Exhibit 10.16
FIRST FARMERS AND MERCHANTS
NATIONAL BANK
GROUP TERM CARVE-OUT
PLAN
THIS PLAN, hereby made effective
this 23 rd day of July, 2002 (the “Effective
Date”), by and between First Farmers and Merchants National
Bank, a national banking association 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 Bark 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
“ Base Annual Salary ” shall mean the
Participant’s current annual salary as of June 1, 2002,
exclusive of special payments such as bonuses or fees, but
including any salary reductions made in accordance with Sections
125 or 401(k) of the Code.
1.2
“ 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.
1.3
“ Code ” shall mean the Internal Revenue Code of
1986, as amended.
1.4
“ Corporation “ shall mean First
Farmers & Merchants Corporation.
1.5
“ 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.
1.6
“ Insured ” shall mean the individual whose life
is insured.
1.7
“ Insurer ” shall mean the insurance company
issuing the life insurance policy on the life of the
insured.
1.8
“ Normal Retirement Age ” shall mean the
Participant’s 65 th birthday, except for Mr. Waymon L.
Hickman, whose Normal Retirement Age shall mean his 68
th birthday.
1.9
“ 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.
1.10
“ 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.
1.11
“ Plan ” shall mean, this instrument, including
all amendments thereto.
1.12
“ Plan Year ” shall mean each consecutive twelve
(12) month period commencing with the Effective Date of this
Plan.
1.13
“ 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.
1.14
“ 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.
Article 5 explains how a Participant achieves vested
status.
1.15
“ 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
2.2
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.
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 one of the following events occur:
(1) the Participant’s employment with the Bank is
terminated prior the Participant meeting any of the criteria for a
Vested Insurance Benefit under Section 5.1 or (2) the
Plan or any Participant’s rights under the Plan are
terminated in accordance with Sections 5.2 or 12.1 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
and, subject to Article 7, the Bank may 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 42.2. 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 two and one-half (2½) times (one times for
Mr. Waymon L. Hickman) the deceased Participant’s Base
Annual Salary at the effective date of the Plan, the amount of
which is specified in Exhibit A.
4.2.2
Death After Termination of Employment . If, pursuant to
Article 5, a terminated Participant has a Vested Insurance
Benefit at the date of death, the Participant’s beneficiary
shall be entitled to a benefit equal to two and one-half (2
1 / 2
)
3
times (one times for Mr. Waymon
L. Hickman) the Participant’s Base Annual Salary as specified
in Exhibit A. If the terminated Participant has not achieved a
Vested Insurance Benefit, the Participant’s beneficiary will
not be entitled to a benefit under this Plan.
Article 5
Vesting
5.1
Vested Insurance
Benefit . The Participant
shall have a Vested Insurance Benefit equal to the amount specified
in Section 4.2 at the earliest of the following
events:
5.1.1
Remaining in continuous employment
with the Bank until age 65;
5.1.2
Remaining in continuous employment
with the Bank until age 60 with fifteen (15) or more Years of
Services;
5.1.3
Remaining in continuous employment
with the Bank for ten (10) years or more from the date the
Participant enters into this Plan;
5.1.4
Termination of Employment due to
Disability; or
5.1.5
At the discretion of the Board of
Directors if there are other circumstances not addressed in
Sections 5.1.1 through 5.1.4 of this Plan.
5.2
Forfeiture of Benefit
. Notwithstanding the provisions of
Section 5.1, the Participant will forfeit his or her Vested
Insurance Benefit if: (1) the Participant violates any of the
provisions detailed in Article 8 or, (2) in the case of a
Disabled Participant who vested pursuant to Section 5.1.3, if
such Participant becomes gainfully employed by an entity other than
the Bank.
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 meets the
limitations set forth in Notice 2002-8 (or the corresponding
applicable provision of any later Revenue Ruling.) 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
Comparable
Coverage
7.1
Insurance Policies
. If a Participant has a Vested
Insurance Benefit, the Bank may provide such benefit through
th
