Document:

ex10_6b.htm

Exhibit 10.6-b

 

CAROLINA FIRST BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

Between

CAROLINA FIRST BANK

and

Jesus Ernesto Diaz

 

This Supplemental Executive Retirement Agreement (this "Agreement") is made and entered into effective as of February 18, 2009 (the "Effective Date"), by and between Jesus Ernesto Diaz, an individual (the "Executive"), and Carolina First Bank, a South Carolina corporation headquartered in Greenville, South Carolina (the "Company") and a wholly owned subsidiary of The South Financial Group, Inc. ("TSFG").

 

INTRODUCTION

 

The Company wishes to provide the Executive with supplemental retirement benefits and thereby encourage the Executive to continue providing services to the Company.  The Company will pay the benefits from its general assets.

 

The Agreement is intended to be a top-hat plan (i.e., an unfunded deferred compensation plan maintained for a member of a select group of management or highly compensated employees) pursuant to Section 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974 ("ERISA").

 

This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code and the regulations and other guidance issued thereunder, as in effect from time to time.  To the extent a provision of the Agreement is contrary to or fails to address the requirements of Code Section 409A and related treasury regulations, the Agreement shall be construed and administered as necessary to comply with such requirements to the extent allowed under applicable treasury regulations until the Agreement is appropriately amended to comply with such requirements.  The benefits provided under this Agreement that are subject to Code Section 409A include benefits accrued prior to January 1, 2005.

 

AGREEMENT

 

The Executive and the Company agree as follows:

 

Article 1

Definitions

 

Whenever used in this Agreement, the following words and phrases shall have the meanings specified:

 

1.1         "Affiliated Company" means any company controlled by, controlling or under common control with the Company.

 

1.2         "Benefit Basis" means the average of the highest three fiscal years of annual Compensation earned by the Executive during the ten fiscal years of the Executive's 

 

  

  

  

 

employment prior to the Termination of Employment, or for such lesser number of fiscal years that the Executive was employed by the Company prior to the Termination of Employment, including the year in which a Termination of Employment occurs.

1.3         "Board" means the Board of Directors of The South Financial Group, Inc.

 

1.4         "Cause" means (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or any Affiliated Company (other than any such failure resulting from incapacity due to physical or mental illness or following the Executive's Involuntary Termination), after a written demand for substantial performance is delivered to the Executive by the Chief Executive Officer that specifically identifies the manner in which the Chief Executive Officer of the Company believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct, in each case, that is materially and demonstrably injurious to the Company.  For purposes of this definition, no act, or failure to act, on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company.  Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board, or upon instructions of the Chief Executive Officer or senior officer, or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.  The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding the Executive, if the Executive is a member of the Board) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel for the Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in clause (i) or (ii) of this definition, and specifying the particulars thereof in detail.

 

  

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1.5         "Change in Control" means:

 

(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 30% 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 1.5; or

 

(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 1.5 (ii), 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 

 

  

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related trust) of the Company or such corporation resulting from such Corporate Transaction) will beneficially own, directly or indirectly, 30% 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.

 

Notwithstanding the foregoing, the foregoing shall only constitute a Change in Control if it also constitutes a “change in control event” as defined under Section 409A.

 

1.6         "Code" means the Internal Revenue Code of 1986, as amended.

 

1.7         "Company" means Carolina First Bank and shall include the Company and any and all of its Affiliated Companies where the context so requires; provided, however, for purposes of application of the "Change in Control" definition and related provisions, Company shall mean and be limited to The South Financial Group, Inc.

 

1.8         "Compensation" means the Executive's annual base salary and annual bonus under The South Financial Group's Management Incentive Compensation Plan, or any comparable bonus under any predecessor or successor plan, including any bonus or portion thereof that has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Executive was employed for less than 12 full months) for the relevant fiscal year.  If the Termination of Employment occurs prior to the end of the fiscal year, the bonus amount for such fiscal year shall be equal to the highest of the bonuses earned by the Executive in the prior three fiscal years (or for such lesser number of fiscal years prior to the Termination of Employment for which the Executive was eligible to earn such a bonus, and annualized in the case of any bonus earned for a partial fiscal year).

 

1.9         "Disability" means 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 Executive being unable to engage in any substantial gainful activity or (ii) the Executive receiving income replacement benefits for a period of not less than 3 months under an accident and health plan (including disability benefits) covering employees of the Company.  In addition, the Executive 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.

 

1.10         "Early Retirement Age" means the date that the Executive has attained age 55 and completed seven Years of Service.

 

  

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1.11         "Early Retirement Date" means the date that is the later of the Early Retirement Age and a Termination of Employment occurring  after the date on which the Executive attains Early Retirement Age but before the Normal Retirement Date.

 

1.12         "Early Termination" means a Termination of Employment before Early Retirement Age for reasons other than (i) death, (ii) Disability, (iii) by the Company for Cause, (iv) by the Company without Cause during the two year period following a Change in Control, or (v) Involuntary Termination within two years following a Change in Control.

 

1.13         "Early Termination Date" means the month, day and year in which an Early Termination occurs.

 

1.14         "Effective Date" means February 18, 2009.

 

1.15         "Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

1.16         "Involuntary Termination" means a Termination of Employment by the Executive following a Change in Control which, in the sole judgment of the Executive, is due to (i) a change of the Executive's responsibilities, position (including the Executive's office, title, reporting relationships or working conditions), authority or duties (including changes resulting from the assignment to the Executive of any duties inconsistent with his positions, duties or responsibilities as in effect immediately prior to the Change in Control); or (ii) a reduction in the Executive's annual base salary or annual bonus opportunity under The South Financial Group's Management Incentive Compensation Plan, or any comparable bonus under any predecessor or successor plan, including any bonus or portion thereof that has been earned but deferred, or benefits; or (iii) a forced relocation of the Executive outside the Miami, Florida, metropolitan area; or (iv) a significant increase in the Executive's travel requirements (collectively "Status Changes"); provided, however, Executive must elect to terminate Executive's employment within two (2) years of the Status Change on which Executive bases Executive's employment termination.

 

1.17         "Normal Retirement Age" means Executive's 65th birthday.

 

1.18         "Normal Retirement Date" means the later of the Normal Retirement Age and a  Termination of Employment.

 

1.19         "Person" means any individual, corporation, bank, partnership, joint venture, association, joint stock company, trust, unincorporated organization or other entity.

 

1.20         "Rate" means the Moody's Aa corporate bond rate as reported by the Society of Actuaries as of the Effective Date and updated on each December 31st thereafter.

 

1.21         "Termination of Employment" means the termination of the Executive's employment with the Company and all of its Affiliated Companies 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 

 

  

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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 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.

 

Notwithstanding the foregoing, no payment shall be made pursuant to this Agreement on account of the Executive’s Termination of Employment until the date on which the Executive experiences a “separation from service” as defined under Code Section 409A (or, if the Executive is a “specified employee” within the meaning of Code Section 409A (as determined in accordance with the methodology established by the Company on the date on which such “separation from service” occurs) (a “Specified Employee”), until the earlier of (i) the first business day that is six months following the date of the Executive’s “separation from service” and (ii) the date of the Executive’s death (the “Delayed Payment Date”)).

 

1.22         "Vesting Percentage" is the percentage of the accrual balance in which the Executive is vested as determined in accordance with Schedule A.

 

1.23         "Vesting Start Date" shall be February 18, 2009.

 

1.24         "Year of Service" means a twelve-month continuous period of employment or a portion of such period, including periods of authorized vacation, authorized leave of absence and short-term disability leave, with the Company or any of its Affiliated Companies or their predecessors or successors rounded up to the nearest whole number commencing on the Vesting Start Date.

 

  

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Article 2

Lifetime Benefits

 

2.1         Normal Retirement Benefit.  Upon a Termination of Employment (i) on or after  Normal Retirement Age for reasons other than death, or (ii) without Cause within two years following a Change in Control or (iii) that is an Involuntary Termination occurring within two years following a Change in Control, the Company shall pay to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Agreement.

 

2.1.1           Amount of Benefit.  The annual benefit under this Section 2.1 is an amount equal to forty percent (40%) of the Benefit Basis, [provided that in the event that the Executive has completed five Years of Service, the annual benefit under this Section 2.1 is an amount equal to sixty percent (60%) of the Benefit Basis.]

 

2.1.2           Payment of Benefit.  The Company shall pay the benefit to the Executive as follows:

 

(a)           payment in a lump sum within five days business days following the date of the Executive’s Termination of Employment (or, if the Executive is a Specified Employee, the Delayed Payment Date); or

 

(b)           at the Executive's election (on the Election Form attached as Exhibit A), payment in either 60, 120, or 180 equal monthly installments (such installments to be considered a "single" payment for purposes of Code Section 409A), as selected by the Executive, which installments shall commence on the date of the Executive’s Termination of Employment (or, if the Executive is a Specified Employee, on the Delayed Payment Date).

 

The Executive may make a subsequent election to further delay a payment or to change the form of a payment among the methods described above, provided (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.

 

Notwithstanding the preceding, no election may be made by the Executive that will extend payment of the Executive's benefit more than fifteen (15) years past the date on which the Executive's benefit would otherwise have commenced under Section 2.1.2(a) following Executive's Normal Retirement Date.

 

For purposes of this Section 2.1, a lump sum payment shall be equal to the present value of the aggregate annual benefits that would have been payable to the Executive had such benefits been paid to the Executive in equal monthly installments over the 180-month period immediately following the Executive's Termination of Employment, assuming a discount rate equal to the Rate.  Payments in monthly installments shall be determined based on the present value of the aggregate annual benefits that would have been payable to Executive had such benefits been paid to the Executive in equal monthly installments over the 180-month period immediately following the Executive's 

 

  

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Termination of Employment.  An interest rate equal to the Rate will be applied to determine the actuarial equivalent of the equal monthly installment payments under this Section 2.1.

2.2         Early Retirement Benefit.  Upon a Termination of Employment on or after the date on which the Executive attains Early Retirement Age but before the date on which the Executive attains Normal Retirement Age for reasons other than (i) death, (ii) due to Disability, (iii) by the Company without Cause within two years following a Change in Control or (iv) an Involuntary Termination within two years following a Change in Control, the Company shall pay to the Executive the benefit described in this Section 2.2 in lieu of any other benefits under this Agreement.

 

2.2.1           Amount of Benefit.  The annual benefit under this Section 2.2 is an amount equal to the greater of (i) the product of (A) the sum of (x) thirty percent (30%) and (y) three percent (3%) for each Year of Service completed by the Executive after the Early Retirement Age and (B) the Benefit Basis and (ii) the benefit under Section 2.3; provided that in no event shall the amount payable under this Section 2.2.1 be greater than the benefit set forth in Section 2.1.1.

 

2.2.2           Payment of Benefit.   The Company shall pay the benefit to the Executive as follows:

 

(a)           payment in a lump sum within five business days following the date of the Executive's Termination of Employment (or, if the Executive is a Specified Employee, the Delayed Payment Date) in an amount equal to the present value of the aggregate annual benefits that would have been payable to the Executive had such benefits been paid to Executive in equal monthly installments over the 180-month period immediately following the Executive's Normal Retirement Age, and assuming a discount rate equal to the Rate; or

 

(b)           at the Executive's election on the Election Form attached as Exhibit A), payment in either 60, 120, or 180 equal monthly installments (such installments to be considered a "single" payment for purposes of Code Section 409A), as selected by the Executive, which installments shall commence on the date of the Executive’s Termination of Employment (or, if the Executive is a Specified Employee, on the Delayed Payment Date), calculated from an amount equal to the present value of the aggregate annual benefits that would have been payable to the Executive had such benefits been paid to Executive in equal monthly installments over the 180-month period immediately following the Executive's Normal Retirement Age, and assuming a discount rate equal to the Rate.

 

The Executive may make a subsequent election to delay a payment or to change the form of a payment among the methods described above, provided (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 

 

  

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would otherwise have been made, and (iii) the election is made at least 12 months prior to the date any such payment was scheduled to begin.

Notwithstanding the preceding, no election may be made by the Executive that will extend payment of the Executive's benefit more than fifteen (15) years past the date on which the Executive's benefit would otherwise have commenced under Section 2.2.2(a).

 

For purposes of this Section 2.2, any lump sum payment shall be calculated as provided in Section 2.2.2(a).  Payments in monthly installments shall be determined based on the actuarial equivalent of the lump sum determined under Section 2.2.2(a).  An interest rate equal to the Rate will be applied to determine the actuarial equivalent of the equal monthly installment payments under this Section 2.2.2.

 

The optional forms of benefit payments under Section 2.2.2(b) shall be available to Executive only upon the Executive's Termination of Employment on or after Early Retirement Age but before Normal Retirement Age for reasons other than death; Disability; termination by the Company without Cause within two years following a Change in Control; or upon the Executive's Involuntary Termination within two years following a Change in Control.

 

2.3         Early Termination Benefit.  Upon Early Termination, the Company shall pay to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Agreement.

 

2.3.1           Amount of Benefit.  The benefit under this Section 2.3 is the Early Termination Annual Benefit set forth in Schedule A for the year ending immediately prior to the Early Termination Date.

 

2.3.2           Payment of Benefit.  The Company shall pay the annual benefit to the Executive in 12 equal monthly installments payable on the first day of each month commencing with the first month following the Normal Retirement Age; provided, however, that if the Executive is a Specified Employee, then such benefit shall commence on the Delayed Payment Date.  The annual benefit shall be paid to the Executive for a total of 15 years.

 

2.4         Disability Benefit.  If the Executive incurs a Disability prior to Normal Retirement Age, the Company shall pay to the Executive the benefit described in this Section 2.4 in lieu of any other benefit under this Agreement.

 

2.4.1           Amount of Benefit.  If the Executive incurs a Disability prior to Normal Retirement Age, but after Early Retirement Age, the benefit under this Section 2.4 shall be the annual benefit set forth in Section 2.2.1.  If the Executive terminates employment due to Disability prior to Early Retirement Age, the benefit under this Section 2.4 is the Disability Annual Benefit set forth in Schedule A for the year ending immediately prior to the Early Termination Date.

 

  

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2.4.2           Payment of Benefit.  The Company shall pay the annual benefit under this Section 2.4 to the Executive in 12 equal monthly installments payable on the first day of each month commencing on the date on which the Executive incurs the Disability.  The annual benefit shall be paid to the Executive for a total of 15 years. If the Executive incurs a Disability on or after Normal Retirement Age, the payment schedule shall be determined pursuant to Section 2.1.2, provided that for this purpose references therein to the date of the Executive’s Termination of Employment shall be replaced by the date on which the Executive incurs the Disability.

 

Article 3

Death Benefits

 

3.1         Death During Active Service.  If the Executive dies while in the active service of the Company, the Company shall pay to the Executive's beneficiary the benefit described in this Section 3.1 in lieu of any other benefits under this Agreement.

 

3.1.1           Amount of Benefit.  The annual benefit under this Section 3.1 is equal to the Disability Annual Benefit described in Section 2.4.1.

 

3.1.2           Payment of Benefit.  The Company shall pay the annual benefit to the Executive's beneficiary in 12 equal monthly installments payable on the first day of each month commencing with the month following the Executive's death.  The annual benefit shall be paid to the Executive's beneficiary for a total of 15 years.

 

3.2         Death During Benefit Period.  If the Executive dies after the benefit payments have commenced under this Agreement but before receiving all such payments, the Company shall pay the remaining benefits to the Executive's beneficiary at the same time and in the same amounts as would have been paid to the Executive had the Executive survived.

 

3.3         Death After Termination of Employment But Before Benefit Payments Commence.  If the Executive is entitled to benefit payments under this Agreement, but dies prior to the commencement of said benefit payments, the Company shall pay to the Executive's beneficiary the benefit payments that the Executive was entitled to prior to death except that the benefit payments shall commence on the first day of the month following the date of the Executive's death.

 

Article 4

Beneficiaries

 

4.1         Beneficiary Designations.  The Executive shall designate a beneficiary by filing a written designation with the Company.  The Executive may revoke or modify the designation at any time by filing a new designation.  However, designations will only be effective if signed by the Executive and accepted by the Company during the Executive's lifetime.  The Executive's beneficiary designation shall be deemed automatically revoked if the beneficiary predeceases the Executive, or if the Executive names a spouse as beneficiary and the marriage is subsequently dissolved.  If the Executive dies without a valid beneficiary designation, all payments shall be made to the Executive's estate.

 

  

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4.2         Facility of Payment.  If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Company may pay such benefit to the guardian, legal representative or person having the care or custody of such minor, incapacitated person or incapable person.  The Company may require proof of incapacity, minority or guardianship as it may deem appropriate prior to distribution of the benefit.  Such distribution shall completely discharge the Company from all liability with respect to such benefit.

 

Article 5

General Limitations

 

5.1         Termination for Cause.  Notwithstanding any provision of this Agreement to the contrary, the Company shall not pay any benefit under this Agreement if the Company terminates the Executive's employment for Cause.

 

5.2         Suicide.  The Company shall not pay any benefit under this Agreement if the Executive commits suicide within two years after the date of this Agreement.

 

Article 6

Claims and Review Procedures

 

6.1         Claims Procedure.  The Company shall notify any person or entity that makes a claim against the Agreement (the "Claimant") in writing, within 90 days of Claimant's written application for benefits, of his or her eligibility or noneligibility for benefits under the Agreement.  If the Company 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 Agreement 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 Agreement'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 Company determines that there are special circumstances requiring additional time to make a decision, the Company 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.

 

6.2         Review Procedure.  If the Claimant is determined by the Company 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 Company by filing a petition for review with the Company within 60 days after receipt of the notice issued by the Company.  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 Company of the petition, the Company shall afford the Claimant (and counsel, if any) an opportunity to present his or her position to the Company 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 

 

  

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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 Company 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 Agreement 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 Company, but notice of this deferral shall be given to the Claimant.

6.3         Special Procedures Applicable to Disability Benefits.  If a claim for benefits under the Agreement is contingent on a determination by the Company (or its designee) that the Executive suffers from a Disability, the Claimant shall receive a written response to the initial claim from the Company within 45 days, rather than 90 days.  If special circumstances require an extension, the Company shall notify the Claimant within the 45-day processing period that additional time is needed.  If the Company 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 Company 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 Company'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, 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 consulted. 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.

 

Article 7

Amendments and Termination

 

7.1         Amendment.  This Agreement may not be amended or modified other than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

7.2         Termination.  Notwithstanding the preceding Section 7.1, the Company shall have the right to terminate this Agreement and to accelerate the payment of benefits under the Agreement in accordance with Code Section 409A and related treasury regulations and other guidance issued under Section 409A in accordance with one of the following:

 

(i)           the termination of the Agreement within twelve (12) months of a corporate dissolution taxed under Code Section 331 or with the approval of a bankruptcy court 

 

  

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pursuant to 11 U.S.C. 503(b)(1)(A), consistent with Treasury Regulation Section 1.409A-3(j)(4)(ix)(A); or

(ii)           the termination of the Agreement 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, consistent with Treasury Regulation Section 1.409A-3(j)(4)(ix)(B); or

 

(iii)           the termination of the Agreement, provided that the termination does not occur proximate to a downturn in the financial health of the Company, all arrangements that would be aggregated with the Agreement under Treasury Regulation Section 1.409A-1(c) are terminated, no payments other than payments that would be payable under the terms of the Agreement if the termination had not occurred are made within twelve (12) months of the Agreement’s termination, all payments are made within twenty-four (24) months of the Agreement’s termination, and no new arrangement that would be aggregated with the Agreement under Treasury Regulation Section 1.409A-1(c) is adopted within three (3) years following the Agreement’s 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 or regulatory guidance under Code Section 409A.

 

Article 8

Miscellaneous

 

8.1         Binding Effect.  This Agreement shall bind the Executive and the Company, and their beneficiaries, survivors, executors, successors, administrators and transferees.

 

8.2         No Guarantee of Employment.  This Agreement is not an employment policy or contract.  It does not give the Executive the right to remain an employee of the Company, nor does it interfere with the Company's right to discharge the Executive.  It also does not require the Executive to remain an employee nor interfere with the Executive's right to terminate employment at any time.

 

8.3         Non-Transferability.  Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.

 

8.4         Successors. This Agreement is personal to the Executive, and, without the prior written consent of the Company, shall not be assignable by the Executive other than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives.  This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.  Subject to the following sentences of this Section 8.4, this Agreement shall not be assignable by the Company without the prior written consent of the Executive.  The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  "Company" means the Company as 

 

  

13

  

 

hereinbefore defined and any successor to its business and/or assets as aforesaid that assumes and agrees to perform this Agreement by operation of law or otherwise.

8.5         Tax Withholding.  The Company shall withhold any taxes that are required to be withheld from the benefits paid under this Agreement.

 

8.6         Applicable Law.  The Agreement and all rights hereunder shall be governed by the laws of the State of South Carolina, without regard to principles of conflicts of laws.

 

8.7         Unfunded Arrangement.  The Executive and beneficiary are general unsecured creditors of the Company for the payment of benefits under this Agreement.  The benefits represent the mere promise by the Company to pay such benefits.  The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors.

 

8.8         Entire Agreement.  This Agreement constitutes the entire agreement between the Company and the Executive as to the subject matter hereof.  No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.  From and after the Effective Date, this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof, including without limitation the Prior Agreement.

 

8.9         Administration and Recordkeeping Authority.  Except as otherwise specifically provided herein, the Company shall have the sole responsibility for and the sole control of the operation, administration, and recordkeeping of this Agreement and shall have the power and authority to take all action and to make all decisions and interpretations that may be necessary or appropriate in order to administer and operate the Agreement, including, without limiting the generality of the foregoing, the power, duty, and responsibility to:

 

	
  

	
(i)

	
Resolve and determine all disputes or questions arising under the Agreement, including the power to determine the rights of the Participant and beneficiaries and their respective benefits, and to remedy any ambiguities, inconsistencies, or omissions in the Agreement;

 

	
  

	
(ii)

	
Adopt such rules of procedure and regulations as in its opinion may be necessary for the proper and efficient administration of the Agreement and as are consistent with the Agreement;

 

	
  

	
(iii)

	
Implement the Agreement in accordance with its terms;

 

	
  

	
(iv)

	
Establish and revise the method of accounting for the Agreement; and

 

	
  

	
(v)

	
Maintain a record of benefit payments.

 

8.10         Named Fiduciary.  The Company shall be the named fiduciary and plan administrator under the Agreement.  The named fiduciary may delegate to others certain aspects of the management and operation responsibilities of the plan including the employment of advisors and the delegation of ministerial duties to qualified individuals.

 

  

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8.11         Captions.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

 

8.12         Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.

 

8.13         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), 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; provided, however, that the Company shall not delay payment pursuant to this Section 8.13 if such delay would result in the imposition of taxes or penalties under Code Section 409A shall be effective.

 

8.14         Acceleration of Payment.  The time or schedule of payment of a benefit hereunder may 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 Executive 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 Executive as a result of failure of the Agreement at any time to meet the requirements of Code Section 409A with respect to the Executive; provided, however, that no acceleration may be made pursuant to this Section 8.14 that would result in the imposition of taxes or penalties under Code Section 409A.

 

IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have signed this Agreement this 18th day of February, 2009.

 

	
EXECUTIVE:

	  	
COMPANY:

 

	  	  	
CAROLINA FIRST BANK

	  	  	  
	
/s/ Jesus Ernesto Diaz

	  	
By:

	
/s/ Mary Jeffrey

	
Jesus Ernesto Diaz

	  	
Title:

	
Executive Vice President

 

  

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BENEFICIARY DESIGNATION

 

CAROLINA FIRST BANK

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

Jesus Ernesto Diaz

 

I DESIGNATE THE FOLLOWING AS BENEFICIARY OF ANY DEATH BENEFITS UNDER THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT:

 

	
Primary:

	  
	  	  
	
Contingent:

	  
	  	  

 

	
NOTE:

	
To name a trust as beneficiary, please provide the name of the trustee(s) and the exact name and date of the trust agreement.

 

I understand that I may change these beneficiary designations by filing a new written designation with the Company.  I further understand that the designations will be automatically revoked if the beneficiary predeceases me, or, if I have named my spouse as beneficiary and our marriage is subsequently dissolved.

 

	
Signature:

	  	  
	
Date:

	  	  

 

Accepted by the Company this ____ day of ____________, 200__.

 

	
By:

	  	  
	
Title:

	  	  

  

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SCHEDULE A CALCULATIONS

CAROLINA FIRST BANK

 

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

To determine the Executive's Early Termination Benefit or Disability Retirement Benefit for the year of the Termination of Employment, the following calculations shall be made:

 

	
  

	
1.

	
Project the Benefit Basis as of Normal Retirement Age by increasing the Benefit Basis as of the Executive's date of Termination of Employment by 5% per year, compounded annually, until Normal Retirement Age (the "Projected Retirement Benefit Basis").

 

	
  

	
2.

	
Multiply the Projected Retirement Benefit Basis by the applicable percentage set forth in Section 2.1.1 of this Agreement (the product, "Annual Projected Retirement Benefit").

 

	
  

	
3.

	
Calculate the discounted value at Normal Retirement Age of the aggregate Annual Projected Retirement Benefit that would have been paid to the Executive in equal monthly installments over the 180-month period immediately following the Normal Retirement Date, by using the Rate, compounded monthly (such discounted value, the "Lump Sum Projected Retirement Benefit").

 

	
  

	
4.

	
Calculate the aggregate amount that has accrued through the end of the year ending immediately prior to the date of the Executive's Termination of Employment (including the amount of the Executive’s Accrual Balance as set forth on Schedule B) by accruing each month from the Effective Date through Normal Retirement Age, with interest on such amounts calculated monthly at the Rate, in order to accumulate to the Lump Sum Projected Retirement Benefit as of the Normal Retirement Date (the "Accrual Balance").

 

In the case of Early Termination Benefit:

 

	
  

	
5.

	
Multiply the Accrual Balance by 10% per Year of Service, subject to a maximum of 100% (the "Vested Accrual Balance").

 

	
  

	
6.

	
Increase the Vested Accrual Balance by the Rate, compounded monthly, to the Normal Retirement Age (the "Inflated Vested Accrual Balance").

 

	
  

	
7.

	
Calculate a fixed annuity which is payable in 180 equal monthly installments, crediting interest on the unpaid balance of the Inflated Vested Accrual Balance at the Rate, compounded monthly.

 

In the case of Disability Retirement Benefit:

 

	
  

	
8.

	
The Disability Annual Benefit amount is determined by calculating a fixed annuity which is payable in 180 equal monthly installments [equal in value to the Accrual Balance], crediting interest on the unpaid balance of the Accrual Balance at the Rate, compounded monthly.

 

  

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SCHEDULE B CALCULATIONS

CAROLINA FIRST BANK

 

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

 

Accrual Balance as of ____________, 200__. [           ]

 

 

18ex10_9a.htm

Exhibit 10.9-a

 

NOTICE:  THIS CONTRACT IS SUBJECT TO ARBITRATION PURSUANT

TO THE SOUTH CAROLINA UNIFORM ARBITRATION ACT

NONCOMPETITION,

SEVERANCE AND EMPLOYMENT AGREEMENT

Between

THE SOUTH FINANCIAL GROUP, INC. and J. W. DAVIS

This Noncompetition, Severance and Employment Agreement (this “Agreement”) is made and entered into as of this 14th day of May, 2003, by and between J. W. Davis, an individual (the “Executive”), and The South Financial Group, Inc., a South Carolina corporation and financial institution holding company headquartered in Greenville, South Carolina (the “Company”). As used herein, the term “Company” shall include the Company and any and all of its subsidiaries where the context so applies.

W I T N E S S E T H

WHEREAS the Company’s Board of Directors (the “Board”) believes that the Executive has been instrumental in the success of MountainBank Financial Corporation (“MBFC”) and its wholly-owned subsidiary MountainBank.

WHEREAS MBFC and the Company have entered into an Agreement and Plan of Merger dated May 14, 2003, which provides for the merger of MBFC into the Company (the “Merger”) and the Company’s operation of MountainBank as a wholly owned subsidiary of the Company;

WHEREAS the Company desires to employ the Executive as President of MountainBank after the Merger;

WHEREAS the terms hereof are consistent with the executive compensation objectives of the Company as established by the Board;

WHEREAS the Executive has entered into an Agreement (the “Gross Up Agreement”) with MountainBank dated May 13, 2003 with respect to the Executive’s currently-effective Executive Indexed Retirement Agreement (the “Indexed Agreement”);

WHEREAS the Executive is willing to accept the employment contemplated herein under the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto agree as follows:

1.           Employment.  Subject to completion of the acquisition of Merger and the terms and conditions hereof, the Company hereby employs the Executive and Executive hereby accepts such employment as the President of MountainBank having such duties and responsibilities as are set forth in Section 3 below. Notwithstanding anything to the contrary herein, the parties agree that in the event that MountainBank is merged into another banking subsidiary of the Company, that Executive shall be the executive directly responsible for the Company’s North Carolina and Virginia banking operations (although the Company shall not be obligated to maintain Virginia operations) and such shall not be considered a breach of this Agreement. Upon Closing (as defined below), the Company agrees to pay to Executive all amounts properly payable under Section 2(g) of his existing employment contract dated June 26, 1997 with MountainBank (the “Existing Agreement”) as if Executive’s employment were terminated without cause (as defined in the Existing Agreement) immediately after the consummation of the Merger. The parties agree that all obligations referenced in the preceding sentence shall be satisfied upon payment of the amounts set forth in Sections 6.2, 6.9 and 6.10.  In the event the Merger is not completed, this Agreement will be null and void.

  

  

  

2.           Definitions.  For purposes of this Agreement, the following terms shall have the meanings specified below.

“Cause” shall mean:

(i)           In the absence of a Change in Control:  (a) fraud; (b) embezzlement; (c) conviction of the Executive of any felony; (d) a material breach of, or the willful failure by the Executive to perform and discharge the Executive’s duties, responsibilities and obligations under this Agreement; (e) any act of moral turpitude or willful misconduct by the Executive intended to result in personal enrichment of the Executive at the expense of the Company, or any of its affiliates or which has a material adverse impact on the business or reputation of the Company or any of its affiliates (such determination to be made by the Board in its reasonable judgment); (f) intentional material damage to the property or business of the Company; (g) gross negligence; or (h) the ineligibility of the Executive to perform Executive’s duties because of a ruling, directive or other action by any agency of the United States or any state of the United States having regulatory authority over the Company.

(ii)           After a Change in Control: (a) material criminal fraud, (b) gross negligence, (c) material dereliction of duties, (d) intentional material damage to the property or business of the Company, or (e) the commission of a material felony, in each case, as determined in the reasonable discretion of the Board, but only if (1) the Executive has been provided with written notice of any assertion that there is a basis for termination for cause which notice shall specify in reasonable detail specific facts regarding any such assertion, (2) such written notice is provided to the Executive a reasonable time before the Board meets to consider any possible termination for cause, (3) at or prior to the meeting of the Board to consider the matters described in the written notice, an opportunity is provided to the Executive and Executive’s counsel to be heard before the Board with respect to the matters described in the written notice, (4) any resolution or other Board action held with respect to any deliberation regarding or decision to terminate the Executive for cause is duly adopted by a vote of a majority of the entire Board of the Company at a meeting of the Board called and held and (5) the Executive is promptly provided with a copy of the resolution or other corporate action taken with respect to such termination.  No act or failure to act by the Executive shall be considered willful unless done or omitted to be done by Executive not in good faith and without reasonable belief that Executive’s action or omission was in the best interests of the Company.  The unwillingness of the Executive to accept any or all of a change in the nature or scope of Executive’s position, authorities or duties, a reduction in Executive’s total compensation or benefits, a relocation that he deems unreasonable in light of Executive’s personal circumstances, or other action by or upon request of the Company in respect of Executive’s position, authority, or responsibility that he reasonably deems to be contrary to this Agreement, may not be considered by the Board to be a failure to perform or misconduct by the Executive.

“Change in Control” shall mean:

(i)           The acquisition, directly or indirectly, by any Person of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company) representing an aggregate of 20% or more of the combined voting power of the Company’s then outstanding voting securities other than an acquisition by:

	
  

	
(A)

	
any employee plan established by the Company;

	
  

	
(B)

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

	
  

	
(C)

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

  

2

  

	
  

	
(D)

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

	
  

	
(E)

	
merger, consolidation, or similar transaction of the Company with any other corporation which is duly approved by the stockholders of the Company;

(ii)           During any period of up to two consecutive years, individuals who, at the beginning of such period, constitute the Board cease for any reason to constitute at least a majority thereof, provided that any person who becomes a director subsequent to the beginning of such period and whose nomination for election is approved by at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved (other than a director (A) whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Company, as such terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act, or (B) who was designated by a Person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) hereof) shall be deemed a director as of the beginning of such period;

(iii)           The stockholders of the Company approve a merger or consolidation of the Company with any other corporation other than (A) 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 (B) 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 (i) 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 25% or more of the combined voting power of the Company’s then outstanding voting securities; or (C) a plan of complete liquidation of the Company or an agreement for the sale or disposition of the Company of all or substantially all of the Company’s assets; or

(iv)           The occurrence of any other event or circumstance which is not covered by (i) through (iii) above which the Board determines affects control of the Company and, in order to implement the purposes of this Agreement as set forth above, adopts a resolution that such event or circumstance constitutes a Change in Control for the purposes of this Agreement.

“Code” shall mean the Internal Revenue Code of 1986, as amended, or any successor statute, rule or regulation of similar effect.

“Compensation” shall mean the amounts payable under Section 6.1, 6.3 and 6.7.  For purposes of determining bonus compensation under Section 6.3 which is not fixed, the annual amount of such unfixed compensation shall be deemed to be equal to the average of such compensation paid under Section 6.3 over the three year period immediately prior to the termination. If the Executive has not been employed by the Company for at least three years, the annual amount of such unfixed bonus compensation under Section 6.3 shall be deemed to be equal to the average of such compensation over the period of time the Executive was employed by the Company immediately prior to the termination. In the event the Executive has been employed by the Company less than one year, the annual amount of such unfixed bonus compensation shall be deemed to be equal to the target bonus amount under Section 6.3, if any, for the year in which such termination occurs.

  

3

  

“Confidential Information” shall mean all business and other information relating to the business of the Company, including without limitation, technical or nontechnical data, programs, methods, techniques, processes, financial data, financial plans, product plans, and lists of actual or potential customers, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other Persons, and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality. Such information and compilations of information shall be contractually subject to protection under this Agreement whether or not such information constitutes a trade secret and is separately protectable at law or in equity as a trade secret. Confidential Information does not include confidential business information which does not constitute a trade secret under applicable law two years after any expiration or termination of this Agreement.

“Disability” or “Disabled” shall mean the Executive’s inability as a result of physical or mental incapacity to substantially perform Executive’s duties for the Company on a full-time basis, with or without accommodation, for a period of six (6) months.

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

“Involuntary Termination” shall mean the termination of Executive’s employment by the Executive following a Change in Control which, in the sole judgment of the Executive, is due to (i) a change of the Executive’s responsibilities, position (including status as President of MountainBank (or head of the Company’s North Carolina operations, if MountainBank is merged into a Company banking subsidiary), reporting relationships or working conditions), authority or duties (including changes resulting from the assignment to the Executive of any duties inconsistent with Executive’s positions, duties or responsibilities as in effect immediately prior to the Change in Control); or (ii) a change in the terms or status (including the rolling three year termination date) of this Agreement; or (iii) a reduction in the Executive’s compensation or benefits; or (iv) a forced relocation of the Executive outside the Hendersonville, North Carolina metropolitan area; or (v) a significant increase in the Executive’s travel requirements (collectively “Status Changes”); provided, however, Executive must elect to terminate Executive’s employment within 90 days of the Status Change on which Executive bases Executive’s employment termination.

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

“Voluntary Termination” shall mean the termination by Executive of Executive’s employment following a Change in Control which is not the result of any of clauses (i) through (v) set forth in the definition of Involuntary Termination above.

3.           Duties.  During the Term hereof, the Executive shall have such duties and authority as are typical of the President of MountainBank, or the head of the Company’s North Carolina operations. Executive shall report directly to the Company’s CEO and shall be a member of the Company’s Executive Committee. The Company shall nominate and recommend Executive for service on the Company’s Board of Directors for at least three years subsequent to Closing (although Executive will not receive director fees for such service so long as other “inside” directors are not so compensated). Executive agrees that during the Term hereof, he will devote Executive’s full time, attention and energies to the diligent performance of Executive’s duties. Executive shall not, without the prior written consent of the Company, at any time during the Term hereof (i) accept employment with, or render services of a business, professional or commercial nature to, any Person other than the Company, (ii) engage in any venture or activity which the Company may in good faith consider to be competitive with or adverse to the business of the Company or of any affiliate of the Company, whether alone, as a partner, or as an officer, director, employee or shareholder or otherwise, except that the ownership of not more than 5% of the stock or other equity interest of any publicly traded corporation or other entity shall not be deemed a violation of this Section, or (iii) engage in any venture or activity which the Board may in good faith consider to interfere with Executive’s performance of Executive’s duties hereunder.

  

4

  

4              Term.  Unless earlier terminated as provided herein, the Executive’s employment hereunder shall be for a rolling term of three years (the “Term”) commencing on the closing date of the Merger (“Closing”).  This Agreement shall be deemed to extend each month for an additional month automatically without any action on behalf of either party hereto; provided, however, that either party may, by written notice to the other, cause this Agreement to cease to extend automatically and upon such notice, the “Term” of this Agreement shall be the three years following the date of such notice, and this Agreement shall terminate upon the expiration of such Term.

5.             Termination.  This Agreement may be terminated as follows:

5.1   The Company.  The Company shall have the right to terminate Executive’s employment hereunder at any time during the Term hereof (i) for Cause, (ii) if the Executive becomes Disabled, (iii) upon the Executive’s death, or (iv) without Cause.

  

5.1.1           If the Company terminates Executive’s employment under this Agreement pursuant to clauses (i) of Section 5.1, the Company’s obligations hereunder shall cease as of the date of termination and forfeitable share awards and unexercised stock options granted on or after the date hereof (regardless of their vested status) shall be deemed immediately terminated.

5.1.2           If the Company terminates Executive’s employment under this Agreement pursuant to clauses (ii) or (iii) of Section 5.1, the Company’s obligations hereunder shall cease as of the date of termination except that Executive or Executive’s estate will be entitled to receive a pro-rata portion of the targeted Annual Incentive Bonus under Section 6.2 for the portion of the year actually worked by Executive prior to Executive’s Disability or death.

5.1.3           If the Company terminates Executive pursuant to clause (iv) of Section 5.1 and there has been a Change in Control, Executive shall be entitled to receive immediately in a lump sum as severance upon such termination, aggregate compensation and benefits provided in Section 6 equal to three times Executive’s annual Compensation being paid at the time of termination.  If the Company terminates Executive pursuant to clause (iv) of Section 5.1 and in the absence of a Change in Control, Executive shall be entitled to receive immediately in a lump sum as severance upon such termination, an amount equal to the Compensation that would otherwise be provided to Executive under the applicable provisions in Section 6 hereof for the remaining Term of this Agreement.

5.1.4           In the event of such termination pursuant to clause (iv) of Section 5.1, (A) all rights of Executive pursuant to awards of share grants or options granted by the Company shall be deemed to have vested and shall be released from all conditions and restrictions, except for restrictions on transfer pursuant to the Securities Act of 1933, as amended, and (B) the Executive shall be deemed to be credited with service with the Company for such remaining Term for the purposes of the Company’s benefit plans; (C) the Executive shall be deemed to have retired from the Company and shall be entitled as of the termination date, or at such later time as he may elect to commence receiving the total combined qualified and non-qualified retirement benefit to which he is entitled hereunder, or Executive’s total non-qualified retirement benefit hereunder if under the terms of the Company’s qualified retirement plan for salaried employees he is not entitled to a qualified benefit, and (D) if any provision of this Section 5.1.4 cannot, in whole or in part, be implemented and carried out under the terms of the applicable compensation, benefit, or other plan or arrangement of the Company because the Executive has ceased to be an actual employee of the Company, because the Executive has insufficient or reduced credited service based upon Executive’s actual employment by the Company, because the plan or 

  

5

  

 

arrangement has been terminated or amended after the effective date of this Agreement, or because of any other reason, the Company itself shall pay or otherwise provide the equivalent of such rights, benefits and credits for such benefits to Executive, Executive’s dependents, beneficiaries and estate.  Subject to applicable legal limits to the contrary, including, without limitation, limits applicable to incentive stock options under the Code, in the event of termination pursuant to clause (iv) of Section 5.1, Executive shall have three (3) years from the date of such termination to exercise any outstanding stock options.

5.2           By Executive.  Executive shall have the right to terminate Executive’s employment hereunder if (i) the Company materially breaches this Agreement and such breach is not cured within 30 days after written notice of such breach is given by Executive to the Company; (ii) there is a Voluntary Termination; or (iii) there is an Involuntary Termination.

5.2.1            If Executive terminates Executive’s employment other than pursuant to clauses (i), (ii) or (iii) of Section 5.2, the Company’s obligations under this Agreement shall cease as of the date of such termination.

5.2.2            If Executive terminates Executive’s employment hereunder pursuant to clause (i) of Section 5.2 and there has been a Change in Control, or pursuant to clause (iii) of Section 5.2, Executive shall be entitled to receive Executive’s base salary and other benefits due Executive through the termination date, less applicable taxes and other deductions, and receive immediately in a lump sum as severance, aggregate compensation and benefits equal to three times Executive’s annual Compensation being paid at the time of termination.  If the Executive terminates Executive’s employment pursuant to clause (i) of Section 5.2 and in the absence of a Change in Control, Executive shall be entitled to receive immediately in a lump sum as severance upon such termination, an amount equal to one times Executive’s annual Compensation being paid at the time of termination.

5.2.3           If Executive terminates Executive’s employment pursuant to clause (ii) of Section 5.2, Executive shall be entitled to receive Executive’s base salary and other benefits due Executive through the termination date less applicable taxes and other deductions and receive immediately in a lump sum as severance aggregate compensation and benefits equal to one times Executive’s annual Compensation being paid at the time of Voluntary Termination.

5.2.4            In addition, in the event of such termination pursuant to any of clauses (i) through (iii) of this Section 5.2, (A) all rights of Executive pursuant to awards of share grants or options granted by the Company shall be deemed to have vested and shall be released from all conditions and restrictions, except for restrictions on transfer pursuant to the Securities Act of 1933, as amended, and (B) the Executive shall be deemed to be credited with service with the Company for such remaining Term for the purposes of the Company’s benefit plans, and (C) the Executive shall be deemed to have retired from the Company and shall be entitled as of the termination date, or at such later time as he may elect to commence receiving the total combined qualified and non-qualified retirement benefit to which he is entitled hereunder, or Executive’s total non-qualified retirement benefit hereunder if under the terms of the Company’s qualified retirement plan for salaried employees he is not entitled to a qualified benefit, and (D) if any provision of this Section 5.2.4 cannot, in whole or in part, be implemented and carried out under the terms of the applicable compensation, benefit, or other plan or arrangement of the Company because the Executive has ceased to be an actual employee of the Company, because the Executive has insufficient or reduced credited service based upon Executive’s actual employment by the Company, because the plan or arrangement has been terminated or amended after the effective date of this Agreement, or because of any other reason, the Company itself shall pay or otherwise provide the equivalent of such rights, benefits and credits for such benefits 

  

6

  

 

to Executive, Executive’s dependents, beneficiaries and estate.  Subject to applicable legal limits to the contrary including, without limitation, limits applicable to incentive stock options under the Code, in the event of termination pursuant to clauses (i) through (iii) of Section 5.2, Executive shall have three (3) years from the date of such termination to exercise any outstanding stock options.

6.            Compensation.  In consideration of Executive’s services and covenants hereunder, Company shall pay to Executive the compensation and benefits described below (which compensation shall be paid in accordance with the normal compensation practices of the Company and shall be subject to such deductions and withholdings as are required by law or policies of the Company in effect from time to time, provided that Executive’s salary pursuant to Section 6.1 shall be payable not less frequently than monthly):

6.1           Annual Salary.  During the Term hereof, the Company shall pay to Executive a base established by the Board which for the first year of the Term shall be Two Hundred Fifty Thousand and 00/100 Dollars ($250,000).  Executive’s salary will be reviewed by the Board at the beginning of each of its fiscal years and, in the sole discretion of the Board, may be increased for such year; provided, however, that following a Change in Control, the base salary shall be increased by an amount at least equal to the average annual increase in that particular year of all the Company’s Executive Committee members except for the CEO.

6.2           Sign On Bonus.  As soon as reasonably possible after the acquisition of MountainBank (but not later than six business days after the Closing), Company shall pay a bonus (the “Sign On Bonus”) to Executive in the amount of Two Hundred Thousand and 00/100 Dollars ($200,000). It is the intention of the parties hereto that these Section 6.2 payments and other compensation provided for herein are reasonable compensation for Executive’s services to the Company and shall not constitute “excess parachute payments” within the meaning of Section 280G of the Code and any regulations thereunder, and the parties agree to cooperate in an effort to achieve this treatment (although if such treatment cannot reasonably be achieved, the Sign On Bonus shall be paid nevertheless).

6.3           Annual Incentive Bonus.  During the Term hereof, the Board may pay to Executive an annual incentive cash bonus in accordance with the terms of the Short Term Incentive Compensation Plan, with a target bonus of 50% of his Annual Salary.

6.4           Long Term Incentive Compensation Plan.  During the Term hereof, the Board may pay to Executive long term incentive cash bonuses in accordance with the Company’s 2004 Long Term Incentive Compensation Plan and any successor plan.

6.5           Supplemental Executive Benefit Plan.  During the Term hereof, Executive shall be entitled to participate in The South Financial Group Supplemental Executive Benefit Plan (the “SERP”); provided, however, that the Company shall not be required to offer the SERP to the Executive unless and until the benefits associated with the SERP exceed the benefits paid to Executive under the Indexed Agreement.

6.6           Stock Options and Restricted Stock.  During the Term hereof, the Board shall grant Executive options to purchase Company Common Stock and restricted stock in accordance with the Company’s 2004 Long Term Incentive Compensation Plan and any successor plan.

6.7           Other Benefits.  Executive shall be entitled to share in any other employee benefits generally provided by the Company to its most highly ranking executives for so long as the Company provides such benefits. The Company also agrees to provide Executive on a grossed-up basis with an automobile allowance equal to similarly situated executives, reasonable club dues for two country clubs and the regimen fee for the Wild Dunes Club, personal tax advisory services, and a $1,000,000.00 life insurance policy and such disability insurance as may be purchased by $15,000 per 

  

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year in premiums. Executive shall also be entitled to participate in all other benefits accorded general Company employees.

6.8             Stock Option. At Closing, the Company shall grant to Executive under its Second Amended and Restated Option Plan an option to purchase 10,000 shares of Company common stock at an exercise price equal to the closing price on the date of grant and otherwise on such terms as are typical of option grants to senior executives of the Company.

6.9             Noncompete Payments.  The Company shall pay to Executive $1.2 million at Closing for the covenants set forth in Section 9.

6.10           Indexed Agreement. The Company shall pay to Executive $1.661 million at Closing in full satisfaction of the “Secondary Normal Retirement Benefit” as such term is defined in the Indexed Agreement.

7.           Excess Parachute Payments.   It is the intention of the parties hereto that the severance payments and other compensation provided for herein are reasonable compensation for Executive’s services to the Company and shall not constitute “excess parachute payments” within the meaning of Section 280G of the Code and any regulations thereunder. In the event that the Company’s independent accountants acting as auditors for the Company on the date of a Change in Control determine that the payments provided for herein, other than the payments described in Section 1 or Section 6.2 or otherwise payable pursuant to obligations in force prior to the date hereof and which have been disclosed to the Company (but subject in all cases to the Gross Up Agreement), constitute “excess parachute payments,” then the compensation payable hereunder shall be reduced to the point that such compensation shall not qualify as “excess parachute payments.”

8.           Confidentiality.  Executive shall hold in a fiduciary capacity for the benefit of the Company all Confidential Information relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company or any of its affiliated companies. After termination of Executive’s employment with the Company for any reason, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. Upon the termination or expiration of Executive’s employment hereunder, Executive agrees to deliver promptly to the Company all Company files, customer lists, management reports, memoranda, research, Company forms, financial data and reports and other documents supplied to or created by Executive in connection with Executive’s employment hereunder (including all copies of the foregoing) in Executive’s possession or control and all of the Company’s equipment and other materials in Executive’s possession or control. In no event shall an asserted violation of the provisions of this Section 8 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement.

9.           Noncompetition and Nonsolicitation Agreement.  If this Agreement is terminated by the Company pursuant to Section 5.1(i) or 5.1(iv), or by Executive pursuant to Section 5.2(i) or Section 5.2.1, Executive shall not provide banking-related services (whether via an employment relationship or a consulting arrangement) to any other bank, thrift, lending or financial institution of any type (1) in any county in the State of North Carolina or Virginia in which the Company conducts a banking business at the time of Executive’s termination, or (2) in Greenville, Spartanburg, Anderson, Oconee, Pickens, Greenwood, Laurens, Newberry, Cherokee, York, Union, Lexington or Richland counties in South Carolina (hereinafter a “competitor”) within three years of the date of the termination of employment (the “Noncompete Period”). The obligations contained in this Section 9 shall not prohibit Executive from being an owner of not more than 5% of the outstanding stock of any class of a corporation which is publicly traded, so long as Executive has no active participation in the business of such corporation.  In the event that Executive’s employment is terminated for any reason following a Change in Control (whether by the Company or Executive), it is expressly acknowledged that there shall be no limitation on any activity of Executive, including direct 

 

  

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competition with the Company or its successor, and Company shall not be entitled to injunctive relief with respect to any such activities of Executive.

9.1           During the Noncompete Period, Executive shall not directly or indirectly through another entity,  including but not limited to a competitor, (i) induce or attempt to induce any employee of Company to leave the employ of Company or in any way interfere with the relationship between Company and any employee thereof, (ii) hire any person who was an employee of Company or any subsidiary at any time during the time that Executive was employed by Company, or (iii) induce or attempt to induce any customer, supplier, or other entity in a business relation with Company to cease doing business with Company, or in any way interfere with the relationship between any such customer, supplier, or business relation and Company or do business with a competitor.

9.2           If, at the time of enforcement of this Section 9, a court shall hold that the duration, scope or area restrictions stated herein are unreasonable under circumstances then existing, the parties agree that the maximum duration, scope or area reasonable under such circumstances shall be substituted for the stated duration, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum period, scope and area permitted by law. Executive agrees that the restrictions contained in this Section 9 are reasonable.

 9.3           In the event of the breach or a threatened breach by Executive of any of the provisions of this Section 9, Company, in addition and supplementary to other rights and remedies existing in its favor, may apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security). In addition, in the event of an alleged breach or violation by Executive of this Section 9, the Noncompete Period shall be tolled until such breach or violation has been duly cured.

10.           Trust.  Notwithstanding anything to the contrary in this agreement, in lieu of direct payments to the Executive under Section 5 of this Agreement, the Company shall establish an irrevocable trust to fund and pay Executive the maximum amount of obligations which could reasonably be expected to become payable hereunder under any circumstances (which may be a “rabbi trust” if so requested by Executive), which trust (i) shall have as trustee an individual acceptable to Executive, (ii) shall be fully funded upon the earlier of a Change in Control or the approval of any regulatory application filed by a potential acquiror of the Company seeking to acquire control of the Company, and (iii) shall contain such other terms and conditions as are reasonably necessary in Executive’s determination to ensure the Company’s compliance with its obligations hereunder.

11.           Assignment.  The parties acknowledge that this Agreement has been entered into due to, among other things, the special skills of Executive, and agree that this Agreement may not be assigned or transferred by Executive, in whole or in part, without the prior written consent of Company.

12.           Notices.  All notices, requests, demands, and other communications required or permitted hereunder shall be in writing and shall be deemed to have been duly given if delivered or seven days after mailing if mailed, first class, certified mail postage prepaid:

	
  

	
To the Company:

	
The South Financial Group, Inc.

Poinsett Plaza

104 South Main Street

Greenville, South Carolina 29601

Attn: Giavonni Gibson

	
  

	
To Executive:

	
J. W. Davis

[Address]

  

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Any party may change the address to which notices, requests, demands, and other communications shall be delivered or mailed by giving notice thereof to the other party in the same manner provided herein.

13.           Provisions Severable.  If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which shall remain in full force and effect.

14.           Remedies in the Absence of a Change in Control.  The terms of this Section 14 will apply in the absence of a Change in Control.

14.1           The Executive acknowledges that if he breaches or threatens to breach Executive’s covenants and agreements in this Agreement, such actions may cause irreparable harm and damage to the Company which could not be compensated in damages. Accordingly, if Executive breaches or threatens to breach this Agreement, the Company shall be entitled to injunctive relief, in addition to any other rights or remedies of the Company.

14.2           All claims, disputes and other matters in question between the Executive and the Company arising out of or related to the interpretation of this Agreement or the breach of this Agreement, except as specifically governed by the foregoing provisions where there may be irreparable harm and damage to the Company which could not be compensated in damages, shall be decided by arbitration in accordance with the rules of the American Arbitration Association. This agreement to arbitrate shall be specifically enforceable under applicable law in any court having jurisdiction. The award rendered by the arbitrator shall be final and judgment may be entered upon it in accordance with the applicable law of any court having jurisdiction thereof.

14.3           In the event that the Executive is reasonably required to engage legal counsel to enforce Executive’s rights hereunder against the Company, Executive shall be entitled to receive from the Company Executive’s reasonable attorneys’ fees and costs; provided that Executive shall not be entitled to receive those fees and costs related to matters, if any, which were the subject of litigation and with respect to which a judgment is rendered against Executive.

15.           Remedies in the Event of a Change in Control.  The terms of this Section 15 shall apply in the event of a Change in Control.

15.1           The Executive acknowledges that if he breaches or threatens to breach Executive’s covenants and agreements in this Agreement, such actions may cause irreparable harm and damage to the Company which could not be compensated in damages. Accordingly, if Executive breaches or threatens to breach this Agreement, the Company shall be entitled to injunctive relief, in addition to any other rights or remedies of the Company. All claims, disputes and other matters in question between the Executive and the Company arising out of or related to the interpretation of this Agreement or the breach of this Agreement shall be decided under and governed by the laws of the State of South Carolina.

15.2           The Company is aware that upon the occurrence of a Change in Control, the Board or a stockholder of the Company may then cause or attempt to cause the Company to refuse to comply with its obligations under this Agreement, or may cause or attempt to cause the Company to institute, or may institute, litigation seeking to have this Agreement declared unenforceable, or may take, or attempt to take, other action to deny the Executive the benefits intended under this Agreement. In these circumstances, the purpose of this Agreement could be frustrated. It is the intent of the parties that the Executive not be required to incur the legal fees and expenses associated with the protection or enforcement of Executive’s rights under this Agreement by litigation or other 

  

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legal action because such costs would substantially detract from the benefits intended to be extended to the Executive hereunder, nor be bound to negotiate any settlement of Executive’s rights hereunder under threat of incurring such costs. Accordingly, if at any time after a Change in Control, it should appear to the Executive that the Company is or has acted contrary to or is failing or has failed to comply with any of its obligations under this Agreement for the reason that it regards this Agreement to be void or unenforceable or for any other reason, or that the Company has purported to terminate Executive’s employment for cause or is in the course of doing so in either case contrary to this Agreement, or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any litigation or other legal action designed to deny, diminish or to recover from the Executive the benefits provided or intended to be provided to Executive hereunder, and the Executive has acted in good faith to perform Executive’s obligations under this Agreement, the Company irrevocably authorizes the Executive from time to time to retain counsel of Executive’s choice at the expense of the Company to represent Executive in connection with the protection and enforcement of Executive’s rights hereunder, including without limitation representation in connection with termination of Executive’s employment contrary to this Agreement or with the initiation or defense of any litigation or other legal action, whether by or against the Executive or the Company or any director, officer, stockholder or other person affiliated with the Company, in any jurisdiction. The reasonable fees and expenses of counsel selected from time to time by the Executive as hereinabove provided shall be paid or reimbursed to the Executive by the Company on a regular, periodic basis upon presentation by the Executive of a statement or statements prepared by such counsel representing other officers or key executives of the Company in connection with the protection and enforcement of their rights under similar agreements between them and the Company, and, unless in Executive’s sole judgment use of common counsel could be prejudicial to Executive or would not be likely to reduce the fees and expenses chargeable hereunder to the Company, the Executive agrees to use Executive’s best efforts to agree with such other officers or executives to retain common counsel.

16.           Waiver.  Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement shall not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver.

17.           Amendments and Modifications.  This Agreement may be amended or modified only by a writing signed by other parties hereto.

18.           Governing Law.  The validity and effect of this agreement shall be governed by and construed and enforced in accordance with the laws of the State of South Carolina.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

	  	
EXECUTIVE

	  	  	  
	  	  	  
	  	
/s/ J. W. Davis

	  	
J. W. Davis

	  	  	  
	  	  	  
	  	
THE SOUTH FINANCIAL GROUP, INC.

	  	  	  
	  	
By:

	
/s/ Mary Jeffrey

	  	  	  
	  	
Title:

	
Executive Vice President

 

 

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