Exhibit 10.3
NON-COMPETITION AGREEMENT
          THIS NON-COMPETITION AGREEMENT (this “Agreement”), made and entered
into this 28th day of February, 2007, between CapitalSouth Bancorp, a Delaware
corporation and a registered bank holding company (“CapitalSouth”), and Jake
Bowen, a resident of Duval County, Florida (“Mr. Bowen”).
W I T N E S S E T H:
          WHEREAS, on even date hereof, CapitalSouth Bancorp, a Delaware
corporation and a registered bank holding company (“CapitalSouth”), and
Monticello Bancshares, Inc., a Florida corporation (“Monticello”), have executed
an Agreement and Plan of Merger (the “Merger Agreement”), joined in by
Mr. Bowen, pursuant to which Monticello will be merged with and into
CapitalSouth (the “Merger”), and it is contemplated, but not required, that, in
the sole discretion of CapitalSouth and in connection with the consummation of
the Merger Agreement and pursuant to the terms of a certain Bank Merger
Agreement (the “Bank Merger Agreement”), Monticello Bank, a federal savings bank
(“Monticello Bank”), will be merged with and into CapitalSouth Bank, an Alabama
banking corporation (“CapitalSouth Bank”); and
          WHEREAS, it is a condition precedent to the Merger that Mr. Bowen
execute this Agreement.
          NOW, THEREFORE, in consideration of the promises, mutual covenants set
forth in this Agreement, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, do hereby agree as follows:
SECTION 1: NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIALITY
     1.1 Non-Competition and Non-Solicitation. As an inducement for CapitalSouth
to enter into the Merger Agreement and in consideration for CapitalSouth’s
consummation of the transactions contemplated thereby, Mr. Bowen agrees that:
          (a) For purposes of this Agreement, the phrase “Non-Competition
Period” shall mean the period commencing on the Closing Date and continuing to
the second (2nd) anniversary of the Closing Date, except as such period may be
extended by Section 1.1(c) hereof. During the Non-Competition Period, Mr. Bowen
will not, without the prior written approval of the Board of Directors of
CapitalSouth, directly or indirectly (i) whether through his own account or as a
partner, member, manager, employee, advisor, consultant, owner, trustee,
shareholder, officer, director or agent of or to any person, corporation,
proprietorship, partnership, limited liability company, joint venture, trust or
other entity or association (any of the foregoing being referred to as a
“Person”), (A) within Duval County, Florida or any county contiguous thereto
(the “Non-Competition Territory”), perform services, own, advise, participate
in, support, have an interest in, give financial assistance to, permit
Mr. Bowen’s name to be used in connection with or serve as a member of
management, supervisor, consultant or employee of any financial service
institution, including without limitation any “insured depository institution”

 

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(as such term is defined in 12 U.S.C. § 1813(c)(2)) or any “regulated lending
institution” (as such term is defined in 42 U.S.C. § 4003(a)(10)) or any other
business, or any affiliate, parent, or subsidiary thereof, which would be
competitive with the business of CapitalSouth or any affiliate or subsidiary
thereof, or (B) within the States of Florida, Georgia, Alabama or South Carolina
perform services for, own, advise, participate in, support, have an interest in,
give financial assistance to, permit Mr. Bowen’s name to be used in connection
with or serve as a member of management, supervisor, consultant or employee of
any broker, originator, packager or seller of residential mortgage loans,
including any mortgage banking operation; (ii) solicit or induce, or attempt to
solicit or induce, any employee of CapitalSouth or any affiliate or subsidiary
thereof to terminate such employment or to become employees of any other person
or entity; (iii) solicit or induce, or attempt to solicit or induce, any Person
who during the term of this Agreement was or is a customer, supplier,
contractual party of CapitalSouth or any affiliate or subsidiary thereof or any
other Person with whom any of them has or had business relations to refrain from
or cease doing business with, seek advice and/or services and products from, or
otherwise discontinue all or any portion of their relationship with CapitalSouth
or any affiliate or subsidiary thereof; or (iv) disparage or cast in a poor
light CapitalSouth or any affiliate or subsidiary thereof, or any of their
respective shareholders, directors, officers, or employees. The preceding
provisions of Section 1.1(a)(i) shall not preclude Mr. Bowen from holding any
publicly-traded stock, provided that Mr. Bowen does not at any time hold any
stock interest in any one company in excess of one percent (1%) of the
outstanding voting stock of that company.
          (b) Mr. Bowen agrees that each of the covenants set forth above in
Section 1.1(a) of this Agreement are reasonable with respect to its duration,
geographical area and scope.
          (c) In the event of a breach by Mr. Bowen of any covenant set forth in
Section 1.1(a) of this Agreement, the Non-Competition Period shall be extended
by the period of the duration of such breach.
     1.2 Confidentiality.
          (a) Mr. Bowen hereby acknowledges that he has occupied a position of
trust and confidence with Monticello and Monticello Bank prior to the date
hereof, has contacts with and has developed and served the customers of
Monticello and Monticello Bank, and that in all of his activities, including
negotiation of the Merger Agreement and the transactions contemplated thereby,
he has become familiar with and has had access to confidential information
relating to the business, assets, operations, customers, suppliers, contractual
parties and other persons with whom Monticello, Monticello Bank, CapitalSouth
and its respective affiliates and subsidiaries do business. Mr. Bowen hereby
acknowledges and confirms that such information constitutes the exclusive
property of CapitalSouth or any affiliate or subsidiary thereof, as the case may
be, and that such information is proprietary in nature. Such information does
not include information already in the public realm or information received by
Mr. Bowen from third parties.
          (b) Mr. Bowen agrees in perpetuity that he shall not at any time
disclose to others (except as permitted and as directed by CapitalSouth or any
affiliate or subsidiary thereof or only as to the extent required pursuant to a
subpoena or order of a court of competent jurisdiction) any such information
referred to in Section 1.2(a) of this Agreement.

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     1.3 Remedies.
          (a) If Mr. Bowen breaches, or threatens to commit a breach, of any of
the provisions of Section 1 hereof, CapitalSouth shall have the following rights
and remedies, each of which rights and remedies shall be independent of the
others and severally enforceable, and each of which is in addition to, and not
in lieu of, any other rights and remedies available to CapitalSouth at law or in
equity (including the right to recover damages):
               (i) the right and remedy to have Section 1 hereof specifically
enforced by any court of competent jurisdiction, it being agreed that any breach
or threatened breach of Section 1 would cause irreparable harm to CapitalSouth
and that money damages would not provide an adequate remedy to CapitalSouth;
               (ii) the right and remedy to require Mr. Bowen to account for and
pay over to CapitalSouth all compensation, profits or other benefits derived or
received by Mr. Bowen as the result of any actions constituting a breach of
Section 1 hereof; and
               (iii) the right to recover all costs, fees and expenses incurred
in connection with enforcing the terms of this agreement, including, but not
limited to, all court arbitration fees, costs, attorneys’ fees, court reporter
fees and expert witness costs.
     1.4 Blue Penciling. If for any reason any court of competent jurisdiction
shall find that the provisions of Sections 1.1 or 1.2 hereof are unreasonable in
duration or in geographic scope, the prohibitions contained herein shall be
restricted to such time and/or geographic areas as such court determines to be
reasonable.
SECTION 2: GENERAL PROVISIONS
     2.1 Defined Terms. Unless defined herein, capitalized terms used herein
shall have the meanings ascribed to them in the Merger Agreement unless the
context clearly requires otherwise.
     2.2 Intention of the Parties. The parties acknowledge and agree that the
terms and provisions of this Agreement, including, but not limited to, Section 1
hereof, have been agreed to by the parties in contemplation of the consummation
of the Merger and that the execution of this Agreement is a condition precedent
to the consummation of the Merger.
     2.3 Nonassignability; Persons Bound. Neither this Agreement nor any of the
rights, obligations or interests arising hereunder may be assigned by Mr. Bowen
without the prior written consent of CapitalSouth. Neither this Agreement nor
any of the rights, obligations or interests arising hereunder may be assigned by
CapitalSouth without the prior written consent of Mr. Bowen to a person other
than (i) an affiliate or subsidiary of CapitalSouth, or (ii) any party with whom
CapitalSouth merges or consolidates, or to whomever CapitalSouth may sell all or
substantially all of its assets; provided, however that any such affiliate,
subsidiary or successor shall expressly assume all of CapitalSouth’s obligations
and liabilities to Mr. Bowen under this Agreement. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Notwithstanding anything to

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contrary herein, there shall be no third-party beneficiaries of this Agreement
except as provided in Section 2.7 hereof.
     2.4 Severability. This Agreement shall be deemed severable and any part
hereof which may be held invalid by a court or other entity of competent
jurisdiction shall be deemed automatically excluded from this Agreement and the
remaining parts shall remain in full force and effect.
     2.5 Entire Understanding. This Agreement contains the entire understanding
of the parties hereto and constitutes the only agreement between CapitalSouth
and Mr. Bowen regarding subject matter contained herein. This Agreement
supersedes all prior agreements, either express or implied, between the parties
hereto regarding the subject matter contained herein.
     2.6 Amendment. None of the terms and conditions of this Agreement shall be
amended or modified unless expressly consented to in writing and signed by each
of the parties hereto. The parties hereto agree to amend this Agreement from
time to time in such a manner that: (a) is agreeable to CapitalSouth; and
(b) prevents the payment of any excise tax resulting from Section 409A of the
Code.
     2.7 Arbitration. Other than as set forth in Section 1.3 hereof, the parties
hereto, by executing this Agreement, WAIVE THEIR RIGHT TO TRIAL BY JURY of
disputes, claims or controversies between themselves or any of their respective
officers, directors, partners, employees, shareholders, affiliates or agents
(such non-signatories being the intended third party beneficiaries of this
Agreement with respect solely to this Section 2.7) and instead agree that ANY
AND ALL CONTROVERSIES AND CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT,
OR THE BREACH THEREOF, SHALL BE SETTLED BY FINAL AND BINDING ARBITRATION IN
ACCORDANCE WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION
ASSOCIATION THEN IN EFFECT. Any such arbitration proceedings shall be and remain
confidential. The panel of arbitrators for any such arbitration shall consist of
three members of the American Arbitration Association, one of whom shall be
selected by CapitalSouth, one of whom shall be selected by Mr. Bowen, and the
third who will be selected by the other two. Judgment upon the decision rendered
by the arbitrators may be entered in any court having jurisdiction thereof. The
parties specifically acknowledge that this Agreement evidences a transaction
involving, affecting, affected by, and a part of, interstate commerce and that
this Agreement to arbitrate is governed by and enforceable under 9 U.S.C. §§ 1
et seq. The place of arbitration shall be Birmingham, Alabama.
     2.8 Notices. All notices or other communications to be given by the parties
among themselves pursuant to this Agreement shall be in writing and shall be
deemed to have been duly made to the party to whom it is directed at Monticello
Bancshares, Inc., 10696 St. Augustine Road, Jacksonville, Florida 32257, Attn:
Jake Bowen, for Mr. Bowen and at 2340 Woodcrest Place, Suite 200, Birmingham,
Alabama 35209, Attention: Chairman, if to CapitalSouth, (a) upon the earlier of
five (5) days after mailing or the date of actual delivery, if mailed by first
class or certified mail with postage prepaid; or (b) upon delivery, if either by
hand delivery or by

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reputable overnight courier. Any of the parties hereto may change their
respective addresses upon written notice to the other given in the manner
provided in this section.
     2.9 Waiver. No waiver by any of the parties to this Agreement of any
condition, term or provision of this Agreement shall be deemed to be a waiver of
any preceding or subsequent breach of the same or any other condition, term or
provision hereof.
     2.10 Effective Date. This Agreement shall be effective as of the Effective
Time. In the event the Merger is not consummated by the parties, this Agreement
shall be void and of no further effect.
     2.11 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Alabama without regard to provisions thereof governing
conflicts of law.
     2.12 Construction. This Agreement was prepared by the parties jointly. The
language used in this Agreement shall be deemed to be the language chosen by the
parties to express their mutual intent, and no rule of strict construction shall
be applied against either party. Whenever used in this Agreement, the singular
number shall include the plural and the plural the singular. Pronouns of one
gender shall include all genders. Accounting terms used and not otherwise
defined in this Agreement have the meanings determined by, and all calculations
with respect to accounting or financial matters unless otherwise provided for
herein, shall be computed in accordance with generally accepted accounting
principles, consistently applied. References herein to articles, sections,
paragraphs, subparagraphs or the like shall refer to the corresponding articles,
sections, paragraphs, subparagraphs or the like of this Agreement. The words
“hereof”, “herein”, and terms of similar import shall refer to this entire
Agreement. Unless the context clearly requires otherwise, the use of the terms
“including”, “included”, “such as”, or terms of similar meaning, shall not be
construed to imply the exclusion of any other particular elements.
     2.13 Captions. The captions as to contents of particular articles, sections
or paragraphs contained in this Agreement and the table of contents hereto are
inserted only for convenience and are in no way to be construed as part of this
Agreement or as a limitation on the scope of the particular articles, sections
or paragraphs to which they refer.
     2.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document with the same force and
effect as though all parties had executed the same document. This Agreement may
be executed and delivered by facsimile transmission.
     2.15 Regulatory Provisions. Notwithstanding anything to the contrary
contained in this Agreement, any payments to be made to Mr. Bowen pursuant to
this Agreement or otherwise, are subject to and conditioned upon their
compliance with 12 U.S.C. Section 1828(k) and FDIC Regulation 12 CFR Part 359,
Golden Parachute and Indemnification Payments. CapitalSouth’s obligations under
this Agreement shall be suspended commencing on the date Mr. Bowen is suspended
and/or temporarily prohibited from participating in the conduct of
CapitalSouth’s affairs by notice served under Section 8(e)(3) or (g)(1) of the
Federal Deposit Insurance Act (12 U.S.C. Section 1818(e)(3) and (g)(1));
provided that if the charges in the notice are dismissed, CapitalSouth shall
(i) pay Mr. Bowen all of the compensation withheld

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while CapitalSouth’s obligations under this Agreement were suspended, and
(ii) reinstate all of its obligations under this Agreement; provided further
that the foregoing provisions shall not effect or impair any other rights of
CapitalSouth to terminate Mr. Bowen for “just cause”. All obligations of
CapitalSouth hereunder shall be terminated, except to the extent it is
determined that the continuation of this Agreement is necessary for the
continued operation of CapitalSouth by the appropriate regulatory authorities,
(i) at the time the Federal Deposit Insurance Corporation enters into an
agreement to provide assistance to or on behalf of CapitalSouth or any of its
subsidiaries under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act; or (ii) at the time appropriate regulatory authorities
approve a supervisory merger to resolve problems related to the operation of
CapitalSouth or any of its subsidiaries or when CapitalSouth or any of its
subsidiaries is determined by appropriate regulatory authorities to be in an
unsafe or unsound condition. If CapitalSouth reasonably determines that any
provision of this Agreement fails to comply with the rules, regulations or
orders of any governmental authority possessing regulatory authority over
CapitalSouth and its operations, CapitalSouth and Mr. Bowen, jointly and
severally, agree to amend, modify and/or appeal any such provision or provisions
in order to make such provision or provisions comply with such rules,
regulations or orders.
[The remainder of this page is intentionally left blank.]

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          IN WITNESS WHEREOF, the parties hereto have duly, or caused to be
executed this Agreement as at the date and year first above written.

                  CAPITALSOUTH:    
 
           
 
  By:        
 
           
 
  Name:        
 
           
 
  Its:        
 
           
 
                MR. BOWEN:    
 
                     
 
  Name:        
 
           

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STATE OF ALABAMA
    )      
 
    :      
JEFFERSON COUNTY
    )      

          I, the undersigned, a notary public in and for said county in said
state, hereby certify that                                         , whose name
as                      of CapitalSouth Bancorp, a Delaware corporation and
registered bank holding company, is signed to the foregoing instrument, and who
is known to me, acknowledged before me on this day that, being informed of the
contents of said instrument, he, as such officer and with full authority,
executed the same voluntarily for and as the act of said corporation.
          Given under my hand and official seal this                      day of
                    , 2007.

         
 
       
 
  Notary Public    
 
       
[NOTARIAL SEAL]
  My commission
expires:                                                                

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STATE OF ALABAMA
    )      
 
    :      
JEFFERSON COUNTY
    )      

          I, the undersigned, a notary public in and for said county in said
state, hereby certify that Jake Bowen, whose name is signed to the foregoing
instrument, and who is known to me, acknowledged before me on this day that,
being informed of the contents of said instrument, he executed the same
voluntarily on the day the same bears date.
          Given under my hand and official seal this                      day of
                    , 2007.

         
 
       
 
  Notary Public    
 
       
[NOTARIAL SEAL]
  My commission
expires: