Exhibit 10.13

 

FIRST FARMERS AND MERCHANTS NATIONAL BANK
DIRECTOR SPLIT DOLLAR AGREEMENT

 

THIS AGREEMENT is made effective this            day of                     
(the “Effective Date”), by and between First Farmers and Merchants National Bank
(the “Bank”), a national banking association located in Columbia, Tennessee and
                     (the “Director”).  This Agreement shall append the Split
Dollar Endorsement entered into on                               , 2002, by and
between the aforementioned parties, intending to be legally bound hereby.

 

INTRODUCTION

 

To encourage the Director to continue to serve on the Board of Directors of the
Bank, the Bank is willing to divide the death proceeds of a life insurance
policy on the Director’s life.  The Bank will pay life insurance premiums from
its general assets.

 

Article 1
General Definitions

 

The following terms shall have the meanings specified:

 

1.1           “Change in Control of the Corporation” means a change in control
of a nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended (“Exchange Act”), or any successor thereto, whether or not the
Corporation is registered under Exchange Act; provided that, without limitation,
such a change in control shall be deemed to have occurred if (i) any “person”
(as such term is used in Sections 13(d) and 14(d) of the Exchange Act) is or
becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation representing 25%
or more of the combined voting power of the Corporation’s then outstanding
securities; or (ii) during any period of two (2) consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of the
Corporation cease for any reason to constitute at least a majority thereof
unless the election, or the nomination for election by stockholders, of each new
director was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of the period.

 

1.2           “Code” means the Internal Revenue Code of 1986, as amended.

 

1.3           “Corporation” means First Farmers & Merchants Corporation.

 

1.4           “Insured” means the Director.

 

1.5           “Insurer” means Clarica Life Insurance Company or its successor
thereto.

 

1.6           “Policy” means insurance policy # 656894 issued by the Insurer.

 

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1.7           “Termination of Service” means the Director ceasing to be a member
of the Board of Directors of the Bank or the Corporation for any reason other
than death.

 

Article 2
Policy Ownership/Interests

 

2.1           Bank Ownership.  The Bank is the sole owner of the Policy and
shall have the right to exercise all incidents of ownership.  The Bank shall be
the direct beneficiary of the death proceeds of the Policy remaining after the
Director’s interest is determined according to Section 2.2 below.

 

2.2           Director’s Interest.  Subject to the provisions of Article 4, the
Director shall have the right to designate the beneficiary of $100,000 of death
proceeds.  The Director shall also have the right to elect and change settlement
options that may be permitted.

 

2.3           Comparable Coverage.  Upon execution of this Agreement, the Bank
shall maintain the Policy in full force and effect and in no event shall the
Bank amend, terminate or otherwise abrogate the Director’s interest in the
Policy.  However, the Bank may replace the Policy with a comparable insurance
policy to cover the benefit provided under this Agreement.  The Policy or any
comparable policy shall be subject to the claims of the Bank’ creditors.

 

2.4           Option to Purchase.  The Bank shall not sell, surrender or
transfer ownership of the Policy while this Agreement is in effect without first
giving the Director or the Director’s transferee the option to purchase the
Policy for a period of sixty (60) days from written notice of such intention. 
The purchase price shall be an amount equal to the cash surrender value of the
Policy.  This provision shall not apply if this Agreement has terminated
pursuant to Article 4.

 

Article 3
Premiums

 

3.1           Premium Payment.  The Bank shall pay any premiums due on the
Policy.

 

3.2           Imputed Income.  The Bank shall impute income to the Director in
an amount equal to the annual cost of current life insurance protection on the
life of the Director measured by the lesser of the Table 2001 rate set forth in
Notice 2002-8 (or the corresponding applicable provision of any later Revenue
Ruling) or the Insurer’s current published premium rate for annually renewable
term insurance for standard risks; provided that the Insurer’s current published
premium rate meets the limitations set forth in Notice 2001-10 (or the
corresponding applicable provision of any later Revenue Ruling.) The Corporation
will provide each Director with an annual statement of the amount of income
reportable by the Director for federal and state income tax purposes as a result
of such imputed income.

 

Article 4
Forfeiture of Benefit

 

4.1           Excess Parachute or Golden Parachute Payment.  If the payments and
benefits pursuant to this Agreement, either alone or together with other
payments and benefits which the Director has the right to receive from the
Corporation, would constitute a “parachute payment”

 

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under Section 280G of the Code, the payments and benefits pursuant to this
Agreement shall be reduced, in the manner determined by the Director, by the
amount, if any, which is the minimum necessary to result in no portion of the
payments and benefits under this Agreement being non-deductible to the
Corporation pursuant to Section 280G of the Code and subject to the excise tax
imposed under Section 4999 of the Code.

 

4.2           Termination for Cause.  Notwithstanding any provision of this
Agreement to the contrary, the Corporation shall not pay any benefit under this
Agreement, if the Corporation terminates the Director’s service for cause. 
Termination of the Director’s service for “Cause” shall mean termination because
of personal dishonesty, willful misconduct, breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order or material breach of any provision of
the Agreement.  For purposes of this paragraph, no act or failure to act on the
Director’s part shall be considered “willful” unless done, or omitted to be
done, by the Director not in good faith and without reasonable belief that the
Director’s action or omission was in the best interest of the Corporation.

 

4.3           Removal.  Notwithstanding any provision of this Agreement to the
contrary, the benefit provided under this Agreement shall be forfeited if the
Director is subject to a final removal or prohibition order issued by an
appropriate federal banking agency pursuant to Section 8(e) of the Federal
Deposit Insurance Act (“FDIA”).

 

4.4           Competition After Termination of Service.  The Director shall
forfeit his right to his split dollar benefit if the Director, without the prior
written consent of the Corporation, violates the following described restrictive
covenants.

 

4.4.1        Non-compete Provision.  The Director shall not, directly or
indirectly, either as an individual or as a proprietor, stockholder, partner,
officer, director, employee, agent, consultant or independent contractor of any
individual, partnership, corporation or other entity (excluding an ownership
interest of three percent (3%) or less in the stock of a publicly traded
company):

 

(i)                                   become employed by, participate in, or be
connected in any manner with the ownership, management, operation or control of
any bank, savings and loan or other similar financial institution if the
Director’s responsibilities will include providing banking or other financial
services within the twenty-five (25) miles of any office maintained by the
Corporation as of the date of the termination of the Director’s service;

 

(ii)                                participate in any way in hiring or
otherwise engaging, or assisting any other person or entity in hiring or
otherwise engaging, on a temporary, part-time or permanent basis, any individual
who was employed by the Corporation as of the date of termination of the
Director’s service;

 

(iii)                             assist, advise, or serve in any capacity,
representative or otherwise, any third party in any action against the
Corporation or transaction involving the Corporation;

 

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(iv)                              sell, offer to sell, provide banking or other
financial services, assist any other person in selling or providing banking or
other financial services, or solicit or otherwise compete for, either directly
or indirectly, any orders, contract, or accounts for services of a kind or
nature like or substantially similar to the financial services performed or
financial products sold by the Corporation (the preceding hereinafter referred
to as “Services”), to or from any person or entity from whom the Director or the
Corporation, to the knowledge of the Director provided banking or other
financial services, sold, offered to sell or solicited orders, contracts or
accounts for Services during the three (3) year period immediately prior to the
termination of the Director’s service;

 

(v)                                 divulge, disclose, or communicate to others
in any manner whatsoever, any confidential information of the Corporation, to
the knowledge of the Director, including, but not limited to, the names and
addresses of customers or prospective customers, of the Corporation, as they may
have existed from time to time, of work performed or services rendered for any
customer, any method and/or procedures relating to projects or other work
developed for the Corporation or any of its subsidiaries, earnings or other
information concerning the Corporation.  The restrictions contained in this
subparagraph (v) apply to all information regarding the Corporation, regardless
of the source who provided or compiled such information.  Notwithstanding
anything to the contrary, all information referred to herein shall not be
disclosed unless and until it becomes known to the general public from sources
other than the Director.

 

4.4.2        Judicial Remedies.  In the event of a breach or threatened breach
by the Director of any provision of these restrictions, the Director recognizes
the substantial and immediate harm that a breach or threatened breach will
impose upon the Corporation, and further recognizes that in such event monetary
damages may be inadequate to fully protect the Corporation.  Accordingly, in the
event of a breach or threatened breach of this Agreement, the Director consents
to the Corporation entitlement to such ex parte, preliminary, interlocutory,
temporary or permanent injunctive, or any other equitable relief, protecting and
fully enforcing the Corporation’s rights hereunder and preventing the Director
from further breaching any of his obligations set forth herein.  The Director
expressly waives any requirement, based on any statute, rule of procedure, or
other source, that the Corporation post a bond as a condition of obtaining any
of the above-described remedies.  Nothing herein shall be construed as
prohibiting the Corporation from pursuing any other remedies available to the
Corporation at law or in equity for such breach or threatened breach, including
the recovery of damages from the Director.  The Director expressly acknowledges
and agrees that:  (i) the restrictions set forth in Section 4.4.1 hereof are
reasonable, in terms of scope, duration, geographic area, and otherwise,
(ii) the protections afforded the Corporation in Section 4.4.1 hereof are
necessary to protect their legitimate business interest, (iii) the restrictions
set forth in Section 4.4.1 hereof will not be materially adverse to the
Director’s service with the Corporation, and (iv) the Director’s agreement to
observe such restrictions forms a material part of the consideration for this
Agreement.

 

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4.4.3        Overbreadth of Restrictive Covenant.  It is the intention of the
parties that if any restrictive covenant in this Agreement is determined by a
court of competent jurisdiction to be overly broad, then the court should
enforce such restrictive covenant to the maximum extent permitted under the law
as to area, breadth and duration.

 

4.4.4        Change in Control.  The non-compete provision detailed in
Section 4.4.1 hereof shall not be enforceable if there is a Change in Control of
the Corporation.

 

4.5           Suicide or Misstatement.  If the Director commits suicide within
two years after the date of this Agreement, or if the insurance company denies
coverage for material misstatements of fact made by the Director on any
application for life insurance purchased by the Corporation, or any other
reason, provided however that the Corporation shall evaluate the reason for the
denial, and upon advice of Counsel and in its sole discretion, consider
judicially challenging any denial.

 

Article 5
Assignment

 

The Director may assign without consideration all interests in the Policy and in
this Agreement to any person, entity or trust.  In the event the Director
transfers all of the Director’s interest in the Policy, then all of the
Director’s interest in the Policy and in the Agreement shall be vested in the
Director’s transferee, subject to such transferee executing agreements binding
them to the provisions of this Agreement, who shall be substituted as a party
hereunder and the Director shall have no further interest in the Policy or in
this Agreement.

 

Article 6
Insurer

 

The Insurer shall be bound only by the terms of the Policy.  Any payments the
Insurer makes or actions it takes in accordance with the Policy shall fully
discharge it from all claims, suits and demands of all entities or persons.  The
Insurer shall not be bound by or be deemed to have notice of the provisions of
this Agreement, except to the extent of any endorsement filed with the Insurer. 
The Insurer shall have the right to rely on the Corporation’s representations
with regard to any definitions, interpretations, or Policy interests as
specified under this Agreement.

 

Article 7
Claims and Review Procedures

 

7.1           Claims Procedure.  A Director or beneficiary (“claimant”) who has
not received benefits under the Agreement that he or she believes should be paid
shall make a claim for such benefits as follows:

 

7.1.1        Initiation – Written Claim.  The claimant initiates a claim by
submitting to the Bank a written claim for the benefits.

 

7.1.2        Timing of Bank Response.  The Bank shall respond to such claimant
within 90 days after receiving the claim.  If the Bank determines that special

 

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circumstances require additional time for processing the claim, the Bank can
extend the response period by an additional 90 days by notifying the claimant in
writing, prior to the end of the initial 90-day period, that an additional
period is required.  The notice of extension must set forth the special
circumstances and the date by which the Bank expects to render its decision.

 

7.1.3        Notice of Decision.  If the Bank denies part or all of the claim,
the Bank shall notify the claimant in writing of such denial.  The Bank shall
write the notification in a manner calculated to be understood by the claimant. 
The notification shall set forth:

 

7.1.3.1          The specific reasons for the denial,

 

7.1.3.2          A reference to the specific provisions of the Agreement on
which the denial is based,

 

7.1.3.3          A description of any additional information or material
necessary for the claimant to perfect the claim and an explanation of why it is
needed,

 

7.1.3.4          An explanation of the Agreement’s review procedures and the
time limits applicable to such procedures, and

 

7.1.3.5          A statement of the claimant’s right to bring a civil action
under ERISA Section 502(a) following an adverse benefit determination on review.

 

7.2           Review Procedure.  If the Claimant is determined by the
Corporation 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 Corporation by filing a petition
for review with the Corporation within sixty (60) days after receipt of the
notice issued by the Corporation.  Said petition shall state the specific
reasons which the Claimant believes entitle him or her to benefits or to greater
or different benefits.  Within sixty (60) days after receipt by the Corporation
of the petition, the Corporation shall afford the Claimant (and counsel, if any)
an opportunity to present his or her position to the Corporation orally or in
writing, and the Claimant (or counsel) shall have the right to review the
pertinent documents.  The Corporation shall notify the Claimant of its decision
in writing within the sixty- 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 this Agreement on which the decision is based.  If,
because of the need for a hearing, the sixty-day period is not sufficient, the
decision may be deferred for up to another sixty-day period at the election of
the Corporation, but notice of this deferral shall be given to the Claimant.

 

Article 8
Amendments and Termination

 

No provisions of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing signed by the
Executive and such officer or officers as may be specifically designated by the
Boards of Directors of the Corporation to sign on their behalf.  No waiver by
any party hereto at any time of any breach by

 

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any other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.

 

Article 9
Miscellaneous

 

9.1                               Administrator.  The Corporation shall be the
administrator under this Agreement.  The Corporation may delegate to others
certain aspects of the management and operational responsibilities including the
service of advisors and the delegation of ministerial duties to qualified
individuals.

 

9.2                               Administration.  The Corporation shall have
powers which are necessary to administer this Agreement, including but not
limited to:

 

9.2.1        Interpreting the provisions of the Agreement;

 

9.2.2        Establishing and revising the method of accounting for the
Agreement;

 

9.2.3        Maintaining a record of benefit payments; and

 

9.2.4        Establishing rules and prescribing any forms necessary or desirable
to administer the Agreement.

 

9.3                               Applicable Law.  The Agreement and all rights
hereunder shall be governed by and construed according to the laws of State of
Tennessee, except to the extent preempted by the laws of the United States of
America.

 

9.4                               Binding Effect.  This Agreement shall bind the
Director and the Corporation, their beneficiaries, survivors, executors,
successors, administrators and transferees, and any Policy beneficiary.

 

9.5                               Right of Offset.  The Corporation shall have
the right to offset the benefits against any unpaid obligation the Director may
have with the Corporation.

 

9.6                               No Guarantee of Service.  This Agreement is
not a contract for services.  It does not give the Director the right to remain
a Director of the Corporation, nor does it interfere with the shareholders’
rights to replace the Director.  It also does not require the Director to remain
a Director nor interfere with the Director’s right to terminate services at any
time.

 

9.7                               Notice.  Any notice, consent or demand
required or permitted to be given under the provisions of this Split Dollar
Agreement by one party to another shall be in writing, shall be signed by the
party giving or making the same, and may be given either by delivering the same
to such other party personally, or by mailing the same, by United States
certified mail, postage prepaid, to such party, addressed to his or her last
known address as shown on the records of the Corporation.  The date of such
mailing shall be deemed the date of such mailed notice, consent or demand.

 

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9.8           Recovery of Estate Taxes.  If the Director’s gross estate for
federal estate tax purposes includes any amount determined by reference to and
on account of this Agreement, and if the beneficiary is other than the
Director’s estate, then the Director’s estate shall be entitled to recover from
the beneficiary receiving such benefit under the terms of the Agreement, an
amount by which the total estate tax due by the Director’s estate, exceeds the
total estate tax which would have been payable if the value of such benefit had
not been included in the Director’s gross estate.  If there is more than one
person receiving such benefit, the right of recovery shall be against each such
person.  In the event the beneficiary has a liability hereunder, the beneficiary
may petition the Corporation for a lump sum payment in an amount not to exceed
the beneficiary’s liability hereunder.

 

9.9           Reorganization.  The Corporation shall not merge or consolidate
into or with another company, or reorganize, or sell substantially all of its
assets to another company, firm or person unless such succeeding or continuing
company, firm or person agrees to assume and discharge the obligations of the
Corporation.

 

9.10         Unfunded Arrangement.  The Director and beneficiary are general
unsecured creditors of the Corporation for the payment of benefits under this
Agreement.  The benefits represent the mere promise by the Corporation to pay
such benefits.  Any insurance on the Director’s life is a general asset of the
Corporation to which the Director and beneficiary have no preferred or secured
claim.

 

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

 

DIRECTOR:

 

BANK:

 

 

 

 

 

FIRST FARMERS AND MERCHANTS NATIONAL BANK

 

 

 

 

 

By

 

 

 

 

 

 

 

 

Title

 

 

 

By execution hereof, First Farmers & Merchants Corporation consents to and
agrees to be bound by the terms and condition of this Agreement.

 

ATTEST:

 

CORPORATION:

 

 

 

 

 

FIRST FARMERS & MERCHANTS CORPORATION

 

 

 

 

 

By

 

 

 

 

 

 

 

Title

 

 

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SCHEDULE

TO

FIRST FARMERS AND MERCHANTS NATIONAL BANK
DIRECTOR SPLIT DOLLAR AGREEMENT

 

Director

 

Kenneth Abercrombie

James L. Bailey, Jr.

H. Terry Cook, Jr.

O. Rebecca Hawkins

Joseph W. Remke, III

T. Randy Stevens

John P. Tomlinson, III

William R. Walter

Dan C. Wheeler

David S. Williams

 

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