The South Financial Group has filed its latest preliminary proxy statement with The Securities and Exchange Commission, and the document gives perhaps the most clear picture yet of the timeline surrounding founder Mack Whittle’s departure last year.
However, like most SEC filings, the document appears to have been drafted by an army of attorneys and is wordy and somewhat obtuse.
The following description of Whittle’s departure from Greenville, SC-based South Financial, which he began in 1986 as Carolina First Corp., is taken from pages 26-27 of the company’s schedule 14A document, filed March 13:
“On September 2, 2008, TSFG announced that Mack I. Whittle, Jr., the Company’s Chairman, President and Chief Executive Officer, retired from his positions as Chairman, President and Chief Executive Officer effective on or before the end of 2008. In August 2008, the Company’s Board of Directors determined it was in the Company’s best interest to change the CEO and, to that end, began a series of negotiations with Mr. Whittle, which resulted in his retirement referenced above, as well as the monetary settlement between Mr. Whittle and the Company (the terms of which have been filed by TSFG with the SEC). In October 2008, based on advice of counsel, the Company’s Board of Directors determined that Mr. Whittle had no legal obligation to agree to the TARP executive compensation limitations (compliance with which was necessary in order to receive a capital allocation under the U.S. Treasury’s TARP Capital Purchase Program). Nonetheless, the Board did request that Mr. Whittle execute a waiver which would have bound him to TARP’s executive compensation limits. Because at that point, his employment with the Company would end in approximately two months or less, Mr. Whittle elected not to agree to the TARP executive compensation limitations. Accordingly, based on the advice of counsel, the Company’s Board of Directors determined that the only prudent way that it could ensure compliance with the TARP executive compensation limitations (and participate in the Capital Purchase Program) was to exercise the right it had under the Company’s separation agreement with Mr. Whittle to select a date in advance of December 30, 2008 as his retirement date, which the Executive Committee of the Board did by selecting October 27, 2008 as his retirement date.
“From September 2, 2008 through his retirement date of October 27, 2008, Mr. Whittle continued to receive salary and benefits at the same level and type, except that he did not receive any future equity-based or other incentive awards. Upon his retirement, Mr. Whittle is entitled to receive substantially the same payments and benefits as would be payable under his employment contract upon termination without cause. Those payments and benefits, among others, include:
- A lump sum cash payment within 30 days after Mr. Whittle’s retirement date.
- Vesting of all restricted stock units, stock options and other equity incentives.
- Service credit under the SERP through age 65 and an annual retirement payment commencing within 30 days of his retirement date (subject to compliance with Section 409A of the Internal Revenue Code) and payable over 15 years.
- Vested benefits under other Company plans.
- Continued welfare and fringe benefits for three years or, at the Company’s option, the cash equivalent thereof.
- Three years of continued life insurance coverage.
“The Company recognized approximately $12 million of incremental expense during the third and fourth quarters of 2008 in connection with this arrangement.”
The boiled-down Whittle would retire by the end of 2008 was made public in September.: Whittle and the board agreed sometime last summer that it was time for Whittle to go, and offered him a lucrative golden parachute as encouragement. The announcement that
In October, South Financial applied for Treasury’s TARP Capital Purchase Program, and eventually received $347 million.
Also in October, legal counsel said Whittle had no legal obligation to agree to TARP executive compensation limitations, even though compliance was necessary for South Financial to participate in the program.
But to cover their butts, the board did ask Whittle to sign a waiver which would have bound him to the TARP executive compensation limits. Whittle declined.
To ensure the company’s ability to participate in the program, the board moved Whittle’s “retirement” date up to Oct. 27.
The bottom line: Whittle got a huge payout (at least $12 million), the bank got a massive bailout from the federal government and the board was free to find a new chief executive. Everyone was happy, except perhaps shareholders, company employees and taxpayers.