Exchange Commission.
All members of the Audit Committee concur in this report.
David C. Wakefield III, Chairman C. Claymon Grimes, Jr. W. Gairy Nichols III H. Earle Russell, Jr.
Charles B. Schooler Edward J. Sebastian William R. Timmons III Samuel H. Vickers
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AUDIT FEES
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The following table presents fees paid to KPMG for professional audit
services associated with the audit of TSFG's annual financial statements for
2002 and fees billed for other KPMG services in 2002. The Audit Committee has
considered whether the provision of these services is compatible with
maintaining KPMG LLP's independence.
Audit Fees (1) ...................................................................... $ 722,000
Financial Information Systems Design and Implementation Fees (2) ..................... --
All Other Fees (3)
Audit Related Fees............................................................. 794,000
Non-audit Related Other Fees................................................... 697,000
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Total All Other Fees................................................. 1,491,000
------------
Total Fees............................................................................ $ 2,213,000
===========
(1) Aggregate fees billed for professional services rendered for the audit of
TSFG's annual financial statements and the reviews of the financial
statements included in TSFG's Quarterly Reports on Form 10-Q for 2002.
(2) This item refers to professional services described in Paragraph (c)(4)(ii)
of Rule 2-01 of Regulation S-X.
(3) All Other Fees consists principally of services rendered in connection with
tax compliance ($197,000) and tax consulting ($500,000), services related
to acquisitions, including review of registration statements ($350,000),
audits of financial statements of certain employee benefit plans ($35,000),
subsidiary audits ($81,000), issuance of letters to underwriters ($85,000),
and information technology internal audit co-sourcing services ($243,000).
6
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STOCK OWNERSHIP
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5% BENEFICIAL OWNERS
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TSFG knows of no person or group that owns beneficially more than 5% of
the outstanding voting power as of March 5, 2003.
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DIRECTORS AND EXECUTIVE OFFICERS
- ----------------------------------------------------
The table below sets forth as of March 5, 2003 the beneficial ownership
of TSFG common stock by (1) all Directors and nominees for Director, (2) all
Named Executive Officers of TSFG (See "Summary Compensation Table" below) and
(3) all Directors and Executive Officers of TSFG as a group. Unless otherwise
indicated, all persons listed below have sole voting and investment power over
all shares beneficially owned.
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AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
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COMMON STOCK SUBJECT
COMMON STOCK TO A RIGHT PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED (1) TO ACQUIRE (1) (2) COMMON STOCK (3)
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William P. Brant 2,000 9,187 *
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Gordon W. Campbell 448,784 107,723 1.2%
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Andrew B. Cheney 4,476 16,752 *
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John C. DuBose 14,026 38,172 *
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Judd B. Farr 137,507 17,965 *
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C. Claymon Grimes, Jr. 60,321 17,965 *
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M. Dexter Hagy 11,948 17,965 *
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William S. Hummers III 63,345 87,396 *
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Thomas J. Rogers 63,623 7,187 *
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H. Earle Russell, Jr. 4,452 17,965 *
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Charles B. Schooler 26,963 17,335 *
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Edward J. Sebastian 244 4,483 *
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John C.B. Smith, Jr. 77,294 10,809 *
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Eugene E. Stone IV 720 15,445 *
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James W. Terry, Jr. 32,297 66,516 *
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William R. Timmons, Jr. 417,300 17,965 *
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William R. Timmons III 337,453 6,483 *
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Samuel H. Vickers 11,738 11,839 *
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David C. Wakefield III 64,931 (4) 13,245 *
- -----------------------------------------------------------------------------------------------------------------------
Mack I. Whittle, Jr. 110,110 159,880 *
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All Executive Officers as a Group (25 persons) 1,601,607 701,210 4.8%
- -----------------------------------------------------------------------------------------------------------------------
*Represents holdings of less than 1% of the outstanding shares of TSFG common
stock.
(1) This is based on information reported to TSFG by its Directors, nominees
and Executive Officers, and includes shares held by spouses, minor
children, affiliated companies, partnerships and trusts over which the
named person has beneficial ownership. It also includes shares allocated to
individual accounts under the TSFG's 401(k) Plan, ESOP and Deferred
Compensation Plan, voting of which is directed by the respective named
persons and group members who participate in those plans.
(2) This includes common stock options that are exercisable on March 5, 2003 or
that become exercisable within 60 days thereafter.
(3) The percentages of total beneficial ownership have been calculated based
upon 47,372,827 (the shares of TSFG common stock outstanding as of March 5,
2003). In addition, under Rule 13d-3 of the Exchange Act, the percentages
have been computed on the assumption that shares of TSFG common stock that
can be acquired within 60 days of March 5, 2003, upon the exercise of
options by a given person are outstanding, but no other shares similarly
subject to acquisition by other persons are outstanding.
(4) Mr. Wakefield disclaims beneficial ownership over 3,151 of these shares
that are owned by his spouse.
7
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COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
------------------------------------------------------------------------------
The Compensation Committee of the Board of Directors, which is composed
solely of non-employee 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 2002 and
which will be applicable in 2003.
Our Guiding Principles
The Compensation Committee is committed to administering a compensation
program that espouses TSFG's values, drives corporate results, and supports the
long-term and short-term goals of TSFG. Our compensation philosophy is grounded
by three principles:
o tying pay to performance,
o aligning executive and shareholder interests, and
o 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 selected financial services market surveys
for financial institutions of a comparable size.
Variable compensation has historically been paid to executive officers
through TSFG's existing Short-Term 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
have provided 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 has been variable, the
actual amount of incentive pay has been subject to performance.
The Compensation Committee has recently reviewed TSFG's compensation
practices to ensure that TSFG is continuing to adhere to its compensation
philosophy of tying pay to performance. After extensive review of its
compensation plans and selected financial services market surveys, the Committee
has determined that in order to strengthen the tie between executive pay and
performance for its executive officers, it would be appropriate and desirable to
increase the amount of pay subject to performance that could be earned by TSFG's
executive officers. To effectuate this, the Short-Term Incentive Plan was
terminated at the end of 2002 and TSFG adopted the Management Incentive
Compensation Plan, which is subject to shareholder approval at TSFG's 2003
Annual Meeting. In addition, TSFG adopted the 2004 Long-Term Incentive Plan,
which is also subject to shareholder approval at the 2003 Annual Meeting. It is
our belief that these new plans will strengthen TSFG's objective of paying for
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.
8
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." The plans focus on reaching and
exceeding established performance goals, which are developed to reflect what the
Committee considers superior performance for TSFG. In determining these 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 was designed to reward such executive
officers for performance contributions that impacted the overall success of TSFG
or its operating units during the fiscal year. The Short-Term Incentive Plan was
intended to motivate those employees and direct their efforts toward achievement
of key annual performance objectives. TSFG has focused on the following areas of
performance:
o earnings per share,
o asset quality (i.e., nonperforming assets as a percent of total
loans and net charge-offs as a percent of average loans), and
o certain strategic incentives.
The relative weighting of these measures was customized on an
individual basis to reflect specific roles, responsibilities, and objectives.
The Short-Term Incentive Plan established a point system, which
determined cash incentive awards based on the extent to which TSFG met
performance goals. Each goal was considered separately. If one goal fell below
threshold, the other goals were evaluated on their own merits. The threshold
level of performance was 85% of a particular performance goal. At this level,
executive officers received only 35% of the targeted incentive for that goal.
Any performance less than the threshold level would result in no cash incentive
for that particular goal. If TSFG achieved 125% or more of a performance goal,
the cash incentive would be 150% of the targeted incentive.
In addition, a corporate profitability modifier allowed Short-Term
Incentive Plan awards to be adjusted up or down based on overall corporate
financial performance. The modifier could reduce incentive plan awards if
overall performance fell below expectations or increase awards if overall
corporate performance exceeded expectations.
Before 2002 began: As part of the planning process, the Compensation
Committee established superior standards of performance consistent with the
"stretch goal" philosophy of the Committee. A target incentive was created for
each eligible executive. This target ranged from 35% to 50% of base salary,
depending on the executive, which was payable if 100% of the performance goals
are met. The Board of Directors approved each of the measures and target
incentives. TSFG communicated the threshold, target, and superior award
opportunities to each eligible executive officer. The Compensation Committee and
the Board of Directors reserved the authority to subjectively adjust award
payouts (positively or negatively) under the Short-Term Incentive Plan if
financial considerations or operating circumstances warranted such action.
After 2002 year end: Under the Short-Term Incentive Plan, corporate
financial statements were generated, and TSFG determined whether it was
successful in achieving its performance measures. Payouts were made accordingly.
2001 Long-Term Incentive Plan
The primary objective of the 2001 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 2001 Long-Term Incentive Plan focuses
on strategic financial success factors, which are intended to align the interest
of TSFG's executives and shareholders. The 2001 Long-Term Incentive Plan
consists of two components: stock options and performance shares. The 2001
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
9
awards provide a long-term incentive opportunity targeted at the top quartile of
the peer group. The 2001 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 2001 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 selected 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. If TSFG's
shareholders approve the 2004 Long-Term Incentive Plan, participants in that
plan will receive their stock options pursuant to the 2004 Long-Term Incentive
Plan, rather than the Amended and Restated Stock Option Plan.
TSFG's policy is not to reprice stock options.
PERFORMANCE SHARE ELEMENT
The 2001 Long-Term Incentive Plan also provides for the grant of common
stock under TSFG's Amended and Restated Restricted Stock Agreement Plan. These
shares 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, 150% of the targeted 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. If TSFG's
shareholders approve the 2004 Long-Term Incentive Plan, participants in that
plan will receive their restricted share grants pursuant to the 2004 Long-Term
Incentive Plan, rather than the Amended and Restated Restricted Stock Agreement
Plan.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code provides that, in general,
a public company may not deduct compensation paid to its CEO or one of the other
top five executive officers to the extent the compensation exceeds $1 million
per year. Historically, it has been TSFG's policy not to pay compensation in
excess of the amount referenced in Section 162(m), and in the event the
compensation was to exceed this limit, TSFG would not have received the
deduction. During the past fiscal year, the Compensation Committee reviewed its
compensation plans to determine the appropriateness of adopting a bonus plan
that complies with the provisions of Section 162(m) so that compensation payable
under such plan would be deductible. After reviewing such plans, the
Compensation Committee has determined that it is in the best interests of TSFG's
shareholders to approve a new bonus plan for "covered employees" so that
compensation in excess of $1,000,000 payable under such plan would be deductible
by TSFG.
CEO Compensation
Mr. Whittle's 2002 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 $525,000 at the beginning of 2002. The Committee
established Mr. Whittle's base salary by analyzing compensation levels of other
chief executive officers of comparable size banks based on targeted 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 Incentive Plan and was targeted at 50% of base salary if all
performance measures were achieved. Because of TSFG's extraordinary performance,
the Compensation Committee used its discretion under the plan to pay Mr. Whittle
$600,000 for 2002.
Compensation Committee:
Thomas J. Rogers, Chairman William P. Brant Judd B. Farr M. Dexter Hagy
Edward J. Sebastian John C. B. Smith, Jr. Eugene E. Stone IV
10
-----------------------------------------------
TOTAL SHAREHOLDER RETURN
-----------------------------------------------
The following graph sets forth the performance of TSFG's common stock
for the five year period ended December 31, 2002 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, 1997 and that all subsequent dividends
were reinvested in additional shares.
- -------------------------------------- ------------- ------------ --------------- ------------ -------------- ------------
DEC-97 DEC-98 DEC-99 DEC-00 DEC-01 DEC-02
- -------------------------------------- ------------- ------------ --------------- ------------ -------------- ------------
The South Financial Group, Inc. 100.00 119.43 87.43 65.38 90.12 107.44
- -------------------------------------- ------------- ------------ --------------- ------------ -------------- ------------
S&P SmallCap 600 100.00 98.69 110.94 124.03 132.13 112.80
- -------------------------------------- ------------- ------------ --------------- ------------ -------------- ------------
SNL Southeast Bank Index 100.00 106.46 83.77 84.12 104.79 115.76
- -------------------------------------- ------------- ------------ --------------- ------------ -------------- ------------
-----------------------------------------------
EXECUTIVE OFFICERS
-----------------------------------------------
TSFG's executive officers are appointed by the Board of Directors. The
following persons serve as executive officers of TSFG.
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
TSFG
NAME AGE TSFG OFFICES CURRENTLY HELD OFFICER SINCE
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
Mack I. Whittle, Jr. 54 President & Chief Executive Officer 1986
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
Andrew B. Cheney 53 President - Mercantile Bank 2000
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
William P. Crawford, Jr. 40 Executive Vice President - General Counsel & Secretary 2002
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
John C. DuBose 51 Executive Vice President - Technology 1998
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
William S. Hummers III 57 Vice Chairman, Executive Vice President & Principal Financial Officer 1988
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
Mary A. Jeffrey 52 Executive Vice President - Human Resources 2002
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
James S. Ross 51 Executive Vice President - Finance 2001
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
Kendall L. Spencer 50 Executive Vice President - Retail Banking 2000
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
Michael W. Sperry 57 Executive Vice President - Credit Administration 1998
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
James W. Terry, Jr. 55 President - Carolina First Bank 1991
- ---------------------------- ------ --------------------------------------------------------------------- ----------------
11
-------------------------------------------
EXECUTIVE COMPENSATION
-------------------------------------------
- ------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------
The following table sets forth information concerning compensation paid
by TSFG during the fiscal years ended December 31, 2002, 2001 and 2000 to TSFG's
CEO and to each of the four most highly compensated executive officers other
than the CEO who were executive officers at December 31, 2002 (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 included for a particular year (including bonus compensation and
long-term compensation payments) were actually paid or issued in the first
quarter of the following year. For example, bonus payments paid in February 2003
are listed as 2002 compensation, because they were earned as of December 31,
2002.
------------------------------------------- ----------------------------------------------
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. 2002 569,640 600,000 (1) 103,159 16,402 -- 116,934 (2)
President, Chief Executive 2001 467,555 301,500 (1) 81,000 30,686 -- 65,094
Officer 2000 388,130 96,080 (1) -- 16,400 -- 77,432
- -----------------------------------------------------------------------------------------------------------------------
Andrew B. Cheney 2002 242,640 187,500 (1) 41,662 6,624 -- 27,243 (3)
President, Mercantile Bank 2001 229,880 90,000 (1) 33,336 9,004 -- 11,644
2000 180,833 39,417 (1) -- 25,000 -- 8,400
- -----------------------------------------------------------------------------------------------------------------------
John C. DuBose 2002 256,800 200,000 (1) 41,662 6,624 -- 45,688 (4)
Executive Vice President 2001 221,800 125,000 (1) 31,662 10,585 -- 31,644
2000 278,667 46,808 (1) -- 5,000 -- 32,281
- -----------------------------------------------------------------------------------------------------------------------
William S. Hummers III 2002 276,280 210,000 (1) 46,674 7,419 -- 70,974 (5)
Executive Vice President 2001 251,190 150,000 (1) 37,494 11,614 -- 39,144
2000 250,200 55,431 (1) -- 5,000 -- 50,885
- -----------------------------------------------------------------------------------------------------------------------
James W. Terry, Jr. 2002 253,740 187,500 (1) 41,662 6,624 -- 41,256 (6)
President, 2001 228,695 90,000 (1) 33,336 10,879 -- 26,644
Carolina First Bank 2000 227,300 49,272 (1) -- 5,000 -- 31,290
- -----------------------------------------------------------------------------------------------------------------------
(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) $11,000 contributed by TSFG to its 401(k)
on behalf of Mr. Whittle to match fiscal 2002 pre-tax deferral
contributions, all of which was vested, (ii) $1,444 contributed to TSFG's
Employee Stock Ownership Plan (the "ESOP"), (iii) $19,170 in premiums
paid by TSFG on behalf of Mr. Whittle with respect to insurance not
generally available to all TSFG employees and (iv) $85,320 paid in
connection with TSFG Supplemental Executive Retirement Plan (the "SERP").
(3) This amount is comprised of (i) $11,000 contributed by TSFG to its 401(k)
on behalf of Mr. Cheney to match fiscal 2002 pre-tax deferral
contributions, of which 60% was vested, (ii) $1,444 contributed to the
ESOP, (iii) $524 in premiums paid by TSFG on behalf of Mr. Cheney with
respect to insurance not generally available to all TSFG employees, and
(iv) $14,275 paid in connection with the SERP.
(4) This amount is comprised of (i) $11,000 contributed by TSFG to its 401(k)
on behalf of Mr. DuBose to match fiscal 2002 pre-tax deferral
contributions, of which 80% was vested, (ii) $1,444 contributed to the
ESOP, (iii) $11,116 in premiums paid by TSFG on behalf of Mr. DuBose with
respect to insurance not generally available to all TSFG employees, and
(iv) $22,128 paid in connection with the SERP.
(5) This amount is comprised of (i) $11,000 contributed by TSFG to its 401(k)
on behalf of Mr. Hummers to match fiscal 2002 pre-tax deferral
contributions, all of which was vested, (ii) $1,444 contributed to the
ESOP, (iii) $11,072 in premiums paid by TSFG on behalf of Mr. Hummers
with respect to insurance not generally available to all TSFG employees,
and (iv) $47,458 paid in connection with the SERP.
(6) This amount is comprised of (i) $11,000 contributed by TSFG to its 401(k)
on behalf of Mr. Terry to match fiscal 2002 pre-tax deferral
contributions, of which all was vested, (ii) $1,444 contributed to the
ESOP, (iii) $1,829 in premiums paid by TSFG on behalf of Mr. Terry with
respect to insurance not generally available to all TSFG employees, (iv)
$954 in TSFG Executive Deferred Compensation Plan, and (v) $26,029 paid
in connection with the SERP.
12
- ----------------------------------------
STOCK OPTIONS GRANTS
- ----------------------------------------
The following table sets forth certain information regarding stock
option, which are included in the Summary Compensation Table for 2002 for the
Named Executive Officers. These stock options were awarded on January 2, 2003
for employment services in 2002.
OPTION GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------------------
Individual Grants
- -------------------------------------------------------------------------------------------------------------------------
Number of % of Total Fair Market
Securities Options Value per Share
Underlying Granted to of Common Exercise
Options Granted Employees Stock at Time Price Expiration Grant Date
Name (#) in 2002 of Grant ($/Sh)(1) ($/Sh) Date (2) Valuation($)(3)
- -------------------------------------------------------------------------------------------------------------------------
Mack I. Whittle, Jr. 16,402 2.26% 21.42 21.42 1/2/13 94,456
- -------------------------------------------------------------------------------------------------------------------------
Andrew B. Cheney 6,624 0.91% 21.42 21.42 1/2/13 38,146
- -------------------------------------------------------------------------------------------------------------------------
John C. DuBose 6,624 0.91% 21.42 21.42 1/2/13 38,146
- -------------------------------------------------------------------------------------------------------------------------
William S. Hummers III 7,419 1.02% 21.42 21.42 1/2/13 42,725
- -------------------------------------------------------------------------------------------------------------------------
James W. Terry, Jr. 6,624 0.91% 21.42 21.42 1/2/13 94,456
- -------------------------------------------------------------------------------------------------------------------------
(1) The number shown is the closing price of a share of TSFG 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 2.80%, expected volatility of 29%,
risk-free interest rate of 4.19% and expected lives of 8 years.
- --------------------------------------
STOCK OPTION EXERCISES
- --------------------------------------
The following table sets forth information with respect to options to
purchase shares of TSFG common stock held by the Named Executive Officers and
the number of shares covered by both exercisable and unexercisable stock options
in 2002. 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 TSFG common stock. This
table excludes any stock option grants awarded subsequent to December 31, 2002.
Accordingly, this table does not reflect the stock options set forth in the
Stock Option Grants table immediately above.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
- -----------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Value Options at 2002 Fiscal at 2002 Fiscal
Acquired on Realized Year-End (#) Year-End ($) (1)
Name Exercise (#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- -----------------------------------------------------------------------------------------------------------------------
Mack I. Whittle, Jr. - - 156,308 93,404 232,127 131,240
- -----------------------------------------------------------------------------------------------------------------------
Andrew B. Cheney - - 11,282 22,722 60,819 99,750
- -----------------------------------------------------------------------------------------------------------------------
John C. DuBose - - 36,775 14,510 21,163 40,844
- -----------------------------------------------------------------------------------------------------------------------
William S. Hummers III - - 85,742 32,539 93,523 46,301
- -----------------------------------------------------------------------------------------------------------------------
James W. Terry, Jr. - - 65,046 14,804 72,092 41,626
- -----------------------------------------------------------------------------------------------------------------------
(1) The indicated value is based on exercise prices ranging from $13.16 to
$31.26 per share and a per share value of $20.66, which was the closing
market price of a share of TSFG's common stock on December 31, 2002 as
reported by the Nasdaq National Market.
13
- --------------------------------------
DIRECTOR COMPENSATION
- --------------------------------------
During 2002, 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 TSFG common stock, which was valued based on the Black-Scholes
valuation method. The balance was paid in cash.
- ------------------------------------------------------------------------
EMPLOYMENT AND CHANGE IN CONTROL AGREEMENTS
- ------------------------------------------------------------------------
TSFG has entered into Noncompetition, Severance and Employment
agreements with certain executive officers of TSFG, including Andrew B. Cheney,
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. 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
14
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.
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 60, 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.
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
15
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
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
16
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
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:
- ---------------------------------------- ---------------- -------------- ---------------------- ------------------------
Retirement Annual Duration of
Name Year of Birth Age Retirement Benefit Retirement Benefit
- ---------------------------------------- ---------------- -------------- ---------------------- ------------------------
Mack I. Whittle, Jr. 1948 65 $370,068 15 years
- ---------------------------------------- ---------------- -------------- ---------------------- ------------------------
Andrew B. Cheney 1950 65 69,281 15 years
- ---------------------------------------- ---------------- -------------- ---------------------- ------------------------
John C. DuBose 1951 65 130,027 15 years
- ---------------------------------------- ---------------- -------------- ---------------------- ------------------------
William S. Hummers III 1945 65 136,096 15 years
- ---------------------------------------- ---------------- -------------- ---------------------- ------------------------
James W. Terry, Jr. 1948 65 102,014 15 years
- ---------------------------------------- ---------------- -------------- ---------------------- ------------------------
17
------------------------------------------------------------
ITEM NO. 2 - APPROVAL OF TSFG'S
MANAGEMENT INCENTIVE COMPENSATION PLAN
------------------------------------------------------------
INTRODUCTION
We are seeking approval of our Management Incentive Compensation Plan
for participants who are or are expected to be "covered employees" within the
meaning of Section 162(m)(3) of the Internal Revenue Code of 1986, as amended,
including, as of the date hereof, the Chief Executive Officer and the other
Named Executive Officers set forth in the Summary Compensation Table above.
It is our intention that, upon approval by the shareholders of the
Management Incentive Compensation Plan, any amounts payable to "covered
employees," under the plan will be fully deductible by TSFG under the provisions
of Section 162(m) of the Code. It is also our belief that the Management
Incentive Compensation Plan supports TSFG's objective of paying for performance
that increases shareholder value.
The following description of the material terms of the Management
Incentive Compensation Plan as applicable to participants designated by the
Committee who are or are expected to be "covered employees" is qualified in its
entirety by reference to the terms of the plan, a copy of which is attached to
this proxy statement as Appendix A.
DESCRIPTION OF THE PLAN
Purpose. The Management Incentive Compensation Plan is designed to
provide a significant and variable economic opportunity to selected officers of
TSFG as a reflection of their individual and group contributions to the success
of TSFG and its subsidiaries.
Administration. The plan will be administered by the Compensation
Committee of the Board or such other committee of the Board which is composed of
not less than three outside Directors, each of whom will serve at the pleasure
of the Board.
Eligibility. The Committee will, in its sole discretion, determine for
each measurement period those officers of TSFG who are eligible to participate
in the plan for such measurement period based upon each participant's
opportunity to have a substantial impact on the operating results of TSFG. The
total number of employees currently eligible to participate in the plan is ten.
Target Bonus. Prior to the commencement of a measurement period, the
Committee will grant bonus award opportunities to the participants, some of whom
may be "covered employees." Payment of these awards will be conditioned upon
satisfaction of specific performance goals measured over a "measurement period"
established by the Committee prior to the time of grant. Awards will be paid in
cash. The extent, if any, to which an award will be payable will be based upon
the degree of achievement of such pre-established performance goals over such
specified measurement period. However, the Committee may, in its sole
discretion, reduce the amount which would otherwise be payable with respect to a
measurement period (in which case the participant will have no right to receive
the amount of such reduction, even if the performance goals are met). The target
bonus is determined based upon the participant's base salary as of the day
immediately preceding the commencement of the measurement period. The maximum
bonus payable to a participant for any measurement period is 250% of such
participant's annual base salary (as determined above) appropriately adjusted to
reflect the length of such measurement period.
18
Measurement Period. The measurement period will be TSFG's fiscal year,
unless a shorter period is designated by the Committee at the time the
performance goals are established with respect to a particular award.
Measurement periods may not extend beyond one year.
Performance Goals. Under the plan, bonus awards may be based on TSFG's
stock price, market share, sales, earnings per share, return on equity, costs,
operating income, marketing-spending efficiency, return on operating assets,
return on assets, core non-interest income, and/or levels of cost savings during
a specified measurement period.
Payment of an Award. At the time the award is granted, the Committee
will prescribe a formula to determine the percentage of the target bonus that
may be payable based upon the degree of attainment of the performance goals
during the measurement period. If the minimum performance goals established by
the Committee are not met, no payment will be made. To the extent that the
minimum performance goals are met, and upon written certification by the
Committee that the performance goals have been satisfied to a particular extent
and any other material terms and conditions of the awards have been satisfied,
payment will be made on the payment date in accordance with the prescribed
formula unless the Committee determines, in its sole discretion, to reduce the
payment to be made. In no event will an award be paid to a participant until the
plan has been approved by TSFG's shareholders.
Maximum Payable. The maximum amount payable to a participant for any
fiscal year of TSFG will be $2,500,000.
Termination of Employment. In the event that a participant's employment
is terminated, no amount will be payable unless their termination is due to
death or disability. Participants who remain employed through the measurement
period but whose employment is terminated prior to the payment date will be
entitled to receive bonuses payable with respect to such measurement period,
unless their employment is terminated for cause.
Amendment and Termination. The Board has the right to amend, modify or
terminate the plan from time to time but no such amendment or modification may,
without prior approval of TSFG's shareholders, alter the business criteria on
which the performance goals are based or increase the maximum amount payable
under the plan, materially increase the amount available for awards, materially
increase the benefits accruing to participants, materially modify the
requirements regarding eligibility for participation in the plan or, without the
consent of the participant affected, impair any award made prior to the
effective date of the amendment, modification or termination.
Shareholder Approval. The Plan will be effective as of the time it is
approved by TSFG's shareholders, as described below under "Vote Required."
Deferral Elections. The Committee may at its option establish
procedures pursuant to which participants are permitted to defer the receipt of
bonuses payable under the plan.
VOTE REQUIRED
The Plan requires the approval of holders of a majority of the votes
cast by the TSFG shareholders with respect to its approval. Abstentions and
broker non-votes will have no effect upon the vote on this matter.
RECOMMENDATION
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
MANAGEMENT INCENTIVE COMPENSATION PLAN.
19
------------------------------------------------------------------------------
ITEM NO. 3 - APPROVAL OF AMENDMENT TO TSFG'S
AMENDED AND RESTATED RESTRICTED STOCK AGREEMENT PLAN
------------------------------------------------------------------------------
We are seeking approval of an amendment to TSFG's Amended and Restated
Restricted Stock Agreement Plan (the "Restricted Stock Plan"), which increases
the number of shares of TSFG's common stock that may be issued thereunder from
750,000 shares to 875,000 shares. The Board recommends approval of the proposed
amendment because it believes that the Restricted Stock Plan is an effective
component of employee compensation. Except as set forth above, the Restricted
Stock Plan would remain unaltered in all material respects.
The Restricted Stock Plan is summarized below. However, this summary is
qualified in its entirety by reference to the text of the Restricted Stock 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 P.
Crawford, Jr.
Administration and Eligibility. The Restricted Stock Plan is
administered by the Board's Compensation Committee, which must be comprised
solely of members thereof who are "disinterested persons" within the meaning of
Section 16 of the Exchange Act. The Committee is authorized to grant shares to
such employees as it determines appropriate 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 Stock Plan. The
Committee is also empowered to administer and interpret the Restricted Stock
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
Stock Plan. The Committee may also utilize guidelines set forth in other
compensation plans of TSFG, including the 2001 Long-Term Incentive Plan, in
determining any matters related to the award of shares under the Restricted
Stock Plan. The awards are exclusively made to officers and key employees
(including non-executive officers) of TSFG. For 2002 performance, 55 persons
received awards under the Restricted Stock Plan.
Transferability; Forfeiture and Assignability. 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 lapses. 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 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. Shares granted under the
Restricted Stock Plan are assignable only in limited instances in accordance
with applicable law.
Amendment. The Committee may modify and amend the Restricted Stock 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
Stock Plan without the consent of any employee whose rights are affected by such
amendment.
Effective Date. The original effective date of the Restricted Stock
Plan was the date of its adoption by the Board in 1986. The effective date of
the amendment to the Restricted Stock Plan shall be April 30, 2003, assuming
shareholder approval is received at the Annual Meeting. If such approval is not
received, the Restricted Stock Plan will continue in effect, unchanged by the
proposed amendment.
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 No. 4 of this Proxy Statement (approval of the 2004
Long-Term Incentive Plan).
20
RESTRICTED STOCK PLAN DATA
Since the inception of the Restricted Stock Plan, originally adopted in
1986, TSFG has awarded 505,578 shares. At December 31, 2002, there were 40,120
shares of unvested restricted stock outstanding with a market value of
approximately $829,000. Since December 31, 2002, 19,701 shares of the unvested
restricted shares have vested. In addition, a grant of 69,805 shares was made in
2003 for 2002 performance, which included 23,265 shares that vested immediately.
The following table provides information on awards under the Restricted Stock
Plan to Named Executive Officers and other groups of employees of TSFG,
including direct awards under the Restricted Stock Plan and indirect awards
under the 2001 Long-Term Incentive Plan.
- -----------------------------------------------------------------------------------------------------------------------
2002 RESTRICTED STOCK AWARDS
UNVESTED SHARES DOLLAR VALUE OF UNVESTED GRANTED ON JANUARY 2, 2003 (#)
OUTSTANDING AT SHARES OUTSTANDING AT ------------------------------------
DECEMBER 31, 2002 DECEMBER 31, 2002 ($)(1) VESTED UNVESTED
- -----------------------------------------------------------------------------------------------------------------------
Mack I. Whittle, Jr. 3,000 61,980 1,605 3,211
- -----------------------------------------------------------------------------------------------------------------------
Andrew B. Cheney 1,235 25,515 648 1,297
- -----------------------------------------------------------------------------------------------------------------------
John C. DuBose 1,173 24,234 648 1,297
- -----------------------------------------------------------------------------------------------------------------------
William S. Hummers III 1,389 28,697 726 1,453
- -----------------------------------------------------------------------------------------------------------------------
James W. Terry, Jr. 1,235 25,515 648 1,297
- -----------------------------------------------------------------------------------------------------------------------
Current Executive Officers as a Group 11,488 237,342 2,634 5,264
- -----------------------------------------------------------------------------------------------------------------------
All Employees, Excluding Executive 28,632 591,537 16,356 32,721
Officers, as a Group
- -----------------------------------------------------------------------------------------------------------------------
(1) Based on $20.66, which was the closing price of TSFG's Common Stock on
December 31, 2002 as reported by Nasdaq.
EQUITY COMPENSATION PLAN DATA
The following table sets forth information regarding TSFG's equity
compensation plans at January 31, 2003. The additional 125,000 shares under the
Restricted Stock Agreement Plan and the 2,000,000 shares under the 2004
Long-Term Incentive Plan, for which authorization is sought at this Annual
Meeting, are not included in this table.
- ---------------------------------------- ---------------------- ------------------- -----------------------------------
Plan Category Number of securities Weighted-average Number of securities remaining
to be issued upon exercise price of available for future issuance
exercise of outstanding under equity compensation plans
outstanding options, options, warrants (excluding securities reflected
warrants and rights and rights in the first column of numbers)
---------------------------------------- ---------------------- ------------------- -----------------------------------
Equity compensation plans 4,077,001(2) $16.69 1,532,819
approved by security holders(1)
- ---------------------------------------- ---------------------- ------------------- -----------------------------------
Equity compensation plans not -- -- --
approved by security holders(3)
- ---------------------------------------- ---------------------- ------------------- -----------------------------------
Total 4,077,001(2) $16.69 1,532,819
- ---------------------------------------- ---------------------- ------------------- -----------------------------------
(1) These plans (as defined in the applicable SEC rules) are as follows: The
TSFG Stock Option Plan, the TSFG Restricted Stock Agreement Plan, the
Director Stock Option Plan, the Amended and Restated Fortune 50 Plan, and
various non-TSFG option plans to which TSFG became a successor by merger
(collectively "non-TSFG Plans").
(2) Of this amount, 879,724 options have been issued pursuant to non-TSFG
Plans.
(3) TSFG has no "equity compensation plans" as defined in the applicable SEC
rules, which have not been approved by TSFG (or its predecessor's)
shareholders.
VOTE REQUIRED
The Restricted Stock Plan requires the approval of holders of a
majority of the votes cast by the TSFG shareholders with respect to its
approval. Abstentions and broker non-votes will have no effect upon the vote on
this matter.
21
RECOMMENDATION
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE RESTRICTED STOCK PLAN.
22
----------------------------------------------------------------------------
ITEM NO. 4 - APPROVAL OF TSFG'S
2004 LONG-TERM INCENTIVE PLAN
----------------------------------------------------------------------------
INTRODUCTION
We are seeking approval of our 2004 Long-Term Incentive Plan. It is our
intention that, upon approval by the shareholders of the 2004 Long-Term
Incentive Plan, any awards granted or amounts payable to "covered employees,"
under the plan will be fully deductible by TSFG under the provisions of Section
162(m) of the Code. It is also our belief that the 2004 Long-Term Incentive Plan
supports TSFG's objective of paying for performance, which increases shareholder
value.
The following description of the material terms of the 2004 Long-Term
Incentive Plan is qualified in its entirety by reference to the terms of the
2004 Long-Term Incentive Plan, a copy of which is attached to this proxy
statement as Appendix B.
DESCRIPTION
Purpose. The purpose of the Plan is to give TSFG a competitive
advantage in attracting, retaining and motivating officers, employees, directors
and consultants and to provide TSFG and its subsidiaries and affiliates with a
stock plan providing incentives directly linked to the profitability of TSFG's
businesses and increases in TSFG'S shareholder value.
Eligible Individuals. Directors, officers, employees and consultants
of, and prospective employees and consultants of, TSFG and its subsidiaries and
affiliates are eligible to participate in the Plan. As of March 5, 2003, there
are (approximately) 57 persons eligible to participate in the Plan.
Administration. The Plan is administered by the Compensation Committee
of the Board, except with respect to grants to non-employee Directors, which
will be administered by the Nominating Committee. The Committee administering
the plan will be referred to in this description as the "Committee". The
Committee is authorized to delegate certain administrative responsibilities to
individuals selected by it in its discretion. The Committee will determine the
eligible individuals to whom and the time or times at which awards will be
granted, the number of shares subject to awards to be granted to any eligible
individual, the duration of any award cycle, and any other terms and conditions
of the grant, in addition to those contained in the Plan. Each grant under the
Plan will be confirmed by and subject to the terms of an award agreement.
Authorized Shares. The maximum number of shares of common stock that
may be delivered to participants and their beneficiaries under the Plan is
2,000,000. No participant may be granted awards covering in excess of 100,000
shares of common stock in any calendar year. Shares subject to an award under
the Plan shall be TSFG's authorized and unissued shares. No more than 600,000
shares of restricted stock may be issued during the term of the Plan. The
closing price of the TSFG Common Stock as of March 10, 2002 was $19.69.
If any award is forfeited, or if any option (or SAR, if any)
terminates, expires or lapses without being exercised, or if any SAR is
exercised for cash, shares of common stock subject to such awards will again be
available for distribution in connection with awards under the Plan. If the
option price of any option or the strike price of any freestanding SAR is
satisfied by delivering shares of common stock to TSFG (by either actual
delivery or by attestation), only the number of shares of common stock delivered
to the participant net of the shares of common stock delivered to TSFG or
attested to will be deemed delivered for purposes of determining the maximum
numbers of shares of common stock available for delivery under the Plan. To the
extent any shares of common stock subject to an award are not delivered to a
participant because such shares are used to satisfy an applicable
23
tax-withholding obligation, such shares will not be deemed to have been
delivered for purposes of determining the maximum number of shares of common
stock available for delivery under the Plan. The maximum number of shares of
common stock that may be issued pursuant to options intended to be incentive
stock options is 1,400,000 shares.
In the event of certain types of corporate transactions or
restructurings, such as stock splits, mergers, consolidations, separations,
spin-offs, reorganizations, liquidations, reorganizations, or other
distributions of stock or property of TSFG (including an extraordinary stock or
cash dividend), the Committee or the Board may make adjustments in the aggregate
number and kind of shares reserved for issuance under the Plan, in the maximum
share limitations upon stock options, incentive stock options, stock
appreciation rights and other awards to be granted to any individual, in the
number, kind and option price or strike price of outstanding stock options and
stock appreciation rights, in the number and kind of shares subject to other
outstanding awards granted under the Plan, and any other equitable substitutions
or adjustments that Committee or the Board determine to be appropriate in their
sole discretion.
Stock Options. Stock options may be granted alone or in addition to
other awards. Stock options may be "incentive stock options" (within the meaning
of Section 422 of the Internal Revenue Code) or nonqualified stock options, as
designated by the Committee and specified in the option agreement setting forth
the terms and provisions of the options. The term of each stock option will be
fixed by the Committee but no incentive stock option may be exercised more than
10 years after the date it is granted. The exercise price per share of common
stock purchasable under a stock option will be determined by the Committee but,
except in the case of stock options granted in lieu of foregone compensation,
may not be less than the fair market value of the common stock on the date of
grant. Options granted under the Plan cannot be repriced without shareholder
approval.
Except as otherwise provided in the Plan, stock options will be
exercisable at the time or times and subject to the terms and conditions
determined by the Committee, and the Committee may at any time accelerate the
exercisability of a stock option. A participant exercising an option may pay the
exercise price in cash or, if approved by the Committee, with previously
acquired shares of common stock or a combination of cash and stock. The
Committee, in its discretion, may allow the cashless exercise of options through
the use of a broker-dealer, to the extent permitted by applicable law, or for
payment of the exercise price by withholding from the shares issuable upon
exercise a number of shares having a fair market value on the date of exercise
equal to the aggregate exercise price. The Plan contains provisions, which apply
unless otherwise determined by the Committee, regarding the vesting and
post-termination exercisability of options held by optionees whose employment
with TSFG terminates by reason of death, disability, retirement, or otherwise.
The Plan provides that the Committee may establish procedures permitting an
optionee to elect to defer to a later time the receipt of shares issuable upon
the exercise of a stock option and/or to receive cash at such later time in lieu
of the deferred shares.
Stock Appreciation Rights. Stock appreciation rights may be granted
separately or in tandem with all or part of any stock option granted under the
Plan. A stock appreciation right granted separately from any stock option under
the Plan is called a freestanding SAR. A stock appreciation right granted in
tandem with a stock option under the Plan is called a tandem SAR. A tandem SAR
will terminate and will no longer be exercisable upon the termination or
exercise of the related stock option. A tandem SAR may be exercised by an
optionee, at the time or times and to the extent the related stock option is
exercisable, by surrendering the applicable portion of the related stock option
in accordance with procedures established by the Committee. Upon exercise, a
tandem SAR permits the optionee to receive cash, shares of common stock, or a
combination of cash or stock, as determined by the Committee. The amount of cash
or the value of the shares is equal to the excess of the fair market value of a
share of common stock on the date of exercise over the per share exercise price
of the related stock option, multiplied by the number of shares with respect to
which the tandem SAR is exercised.
A freestanding SAR may have a term of up to ten years. Except in the
case of freestanding SARs granted in lieu of compensation, the strike price
cannot be lower than the fair market value of the stock on the grant date. The
strike price cannot be repriced without shareholder approval. The Committee can
determine exercisability restrictions on freestanding SARs at the time of grant.
Upon exercise, a freestanding SAR permits the holder to receive cash, shares of
common stock, or a combination of cash or stock, as determined by the Committee.
The amount of cash or the value of the shares is equal to the excess of the fair
market value of a share of common stock on the date of exercise over the strike
price, multiplied by the number of shares with respect to which the freestanding
SAR is exercised. The Plan contains provisions, which apply unless otherwise
determined by the Committee, regarding the vesting and post-termination
24
exercisability of freestanding SARs held by an individual whose employment with
TSFG terminates by reason of death, disability, retirement or otherwise. The
Committee may also establish procedures permitting the holder of a freestanding
SAR to defer to a later time the receipt of shares issuable upon the exercise of
a freestanding SAR and/or to receive cash at such later time in lieu of the
deferred shares.
Restricted Stock. The Plan authorizes the Committee to grant restricted
stock to individuals with such restriction periods as the Committee may
designate. The Committee may also provide at the time of grant that restricted
stock cannot vest unless applicable performance goals are satisfied.
If the grant is intended to be a "qualified performance based award,"
these goals must be based on the attainment of specified levels of one or more
of the following measures: revenue growth; earnings before interest, taxes,
depreciation, and amortization; earnings before interest and taxes; operating
income; pre- or after- tax income; earnings per share; cash flow; cash flow per
share; return on equity; return on invested capital; return on assets; economic
value added (or an equivalent metric); share price performance; total
shareholder return; improvement in or attainment of expense levels; improvement
in or attainment of working capital levels. These goals may be established on a
corporate-wide basis or with respect to one or more business units, divisions,
or subsidiaries. Measurement of performance against goals may exclude impact of
charges for restructurings, discontinued operations, extraordinary items, and
other unusual or non-recurring items, and the cumulative effects of accounting
changes, each as defined by generally accepted accounting principles and as
identified in the financial statements, notes to the financial statements, or
management's discussion and analysis within TSFG's annual report.
A "qualified performance-based award" is a grant of restricted stock or
performance units designated as such by the Committee at the time of grant based
upon a determination that (1) the recipient is or may be a "covered employee"
within the meaning of Section 162(m)(3) of the Internal Revenue Code in the year
in which TSFG would expect to be able to claim a tax deduction with respect to
such performance unit awards, and (2) the Committee wishes such grant to qualify
for the exemption from the limitation on deductibility of compensation with
respect to any covered employee imposed by Section 162(m) of the Internal
Revenue Code. The Committee will specify the performance goals to which any
"qualified performance-based award" will be subject. No more than 25,000 shares
of common stock may be subject to "qualified performance-based awards" granted
to any participant in any fiscal year.
The provisions of restricted stock awards (including any applicable
performance goals) need not be the same with respect to each participant. During
the restriction period, the Committee may require that the stock certificates
evidencing restricted shares be held by TSFG. Restricted stock may not be sold,
assigned, transferred, pledged or otherwise encumbered. Restricted stock is
forfeited upon termination of employment, unless otherwise provided by the
Committee. Other than these restrictions on transfer and any other restrictions
the Committee may impose, the participant will have all the rights of a holder
of stock holding the class or series of stock that is the subject of the
restricted stock award.
Performance Units. Performance units may be granted either alone or in
addition to other awards granted under the Plan. Performance units may be
performance-based stock awards or performance-based cash awards. Performance
units may be granted subject to the attainment of performance goals and/or the
continued service of the participant. As noted above, performance units can be
"qualified performance-based awards." At the conclusion of the award cycle, the
Committee will evaluate the degree to which any applicable performance goals
have been achieved and the performance amounts earned, and will cause to be
delivered the amount earned in either cash or shares, at the election of the
Committee.
Except to the extent otherwise provided in the applicable Performance
unit agreement or the Plan, all rights to receive cash or stock in settlement of
Performance units will be forfeited upon a participant's termination of
employment for any reason during the award cycle or before any applicable
performance goals are satisfied, unless the Committee, in its discretion, waives
any or all remaining payment limitations with respect to such participant's
performance units. However, the Committee may not waive the satisfaction of the
applicable performance goals in the case of performance units that are
"qualified performance-based awards" unless the participant's employment is
terminated by reason of death or disability or is terminated by TSFG without
cause or by the participant for good reason.
Other Stock-Based Awards. Other awards of common stock and other awards
that are valued by reference to, or otherwise based upon common stock, including
(without limitation) dividend equivalents and convertible debentures, may also
be granted under the Plan, either alone or in conjunction with other awards.
25
Transferability of Awards. Awards are nontransferable other than by
will or the laws of descent and distribution. However, in the discretion of the
Committee, nonqualified stock options and stock appreciation rights may be
transferred as expressly permitted by the Committee, including pursuant to a
transfer to members of the holder's immediate family. The transfer may be made
directly or indirectly or by means of a trust or partnership or otherwise. Stock
options and stock appreciation rights may be exercised only by the initial
holder, any such permitted transferee or a guardian, legal representative or
beneficiary.
Repricing Policy. Options and stock appreciation rights granted under
the Plan cannot be repriced without shareholder approval.
Change in Control. Unless provided otherwise by the Committee, in the
event of a change in control (as defined in the Plan), any option or stock
appreciation right that is not then exercisable and vested will become fully
exercisable and vested, any restrictions on shares of restricted stock will
lapse, and performance units will be deemed earned and payable in full in cash.
In addition, unless otherwise determined by the Committee, if a stock option or
stock appreciation right holder's employment is terminated by TSFG other than
for cause, death or disability or if such holder voluntarily resigns for good
reason during the two-year period following a change in control, such holder may
exercise the option or stock appreciation right until at least the first
anniversary of such termination, unless the term of the option expires first.
If the Committee so provides, in the event of a change in control, a
holder of a nonqualified stock option or a freestanding stock appreciation right
may have the right, for 60 days after the change in control, to surrender all or
part of the stock option or stock appreciation right and receive cash for the
excess of (A) the greater of (i) the fair market value of a share of common
stock at the time of surrender or (ii) the highest trading price of a share of
common stock during the 60-day period preceding the change in control (or, under
some circumstances, the value of the consideration for each share of common
stock paid in the change of control, if higher) over (B) the exercise price of
the stock option or strike price of the stock appreciation right, whichever is
applicable.
Effectiveness, Amendments and Termination. The Plan will be effective
as of the time it is approved by a majority of the votes cast by TSFG's
shareholders with respect to its approval. The Board of Directors may at any
time amend, alter, or discontinue the Plan but may not impair the rights of a
holder of outstanding awards without the holder's consent except for an
amendment made to comply with applicable law, stock exchange rules or accounting
rules. No amendment may be made without the approval of TSFG's shareholders to
the extent such approval is required by applicable law or stock exchange rules.
The Committee may amend the terms of any outstanding stock option or other award
but no such amendment may cause a "qualified performance-based award" to cease
to qualify for the Section 162(m) exemption or impair the rights of any holder
without the holder's consent except an amendment made to cause the Plan or award
to comply with applicable law, stock exchange rules or accounting rules. The
Committee's authority to amend any award is subject to the condition that the
Committee may not cause any such award to cease to qualify as a "qualified
performance-based award."
In the event an award is granted to an individual who is employed
outside the United States and who is not compensated from a payroll maintained
in the United States, the Committee may, in its sole discretion, modify the
provisions of the grant as they pertain to such individual to achieve the
purposes of the Plan.
FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the federal income tax rules relevant to
participants in the Plan who receive options, based upon the Internal Revenue
Code as currently in effect. These rules are highly technical and subject to
change in the future. The following summary relates only to the federal income
tax treatment of the awards and the state, local and foreign tax consequences
may be substantially different.
Stock options granted under the Plan may be either nonqualified options
or incentive options for federal income tax purposes.
26
Nonqualified Options. Generally, the optionee does not recognize any
taxable income at the time of grant of a nonqualified option. Upon the exercise
of the nonqualified option the optionee will recognize ordinary income, equal to
the excess of the fair market value of the common stock acquired on the date of
exercise over the exercise price, and will be subject to wage and employment tax
withholding. TSFG will generally be entitled to a deduction equal to such
ordinary income at the time that the employee recognizes such income. The
optionee will have a capital gain or loss upon the subsequent sale of the stock
in an amount equal to the sale price less the fair market value of the common
stock on the date of exercise. The capital gain or loss will be long-term or
short-term depending on whether the stock was held for more than one year after
the exercise date. TSFG will not be entitled to a deduction for any capital gain
realized. Capital losses on the sale of common stock acquired upon an option's
exercise may be used to offset capital gains.
Incentive Stock Options. Generally, the optionee will not recognize any
taxable income at the time of grant or exercise of an option that qualifies as
an incentive option under Section 422 of the Internal Revenue Code. However, the
excess of the stock's fair market value at the time of exercise over the
exercise price will be included in the optionee's alternative minimum taxable
income and thereby may cause the optionee to be subject to an alternative
minimum tax. The optionee will recognize long-term capital gain or loss,
measured by the difference between the stock sale price and the exercise price,
when the shares are sold.
In order to qualify for the incentive option tax treatment described in
the preceding paragraph, the optionee must be employed by TSFG continuously from
the time of the option's grant until three months before the option's exercise
and the optionee must not sell the shares until more than one year after the
option's exercise date and more than two years after its grant date. If the
optionee does not satisfy these conditions, the optionee will recognize taxable
ordinary income when the optionee sells the shares in an amount equal to the
difference between the option exercise price and the lesser of (i) the fair
market value of the stock on the exercise date and (ii) the sale price. If the
sale price exceeds the fair market value on the exercise date, the excess will
be taxable to the optionee as long-term or short-term capital gain depending on
whether the optionee held the stock for more than one year. Notwithstanding the
foregoing, incentive stock options will not be treated as incentive stock
options to the extent that the aggregate fair market value of stock (determined
as of the date of grant) with respect to which the options are first exercisable
during any calendar year exceeds $100,000. TSFG will not be entitled to any
deduction by reason of the grant or exercise of the incentive option or the sale
of stock received upon exercise after the required holding periods have been
satisfied. If the optionee does not satisfy the required holding periods before
selling the shares and consequently recognizes ordinary income, TSFG will be
allowed a deduction corresponding to the optionee's ordinary income.
Withholding Taxes. Because the amount of ordinary income the optionee
recognizes with respect to the receipt or exercise of an award may be treated as
compensation that is subject to applicable withholding of federal, state and
local income taxes and Social Security taxes, TSFG may require the optionee to
pay the amount required to be withheld by TSFG before delivering to the
individual any shares or other payment to be received under the Plan.
Arrangements for payment may include deducting the amount of any withholding or
other tax due from other compensation, including salary or bonus, otherwise
payable to the individual.
VOTE REQUIRED
The 2004 Long-Term Incentive Plan requires the approval of holders of a
majority of the votes cast by the TSFG shareholders with respect to its
approval. Abstentions and broker non-votes will have no effect upon the vote on
this matter.
RECOMMENDATION
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE 2004 LONG-TERM INCENTIVE PLAN.
27
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ITEM NO. 5 - RATIFICATION OF KPMG LLP AS AUDITORS FOR 2003
------------------------------------------------------------------------------
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 2003 and to audit and report to the
shareholders upon the financial statements of TSFG as of and for the period
ending December 31, 2003. 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.
Ratification requires the approval of holders of a majority of the
votes cast by the TSFG shareholders with respect to this matter. Abstentions and
broker non-votes will have no effect upon the vote on this matter.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF KPMG LLP AS INDEPENDENT AUDITORS.
----------------------------------------------------
RELATED PARTY 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. The aggregate dollar amount of these loans was
approximately $21.3 million at December 31, 2002. During 2002, new loans of
approximately $7.2 million were made, and repayments of principal totaled
approximately $15.8 million.
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HOUSEHOLDING OF PROXY STATEMENT, FORM 10-K AND ANNUAL REPORT
------------------------------------------------------------------------------
Our stock transfer agent and a number of brokers with accountholders
who are owners of TSFG common stock will be "householding" our proxy materials.
This means that only one copy of this Proxy Statement, the 2002 Annual Report to
Shareholders and the Annual Report on Form 10-K may have been sent to you and
the other TSFG shareholders who share your address. Householding is designed to
reduce the volume of duplicate information that shareholders receive and reduce
TSFG's printing and mailing expenses.
If your household has received only one copy of these materials, and
you would prefer to receive separate copies of these documents, either now or in
the future, please call us at 864-255-4919, or write us at Investor Relations,
The South Financial Group, 102 South Main Street, Greenville, South Carolina
29601. We will deliver separate copies promptly. If you are now receiving
multiple copies of our proxy materials and would like to have only one copy of
these documents delivered to your household in the future, please contact us in
the same manner.
--------------------------------------------------------------
EXPENSES OF SOLICITATION
--------------------------------------------------------------
TSFG 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.
Georgeson employees may contact shareholders by mail, by telephone or through
personal solicitation. TSFG expects to pay Georgeson approximately $7,500 plus
expense reimbursements, in connection with such services. Proxies may also be
solicited by telephone or through personal solicitation conducted by regular
28
TSFG employees. Employees 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.
--------------------------------------------------------------
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 in
2004 should submit his or her proposal on or before November 19, 2003, 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.
------------------------------------------------------------------------------
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
------------------------------------------------------------------------------
Section 16(a) of the Exchange Act requires TSFG's Directors, executive
officers and 10% shareholders to file reports of holdings and transactions in
TSFG common stock with the Securities and Exchange Commission. Based on a review
of Section 16(a) reports received by TSFG and written representations from its
Directors and executive officers, TSFG believes that all of its executive
officers, Directors and 10% shareholders have made all filings required under
Section 16(a) for 2002 in a timely manner.
--------------------------------------------------------
FINANCIAL INFORMATION
--------------------------------------------------------
TSFG'S 2002 ANNUAL REPORT TO SHAREHOLDERS AND ANNUAL REPORT ON FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 2002 (WITHOUT EXHIBITS) ARE ENCLOSED.
ADDITIONAL COPIES MAY BE OBTAINED UPON REQUEST FROM THE SOUTH FINANCIAL GROUP,
POST OFFICE BOX 1029, GREENVILLE, SOUTH CAROLINA 29602, ATTENTION: INVESTOR
RELATIONS DEPARTMENT. COPIES MAY ALSO BE OBTAINED ONLINE AT
HTTP://WWW.THESOUTHGROUP.COM.
By order of the Board of Directors,
/s/ William P. Crawford, Jr.
William P. Crawford, Jr.
Executive Vice President, General Counsel
and Secretary
March 17, 2003
APPENDIX A
THE SOUTH FINANCIAL GROUP MANAGEMENT INCENTIVE COMPENSATION PLAN
I PURPOSE
The South Financial Group Management Incentive Compensation Plan (the
"Plan") which, subject to approval by the stockholders of The South Financial
Group (the "Company"), shall be effective with respect to Covered Employees as
of January 1, 2003, is designed to provide a significant and variable economic
opportunity to selected officers and employees of the Company as a reflection of
their individual and group contributions to the success of the Company and its
subsidiaries. Payments pursuant to Section IX of the Plan are intended to
qualify under Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as
amended, as excluded from the term "applicable employee remuneration" (such
payments are hereinafter referred to as "Excluded Income").
II DEFINITIONS
"Board" shall mean the Board of Directors of the Company.
"Bonus" shall mean a cash award payable to a Participant pursuant to
the terms of the Plan, including an Incentive Award.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the Compensation Committee of the Board.
"Company" shall mean The South Financial Group, a South Carolina
corporation, and its subsidiaries.
"Covered Employees" shall mean Participants designated by the Committee
who are or are expected to be "covered employees" within the meaning of Section
162(m)(3) of the Code for the Measurement Period in which a Bonus hereunder is
payable and for whom the Committee intends that amounts payable hereunder
constitute Excluded Income.
"Disinterested Person" shall mean a member of the Board who qualifies
as an "outside director" for purposes of Section 162(m) of the Code.
"Incentive Award" shall have the meaning set forth in Article IX
hereof.
"Individual Agreement" shall mean an employment, consulting or similar
agreement between a Participant and the Company or one of its Subsidiaries or
Affiliates.
"Measurement Period" shall have the meaning set forth in Article IX
hereof.
"Participant" shall have the meaning set forth in Article IV hereof.
"Payment Date" shall mean the date following the conclusion of a
particular Measurement Period on which the Committee certifies that applicable
Performance Goals have been satisfied and authorizes payment of corresponding
Bonuses.
"Performance Goals" shall have the meaning set forth in Article IX
hereof.
"Target Bonus" shall mean the amount determined by multiplying a
Participant's base salary as of the last day of the applicable Measurement
Period by a percentage designated by the Committee in its sole discretion at the
time the award is granted, which percentage need not be the same for each
Participant. Notwithstanding the foregoing, in the case of a Participant who is
a Covered Employee, such Target Bonus shall be determined based upon the
Participant's base salary as of the day immediately preceding the commencement
of the applicable Measurement Period. The maximum Bonus payable to a Participant
for any Measurement Period shall be 250 percent of such Participant's annual
base salary (as determined above) appropriately adjusted to reflect the length
of such Measurement Period.
III ADMINISTRATION
The Plan shall be administered by the Committee or such other committee
of the Board which is composed of not less than two Disinterested Persons, each
of whom shall be appointed by and serve at the pleasure of the Board.
In administering the Plan, the Committee may at its option employ
compensation consultants, accountants and counsel (who may be the independent
auditors and outside counsel and compensation consultants of the Company) and
other persons to assist or render advice to the Committee, all at the expense of
the Company.
IV ELIGIBILITY
The Committee shall, in its sole discretion, determine for each
Measurement Period those officers and employees of the Company who shall be
eligible to participate in the Plan (the "Participants") for such Measurement
Period based upon such Participants' opportunity to have a substantial impact on
the Company's operating results. Nothing contained in the Plan shall be
construed as or be evidence of any contract of employment with any Participant
for a term of any length nor shall participation in the Plan in any Measurement
Period by any Participant require continued participation by such Participant in
any subsequent Measurement Period.
V DETERMINATION OF BONUS
Subject to Article IX hereof, the form and amount of each Bonus award
to a Participant shall be determined by and in the discretion of the Committee.
The Committee may condition the earning of a Bonus upon the attainment of
specified performance goals measured over a period not greater than one year
relating to the Participant or the Company, or a subsidiary, division or
department of the Company for or within which the Participant is primarily
A-1
employed, or upon such other factors or criteria as the Committee shall
determine, which performance goals may be different for each Participant.
Bonuses payable under the Plan will consist of a cash award from the Company,
based upon a percentage of the Target Bonus and the degree of achievement of
such performance goals over the Measurement Period. Bonuses under this Plan for
Covered Employees shall be subject to pre-established Performance Goals in
accordance with Article IX hereof. The Committee may, in its sole discretion,
increase (other than for Covered Employees) or decrease the amount of any Bonus
payable to a Participant and may award Bonuses to Participants (other than
Covered Employees) even though the Bonuses are not earned. Bonuses earned or
otherwise awarded will be paid on the Payment Date.
VI TERMINATION OF EMPLOYMENT
In the event that a Participant's employment with the Company
terminates for any reason prior to the Payment Date with respect to any Bonus,
the balance of any Bonus which remains unpaid at the time of such termination
shall be payable to the Participant, or forfeited by the Participant, in
accordance with the terms of the award granted by the Committee; provided,
however, that in the case of a Covered Employee, no amount shall be payable
unless the Performance Goals are satisfied unless the termination of employment
of the Covered Employee is a termination due to death or disability.
Participants who remain employed through the Measurement Period but whose
employment is terminated prior to the Payment Date shall be entitled to receive
Bonuses payable with respect to such Measurement Period, unless such employment
is terminated for cause (as defined at common law, or if the Participant is
party to an Individual Agreement, as defined therein).
VII AMENDMENT AND TERMINATION
The Board shall have the right to amend, modify or terminate the Plan
from time to time but no such amendment or modification shall, without prior
approval of the Company's stockholders, change Article IX of this Plan to alter
the business criteria on which the Performance Goals are based or to increase
the amount set forth in Section (e) of Article IX, materially increase the
amount available for Incentive Awards, materially increase the benefits accruing
to Participants hereunder who are Covered Employees, materially modify the
requirements regarding eligibility for participation in the Plan or, without the
consent of the Participant affected, impair any award made prior to the
effective date of the amendment, modification or termination.
VIII MISCELLANEOUS
Bonus payments shall be made from the general funds of the Company and
no special or separate fund shall be established or other segregation of assets
made to assure payment. No Participant or other person shall have under any
circumstances any interest in any particular property or assets of the Company.
The Plan shall be governed by and construed in accordance with the laws of the
State of South Carolina, without regard to its principles of conflict of laws.
IX PROCEDURES FOR CERTAIN DESIGNATED PARTICIPANTS
Bonuses under the Plan to Participants who are Covered Employees shall
be subject to pre-established Performance Goals as set forth herein.
Notwithstanding Article V hereof, the Committee shall not have discretion to
modify the terms of awards to such Participants except as specifically set forth
in this Article IX.
Target Bonus. Prior to the commencement of a Measurement Period, the
Committee shall grant bonus award opportunities ("Incentive Awards") to such of
the Participants who may be Covered Employees, payment of which shall be
conditioned upon satisfaction of specific Performance Goals measured over a
period not greater than one year established by the Committee in writing prior
to or at the time of grant. An Incentive Award shall consist of a cash award
from the Company to be based upon a percentage of a Target Bonus. The extent, if
any, to which an Incentive Award will be payable will be based upon the degree
of achievement of such pre-established Performance Goals over such specified
Measurement Period; provided, however, that the Committee may, in its sole
discretion, reduce the amount which would otherwise be payable with respect to a
Measurement Period (under which circumstances the Participant will have no right
to receive the amount of such reduction even if the Performance Goals are met).
Measurement Period. The Measurement Period will be a period of one
fiscal year, unless a shorter period is otherwise selected and established in
writing by the Committee at the time the Performance Goals are established with
respect to a particular Incentive Award (the period so specified being herein
referred to as the "Measurement Period").
Performance Goals. The performance goals ("Performance Goals")
established by the Committee at the time an Incentive Award is granted will be
comprised of specified levels of the Company's stock price, market share, sales,
asset quality, non-performing assets, earnings per share, return on equity,
costs, operating income, marketing-spending efficiency, return on operating
assets, return on assets, core non-interest income and/or levels of cost savings
during the Measurement Period, provided that the outcome of such Performance
Goals shall be substantially uncertain at the time the Performance Goals are
established.
Payment of an Incentive Award. At the time the Incentive Award is
granted, the Committee shall prescribe a formula to determine the percentage of
the Target Bonus which may be payable based upon the degree of attainment of the
Performance Goals during the Measurement Period. If the minimum Performance
Goals established by the Committee are not met, no payment will be made to a
Participant who is a Covered Employee. To the extent that the minimum
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Performance Goals are satisfied or surpassed, and upon written certification by
the Committee that the Performance Goals have been satisfied to a particular
extent and any other material terms and conditions of the Incentive Awards have
been satisfied, payment shall be made on the Payment Date in accordance with the
prescribed formula based upon a percentage of the Target Bonus unless the
Committee determines, in its sole discretion, to reduce the payment to be made.
In no event shall an Incentive Award be paid to a Covered Employee unless and
until the Plan ahs been approved by the Company's stockholders.
Maximum Payable. The maximum amount payable to a Covered Employee for
any fiscal year of the Company shall be $2,500,000.
X DEFERRAL ELECTIONS
The Committee may at its option establish procedures pursuant to which
Participants are permitted to defer the receipt of Bonuses payable hereunder.
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APPENDIX B
THE SOUTH FINANCIAL GROUP, INC. 2004 LONG-TERM INCENTIVE PLAN
SECTION 1. Purpose; Definitions
The purpose of the Plan is to give the Company a competitive advantage
in attracting, retaining and motivating officers, employees, directors and/or
consultants and to provide the Company and its Subsidiaries and Affiliates with
a stock plan providing incentives directly linked to the profitability of the
Company's businesses and increases in Company shareholder value.
Certain terms used herein have definitions given to them in the first
place in which they are used. In addition, for purposes of the Plan, the
following terms are defined as set forth below:
(a) "Affiliate" means a corporation or other entity controlled by,
controlling or under common control with the Company.
(b) "Award" means a Stock Appreciation Right, Stock Option, Restricted
Stock, Performance Unit, or other stock-based award granted pursuant to the
terms of the Plan.
(c) "Award Agreement" means any written agreement, contract or other
instrument or document evidencing the grant of an Award.
(d) "Award Cycle" means a period of consecutive fiscal years or portions
thereof designated by the Committee over which Performance Units are to be
earned.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" means, unless otherwise provided by the Committee in an Award
Agreement, (i) "Cause" as defined in any Individual Agreement to which the
Participant is a party, or (ii) if there is no such Individual Agreement or if
it does not define Cause: (A) conviction of the Participant for committing a
felony under federal law or the law of the state in which such action occurred,
(B) dishonesty in the course of fulfilling the Participant `s employment duties,
(C) willful and deliberate failure on the part of the Participant to perform his
or her employment duties in any material respect, or (D) prior to a Change in
Control, such other events as shall be determined by the Committee. The
Committee shall, unless otherwise provided in an Individual Agreement with the
Participant have the sole discretion to determine whether "Cause" exists, and
its determination shall be final.
(g) "Change in Control" and "Change in Control Price" have the meanings set
forth in Sections 11(b) and (c), respectively.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
(i) "Commission" means the Securities and Exchange Commission or any
successor agency.
(j) "Committee" means the Committee referred to in Section 2.
(k) "Common Stock" means common stock, par value $1.00 per share, of the
Company.
(l) "Company" means The South Financial Group, Inc., a South Carolina
corporation.
(m) "Covered Employee" means a Participant designated prior to the grant of
Restricted Stock or Performance Units by the Committee who is or may be a
"covered employee" within the meaning of Section 162(m)(3) of the Code in the
year in which Restricted Stock or Performance Units are expected to be taxable
to such Participant.
(n) "Disability" means, unless otherwise provided by the Committee, (i)
"Disability" as defined in any Individual Agreement to which the Participant is
a party, or (ii) if there is no such Individual Agreement or it does not define
"Disability," permanent and total disability as determined under the Company's
Long Term Disability Plan applicable to the Participant.
(o) "Early Retirement" means retirement from active employment with the
Company, a Subsidiary or Affiliate pursuant to the early retirement provisions
of the applicable pension plan of such employer.
(p) "Effective Date" shall have the meaning set forth in Section 16.
(q) "Eligible Individuals" mean directors, officers, employees and
consultants of the Company or any of its Subsidiaries or Affiliates, and
prospective employees and consultants who have accepted offers of employment or
consultancy from the Company or its Subsidiaries or Affiliates, who are or will
be responsible for or contribute to the management, growth or profitability of
the business of the Company, or its Subsidiaries or Affiliates.
(r) "Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
(s) "Fair Market Value" means, except as otherwise provided by the
Committee, as of any given date, the average of the highest and lowest per-share
sales prices for a share of Common Stock during normal business hours on the
NASDAQ or such other national securities market or exchange as may at the time
be the principal market for the Common Stock, or if the shares were not traded
on such national securities market or exchange on such date, then on the next
preceding date on which such shares of Common Stock were traded, all as reported
by such source as the Committee may select.
(t) "Incentive Stock Option" means any Stock Option designated as, and
qualified as, an "incentive stock option" within the meaning of Section 422 of
the Code.
(u) "Individual Agreement" means an employment, consulting or similar
written agreement between a Participant and the Company or one of its
Subsidiaries or Affiliates.
(v) "Involuntary Termination" means a Termination of Employment by reason
of an Involuntary Termination as defined in an Individual Agreement to which the
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Participant is a party that is then in effect. If a Participant is not party to
an Individual Agreement, or if it does not define "Involuntary Termination," no
Termination of Employment of that Participant shall be considered to be an
Involuntary Termination.
(w) "NonQualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(x) "Normal Retirement" means retirement from active employment with the
Company, a Subsidiary or Affiliate at or after age 65.
(y) "Option Price" shall have the meaning set forth in Section 5(d).
(z) "Outside Director" means a director who qualifies as an "independent
director" within the meaning of Rule 4200 of the National Association of
Securities Dealers, as an "outside director" within the meaning of Section
162(m) of the Code, and as a "non-employee director" within the meaning of Rule
16b-3 promulgated under the Exchange Act.
(aa) "Performance Goals" means the performance goals established by the
Committee in connection with the grant of Restricted Stock or Performance Units.
In the case of Qualified Performance-Based Awards, (i) such goals shall be based
on the attainment of specified levels of one or more of the following measures:
specified levels of the Company's stock price, market share, sales, asset
quality, non-performing assets, earnings per share, return on equity, costs,
operating income, marketing-spending efficiency, return on operating assets,
return on assets, core non-interest income and/or levels of cost savings and
(ii) such Performance Goals shall be set by the Committee within the time period
prescribed by Section 162(m) of the Code and related regulations.
(bb) "Performance Units" means an Award granted under Section 8.
(cc) "Plan" means The South Financial Group, Inc. 2004 Long Term Incentive
Plan, as set forth herein and as hereinafter amended from time to time.
(dd) "Qualified Performance-Based Award" means an Award of Restricted Stock
or Performance Units designated as such by the Committee at the time of grant,
based upon a determination that (i) the recipient is or may be a "covered
employee" within the meaning of Section 162(m)(3) of the Code in the year in
which the Company would expect to be able to claim a tax deduction with respect
to such Restricted Stock or Performance Units and (ii) the Committee wishes such
Award to qualify for the Section 162(m) Exemption.2
(ee) "Restricted Stock" means an Award granted under Section 7.
(ff) "Retirement" means Normal or Early Retirement.
(gg) "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.
(hh) "Section 162(m) Exemption" means the exemption from the limitation on
deductibility imposed by Section 162(m) of the Code that is set forth in Section
162(m)(4)(C) of the Code.
(ii) "Stock Appreciation Right" means an Award granted under Section 6.
(jj) "Stock Option" means an Award granted under Section 5.
(kk) "Subsidiary" means any corporation, partnership, joint venture or
other entity during any period in which at least a 50% voting or profits
interest is owned, directly or indirectly, by the Company or any successor to
the Company.
(ll) "Termination of Employment" means the termination of the Participant's
employment with, or performance of services for, the Company and any of its
Subsidiaries or Affiliates. An Participant employed by, or performing services
for, a Subsidiary or an Affiliate shall also be deemed to incur a Termination of
Employment if the Subsidiary or Affiliate ceases to be such a Subsidiary or an
Affiliate, as the case may be, and the Participant does not immediately
thereafter become an employee of, or service-provider for, the Company or
another Subsidiary or Affiliate. Temporary absences from employment because of
illness, vacation or leave of absence and transfers among the Company and its
Subsidiaries and Affiliates shall not be considered Terminations of Employment.
SECTION 2. Administration
(a) The Plan shall be administered by the Compensation Committee or such
other committee of the Board as the Board may from time to time designate (the
"Committee"), which shall be composed of not less than three Outside Directors,
and shall be appointed by and serve at the pleasure of the Board, except with
respect to Awards to non-employee directors, which shall be administered by the
Nominating Committee. All references to the "Committee" with respect to grants
to non-employee directors shall refer to the Nominating Committee.
(b) The Committee shall have plenary authority to grant Awards pursuant to
the terms of the Plan to Participants.
(c) Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(i) To select the Participants to whom Awards may from time to time be
granted;
(ii) To determine whether and to what extent any type of Award is to
be granted hereunder;
(iii) To determine the number of shares of Common Stock to be covered
by each Award granted hereunder;
(iv) To determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price (subject to
Section 5(a)), any vesting condition, restriction or limitation (which may
be related to the performance of the Participant, the Company or any
Subsidiary or Affiliate) and any vesting acceleration or forfeiture waiver
regarding any Award and the shares of Common Stock relating thereto, based
on such factors as the Committee shall determine;
(v) Subject to the terms of the Plan, including without limitation
Section 13, to modify, amend or adjust the terms and conditions of any
Award, at any time or from time to time, including but not limited to
Performance Goals; provided, however, that the Committee may not adjust
upwards the amount payable with respect to a Qualified Performance-Based
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Award or waive or alter the Performance Goals associated therewith in a
manner that would violate Section 162(m) of the Code;
(vi) To determine to what extent and under what circumstances Common
Stock and other amounts payable with respect to an Award shall be deferred;
and (vii) To determine under what circumstances an Award may be settled in
cash or Common Stock under Sections 5(k), 6(b)(ii) and 8(b)(iv).
(d) The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall
from time to time deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
(e) The Committee may act only by a majority of its members then in office.
Except to the extent prohibited by applicable law or the applicable rules of a
stock exchange, the Committee may (i) allocate all or any portion of its
responsibilities and powers to any one or more of its members and (ii) delegate
all or any part of its responsibilities and powers to any person or persons
selected by it, provided that no such delegation may be made that would cause
Awards or other transactions under the Plan to cease to be exempt from Section
16(b) of the Exchange Act or cause an Award designated as a Qualified
Performance-Based Award not to qualify for, or to cease to qualify for, the
Section 162(m) Exemption. Any such allocation or delegation may be revoked by
the Committee at any time.
(f) Any determination made by the Committee with respect to any Award shall
be made in the sole discretion of the Committee at the time of the grant of the
Award or, unless in contravention of any express term of the Plan, at any time
thereafter. All decisions made by the Committee or any appropriately delegated
officer pursuant to the provisions of the Plan shall be final and binding on all
persons, including the Company, its Affiliates, Subsidiaries, shareholders and
Participants.
(g) Any authority granted to the Committee may also be exercised by the
full Board, except to the extent that the grant or exercise of such authority
would cause any Award or transaction to become subject to (or lose an exemption
under) the short-swing profit recovery provisions of Section 16 of the Exchange
Act or cause an Award designated as a Qualified Performance-Based Award not to
qualify for, or to cease to qualify for, the Section 162(m) Exemption. To the
extent that any permitted action taken by the Board conflicts with action taken
by the Committee, the Board action shall control.
SECTION 3. Common Stock Subject to Plan
(a) The maximum number of shares of Common Stock that may be delivered to
Participants and their beneficiaries under the Plan shall be 2,000,000. No
Participant may be granted Stock Options and Stock Appreciation Rights covering
in excess of 100,000 shares of Common Stock in any calendar year. Shares subject
to an Award under the Plan may be authorized and unissued shares or may be
treasury shares. No more than 600,000 shares of Restricted Stock may be issued
during the term of the Plan.
(b) If any Award is forfeited, or if any Stock Option (or Stock
Appreciation Right, if any) terminates, expires or lapses without being
exercised, or if any Stock Appreciation Right is exercised for cash, shares of
Common Stock subject to such Awards shall again be available for distribution in
connection with Awards under the Plan. If the Option Price of any Stock Option
or the Strike Price of any Freestanding Stock Appreciation Right is satisfied by
delivering shares of Common Stock to the Company (by either actual delivery or
by attestation), only the number of shares of Common Stock delivered to the
Participant net of the shares of Common Stock delivered to the Company or
attested to shall be deemed delivered for purposes of determining the maximum
numbers of shares of Common Stock available for delivery under the Plan. To the
extent any shares of Common Stock subject to an Award are not delivered to a
Participant because such shares are used to satisfy an applicable
tax-withholding obligation, such shares shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of Common
Stock available for delivery under the Plan. The maximum number of shares of
Common Stock that may be issued pursuant to Stock Options intended to be
Incentive Stock Options shall be 1,400,000 shares.
(c) In the event of any change in corporate capitalization (including, but
not limited to, a change in the number of shares of Common Stock outstanding),
such as a stock split or a corporate transaction, such as any merger,
consolidation, separation, including a spin-off, or other distribution of stock
or property of the Company (including any extraordinary cash or stock dividend),
any reorganization (whether or not such reorganization comes within the
definition of such term in Section 368 of the Code) or any partial or complete
liquidation of the Company, the Committee or Board may make such substitution or
adjustments in the aggregate number and kind of shares reserved for issuance
under the Plan, and the maximum limitation upon Stock Options and Stock
Appreciation Rights and other Awards to be granted to any Participant, in the
number, kind and Option Price and Strike Price of shares subject to outstanding
Stock Options and Stock Appreciation Rights, in the number and kind of shares
subject to other outstanding Awards granted under the Plan and/or such other
equitable substitution or adjustments as it may determine to be appropriate in
its sole discretion (including, without limitation, an amount in cash therefor);
provided, however, that the number of shares subject to any Award shall always
be a whole number. Such adjusted Option Price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any Stock Option.
SECTION 4. Eligibility
Awards may be granted under the Plan to Eligible Individuals.
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SECTION 5. Stock Options
(a) Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options and
NonQualified Stock Options. Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.
(b) The Committee shall have the authority to grant any Participant
Incentive Stock Options, NonQualified Stock Options or both types of Stock
Options (in each case with or without Stock Appreciation Rights); provided,
however, that grants hereunder are subject to the limits on grants set forth in
Section 3. Incentive Stock Options may be granted only to employees of the
Company and its subsidiaries or parent corporation (within the meaning of
Section 424(f) of the Code). To the extent that any Stock Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option on or subsequent to its grant date, it
shall constitute a NonQualified Stock Option.
(c) Stock Options shall be evidenced by Award Agreements, the terms and
provisions of which may differ. An Award Agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
NonQualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects a Participant to receive a grant of a Stock
Option, determines the number of shares of Common Stock to be subject to such
Stock Option to be granted to such Participant and specifies the terms and
provisions of the Stock Option. The Company shall notify a Participant of any
grant of a Stock Option, and a written Award Agreement shall be duly executed
and delivered by the Company to the Participant. Such agreement or agreements
shall become effective upon execution by the Company and the Participant.
(d) Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(i) Option Price. The Committee shall determine the option price per
share of Common Stock purchasable under a Stock Option (the "Option
Price"). The Option Price per share of Common Stock subject to a Stock
Option shall not be less than the Fair Market Value of the Common Stock
subject to such Stock Option on the date of grant, other than with respect
to Stock Option granted in lieu of foregone compensation, unless the
Committee determines otherwise. Except for adjustments pursuant to Section
3(c), in no event may any Stock Option granted under this Plan be amended
to decrease the Option Price thereof, cancelled in conjunction with the
grant of any new Stock Option with a lower Option Price, or otherwise be
subject to any action that would be treated, for accounting purposes, as a
"repricing" of such Stock Option, unless such amendment, cancellation, or
action is approved by the Company's shareholders in accordance with
applicable law and stock exchange rules.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than 10
years after the date the Stock Option is granted.
(iii) Exercisability. Except as otherwise provided herein, Stock
Options shall be exercisable at such time or times and subject to such
terms and conditions as shall be determined by the Committee. If the
Committee provides that any Stock Option is exercisable only in
installments, the Committee may at any time waive such installment exercise
provisions, in whole or in part, based on such factors as the Committee may
determine. In addition, the Committee may at any time accelerate the
exercisability of any Stock Option.
(iv) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying
the number of shares of Common Stock subject to the Stock Option to be
purchased. Such notice shall be accompanied by payment in full of the
Option Price by certified or bank check or such other instrument as the
Company may accept. If approved by the Committee, payment, in full or in
part, may also be made in the form of unrestricted Common Stock (by
delivery of such shares or by attestation) already owned by the Participant
of the same class as the Common Stock subject to the Stock Option (based on
the Fair Market Value of the Common Stock on the date the Stock Option is
exercised); provided, however, that, in the case of an Incentive Stock
Option, the right to make a payment in the form of already owned shares of
Common Stock of the same class as the Common Stock subject to the Stock
Option may be authorized only at the time the Stock Option is granted and
provided, further, that such already owned shares have been held by the
Participant for at least six months at the time of exercise or had been
purchased on the open market. If approved by the Committee, to the extent
permitted by applicable law, payment in full or in part may also be made by
delivering a properly executed exercise notice to the Company, together
with a copy of irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds necessary to pay the Option
Price, and, if requested, the amount of any federal, state, local or
foreign withholding taxes. To facilitate the foregoing, the Company may
enter into agreements for coordinated procedures with one or more brokerage
firms. No shares of Common Stock shall be delivered until full payment
therefor has been made. Except as otherwise provided in Section 5(m) below,
a Participant shall have all of the rights of a shareholder of the Company
holding the class or series of Common Stock that is subject to such Stock
Option (including, if applicable, the right to vote the shares and the
right to receive dividends), when the Participant has given written notice
of exercise, has paid in full for such shares and, if requested by the
Company, has given the representation described in Section 15(a).
(e) Nontransferability of Stock Options. No Stock Option shall be
transferable by the Participant other than (i) by will or by the laws of descent
and distribution or any other testamentary distribution; or (ii) in the case of
a NonQualified Stock Option, unless otherwise determined by the Committee, to
such Participant's children or family members, whether directly or indirectly or
by means of a trust or partnership or otherwise. For purposes of this Plan,
unless otherwise determined by the Committee, "family member" shall have the
meaning given to such term in General Instructions A.1(a)(5) to Form S-8 under
the Securities Act of 1933 as amended, or any successor thereto. All Stock
Options shall be exercisable, subject to the terms of this Plan, only by the
Participant, the guardian or legal representative of the Participant, or any
person to whom such option is transferred pursuant to this paragraph, it being
understood that the term "holder" and "Participant" include such guardian, legal
representative and other transferee; provided, however, that Termination of
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Employment shall continue to refer to the Termination of Employment of the
original Participant.
(f) Termination by Death. Unless otherwise determined by the Committee, if
a Participant incurs a Termination of Employment by reason of death, any Stock
Option held by such Participant may thereafter be exercised, to the extent then
exercisable, or on such accelerated basis as the Committee may determine, until
the expiration of the stated term of such Stock Option, except in the case of an
Incentive Stock Option, which shall be exercisable for (i) a period of one year
from the date of such death or (ii) the expiration of the stated term of the
Incentive Stock Option, whichever period is the shorter.
(g) Termination by Reason of Disability. Unless otherwise determined by the
Committee, if a Participant incurs a Termination of Employment by reason of
Disability, any Stock Option held by such Participant (or the appointed
fiduciary of such Participant) may thereafter be exercised by the Participant
(or the appointed fiduciary of such Participant), to the extent it was
exercisable at the time of termination, or on such accelerated basis as the
Committee may determine, for a period of one year (or such other period as the
Committee may specify in the Award Agreement) from the date of such Termination
of Employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that if the Participant dies
within such period, any unexercised Stock Option held by such Participant shall,
notwithstanding the expiration of such period, continue to be exercisable to the
extent to which it was exercisable at the time of death until the expiration of
the stated term of such Stock Option. In the event of Termination of Employment
by reason of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, such Stock Option will thereafter be treated as a NonQualified Stock
Option.
(h) Termination by Reason of Retirement. Unless otherwise determined by the
Committee, if a Participant incurs a Termination of Employment by reason of
Retirement, any Stock Option held by such Participant may thereafter be
exercised by the Participant, to the extent it was exercisable at the time of
such Retirement, or on such accelerated basis as the Committee may determine,
for a period of one year (or such other period as the Committee may specify in
the Award Agreement) from the date of such Termination of Employment or until
the expiration of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the Participant dies within such period any
unexercised Stock Option held by such Participant shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death for until the expiration of the stated term
of such Stock Option, except in the case of an Incentive Stock Option, which
shall be exercisable for (i) a period of one year from the date of such death or
(ii) the expiration of the stated term of the Incentive Stock Option, whichever
period is the shorter. In the event of Termination of Employment by reason of
Retirement, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a NonQualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee: (A) if
a Participant incurs a Termination of Employment for Cause, all Stock Options
held by such Participant shall thereupon terminate; and (B) if a Participant
incurs a Termination of Employment for any reason other than death, Disability,
Retirement or for Cause, any Stock Option held by such Participant, to extent it
was then exercisable at the time of termination, or on such accelerated basis as
the Committee may determine, may be exercised for the lesser of three months
from the date of such Termination of Employment or the balance of such Stock
Option's term; provided, however, that if the Participant dies within such
three-month period, any unexercised Stock Option held by such Participant shall,
notwithstanding the expiration of such three-month period, continue to be
exercisable to the extent to which it was exercisable at the time of death until
the expiration of the stated term of such Stock Option, except in the case of an
Incentive Stock Option, which shall be exercisable for (i) a period of one year
from the date of such death or (ii) the expiration of the stated term of the
Incentive Stock Option, whichever period is the shorter.
(j) Change of Control Termination. Notwithstanding any other provision of
this Plan to the contrary, in the event a Participant incurs a Termination of
Employment during the 24-month period following a Change in Control other than
(i) by the Company for Cause, (ii) by reason of death, (iii) by reason of
Disability or (iv) by voluntary resignation other than by reason of an
Involuntary Termination, any Stock Option held by such Participant may
thereafter be exercised by the Participant, to the extent it was exercisable at
the time of termination, or on such accelerated basis as the Committee may
determine, for (A) the longer of one year from such date of termination or (2)
such other period as may be provided in the Plan for such Termination of
Employment or as the Committee may provide in the Award Agreement or Individual
Agreement, or (B) until expiration of the stated term of such Stock Option,
whichever period is the shorter. If an Incentive Stock Option is exercised after
the expiration of the post-termination exercise periods that apply for purposes
of Section 422 of the Code, such Stock Option will thereafter be treated as a
NonQualified Stock Option.
(k) Cashing Out of Stock Option. On receipt of written notice of exercise,
the Committee may elect to cash out all or part of the portion of the shares of
Common Stock for which a Stock Option is being exercised by paying the
Participant an amount, in cash or Common Stock, equal to the excess of the Fair
Market Value of the Common Stock over the Option Price times the number of
shares of Common Stock for which the Option is being exercised on the effective
date of such cash-out.
(l) Change in Control Cash-Out. Notwithstanding any other provision of the
Plan, during the 60-day period from and after a Change in Control (the "Exercise
Period"), if the Committee shall determine at the time of grant or thereafter, a
Participant shall have the right, whether or not the Stock Option is fully
exercisable and in lieu of the payment of the Option Price for the shares of
Common Stock being purchased under the Stock Option and by giving notice to the
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Company, to elect (within the Exercise Period) to surrender all or part of the
Stock Option to the Company and to receive cash, within 30 days of such
election, in an amount equal to the amount by which the Change in Control Price
per share of Common Stock on the date of such election shall exceed the Option
Price per share of Common Stock under the Stock Option (the "Spread") multiplied
by the number of shares of Common Stock granted under the Stock Option as to
which the right granted under this Section 5(l) shall have been exercised.
(m) Deferral of Option Shares. The Committee may from time to time
establish procedures pursuant to which a Participant may elect to defer, until a
time or times later than the exercise of a Stock Option, receipt of all or a
portion of the shares of Common Stock subject to such Stock Option and/or to
receive cash at such later time or times in lieu of such deferred shares, all on
such terms and conditions as the Committee shall determine. If any such
deferrals are permitted, then notwithstanding Section 5(d) above, a Participant
who elects such deferral shall not have any rights as a shareholder with respect
to such deferred shares unless and until shares are actually delivered to the
Participant with respect thereto, except to the extent otherwise determined by
the Committee.
SECTION 6. Stock Appreciation Rights
(a) Grant and Exercise. Stock Appreciation Rights may be granted alone
("Freestanding Stock Appreciation Rights") or in conjunction with all or part of
any Stock Option granted under the Plan ("Tandem Stock Appreciation Rights").
(b) Terms and Conditions of Tandem Stock Appreciation Rights. Tandem Stock
Appreciation Rights shall be subject to such terms and conditions as shall be
determined by the Committee, including the following:
(i) Relationship to Related Stock Option. A Stock Appreciation Right
issued in conjunction with a NonQualified Stock Option may be granted
either at or after the time of grant of such Stock Option. A Stock
Appreciation Right issued in conjunction with an Incentive Stock Option may
be granted only at the time of grant of such Stock Option. Tandem Stock
Appreciation Rights shall be exercisable only at such time or times and to
the extent that the Stock Options to which they relate are exercisable in
accordance with the provisions of Section 5.
(ii) Settlement. Upon the exercise of a Tandem Stock Appreciation
Right, a Participant shall be entitled to receive an amount in cash, shares
of Common Stock or a combination of cash and shares, equal to (A) the
excess of the Fair Market Value of one share of Common Stock over the
Option Price per share specified in the related Stock Option multiplied by
(B) the number of shares of Common Stock in respect of which such Stock
Appreciation Right shall have been exercised, with the Committee having the
right to determine the form of payment. The Committee may from time to time
establish procedures pursuant to which a Participant may elect to further
defer receipt of cash or shares in settlement of Tandem Stock Appreciation
Rights for a specified period or until a specified event, all on such terms
and conditions as the Committee shall determine.
(iii) Nontransferability. Tandem Stock Appreciation Rights shall be
transferable only to the extent that the underlying Stock Option is
transferable pursuant to Section 5(e).
(iv) Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by a Participant by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the
Committee. Upon such exercise and surrender, the Participant shall be
entitled to receive an amount determined in the manner prescribed by
Section 6(b)(ii). Stock Options which have been so surrendered shall no
longer be exercisable to the extent the related Stock Appreciation Rights
have been exercised. Any Tandem Stock Appreciation Right shall terminate
and no longer be exercisable upon the termination or exercise of the
related Stock Option.
(c) Terms and Conditions of Freestanding Stock Appreciation Rights.
Freestanding Stock Appreciation Rights shall be subject to such terms and
conditions as shall be determined by the Committee, including the following:
(i) Term. The Committee shall determine the stated term of each
Freestanding Stock Appreciation Right granted under this Plan.
(ii) Strike Price. Unless provided otherwise by the Committee, the
strike price (the "Strike Price") per share of Common Stock subject to a
Freestanding Stock Appreciation Right shall be the Fair Market Value of the
Common Stock on the date of grant, except with respect to Freestanding
Stock Appreciation Rights granted in lieu of foregone compensation. Except
for adjustments pursuant to Section 3(c), in no event may any Stock
Appreciation Right granted under this Plan be amended to decrease the
Strike Price thereof, cancelled in conjunction with the grant of any new
Stock Appreciation Right with a lower Strike Price, or otherwise be subject
to any action that would be treated, for accounting purposes, as a
"repricing" of such Stock Appreciation Right, unless such amendment,
cancellation, or action is approved by the Company's shareholders in
accordance with applicable law and stock exchange rules.
(iii) Exercisability. Except as otherwise provided herein,
Freestanding Share Appreciation Rights shall be exercisable at such time or
times and subject to such terms and conditions as shall be determined by
the Committee, and the Committee may at any time accelerate the
exercisability of any Stock Appreciation Right. If the Committee provides
that any Stock Appreciation Right is exercisable only in installments, the
Committee may at any time waive such installment exercise provisions, in
whole or in part, based on such factors as the Committee may determine.
(iv) Settlement. Upon the exercise of a Freestanding Stock
Appreciation Right, a Participant shall be entitled to receive an amount in
cash, shares of Common Stock or a combination of cash and shares, equal to
(A) the excess of the Fair Market Value of one share of Common Stock over
the applicable Strike Price multiplied by (B) the number of shares of
Common Stock in respect of which the Freestanding Stock Appreciation Right
shall have been exercised, with the Committee having the right to determine
the form of payment.
(v) Nontransferability. No Freestanding Stock Appreciation Right shall
be transferable by a Participant other than by will or by the laws of
descent and distribution or as otherwise expressly permitted by the
Committee, including, if so permitted, pursuant to a transfer to such
Participant's children or family members, whether directly or indirectly or
by means of a trust or partnership or otherwise. For purposes of this Plan,
unless otherwise determined by the Committee, "family member" shall have
the meaning given to such term in General Instructions A.1(a)(5) to Form
S-8 under the Securities Act of 1933 as amended, and any successor thereto.
All Freestanding Stock Appreciation Rights shall be exercisable, subject to
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the terms of this Plan, only by the Participant, the guardian or legal
representative of the Participant, or any person to whom such Freestanding
Stock Appreciation Right is transferred pursuant to this paragraph, it
being understood that the terms "holder" and "Participant" include such
guardian, legal representative and other transferee; provided, however,
that the term "Termination of Employment" shall continue to refer to the
Termination of Employment of the original Participant.
(vi) Termination by Death. Unless otherwise determined by the
Committee, if a Participant incurs a Termination of Employment by reason of
death, any Freestanding Stock Appreciation Right held by such Participant
may thereafter be exercised, to the extent then exercisable, or on such
accelerated basis as the Committee may determine, until the expiration of
the stated term of such Freestanding Stock Appreciation Right.
(vii) Termination by Reason of Disability. Unless otherwise determined
by the Committee, if a Participant incurs a Termination of Employment by
reason of Disability, any Freestanding Stock Appreciation Right held by
such Participant may thereafter be exercised by the Participant, to the
extent it was exercisable at the time of termination, or on such
accelerated basis as the Committee may determine, for a period of one year
(or such other period as the Committee may specify in the Award Agreement)
from the date of such Termination of Employment or until the expiration of
the stated term of such Freestanding Stock Appreciation Right, whichever
period is the shorter; provided, however, that if the Participant dies
within such period, any unexercised Freestanding Stock Appreciation Right
held by such Participant shall, notwithstanding the expiration of such
period, continue to be exercisable to the extent to which it was
exercisable at the time of death until the expiration of the stated term of
such Freestanding Stock Appreciation Right.
(viii) Termination by Reason of Retirement. Unless otherwise
determined by the Committee, if a Participant incurs a Termination of
Employment by reason of Retirement, any Freestanding Stock Appreciation
Right held by such Participant may thereafter be exercised by the
Participant, to the extent it was exercisable at the time of such
Retirement, or on such accelerated basis as the Committee may determine,
for a period of one year (or such other period as the Committee may specify
in the Award Agreement) from the date of such Termination of Employment or
until the expiration of the stated term of such Freestanding Stock
Appreciation Right, whichever period is the shorter; provided, however,
that if the Participant dies within such period any unexercised
Freestanding Stock Appreciation Right held by such Participant shall,
notwithstanding the expiration of such period, continue to be exercisable
to the extent to which it was exercisable at the time of death until the
expiration of the stated term of such Freestanding Stock Appreciation
Right.
(ix) Other Termination. Unless otherwise determined by the Committee:
(A) if a Participant incurs a Termination of Employment for Cause, all
Freestanding Stock Appreciation Rights held by such Participant shall
thereupon terminate; and (B) if a Participant incurs a Termination of
Employment for any reason other than death, Disability, Retirement or for
Cause, any Freestanding Stock Appreciation Right held by such Participant,
to extent it was then exercisable at the time of termination, or on such
accelerated basis as the Committee may determine, may be exercised for the
lesser of three months from the date of such Termination of Employment or
the balance of such Freestanding Stock Appreciation Right's term; provided,
however, that if the Participant dies within such three-month period, any
unexercised Freestanding Stock Appreciation Right held by such Participant
shall, notwithstanding the expiration of such three-month period, continue
to be exercisable to the extent to which it was exercisable at the time of
death until the expiration of the stated term of such Freestanding Stock
Appreciation Right.
(x) Change of Control Termination. Notwithstanding any other provision
of this Plan to the contrary, in the event a Participant incurs a
Termination of Employment during the 24-month period following a Change in
Control other than (i) by the Company for Cause, (ii) by reason of death or
(iii) by reason of Disability or (iv) by voluntary resignation other than
by reason of an Involuntary Termination, any Freestanding Stock
Appreciation Right held by such Participant may thereafter be exercised by
the Participant, to the extent it was exercisable at the time of
termination, or on such accelerated basis as the Committee may determine,
for (A) the longer of one year from such date of termination or (2) such
other period as may be provided in the Plan for such Termination of
Employment or as the Committee may provide in the Award Agreement, or (B)
until expiration of the stated term of such Freestanding Stock Appreciation
Right, whichever period is the shorter.
(xi) Change in Control Cash-Out. Notwithstanding any other provision
of the Plan, during the 60-day period from and after a Change in Control
(the "Exercise Period"), if the Committee shall determine at the time of
grant or thereafter, a holder of a Freestanding Stock Appreciation Right
shall have the right, whether or not such Stock Appreciation Right is fully
exercisable, to surrender all or part of such Stock Appreciation Right to
the Company and to receive cash, within 30 days of such election, in an
amount equal to (A) the amount by which the Change in Control Price per
share of Common Stock on the date of such election shall exceed the Strike
Price under such Stock Appreciation Right multiplied by (B) the number of
shares of Common Stock subject to the Stock Appreciation Right as to which
the right granted under this Section 6(c)(xi) shall have been exercised.
(xii) Deferral. The Committee may from time to time establish
procedures pursuant to which a Participant may elect to further defer
receipt of cash or shares in settlement of Freestanding Stock Appreciation
Rights for a specified period or until a specified event, subject in each
case to the Committee's approval and to such terms as are determined by the
Committee.
SECTION 7. Restricted Stock
(a) Administration. Shares of Restricted Stock may be awarded either alone
or in addition to other Awards granted under the Plan. The Committee shall
determine the Participants to whom and the time or times at which grants of
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Restricted Stock will be awarded, the number of shares to be awarded to any
Participant, the conditions for vesting, the time or times within which such
Awards may be subject to forfeiture and any other terms and conditions of the
Awards, in addition to those contained in Section 7(c).
(b) Awards and Certificates. Shares of Restricted Stock shall be evidenced
in such manner as the Committee may deem appropriate, including book-entry
registration or issuance of one or more stock certificates. Any certificate
issued in respect of shares of Restricted Stock shall be registered in the name
of such Participant and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Award, substantially in the
following form:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of The South Financial Group, Inc. 2004 Long Term Incentive
Plan and an Award Agreement. Copies of such Plan and Agreement are on
file at the offices of The South Financial Group, 102 S. Main Street,
Greenville, SC 29601."
The Committee may require that the certificates evidencing such shares be
held in custody by the Company until the restrictions thereon shall have lapsed
and that, as a condition of any Award of Restricted Stock, the Participant shall
have delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject to
the following terms and conditions:
(i) The Committee may, prior to or at the time of grant, designate an
Award of Restricted Stock as a Qualified Performance-Based Award, in which
event it shall condition the grant or vesting, as applicable, of such
Restricted Stock upon the attainment of Performance Goals. If the Committee
does not designate an Award of Restricted Stock as a Qualified
Performance-Based Award, it may also condition the grant or vesting thereof
upon the attainment of Performance Goals. Regardless of whether an Award of
Restricted Stock is a Qualified Performance-Based Award, the Committee may
also condition the grant or vesting thereof upon the continued service of
the Participant. The conditions for grant or vesting and the other
provisions of Restricted Stock Awards (including without limitation any
applicable Performance Goals) need not be the same with respect to each
recipient. The Committee may at any time, in its sole discretion,
accelerate or waive, in whole or in part, any of the foregoing
restrictions; provided, however, that in the case of Restricted Stock that
is a Qualified Performance-Based Award, the applicable Performance Goals
have been satisfied.
(ii) Subject to the provisions of the Plan and the Award Agreement
referred to in Section 7(c)(vi), during the period, if any, set by the
Committee, commencing with the date of such Award for which such
Participant's continued service is required (the "Restriction Period"), and
until the later of (A) the expiration of the Restriction Period and (B) the
date the applicable Performance Goals (if any) are satisfied, the
Participant shall not be permitted to sell, assign, transfer, pledge or
otherwise encumber shares of Restricted Stock; provided that, to the extent
permitted by applicable law, the foregoing shall not prevent a Participant
from pledging Restricted Stock as security for a loan, the sole purpose of
which is to provide funds to pay the Option Price for Stock Options.
(iii) Except as provided in this paragraph (iii) and Sections 7(c)(i)
and 7(c)(ii) and the Award Agreement, the Participant shall have, with
respect to the shares of Restricted Stock, all of the rights of a
shareholder of the Company holding the class or series of Common Stock that
is the subject of the Restricted Stock, including, if applicable, the right
to vote the shares and the right to receive any cash dividends. If so
determined by the Committee in the applicable Award Agreement and subject
to Section 15(e) of the Plan, (A) cash dividends on the class or series of
Common Stock that is the subject of the Restricted Stock Award shall be
automatically deferred and reinvested in additional Restricted Stock, held
subject to the vesting of the underlying Restricted Stock, or held subject
to meeting Performance Goals applicable only to dividends, and (B)
dividends payable in Common Stock shall be paid in the form of Restricted
Stock of the same class as the Common Stock with which such dividend was
paid, held subject to the vesting of the underlying Restricted Stock, or
held subject to meeting Performance Goals applicable only to dividends.
(iv) Except to the extent otherwise provided in the applicable Award
Agreement or Section 7(c)(i), 7(c)(ii), 7(c)(v) or 11(a)(ii), upon a
Participant's Termination of Employment for any reason during the
Restriction Period or before the applicable Performance Goals are
satisfied, all shares still subject to restriction shall be forfeited by
the Participant; provided, however, that the Committee shall have the
discretion to waive, in whole or in part, any or all remaining restrictions
(other than, in the case of Restricted Stock with respect to which a
Participant is a Covered Employee, satisfaction of the applicable
Performance Goals unless the Participant's employment is terminated by
reason of death or Disability by the Company without Cause or by the
Participant for "Good Reason" (as defined in any applicable Individual
Agreement)) with respect to any or all of such Participant's shares of
Restricted Stock.
(v) If and when any applicable Performance Goals are satisfied and the
Restriction Period expires without a prior forfeiture of the Restricted
Stock, unlegended certificates for such shares shall be delivered to the
Participant upon surrender of the legended certificates.
(vi) Each Award shall be confirmed by, and be subject to, the terms of
an Award Agreement.
SECTION 8. Performance Units
(a) Administration. Performance Units may be awarded either alone or in
addition to other Awards granted under the Plan. The Committee shall determine
the Participants to whom and the time or times at which Performance Units shall
be awarded, the number of Performance Units to be awarded to any Participant),
the duration of the Award Cycle and any other terms and conditions of the Award,
in addition to those contained in Section 8(b).
(b) Terms and Conditions. Performance Units Awards shall be subject to the
following terms and conditions:
(i) The Committee may, prior to or at the time of the grant, designate
Performance Units as Qualified Performance-Based Awards, in which event it
shall condition the settlement thereof upon the attainment of Performance
Goals. If the Committee does not designate Performance Units as Qualified
Performance-Based Awards, it may also condition the settlement thereof upon
the attainment of Performance Goals. Regardless of whether Performance
Units are Qualified Performance-Based Awards, the Committee may also
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condition the settlement thereof upon the continued service of the
Participant. The provisions of such Awards (including without limitation
any applicable Performance Goals) need not be the same with respect to each
recipient. Subject to the provisions of the Plan and the Award Agreement
referred to in Section 8(b)(v), Performance Units may not be sold,
assigned, transferred, pledged or otherwise encumbered during the Award
Cycle. No more than 25,000 shares of Common Stock may be subject to
Qualified Performance Based Awards granted to any Eligible Individual in
any fiscal year of the Company.
(ii) Except to the extent otherwise provided in the applicable Award
Agreement or Section 8(b)(ii) or 11(a)(iii), upon a Participant's
Termination of Employment for any reason during the Award Cycle or before
any applicable Performance Goals are satisfied, all rights to receive cash
or stock in settlement of the Performance Units shall be forfeited by the
Participant; provided, however, that the Committee shall have the
discretion to waive, in whole or in part, any or all remaining payment
limitations (other than, in the case of Performance Units that are
Qualified Performance-Based Awards, satisfaction of the applicable
Performance Goals unless the Participant's employment is terminated by
reason of death or Disability by the Company without Cause or by the
Participant for Good Reason) with respect to any or all of such
Participant's Performance Units.
(iii) An Participant may elect to further defer receipt of cash or
shares in settlement of Performance Units for a specified period or until a
specified event, subject in each case to the Committee's approval and to
such terms as are determined by the Committee. Subject to any exceptions
adopted by the Committee, such election must generally be made prior to
commencement of the Award Cycle for the Performance Units in question.
(iv) At the expiration of the Award Cycle, the Committee shall
evaluate the Company's performance in light of any Performance Goals for
such Award, and shall determine the number of Performance Units granted to
the Participant which have been earned, and the Committee shall then cause
to be delivered (A) a number of shares of Common Stock equal to the number
of Performance Units determined by the Committee to have been earned, or
(B) cash equal to the Fair Market Value of such number of shares of Common
Stock to the Participant, as the Committee shall elect (subject to any
deferral pursuant to Section 8(b)(iii)).
(v) Each Award shall be confirmed by, and be subject to, the terms of
an Award Agreement.
SECTION 9. Tax Offset Bonuses
At the time an Award is made hereunder or at any time thereafter, the
Committee may grant to the Participant receiving such Award the right to receive
a cash payment in an amount specified by the Committee, to be paid at such time
or times (if ever) as the Award results in compensation income to the
Participant, for the purpose of assisting the Participant to pay the resulting
taxes, all as determined by the Committee and on such other terms and conditions
as the Committee shall determine.
SECTION 10. Other Stock-Based Awards
Other Awards of Common Stock and other Awards that are valued in whole or
in part by reference to, or are otherwise based upon, Common Stock, including
(without limitation) dividend equivalents and convertible debentures, may be
granted either alone or in conjunction with other Awards granted under the Plan.
SECTION 11. Change in Control Provisions
(a) Impact of Event. Notwithstanding any other provision of the Plan to the
contrary, unless otherwise provided by the Committee in any Award Agreement, in
the event of a Change in Control:
(i) Any Stock Options and Stock Appreciation Rights outstanding as of
the date such Change in Control, and which are not then exercisable and
vested, shall become fully exercisable and vested.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock shall lapse, and such Restricted Stock shall become free
of all restrictions and become fully vested.
(iii) All Performance Units shall be considered to be earned and
payable in full, and any deferral or other restriction shall lapse and such
Performance Units shall be settled in cash as promptly as is practicable.
(b) Definition of Change in Control. For purposes of the Plan, a "Change in
Control" shall mean the happening of any of the following events:
(i) An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person")
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of 20% or more of either (1) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or
(2) the combined voting power of the then outstanding voting securities of
the Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding, however, the
following: (1) Any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Company,
(2) Any acquisition by the Company, (3) Any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Company or
any entity controlled by the Company, or (4) Any acquisition pursuant to a
transaction which complies with clauses (1), (2) and (3) of subsection
(iii) of this Section 11(b); or
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(ii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board (such Board
shall be hereinafter referred to as the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board; provided, however,
for purposes of this Section 11(b), that any individual who becomes a
member of the Board subsequent to the Effective Date, whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of those individuals who are members of the
Board and who were also members of the Incumbent Board (or deemed to be
such pursuant to this proviso) shall be considered as though such
individual were a member of the Incumbent Board; but, provided, further,
that any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board
shall not be so considered as a member of the Incumbent Board; or
(iii) Consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company ("Corporate Transaction"); excluding, however, such a Corporate
Transaction pursuant to which (1) all or substantially all of the
individuals and entities who are the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction will
beneficially own, directly or indirectly, more than 50% of, respectively,
the outstanding shares of common stock, and the combined voting power of
the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the corporation resulting
from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Corporate Transaction, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) no Person (other than the Company, any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Corporate Transaction) will beneficially own, directly
or indirectly, 20% or more of, respectively, the outstanding shares of
common stock of the corporation resulting from such Corporate Transaction
or the combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors except
to the extent that such ownership existed prior to the Corporate
Transaction, and (3) individuals who were members of the Incumbent Board
will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or
(iv) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(c) Change in Control Price. For purposes of the Plan, "Change in Control
Price" means the higher of (i) the highest reported sales price, regular way, of
a share of Common Stock in any transaction reported on the Nasdaq (or such other
national securities market or exchange as may at the time be the principal
market for the Common Stock) during the 60-day period prior to and including the
date of a Change in Control or (ii) if the Change in Control is the result of a
tender or exchange offer or a Corporate Transaction, the highest price per share
of Common Stock paid in such tender or exchange offer or Corporate Transaction;
provided, however, that in the case of Incentive Stock Options and Tandem Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Common Stock on the
date such Incentive Stock Option or Tandem Stock Appreciation Right is
exercised. To the extent that the consideration paid in any such transaction
described above consists all or in part of securities or other noncash
consideration, the value of such securities or other noncash consideration shall
be determined in the sole discretion of the Board.
SECTION 12. Forfeiture of Awards
Notwithstanding anything in the Plan to the contrary, the Committee shall
have the authority under the Plan to provide in any Award Agreement that in the
event of serious misconduct by a Participant (including, without limitation, any
misconduct prejudicial to or in conflict with the Company or its Subsidiaries or
Affiliates, or any Termination of Employment for Cause), or any activity of a
Participant in competition with the business of the Company or any Subsidiary or
Affiliate, any outstanding Award granted to such Participant shall be cancelled,
in whole or in part, whether or not vested or deferred. The determination of
whether a Participant has engaged in a serious breach of conduct or any activity
in competition with the business of the Company or any Subsidiary or Affiliate
shall be determined by the Committee in good faith and in its sole discretion.
This Section 12 shall have no application following a Change in Control.
SECTION 13. Term, Amendment and Termination
The Plan will terminate on the tenth anniversary of the Effective Date.
Under the Plan, Awards outstanding as of such date shall not be affected or
impaired by the termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of a
Participant under a Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award, Performance Unit Award or other Award theretofore
granted without the Participant's or recipient's consent, except such an
amendment made to comply with applicable law, stock exchange rules or accounting
rules. In addition, no such amendment shall be made without the approval of the
Company's shareholders to the extent such approval is required by applicable law
or stock exchange rules.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
cause a Qualified Performance-Based Award to cease to qualify for the Section
162(m) Exemption or impair the rights of any holder without the holder's consent
except such an amendment made to cause the Plan or Award to comply with
applicable law, stock exchange rules or accounting rules.
Subject to the above provisions, the Board shall have authority to amend
the Plan to take into account changes in law and tax and accounting rules as
well as other developments, and to grant Awards which qualify for beneficial
treatment under such rules without shareholder approval.
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SECTION 14. Unfunded Status of Plan
It is presently intended that the Plan constitute an "unfunded" plan for
incentive and deferred compensation. The Committee may authorize the creation of
trusts or other arrangements to meet the obligations created under the Plan to
deliver Common Stock or make payments; provided, however, that unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the "unfunded" status of the Plan.
SECTION 15. General Provisions
(a) Representation. The Committee may require each person purchasing or
receiving shares pursuant to an Award to represent to and agree with the Company
in writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
Notwithstanding any other provision of the Plan or agreements made pursuant
thereto, the Company shall not be required to issue or deliver any certificate
or certificates for shares of Common Stock under the Plan prior to fulfillment
of all of the following conditions:
(i) Listing or approval for listing upon notice of issuance, of such
shares on NASDAQ, or such other securities exchange as may at the time be
the principal market for the Common Stock;
(ii) Any registration or other qualification of such shares of the
Company under any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Committee
shall, in its absolute discretion upon the advice of counsel, deem
necessary or advisable; and
(iii) Obtaining any other consent, approval, or permit from any state
or federal governmental agency which the Committee shall, in its absolute
discretion after receiving the advice of counsel, determine to be necessary
or advisable.
(b) No Limit of Other Arrangements. Nothing contained in the Plan shall
prevent the Company or any Subsidiary or Affiliate from adopting other or
additional compensation arrangements for its employees.
(c) No Contract of Employment. The Plan shall not constitute a contract of
employment, and adoption of the Plan shall not confer upon any employee any
right to continued employment, nor shall it interfere in any way with the right
of the Company or any Subsidiary or Affiliate to terminate the employment of any
employee at any time.
(d) Tax Withholding. No later than the date as of which an amount first
becomes includible in the gross income of the Participant for federal income tax
purposes with respect to any Award under the Plan, the Participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Company, withholding obligations may be settled with Common Stock, including
Common Stock that is part of the Award that gives rise to the withholding
requirement; provided, that not more than the legally required minimum
withholding may be settled with Common Stock. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and the
Company and its Affiliates shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment otherwise due to the Participant. The
Committee may establish such procedures as it deems appropriate, including
making irrevocable elections, for the settlement of withholding obligations with
Common Stock.
(e) Dividends. Reinvestment of dividends in additional Restricted Stock at
the time of any dividend payment shall only be permissible if sufficient shares
of Common Stock are available under Section 3 for such reinvestment (taking into
account then outstanding Stock Options and other Awards).
(f) Death Beneficiary. The Committee shall establish such procedures as it
deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant's death are to be paid or by
whom any rights of the Participant, after the Participant's death, may be
exercised.
(g) Subsidiary Employees. In the case of a grant of an Award to any
employee of a Subsidiary of the Company, the Company may, if the Committee so
directs, issue or transfer the shares of Common Stock, if any, covered by the
Award to the Subsidiary, for such lawful consideration as the Committee may
specify, upon the condition or understanding that the Subsidiary will transfer
the shares of Common Stock to the employee in accordance with the terms of the
Award specified by the Committee pursuant to the provisions of the Plan. All
shares of Common Stock underlying Awards that are forfeited or canceled should
revert to the Company.
(h) Governing Law. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
State of South Carolina, without reference to principles of conflict of laws.
(i) Nontransferability. Except as otherwise provided in Section 5(e) or
6(b)(iii) or by the Committee, Awards under the Plan are not transferable except
by will or by laws of descent and distribution.
(j) In the event an Award is granted to Participant who is employed or
providing services outside the United States and who is not compensated from a
payroll maintained in the United States, the Committee may, in its sole
discretion, modify the provisions of the Plan as they pertain to such individual
to comply with applicable foreign law.
SECTION 16. Effective Date of Plan
The Plan shall be effective as of the date (the "Effective Date"), provided
that it is approved by the stockholders of the Company in accordance with all
applicable laws, regulations and stock exchange rules and listing standards.
B-11
Annex A
{X} PLEASE MARK VOTES AS IN THIS EXAMPLE
REVOCABLE PROXY
THE SOUTH FINANCIAL GROUP, INC.
With- For All
For hold Except
ANNUAL MEETING, APRIL 29, 2003 1. Election of Directors set forth below and to ___ ___ ___
The undersigned shareholder of The South Financial set the number of directors at 17 persons
Group Inc. hereby revoking all previous proxies, hereby (except as marked to the contrary below):
appoints William S. Hummers III and William P. C
Crawford, Jr. and each of them, the attorneys of the Gordon W. Campbell M. Dexter Hagy H. Earle Russell, Jr.
undersigned, with power of substitution, to vote all O John C. B. Smith, Jr. William R. Timmons, Jr. Samuel H. Vickers
stock of The South Financial Group, Inc. standing in
the name of the undersigned upon all matters at TSFG's M INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
Annual Meeting to be held in the Gunter Theatre, Peace STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
Center for the Performing Arts, 300 South Main Street, M
Greenville, South Carolina on Wednesday, April 29, 2003 2. Proposal to approve TSFG's Management Incentive For Against Abstain
at 10:30 a.m. and at any adjournment thereof, with all O Compensation Plan ___ ___ ___
powers the undersigned would possess if personally
present, and without limiting the general authorization N 3. Proposal to amend TSFG's Amended and Restated
and power hereby given, directs the above-referenced Restricted Stock Agreement Plan to increase
attorneys or either of them to cast the undersigned's the shares available for issuance by 125,000 ___ ___ ___
vote as specified on this proxy card.
4. Proposal to approve TSFG's Long-Term Incentive
Plan ___ ___ ___
5. Ratification of the appointment of KPMG LLP as
independent auditors of TSFG for fiscal year
2003 ___ ___ ___
6. At their discretion upon such other matters as may properly come
before the meeting.
Please be sure to sign and date Date: ________________
this Proxy in the box below. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE SOUTH
FINANCIAL GROUP, INC. IF NOT OTHERWISE SPECIFIED, THE PROXY WILL BE
________________________________________________________ VOTED FOR APPROVAL OF EACH OF THE PROPOSALS ABOVE.
Shareholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage-paid envelope provided.
THE SOUTH FINANCIAL GROUP, INC.
Please sign this proxy card as your name or names appear hereon. If stock is held jointly, signature should appear for both names.
When signing as attorney, administrator, trustee, guardian or agent, please indicate the capacity in which you are acting. If stock
is held by a corporation, please sign in full corporate name by authorized officer and give title of office.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
IF YOUR ADDRESS HAS CHANGED, PELASE CORRECT THE ADDRESS IN THE SPACE PROVIDED BELOW AND RETURN THIS PORTION WITH
THE PROXY IN THE ENVELOPE PROVIDED.
___________________________________________________________
___________________________________________________________
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