The South Financial Group 2005 Executive and Director Deferred Compensation Plan

Page

ARTICLE 1.

Definitions

1

ARTICLE 2.

Selection, Enrollment, and Eligibility

9

2.1

Selection by Committee

9

2.2

Enrollment Requirements

9

2.3

Eligibility; Commencement of Participation

9

2.4

Termination of Participation and/or Deferrals

9

ARTICLE 3

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

10

3.1

Minimum Deferrals

10

3.2

Maximum Deferral

10

3.3

Election to Defer; Effect of Election Form

11

3.4

Withholding and Crediting of Annual Deferral Amounts

12

3.5

Transfer and Crediting of Restricted Stock Awards

12

3.6

Annual Company Match Amount

13

3.7

Vesting

13

3.8

Crediting/Debiting of Account Balances

13

3.9

FICA and Other Taxes

16

ARTICLE 4

Deduction Limitation

16

4.1

Deduction Limitation on Benefit Payments

16

ARTICLE 5

In-Service Distribution; Unforeseeable Emergencies

17

5.1

In-Service Distribution

17

5.2

Other Benefits Take Precedence Over In-Service Distributions

17

5.3

Withdrawal Payout/Suspensions for Unforeseeable Emergencies

17

ARTICLE 6

Change In Control Benefit

18

6.1

Change in Control Benefit

18

6.2

Payment of Retirement Benefit

18

ARTICLE 7

Retirement Benefit

18

7.1

Retirement Benefit

18

7.2

Payment of Retirement Benefit

18

ARTICLE 8

Termination Benefit

19

8.1

Termination Benefit

19

8.2

Payment of Termination Benefit

19

ARTICLE 9

Disability Benefit

19

9.1

Deferrals

19

9.2

Continued Eligibility; Disability Benefit

20

ARTICLE 10

Survivor Benefit

20

10.1

Survivor Benefit

20

10.2

Payment of Survivor Benefit

21

ARTICLE 11

Beneficiary Designation

21

11.1

Beneficiary

21

11.2

Beneficiary Designation; Change; Spousal Consent

21

11.3

Acknowledgement

21

11.4

No Beneficiary Designation

21

11.5

Doubt as to Beneficiary

21

11.6

Discharge of Obligations

21

ARTICLE 12

Leave of Absence

21

12.1

Paid Leave of Absence

21

12.2

Unpaid Leave of Absence

22

ARTICLE 13

Termination or Amendment of Plan

22

13.1

Termination

22

13.2

Amendment

23

13.3

Plan Agreement

23

13.4

Effect of Payment

23

ARTICLE 14

Administration

23

14.1

Committee Duties

23

14.2

Administration Upon Change In Control

23

14.3

Agents

24

14.4

Binding Effect of Decisions

24

14.5

Indemnity of Committee

24

14.6

Employer Information

24

ARTICLE 15

Other Benefits and Agreements

24

15.1

Coordination with Other Benefits

24

ARTICLE 16

Claims Procedures

24

16.1

Presentation of Claim

24

16.2

Claims Procedure

24

16.3

Review Procedure

25

16.4

Special Procedures Applicable to Disability Benefits

25

16.5

Legal Action

25

ARTICLE 17

Miscellaneous

26

17.1

Status of Plan

26

17.2

Unsecured General Creditor

26

17.3

Employer's Liability

26

17.4

Nonassignability

26

17.5

Not a Contract of Employment

26

17.6

Furnishing Information

26

17.7

Terms

26

17.8

Captions

26

17.9

Governing Law

27

17.10

Notice

27

17.11

Successors

27

17.12

Spouse's Interest

27

17.13

Validity

27

17.14

Incompetent

27

17.15

Acceleration of Payment

27

17.16

Delay of Payment

27

17.17

Compliance With Code Section 409A

28

17.18

Mandatory Cash Out of Small Amounts

28

17.19

Insurance

28

17.20

Legal Fees To Enforce Rights After Change in Control

28

1.1

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

1.2

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

1.3

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

1.4

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

1.5

“Annual Installment Method” shall be an annual installment payment (which shall be deemed to be a “single” payment for purposes of Code Section 409A) over the number of years selected by the Participant in accordance with this Plan, calculated as follows: (i) for the first annual installment, the vested Account Balance of the Participant shall be calculated as of the close of business on or around the date on which the Participant Retires, as determined by the Committee in its sole discretion, and (ii) for remaining annual installments, the vested Account Balance of the Participant shall be calculated on every applicable anniversary of the date on which the Participant Retires. Each annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a ten (10) year Annual Installment Method, the first payment shall be 1/10 of the vested Account Balance, calculated as described in this definition. The following year, the payment shall be 1/9 of the vested Account Balance, calculated as described in this definition. Subject to Section 3.8, shares of Stock that shall be distributable from The South Financial Group Stock Funds shall be distributable in shares of actual Stock in the same manner previously described. However, the Committee shall round the number of shares down to distribute whole shares of actual Stock.

1.6

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

1.7

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

1.8

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

1.9

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

1.10

“Change in Control” shall mean:

(a)

Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d 3 promulgated under the Exchange Act) of 50% 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 Paragraph (c) of this Section 1.10; or

(b)

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 1.10(b), that any individual who becomes a member of the Board subsequent to the Effective Date, whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of those individuals then comprising 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 excluding, for this purposes 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; or

(c)

Consummation of a reorganization, merger, statutory share exchange or consolidation or similar transaction involving the Company or any of its subsidiaries, a sale or other disposition of all or substantially all of the assets of the Company, or the acquisition of assets or stock of another entity by the Company or any of its subsidiaries (“Corporate Transaction”); in each case unless, following such Corporate Transaction, (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 beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock (or, for a non-corporate entity, equivalent securities) and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors (or, for a non-corporate entity, equivalent governing body), as the case may be, of the entity resulting from such Corporate Transaction (including, without limitation, an entity that, 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 (excluding than any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) beneficially owns, directly or indirectly, 50% 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, except to the extent that such ownership existed prior to the Corporate Transaction, and (3) at least a majority of the members of the board of directors (or, for a non-corporate entity, equivalent governing body) of the entity resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Corporate Transaction

(d)

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

1.11

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

1.12

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

1.13

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

1.14

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

1.15

“Company” shall mean The South Financial Group, Inc., a South Carolina corporation and any successor thereto.

1.15A

“ Company Contribution Amount ” shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5A.

1.16

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

1.17

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

1.18

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

1.19

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

1.20

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

1.21

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

1.22

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

1.23

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

1.24

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

1.25

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

1.26

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

1.27

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

1.28

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

1.29

“Participant” shall mean any Employee or Director (i) who is selected to participate in the Plan, (ii) who elects to participate in the Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary Designation Form, (iv) whose signed Plan Agreement, Election Form and Beneficiary Designation Form are accepted by the Committee, (v) who commences participation in the Plan, and (vi) whose Plan Agreement has not terminated. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant’s benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce.

1.30

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

1.31

“Plan” shall mean The South Financial Group 2005 Executive and Director Deferred Compensation Plan, as amended and restated effective December 31, 2008, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time.

1.32

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

1.33

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

1.34

“Restricted Stock Award(s)” shall mean any performance share grant award that a Participant elects to defer with respect to The South Financial Group, Inc. Long Term Incentive Plan (January 1, 2001); any restricted stock award that a Participant elects to defer with respect to The South Financial Group, Inc. Long Term Incentive Plan; or any restricted stock award that a Participant elects to defer with respect to

1.35

“Restricted Stock Award Account” shall mean the aggregate value, measured on any given date, of (i) the number of all shares of Stock deferred into the Plan by a Participant as a result of all Restricted Stock Awards, including all such shares of Stock that were deferred into the Prior Plan but which were transferred to and are being held under the terms of this Plan because such shares were not vested as of December 31, 2004 under the Code Section 409A grandfathering rules, plus (ii) the number of additional shares of Stock credited as a result of the deemed reinvestment of dividends in accordance with the applicable crediting provisions of The South Financial Group Common Stock Measurement Fund, less (iii) the number of shares of Stock distributed to the Participant or his or her Beneficiary pursuant to this Plan, subject in each case to any adjustments to the number of such shares determined by the Committee with respect to The South Financial Group Common Stock Measurement Stock Fund pursuant to Section 3.8. This portion of a Participant’s Account Balance shall only be distributable in actual shares of Stock.

1.36

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

1.37

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

1.38

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

1.39

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

1.40

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

1.41

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

1.42

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

(i)

Through reimbursement or compensation by insurance or otherwise;

(ii)

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

(iii)

By cessation of deferrals under the Plan.

1.43

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

2.1

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

2.2

Enrollment Requirements. As a condition of participation in the Plan, each selected Employee or Director shall complete, execute and return to the Committee a Plan Agreement, an Election Form for each Plan Year, and a Beneficiary Designation Form for the initial deferral or for any subsequent change in Beneficiary. Deferral elections and Election Forms shall be provided as described in Section 3.3. Also, the Committee shall establish from time to time such other enrollment requirements as it determines in its sole discretion are necessary, provided such enrollment requirements are consistent with Code Section 409A and applicable treasury regulations and published regulatory or other guidance.

2.3

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

2.4

Termination of Participation and/or Deferrals. If the Committee determines in good faith that a Participant who is an Employee no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and is not also a Director, the Committee shall have the right, in its sole discretion, to prevent the Participant from making future deferral elections with respect to future Plan Years.

3.1

Minimum Deferrals.

(a)

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

Deferral

Minimum Amount

Base Annual Salary

$1,000

Annual Bonus

$1,000

Director Fees

$1,000

(b)

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

Deferral

Minimum Amount

Restricted Stock Awards

100 Shares

(c)

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

3.2

Maximum Deferral.

(a)

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

Deferral

Maximum Amount

Base Annual Salary

80%

Annual Bonus

100%

Director Fees

100%

(b)

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

Deferral

Maximum Amount

Restricted Stock Awards

100%

(c)

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

3.3

Election to Defer; Effect of Election Form.

(a)

First Plan Year . In the case of the first Plan Year in which a selected Employee or Director becomes eligible to participate in the Plan, he or she may make an irrevocable initial deferral election within thirty (30) days after the date he or she first becomes eligible to participate under this plan or a similar plan as determined under Code Section 409A and related treasury regulations, with respect to compensation paid for services to be rendered subsequent to the election, along with such other elections as the Committee deems necessary or desirable under the Plan. For these elections to be valid, the Election Form must be completed and signed by the Participant, and timely delivered to the Committee and accepted by the Committee. Except as provided in Section 3.3(c), for compensation that is earned based upon a specified performance period (for example, an annual bonus), where a deferral election is made in the first year of eligibility but after the beginning of the performance period, the election will be deemed to apply to compensation paid for services

(b)

Subsequent Plan Years . For each succeeding Plan Year, an irrevocable deferral election for that Plan Year, and subject to Section 5.1(a) such other elections as the Committee deems necessary or desirable under the Plan, shall be made by timely delivering a new Election Form to the Committee, in accordance with its rules and procedures, before the end of the Plan Year preceding the Plan Year for which the election is made. If no such Election Form is timely delivered for a Plan Year, the Annual Deferral Amount shall be zero for that Plan Year.

(c)

Deferral Election for Performance-Based Compensation . Notwithstanding the preceding, in the case of any “performance-based compensation” based on services performed over a period of at least twelve (12) months as determined by the Committee in accordance with Code Section 409A and regulations and applicable guidance thereunder (including Treasury Regulations Section 1.409A-1(e)), an initial deferral election may be made with respect to such performance-based compensation no later than the date that is six months before the end of the performance period, provided that the Participant performs services continuously from the later of the beginning of the performance period or the date upon which the performance criteria are established through the date the Participant makes an initial deferral election hereunder, and provided further that in no event may an election to defer performance-based compensation be made after such compensation has become readily ascertainable.

3.4

Withholding and Crediting of Annual Deferral Amounts. For each Plan Year, the Base Annual Salary portion of the Annual Deferral Amount or deferred Director Fees shall be withheld from each regularly scheduled Base Annual Salary or Director Fees payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Annual Salary or Director Fees. The Annual Bonus portion of the Annual Deferral Amount shall be withheld at the time the Annual Bonus would be paid to the Participant, whether or not this occurs during the Plan Year itself. Annual Deferral Amounts and deferred Director Fees shall be credited to a Participant’s Deferral Account at the time such amounts would otherwise have been paid to the Participant, provided however, that all Base Annual Salary deferrals by Executives into the South Financial Group Common Stock Measurement Fund will be held in the Plan in a cash Measurement Fund, as determined by the Committee in its sole discretion, and reallocated into the South Financial Group Common Stock Measurement Fund on a quarterly basis on the first business day of the second month of each fiscal quarter.

3.5

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

3. 5A

Company Contribution Amount .

(a)

For each Plan Year, an Employer may credit amounts to a Participant’s Annual Deferral Amount in accordance with employment or other agreements entered into between the Participant and the Employer, which amounts shall be part of the Participant’s Company Contribution Amount for that Plan Year. Such amounts shall be credited to the Participant’s Annual Deferral Amount for the applicable Plan Year on the date or dates prescribed by such agreements.

(b)

For each Plan Year, an Employer, in its sole discretion, may, but is not required to, credit any amount it desires to any Participant’s Annual Deferral Amount under this Plan, which amount shall be part of the Participant’s Company Contribution Amount for that Plan Year. The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive a Company Contribution Amount for that Plan Year. The Company Contribution Amount described in this Section 3.5A(b), if any, shall be credited to the Participant’s Annual Deferral Amount for the applicable Plan Year on a date or dates to be determined by the Committee.

(c)

If not otherwise specified in the Participant’s employment or other agreement entered into between the Participant and the Employer, the amount (or the method or formula for determining the amount) of a Participant’s Company Contribution Amount shall be set forth in writing