Exhibit 10.18


 


FIRST FARMERS & MERCHANTS BANK

LIFE INSURANCE ENDORSEMENT METHOD SPLIT

DOLLAR PLAN AGREEMENT


 


THIS PLAN, hereby made
effective this 7th day of January, 2008 (the “Effective Date”), by and between
First Farmers and Merchants Bank, state-chartered bank located in Columbia,
Tennessee (the “Bank”), and the Participant (the “Participant”) selected to
participate in this Plan, intending to be legally bound hereby.


 


INTRODUCTION


 


The Bank wishes to attract,
retain and reward highly qualified executives. To further this objective, the
Bank is willing to divide the death proceeds of certain life insurance policies
which are owned by the Bank on the lives of the participating executives with
the designated beneficiary of each insured participating executive. The Bank
will pay the 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” shall mean the Internal Revenue Code of 1986, as amended.


 


1.3           “Corporation” shall mean First Farmers & Merchants
Corporation.


 


1.4           “Disability” means the Participant’s suffering a sickness, accident or
injury which has been determined by the carrier of any individual or group
disability insurance policy covering the Participant, or by the Social Security
Administration, to be a disability rendering the Participant totally and
permanently disabled. The Participant must submit proof to the Bank of the
carrier’s or Social Security Administration’s determination upon the request of
the Bank.


 

















 


1.5           “Insured” shall mean the individual whose life is insured.


 


1.6           “Insurer” shall mean the insurance company issuing the life insurance
policy on the life of the insured.


 


1.7           “Normal Retirement Age” shall mean the Participant’s 65th birthday.


 


1.8           “Participant” shall mean the employee who is designated by the Board of
Directors as eligible to participate in the Plan, elects in writing to
participate in the Plan using the form attached hereto as Exhibit A, and
signs a Split Dollar Endorsement for the Policy in which he or she is the insured.


 


1.9           “Policy” or “Policies” shall mean the individual insurance policy (or
policies) adopted by the Board of Directors for purposes of insuring a
Participant’s life under this Plan.


 


1.10         “Plan” shall mean this instrument, including all amendments thereto.


 


1.11         “Plan Year” shall mean each consecutive twelve (12) month period
commencing with the Effective Date of this Plan.


 


1.12         “Termination of Employment” shall mean that the Participant ceases to
be employed by the Bank for any reason whatsoever other than by reason of a
leave of absence, which is approved by the Bank. For purposes of this Plan, if
there is a dispute over the employment status of the Participant or the date of
the Participant’s Termination of Employment, the Bank shall have the sole and
absolute right to decide the dispute.


 


1.13         “Vested Insurance Benefit” shall mean the Bank will provide the
Participant with continued insurance coverage from the date of vesting until
death, subject to the forfeiture provisions detailed in Section 5.2 and
Article 8.


 


1.14         “Years of Service” shall mean the number of consecutive twelve (12)
month periods of continuous employment with the Bank, including leaves of
absences approved by the Bank.


 


Article 2

Participation


 


2.1           Eligibility to Participate. The Board of Directors in its sole
discretion shall designate from time to time Participants that are eligible to
participate in this Plan. The Board may delegate this authority to management.


 


2.2           Participation. The eligible executive may participate in this Plan by
executing an Election to Participate (Exhibit A) and a Split Dollar
Endorsement. The Split Dollar Endorsement shall bind the Participant and his or
her beneficiaries, assigns and transferees, to the terms and conditions of this
Plan. A Participant’s participation is limited to only Policies where he or she
is the Insured. Exhibit A sets forth the information about the Policy or
Policies and maximum Participant benefit under the Plan.


 


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2.3           Termination of Participation. A Participant’s rights under this Plan
shall cease and his or her participation in this Plan shall terminate if, the
Plan or any Participant’s rights under the Plan are terminated in accordance
with Sections 5.2 of this Plan. In the event that the Bank decides to maintain
the Policy after the Participant’s termination of participation in the Plan,
the Bank shall be the direct beneficiary of the entire death proceeds of the
Policy. The Bank may document the Participant’s termination from the Plan by
indicating the date of termination on Exhibit A. However, the Bank’s
failure to do so will not be deemed evidence of Participant’s continued
participation in the Plan.


 


Article 3

Premium Payments


 


The
Bank shall pay all premiums due on all Policies under this Plan.


 


Article 4

Policy Ownership/Interests


 


4.1           Bank Ownership. The Bank shall own the Policies and shall have the
right to exercise all incidents of ownership, including the right to terminate
a Policy without the consent of the Insured. With respect to each Policy, the
Bank shall be the direct beneficiary of an amount of death proceeds equal to
the greatest of: (1) the cash surrender value of the policy; (2) the
aggregate premiums paid on the Policy by the Bank less any outstanding
indebtedness to the Insurer; or (3) the amount in excess of the
Participant’s interest specified in Section 4.2. If the Bank owns more
than one policy on a Participant, the Policies shall be aggregated with respect
to item (3) of this paragraph.


 


4.2           Participant’s Interest. Each Participant, or the Participant’s
assignee, shall have the right to designate the beneficiary of the death
proceeds of the Policy as specified in Section 4.2.1 or 4.2.2. The
Participant shall also have the right to elect and change settlement options.


 


4.2.1        Death Prior to termination of Employment. If the Participant dies while
employed by the Bank, the Participant’s beneficiary shall be entitled to a
benefit equal to, the amount specified in Exhibit A.


 


4.2.2        Death After Termination of Employment. At the date of death, the
Participant’s beneficiary shall be entitled to a benefit as specified in
Exhibit A.


 


4.2.3        Notwithstanding any provision to the contrary in this Agreement, the
bank shall not be liable for a death benefit in the event of bankruptcy or
insolvency of the insurer at the time of Participant’s death, or in the event
the Policy has been cancelled, surrendered or otherwise terminated at the time
of the Participant’s death.


 


Article 5

Vesting


 


5.1           Vested Insurance Benefit. The Participant shall be one hundred percent
(100%) vested in the Insurance Benefit from the Effective Date of this
Agreement.


 


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5.2           Forfeiture of Benefit. Notwithstanding the provisions of
Section 5.1, the Participant will forfeit his or her Vested Insurance
Benefit if the Participant violates any of the provisions detailed in
Article 8.


 


Article 6

Imputed Income/Reimbursement


 


The Bank shall impute income
to the Participant in an amount equal to the annual cost of current life
insurance protection on the life of the Participant 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 qualifies under current IRS
Rules. The Bank will provide each Participant with an annual statement of the
amount of income reportable by the Participant for federal and state income tax
purposes as a result of such imputed income.


 


Article 7

Offer to Purchase


 


7.1           Offer to Purchase. If the Bank discontinues a Policy on a Participant
who is employed by the Bank at the date of discontinuance or who has a Vested
Insurance Benefit that has not been forfeited, the Bank shall give the
Participant at least thirty (30) days to purchase such Policy. The purchase
price shall be the cash surrender value of the Policy. Such notification shall
be in writing.


 


Article 8

General Limitations


 


8.1           Termination for Cause. Notwithstanding any provision of this plan to
the contrary, the Participant shall forfeit any right to a benefit under this
Plan, if the Bank terminates the Participant’s employment for cause.
Termination of the Participant’s employment 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 Plan. For purposes of this paragraph, no act or
failure to act on the Participant’s part shall be considered “willful” unless
done, or omitted to be done, by the Participant not in good faith and without
reasonable belief that the Participant’s action or omission was in the best
interest of the Bank.


 


8.2           Removal. Notwithstanding any provision of this Plan to the contrary,
the benefit provided under this Plan shall be forfeited if the Participant 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”).


 


8.3           Suicide or Misstatement. The Participant shall forfeit his benefit
under this Plan if the Participant commits suicide within two years after the
date of this Plan, or if the insurance company denies coverage for material
misstatements of fact made by the Participant on any application for life
insurance purchased by the Bank, or any other reason; provided, however that 


 


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the Bank shall evaluate the
reason for the denial, and upon advice of Counsel and in its sole discretion,
consider judicially challenging any denial. The Bank shall have no liability to
the Participant for any denial of coverage by the insurance company.


 


Article 9

Assignment


 


Any Participant may assign
without consideration all interest in his or her Policy and in this Plan to any
person, entity or trust. In the event a Participant shall transfer all of
his/her interest in the Policy, then all of that Participant’s interest in his
or her Policy and in the Plan shall be vested in his/her transferee, subject to
such transferee executing agreements binding them to the provisions of this
Plan, who shall be substituted as a party hereunder, and that Participant shall
have no further interest in his or her Policy or in this Plan.


 


Article 10

Insurer


 


The Insurer shall be bound
only by the terms of their corresponding Policy. Any payments the Insurer makes
or actions it takes in accordance with a Policy shall fully discharge it from
all claims, suits and demands of all persons relating to that Policy. The
Insurer shall not be bound by the provisions of this Plan, except to the extent
of any endorsement files with the Insurer. The Insurer shall have the right to
rely on the Bank’s representations with regard to any definitions,
interpretations or Policy interests as specified under this Plan.


 


Article 11

Claims Procedure


 


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


 


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


 


11.1.2         Timing of Bank Response. The Bank shall respond to such claimant within
90 days after receiving the claim. If the Bank determines that special
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 expect to render their decision.


 


11.1.3         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:


 


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11.1.3.1                   The specific reasons for the denial,


 


11.1.3.2                   A reference to the specific provisions of the
Plan on which the denial is based,


 


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


 


11.1.3.4                   An explanation of the Plan’s review
procedures and the time limits applicable to such procedures, and


 


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


 


Article 12

Amendment or Termination of Plan


 


12.1         Vested Insurance Benefit. If a Participant has a Vested Insurance
Benefit, the Bank may amend or terminate the Plan for that Participant only if:
(1) continuation of the Plan would cause significant financial harm to the
Bank and (2) the Participant agrees to such action.


 


12.2         This Plan is established based on the assumption that current
accounting, tax, and regulatory rules will remain in effect. In the event
that these rules change, and such change is considered by the Bank to be
detrimental to the operation of the Bank, the Bank reserves the right to
terminate or amend the Plan in its sole discretion.


 


Article 13

Miscellaneous


 


13.1         Administrator. The Bank shall be the administrator of this Plan. The
Bank 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.


 


13.2         Administration. The Bank shall have powers which are necessary to
administer this Plan, including but not limited to:


 


13.2.1      Interpreting the provisions of the Plan;


 


13.2.2      Establishing and revising the method of accounting for the Plan;


 


13.2.3      Maintaining a record of benefit payments; and


 


13.2.4      Establishing rules and prescribing any forms necessary or
desirable to administer the Plan.


 


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


 


13.4         Binding Effect. This Plan shall bind the Participant and the Bank, and
their beneficiaries, survivors, executors, successors, administrators and
transferees.


 


13.5         Entire Agreement. This Plan constitutes the entire agreement between
the Bank and the Participant as to the subject matter hereof. No rights are
granted to the Participant by virtue of this Plan other than those specifically
set forth herein.


 


13.6         Right of Offset. The Bank shall have the right to offset the benefits
against any unpaid obligation the Participant may have with the Bank.


 


13.7         No Guarantee of Employment. This Plan is not an employment policy or
contract. It does not give the Participant the right to remain an employee of
the Bank, nor does it interfere with the Bank’s right to terminate the
Participant’s employment. It also does not require the Participant to remain in
employment nor interfere with the Participant’s right to terminate employment at
any time.


 


13.8         Notice. Any notice, consent or demand required or permitted to be given
under the provisions of this Life Insurance Endorsement Method Split Dollar
Plan Agreement by one party to another shall be in writing, shall be signed by
the party giving or making the same, and may be give 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 Bank. The date of such mailing
shall be deemed the date of such mailed notice, consent or demand.


 


13.9         Reorganization. The Bank 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 Bank under
this Plan. Upon the occurrence of such event, the term “Bank” as used in this
Plan shall be deemed to refer to the successor or survivor company.


 


IN WITNESS WHEREOF, the Bank
executes this Plan as of the date indicated above.


 


	
  ATTEST:

  	
  BANK:

  	 

	 
	
   

  	
  FIRST FARMERS &
  MERCHANTS

  
	 
	
   

  	
  BANK

  
	 
	
   

  	
   

  
	
   /s/ Martha M. McKennon

  	
   

  	
  By:

  	
  /s/ T. Randy Stevens

  	 

	
   

  	
   

  	 

	 
	
   

  	
  Title: Chairman and CEO

  
							



 


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


 


 


	 
	
  ATTEST:

  	
  CORPORATION:

  
	 
	
   

  	
  FIRST FARMERS &
  MERCHANTS

  
	 
	
   

  	
  CORPORATION

  
	 
	
   

  	
   

  
	
  /s/ Martha M. McKennon

  	
   

  	
  By:

  	
  /s/ T. Randy Stevens

  	 

	
   

  	
   

  	 

	 
	
   

  	
  Title: Chairman and CEO

  
							



 


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