The South Financial Group

2005 Executive and Director

Deferred Compensation Plan

 

 

 

 

 

 

 

Effective January 1, 2005

 

THE SOUTH FINANCIAL GROUP

2005 EXECUTIVE AND DIRECTOR

DEFERRED COMPENSATION PLAN

 

Effective January 1, 2005

 

Purpose

The South Financial Group 2005 Executive and Director Deferred Compensation Plan
(“Plan”) is entered into effective as of January 1, 2005, in order to provide
specified benefits to a select group of management or highly compensated
Employees and Directors who contribute materially to the continued growth,
development and future business success of The South Financial Group, Inc., a
South Carolina corporation (“Company”), and its subsidiaries, if any, that
sponsor this Plan.

The Company also maintains for the benefit of certain Employees and Directors
The South Financial Group Executive and Director Deferred Compensation Plan
originally dated March 3, 2000, (as amended and/or restated, the “Prior Plan”).
In response to the enactment of Code Section 409A, the Prior Plan was frozen as
of December 31, 2004 so that the benefits payable under the Prior Plan are
limited to those benefits, including earnings accrued after December 31, 2004,
that are not subject to Code Section 409A because they were earned and vested as
of December 31, 2004 (i.e., they are “grandfathered” within the meaning of
Treasury Regulations Section 409A-6(a)(3)(ii) and (iv).

Accordingly, one of the purposes of this Plan is to continue to provide benefits
to Participants that would have been payable under the Prior Plan had the Prior
Plan not been frozen, subject to such changes as are required because the
“non-grandfathered” benefits payable under this Plan are subject to Code Section
409A. The benefits provided under this Plan include not only all amounts
deferred on and after January 1, 2005, but also any amounts deferred under the
Prior Plan that were not vested as of December 31, 2004.

This Plan shall be unfunded for tax purposes and for purposes of Title I of
ERISA. This Plan is a “Top Hat” plan within the meaning of Section 201(2),
201(a)(3), and 401(a)(1) of ERISA. As such, this Plan is subject to limited
ERISA reporting and disclosure requirements, and is exempt from all other ERISA
requirements. Distributions required or contemplated by this Plan or actions
required to be taken under this Plan shall not be construed as creating a trust
of any kind of a fiduciary relationship between the Company and any Participant,
any Participant’s designated beneficiary, or any other person.

ARTICLE 1

Definitions

For the purposes of this Plan, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:

1.1

“Account Balance” shall mean, with respect to a Participant, a credit on the
records of the Employer equal to the sum of (i) the Deferral Account balance,
(ii) the Company Match Account balance, and (iii) the Restricted Stock Award
Account balance. The Account Balance, and each other specified account balance,
shall be a bookkeeping entry only and shall be utilized solely as a device for
the measurement and determination of the amounts to be paid to a Participant, or
his or her designated Beneficiary, pursuant to this Plan.

1.2

“Annual Bonus” shall mean any compensation, other than Base Annual Salary,
related to services performed by a Participant during a Plan Year, under any
Employer’s Annual Bonus and cash incentive plans, excluding stock options.

1.3

“Annual Company Match Amount” shall mean, for any one Plan Year, the amount
determined in accordance with Section 3.6.

1.4

“Annual Deferral Amount” shall mean that portion of a Participant’s Base Annual
Salary, Annual Bonus, and Director Fees that a Participant defers in accordance
with Article 3 for any one Plan Year. In the event of a Participant’s
Retirement, death or a Termination of Employment prior to the end of a Plan
Year, such year’s Annual Deferral Amount shall be the actual amount withheld
prior to such event.

1.5

“Annual Installment Method” shall be an annual installment payment (which shall
be deemed to be a “single” payment for purposes of Code Section 409A) over the
number of years selected by the Participant in accordance with this Plan,
calculated as follows: (i) for the first annual installment, the vested Account
Balance of the Participant shall be calculated as of the close of business on or
around the date on which the Participant Retires, as determined by the Committee
in its sole discretion, and (ii) for remaining annual installments, the vested
Account Balance of the Participant shall be calculated on every applicable
anniversary of the date on which the Participant Retires. Each annual
installment shall be calculated by multiplying this balance by a fraction, the
numerator of which is one and the denominator of which is the remaining number
of annual payments due the Participant. By way of example, if the Participant
elects a ten (10) year Annual Installment Method, the first payment shall be
1/10 of the vested Account Balance, calculated as described in this definition.
The following year, the payment shall be 1/9 of the vested Account Balance,
calculated as described in this definition. Shares of Stock that shall be
distributable from The South Financial Group Stock Fund shall be distributable
in shares of actual Stock in the same manner previously described. However, the
Committee may, in its sole discretion, adjust the annual installments in order
to distribute whole shares of actual Stock.

 

 

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1.6

“Base Annual Salary” shall mean the annual cash compensation relating to
services performed during any calendar year, excluding bonuses, commissions,
overtime, fringe benefits, stock options, relocation expenses, incentive
payments, non-monetary awards, director fees and other fees, and automobile and
other allowances paid to a Participant for employment services rendered (whether
or not such allowances are included in the Employee’s gross income). Base Annual
Salary shall be calculated before reduction for compensation voluntarily
deferred or contributed by the Participant pursuant to all qualified or
non-qualified plans of any Employer and shall be calculated to include amounts
not otherwise included in the Participant’s gross income under Code Sections
125, 132(f)(4), 402(e)(3), 402(h), or 403(b) pursuant to plans established by
any Employer; provided, however, that all such amounts will be included in
compensation only to the extent that had there been no such plan, the amount
would have been payable in cash to the Employee.

1.7

“Beneficiary” shall mean one or more persons, trusts, estates or other entities,
designated in accordance with Article 11, that are entitled to receive benefits
under this Plan upon the death of a Participant.

1.8

“Beneficiary Designation Form” shall mean the form established from time to time
by the Committee that a Participant completes, signs and returns to the
Committee to designate one or more Beneficiaries.

1.9

“Board” shall mean the board of directors of the Company.

1.10

“Change in Control” shall mean (“Change in Control” definition):

 

(a)

when any Person or Persons acting as a “group” (within the meaning of Section
13(d)(3) or 14(d)(2) of the “Exchange Act” and within the meaning of Code
Section 409A and applicable regulations thereunder) acquires directly or
indirectly, securities of the Company representing an aggregate of more than 50%
of the combined voting power of the Company’s then outstanding voting securities
other than an acquisition by:

 

(i)

an acquisition by any employee plan established by the Company;

 

(ii)

an acquisition by the Company or any of its affiliates (as defined in Rule 12b-2
promulgated under the Exchange Act);

 

(iii)

an acquisition by an underwriter temporarily holding securities pursuant to an
offering of such securities;

 

(iv)

an acquisition by a corporation owned, directly or indirectly, by stockholders
of the Company in substantially the same proportions as their ownership of the
Company; or

 

(v)

except as provided in clause (c) below, merger or consolidation of the Company
with any other corporation which is duly approved by the stockholders of the
Company; or

 

 

 

3

 

(b)

when a majority of the board of directors of the Company is replaced during any
12-month period and such new appointments are not approved by a majority of the
members of the current Board prior to the date of appointment or election; or

 

(c)

when the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation other than (i) a merger or consolidation that
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or any parent
thereof), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of any Company, at least a
majority of the combined voting power of the voting securities of the Company or
such surviving entity or any parent thereof outstanding immediately after such
merger or consolidation; or (ii) a merger or consolidation effected to implement
a recapitalization of the Company (or similar transaction) in which no Person is
or becomes the beneficial owner (as defined in clause (a) above), directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company) representing a majority of the combined voting power of the Company’s
then outstanding voting securities; or (iii) a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.

1.11

“Change in Control Benefit” shall have the meaning set forth in Article 6.

1.12

“Claimant” shall have the meaning set forth in Section 16.1.

1.13

“Code” shall mean the Internal Revenue Code of 1986, as it may be amended from
time to time, and the regulations promulgated thereunder.

1.14

“Committee” shall mean the committee described in Article 14.

1.15

“Company” shall mean The South Financial Group, Inc., a South Carolina
corporation, and any successor to all or substantially all of the Company’s
assets or business.

1.16

“Company Match Account” shall mean (i) that portion of a Participant’s Account
Balance which is represented by the Participant’s aggregate 10% company match
described in Section 3.7 of the Prior Plan, which was transferred to and is
being held under the terms of this Plan, as well as any appreciation (or
depreciation) specifically attributable to such matching amounts accumulated
under the Prior Plan, plus (ii) the sum of the Participant’s Annual Company
Match Amounts, plus (iii) amounts credited or debited in accordance with all the
applicable crediting and debiting provisions of this Plan that relate to the
Participant’s Company Match Account, less (iv) all distributions made to the
Participant or his or her Beneficiary pursuant to this Plan that relate to the
Participant’s Company Match Account.

1.17

“Deduction Limitation” shall mean the limitation on a benefit that may otherwise
be distributable pursuant to the provisions of this Plan, as set forth in
Article 4.

 

 

 

4

1.18

“Deferral Account” shall mean (i) the sum of all of a Participant’s Annual
Deferral Amounts, plus (ii) amounts credited in accordance with all the
applicable crediting and debiting provisions of this Plan that relate to the
Participant’s Deferral Account, less (iii) all distributions made to the
Participant or his or her Beneficiary pursuant to this Plan that relate to his
or her Deferral Account.

1.19

“Director” shall mean any member of the board of directors of any Employer.

1.20

“Director Fees” shall mean the annual fees paid by any Employer, including
retainer fees and meetings fees, as compensation for serving on the board of
directors.

1.21

“Disability” or “Disabled” shall mean any medically determinable physical or
mental impairment that can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months which results in (i) the
Participant being unable to engage in any substantial gainful activity or (ii)
the Participant receiving income replacement benefits for a period of not less
than 3 months under an accident and health plan covering employees of the
Company. In addition, the Participant will be deemed disabled if determined to
be totally disabled by the Social Security Administration, or if determined to
be disabled in accordance with a disability insurance program provided the
definition of disability applied under such disability insurance program
complies with the requirements of the preceding sentence.

1.22

“Disability Benefit” shall mean the benefit set forth in Article 9.

1.23

“Election Form” shall mean the form established from time to time by the
Committee that a Participant completes, signs and returns to the Committee to
make an election under the Plan. Notwithstanding anything to the contrary, any
subsequent election that delays a payment or changes a form of payment under the
Plan as a result of the completion of a new Election Form shall comply with the
requirements of Code Section 409A(a)(4)(C).

1.24

“Employee” shall mean a person who is an employee of any Employer.

1.25

“Employer(s)” shall mean the Company and/or any of its subsidiaries (now in
existence or hereafter formed or acquired) that have been selected by the Board
to participate in the Plan and have adopted the Plan as a sponsor.

1.26

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

1.27

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it
may be amended from time to time.

1.28

“In-Service Distribution” shall mean the distribution set forth in Section 5.1.

1.29

“Participant” shall mean any Employee or Director (i) who is selected to
participate in the Plan, (ii) who elects to participate in the Plan, (iii) who
signs a Plan Agreement, an Election Form and a Beneficiary Designation Form,
(iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form
are accepted by the Committee, (v) who commences participation

 

 

 

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in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or
former spouse of a Participant shall not be treated as a Participant in the Plan
or have an account balance under the Plan, even if he or she has an interest in
the Participant’s benefits under the Plan as a result of applicable law or
property settlements resulting from legal separation or divorce.

1.30

“Person” shall mean any individual, corporation, bank, partnership, joint
venture, association, joint stock company, trust, unincorporated corporation or
other entity.

1.31

“Plan” shall mean The South Financial Group 2005 Executive and Director Deferred
Compensation Plan, which shall be evidenced by this instrument and by each Plan
Agreement, as they may be amended from time to time.

1.32

“Plan Agreement” shall mean a written agreement, as may be amended from time to
time, which is entered into by and between an Employer and a Participant. Each
Plan Agreement executed by a Participant and the Participant’s Employer shall
provide for the entire benefit to which such Participant is entitled under the
Plan; should there be more than one Plan Agreement, the Plan Agreement bearing
the latest date of acceptance by the Employer shall supersede all previous Plan
Agreements in their entirety and shall govern such entitlement. The terms of any
Plan Agreement may be different for any Participant, and any Plan Agreement may
provide additional benefits not set forth in the Plan or limit the benefits
otherwise provided under the Plan; provided, however, that any such additional
benefits or benefit limitations must be agreed to by both the Employer and the
Participant.

1.33

“Plan Year” shall mean a period beginning on January 1 of each calendar year and
continuing through December 31 of such calendar year.

1.34

“Restricted Stock Award(s)” shall mean any performance share grant award that a
Participant elects to defer with respect to The South Financial Group, Inc. Long
Term Incentive Plan (January 1, 2001); any restricted stock award that a
Participant elects to defer with respect to The South Financial Group, Inc. 2004
Long Term Incentive Plan; or any restricted stock award that a Participant
elects to defer with respect to any other plan or program sponsored by the
Company that provides for restricted stock awards and allows Participants to
defer receipt of such restricted stock awards. Notwithstanding any other
provision of this Plan, Restricted Stock Awards may not be deferred by a
Participant after December 31, 2006.

1.35

“Restricted Stock Award Account” shall mean the aggregate value, measured on any
given date, of (i) the number of all shares of Stock deferred into the Plan by a
Participant as a result of all Restricted Stock Awards, including all such
shares of Stock that were deferred into the Prior Plan but which were
transferred to and are being held under the terms of this Plan because such
shares were not vested as of December 31, 2004 under the Code Section 409A
grandfathering rules, plus (ii) the number of additional shares of Stock
credited as a result of the deemed reinvestment of dividends in accordance with
the applicable crediting provisions of The South Financial Group Stock Fund,
less (iii) the number of shares of Stock distributed to the Participant or his
or her Beneficiary pursuant to this Plan, subject in each case to any
adjustments to the number of such shares determined by the Committee with
respect to The South Financial Group

 

 

 

6

Stock Fund pursuant to Section 3.8. This portion of a Participant’s Account
Balance shall only be distributable in actual shares of Stock.

1.36

“Retirement”, “Retire(s)” or “Retired” shall mean, with respect to an Employee,
separation from service from all Employers within the meaning of Treasury
Regulations Section 1.409A-1(h) (and from all entities that are considered a
single employer with the Employers under Code Sections 414(b) and 414(c)), for
any reason other than a leave of absence, death or Disability on or after the
earlier of the attainment of age sixty-five (65), or age fifty-five (55) with
five (5) Years of Service; and shall mean with respect to a Director who is not
an Employee, severance of his or her directorships with all Employers and
related entities as described in the previous sentence. If a Participant is both
an Employee and a Director, Retirement shall be deemed to be a Retirement as an
Employee under the provisions of this Section 1.36. In other words, Employees
who also serve as Directors are only eligible to participate in plans available
to them as employees of the Company and are not eligible to participate in plans
available to them as Directors.

1.37

“Retirement Benefit” shall mean the benefit set forth in Article 7.

1.38

“Stock” shall mean Company common stock, or any other equity securities of the
Company designated by the Committee.

1.39

“Survivor Benefit” shall mean the benefit set forth in Article 10.

1.40

“Termination Benefit” shall mean the benefit set forth in Article 8.

1.41

“Termination of Employment” means the termination of the Executive's employment
with the Company and all of its subsidiaries or affiliates that are considered a
single employer within the meaning of Code Sections 414(b) and 414(c), provided
that in applying Code Sections 1563(a)(1), (2) and (3) for purposes of
determining a controlled group of corporations under Code Section 414(b), the
language "at least 50 percent" is used instead of "at least 80 percent" each
place it appears, and in applying Treasury Regulation Section 1.414(c)-2 for
purposes of determining trades or businesses (whether or not incorporated) that
are under common control for purposes of Code Section 414(c), "at least 50
percent" is used instead of "at least 80 percent" each place it appears. Whether
a Termination of Employment has occurred is determined based on whether the
facts and circumstances indicate that the employer and Executive reasonably
anticipated that no further services would be performed after a certain date or
that the level of bona fide services the Executive would perform after such date
(whether as an employee or as an independent contractor) would permanently
decrease to no more than 20 percent of the average level of bona fide services
performed (whether as an employee or an independent contractor) over the
immediately preceding 36-month period (or the full period of services to the
employer if the Executive has been providing services to the employer less than
36 months).

Temporary absences from employment while the Executive is on military leave,
sick leave, or other bona fide leave of absence will not be considered a
Termination of Employment if the period of such leave does not exceed six
months, or if longer, so long as the Executive's right to reemployment with the
Company is provided either by statute or by contract. However, if the

 

 

 

7

period of leave exceeds six months and the Executive's right to reemployment is
not provided either by statute or by contract, a Termination of Employment is
deemed to occur on the first day immediately following such six-month period.
Notwithstanding the foregoing, where a leave of absence is due to any medically
determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than six
months, where such impairment causes the Executive to be unable to perform the
duties of his or her position of employment or any substantially similar
position of employment, a 29-month period of absence may be substituted for such
six-month period.

1.42

“Unforeseeable Emergency” shall mean unforeseeable emergency, consistent with
Code Section 409A and the treasury regulations thereunder, that would result in
severe financial hardship to the Participant resulting from (i) an illness or
accident of the Participant, or the Participant’s spouse, Beneficiary or
dependent (as defined in Code Section 152(a)), (ii) a loss of the Participant’s
property due to casualty, or (iii) other such similar, extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. The existence of an Unforeseeable Emergency will be determined
by the Committee on the basis of the relevant facts and circumstances of each
case, including information supplied by the Participant in accordance with
uniform guidelines prescribed from time to time by the Committee; provided, the
Participant will be deemed not to have an Unforeseeable Emergency to the extent
that such hardship is or may be relieved:

 

(i)

Through reimbursement or compensation by insurance or otherwise;

 

(ii)

By liquidation of the Participant’s assets, to the extent the liquidation of
such assets would not itself cause severe financial hardship; or

 

(iii)

By cessation of deferrals under the Plan.

For example, the purchase of a home and the payment of college tuition generally
may not be considered an Unforeseeable Emergency. The imminent foreclosure of or
eviction from the Participant’s primary residence may constitute an
Unforeseeable Emergency. In addition, the need to pay for medical expenses,
including nonrefundable deductibles, as well as for the costs of prescription
drug medication, may constitute an Unforeseeable Emergency. Finally, the need to
pay for the funeral expense of a Participant’s spouse, a Beneficiary, or a
dependent (as defined in Section 152(a), without regard to Section 152(b)(1),
(b)(2), and (d)(1)(B)) may also constitute an Unforeseeable Emergency.

1.43

“Years of Service” shall mean the total number of full years in which a
Participant has been employed by one or more Employers. For purposes of this
definition, a year of employment shall be a 365 day period (or 366 day period in
the case of a leap year) that, for the first year of employment, commences on
the Employee’s date of hiring and that, for any subsequent year, commences on an
anniversary of that hiring date. The Committee shall make a determination as to
whether any partial year of employment shall be counted as a Year of Service.

 

 

 

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ARTICLE 2

Selection, Enrollment, and Eligibility

2.1

Selection by Committee. Participation in the Plan shall be limited to a select
group of management or highly compensated Employees (as defined in Sections
201(2), 301(a)(3) and 401(a)(1) of ERISA) and Directors of the Employer, as
determined by the Committee in its sole discretion. From that group, the
Committee shall select, in its sole discretion, Employees and Directors to
participate in the Plan.

2.2

Enrollment Requirements. As a condition of participation in the Plan, each
selected Employee or Director shall complete, execute and return to the
Committee a Plan Agreement, an Election Form for each Plan Year, and a
Beneficiary Designation Form for the initial deferral or for any subsequent
change in Beneficiary. Deferral elections and Election Forms shall be provided
as described in Section 3.3. In addition, each Employee must be an active
participant in The South Financial Group, Inc., 401(k) Plan or a similar Code
Section 401(k) plan sponsored by any Employer. Also, the Committee shall
establish from time to time such other enrollment requirements as it determines
in its sole discretion are necessary, provided such enrollment requirements are
consistent with Code Section 409A and applicable treasury regulations and
published regulatory or other guidance.

2.3

Eligibility; Commencement of Participation. Provided an Employee or Director
selected to participate in the Plan has met all enrollment requirements set
forth in this Plan and required by the Committee, including returning all
required documents to the Committee within the specified time period, that
Employee or Director shall commence participation in the Plan on the first day
of the month following the month in which the Employee completes all enrollment
requirements. If an Employee or Director fails to meet all such requirements
within the period required, in accordance with Sections 2.2 and 3.3, that
Employee or Director shall not be eligible to participate in the Plan until the
first day of the Plan Year following the delivery to and acceptance by the
Committee of the required documents.

2.4

Termination of Participation and/or Deferrals. If the Committee determines in
good faith that a Participant who is an Employee no longer qualifies as a member
of a select group of management or highly compensated employees, as membership
in such group is determined in accordance with Sections 201(2), 301(a)(3) and
401(a)(1) of ERISA and is not also a Director, the Committee shall have the
right, in its sole discretion, to (i) terminate any deferral election the
Participant has made effective as of the last day of the Plan Year in which the
Participant’s membership status changes, (ii) prevent the Participant from
making future deferral elections and/or (iii) terminate the Participant’s
participation in the Plan effective as of the last day of a Plan Year. If a
Participant who is a Director ceases to be a Director and is not an Employee,
the Committee shall have the right, in its sole discretion, to terminate the
Participant’s participation in the Plan.

 

 

 

9

ARTICLE 3

Deferral Commitments/Company Match Amounts/Vesting/Crediting/Taxes

3.1

Minimum Deferrals.

 

(a)

Annual Deferral Amount. For each Plan Year, a Participant may elect to defer, as
his or her Annual Deferral Amount, Base Annual Salary, Annual Bonus, and/or
Director Fees in the following minimum amounts for each deferral elected:

Deferral

Minimum Amount

Base Annual Salary

$1,000

Annual Bonus

$1,000

Director Fees

$1,000

If an election is made for less than the stated minimum amounts, or if no
election is made, the amount deferred shall be zero.

 

(b)

Restricted Stock Awards. A Participant may elect to defer into the Plan his or
her Restricted Stock Awards in the following minimum number of shares for each
Plan Year:

Deferral

Minimum Amount

Restricted Stock Awards

100 Shares

 

If an election is made for less than the stated minimum number of shares, or if
no election is made, the shares deferred shall be zero. Notwithstanding any
other provision of this Plan, Restricted Stock Awards may not be deferred by a
Participant after December 31, 2006.

 

(c)

Short Plan Year. Notwithstanding the foregoing, if a Participant first becomes a
Participant after the first day of a Plan Year, the minimum Annual Deferral
Amount shall be an amount equal to the minimum set forth above, multiplied by a
fraction, the numerator of which is the number of complete months remaining in
the Plan Year and the denominator of which is 12.

3.2

Maximum Deferral.

 

(a)

Annual Deferral Amount. For each Plan Year, a Participant may elect to defer, as
his or her Annual Deferral Amount, Base Annual Salary, Annual Bonus, and/or
Director Fees up to the following maximum percentages for each deferral elected:

Deferral

Maximum Amount

Base Annual Salary

80%

Annual Bonus

100%

Director Fees

100%

 

 

 

 

10

 

(b)

Restricted Stock Awards. A Participant may elect to defer into the Plan his or
her Restricted Stock Awards up to the following maximum percentage for each Plan
Year:

Deferral

Maximum Amount

Restricted Stock Awards

100%

 

Restricted Stock Awards may also be limited by other terms or conditions set
forth in the Company’s applicable Long Term Incentive Plan or other
Company-sponsored plan or program that allows Participants to defer receipt of
such Restricted Stock Awards. Notwithstanding any other provision of this Plan,
Restricted Stock Awards may not be deferred by a Participant after December 31,
2006.

 

(c)

Short Plan Year. Notwithstanding the foregoing, if a Participant first becomes a
Participant after the first day of a Plan Year, the maximum Annual Deferral
Amount (i) with respect to Base Annual Salary and Director Fees shall be limited
to the amount of compensation not yet earned by the Participant as of the date
the Participant submits a Plan Agreement and Election Form to the Committee for
acceptance, and (ii) with respect to Annual Bonus, shall be limited to those
amounts deemed eligible for deferral, in the sole discretion of the Committee,
provided such discretion is exercised in a manner which is consistent with Code
Section 409A and applicable treasury regulations and other published regulatory
or other guidance.

3.3

Election to Defer; Effect of Election Form.

 

(a)

First Plan Year. In the case of the first Plan Year in which a selected Employee
or Director becomes eligible to participate in the Plan, he or she may make an
irrevocable initial deferral election within thirty (30) days after the date he
or she first becomes eligible to participate under this plan or a similar plan
as determined under Code Section 409A and related treasury regulations, with
respect to compensation paid for services to be rendered subsequent to the
election, along with such other elections as the Committee deems necessary or
desirable under the Plan. For these elections to be valid, the Election Form
must be completed and signed by the Participant, and timely delivered to the
Committee and accepted by the Committee.

 

(b)

Subsequent Plan Years. For each succeeding Plan Year, an irrevocable deferral
election for that Plan Year, and such other elections as the Committee deems
necessary or desirable under the Plan, shall be made by timely delivering a new
Election Form to the Committee, in accordance with its rules and procedures,
before the end of the Plan Year preceding the Plan Year for which the election
is made. If no such Election Form is timely delivered for a Plan Year, the
Annual Deferral Amount shall be zero for that Plan Year.

 

(c)

Deferral Election for Performance-Based Compensation. Notwithstanding the
preceding, in the case of any “performance-based compensation” based on services
performed over a period of at least twelve (12) months as determined by the
Committee in accordance with

 

 

 

11

Code Section 409A and regulations and applicable guidance thereunder (including
Treasury Regulations Section 1.409A-1(e)), an initial deferral election may be
made with respect to such performance-based compensation no later than the date
that is six months before the end of the performance period, provided that the
Participant performs services continuously from the later of the beginning of
the performance period or the date upon which the performance criteria are
established through the date the Participant makes an initial deferral election
hereunder, and provided further that in no event may an election to defer
performance-based compensation be made after such compensation has become
readily ascertainable.

3.4

Withholding and Crediting of Annual Deferral Amounts. For each Plan Year, the
Base Annual Salary portion of the Annual Deferral Amount or deferred Director
Fees shall be withheld from each regularly scheduled Base Annual Salary or
Director Fees payroll in equal amounts, as adjusted from time to time for
increases and decreases in Base Annual Salary or Director Fees. The Annual Bonus
portion of the Annual Deferral Amount shall be withheld at the time the Annual
Bonus would be paid to the Participant, whether or not this occurs during the
Plan Year itself. Annual Deferral Amounts and deferred Director Fees shall be
credited to a Participant’s Deferral Account at the time such amounts would
otherwise have been paid to the Participant.

3.5

Transfer and Crediting of Restricted Stock Awards. For each Plan Year prior to
January 1, 2007, the Restricted Stock Award that a Participant elects to defer
(which deferral must occur on or before December 31, 2006) shall be transferred
and credited to the Plan as of the date provided in the plan or program
providing the Restricted Stock Award. Shares of stock included in the Restricted
Stock Award shall be maintained in The South Financial Group Stock Fund as
provided in Section 3.8(c) of the Plan.

3.6

Annual Company Match Amount. For each Plan Year, the Company shall match a
Participant’s Annual Deferral Amount up to a maximum of 10% of such deferrals.
The Annual Company Match Amount shall be credited to a Participant’s Annual
Company Match Account at the same time the Annual Deferral Amounts are made.
Notwithstanding this provision, deferred Directors Fees are not eligible for an
Annual Company Match. In addition, the Company shall match amounts deferred
under The South Financial Group Securities Division Annual Incentive Plan prior
to January 1, 2008 at 100% of such deferrals.

3.7

Vesting.

 

(a)

A Participant shall at all times be 100% vested in his or her Deferral Account.

 

(b)

A Participant shall not vest in his or her Restricted Stock Award Account until
such time or times, and pursuant to the terms and conditions, set forth in the
Company-sponsored plan or program that provided the Restricted Stock Award.

 

(c)

A Participant shall not vest to any extent in an Annual Company Match Amount
until the January 1 immediately following the fifth year anniversary of the
Annual Company Match Amount, at which point the Participant shall become 100%
vested  in such

 

 

 

12

Amount, provided that he has remained continuously employed by one or more
Employers during such period. For example, for Annual Company Match Amounts made
for the 2002 Plan Year, a Participant will vest 100% in those amounts on January
1, 2008 (assuming he was continuously employed by one or more Employers from the
2002 Plan Year through January 1, 2008).

 

(d)

Notwithstanding anything to the contrary contained in this Section 3.7, in the
event of a Change in Control, or upon a Participant’s Retirement, death while
employed by an Employer, or Disability, a Participant’s Company Match Account
shall immediately become 100% vested (if it is not already vested in accordance
with the above vesting schedules).

 

(e)

Notwithstanding subsection 3.7(d) above, the vesting schedule for a
Participant’s Company Match Account shall not be accelerated to the extent that
the Committee determines that such acceleration would cause the deduction
limitations of Section 280G of the Code to become effective. In the event that
all of a Participant’s Company Match Account is not vested pursuant to such a
determination, the Participant may request independent verification of the
Committee’s calculations with respect to the application of Section 280G. In
such case, the Committee must provide to the Participant within ninety (90) days
of such a request an opinion from a nationally recognized accounting firm
selected by the Participant (the “Accounting Firm”). The opinion shall state the
Accounting Firm’s opinion that any limitation in the vested percentage hereunder
is necessary to avoid the limits of Section 280G and contain supporting
calculations. The cost of such opinion shall be paid for by the Company.

 

(f)

Section 3.7(e) shall not prevent the acceleration of the vesting schedule
applicable to a Participant’s Company Match Account if such Participant is
entitled to a “gross-up” payment, to eliminate the effect of the Code section
4999 excise tax, pursuant to his or her employment agreement or other agreement
entered into between such Participant and the Employer.

3.8

Crediting/Debiting of Account Balances. In accordance with, and subject to, the
rules and procedures that are established from time to time by the Committee, in
its sole discretion, amounts shall be credited or debited to a Participant’s
Account Balance in accordance with the following rules:

 

(a)

Measurement Funds. Subject to the restrictions found in Section 3.8.(c) below,
the Participant may elect one or more of the measurement funds selected by the
Committee, in its sole discretion, which are based on certain mutual funds (the
“Measurement Funds”), for the purpose of crediting or debiting additional
amounts to his or her Account Balance. As necessary, the Committee may, in its
sole discretion, discontinue, substitute or add a Measurement Fund. Each such
action will take effect as of the first day of the first calendar quarter that
begins at least thirty (30) days after the day on which the Committee gives
Participants advance written notice of such change.

 

 

 

13

 

(i)

Prime Rate Fund. Amounts deferred into the Prime Rate Measurement Fund shall be
credited on a daily basis with an amount equal to an imputed interest on the
Deferral Account at a rate that equals the average Prime Lending Rate for the
previous calendar year. Such rate shall be determined on an annual basis, not
later than January 31 of each Plan Year. In the event that all or a portion of a
Deferral Account is remitted to the Participant, payment shall include
applicable accrued interest calculated to the date of payment.

 

(b)

Election of Measurement Funds. Subject to the restrictions found in Section
3.8(c) below, a Participant, in connection with his or her initial deferral
election in accordance with Section 3.3(a) or 3.3(c) above, shall elect, on the
Election Form, one or more Measurement Fund(s) (as described in Section 3.8(a)
above) to be used to determine the amounts to be credited or debited to his or
her Account Balance. If a Participant does not elect any of the Measurement
Funds as described in the previous sentence, the Participant’s Account Balance
shall automatically be allocated into the Prime Rate Measurement Fund, as
determined by the Committee, in its sole discretion. Subject to the restrictions
found in Section 3.8(c) below, the Participant may (but is not required to)
elect, by submitting an Election Form to the Committee that is accepted by the
Committee, to add or delete one or more Measurement Fund(s) to be used to
determine the amounts to be credited or debited to his or her Account Balance,
or to change the portion of his or her Account Balance allocated to each
previously or newly elected Measurement Fund. If an election is made in
accordance with the previous sentence, it shall apply as of the first business
day deemed reasonably practicable by the Committee, in its sole discretion, and
shall continue thereafter for each subsequent day in which the Participant
participates in the Plan, unless changed in accordance with the previous
sentence.

 

(c)

The South Financial Group Stock Fund.

 

(i)

An Employee (other than an Employee who is a "reporting person" of the Company
under Section 16 of the Securities Exchange Act of 1934)who is a Participant may
allocate any portion of his or her Annual Bonus, at the time the deferral
election is made, to The South Financial Group Stock Fund Measurement Fund.
Restricted Stock Awards deferred into this Plan shall be allocated to The South
Financial Group Stock Fund. Directors may not allocate Directors Fees to The
South Financial Group Stock Fund Measurement Fund. Furthermore, no other portion
of the Participant’s Account Balance can be either initially allocated or
re-allocated to The South Financial Group Stock Fund. Once Annual Bonus
deferrals and Restricted Stock Awards are allocated into this Fund, participants
may not reallocate any portion of their Account Balance from this Fund to any
other Measurement Fund at any time. All distributions will be made in shares of
Company Stock only. Notwithstanding the preceding sentence, the Committee may
postpone any transfer that would otherwise be made in a period in which the
Participant would be prohibited (by Company policy or otherwise) from acquiring

 

 

 

14

or disposing of equity securities of the Company until after such period has
expired.

 

(ii)

Any stock dividends, cash dividends or other non-cash dividends that would have
been payable on the Stock credited to a Participant’s Account Balance (including
Restricted Stock Awards deferred into this Plan) shall be credited to the
Participant’s Account Balance in the form of additional shares of Stock and
shall automatically and irrevocably be deemed to be re-invested in The South
Financial Group Stock Fund until such amounts are distributed to the
Participant. The number of shares credited to the Participant for a particular
stock dividend shall be equal to (a) the number of shares of Stock credited to
the Participant’s Account Balance as of the payment date for such dividend in
respect of each share of Stock, multiplied by (b) the number of additional
shares of Stock actually paid as a dividend in respect of each share of Stock.
The number of shares credited to the Participant for a particular cash dividend
or other non-cash dividend shall be equal to (a) the number of shares of Stock
credited to the Participant’s Account Balance as of the payment date for such
dividend in respect of each share of Stock, multiplied by (b) the fair market
value of the dividend, divided by (c) the “fair market value” of the Stock on
the payment date for such dividend.

 

(iii)

The number of shares of Stock credited to the Participant’s Account Balance may
be adjusted by the Committee, in its sole discretion, to prevent dilution or
enlargement of Participants’ rights with respect to the portion of his or her
Account Balance allocated to The South Financial Group Stock Fund, in the event
of any reorganization, reclassification, stock split, or other unusual corporate
transaction or event which affects the value of the Stock, provided that any
such adjustment shall be made taking into account any crediting of shares of
Stock to the Participant under Section 3.8.

 

(iv)

For purposes of this Section 3.8(c), the fair market value of the Stock shall be
determined by the Committee in its sole discretion.

 

(d)

Proportionate Allocation. In making any election described in Section 3.8(b)
above, the Participant shall specify on the Election Form, in increments of one
percent (1%), the percentage of his or her Account Balance to be allocated to a
Measurement Fund (as if the Participant was making an investment in that
Measurement Fund with that portion of his or her Account Balance).

 

(e)

Crediting or Debiting Method. The performance of each elected Measurement Fund
(either positive or negative) will be determined by the Committee, in its
reasonable discretion, based on the performance of the Measurement Funds
themselves. A Participant’s Account Balance shall be credited or debited on a
daily basis based on the performance of each Measurement Fund selected by the
Participant, such performance being determined by the Committee in its sole
discretion.

 

 

 

15

 

(f)

No Actual Investment. Notwithstanding any other provision of this Plan that may
be interpreted to the contrary, the Measurement Funds are to be used for
measurement purposes only, and a Participant’s election of any such Measurement
Fund, the allocation to his or her Account Balance thereto, the calculation of
additional amounts and the crediting or debiting of such amounts to a
Participant’s Account Balance shall not be considered or construed in any manner
as an actual investment of his or her Account Balance in any such Measurement
Fund. In the event that the Company or the Trustee, in its own discretion,
decides to invest funds in any or all of the investments on which the
Measurement Funds are based, no Participant shall have any rights in or to such
investments themselves. Without limiting the foregoing, a Participant’s Account
Balance shall at all times be a bookkeeping entry only and shall not represent
any investment made on his or her behalf by the Company; the Participant shall
at all times remain an unsecured creditor of the Company.

3.9

FICA and Other Taxes.

 

(a)

Annual Deferral Amounts. For each Plan Year in which an Annual Deferral Amount
is being withheld from a Participant, the Participant’s Employer(s) shall
withhold from that portion of the Participant’s Base Annual Salary and Annual
Bonus amounts that are not being deferred, in a manner determined by the
Employer(s), the Participant’s share of FICA and other employment taxes on such
Annual Deferral Amount. If necessary, the Committee may reduce the Annual
Deferral Amount in order to comply with this Section 3.9.

 

(b)

Restricted Stock Awards. When a Participant’s Restricted Stock Award Account
ceases to be subject to a substantial risk of forfeiture, the Participant’s
Employer(s) shall withhold from the Participant’s Base Annual Salary and Annual
Bonus that are not deferred, in a manner determined by the Employer(s), the
Participant’s share of FICA and other employment taxes. If necessary, the
Committee may reduce the Annual Deferred Amount in order to comply with this
Section 3.9.

 

(c)

Company Match Account. When a Participant becomes vested in a portion of his or
her Company Match Account, the Participant’s Employer(s) shall withhold from the
Participant’s Base Annual Salary and Annual Bonus that are not deferred, in a
manner determined by the Employer(s), the Participant’s share of FICA and other
employment taxes. If necessary, the Committee may reduce the vested portion of
the Participant’s Company Match Account, as applicable, in order to comply with
this Section 3.9.

 

(d)

Distributions. The Participant’s Employer(s) shall withhold from any payments
made to a Participant under this Plan all federal, state and local income,
employment and other taxes required to be withheld by the Employer(s) in
connection with such payments, in amounts and in a manner to be determined in
the sole discretion of the Employer(s).

 

 

 

16

ARTICLE 4

Deduction Limitation

4.1

Deduction Limitation on Benefit Payments. A payment may be delayed to the extent
that the Employer reasonably anticipates that if the payment were made as
scheduled, the Employer’s deduction with respect to such payment would not be
permitted due to the application of Code Section 162(m), provided that the
payment is made either during the Participant’s first taxable year in which the
Employer reasonably anticipates, or should reasonably anticipate, that if the
payment is made during such year, the deduction of such payment will not be
barred by application of Code Section 162(m) or during the period beginning with
the date of the Participant’s Termination of Employment or Retirement and ending
on the later of the last day of the taxable year of the Employer which includes
the Participant’s Termination of Employment or Retirement or the 15th day of the
third month following the Participant’s Termination of Employment or Retirement,
and provided further that where any scheduled payment to a Participant in a
taxable year is delayed in accordance with this paragraph, the delay in payment
will be treated as a subsequent deferral election unless all scheduled payments
to that Participant that could be delayed in accordance with this paragraph are
also delayed. Where the payment is delayed to a date on or after the
Participant’s Termination of Employment or Retirement, the payment will be
considered a payment upon a “separation from service” for purposes of the rules
under Treasury Regulation Section 1.409A-3(i)(2) (payments to specified
employees upon a separation from service) and, in the case of a Participant who
is a “specified employee” (as determined under Treasury Regulation Section
1.409A-1(i) and related Employer procedures), the date that is six months after
a Participant’s Termination of Employment or Retirement is substituted for any
reference to a Participant’s Termination of Employment or Retirement in the
first sentence of this Section 4.1. No election may be provided to a Participant
with respect to the timing of the payment under this Section 4.1.

ARTICLE 5

  In-Service Distribution; Unforeseeable Emergencies

5.1

In-Service Distribution. In connection with each election to defer an Annual
Deferral Amount, a Participant may irrevocably elect to receive an In-Service
Distribution from the Plan with respect to all or a portion of (i) the Annual
Deferral Amount, excluding Director Fees and that portion of the bonus allocated
to The South Financial Group Stock Fund; or (ii) the Annual Company Match
Amount. Notwithstanding the preceding and subject to Section 5.4, deferred
Director Fees shall not be eligible for In-Service Distribution, and may only be
distributed upon Retirement of the Director. The In-Service Distribution shall
be a lump sum payment in an amount that is equal to the portion of the Annual
Deferral Amount and the vested portion of the Annual Company Match Amount that
the Participant elected to have distributed as an In-Service Distribution, plus
amounts credited or debited in the manner provided in Section 3.8 above on that
amount, calculated as of the close of business on or around the date on which
the In-Service Distribution becomes payable, as determined by the Committee in
its sole discretion. Subject to the other terms and conditions of this Plan,
each In-Service Distribution elected shall be paid out

 

 

 

17

during a sixty (60) day period commencing immediately after the first day of any
Plan Year designated by the Participant. The Plan Year designated by the
Participant must be at least three Plan Years after the end of the Plan Year in
which the Annual Deferral Amount is actually deferred, or the vested portion of
the Annual Company Match Amount is actually contributed. By way of example, if
an In-Service Distribution is elected for Annual Deferral Amounts that are
deferred in the Plan Year commencing January 1, 2003, the In-Service
Distribution would become payable during a sixty (60) day period commencing
January 1, 2007. Notwithstanding the language set forth above, the Committee
shall, in its sole discretion, adjust the amount distributable as an In-Service
Distribution if any portion of the Annual Company Match Amount is unvested on
the In-Service Distribution Date.

Notwithstanding the preceding, the Participant may make a subsequent election to
delay a payment of an In-Service Distribution by submitting a new Election Form
to the Committee, provided that (i) the election does not take effect until at
least twelve (12) months after the date the election is made, (ii) the payment
is deferred for a period of at least five (5) years from the date such payment
would otherwise have been made, and (iii) the election is made at least twelve
(12) months prior to the date any such payment was scheduled to begin.

5.2

Other Benefits Take Precedence Over In-Service Distributions. Should an event
occur that triggers a benefit under Article 6, 7, 8, 9 or 10, any Annual
Deferral Amount or Annual Company Match Amount, plus amounts credited or debited
thereon, that is subject to an In-Service Distribution election under Section
5.1 shall not be paid in accordance with Section 5.1 but shall be paid in
accordance with the other applicable Article.

5.3

Withdrawal Payout/Suspensions for Unforeseeable Emergencies. If a Participant
experiences an Unforeseeable Emergency, the Participant may petition the
Committee to receive a partial or full payout from the Plan. The payout shall
not exceed the lesser of the Participant’s vested Account Balance, excluding the
portion of the Account Balance allocated to The South Financial Group Stock Fund
(including any Restricted Stock Awards), calculated as if such Participant were
receiving a Termination Benefit, or the amount reasonably needed to satisfy the
Unforeseeable Emergency (including any amounts necessary to pay any federal,
state or local income taxes or penalties reasonably anticipated to result from
the payout). Notwithstanding any provision in the Plan to the contrary, any
payment made pursuant to this Section 5.3 shall comply with Code Section
409A(a)(2)(A)(vi) and the related treasury regulations.

If the Committee, in its sole discretion, approves a Participant’s petition for
payout due to an Unforeseeable Emergency, the Participant’s deferral elections
for any amounts payable for the remainder of the Plan Year shall be cancelled as
of the date of such approval, and the Participant shall receive a payout from
the Plan within sixty (60) days of the date of such approval. A Participant may
re-enroll in the Plan for a subsequent Plan Year by making an annual enrollment
in accordance with Section 3.3.

 

 

 

18

ARTICLE 6

Change in Control Benefit

6.1

Change in Control Benefit. The Participant will receive a Change in Control
Benefit, which shall be equal to the Participant’s vested Account Balance,
calculated as of the close of business on or around the date of the Change in
Control, as selected by the Committee in its sole discretion, if (i) the
Participant has elected to receive a Change in Control Benefit, as set forth in
Section 6.2 below, and (ii) if a Change in Control occurs prior to the
Participant’s Termination of Employment, Retirement, death or Disability.

6.2

Payment of Change in Control Benefit. A Participant, in connection with his or
her commencement of participation in the Plan, shall irrevocably elect on an
Election Form whether to (i) receive a Change in Control Benefit, or (ii) have
his or her Account Balance remain in the Plan upon the occurrence of a Change in
Control and to have his or her Account Balance remain subject to the terms and
conditions of the Plan. If a Participant does not make any election with respect
to the payment of the Change in Control Benefit, then such Participant’s Account
Balance shall remain in the Plan upon a Change in Control and shall be subject
to the terms and conditions of the Plan. The Change in Control Benefit, if any,
shall be paid to the Participant in a lump sum no later than sixty (60) days
after a Change in Control.

ARTICLE 7

Retirement Benefit

7.1

Retirement Benefit. A Participant who Retires shall receive, as a Retirement
Benefit, his or her vested Account Balance, calculated as of the close of
business on or around the date on which the Participant Retires, as determined
by the Committee in its sole discretion.

7.2

Payment of Retirement Benefit. In connection with each election to defer an
Annual Deferral Amount, a Participant shall elect to receive the portion of the
Retirement Benefit attributable to such Annual Deferral Amount in a lump sum or
pursuant to an Annual Installment Method of up to 20 years (or if elected and
distributed on or before December 31, 2007, a combination of lump sum or
installments). A Participant who is a Director shall elect on an Election Form
to receive the Retirement Benefit in a lump sum or pursuant to an Annual
Installment Method of up to 5 years. The Participant may change his or her
election attributable to each Annual Deferral Amount to an allowable alternative
payout period or to an allowable alternative form of payment by submitting a new
Election Form to the Committee, provided that (i) any such Election Form is
submitted to and accepted by the Committee in its sole discretion at least
twelve (12) months prior to the Participant’s Retirement and (ii) the payout is
deferred for a period of at least five (5) years from the date such payment
would otherwise have been made. If a Participant does not make any election with
respect to the payment of a portion of the Retirement Benefit, then such benefit
shall be payable in a lump sum. The lump sum payment shall be made, or
installment payments shall commence, no later than sixty (60) days after the
date on which the Participant Retires. Notwithstanding the above, if the
Participant is a “specified employee” of the Company within the meaning of
Treasury Regulations Section 1.409A-1(i), any such payments shall be made, or
shall commence, within thirty (30) days following the end of the sixth month
after the

 

 

 

19

Participant’s Retirement. Remaining installments, if any, shall be paid no later
than sixty (60) days after each anniversary of the date on which the Participant
retires.

ARTICLE 8

Termination Benefit

8.1

Termination Benefit. A Participant who experiences a Termination of Employment
shall receive a Termina­tion Benefit, which shall be equal to the Participant’s
vested Account Balance, calculated as of the close of business on or around the
date on which the Participant experiences a Termination of Employment, as
determined by the Committee in its sole discretion.

8.2

Payment of Termination Benefit. The Termination Benefit shall be paid to the
Participant in a lump sum payment no later than sixty (60) days after the date
on which the Participant experiences the Termination of Employment.
Notwithstanding the above, if the Participant is a “specified employee” of the
Company within the meaning of Treasury Regulations Section 1.409A-1(i), such
lump sum payment shall be made within thirty (30) days following the end of the
sixth month after the Participant’s Termination of Employment.

ARTICLE 9

Disability Benefit

9.1

Deferrals.

 

(a)

Deferral During Disability. A Participant who is deter­mined to be suffering
from a Disability shall continue to be eligible for the benefits provided in
Articles 5, 6, 7, 8, 9 or 10 in accordance with the provisions of those
Articles, and any previously elected deferrals of Restricted Stock Awards shall
continue to be withheld during the remainder of the Plan Year in which the
Participant first suffers the Disability. However, such Disabled Participant
shall be excused from fulfilling that portion of the Annual Deferral Amount
commitment that would otherwise have been withheld from a Participant’s Base
Annual Salary, Annual Bonus, or Director’s Fees. During the remaining period of
Disability, the Participant shall not be allowed to make any additional deferral
elections, except that deferral elections with respect to Restricted Stock
Awards may continue. Notwithstanding the preceding sentence, Restricted Stock
Awards may not be deferred by a Participant after December 31, 2006.

 

(b)

Deferral Following Disability. If a Participant returns to employment with an
Employer after a Disability ceases, the Participant may elect to defer an Annual
Deferral Amount for the Plan Year following his or her return to employment or
service and for every Plan Year thereafter while a Participant in the Plan;
provided such deferral elections are otherwise allowed and an Election Form is
delivered to and accepted by the Committee for each such election in accordance
with Section 3.3 above.

 

 

 

20

9.2

Continued Eligibility; Disability Benefit.

 

(a)

Continued Eligibility. A Participant suffering a Disability shall, for benefit
purposes under this Plan, continue to be considered to be employed, or continue
in service as a Director, and shall be eligible for the benefits provided for in
Articles 5, 6, 7, 8 or 10 in accordance with the provisions of those Articles.
Notwithstanding the above, the Committee shall have the right to, in its sole
and absolute discretion and for purposes of this Plan only, deem the
Participant’s employment to have terminated at any time after such Participant
is determined to be suffering a Disability.

 

(b)

Deemed Termination of Employment. If, in the Committee’s discretion, the
Disabled Participant’s employment has terminated, and such Participant is not
otherwise eligible to Retire, the Participant shall be deemed to have
experienced a Termination of Employment for purposes of this Plan and will
receive a Disability Benefit. The Disability Benefit shall be equal to his or
her vested Account Balance, calculated as of the close of business on or around
the date on which the Disabled Participant is deemed to have experienced a
Termination of Employment, as determined by the Committee in its sole
discretion. The Participant shall receive his or her Disability Benefit in a
lump sum payment no later than sixty (60) days after the date on which the
Committee deems the Disabled Participant to have experienced a Termination of
Employment. Notwithstanding the above, if the Participant is a “specified
employee” of the Company within the meaning of Treasury Regulations Section
1.409A-1(i), such lump sum payment shall be made within thirty (30) days
following the end of the sixth month after the Participant’s Termination of
Employment.

 

(c)

Deemed Retirement. If, in the Committee’s discretion, the Disabled Participant’s
employment has terminated, and such Participant is otherwise eligible to Retire,
the Participant shall be deemed to have Retired for purposes of this Plan and
will receive a Disability Benefit. The Disability Benefit shall be equal to his
or her vested Account Balance, calculated as of the close of business on or
around the date on which the Participant is deemed to have Retired, as
determined by the Committee in its sole discretion. The Participant shall
receive his or her Disability Benefit in the same form in which such Participant
elected to receive his or her Retirement Benefit. The lump sum payment shall be
made, or installment payments shall commence, no later than sixty (60) days
after the date on which the Disabled Participant is deemed to have Retired.
Remaining installments, if any, shall be paid no later than sixty (60) days
after each anniversary of the date on which the Disabled Participant is deemed
to have Retired. Notwithstanding the above, if the Participant is a “specified
employee” of the Company within the meaning of Treasury Regulations Section
1.409A-1(i), any such payments shall be made, or shall commence, within thirty
(30) days following the sixth month after the Participant’s Retirement.
Remaining installments, if any, shall be paid no later than sixty (60) days
after each anniversary of the date on which the Participant retires.

 

 

 

21

ARTICLE 10

Survivor Benefit

10.1

Survivor Benefit. The Participant’s Beneficiary(ies) shall receive a Survivor
Benefit upon the Participant’s death which will be equal to (i) the
Participant’s vested Account Balance, calculated as of the close of business on
or around the date of the Participant’s death, as selected by the Committee in
its sole discretion, if the Participant dies prior to his or her Retirement,
Termination of Employment or Disability, or (ii) the Participant’s unpaid
Retirement Benefit or Disability Benefit, calculated as of the close of business
on or around the date of the Participant’s death, as selected by the Committee
in its sole discretion, if the Participant dies before his or her Retirement
Benefit is paid in full.

10.2

Payment of Survivor Benefit. The Survivor Benefit shall be paid to the
Participant’s Beneficiary(ies) in a lump sum payment no later than sixty (60)
days after the date on which the Committee is provided with proof that is
satisfactory to the Committee of the Participant’s death.

ARTICLE 11

Beneficiary Designation

11.1

Beneficiary. Each Participant shall have the right, at any time, to designate
his or her Beneficiary(ies) (both primary as well as contingent) to receive any
benefits payable under the Plan to a beneficiary upon the death of a
Participant. The Beneficiary designated under this Plan may be the same as or
different from the Beneficiary designation under any other plan of an Employer
in which the Participant participates.

11.2

Beneficiary Designation; Change; Spousal Consent. A Participant shall designate
his or her Beneficiary by completing and signing the Beneficiary Designation
Form, and returning it to the Committee or its designated agent. A Participant
shall have the right to change a Beneficiary by completing, signing and
otherwise complying with the terms of the Beneficiary Designation Form and the
Committee’s rules and procedures, as in effect from time to time. Upon the
acceptance by the Committee of a new Beneficiary Designation Form, all
Beneficiary designations previously filed shall be canceled. The Committee shall
be entitled to rely on the last Beneficiary Designation Form filed by the
Participant and accepted by the Committee prior to his or her death.

11.3

Acknowledgment. No designation or change in designation of a Beneficiary shall
be effective until received and acknowledged in writing by the Committee or its
designated agent.

11.4

No Beneficiary Designation. If a Participant fails to designate a Beneficiary as
provided in Sections 11.1, 11.2 and 11.3 above, or if all designated
Beneficia­ries predecease the Participant or die prior to complete distribution
of the Participant’s benefits, then the Participant’s designated Beneficiary
shall be deemed to be his or her surviving spouse. If the Participant has no
surviving spouse, the benefits remaining under the Plan to be paid to a
Beneficiary shall be payable to the executor or personal representative of the
Participant’s estate.

 

 

 

22

11.5

Doubt as to Beneficiary. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall have
the right, exercisable in its discretion, to cause the Participant’s Employer to
withhold such payments until this matter is resolved to the Committee’s
satisfaction.

11.6

Discharge of Obligations. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge all Employers and the Committee
from all further obligations under this Plan with respect to the Participant,
and that Participant’s Plan Agreement shall terminate upon such full payment of
benefits.

ARTICLE 12

Leave of Absence

12.1

Paid Leave of Absence. If a Participant is authorized by the Participant’s
Employer to take a paid leave of absence from the employment of the Employer,
(i) the Partici­pant shall continue to be considered eligible for the benefits
provided in Articles 5, 6, 7, 8, 9 or 10 in accordance with the provisions of
those Articles, and (ii) the Annual Deferral Amount and previously elected
deferrals of Restricted Stock Awards shall continue to be withheld during such
paid leave of absence in accordance with Section 3.3. Notwithstanding the
preceding sentence, Restricted Stock Awards may not be deferred by a Participant
after December 31, 2006.

12.2

Unpaid Leave of Absence. If a Participant is authorized by the Participant’s
Employer to take an unpaid leave of absence from the employ­ment of the Employer
for any reason, (i) such Participant shall continue to be eligible for the
benefits provided in Articles 5, 6, 7, 8, 9 or 10 in accordance with the
provisions of those Articles, and (ii) the Annual Deferral Amount and any
previously elected deferrals of Restricted Stock Awards shall continue to be
withheld during the remainder of the Plan Year in which the unpaid leave of
absence is taken. During the unpaid leave of absence, the Participant shall not
be allowed to make any additional deferral elections, except that deferral
elections with respect to Restricted Stock Awards may continue. Notwithstanding
the preceding sentence, Restricted Stock Awards may not be deferred by a
Participant after December 31, 2006. If the Participant returns to paid
employment, the Participant may elect to defer an Annual Deferral Amount for the
Plan Year following his or her return to employment and for every Plan Year
thereafter while a Participant in the Plan.

ARTICLE 13

Termination or Amendment of Plan

13.1

Termination. The Board reserves the right to terminate the Plan at any time, as
permitted under Code Section 409A and its related treasury regulations and other
guidance. Upon the termination of the Plan, the Plan Agreements of the affected
Participants shall terminate and their vested Account Balances shall be
determined (i) as if they had experienced a Termination of Employment on the
date of Plan termination; or (ii) if Plan termination occurs after the date upon
which a Participant was eligible to Retire, then with respect to that
Participant as if he or she had Retired on the date of Plan termination. A
Participant’s Account Balance shall be paid on the

 

 

 

23

date of Plan termination if and to the extent permitted under Code Section 409A
and the regulations thereunder. Notwithstanding the preceding, however, in
accordance with Code Section 409A and its related treasury regulations, the Plan
may be terminated in the discretion of the Company and benefits paid to
Participants in accordance with one of the following:

 

(i)

the termination of the Plan within twelve (12) months of a corporate dissolution
taxed under Code Section 331 or with the approval of a bankruptcy court pursuant
to 11 U.S.C. 503(b)(1)(A), as provided in Treasury Regulation Section
1.409A-3(j)(4)(ix)(A); or

 

(ii)

the termination of the Plan within the thirty (30) days preceding or the twelve
(12) months following a Change in Control, provided that all substantially
similar arrangements are also terminated, as provided in Treasury Regulation
Section 1.409A-3(j)(4)(ix)(B); or

 

(iii)

the termination of the Plan, provided that the termination does not occur
proximate to a downturn in the financial health of the Employer, if all
arrangements that would be aggregated with the Plan under Treasury Regulation
Section 1.409A-1(c) are terminated, and no payments other than payments that
would be payable under the terms of the Plan if the termination had not occurred
are made within twelve (12) months of the Plan termination, and all payments are
made within twenty-four (24) months of the Plan termination, and no new
arrangement that would be aggregated with the Plan under Treasury Regulation
Section 1.409A-1(c) is adopted within three (3) years following the Plan
termination, as provided in Treasury Regulation Section 1.409A-3(j)(4)(ix)(C);
or

 

(iv)

such other events and conditions as the IRS may prescribe in generally
applicable published regulatory or other guidance under Code Section 409A.

The termination of the Plan shall not adversely affect any Participant or
Beneficiary who has become entitled to the payment of any benefits under the
Plan as of the date of termination.

13.2

Amendment. The Board may, at any time, amend or modify the Plan in whole or in
part with respect to any or all Employers; provided, however, that: (i) no
amendment or modification shall be effective to decrease or restrict the value
of a Participant’s vested Account Balance in existence at the time the amendment
or modification is made, calculated as if the Participant had experienced a
Termination of Employment as of the effective date of the amendment or
modification or, if the amendment or modification occurs after the date upon
which the Participant was eligible to Retire, the Participant had Retired as of
the effective date of the amendment or modification, and (ii) no amendment or
modification of Section 14.2 of the Plan shall be effective. The amendment or
modification of the Plan shall not affect any Participant or Beneficiary who has
become entitled to the payment of benefits under the Plan as of the date of the
amendment or modification. Notwithstanding the foregoing, the Board may amend
the Plan retroactively to the extent required to qualify the Plan under Code
Section 409A, provided that no such amendment may reduce any Participant’s
Account Balance.

 

 

 

24

13.3

Plan Agreement. Despite the provisions of Sections 13.1 and 13.2 above, if a
Participant’s Plan Agreement contains benefits or limitations that are not in
this Plan document, the Employer may only amend or terminate such provisions
with the written consent of the Participant.

13.4

Effect of Payment. The full payment of the Participant’s vested Account Balance
under Articles 5, 6, 7, 8, 9 or 10 of the Plan shall completely discharge all
obligations to a Participant and his or her designated Beneficiaries under this
Plan and the Participant’s Plan Agreement shall terminate.

ARTICLE 14

Administration

14.1

Committee Duties. Except as otherwise provided in this Article 14, this Plan
shall be administered by a Committee, which shall consist of the Board, or such
committee as the Board shall appoint. Members of the Committee may be
Participants under this Plan. The Committee shall also have the discretion and
authority to (i) make, amend, interpret, and enforce all appropriate rules and
regulations for the administra­tion of this Plan and (ii) decide or resolve any
and all ques­tions including interpretations of this Plan, as may arise in
connection with the Plan. Any individual serving on the Committee who is a
Participant shall not vote or act on any matter relating solely to himself or
herself. When making a determination or calculation, the Committee shall be
entitled to rely on information furnished by a Participant or an Employer.

14.2

Administration Upon Change In Control. For purposes of this Plan, the Committee
shall be the “Administrator” at all times prior to the occurrence of a Change in
Control. Within one-hundred and twenty (120) days following a Change in Control,
an independent third party “Administrator” may be selected by the individual
who, immediately prior to the Change in Control, was the Company’s Chief
Executive Officer or, if not so identified, the Company’s highest ranking
officer (the “Ex-CEO”). The Committee, as constituted prior to the Change in
Control, shall continue to be the Administrator until the earlier of (i) the
date on which such independent third party is selected and approved, or (ii) the
expiration of the one-hundred and twenty (120) day period following the Change
in Control. If an independent third party is not selected within one-hundred and
twenty (120) days of such Change in Control, the Committee, as described in
Section 14.1 above, shall be the Administrator. The Administrator shall have the
discretionary power to determine all questions arising in connection with the
administration of the Plan and the interpretation of the Plan including, but not
limited to benefit entitlement determinations; provided, however, upon and after
the occurrence of a Change in Control, the Administrator shall have no power to
direct the investment of Plan assets or select any investment manager or
custodial firm for the Plan. Upon and after the occurrence of a Change in
Control, the Company must: (1) pay all reasonable administrative expenses and
fees of the Administrator; (2) indemnify the Administrator against any costs,
expenses and liabilities including, without limitation, attorney’s fees and
expenses arising in connection with the performance of the Administrator
hereunder, except with respect to matters resulting from the gross negligence or
willful misconduct of the Administrator or its employees or agents; and (3)
supply full and timely information to the Administrator on all matters relating
to the Plan, the

 

 

 

25

Participants and their Beneficiaries, the Account Balances of the Participants,
the date and circumstances of the Retirement, Disability, death or Termination
of Employment of the Participants, and such other pertinent information as the
Administrator may reasonably require. Upon and after a Change in Control, the
Administrator may be terminated (and a replacement appointed) only with the
approval of the Ex-CEO. Upon and after a Change in Control, the Administrator
may not be terminated by the Company.

14.3

Agents. In the administration of this Plan, the Committee may, from time to
time, employ agents and delegate to them such administrative duties as it sees
fit (including acting through a duly appointed representative) and may from time
to time consult with counsel who may be counsel to any Employer.

14.4

Binding Effect of Decisions. The decision or action of the Administrator with
respect to any question arising out of or in connection with the administration,
interpretation and application of the Plan and the rules and regulations
promulgated hereunder shall be final and conclusive and binding upon all persons
having any interest in the Plan.

14.5

Indemnity of Committee. All Employers shall indemnify and hold harmless the
members of the Committee, any Employee to whom the duties of the Committee may
be delegated, and the Administrator against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with respect
to this Plan, except in the case of willful misconduct by the Committee, any of
its members, any such Employee or the Administrator.

14.6

Employer Information. To enable the Committee and/or Administrator to perform
its functions, the Company and each Employer shall supply full and timely
information to the Committee and/or Administrator, as the case may be, on all
matters relating to the compensation of its Participants, the date and
circum­stances of the Retirement, Disability, death or Termination of Employment
of its Participants, and such other pertinent information as the Committee or
Administrator may reasonably require.

ARTICLE 15

Other Benefits and Agreements

15.1

Coordination with Other Benefits. The benefits provided for a Participant and
Participant’s Beneficiary under the Plan are in addition to any other benefits
available to such Participant under any other plan or program for employees of
the Participant’s Employer. The Plan shall supplement and shall not supersede,
modify or amend any other such plan or program except as may otherwise be
expressly provided. Code Section 409A applies to certain amounts which were
deferred under the Prior Plan but which were not vested as of December 31, 2004.
To the extent required by Code Section 409A and the regulations and guidance
promulgated thereunder, such amounts shall be governed by the provisions of this
Plan instead of by the Prior Plan, with payout conditions roughly equivalent to
the payouts elected under the Prior Plan.

 

 

 

26

ARTICLE 16

Claims Procedures

16.1

Presentation of Claim. Any Participant or Beneficiary of a deceased Participant
(such Participant or Beneficiary being referred to below as a “Claimant”) may
deliver to the Committee a written claim for a determination with respect to the
amounts distributable to such Claimant from the Plan. The claim must state with
particularity the determination desired by the Claimant.

16.2

Claims Procedure. The Committee shall notify any person or entity that makes a
claim against the Plan in writing, within 90 days of Claimant's written
application for benefits, of his or her eligibility or noneligibility for
benefits under the Plan. If the Committee determines that the Claimant is not
eligible for benefits or full benefits, the notice shall set forth (1) the
specific reasons for such denial, (2) a specific reference to the provisions of
the Plan on which the denial is based, (3) a description of any additional
information or material necessary for the Claimant to perfect his or her claim,
and a description of why it is needed, and (4) an explanation of the Plan’s
claims review procedure and other appropriate information as to the steps to be
taken if the Claimant wishes to have the claim reviewed. If the Committee
determines that there are special circumstances requiring additional time to
make a decision, the Committee shall notify the Claimant of the special
circumstances and the date by which a decision is expected to be made, and may
extend the time for up to an additional 90 days.

16.3

Review Procedure. If the Claimant is determined by the Committee not to be
eligible for benefits, or if the Claimant believes that he or she is entitled to
greater or different benefits, the Claimant shall have the opportunity to have
such claim reviewed by the Committee by filing a petition for review with the
Committee within 60 days after receipt of the notice issued by the Committee.
Said petition shall state the specific reasons which the Claimant believes
entitle him or her to benefits or to greater or different benefits. Within 60
days after receipt by the Committee of the petition, the Committee shall afford
the Claimant (and counsel, if any) an opportunity to present his or her position
to the Committee verbally or in writing. Claimant (or counsel) shall have the
opportunity to submit written comments, documents, records, and other
information relating to the claim for benefits, and shall be provided, upon
request and free of charge, reasonable access to, and copies of, all documents,
records, and other information relevant to the Claimant’s claim. The review
shall take into account all comments, documents, records, and other information
submitted by the Claimant relating to the claim, without regard to whether such
information was submitted or considered in the initial benefit determination.
The Committee shall notify the Claimant of its decision in writing within the
60-day period, stating specifically the basis of its decision, written in a
manner calculated to be understood by the Claimant and the specific provisions
of the Plan on which the decision is based. If, because of the need for a
hearing, the 60-day period is not sufficient, the decision may be deferred for
up to another 60 days at the election of the Committee, but notice of this
deferral shall be given to the Claimant.

16.4

Special Procedures Applicable to Disability Benefits. If a claim for benefits
under the Plan is contingent on a determination by the Committee (or its
designee) that the Participant suffers from a Disability, the Claimant shall
receive a written response to the initial claim from the Committee

 

 

 

27

within 45 days, rather than 90 days. If special circumstances require an
extension, the Committee shall notify the Claimant within the 45-day processing
period that additional time is needed. If the Committee requests additional
information so it can process the claim, the Claimant will have at least 45 days
in which to provide the information. Otherwise, the initial extension cannot
exceed 30 days. If circumstances require further extension, the Committee will
again notify the Claimant, this time before the end of the initial 30-day
extension. The notice will state the date a decision can be expected. In no
event will a decision be postponed beyond an additional 30 days after the end of
the first 30-day extension. The Claimant may request a review of the Committee’s
decision regarding the Disability claim within 180 days, rather than 60 days.
The review must be conducted by a fiduciary different from the fiduciary who
originally denied the claim, and the fiduciary also cannot be subordinate to the
fiduciary who originally denied the claim. If the original denial of the claim
was based on a medical judgment, the reviewing fiduciary must consult with an
appropriate health care professional who was not consulted on the original claim
and who is not subordinate to someone who was The review must identify the
medical or vocational experts consulted on the original claim. The Claimant may
request, in writing, a list of those medical or vocational experts. The Claimant
will receive notice of the reviewing fiduciary’s final decision regarding the
Disability claim within 45 days, rather than 60 days, of the request for review.

16.5

Legal Action. A Claimant’s compliance with the foregoing provisions of this
Article 16 is a mandatory prerequisite to a Claimant’s right to commence any
legal action with respect to any claim for benefits under this Plan.

ARTICLE 17

Miscellaneous

17.1

Status of Plan. The Plan is intended to be a plan that is not qualified within
the meaning of Code Section 401(a) and that “is unfunded and is maintained by an
employer primarily for the purpose of providing deferred compensation for a
select group of management or highly compensated employees” within the meaning
of ERISA Sections 201(2), 301(a)(3) and 401(a)(1). The Plan shall be
administered and interpreted to the extent possible in a manner consistent with
that intent.

17.2

Unsecured General Creditor. Participants and their Bene­ficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests or
claims in any property or assets of an Employer. For purposes of the payment of
benefits under this Plan, any and all of an Employer’s assets shall be, and
remain, the general, unpledged unrestricted assets of the Employer. An
Employer’s obligation under the Plan shall be merely that of an unfunded and
unsecured promise to pay money in the future.

17.3

Employer’s Liability. An Employer’s liability for the payment of benefits shall
be defined only by the Plan and the Plan Agreement, as entered into between the
Employer and a Participant. An Employer shall have no obliga­tion to a
Participant under the Plan except as expressly provided in the Plan and his or
her Plan Agreement.

 

 

 

28

17.4

Nonassignability. Neither a Participant nor any other person shall have any
right to commute, sell, assign, transfer, pledge, anticipate, mortgage or
otherwise encumber, transfer, hypothecate, alienate or convey in advance of
actual receipt, the amounts, if any, payable hereunder, or any part thereof,
which are, and all rights to which are expressly declared to be, unassignable
and non-transfer­able. No part of the amounts payable shall, prior to actual
payment, be subject to seizure, attachment, garnishment or sequestration for the
payment of any debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, be transferable by operation of law in the
event of a Participant’s or any other person’s bankruptcy or insolvency or be
transferable to a spouse as a result of a property settlement or otherwise.

17.5

Not a Contract of Employment. The terms and conditions of this Plan shall not be
deemed to constitute a contract of employment between any Employer and the
Participant. Such employment is hereby acknowledged to be an “at will”
employment relationship that can be terminated at any time for any reason, or no
reason, with or without cause, and with or without notice, unless expressly
provided in a written employment agreement. Nothing in this Plan shall be deemed
to give a Participant the right to be retained in the service of any Employer,
either as an Employee or Director, or to inter­fere with the right of any
Employer to discipline or discharge the Participant at any time.

17.6

Furnishing Information. A Participant or his or her Beneficiary will cooperate
with the Committee by furnishing any and all information requested by the
Committee and take such other actions as may be requested in order to facilitate
the administra­tion of the Plan and the payments of benefits hereunder,
including but not limited to taking such physical examinations as the Committee
may deem necessary.

17.7

Terms. Whenever any words are used herein in the masculine, they shall be
construed as though they were in the feminine in all cases where they would so
apply; and whenever any words are used herein in the singular or in the plural,
they shall be construed as though they were used in the plural or the singular,
as the case may be, in all cases where they would so apply.

17.8

Captions. The captions of the articles, sections and paragraphs of this Plan are
for convenience only and shall not control or affect the meaning or construction
of any of its provisions.

17.9

Governing Law. Subject to ERISA, the provisions of this Plan shall be construed
and interpreted according to the internal laws of the State of South Carolina
without regard to its conflicts of laws principles.

17.10

Notice. Any notice or filing required or permitted to be given to the Committee
under this Plan shall be sufficient if in writing and hand-delivered, or sent by
registered or certified mail, to the address below:

The South Financial Group, Inc.

104 South Main Street

Poinsett Plaza

Greenville, South Carolina 29601

 

 

 

 

29

Such notice shall be deemed given as of the date of delivery or, if delivery is
made by mail, as of the date shown on the postmark on the receipt for
registration or certification.

Any notice or filing required or permitted to be given to a Participant under
this Plan shall be sufficient if in writing and hand-delivered, or sent by mail,
to the last known address of the Participant.

17.11

Successors. The provisions of this Plan shall bind and inure to the benefit of
the Participant’s Employer and its successors and assigns and the Participant
and the Participant’s designated Beneficiaries.

17.12

Spouse’s Interest. The interest in the benefits hereunder of a spouse of a
Participant who has predeceased the Participant shall automatically pass to the
Participant and shall not be transferable by such spouse in any manner,
including but not limited to such spouse’s will, nor shall such interest pass
under the laws of intestate succession.

17.13

Validity. In case any provision of this Plan shall be illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts
hereof, but this Plan shall be construed and enforced as if such illegal or
invalid provision had never been inserted herein.

17.14

Incompetent. If the Committee determines in its discretion that a benefit under
this Plan is to be paid to a minor, a person declared incompetent or to a person
incapable of handling the disposition of that person’s property, the Committee
may direct payment of such benefit to the guardian, legal representative or
person having the care and custody of such minor, incompetent or incapable
person. The Committee may require proof of minority, incompetence, incapacity or
guardianship, as it may deem appropriate prior to distribution of the benefit.
Any payment of a benefit shall be a payment for the account of the Participant
and the Participant’s Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.

17.15

Acceleration of Payment. The time or schedule of payment of a benefit hereunder
may only be accelerated upon such events and conditions as the IRS may permit in
generally applicable published regulatory or other guidance under Code Section
409A, including, without limitation, payment to a person other than the
Participant to the extent necessary to fulfill the terms of a domestic relations
order (as defined in Code Section 414(p)(1)(B)), payment of FICA tax and income
tax on wages imposed on any amounts under this Agreement, or payment of the
amount required to be included in income for the Participants of Code Section
409A with respect to the Participant.

17.16

Delay of Payment. The Company may delay payment of a benefit hereunder upon such
events and conditions as the IRS may permit in generally applicable published
regulatory or other guidance under Code Section 409A, including, without
limitation, payments that the Company reasonably anticipates will be subject to
the application of Code Section 162(m) as provided in Section 4.1, or will
violate Federal securities laws or other applicable law; provided that any such
delayed payment will be made at the earliest date at which the Company
reasonably anticipates that the making of the payment would not cause such a
violation.

 

 

 

30

17.17

Compliance With Code Section 409A. The Plan is intended to comply with the
requirements of Code Section 409A and the treasury regulations and other
guidance issued thereunder, as in effect from time to time. To the extent a
provision of the Plan is contrary to or fails to address the requirements of
Code Section 409A and related treasury regulations, the Plan shall be construed
and administered as necessary to comply with such requirements to the extent
allowed under applicable treasury regulations until the Plan is appropriately
amended to comply with such requirements.

17.18

Mandatory Cash Out of Small Accounts. Notwithstanding any provision herein to
the contrary, a Participant’s benefit under the Plan shall be paid in a
mandatory lump sum payment in cash if, at the time the Participant’s benefit is
scheduled to be paid or commence to be paid, the payment is not greater than the
applicable dollar amount under Code Section 402(g)(1)(B) and the payment results
in the termination and liquidation of the Participant’s interest under the Plan,
including all agreements, programs or other arrangements with respect to which
deferrals of compensation are treated as having been deferred under a single
nonqualified deferred compensation plan under Treasury Regulation Section
1.409A-1(c)(2).

17.19

Insurance. The Employers, on their own behalf or on behalf of the trustee of the
Trust, and, in their sole discretion, may apply for and procure insurance on the
life of the Participant, in such amounts and in such forms as the Employer may
choose. The Employers shall be the sole owner and beneficiary of any such
insurance. The Participant shall have no interest whatsoever in any such policy
or policies, and at the request of the Employers shall submit to medical
examinations and supply such information and execute such documents as may be
required by the insurance company or companies to whom the Employers have
applied for insurance.

17.20

Legal Fees To Enforce Rights After Change in Control. The Company and each
Employer is aware that upon the occurrence of a Change in Control, the Board or
the board of directors of a Participant’s Employer (which might then be composed
of new members) or a shareholder of the Company or the Participant’s Employer,
or of any successor corporation might then cause or attempt to cause the
Company, the Participant’s Employer or such successor to refuse to comply with
its obligations under the Plan and might cause or attempt to cause the Company
or the Participant’s Employer to institute, or may institute, litigation seeking
to deny Participants the benefits intended under the Plan. In these
circumstances, the purpose of the Plan could be frustrated. Accordingly, if,
following a Change in Control, it should appear to any Participant that the
Company, the Participant’s Employer or any successor corporation has failed to
comply with any of its obligations under the Plan or any agreement thereunder
or, if the Company, such Employer or any other person takes any action to
declare the Plan void or unenforceable or institutes any litigation or other
legal action designed to deny, diminish or to recover from any Participant the
benefits intended to be provided, then the Company and the Participant’s
Employer irrevocably authorize such Participant to retain counsel of his or her
choice at the expense of the Company and the Participant’s Employer (who shall
be jointly and severally liable) to represent such Participant in connection
with the initiation or defense of any litigation or other legal action, whether
by or against the Company, the Participant’s Employer or any director, officer,
shareholder or other person affiliated with the Company, the Participant’s
Employer or any successor thereto in any jurisdiction.

 

 

 

31

 

IN WITNESS WHEREOF, the Company has signed this Plan document as of August 14,
2007.

THE SOUTH FINANCIAL GROUP, INC.

By:    /s/   William P. Crawford, Jr.

 

Title:   Executive Vice President

 

 

 

 

32