TSFG LONG-TERM INCENTIVE PLAN

(Amended and Restated Effective December 11, 2008)

DISCLAIMER

THIS DOCUMENT IS NOT A CONTRACT OF EMPLOYMENT. THE EMPLOYMENT RELATIONSHIP
BETWEEN THE SOUTH FINANCIAL GROUP, INC. AND ITS AFFILIATES (COLLECTIVELY,
“TSFG”) AND EMPLOYEES WHO DO NOT HAVE A SPECIFIC INDIVIDUAL EMPLOYMENT CONTRACT
IS AT-WILL AND VOLUNTARY. THIS MEANS THAT EITHER TSFG OR THE EMPLOYEE CAN
TERMINATE THE EMPLOYMENT RELATIONSHIP AT ANY TIME WITH OR WITHOUT CAUSE AND WITH
OR WITHOUT NOTICE. THE EMPLOYMENT AT-WILL STATUS OF SUCH EMPLOYEES CANNOT BE
ALTERED BY THIS DOCUMENT OR ANY OTHER STATEMENT OR REPRESENTATION, BUT CAN ONLY
BE CHANGED BY A WRITTEN CONTRACT, WHICH MUST BE SIGNED BY THE APPROPRIATE MEMBER
OF TSFG’S EXECUTIVE COMMITTEE.

ALL EMPLOYEES WHO HAVE ENTERED INTO OR MAY LATER ENTER INTO SUCH A WRITTEN
CONTRACT ARE FURTHER ADVISED THAT THIS DOCUMENT DOES NOT AND CANNOT IN ANY WAY
ALTER, MODIFY, OR AMEND SUCH A CONTRACT.

ALL EMPLOYEES ARE FURTHER ADVISED THAT THE EMPLOYMENT RELATIONSHIP BETWEEN TSFG
AND ITS EMPLOYEES IS NOT MODIFIED IN ANY WAY BY ANY EMPLOYEE’S OWNERSHIP,
VESTING, OR OTHER INTEREST OF ANY KIND IN ANY BENEFIT OR ASSET THAT MAY BE
PROVIDED OR AWARDED UNDER THIS PLAN.

SOME PROVISIONS OF THIS PLAN MAY BE CONDITIONED UPON CONTINUED EMPLOYMENT WITH
TSFG OR MAY OTHERWISE BE RELATED TO THE DURATION OF EMPLOYMENT WITH TSFG. NO
RELATIONSHIP BETWEEN THE PROVISIONS OF THIS PLAN AND A PARTICIPANT’S STATUS AS
AN EMPLOYEE WITH TSFG SHALL CONSTITUTE AN ALTERATION OF ANY KIND TO THE
EMPLOYMENT RELATIONSHIP BETWEEN TSFG AND SUCH PARTICIPANT.  

Section 1.

Purpose; Definitions

The purpose of the Plan is to give the Company a competitive advantage in
attracting, retaining and motivating officers, employees, directors and/or
consultants and to provide the Company and its Subsidiaries and Affiliates with
a stock plan providing incentives directly linked to the profitability of the
Company’s businesses and increases in Company shareholder value.

Certain terms used herein have definitions given to them in the first place in
which they are used. In addition, for purposes of the Plan, the following terms
are defined as set forth below:

(a)           “Affiliate” means a corporation or other entity controlled by,
controlling or under common control with the Company.

 

 

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(b)           “Award” means a Stock Appreciation Right, Stock Option, Restricted
Stock, Performance Unit, or other stock-based award granted pursuant to the
terms of the Plan.

(c)           “Award Agreement”means any written agreement, contract or other
instrument or document evidencing the grant of an Award.

(d)           “Award Cycle”means a period of consecutive fiscal years or
portions thereof designated by the Committee over which Performance Units are to
be earned.

 

(e)

“Board ” means the Board of Directors of the Company.

(f)            “Cause” means, unless otherwise provided by the Committee in an
Award Agreement, (i) “Cause” as defined in any Individual Agreement to which the
Participant is a party, or (ii) if there is no such Individual Agreement or if
it does not define Cause: (A) conviction of the Participant for committing a
felony under federal law or the law of the state in which such action occurred,
(B) dishonesty in the course of fulfilling the Participant’s employment duties,
(C) willful and deliberate failure on the part of the Participant to perform his
or her employment duties in any material respect, or (D) prior to a Change in
Control, such other events as shall be determined by the Committee. The
Committee shall, unless otherwise provided in an Individual Agreement with the
Participant have the sole discretion to determine whether “Cause” exists, and
its determination shall be final.

(g)           “Change in Control”have the meanings set forth in Sections 11(b)
and (c), respectively.

(h)           “Code” means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto, the Treasury Regulations thereunder and
other relevant interpretive guidance issued by the Internal Revenue Service or
the Treasury Department.

(i)            “Commission” means the Securities and Exchange Commission or any
successor agency.

 

(j)

“Committee ” means the Committee referred to in Section 2.

(k)           “Common Stock”means common stock, par value $1.00 per share, of
the Company.

(l)            “Company” means The South Financial Group, Inc., a South Carolina
corporation.

(m)          “Covered Employee”means a Participant designated prior to the grant
of Restricted Stock or Performance Units by the Committee who is or may be a
“covered employee” within the meaning of Section 162(m)(3) of the Code in the
year in which Restricted Stock or Performance Units are expected to be taxable
to such Participant.

(n)           “Disability” or “Disabled” means, unless otherwise provided by the
Committee, (i) “Disability” as defined in any Individual Agreement to which the
Participant is a party, or (ii) if there is no such Individual Agreement or it
does not define “Disability,” permanent and

 

 

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total disability as determined under the Company’s Long Term Disability Plan
applicable to the Participant. Notwithstanding the forgoing, with respect to an
Incentive Stock Option, “Disability” shall mean Permanent and Total Disability
as defined in Section 22(e)(3) of the Code, and with respect to any Award that
constitutes a “nonqualified deferred compensation plan” within the meaning of
Section 409A of the Code, the definition set forth in the initial sentence of
this paragraph shall apply to the extent that an Award vests by reason of
Disability, provided that any such Award that so vests shall not be settled
until the earliest of: (i) the Participant’s “disability” within the meaning of
Section 409A of the Code, (ii) the Participant’s “separation from service”
within the meaning of Section 409A of the Code and (iii) the date such Award
would otherwise be settled pursuant to the terms of the Award Agreement.

(o)           “Early Retirement”means retirement from active employment with the
Company, a Subsidiary or Affiliate pursuant to the early retirement provisions
of the applicable pension plan of such employer.

 

(p)

“Effective Date” shall have the meaning set forth in Section 16.

(q)           “Eligible Individuals”mean directors, officers, employees and
consultants of the Company or any of its Subsidiaries or Affiliates, and
prospective employees and consultants who have accepted offers of employment or
consultancy from the Company or its Subsidiaries or Affiliates, who are or will
be responsible for or contribute to the management, growth or profitability of
the business of the Company, or its Subsidiaries or Affiliates.

(r)            “Exchange Act”means the Securities Exchange Act of 1934, as
amended from time to time, and any successor thereto.

(s)           “Fair Market Value”means, except as otherwise provided by the
Committee, as of any given date, the average of the highest and lowest per-share
sales prices for a share of Common Stock during normal business hours on the
NASDAQ or such other national securities market or exchange as may at the time
be the principal market for the Common Stock, or if the shares were not traded
on such national securities market or exchange on such date, then on the next
preceding date on which such shares of Common Stock were traded, all as reported
by such source as the Committee may select. If the Common Stock is not listed on
a national securities exchange, Fair Market Value shall be determined by the
Committee in its good faith discretion, in compliance with the requirements of
Section 409A of the Code.

(t)            “Incentive Stock Option”means any Stock Option designated as, and
qualified as, an “incentive stock option” within the meaning of Section 422 of
the Code.

(u)           “Individual Agreement”means an employment, consulting or similar
written agreement between a Participant and the Company or one of its
Subsidiaries or Affiliates.

(v)           “Involuntary Termination”means a Termination of Employment by
reason of an Involuntary Termination as defined in an Individual Agreement to
which the Participant is a party that is then in effect. If a Participant is not
party to an Individual Agreement, or if it does not define “Involuntary
Termination,” no Termination of Employment of that Participant shall be
considered to be an Involuntary Termination.

 

 

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(w)          “Non Qualified Stock Option”means any Stock Option that is not an
Incentive Stock Option.

(x)           “Normal Retirement”means retirement from active employment with
the Company, a Subsidiary or Affiliate at or after age 65.

 

(y)

“Option Price” shall have the meaning set forth in Section 5(d).

(z)           “Outside Director”means a director who qualifies as an
“independent director” within the meaning of Rule 4200 of the Rules of Nasdaq,
as an “outside director” within the meaning of Section 162(m) of the Code, and
as a “non-employee director” within the meaning of Rule 16b-3 promulgated under
the Exchange Act.

(aa)         “Performance Goals”means the performance goals established by the
Committee in connection with the grant of Restricted Stock or Performance Units.
In the case of Qualified Performance-Based Awards, (i) such goals shall be based
on the attainment of specified levels of one or more of the following measures:
specified levels of the Company’s stock price, market share, sales, asset
quality, non-performing assets, earnings per share, return on equity, costs,
operating income, marketing-spending efficiency, return on operating assets,
return on assets, core non-interest income and/or levels of cost savings and
(ii) such Performance Goals shall be set by the Committee within the time period
prescribed by Section 162(m) of the Code and related regulations.

 

(bb)

“Performance Units” means an Award granted under Section 8.

(cc)         “Plan” means TSFG Long Term Incentive Plan (formerly known as The
South Financial Group, Inc. 2004 Long Term Incentive Plan), as set forth herein
and as hereinafter amended from time to time.

(dd)        “Qualified Performance-Based Award”means an Award of Restricted
Stock or Performance Units designated as such by the Committee at the time of
grant, based upon a determination that (i) the recipient is or may be a “covered
employee” within the meaning of Section 162(m)(3) of the Code in the year in
which the Company would expect to be able to claim a tax deduction with respect
to such Restricted Stock or Performance Units and (ii) the Committee wishes such
Award to qualify for the Section 162(m) Exemption.

 

(ee)

“Restricted Stock” means an Award granted under Section 7.

 

(ff)

“Retirement ” means Normal or Early Retirement.

(gg)        “Rule 16b-3”means Rule 16b-3, as promulgated by the Commission under
Section 16(b) of the Exchange Act, as amended from time to time.

(hh)        “Section 162(m) Exemption”means the exemption from the limitation on
deductibility imposed by Section 162(m) of the Code that is set forth in Section
162(m)(4)(C) of the Code.

 

 

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(ii)           “Specified Employees” means any individual who is a “key
employee” (as defined in Section 416(i) of the Code without regard to paragraph
(5) thereof) with respect to the Company or its Affiliates, as determined by the
Company (or the Affiliate, in the event that the Affiliate and the Company are
not considered a single employer under Sections 414(b) or 414(c) of the Code) in
accordance with its uniform policy with respect to all arrangements subject to
Section 409A of the Code[, based upon the twelve (12) month period ending on
each December 31st. All individuals who are determined to be key employees under
Section 416(i)(1)(A)(i), (ii) or (iii) of the Code (without regard to paragraph
(5) thereof) on December 31st shall be treated as Specified Employees for
purposes of the Plan during the twelve (12) month period that begins on the
following January 15.

 

(jj)

“Stock Appreciation Right” means an Award granted under Section 6.

 

(kk)

“Stock Option” means an Award granted under Section 5.

(ll)           “Subsidiary” means any corporation, partnership, joint venture or
other entity during any period in which at least a 50% voting or profits
interest is owned, directly or indirectly, by the Company or any successor to
the Company.

(mm)      “Termination of Employment”means the termination of the Participant’s
employment with, or performance of services for, the Company and any of its
Subsidiaries or Affiliates. An Participant employed by, or performing services
for, a Subsidiary or an Affiliate shall also be deemed to incur a Termination of
Employment if the Subsidiary or Affiliate ceases to be such a Subsidiary or an
Affiliate, as the case may be, and the Participant does not immediately
thereafter become an employee of, or service-provider for, the Company or
another Subsidiary or Affiliate. Temporary absences from employment because of
illness, vacation or leave of absence and transfers among the Company and its
Subsidiaries and Affiliates shall not be considered Terminations of Employment.
Notwithstanding the foregoing, with respect to any Award that constitutes a
“nonqualified deferred compensation plan” within the meaning of Section 409A of
the Code, for purposes of the settlement or payment (but not vesting or
forfeiture) of any such Award, “Termination of Employment” shall mean a
“separation from service” as defined under Section 409A of the Code.

Section 2.

Administration

(a)           The Plan shall be administered by the Compensation Committee or
such other committee of the Board as the Board may from time to time designate
(the “Committee”), which shall be composed of not less than three Outside
Directors, and shall be appointed by and serve at the pleasure of the Board,
except with respect to Awards to non-employee directors, which shall be
administered by the Nominating Committee. All references to the “Committee” with
respect to grants to non-employee directors shall refer to the Nominating
Committee.

(b)           The Committee shall have plenary authority to grant Awards
pursuant to the terms of the Plan to Participants.

(c)           Among other things, the Committee shall have the authority,
subject to the terms of the Plan:

 

 

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(i)            To select the Participants to whom Awards may from time to time
be granted;

(ii)           To determine whether and to what extent any type of Award is to
be granted hereunder;

(iii)         To determine the number of shares of Common Stock to be covered by
each Award granted hereunder;

(iv)          To determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the Option Price (subject to Section
5(a)), any vesting condition, restriction or limitation (which may be related to
the performance of the Participant, the Company or any Subsidiary or Affiliate)
and any vesting acceleration or forfeiture waiver regarding any Award and the
shares of Common Stock relating thereto, based on such factors as the Committee
shall determine;

(v)           Subject to the terms of the Plan, including without limitation
Section 13, to modify, amend or adjust the terms and conditions of any Award, at
any time or from time to time, including but not limited to Performance Goals;
provided, however, that the Committee may not adjust upwards the amount payable
with respect to a Qualified Performance-Based Award or waive or alter the
Performance Goals associated therewith in a manner that would violate Section
162(m) of the Code; and

(vi)          To determine under what circumstances an Award may be settled in
cash or Common Stock under Sections 5(k), 6(b)(ii) and 8(b)(iv).

(d)           The Committee shall have the authority to adopt, alter and repeal
such administrative rules, guidelines and practices governing the Plan as it
shall from time to time deem advisable, to interpret the terms and provisions of
the Plan and any Award issued under the Plan (and any agreement relating
thereto) and to otherwise supervise the administration of the Plan.

(e)           The Committee may act only by a majority of its members then in
office. Except to the extent prohibited by applicable law or the applicable
rules of a stock exchange, the Committee may (i) allocate all or any portion of
its responsibilities and powers to any one or more of its members and (ii)
delegate all or any part of its responsibilities and powers to any person or
persons selected by it, provided that no such delegation may be made that would
cause Awards or other transactions under the Plan to cease to be exempt from
Section 16(b) of the Exchange Act or cause an Award designated as a Qualified
Performance-Based Award not to qualify for, or to cease to qualify for, the
Section 162(m) Exemption. Any such allocation or delegation may be revoked by
the Committee at any time.

(f)            Any determination made by the Committee with respect to any Award
shall be made in the sole discretion of the Committee at the time of the grant
of the Award or, unless in contravention of any express term of the Plan, at any
time thereafter. All decisions made by the Committee or any appropriately
delegated officer pursuant to the provisions of the Plan shall be final and
binding on all persons, including the Company, its Affiliates, Subsidiaries,
shareholders and Participants.

 

 

6

(g)           Any authority granted to the Committee may also be exercised by
the full Board, except to the extent that the grant or exercise of such
authority would cause any Award or transaction to become subject to (or lose an
exemption under) the short-swing profit recovery provisions of Section 16 of the
Exchange Act or cause an Award designated as a Qualified Performance-Based Award
not to qualify for, or to cease to qualify for, the Section 162(m) Exemption. To
the extent that any permitted action taken by the Board conflicts with action
taken by the Committee, the Board action shall control.

Section 3.

Common Stock Subject to Plan

(a)           The maximum number of shares of Common Stock that may be delivered
to Participants and their beneficiaries under the Plan shall be 2,500,000. No
Participant may be granted Stock Options and Stock Appreciation Rights covering
in excess of 100,000 shares of Common Stock in any calendar year. Shares subject
to an Award under the Plan may be authorized and unissued shares or may be
treasury shares. No more than 1,700,000 shares of Restricted Stock may be issued
during the term of the Plan.

(b)           If any Award is forfeited, or if any Stock Option (or Stock
Appreciation Right, if any) terminates, expires or lapses without being
exercised, or if any Stock Appreciation Right is exercised for cash, shares of
Common Stock subject to such Awards shall again be available for distribution in
connection with Awards under the Plan. If the Option Price of any Stock Option
or the Strike Price of any Freestanding Stock Appreciation Right is satisfied by
delivering shares of Common Stock to the Company (by either actual delivery or
by attestation), only the number of shares of Common Stock delivered to the
Participant net of the shares of Common Stock delivered to the Company or
attested to shall be deemed delivered for purposes of determining the maximum
numbers of shares of Common Stock available for delivery under the Plan. To the
extent any shares of Common Stock subject to an Award are not delivered to a
Participant because such shares are used to satisfy an applicable
tax-withholding obligation, such shares shall not be deemed to have been
delivered for purposes of determining the maximum number of shares of Common
Stock available for delivery under the Plan. The maximum number of shares of
Common Stock that may be issued pursuant to Stock Options intended to be
Incentive Stock Options shall be 1,900,000 shares.

(c)           In the event of any change in corporate capitalization (including,
but not limited to, a change in the number of shares of Common Stock
outstanding), such as a stock split or a corporate transaction, such as any
merger, consolidation, separation, including a spin-off, or other distribution
of stock or property of the Company (including any extraordinary cash or stock
dividend), any reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code) or any partial or
complete liquidation of the Company, the Committee or Board shall make such
substitution or adjustments in the aggregate number and kind of shares reserved
for issuance under the Plan, and the maximum limitation upon Stock Options and
Stock Appreciation Rights and other Awards to be granted to any Participant, in
the number, kind and Option Price and Strike Price of shares subject to
outstanding Stock Options and Stock Appreciation Rights, in the number and kind
of shares subject to other outstanding Awards granted under the Plan and/or such
other equitable substitution or adjustments as it may determine to be
appropriate in its sole discretion (including, without limitation, an amount in
cash therefor); provided, however, that the number of shares subject to any
Award shall always

 

 

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be a whole number. Such adjusted Option Price shall also be used to determine
the amount payable by the Company upon the exercise of any Stock Appreciation
Right associated with any Stock Option. Notwithstanding the foregoing: (i) any
adjustments made pursuant to this Section 3(c) to Awards that constitute a
“nonqualified deferred compensation plan” within the meaning of Section 409A of
the Code shall be made in compliance with the requirements of Section 409A of
the Code; (ii) any adjustments made pursuant to this Section 3(c) to Awards that
do not constitute a “nonqualified deferred compensation plan” subject to Section
409A of the Code shall be made in such a manner as to ensure that after such
adjustment, the Awards either (A) continue not to be subject to Section 409A of
the Code or (B) comply with the requirements of Section 409A of the Code; and
(iii) in any event, neither the Committee nor the Board shall have the authority
to make any adjustments pursuant to this Section 3(c) to the extent the
existence of such authority would cause an Award that is not intended to be
subject to Section 409A of the Code at the date of grant to violate Section 409A
of the Code.

Section 4.

Eligibility

Awards may be granted under the Plan to Eligible Individuals; provided that, any
Award that constitutes a “stock right,” within the meaning of Section 409A of
the Code, shall only be granted to Eligible Individuals with respect to whom the
Company is an “eligible issuer of service recipient stock,” under Section 409A
of the Code.

Section 5.

Stock Options

(a)           Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options and
NonQualified Stock Options. Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.

(b)           The Committee shall have the authority to grant any Participant
Incentive Stock Options, NonQualified Stock Options or both types of Stock
Options (in each case with or without Stock Appreciation Rights); provided,
however, that grants hereunder are subject to the limits on grants set forth in
Section 3. Incentive Stock Options may be granted only to employees of the
Company and its subsidiaries or parent corporation (within the meaning of
Section 424(f) of the Code). To the extent that any Stock Option is not
designated as an Incentive Stock Option or even if so designated does not
qualify as an Incentive Stock Option on or subsequent to its grant date, it
shall constitute a NonQualified Stock Option.

(c)           Stock Options shall be evidenced by Award Agreements, the terms
and provisions of which may differ. An Award Agreement shall indicate on its
face whether it is intended to be an agreement for an Incentive Stock Option or
a NonQualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects a Participant to receive a grant of a Stock
Option, determines the number of shares of Common Stock to be subject to such
Stock Option to be granted to such Participant and specifies the terms and
provisions of the Stock Option. The Company shall notify a Participant of any
grant of a Stock Option, and a written Award Agreement shall be duly executed
and delivered by the Company to the Participant. Such agreement or agreements
shall become effective upon execution by the Company and the Participant.

 

 

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(d)           Stock Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions as the Committee shall deem desirable:

(i)            Option Price. The Committee shall determine the option price per
share of Common Stock purchasable under a Stock Option (the “Option Price”). The
Option Price per share of Common Stock subject to a Stock Option shall not be
less than the Fair Market Value of the Common Stock subject to such Stock Option
on the date of grant. Except for adjustments pursuant to Section 3(c), in no
event may any Stock Option granted under this Plan be amended to decrease the
Option Price thereof, cancelled in conjunction with the grant of any new Stock
Option with a lower Option Price, or otherwise be subject to any action that
would be treated, for accounting purposes, as a “repricing” of such Stock
Option, unless such amendment, cancellation, or action is approved by the
Company’s shareholders in accordance with applicable law and stock exchange
rules.

(ii)           Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than 10 years
after the date the Stock Option is granted.

(iii)          Exercisability. Except as otherwise provided herein, Stock
Options shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part, based
on such factors as the Committee may determine. In addition, the Committee may
at any time accelerate the exercisability of any Stock Option.

(iv)          Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying the
number of shares of Common Stock subject to the Stock Option to be purchased.
Such notice shall be accompanied by payment in full of the Option Price by
certified or bank check or such other instrument as the Company may accept. If
approved by the Committee, payment, in full or in part, may also be made in the
form of unrestricted Common Stock (by delivery of such shares or by attestation)
already owned by the Participant of the same class as the Common Stock subject
to the Stock Option (based on the Fair Market Value of the Common Stock on the
date the Stock Option is exercised); provided, however, that, in the case of an
Incentive Stock Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject to the
Stock Option may be authorized only at the time the Stock Option is granted and
provided, further, that such already owned shares have been held by the
Participant for at least six months at the time of exercise or had been
purchased on the open market. If approved by the Committee, to the extent
permitted by applicable law, payment in full or in part may also be made by
delivering a properly executed exercise notice to the Company, together with a
copy of irrevocable instructions to a broker to deliver promptly to the Company
the amount of sale or loan proceeds necessary to pay the Option Price,

 

 

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and, if requested, the amount of any federal, state, local or foreign
withholding taxes. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms. No
shares of Common Stock shall be delivered until full payment therefor has been
made. Except as otherwise provided in Section 5(m) below, a Participant shall
have all of the rights of a shareholder of the Company holding the class or
series of Common Stock that is subject to such Stock Option (including, if
applicable, the right to vote the shares and the right to receive dividends),
when the Participant has given written notice of exercise, has paid in full for
such shares and, if requested by the Company, has given the representation
described in Section 15(a).

(e)           Nontransferability of Stock Options. No Stock Option shall be
transferable by the Participant other than (i) by will or by the laws of descent
and distribution or any other testamentary distribution; or (ii) in the case of
a NonQualified Stock Option, unless otherwise determined by the Committee, to
such Participant’s children or family members, whether directly or indirectly or
by means of a trust or partnership or otherwise. For purposes of this Plan,
unless otherwise determined by the Committee, “family member” shall have the
meaning given to such term in General Instructions A.1(a)(5) to Form S-8 under
the Securities Act of 1933 as amended, or any successor thereto. All Stock
Options shall be exercisable, subject to the terms of this Plan, only by the
Participant, the guardian or legal representative of the Participant, or any
person to whom such option is transferred pursuant to this paragraph, it being
understood that the term “holder” and “Participant” include such guardian, legal
representative and other transferee; provided, however, that Termination of
Employment shall continue to refer to the Termination of Employment of the
original Participant.

(f)            Termination by Death. Unless otherwise determined by the
Committee, if a Participant incurs a Termination of Employment by reason of
death, any Stock Option held by such Participant may thereafter be exercised, to
the extent then exercisable, or on such accelerated basis as the Committee may
determine, until the expiration of the stated term of such Stock Option, except
in the case of an Incentive Stock Option, which shall be exercisable for (i) a
period of one year from the date of such death or (ii) the expiration of the
stated term of the Incentive Stock Option, whichever period is the shorter.

(g)           Termination by Reason of Disability. Unless otherwise determined
by the Committee, if a Participant incurs a Termination of Employment by reason
of Disability, any Stock Option held by such Participant (or the appointed
fiduciary of such Participant) may thereafter be exercised by the Participant
(or the appointed fiduciary of such Participant), to the extent it was
exercisable at the time of termination, or on such accelerated basis as the
Committee may determine, for a period of one year (or such other period as the
Committee may specify in the Award Agreement) from the date of such Termination
of Employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that if the Participant dies
within such period, any unexercised Stock Option held by such Participant shall,
notwithstanding the expiration of such period, continue to be exercisable to the
extent to which it was exercisable at the time of death until the expiration of
the stated term of such Stock Option. In the event of Termination of Employment
by reason of Disability, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply

 

 

10

for purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a NonQualified Stock Option.

(h)           Termination by Reason of Retirement. Unless otherwise determined
by the Committee, if a Participant incurs a Termination of Employment by reason
of Retirement, any Stock Option held by such Participant may thereafter be
exercised by the Participant, to the extent it was exercisable at the time of
such Retirement, or on such accelerated basis as the Committee may determine,
for a period of one year (or such other period as the Committee may specify in
the Award Agreement) from the date of such Termination of Employment or until
the expiration of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that if the Participant dies within such period any
unexercised Stock Option held by such Participant shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death for until the expiration of the stated term
of such Stock Option, except in the case of an Incentive Stock Option, which
shall be exercisable for (i) a period of one year from the date of such death or
(ii) the expiration of the stated term of the Incentive Stock Option, whichever
period is the shorter. In the event of Termination of Employment by reason of
Retirement, if an Incentive Stock Option is exercised after the expiration of
the exercise periods that apply for purposes of Section 422 of the Code, such
Stock Option will thereafter be treated as a NonQualified Stock Option.

(i)            Other Termination. Unless otherwise determined by the Committee:
(A) if a Participant incurs a Termination of Employment for Cause, all Stock
Options held by such Participant shall thereupon terminate; and (B) if a
Participant incurs a Termination of Employment for any reason other than death,
Disability, Retirement or for Cause, any Stock Option held by such Participant,
to extent it was then exercisable at the time of termination, or on such
accelerated basis as the Committee may determine, may be exercised for the
lesser of three months from the date of such Termination of Employment or the
balance of such Stock Option’s term; provided, however, that if the Participant
dies within such three-month period, any unexercised Stock Option held by such
Participant shall, notwithstanding the expiration of such three-month period,
continue to be exercisable to the extent to which it was exercisable at the time
of death until the expiration of the stated term of such Stock Option, except in
the case of an Incentive Stock Option, which shall be exercisable for (i) a
period of one year from the date of such death or (ii) the expiration of the
stated term of the Incentive Stock Option, whichever period is the shorter.

(j)            Change of Control Termination. Notwithstanding any other
provision of this Plan to the contrary, in the event a Participant incurs a
Termination of Employment during the 24-month period following a Change in
Control other than (i) by the Company for Cause, (ii) by reason of death, (iii)
by reason of Disability or (iv) by voluntary resignation other than by reason of
an Involuntary Termination, any Stock Option held by such Participant may
thereafter be exercised by the Participant, to the extent it was exercisable at
the time of termination, or on such accelerated basis as the Committee may
determine, for (A) the longer of one year from such date of termination or (2)
such other period as may be provided in the Plan for such Termination of
Employment or as the Committee may provide in the Award Agreement or Individual
Agreement, or (B) until expiration of the stated term of such Stock Option,
whichever period is the shorter. If an Incentive Stock Option is exercised after
the expiration of the post-termination

 

 

11

exercise periods that apply for purposes of Section 422 of the Code, such Stock
Option will thereafter be treated as a NonQualified Stock Option.

(k)           Cashing Out of Stock Option. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of the
shares of Common Stock for which a Stock Option is being exercised by paying the
Participant an amount, in cash or Common Stock, equal to the excess of the Fair
Market Value of the Common Stock over the Option Price times the number of
shares of Common Stock for which the Option is being exercised on the effective
date of such cash-out.

Section 6.

Stock Appreciation Rights

(a)           Grant and Exercise. Stock Appreciation Rights may be granted alone
(“Freestanding Stock Appreciation Rights”) or in conjunction with all or part of
any Stock Option granted under the Plan (“Tandem Stock Appreciation Rights”).

(b)           Terms and Conditions of Tandem Stock Appreciation Rights. Tandem
Stock Appreciation Rights shall be subject to such terms and conditions as shall
be determined by the Committee, including the following:

(i)            Relationship to Related Stock Option. A Stock Appreciation Right
issued in conjunction with a Stock Option may be granted only at the time of
grant of such Stock Option. Tandem Stock Appreciation Rights shall be
exercisable only at such time or times and to the extent that the Stock Options
to which they relate are exercisable in accordance with the provisions of
Section 5.

(ii)           Settlement. Upon the exercise of a Tandem Stock Appreciation
Right, a Participant shall be entitled to receive an amount in cash, shares of
Common Stock or a combination of cash and shares, equal to (A) the excess of the
Fair Market Value of one share of Common Stock over the Option Price per share
specified in the related Stock Option multiplied by (B) the number of shares of
Common Stock in respect of which such Stock Appreciation Right shall have been
exercised, with the Committee having the right to determine the form of payment.

(iii)          Nontransferability. Tandem Stock Appreciation Rights shall be
transferable only to the extent that the underlying Stock Option is transferable
pursuant to Section 5(e).

(iv)          Method of Exercise. A Tandem Stock Appreciation Right may be
exercised by a Participant by surrendering the applicable portion of the related
Stock Option in accordance with procedures established by the Committee. Upon
such exercise and surrender, the Participant shall be entitled to receive an
amount determined in the manner prescribed by Section 6(b)(ii). Stock Options
which have been so surrendered shall no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised. Any Tandem Stock
Appreciation Right shall terminate and no longer be exercisable upon the
termination or exercise of the related Stock Option.

 

 

12

(c)           Terms and Conditions of Freestanding Stock Appreciation Rights.
Freestanding Stock Appreciation Rights shall be subject to such terms and
conditions as shall be determined by the Committee, including the following:

(i)            Term. The Committee shall determine the stated term of each
Freestanding Stock Appreciation Right granted under this Plan.

(ii)           Strike Price. Unless provided otherwise by the Committee, the
strike price (the “Strike Price”) per share of Common Stock subject to a
Freestanding Stock Appreciation Right shall be the Fair Market Value of the
Common Stock on the date of grant. Except for adjustments pursuant to Section
3(c), in no event may any Stock Appreciation Right granted under this Plan be
amended to decrease the Strike Price thereof, cancelled in conjunction with the
grant of any new Stock Appreciation Right with a lower Strike Price, or
otherwise be subject to any action that would be treated, for accounting
purposes, as a “repricing” of such Stock Appreciation Right, unless such
amendment, cancellation, or action is approved by the Company’s shareholders in
accordance with applicable law and stock exchange rules.

(iii)          Exercisability. Except as otherwise provided herein, Freestanding
Share Appreciation Rights shall be exercisable at such time or times and subject
to such terms and conditions as shall be determined by the Committee, and the
Committee may at any time accelerate the exercisability of any Stock
Appreciation Right. If the Committee provides that any Stock Appreciation Right
is exercisable only in installments, the Committee may at any time waive such
installment exercise provisions, in whole or in part, based on such factors as
the Committee may determine.

(iv)          Settlement. Upon the exercise of a Freestanding Stock Appreciation
Right, a Participant shall be entitled to receive an amount in cash, shares of
Common Stock or a combination of cash and shares, equal to (A) the excess of the
Fair Market Value of one share of Common Stock over the applicable Strike Price
multiplied by (B) the number of shares of Common Stock in respect of which the
Freestanding Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment.

(v)           Nontransferability. No Freestanding Stock Appreciation Right shall
be transferable by a Participant other than by will or by the laws of descent
and distribution or as otherwise expressly permitted by the Committee,
including, if so permitted, pursuant to a transfer to such Participant’s
children or family members, whether directly or indirectly or by means of a
trust or partnership or otherwise. For purposes of this Plan, unless otherwise
determined by the Committee, “family member” shall have the meaning given to
such term in General Instructions A.1(a)(5) to Form S-8 under the Securities Act
of 1933 as amended, and any successor thereto. All Freestanding Stock
Appreciation Rights shall be exercisable, subject to the terms of this Plan,
only by the Participant, the guardian or legal representative of the
Participant, or any person to whom such Freestanding Stock Appreciation Right is
transferred pursuant to this paragraph, it being understood that the terms
“holder” and “Participant” include such guardian, legal representative and other
transferee; provided, however, that the term “Termination of

 

 

13

Employment” shall continue to refer to the Termination of Employment of the
original Participant.

(vi)          Termination by Death. Unless otherwise determined by the
Committee, if a Participant incurs a Termination of Employment by reason of
death, any Freestanding Stock Appreciation Right held by such Participant may
thereafter be exercised, to the extent then exercisable, or on such accelerated
basis as the Committee may determine, until the expiration of the stated term of
such Freestanding Stock Appreciation Right.

(vii)        Termination by Reason of Disability. Unless otherwise determined by
the Committee, if a Participant incurs a Termination of Employment by reason of
Disability, any Freestanding Stock Appreciation Right held by such Participant
may thereafter be exercised by the Participant, to the extent it was exercisable
at the time of termination, or on such accelerated basis as the Committee may
determine, for a period of one year (or such other period as the Committee may
specify in the Award Agreement) from the date of such Termination of Employment
or until the expiration of the stated term of such Freestanding Stock
Appreciation Right, whichever period is the shorter; provided, however, that if
the Participant dies within such period, any unexercised Freestanding Stock
Appreciation Right held by such Participant shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death until the expiration of the stated term of
such Freestanding Stock Appreciation Right.

(viii)       Termination by Reason of Retirement. Unless otherwise determined by
the Committee, if a Participant incurs a Termination of Employment by reason of
Retirement, any Freestanding Stock Appreciation Right held by such Participant
may thereafter be exercised by the Participant, to the extent it was exercisable
at the time of such Retirement, or on such accelerated basis as the Committee
may determine, for a period of one year (or such other period as the Committee
may specify in the Award Agreement) from the date of such Termination of
Employment or until the expiration of the stated term of such Freestanding Stock
Appreciation Right, whichever period is the shorter; provided, however, that if
the Participant dies within such period any unexercised Freestanding Stock
Appreciation Right held by such Participant shall, notwithstanding the
expiration of such period, continue to be exercisable to the extent to which it
was exercisable at the time of death until the expiration of the stated term of
such Freestanding Stock Appreciation Right.

(ix)          Other Termination. Unless otherwise determined by the Committee:
(A) if a Participant incurs a Termination of Employment for Cause, all
Freestanding Stock Appreciation Rights held by such Participant shall thereupon
terminate; and (B) if a Participant incurs a Termination of Employment for any
reason other than death, Disability, Retirement or for Cause, any Freestanding
Stock Appreciation Right held by such Participant, to extent it was then
exercisable at the time of termination, or on such accelerated basis as the
Committee may determine, may be exercised for the lesser of three months from
the date of such Termination of Employment or the balance of such Freestanding
Stock Appreciation Right’s term; provided, however, that if the Participant dies
within such three-month period, any unexercised Freestanding Stock Appreciation

 

 

14

Right held by such Participant shall, notwithstanding the expiration of such
three-month period, continue to be exercisable to the extent to which it was
exercisable at the time of death until the expiration of the stated term of such
Freestanding Stock Appreciation Right.

(x)           Change of Control Termination. Notwithstanding any other provision
of this Plan to the contrary, in the event a Participant incurs a Termination of
Employment during the 24-month period following a Change in Control other than
(i) by the Company for Cause, (ii) by reason of death or (iii) by reason of
Disability or (iv) by voluntary resignation other than by reason of an
Involuntary Termination, any Freestanding Stock Appreciation Right held by such
Participant may thereafter be exercised by the Participant, to the extent it was
exercisable at the time of termination, or on such accelerated basis as the
Committee may determine, for (A) the longer of one year from such date of
termination or (2) such other period as may be provided in the Plan for such
Termination of Employment or as the Committee may provide in the Award
Agreement, or (B) until expiration of the stated term of such Freestanding Stock
Appreciation Right, whichever period is the shorter.

Section 7.

Restricted Stock

(a)           Administration. Shares of Restricted Stock may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee shall
determine the Participants to whom and the time or times at which grants of
Restricted Stock will be awarded, the number of shares to be awarded to any
Participant, the conditions for vesting, the time or times within which such
Awards may be subject to forfeiture and any other terms and conditions of the
Awards, in addition to those contained in Section 7(c).

(b)           Awards and Certificates. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock certificates. Any
certificate issued in respect of shares of Restricted Stock shall be registered
in the name of such Participant and shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Award,
substantially in the following form:

“The transferability of this certificate and the shares of stock represented
hereby are subject to the terms and conditions (including forfeiture) of the
TSFG Long Term Incentive Plan and an Award Agreement. Copies of such Plan and
Agreement are on file at the offices of The South Financial Group, 102 S. Main
Street, Greenville, SC 29601.”

The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the Participant shall
have delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award.

(c)           Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:

 

 

15

(i)            The Committee may, prior to or at the time of grant, designate an
Award of Restricted Stock as a Qualified Performance-Based Award, in which event
it shall condition the grant or vesting, as applicable, of such Restricted Stock
upon the attainment of Performance Goals. If the Committee does not designate an
Award of Restricted Stock as a Qualified Performance-Based Award, it may also
condition the grant or vesting thereof upon the attainment of Performance Goals.
Regardless of whether an Award of Restricted Stock is a Qualified
Performance-Based Award, the Committee may also condition the grant or vesting
thereof upon the continued service of the Participant. The conditions for grant
or vesting and the other provisions of Restricted Stock Awards (including
without limitation any applicable Performance Goals) need not be the same with
respect to each recipient. The Committee may at any time, in its sole
discretion, accelerate or waive, in whole or in part, any of the foregoing
restrictions; provided, however, that in the case of Restricted Stock that is a
Qualified Performance-Based Award, the applicable Performance Goals have been
satisfied.

(ii)           Subject to the provisions of the Plan and the Award Agreement
referred to in Section 7(c)(vi), during the period, if any, set by the
Committee, commencing with the date of such Award for which such Participant’s
continued service is required (the “Restriction Period”), and until the later of
(A) the expiration of the Restriction Period and (B) the date the applicable
Performance Goals (if any) are satisfied, the Participant shall not be permitted
to sell, assign, transfer, pledge or otherwise encumber shares of Restricted
Stock; provided that, to the extent permitted by applicable law, the foregoing
shall not prevent a Participant from pledging Restricted Stock as security for a
loan, the sole purpose of which is to provide funds to pay the Option Price for
Stock Options.

(iii)         Except as provided in this paragraph (iii) and Sections 7(c)(i)
and 7(c)(ii) and the Award Agreement, the Participant shall have, with respect
to the shares of Restricted Stock, all of the rights of a shareholder of the
Company holding the class or series of Common Stock that is the subject of the
Restricted Stock, including, if applicable, the right to vote the shares and the
right to receive any cash dividends. If so determined by the Committee in the
applicable Award Agreement and subject to Section 15(d) of the Plan, (A) cash
dividends on the class or series of Common Stock that is the subject of the
Restricted Stock Award shall be automatically reinvested in additional
Restricted Stock, held subject to the vesting of the underlying Restricted
Stock, or held subject to meeting Performance Goals applicable only to
dividends, and (B) dividends payable in Common Stock shall be paid in the form
of Restricted Stock of the same class as the Common Stock with which such
dividend was paid, held subject to the vesting of the underlying Restricted
Stock, or held subject to meeting Performance Goals applicable only to
dividends.

(iv)          Except to the extent otherwise provided in the applicable Award
Agreement or Section 7(c)(i), 7(c)(ii), 7(c)(v) or 11(a)(ii), upon a
Participant’s Termination of Employment for any reason during the Restriction
Period or before the applicable Performance Goals are satisfied, all shares
still subject to restriction shall be forfeited by the Participant; provided,
however, that the Committee shall have the discretion to waive, in whole or in
part, any or all remaining restrictions (other than, in the case of Restricted
Stock with respect to which a Participant is a Covered Employee,

 

 

16

satisfaction of the applicable Performance Goals, unless the Participant’s
employment is terminated by reason of death or Disability, by the Company
without Cause or by the Participant for “Good Reason” (as defined in any
applicable Individual Agreement)) with respect to any or all of such
Participant’s shares of Restricted Stock except to the extent that any such
shares of Restricted Stock are Qualified Performance-Based Awards and the waiver
of any or all remaining restrictions would cause such shares of Restricted Stock
to fail to satisfy the Section 162(m) Exception.

(v)           If and when any applicable Performance Goals are satisfied and the
Restriction Period expires without a prior forfeiture of the Restricted Stock,
unlegended certificates for such shares shall be delivered to the Participant
upon surrender of the legended certificates.

(vi)          Each Award shall be confirmed by, and be subject to, the terms of
an Award Agreement.

Section 8.

Performance Units

(a)           Administration. Performance Units may be awarded either alone or
in addition to other Awards granted under the Plan. The Committee shall
determine the Participants to whom and the time or times at which Performance
Units shall be awarded, the number of Performance Units to be awarded to any
Participant), the duration of the Award Cycle and any other terms and conditions
of the Award, in addition to those contained in Section 8(b).

(b)           Terms and Conditions. Performance Units Awards shall be subject to
the following terms and conditions:

(i)            The Committee may, prior to or at the time of the grant,
designate Performance Units as Qualified Performance-Based Awards, in which
event it shall condition the settlement thereof upon the attainment of
Performance Goals. If the Committee does not designate Performance Units as
Qualified Performance-Based Awards, it may also condition the settlement thereof
upon the attainment of Performance Goals. Regardless of whether Performance
Units are Qualified Performance-Based Awards, the Committee may also condition
the settlement thereof upon the continued service of the Participant. The
provisions of such Awards (including without limitation any applicable
Performance Goals) need not be the same with respect to each recipient. Subject
to the provisions of the Plan and the Award Agreement referred to in Section
8(b)(v), Performance Units may not be sold, assigned, transferred, pledged or
otherwise encumbered during the Award Cycle. No more than 250,000 shares of
Common Stock may be subject to Qualified Performance Based Awards granted to any
Eligible Individual in any fiscal year of the Company.

(ii)           Except to the extent otherwise provided in the applicable Award
Agreement or Section 8(b)(ii) or 11(a)(iii), upon a Participant’s Termination of
Employment for any reason during the Award Cycle or before any applicable
Performance Goals are satisfied, all rights to receive cash or stock in
settlement of the Performance Units shall be forfeited by the Participant;
provided, however, that the

 

 

17

Committee shall have the discretion to waive, in whole or in part, any or all
remaining payment limitations (other than, in the case of Performance Units that
are subject to applicable Performance Goals, satisfaction of the applicable
Performance Goals unless the Participant’s employment is terminated by reason of
death or Disability, by the Company without Cause or by the Participant for
“Good Reason” (as defined in any applicable Individual Agreement)) with respect
to any or all of such Participant’s Performance Units, except to the extent that
any such Performance Units are Qualified Performance-Based Awards and the waiver
of any or all remaining payment limitations would cause such Performance Units
to fail to satisfy the Section 162(m) Exception; provided, further, that if any
of such Participant’s Performance Units constitute a “nonqualified deferred
compensation plan” within the meaning of Section 409A of the Code, settlement of
any such Performance Units for which the limitations thereon are so waived by
the Committee shall not occur until the date such Performance Units would
otherwise be settled pursuant to the terms of the Award Agreement.

(iii)         At the expiration of the Award Cycle, the Committee shall evaluate
the Company’s performance in light of any Performance Goals for such Award, and
shall determine the number of Performance Units granted to the Participant which
have been earned, and the Committee shall then cause to be delivered (A) a
number of shares of Common Stock equal to the number of Performance Units
determined by the Committee to have been earned, or (B) cash equal to the Fair
Market Value of such number of shares of Common Stock to the Participant, as the
Committee shall elect.

(iv)          Each Award shall be confirmed by, and be subject to, the terms of
an Award Agreement.

Section 9.

Tax Offset Bonuses

At the time an Award other than a Stock Option or Stock Appreciation Right is
made hereunder or at any time thereafter, the Committee may grant to the
Participant receiving such Award the right to receive a cash payment in an
amount specified by the Committee, to be paid at such time or times (if ever) as
the Award results in compensation income to the Participant, for the purpose of
assisting the Participant to pay the resulting taxes, all as determined by the
Committee and on such other terms and conditions as the Committee shall
determine; provided that any such cash payment shall be structured either (i) to
comply with Section 409A of the Code or (b) to be exempt from Section 409A of
the Code.

Section 10.

Other Stock-Based Awards

Other Awards of Common Stock and other Awards that are valued in whole or in
part by reference to, or are otherwise based upon, Common Stock, including
(without limitation) dividend equivalents and convertible debentures, may be
granted either alone or in conjunction with other Awards granted under the Plan.

 

 

18

Section 11.

Change in Control Provisions

(a)           Impact of Event. Notwithstanding any other provision of the Plan
to the contrary, unless otherwise provided by the Committee in any Award
Agreement, in the event of a Change in Control:

(i)            Any Stock Options and Stock Appreciation Rights outstanding as of
the date such Change in Control, and which are not then exercisable and vested,
shall become fully exercisable and vested.

(ii)           The restrictions applicable to any Restricted Stock shall lapse,
and such Restricted Stock shall become free of all restrictions and become fully
vested.

(iii)         All Performance Units shall be considered to be earned and payable
in full, and any restriction shall lapse and such Performance Units shall

be settled in cash as promptly as is practicable, but no in event later than
five (5) days following the date of such Change in Control;

(iv)          Notwithstanding the foregoing, with respect to any Performance
Unit that constitutes a “nonqualified deferred compensation plan” within the
meaning of Section 409A of the Code, the settlement of such Performance Unit
pursuant to this Section 11(a)(iii) shall only occur (A) upon the Change in
Control if such Change in Control constitutes a “change in the ownership of the
corporation,” a “change in effective control of the corporation” or a “change in
the ownership of a substantial portion of the assets of the corporation,” each
within the meaning of Section 409A(a)(2)(A)(v) of the Code (each, a “Change in
Control Event”) or (B) if such Change in Control does not constitute a Change in
Control Event, upon the earlier of (1) the Participant’s “separation from
service” within the meaning of Section 409A of the Code and (2) the date such
Award would otherwise be settled pursuant to the terms of the Award Agreement

(b)           Definition of Change in Control. For purposes of the Plan, a
“Change in Control” shall mean the happening of any of the following events:

(i)            An acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (1) the then outstanding shares of common
stock of the Company (the “Outstanding Company Common Stock”) or (2) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); excluding, however, the following: (1) Any
acquisition directly from the Company, other than an acquisition by virtue of
the exercise of a conversion privilege unless the security being so converted
was itself acquired directly from the Company, (2) Any acquisition by the
Company, (3) Any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any entity controlled by the Company,
or (4) Any acquisition pursuant to a transaction which complies with clauses
(1), (2) and (3) of subsection (iii) of this Section 11(b) ; or

 

 

19

(ii)           A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board (such Board
shall be hereinafter referred to as the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board; provided, however, for purposes
of this Section 11(b), that any individual who becomes a member of the Board
subsequent to the Effective Date, whose election, or nomination for election by
the Company’s shareholders, was approved by a vote of at least a majority of
those individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered as though such individual were a member of the Incumbent Board; but,
provided, further, that any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect to
the election or removal of directors or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board shall
not be so considered as a member of the Incumbent Board; or

(iii)          Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company
(“Corporate Transaction”); excluding, however, such a Corporate Transaction
pursuant to which (1) all or substantially all of the individuals and entities
who are the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly, more than
50% of, respectively, the outstanding shares of common stock, and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Corporate Transaction (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company’s assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case may be, (2)
no Person (other than the Company, any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Corporate Transaction)
will beneficially own, directly or indirectly, 20% or more of, respectively, the
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the outstanding voting
securities of such corporation entitled to vote generally in the election of
directors except to the extent that such ownership existed prior to the
Corporate Transaction, and (3) individuals who were members of the Incumbent
Board will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction; or

(iv)          The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.

Section 12.

Forfeiture of Awards

Notwithstanding anything in the Plan to the contrary, the Committee shall have
the authority under the Plan to provide in any Award Agreement that in the event
of serious misconduct by a Participant (including, without limitation, any
misconduct prejudicial to or in

 

 

20

conflict with the Company or its Subsidiaries or Affiliates, or any Termination
of Employment for Cause), or any activity of a Participant in competition with
the business of the Company or any Subsidiary or Affiliate, any outstanding
Award granted to such Participant shall be cancelled, in whole or in part,
whether or not vested or deferred. The determination of whether a Participant
has engaged in a serious breach of conduct or any activity in competition with
the business of the Company or any Subsidiary or Affiliate shall be determined
by the Committee in good faith and in its sole discretion. This Section 12 shall
have no application following a Change in Control.

Section 13.

Term, Amendment and Termination

The Plan will terminate on the tenth anniversary of the Effective Date. Under
the Plan, Awards outstanding as of such date shall not be affected or impaired
by the termination of the Plan.

The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would impair the rights of a
Participant under a Stock Option or a recipient of a Stock Appreciation Right,
Restricted Stock Award, Performance Unit Award or other Award theretofore
granted without the Participant’s or recipient’s consent, except such an
amendment made to comply with applicable law (including without limitation
Section 409A of the Code), stock exchange rules or accounting rules. In
addition, no such amendment shall be made without the approval of the Company’s
shareholders to the extent such approval is required by applicable law or stock
exchange rules.

The Committee may amend the terms of any Stock Option or other Award theretofore
granted, but no such amendment shall cause a Qualified Performance-Based Award
to cease to qualify for the Section 162(m) Exemption or impair the rights of any
holder without the holder’s consent except such an amendment made to cause the
Plan or Award to comply with applicable law (including without limitation
Section 409A of the Code), stock exchange rules or accounting rules.

Subject to the above provisions, the Board shall have authority to amend the
Plan to take into account changes in law (including without limitation Section
409A of the Code) and tax and accounting rules as well as other developments,
and to grant Awards which qualify for beneficial treatment under such rules
without shareholder approval.

Section 14.

Unfunded Status of Plan

It is presently intended that the Plan constitute an “unfunded” plan for
incentive compensation. The Committee may authorize the creation of trusts or
other arrangements to meet the obligations created under the Plan to deliver
Common Stock or make payments; provided, however, that the existence of such
trusts or other arrangements is consistent with the “unfunded” status of the
Plan. Notwithstanding any other provision of this Plan to the contrary, no trust
shall be funded with respect to an Award that constitutes a “nonqualified
deferred compensation plan” within the meaning of Section 409A of the Code held
by a Participant if such funding would result in taxable income to such
Participant by reason of Section 409A(b) of

 

 

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the Code, and in no event shall any such trust assets at any time be located or
transferred outside of the United States, within the meaning of Section 409A(b)
of the Code.

Section 15.

General Provisions

(a)           Representation. The Committee may require each person purchasing
or receiving shares pursuant to an Award to represent to and agree with the
Company in writing that such person is acquiring the shares without a view to
the distribution thereof. The certificates for such shares may include any
legend which the Committee deems appropriate to reflect any restrictions on
transfer. Notwithstanding any other provision of the Plan or agreements made
pursuant thereto, the Company shall not be required to issue or deliver any
certificate or certificates for shares of Common Stock under the Plan prior to
fulfillment of all of the following conditions:

(i)            Listing or approval for listing upon notice of issuance, of such
shares on NASDAQ, or such other securities exchange as may at the time be the
principal market for the Common Stock;

(ii)           Any registration or other qualification of such shares of the
Company under any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Committee
shall, in its absolute discretion upon the advice of counsel, deem necessary or
advisable; and

(iii)          Obtaining any other consent, approval, or permit from any state
or federal governmental agency which the Committee shall, in its absolute
discretion after receiving the advice of counsel, determine to be necessary or
advisable.

(b)           No Limit of Other Arrangements. Nothing contained in the Plan
shall prevent the Company or any Subsidiary or Affiliate from adopting other or
additional compensation arrangements for its employees.

(c)           Tax Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for federal
income tax purposes with respect to any Award under the Plan, the Participant
shall pay to the Company, or make arrangements satisfactory to the Company
regarding the payment of, any federal, state, local or foreign taxes of any kind
required by law to be withheld with respect to such amount. Unless otherwise
determined by the Company, withholding obligations may be settled with Common
Stock, including Common Stock that is part of the Award that gives rise to the
withholding requirement; provided, that not more than the legally required
minimum withholding may be settled with Common Stock. The obligations of the
Company under the Plan shall be conditional on such payment or arrangements, and
the Company and its Affiliates shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment otherwise due to the
Participant. The Committee may establish such procedures as it deems
appropriate, including making irrevocable elections, for the settlement of
withholding obligations with Common Stock.

(d)           Dividends. Reinvestment of dividends in additional Restricted
Stock at the time of any dividend payment shall only be permissible if
sufficient shares of Common Stock are

 

 

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available under Section 3 for such reinvestment (taking into account then
outstanding Stock Options and other Awards).

(e)           Death Beneficiary. The Committee shall establish such procedures
as it deems appropriate for a Participant to designate a beneficiary to whom any
amounts payable in the event of the Participant’s death are to be paid or by
whom any rights of the Participant, after the Participant’s death, may be
exercised.

(f)            Subsidiary Employees. In the case of a grant of an Award to any
employee of a Subsidiary of the Company, the Company may, if the Committee so
directs, issue or transfer the shares of Common Stock, if any, covered by the
Award to the Subsidiary, for such lawful consideration as the Committee may
specify, upon the condition or understanding that the Subsidiary will transfer
the shares of Common Stock to the employee in accordance with the terms of the
Award specified by the Committee pursuant to the provisions of the Plan. All
shares of Common Stock underlying Awards that are forfeited or canceled should
revert to the Company.

(g)           Governing Law. The Plan and all Awards made and actions taken
thereunder shall be governed by and construed in accordance with the laws of the
State of South Carolina, without reference to principles of conflict of laws.

(h)           Nontransferability. Except as otherwise provided in Section 5(e)
or 6(b)(iii) or by the Committee, Awards under the Plan are not transferable
except by will or by laws of descent and distribution.

(i)            Foreign Participants. In the event an Award is granted to
Participant who is employed or providing services outside the United States and
who is not compensated from a payroll maintained in the United States, the
Committee may, in its sole discretion, modify the provisions of the Plan as they
pertain to such individual to comply with applicable foreign law.

(j)            Section 409A. It is the intention of the Corporation that no
Award shall be “deferred compensation” subject to Section 409A of the Code,
unless and to the extent that the Committee specifically determines otherwise as
provided in this Section 15(j), and the Plan and the terms and conditions of all
Awards shall be interpreted accordingly. The terms and conditions governing any
Awards that the Committee determines will be subject to Section 409A of the
Code, including any rules for elective or mandatory deferral of the delivery of
cash or shares of Common Stock pursuant thereto and any rules regarding
treatment of such Awards in the event of a Change in Control, shall be set forth
in the applicable Award agreement, and shall comply in all respects with Section
409A of the Code. Notwithstanding any provision of the Plan or an Award
Agreement to the contrary, in the event that any term of an Award Agreement
conflicts with any provision of the Plan that specifically pertains to Section
409A of the Code, the provision of the Plan shall govern. Notwithstanding any
other provision of the Plan to the contrary, with respect to any Award that
constitutes a “nonqualified deferred compensation plan,” any payments (whether
in cash, Shares or other property) to be made with respect to the Award upon the
Participant’s Termination of Employment shall be delayed if the participant is a
Specified Employee until the earlier of (i) the first day of the seventh month
following the Participant’s Termination of Employment and (ii) the Participant’s
death.

 

 

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Section 16.

Effective Date of Plan

The Plan shall be effective as of the date (the “Effective Date”), provided that
it is approved by the stockholders of the Company in accordance with all
applicable laws, regulations and stock exchange rules and listing standards.

 

 

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