Document:

Exhibit 10.20

 

FIRST FARMERS AND MERCHANTS BANK

DIRECTOR DEFERRED COMPENSATION AGREEMENT

 

This Director Deferred Compensation Agreement
(the “Agreement”) is adopted this
         day of
                              ,
by and between First Farmers and Merchants Bank, a state-chartered bank located
in Columbia, Tennessee (the “Bank”), and
                              
(the “Director”) and is effective as of the
       day of
                .

 

The purpose of this Agreement is to provide
specified benefits to the Director who contributes to the continued growth,
development and future business success of the Bank.

 

ARTICLE 1

Definitions

 

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

 

1.1                                “Beneficiary”
means each designated person, or the estate of the deceased Director, entitled
to benefits, if any, upon the death of the Director determined pursuant to Article 6.

 

1.2                                “Beneficiary
Designation Form” means the form established from time to time by the Plan
Administrator that the Director completes signs and returns to the Plan
Administrator to designate one or more beneficiaries.

 

1.3                                “Board”
means the Board of Directors of the Bank as from time to time constituted.

 

1.4                                “Change
in Control” means a change in the ownership or effective control of the
Bank, as such change is defined in section 409A of the code and
regulations there under.

 

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

 

1.6                                “Crediting
Rate” means the Wall Street Journal Prime Rate as published on the last
business day of the previous Plan Year plus three percent (3%), with a maximum
rate of nine and three quarters percent (9.75%).

 

1.7                                “Deferrals”
means the amount of Fees which the Director elects to defer according to this
Agreement. In the absence of a valid Deferral Election Form, Deferrals shall
mean one hundred percent (100%) of the Fees.

 

 

1.8                                “Deferral
Account” means the Bank’s accounting of the Director’s accumulated
Deferrals, plus accrued interest.

 

1.9                                “Deferral
Election Form” means the form established from time to time by the plan
Administrator that the Director completes, signs, and returns to the Plan
Administrator to designate the amount of the deferrals.

 

1.10                          “Distribution
Election Form” means the form established from time to time by the Plan
Administrator that the Director completes, signs, and returns to the Plan
Administrator to designate the time and form of distribution.

 

1.11                          “Fees”
means the total fees payable to the Director during a Plan Year.

 

1.12                          “Original
Effective Date” means
                  .

 

1.13                          “Plan
Administrator” means the plan administrator described in Article 8.

 

1.14                          “Plan
Year” means each twelve (12) month period commencing on January 1st and ending on December 31st of
each year.

 

1.15                          “Separation
from Service” In accordance with Section 409A, “Separation from
Service” shall mean the Director dies, retires, or otherwise has a termination
of service with the Bank. However, the employment relationship is treated as
continuing intact while the individual is on military leave, sick leave, or
other bona fide leave of absence if the period of such leave does not exceed
six (6) months, or if longer, so long as the individual retains a right to
reemployment with the service recipient under an applicable statute or by
contract. For purposes of this definition, a leave of absence constitutes a
bona fide leave of absence only if there is a reasonable expectation that the
Director will return to perform services for the Bank. If the period of leave
exceeds six (6) months and the individual does not retain a right to
reemployment under an applicable statute or by contract, the employment
relationship is deemed to terminate on the first date immediately following
such six (6) 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 (6) months, where such impairment causes the
Director to be unable to perform the duties of his or her position of
employment or any substantially similar position of employment, a twenty-nine
(29) month period of absence may be substituted for such six (6) month
period.

 

Whether a
termination of service has occurred is determined based on whether the facts
and circumstances indicate that the Bank and Director reasonably anticipated
that no further services would be performed after a certain date or that the
level of bona fide services the Director would perform 

 

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after such
date (whether as a Director or as an independent contractor) would permanently
decrease to no more than twenty percent (20%) of the average level of bona fide
services performed (whether as a Director or an independent contractor) over
the immediately preceding thirty-six (36) month period (or the full period of
services to the Bank if the Director has been providing services to the Bank
less than 36 months). Facts and circumstances to be considered in making this
determination include, but are not limited to, whether the Director continues
to be treated as an Director for other purposes (such as continuation of salary
and participation in Director benefit programs), whether similarly situated
service providers have been treated consistently, and whether the Director is
permitted, and realistically available, to perform services for other service
recipients in the same line of business. A Director is presumed to have separated
from service where the level of bona fide services performed decreases to a
level equal to twenty percent (20%) or less of the average level of services
performed by the Director during the immediately preceding thirty-six (36)
month period. A Director will be presumed not to have separated from service
where the level of bona fide services performed continues at a level that is
fifty percent (50%) or more of the average level of service performed by the
Director during the immediately preceding thirty-six (36) month period.

 

1.16                          “Termination
for Cause” means a Separation from Service for:

 

(a)                                  Gross
negligence or gross neglect of duties to the Bank; or

 

(b)                                 Conviction
of a felony or of a gross misdemeanor involving moral turpitude in connection
with the Director’s service with the Bank; or

 

(c)                                  Fraud,
disloyalty, dishonesty or willful violation of any law or significant Bank
policy committed in connection with the Director’s service and resulting in a
material adverse effect on the Bank.

 

1.17                          “Unforeseeable
Emergency” means a severe financial hardship to the Director resulting from
an illness or accident of the Director, the Director’s spouse, or the Director’s
dependent (as defined in Section 152(a) of the Code), loss of the
Director’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Director.

 

Article 2

Deferral Election

 

2.1                                “Elections
Generally”. In any Plan Year during which Director defers fees, Director
shall file a Deferral Election Form for any fees deferred. Such form shall
be filed with the Plan Administrator no later than the end of the Plan 

 

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Year preceding the Plan Year
during which services will be performed for fees deferred, and is effective
only to deferred fees that have not yet been earned by the Director.

 

2.2                                A
deferral election submitted for a particular year may continue to be valid for
succeeding years until changed or modified. Deferral elections, once made,
however, are irrevocable for the Plan Year in which the fees are to be
deferred.

 

A.                                   Initial
Deferral Election(s).

 

Upon notification of eligibility in this
Agreement during the initial Plan Year, and if Director elects to defer fees,
Director shall deliver to the Plan Administrator:

 

(a)                                  a
Deferral Election Form, signed and dated;

 

(b)                                 a
Beneficiary Form, signed and dated;

 

(c)                                  a
Distribution Election Form, signed and dated.

 

The Director shall deliver such forms to the
Plan Administrator within thirty (30) days of notification of eligibility, and
shall set forth on the forms the amount of fees to be deferred.

 

2.3                                Change
in Form or Timing of Distributions. All changes in the form or timing
of distributions hereunder must comply with the following requirements. The
changes:

 

(a)                                  may
not accelerate the time or schedule of any distribution, except as provided in Section 409A
of the Code and the regulations thereunder;

 

(b)                                 must,
for benefits distributable under Section 4.1, delay the commencement of
distributions for a minimum of five (5) years from the date the first
distribution was originally scheduled to be made; and

 

(c)                                  must
take effect not less than twelve (12) months after the election is made.

 

Article 3

Deferral Account

 

3.1                                Establishing
and Crediting. The Bank shall establish a Deferral Account on its books for
the Director and shall credit to the Deferral Account the following amounts:

 

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(a)                                  Any
Deferrals hereunder: and

 

(b)                                 Interest
as follows:

 

(i)                                   On
the last day of each month and immediately prior to the distribution of any
benefits, but only until commencement of benefit distributions under this
Agreement, interest shall be credited on the Deferral Account at an annual rate
equal to the Crediting Rate, compounded monthly; and

 

(ii)                                Prior
to the commencement of any distributions hereunder, the Board, in its sole
discretion, may change the rate used to calculate interest credited on the
unpaid Deferral Account balance during any applicable installment period. Once
the annual interest rate is determined it will compound monthly on the last day
of each month.

 

3.2                                Accounting
Device Only. The Deferral Account is solely a device for measuring amounts
to be paid under this Agreement. The Deferral Account is not a trust fund of
any kind. The Director is a general unsecured creditor of the Bank for the
distribution of benefits. The benefits represent the mere Bank promise to
distribute such benefits. The Director’s rights are not subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by the Director’s creditors.

 

Article 4

Distributions During Lifetime

 

4.1                                Separation
from Service Benefit. Upon Separation from Service, the Bank shall
distribute to the Director the benefit described in this section 4.1.

 

4.1.1                      Amount of
Benefit. The benefit under this Section 4.1 is the Deferral Account
balance at Separation from Service.

 

4.1.2                      Distribution
of Benefit. The Bank shall pay the benefit to the Director as elected by
the Director on the Distribution Election Form commencing within sixty
(60) days following Separation from Service. In the event the Director elects
monthly installments, the Bank shall annuitize the Deferral Account using an
interest rate determined in accordance with Section 3.1(b)(ii).

 

4.2                                Hardship
Distribution. The Bank will permit early withdrawals for an unforeseeable
emergency under certain circumstances arising as a result of events beyond the
control of the Director. The Director may submit an application for an
in-service early withdrawal due to an unforeseeable 

 

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emergency to the Board of
Directors. If, in the discretion of the Board, the Director is permitted to
take an early withdrawal due to an unforeseeable emergency, the Board shall
make a distribution to such Director from the Director’s Account. Such
distribution shall be paid in one (1) lump sum payment within thirty (30)
days, after the Board determines that the Director is permitted to take an
early withdrawal due to an unforeseeable emergency. The amount of such lump sum
payment shall be limited to the amount reasonably necessary to meet the
Director’s requirements to the extent such emergency is not relieved through
reimbursement or compensation from insurance or otherwise, by liquidation of
the Director’s assets, (to the extent the liquidation of such assets will not
cause severe financial hardship) or by cessation of deferrals. For purposes of
this section the term “unforeseeable emergency” means a severe financial
hardship to the Director resulting from an illness or accident of the Director,
the Director’s spouse, the Director’s dependent, or the Director’s Beneficiary,
loss of the Director’s property due to casualty, other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond the
control of the Director. The imminent foreclosure of or eviction from the
service provider’s primary residence may constitute an unforeseeable emergency.
In addition, the need to pay for medical expenses, including non-refundable
deductibles, as well as for the costs of prescription drug medication, may
constitute an unforeseeable emergency. Finally, the need to pay for the funeral
expenses of a spouse, a beneficiary, or a dependent may also constitute an
unforeseeable emergency. At all times this definition shall be construed in
accordance with the definition under Section 409A. If the Director seeks
to terminate any current deferral elections or re-start the deferral election,
it must be done in accordance with Section 409A.

 

4.3                                Restriction
on Timing of Distribution. Notwithstanding any provision of this Agreement
to the contrary, if the Director is considered a Specified Employee at
Separation from Service under such procedures as established by the Bank in
accordance with Section 409A of the Code, benefit distributions that are
made upon Separation from Service may not commence earlier than six (6) months
after the date of such Separation from Service. Therefore, in the event this Section 4.3
is applicable to the Director, any distribution which would otherwise be paid
to the Director within the first six months following the Separation from
Service shall be accumulated and paid to the Director in a lump sum on the
first day of the seventh month following the Separation from Service. All
subsequent distributions shall be paid in the manner specified.

 

4.4                                Distributions
Upon Income Inclusion Under Section 409A of the Code. Upon the
inclusion of any portion of the Deferral Account balance into the Director’s
income as a result of the failure of this non-qualified deferred 

 

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compensation
plan to comply with the requirements of Section 409A of the Code, to the
extent such tax liability can be covered by the Deferral Account balance, a
distribution shall be made as soon as is administratively practicable following
the discovery of the plan failure.

 

Article 5

Distributions at Death

 

5.1                                Death
During Active Service. If the Director dies while in active service to the
Bank, the Bank shall distribute to the Beneficiary the benefit described in
this Section 5.1. This benefit shall be distributed in lieu of the benefit
under Article 4.

 

5.1.1                      Amount of
Benefit. The benefit under this Section 5.1 is the greater of (i) the
Deferral Account balance determined as of the date of the Director’s death, or (ii) $                .

 

5.1.2                      Distribution
of Benefit. The Bank shall pay the benefit to the Beneficiary as elected by
the Director on the Distribution Election Form commencing within sixty
(60) days following the Director’s death. In the event the Director elects
monthly installments, the Bank shall annuitize the Deferral Account using an
interest rate determined in accordance with Section 3.1(b)(ii).

 

5.2                                Death
During Distribution of a Benefit. If the Director dies after any benefit
distributions have commenced under this Agreement but before receiving all such
distributions, the Bank shall distribute to the Beneficiary the remaining
benefits at the same time and in the same amounts that would have been
distributed to the Director had the Director survived.

 

5.3                                Death
After Separation from Service But Before Benefit Distributions Commence. If
the Director is entitled to benefit distributions under this Agreement, but
dies prior to the commencement of said benefit distributions, the Bank shall
distribute to the Beneficiary the same benefits that the Director was entitled
to prior to death except that the benefit distributions shall commence within
thirty (30) days following receipt by the Bank of the Director’s death
certificate.

 

Article 6

Beneficiaries

 

6.1                                Beneficiary.
The Director shall have the right, at any time, to designate a Beneficiary(ies)
to receive any benefits distributable under the Agreement to a Beneficiary upon
the death of the Director. The Beneficiary designated under this Agreement may
be the same as or different from the beneficiary

 

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designation under any other
plan of the Bank in which the Director participates.

 

6.2                               Beneficiary
Designation Change. The Director shall designate a Beneficiary by
completing and signing the Beneficiary Designation Form, and delivering it to
the Plan Administrator or its designated agent. The Director’s beneficiary
designation shall be deemed automatically revoked if the Beneficiary
predeceases the Director or if the Director names a spouse as Beneficiary and
the marriage is subsequently dissolved. The Director shall have the right to
change a Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Plan Administrator’s rules and
procedures, as in effect from time to time. Upon the acceptance by the Plan
Administrator of a new Beneficiary Designation Form, all Beneficiary
designations previously filed shall be cancelled. The Plan Administrator shall
be entitled to rely on the last Beneficiary Designation Form filed by the
Director and accepted by the Plan Administrator prior to the Director’s death.

 

6.3                               Acknowledgement.
No designation or change in designation of a Beneficiary shall be effective
until received, accepted and acknowledged in writing by the Plan Administrator
or its designated agent.

 

6.4                               No
Beneficiary Designation. If the Director dies without a valid Beneficiary
designation, or if all designated Beneficiaries predecease the Director, then
the Director’s spouse shall be the designated Beneficiary. If the Director has
no surviving spouse, the benefits shall be paid to the personal representative
of the Director’s estate.

 

6.5                               Facility
of Distribution. If the Plan Administrator determines in its discretion
that a benefit is to be paid to a minor, to a person declared incompetent, or
to a person incapable of handling the disposition of that person’s property,
the Plan Administrator may direct distribution of such benefit to the guardian,
legal representative or person having the care or custody of such minor,
incompetent person or incapable person. The Plan Administrator may require
proof of incompetence, minority or guardianship as it may deem appropriate
prior to distribution of the benefit. Any distribution of a benefit shall be a
distribution for the account of the Director and the Beneficiary, as the case
may be, and shall be a complete discharge of any liability under the Agreement
for such distribution amount.

 

Article 7

General Limitations

 

7.1                               Termination
for Cause. Notwithstanding any provision of this Agreement to the contrary,
the Bank shall not distribute any benefit under this Agreement 

 

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in excess of
the Deferrals if the Director’s service with the Bank is terminated due to a
Termination for Cause.

 

7.2                               Suicide
or Misstatement. Notwithstanding any provision of this Agreement to the
contrary, the Bank shall not distribute any benefit under this Agreement in
excess of the Deferrals if the Director commits suicide within two years after
the Original Effective Date of this Agreement, or if an insurance company which
issued a life insurance policy covering the Director and owned by the Bank
denies coverage (i) for material misstatements of fact made by the
Director on an application for such life insurance, or (ii) for any other
reason.

 

Article 8

Administration of Agreement

 

8.1                               Plan
Administrator Duties. This Agreement shall be administered by a Plan
Administrator which shall consist of the Board, or such committee or person(s) as
the Board shall appoint. The Plan Administrator shall administer this Agreement
according to its express terms and shall also have the discretion and authority
to (i) make, amend interpret and enforce all appropriate rules and
regulations for the administration of this Agreement and (ii) decide or
resolve any and all questions including interpretations of this Agreement, as
may arise in connection with the Agreement to the extent the exercise of such
discretion and authority does not conflict with Section 409A of the Code
and regulations thereunder.

 

8.2                               Agents.
In the administration of this Agreement, the Plan Administrator may employ
agents and delegate to them such administrative duties as it sees fit,
(including acting through a duly appointed representative), and may from time
to time consult with counsel who may be counsel to the Bank.

 

8.3                               Binding
Effect of Decisions. The decision or action of the Plan Administrator with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Agreement and the rules and
regulations promulgated hereunder shall be final and conclusive and binding
upon all persons having any interest in the Agreement.

 

8.4                               Indemnity
of Plan Administrator. The Bank shall indemnify and hold harmless the
members of the Plan Administrator against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with respect
to this Agreement, except in the case of willful misconduct by the Plan
Administrator or any of its members.

 

8.5                               Bank
Information. To enable the Plan Administrator to perform its functions, the
Bank shall supply full and timely information to the Plan Administrator 

 

9

 

on all matters relating to the
Compensations of its Directors, the date and circumstances of the retirement,
Disability, death or Separation from Service of its Directors, and such other
pertinent information as the Plan Administrator may reasonably require.

 

8.6                               Statement
of Accounts. The Plan Administrator shall provide to the Director, within
one hundred twenty (120) days after the end of each Plan Year, a statement
setting forth the Deferral Account balance.

 

Article 9

Claims and Review Procedures

 

9.1                               Claims
Procedure. The 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:

 

9.1.1                      Initiation
- Written Claim. The Claimant initiates a claim by submitting to the Bank a
written claim for the benefits. If such a claim relates to the contents of a
notice received by the Claimant, the claim must be made within sixty (60) days
after such notice was received by the Claimant. All other claims must be made
within one hundred eighty (180) days of the date on which the event that caused
the claim to arise occurred. The claim must state with particularity the
determination desired by the Claimant.

 

9.1.2                      Timing of
Bank Response. The Bank shall respond to such Claimant within ninety (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 ninety (90) days by notifying the
Claimant in writing, prior to the end of the initial ninety (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.

 

9.1.3                      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:

 

(a)                                  The specific reasons
for the denial,

 

(b)                                 A reference to the
specific provisions of the Agreement on which the denial is based,

 

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(c)                                  A description of any
additional information or material necessary for the Claimant to perfect the
claim and an explanation of why it is needed, and

 

(d)                                 An explanation of the
Agreement’s review procedures and the time limits applicable to such
procedures.

 

9.2                               Review
Procedure. If the Bank denies part or all of the claim, the Claimant shall
have the opportunity for a full and fair review by the Bank of the denial, as
follows:

 

9.2.1                      Initiation
- Written Request. To initiate the review, the Claimant, within 60 days
after receiving the Bank’s notice of denial, must file with the Bank a written
request for review.

 

9.2.2                      Additional
Submissions - Information Access. The Claimant shall then have the
opportunity to submit written comments, documents, records and other
information relating to the claim. The Bank shall also provide the Claimant,
upon request and free of charge, reasonable access to, and copies of, all
documents, records and other information relevant to the Claimant’s claim for
benefits.

 

9.2.3                      Considerations
on Review. In considering the review, the Bank shall take into account all
materials and information the Claimant submits relating to the claim, without
regard to whether such information was submitted or considered in the initial
benefit determination.

 

9.2.4                      Timing of
Bank Response. The Bank shall respond in writing to such Claimant within 60
days after receiving the request for review. If the Bank determines that
special circumstances require additional time for processing the claim, the
Bank can extend the response period by an additional 60 days by notifying the
Claimant in writing, prior to the end of the initial 60-day period that an
additional period is required. The notice of extension must set for the special
circumstances and the date by which the Bank expects to render its decision.

 

9.2.5                      Notice of
Decision. The Bank shall notify the Claimant in writing of its decision on
review. The Bank shall write the notification in a manner calculated to be
understood by the Claimant. The notification shall set forth:

 

(a)                                  The specific reasons
for the denial,

 

(b)                                 A reference to the
specific provisions of the Agreement on which the denial is based, and

 

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(c)                                  A statement that the
Claimant is entitled to receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records and other information relevant
to the Claimant’s claim for benefits.

 

Article 10

Amendments and Termination

 

10.1                         Amendments.
The Bank may amend this Agreement unilaterally at any time. However, no
amendment may be made which would reduce amounts payable under this Agreement
to the Director or a Beneficiary without such person’s written consent.

 

10.2                         Plan
Termination Generally. The Bank may unilaterally terminate this Agreement
at any time upon 90 days advance written notice to the Director. Except as
provided in Treasury Regulation 1.409A-3(j) (4) a payment of deferred
compensation may not be accelerated.

 

Article 11

Miscellaneous

 

11.1                         Binding
Effect. This Agreement shall bind the Director and the Bank and their
beneficiaries, survivors, executors, administrators and transferees.

 

11.2                         No
Guarantee of Service. This Agreement is not a contract for service. It does
not give the Director the right to remain as a director of the Bank, nor does
it interfere with the Bank’s right to discharge the Director. It also does not
require the Director to remain a director nor interfere with the Director’s
right to terminate service at any time.

 

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

 

11.4                         Tax
Withholding and Reporting. The Bank shall withhold any taxes that are
required to be withheld, from the benefits provided under this Agreement.
Director acknowledges that the Bank’s sole liability regarding taxes is to
forward any amounts withheld to the appropriate taxing authority(ies). Further,
the Bank shall satisfy all applicable reporting requirements, including those
under Section 409A of the Code and regulations thereunder.

 

11.5                         Applicable
Law. The Agreement 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.

 

11.6                         Unfunded
Arrangement. The Director and the Beneficiary are general unsecured
creditors of the Bank for the distribution of benefits under this 

 

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Agreement. The benefits
represent the mere promise by the Bank to distribute 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. Any insurance on the Director’s life or other informal funding asset
is a general asset of the Bank to which the Director and the Beneficiary have
no preferred or secured claim.

 

11.7                         Reorganization.
The Bank shall not merge or consolidate into or with another Bank, or
reorganize, or sell substantially all of its assets to another Bank, firm, or
person unless such succeeding or continuing Bank, firm, or person agrees to
assume and discharge the obligations of the Bank under this Agreement. Upon the
occurrence of such event, the term “Bank” as used in this Agreement shall be
deemed to refer to the successor or survivor Bank.

 

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

 

11.9                         Interpretation.
Wherever the fulfillment of the intent and purpose of this Agreement requires,
and the context will permit, the use of the masculine gender includes the
feminine and use of the singular includes the plural.

 

11.10                   Alternative
Action. In the event it shall become impossible for the Bank or the Plan
Administrator to perform any act required by this Agreement, the Bank or Plan
Administrator may, in its discretion, perform such alternative act as most
nearly carries out the intent and purpose of this Agreement and is in the best
interests of the Bank, provided that such alternative acts do not violate Section 409A
of the Code.

 

11.11                   Headings.
Article and section headings are for convenient reference only and shall
not control or affect the meaning or construction of any of its provisions.

 

11.12                   Validity.
In case any provision of this Agreement shall be illegal or invalid for any
reason, said illegality or invalidity shall not affect the remaining parts
hereof, but this Agreement shall be construed and enforced as if such illegal
and invalid provision has never been inserted herein.

 

11.13                   Notice.
Any notice or filing required or permitted to be given to the Plan
Administrator under this Agreement shall be sufficient if in writing and
hand-delivered, or sent by registered or certified mail, to the address below:

 

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First Farmers and Merchants Bank

816 S. Garden Street

Columbia, Tennessee 38402-1148

 

Such notice shall be deemed given as of the
date of delivery or, if delivery is made by mail, as of the date shown on the
postmark or the receipt for registration or certification. Any notice or filing
required or permitted to be given to the Director under this Agreement shall be
sufficient if in writing and hand-delivered, or sent by mail, to the last known
address of the Director.

 

11.14.                Permissible
Acceleration Provision. Under Section 409A-3(j)(4), a payment of
deferred compensation may not be accelerated except as provided in regulations
by the Internal Revenue Code. This Agreement allows all permissible payment
accelerations under 409A-3(j)(4) that include but are not limited to
payments necessary to comply with a domestic relations order, payments
necessary to comply with certain conflict of interest rules, payments intended
to pay employment taxes, and other permissible payments are allowed as
permitted by statute or regulation.

 

11.15                   Compliance
with Section 409A. This Agreement shall at all times be administered
and the provisions of this Agreement shall be interpreted consistent with the
requirements of Section 409A of the Code and any and all regulations
thereunder, including such regulations as may be promulgated after the
Effective Date of this Agreement.

 

IN WITNESS WHEREOF,
the Bank and the Director have signed this Agreement as of
                            ,
2007.

 

 

	
  Director:

  	
   

  	
  Bank:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FIRST FARMERS AND MERCHANTS BANK

  
	
   

  	
   

  	
  Columbia, Tennessee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
  Witness

  	
   

  	
   

  
					

 

14

 

SCHEDULE

TO

FIRST FARMERS AND MERCHANTS BANK

DIRECTOR DEFERRED COMPENSATION AGREEMENT

 

	
  Director

  	
   

  	
  Amount in Section 5.1.1(ii)

  	
   

  
	
  M. Darlene Baxter

  	
   

  	
  $

  	
  176,500

  	
   

  
	
  W. Lacy Upchurch

  	
   

  	
  163,000

  	
   

  
					

 

15Exhibit 10.21

 

FIRST FARMERS AND MERCHANTS BANK

DIRECTOR DEFERRED COMPENSATION AGREEMENT

 

This Director Deferred Compensation Agreement
(the “Agreement”) is adopted this 5th day of March, 2008, by and between First
Fanners and Merchants Bank, a state-chartered commercial bank located in
Columbia, Tennessee (the “Bank”), and Tim E. Pettus (the “Director”) and is
effective as of the 5th day of March, 2008.

 

The purpose of this Agreement is to provide
specified benefits to the Director who contributes to the continued growth,
development and future business success of the bank.

 

ARTICLE 1

Definitions

 

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

 

1.1                                “Beneficiary”
means each designated person, or the estate of the deceased Director, entitled
to benefits, if any, upon the death of the Director determined pursuant to Article 6.

 

1.2                                “Beneficiary
Designation Form” means the form established from time to time by the Plan
Administrator that the Director completes signs and returns to the Plan
Administrator to designate one or more beneficiaries.

 

1.3                                “Board”
means the Board of Directors of the Bank as from time to time constituted.

 

1.4                                “Change
in Control” means a change in the ownership or effective control of the
Bank, as such change is defined in section 409A of the code and regulations
there under.

 

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

 

1.6                                “Crediting
Rate” means the Wall Street Journal Prime Rate as published on the last
business day of the previous Plan Year plus three percent (3%), with a maximum
rate of nine and three quarters percent (9.75%).

 

1.7                                “Deferrals”
means the amount of Fees which the Director elects to defer according to this
Agreement. In the absence of a valid Deferral Election Form, Deferrals shall
mean 100% of the Fees.

 

 

1.8                                “Deferral
Account” means the Bank’s accounting of the Director’s accumulated
Deferrals, plus accrued interest.

 

1.9                                “Deferral
Election Form” means the form established from time to time by the plan
Administrator that the Director completes, signs, and returns to the Plan
Administrator to designate the amount of the deferrals.

 

1.10                          “Distribution
Election Form” means the form established from time to time by the Plan
Administrator that the Director completes, signs, and returns to the Plan
Administrator to designate the time and form of distribution.

 

1.11                          “Fees”
means the total fees payable to the Director during a Plan Year.

 

1.12                          “Original
Effective Date” means March 5, 2008.

 

1.13                          “Plan
Administrator” means the plan administrator described in Article 8.

 

1.14                          “Plan
Year” means each twelve-month period commencing on January 1 and
ending on December 31 of each year.

 

1.15                          “Separation
from Service” In accordance with Section 409A, “Separation from Service”
shall mean the Director dies, retires, or otherwise has a termination of
service with the Bank. However, the employment relationship is treated as
continuing intact while the individual is on military leave, sick leave, or
other bona fide leave of absence if the period of such leave does not exceed
six (6) months, or if longer, so long as the individual retains a right to
reemployment with the service recipient under an applicable statute or by
contract. For purposes of this definition, a leave of absence constitutes a
bona fide leave of absence only if there is a reasonable expectation that the
Director will return to perform services for the Bank. If the period of leave
exceeds six (6) months and the individual does not retain a right to
reemployment under an applicable statute or by contract, the employment
relationship is deemed to terminate on the first date immediately following
such six (6) 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 (6) months, where such impairment causes the
Director to be unable to perform the duties of his or her position of
employment or any substantially similar position of employment, a twenty-nine
(29) month period of absence may be substituted for such six (6) month
period.

 

Whether a termination of service has occurred
is determined based on whether the facts and circumstances indicate that the
Bank and Director reasonably anticipated that no further services would be
performed after a certain date or that the level of bona fide services the
Director would perform

 

 

after such date (whether as a Director or as
an independent contractor) would permanently decrease to no more than twenty
percent (20%) of the average level of bona fide services performed (whether as
a Director or an independent contractor) over the immediately preceding
thirty-six (36) month period (or the full period of services to the Bank if the
Director has been providing services to the Bank less than 36 months). Facts
and circumstances to be considered in making this determination include, but
are not limited to, whether the Director continues to be treated as an Director
for other purposes (such as continuation of salary and participation in
Director benefit programs), whether similarly situated service providers have
been treated consistently, and whether the Director is permitted, and realistically
available, to perform services for other service recipients in the same line of
business. A Director is presumed to have separated from service where the level
of bona fide services performed decreases to a level equal to twenty percent
(20%) or less of the average level of services performed by the Director during
the immediately preceding thirty-six (36) month period. A Director will be
presumed not to have separated from service where the level of bona fide
services performed continues at a level that is fifty percent (50%) or more of
the average level of service performed by the Director during the immediately
preceding thirty-six (36) month period.

 

1.16                          “Termination
for Cause” means a Separation from Service for:

 

(a)                                  Gross
negligence or gross neglect of duties to the Bank; or

 

(b)                                 Conviction
of a felony or of a gross misdemeanor involving moral turpitude in connection
with the Director’s service with the Bank; or

 

(c)                                  Fraud,
disloyalty, dishonesty or willful violation of any law or significant Bank policy
committed in connection with the Director’s service and resulting in a material
adverse effect on the Bank.

 

1.17                          “Unforeseeable
Emergency” means a severe financial hardship to the Director resulting from
an illness or accident of the Director, the Director’s spouse, or the Director’s
dependent (as defined in Section 152(a) of the Code), loss of the
Director’s property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Director.

 

Article 2

Deferral Election

 

2.1                                “Elections
Generally” In any Plan Year during which Director defers fees, Director
shall file a Deferral Election Form for any fees deferred. Such form shall
be filed with the Plan Administrator no later than the end of the Plan

 

 

Year preceding the Plan Year
during which services will be performed for fees deferred, and is effective
only to deferred fees that have not yet been earned by the Director.

 

2.2                                A
deferral election submitted for a particular year may continue to be valid for
succeeding years until changed or modified. Deferral elections, once made,
however, are irrevocable for the Plan Year in which the fees are to be
deferred.

 

A.                                   Initial
Deferral Election(s).

 

Upon notification of eligibility in this
Agreement during the initial Plan Year, and if Director elects to defer fees,
Director shall deliver to the Plan Administrator:

 

(a)                                  a
Deferral Election Form, signed and dated;

 

(b)                                 a
Beneficiary Form, signed and dated;

 

(c)                                  a
Distribution Election Form, signed and dated.

 

The Director shall deliver such forms to the
Plan Administrator within thirty (30) days of notification of eligibility, and
shall set forth on the forms the amount of fees to be deferred.

 

2.3                                Change
in Form or Timing of Distributions. All changes in the form or timing
of distributions hereunder must comply with the following requirements. The
changes:

 

(a)                                  may
not accelerate the time or schedule of any distribution, except as provided in Section 409A
of the Code and the regulations thereunder;

 

(b)                                 must,
for benefits distributable under Section 4.1, delay the commencement of
distributions for a minimum of five (5) years from the date the first
distribution was originally scheduled to be made; and

 

(c)                                  must
take effect not less than twelve (12) months after the election is made.

 

Article 3

Deferral Account

 

3.1                                Establishing
and Crediting. The Bank shall establish a Deferral Account on its books for
the Director and shall credit to the Deferral Account the following amounts:

 

 

(a)           Any Deferrals hereunder: and

 

(b)           Interest as follows:

 

(i)                                   On
the last day of each month interest shall be credited on the Deferral Account
at an annual rate equal to the Crediting Rate, compounded monthly until the
account has a zero balance; and

 

(ii)                                Prior
to the commencement of any distributions hereunder, the Board, in its sole
discretion, may change the rate used to calculate interest credited on the
unpaid Deferral Account balance during any applicable installment period. Once
the annual interest rate is determined it will compound monthly on the last day
of each month.

 

3.2                                Accounting
Device Only. The Deferral Account is solely a device for measuring amounts
to be paid under this Agreement. The Deferral Account is not a trust fund of
any kind. The Director is a general unsecured creditor of the Bank for the
distribution of benefits. The benefits represent the mere Bank promise to
distribute such benefits. The Director’s rights are not subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment or garnishment by the Director’s creditors.

 

Article 4

Distributions During Lifetime

 

4.1                                Separation
from Service Benefit. Upon Separation from Service, the Bank shall
distribute to the Director the benefit described in this section 4.1.

 

4.1.1                   Amount of
Benefit. The benefit under this Section 4.1 is the Deferral Account
balance plus interest at Separation from Service.

 

4.1.2                   Distribution
of Benefit. The Bank shall pay the benefit to the Director as elected by
the Director on the Distribution Election Form commencing within sixty
(60) days following Separation from Service. In the event the Director elects
monthly installments, the Bank shall annuitize the Deferral Account using an
interest rate determined in accordance with Section 3.1(b)(ii).

 

4.2                                Hardship
Distribution.  The Bank will permit
early withdrawals for an unforeseeable emergency under certain circumstances
arising as a result of events beyond the control of the Director. The Director
may submit an application for an in-service early withdrawal due to an
unforeseeable emergency to the Board of Directors. If, in the discretion of the
Board, the Director is permitted to take an early withdrawal due to an
unforeseeable

 

 

emergency, the Board shall make
a distribution to such Director from the Director’s Account. Such distribution
shall be paid in one (1) lump sum payment within thirty (30) days, after
the Board determines that the Director is permitted to take an early withdrawal
due to an unforeseeable emergency. The amount of such lump sum payment shall be
limited to the amount reasonably necessary to meet the Director’s requirements
to the extent such emergency is not relieved through reimbursement or
compensation from insurance or otherwise, by liquidation of the Director’s
assets, (to the extent the liquidation of such assets will not cause severe
financial hardship) or by cessation of deferrals. For purposes of this section
the term “unforeseeable emergency” means a severe financial hardship to
the Director resulting from an illness or accident of the Director, the
Director’s spouse, the Director’s dependent, or the Director’s Beneficiary,
loss of the Director’s property due to casualty, other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond the
control of the Director. The imminent foreclosure of or eviction from the
service provider’s primary residence may constitute an unforeseeable emergency.
In addition, the need to pay for medical expenses, including non-refundable
deductibles, as well as for the costs of prescription drug medication, may
constitute an unforeseeable emergency. Finally, the need to pay for the funeral
expenses of a spouse, a beneficiary, or a dependent may also constitute an
unforeseeable emergency. At all times this definition shall be construed in
accordance with the definition under Section 409A. If the Director seeks
to terminate any current deferral elections or re-start the deferral election,
it must be done in accordance with Section 409A.

 

4.3                                Restriction
on Timing of Distribution. Notwithstanding any provision of this Agreement
to the contrary, if the Director is considered a Specified Employee at
Separation from Service under such procedures as established by the Bank in
accordance with Section 409A of the Code, benefit distributions that are
made upon Separation from Service may not commence earlier than six (6) months
after the date of such Separation from Service. Therefore, in the event this Section 4.3
is applicable to the Director, any distribution which would otherwise be paid
to the Director within the first six months following the Separation from
Service shall be accumulated and paid to the Director in a lump sum on the
first day of the seventh month following the Separation from Service. All
subsequent distributions shall be paid in the manner specified.

 

4.4                                Distributions
Upon Income Inclusion Under Section 409A of the Code. Upon the
inclusion of any portion of the Deferral Account balance into the Director’s
income as a result of the failure of this non-qualified deferred compensation
plan to comply with the requirements of Section 409A of the Code, to the
extent such tax liability can be covered by the Deferral Account

 

 

balance, a distribution shall
be made as soon as is administratively practicable following the discovery of
the plan failure.

 

Article 5

Distributions at Death

 

5.1                                Death
During Active Service. If the Director dies while in active service to the
Bank, the Bank shall distribute to the Beneficiary the benefit described in
this Section 5.1. This benefit shall be distributed in lieu of the benefit
under Article 4.

 

5.1.1                      Amount of
Benefit. The benefit under this Section 5.1 is the greater of (i) the
Deferral Account balance determined as of the date of the Director’s death, or (ii) $
750,000.

 

5.1.2                      Distribution
of Benefit. The Bank shall pay the benefit to the Beneficiary as elected by
the Director on the Distribution Election Form commencing within sixty
(60) days following the Director’s death. In the event the Director elects
monthly installments, the Bank shall annuitize the Deferral Account using an
interest rate determined in accordance with Section 3.1(b)(ii).

 

5.2                                Death
During Distribution of a Benefit. If the Director dies after any benefit
distributions have commenced under this Agreement but before receiving all such
distributions, the Bank shall distribute to the Beneficiary the remaining
benefits at the same time and in the same amounts that would have been
distributed to the Director had the Director survived.

 

5.3                                Death
After Separation from Service But Before Benefit Distributions Commence. If
the Director is entitled to benefit distributions under this Agreement, but
dies prior to the commencement of said benefit distributions, the Bank shall
distribute to the Beneficiary the same benefits that the Director was entitled
to prior to death except that the benefit distributions shall commence within
thirty (30) days following receipt by the Bank of the Director’s death
certificate.

 

Article 6

Beneficiaries

 

6.1                                Beneficiary.
The Director shall have the right, at any time, to designate a Beneficiary(ies)
to receive any benefits distributable under the Agreement to a Beneficiary upon
the death of the Director. The Beneficiary designated under this Agreement may
be the same as or different from the beneficiary designation under any other
plan of the Bank in which the Director participates.

 

 

6.2                                Beneficiary
Designation: Change. The Director shall designate a Beneficiary by
completing and signing the Beneficiary Designation Form, and delivering it to
the Plan Administrator or its designated agent. The Director’s beneficiary
designation shall be deemed automatically revoked if the Beneficiary
predeceases the Director or if the Director names a spouse as Beneficiary and
the marriage is subsequently dissolved. The Director shall have the right to
change a Beneficiary by completing, signing and otherwise complying with the
terms of the Beneficiary Designation Form and the Plan Administrator’s rules and
procedures, as in effect from time to time. Upon the acceptance by the Plan
Administrator of a new Beneficiary Designation Form, all Beneficiary
designations previously filed shall be cancelled. The Plan Administrator shall
be entitled to rely on the last Beneficiary Designation Form filed by the
Director and accepted by the Plan Administrator prior to the Director’s death.

 

6.3                                Acknowledgement.
No designation or change in designation of a Beneficiary shall be effective
until received, accepted and acknowledged in writing by the Plan Administrator
or its designated agent.

 

6.4                                No
Beneficiary Designation. If the Director dies without a valid Beneficiary
designation, or if all designated Beneficiaries predecease the Director, then
the Director’s spouse shall be the designated Beneficiary. If the Director has
no surviving spouse, the benefits shall be paid to the personal representative
of the Director’s estate.

 

6.5                                Facility
of Distribution. If the Plan Administrator determines in its discretion
that a benefit is to be paid to a minor, to a person declared incompetent, or
to a person incapable of handling the disposition of that person’s property,
the Plan Administrator may direct distribution of such benefit to the guardian,
legal representative or person having the care or custody of such minor,
incompetent person or incapable person. The Plan Administrator may require
proof of incompetence, minority or guardianship as it may deem appropriate
prior to distribution of the benefit. Any distribution of a benefit shall be a
distribution for the account of the Director and the Beneficiary, as the case
may be, and shall be a complete discharge of any liability under the Agreement
for such distribution amount.

 

Article 7

General Limitations

 

7.1                                Termination
for Cause. Notwithstanding any provision of this Agreement to the contrary,
the Bank shall not distribute any benefit under this Agreement in excess of the
Deferrals if the Director’s service with the Bank is terminated due to a
Termination for Cause.

 

 

7.2           Suicide or Misstatement.
Notwithstanding any provision of this Agreement to the contrary, the Bank shall
not distribute any benefit under this Agreement in excess of the Deferrals if
the Director commits suicide within two years after the Original Effective Date
of this Agreement, or if an insurance company which issued a life insurance
policy covering the Director and owned by the Bank denies coverage (i) for
material misstatements of fact made by the Director on an application for such
life insurance, or (ii) for any other reason.

 

7.3           Removal. Notwithstanding any
provision of this Agreement to the contrary, the Bank shall not distribute any
benefit under this Agreement in excess of the Deferrals 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.

 

Article 8

Administration of Agreement

 

8.1           Plan Administrator Duties. This
Agreement shall be administered by a Plan Administrator which shall consist of
the Board, or such committee or person(s) as the Board shall appoint. The
Plan Administrator shall administer this Agreement according to its express
terms and shall also have the discretion and authority to (i) make, amend
interpret and enforce all appropriate rules and regulations for the
administration of this Agreement and (ii) decide or resolve any and all
questions including interpretations of this Agreement, as may arise in
connection with the Agreement to the extent the exercise of such discretion and
authority does not conflict with Section 409A of the Code and regulations
thereunder.

 

8.2           Agents. In the administration of this
Agreement, the Plan Administrator may employ agents and delegate to them such
administrative duties as it sees fit, (including acting through a duly
appointed representative), and may from time to time consult with counsel who
may be counsel to the Bank.

 

8.3           Binding Effect of Decisions. The
decision or action of the Plan Administrator with respect to any question
arising out of or in connection with the administration, interpretation and
application of the Agreement and the rules and regulations promulgated
hereunder shall be final and conclusive and binding upon all persons having any
interest in the Agreement.

 

8.4           Indemnity of Plan Administrator. The
Bank shall indemnify and hold harmless the members of the Plan Administrator
against any and all claims, losses, damages, expenses or liabilities arising
from any action or failure to act with respect to this Agreement, except in the
case of willful misconduct by the Plan Administrator or any of its members.

 

 

8.5           Bank Information. To enable the Plan
Administrator to perform its functions, the Bank shall supply full and timely
information to the Plan Administrator on all matters relating to the
Compensations of its Directors, the date and circumstances of the retirement,
Disability, death or Separation from Service of its Directors, and such other
pertinent information as the Plan Administrator may reasonably require.

 

8.6           Statement of Accounts. The Plan
Administrator shall provide to the Director, within one hundred twenty (120)
days after the end of each Plan Year, a statement setting forth the Deferral
Account balance.

 

Article 9

Claims and Review Procedures

 

9.1           Claims Procedure. The 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:

 

9.1.1       Initiation — Written
Claim. The Claimant initiates a claim by submitting to the Bank a written
claim for the benefits. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within sixty (60) days after
such notice was received by the Claimant. All other claims must be made within
one hundred eighty (180) days of the date on which the event that caused the
claim to arise occurred. The claim must state with particularity the
determination desired by the Claimant.

 

9.1.2       Timing of Bank Response.
The Bank shall respond to such Claimant within ninety (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 ninety (90) days by notifying the Claimant in writing, prior to the
end of the initial ninety (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.

 

9.1.3       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:

 

(a)           The specific reasons for the denial,

 

 

(b)           A reference to the specific provisions of
the Agreement on which the denial is based,

 

(c)           A description of any additional information
or material necessary for the Claimant to perfect the claim and an explanation
of why it is needed, and

 

(d)           An explanation of the Agreement’s review
procedures and the time limits applicable to such procedures.

 

9.2           Review Procedure. If the Bank denies
part or all of the claim, the Claimant shall have the opportunity for a full
and fair review by the Bank of the denial, as follows:

 

9.2.1       Initiation — Written
Request. To initiate the review, the Claimant, within sixty (60) days after
receiving the Bank’s notice of denial, must file with the Bank a written
request for review.

 

9.2.2       Additional Submissions —
Information Access. The Claimant shall then have the opportunity to submit
written comments, documents, records and other information relating to the
claim. The Bank shall also provide the Claimant, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other
information relevant to the Claimant’s claim for benefits.

 

9.2.3       Considerations on Review.
In considering the review, the Bank shall take into account all materials and
information the Claimant submits relating to the claim, without regard to
whether such information was submitted or considered in the initial benefit
determination.

 

9.2.4       Timing of Bank Response.
The Bank shall respond in writing to such Claimant within sixty (60) days after
receiving the request for review. If the Bank determines that special
circumstances require additional time for processing the claim, the Bank can
extend the response period by an additional sixty (60) days by notifying the
Claimant in writing, prior to the end of the initial sixty (60) day period that
an additional period is required. The notice of extension must set for the
special circumstances and the date by which the Bank expects to render its
decision.

 

9.2.5       Notice of Decision.
The Bank shall notify the Claimant in writing of its decision on review. The
Bank shall write the notification in a manner calculated to be understood by
the Claimant. The notification shall set forth:

 

(a)           The specific reasons for the denial,

 

 

(b)           A reference to the specific provisions of
the Agreement on which the denial is based, and

 

(c)           A statement that the Claimant is entitled to
receive, upon request and free of charge, reasonable access to, and copies of,
all documents, records and other information relevant to the Claimant’s claim
for benefits.

 

Article 10

Amendments and Termination

 

10.1        Amendments. The
Bank may amend this Agreement unilaterally at any time. However, no amendment
may be made which would reduce amounts payable under this Agreement to the
Director or a Beneficiary without such person’s written consent.

 

10.2        Plan Termination
Generally. The Bank may unilaterally terminate this Agreement at any time
upon ninety (90) days advance written notice to the Director. Except as
provided in Treasury Regulation 1.409A-3(j) (4) a payment of deferred
compensation may not be accelerated.

 

Article 11

Miscellaneous

 

11.1         Binding Effect. This Agreement shall
bind the Director and the Bank and their beneficiaries, survivors, executors,
administrators and transferees.

 

11.2         No Guarantee of Service. This Agreement
is not a contract for service. It does not give the Director the right to
remain as a director of the Bank, nor does it interfere with the Bank’s right
to discharge the Director. It also does not require the Director to remain a
director nor interfere with the Director’s right to terminate service at any
time.

 

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

 

11.4         Tax Withholding and Reporting. The Bank
shall withhold any taxes that are required to be withheld, from the benefits
provided under this Agreement. Director acknowledges that the Bank’s sole
liability regarding taxes is to forward any amounts withheld to the appropriate
taxing authority(ies). Further, the Bank shall satisfy all applicable reporting
requirements, including those under Section 409A of the Code and
regulations thereunder.

 

 

11.5         Applicable Law. The Agreement 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.

 

11.6         Unfunded Arrangement. The Director and
the Beneficiary are general unsecured creditors of the Bank for the distribution
of benefits under this Agreement. The benefits represent the mere promise by
the Bank to distribute 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. Any insurance on the
Director’s life or other informal funding asset is a general asset of the Bank
to which the Director and the Beneficiary have no preferred or secured claim.

 

11.7         Reorganization. The Bank shall not
merge or consolidate into or with another bank, or reorganize, or sell
substantially all of its assets to another bank, firm, or person unless such
succeeding or continuing bank, firm, or person agrees to assume and discharge
the obligations of the Bank under this Agreement. Upon the occurrence of such
event, the term “Bank” as used in this Agreement shall be deemed to
refer to the successor or survivor bank.

 

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

 

11.9         Interpretation. Wherever the
fulfillment of the intent and purpose of this Agreement requires, and the
context will permit, the use of the masculine gender includes the feminine and
use of the singular includes the plural.

 

11.10       Alternative Action. In the event it shall
become impossible for the Bank or the Plan Administrator to perform any act required
by this Agreement, the Bank or Plan Administrator may, in its discretion,
perform such alternative act as most nearly carries out the intent and purpose
of this Agreement and is in the best interests of the Bank, provided that such
alternative acts do not violate Section 409A of the Code.

 

11.11       Headings. Article and section
headings are for convenient reference only and shall not control or affect the
meaning or construction of any of its provisions.

 

11.12       Validity. In case any provision of this
Agreement shall be illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining parts hereof, but this Agreement
shall be construed and enforced as if such illegal and invalid provision has
never been inserted herein.

 

 

11.13       Notice. Any notice or filing required or
permitted to be given to the Plan Administrator under this Agreement shall be
sufficient if in writing and hand- delivered, or sent by registered or
certified mail, to the address below:

 

First Farmers and Merchants Bank

816 S. Garden Street

Columbia, Tennessee 38402-1148

 

Such notice shall be deemed given as of the
date of delivery or, if delivery is made by mail, as of the date shown on the
postmark or the receipt for registration or certification. Any notice or filing
required or permitted to be given to the Director under this Agreement shall be
sufficient if in writing and hand-delivered, or sent by mail, to the last known
address of the Director.

 

11.14.      Permissible Acceleration Provision. Under Section 409A-3(j)(4),
a payment of deferred compensation may not be accelerated except as provided in
regulations by the Internal Revenue Code. This Agreement allows all permissible
payment accelerations under 409A-3(j)(4) that include but are not limited
to payments necessary to comply with a domestic relations order, payments
necessary to comply with certain conflict of interest rules, payments intended
to pay employment taxes, and other permissible payments are allowed as
permitted by statute or regulation.

 

11.15       Compliance with Section 409A. This
Agreement shall at all times be administered and the provisions of this
Agreement shall be interpreted consistent with the requirements of Section 409A
of the Code and any and all regulations thereunder, including, such regulations
as may be promulgated after the Effective Date of this Agreement.

 

IN WITNESS WHEREOF,
the Bank and the Director have signed this Agreement as of March 5, 2008.

 

	
  Director:

  	
   

  	
  Bank:

  
	
   

  	
   

  	
   

  
	
  Tim E.
  Pettus

  	
   

  	
  FIRST
  FARMERS AND MERCHANTS BANK

  
	
   

  	
   

  	
  Columbia,
  Tennessee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   /s/
  Tim E. Pettus

  	
   

  	
  By:

  	
   /s/
  T. Randy Stevens

  
	
   

  	
   

  	
   

  
	
   /s/
  Martha M. McKennon

  	
   

  	
  Title:

  	
   Chairman and CEO

  
	
  Witness

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