Exhibit 10.2

EMPLOYMENT AGREEMENT

 

This Agreement is made, entered into, and effective this 31st day of December,
2007 (the “Effective Date”) between Green Bankshares, Inc. (the “Company”) and
Kenneth R. Vaught (“Vaughtt”).

 

RECITALS
EMPLOYMENT

 

A.

 

The Company is a Tennessee corporation and serves as the bank holding company
for GreenBank.

 

 

 

B.

 

Vaught is willing and desires to accept or continue employment on the terms,
covenants, and conditions set forth below.

 

 

THEREFORE, in consideration of the parties’ mutual covenants and promises, all
of which the parties acknowledge are sufficient to support this Agreement, the
Company and Vaught agree as follows:

 

1.                                       Employment. The Company employs Vaught
and Vaught accepts such employment with the Company, subject to the terms and
conditions of this Agreement. Vaught will be employed as President and Chief
Operating Officer for the Company and will perform all duties and services
incident to such position and such other duties and services as delegated to
Vaught by the Board of Directors. Vaught’s employment shall be at-will and may
be terminated by either party with or without cause, subject to the terms and
conditions of this Agreement.

 

2.                                       Term of Agreement. The initial term of
this Agreement shall commence on the Effective Date and continue through
December 31, 2010, subject, however, to prior termination and the survival of
certain covenants as provided in this Agreement. Additionally, on the expiration
of the initial term or any subsequent renewal term, this Agreement shall be
automatically renewed and extended for successive periods of three (3) years
each, unless either party notifies the other of a termination at least ninety
(90) days prior to the end of the then current term.

 

3.                                       Compensation and Benefits.

 

A.

 

Salary. The Company will pay Vaught, and Vaught agrees to accept from the
Company in payment for Vaught’s services under this Agreement, an initial salary
of $237,000.00 per year, payable in accordance with the the Company’s normal
payroll practices with such employment taxes and other customary withholdings as
required with respect to compensation paid by a corporation to an employee. The
salary set forth in this Section is subject to the discretion of the Board of
Directors and may be modified from time to time by the Board of Directors, but
shall not be reduced below the initial level specified in this Agreement

 

 

 

B.

 

Bonus. In addition to Vaught’s salary, Vaught will be eligible for an annual
bonus to be paid at the discretion of the Board of Directors based on the Board
of Directors’ assessment of various performance measures, including, but not
limited to, the Company’s return on assets, return on equity, and net income.
Vaught shall have the option to take all or a portion of the bonus in restricted
stock. Any bonus paid under this Section shall be paid no later than March 15 of
the year following the year in which the bonus is earned.

 

 

 

C.

 

Director’s Fees. In addition to his compensation as President and Chief
Operating Officer, Vaught shall also receive director’s fees for his service on
the Company’s Board of Directors. Such fees and service on the Company’s Board
of Directors will be subject to the discretion of the Board of Directors in
accordance with its legal authority and the Company’s bylaws and other governing
documents.

 

 

 

D.

 

Life Insurance. The Company will provide Vaught with a tem life insurance policy
with $500,000 worth of coverage, payable to a beneficiary designated by Vaught.
The provision of life insurance pursuant to this Agreement is subject to
Vaught’s insurability and the terms of the applicable life insurance policy

 

 

 

 

1

--------------------------------------------------------------------------------

 

 

 

E.                                 Benefits. During his employment with the
Company, Vaught shall have the right to participate in any and all employee
benefit programs maintained by the Company for its employees, subject to the
terms and conditions of such programs. Such employee benefit programs may
include, without limitation, medical benefits, health insurance coverage,
Executive Bonus Plan, incentive stock option plan, profit sharing plan,
qualified salary deferral plan, educational benefits plan and/or pension plan.
The Company may modify or terminate such programs from time to time.

 

4.                                       Expenses. The Company agrees that it
will reimburse Vaught in accordance with the terms of its policies and
procedures for any and all necessary, customary, and usual expenses incurred by
Vaught in the course of his employment with the Company.

 

5.                                       Vacation and Holidays. Beginning
January 1, 2008, Vaught shall be allowed to take up to four (4) weeks of paid
vacation each calendar year. Unused vacation time may not be carried forward
from year to year. Any legal holidays on which the Company is closed shall not
count as paid vacation time. Vaught shall schedule his vacation such that he is
absent from his duties for an uninterrupted period of not less than one week
each year.

 

6.                                       Vaught’s Devotion to Business. Vaught
shall devote his entire professional and business-related time and energy to
performing his duties faithfully under this Agreement and shall hold no other
paying job. Vaught agrees he will not engage in any other activity that has an
adverse impact on the fulfillment of his obligations under this Agreement or
that takes any business opportunity away from the Company.

 

7.                                       Option to Terminate Contract for
Permanent Disability of Vaught. Notwithstanding anything in this Agreement to
the contrary, the Company has the option to terminate this Agreement in the
event that, during the term of this Agreement, Vaught becomes permanently
disabled as the term “permanently disabled” is defined in this section. The
Company may exercise such option by giving written notice to Vaught of its
intention to terminate this Agreement pursuant to this section. After the
Company gives such notice, this Agreement and the term of this Agreement shall
cease and come to an end on the last day of the month in which the notice
isdelivered with the same force and effect as if such last day of the month were
originally set forth as the Agreement’s termination date. For the purposes of
this Agreement, Vaught shall be deemed to be permanently disabled if, because of
ill health, physical or mental disability, or for other causes beyond his
control, he has failed to perform his duties under this Agreement for thirteen
(13) consecutive weeks, or if he has failed to perform his duties for a total
period of one hundred (100) days, either consecutive or not, during any
twelve-month period. Within ten (10) business days of termination, the Company
shall pay to Vaught a sum equal to one month of his then current salary, plus an
amount equal to the last annual bonus paid to him should Vaught’s disability
occur before any annual bonus is paid under this Agreement. Nothing in this
section, however, should be construed as inconsistent with, or relieve any
obligation that the Company may have under, the Americans with Disabilities Act
or similar state or local law.

 

8.                                       Termination.

 

A. Termination for Cause. The Company shall have the right at any time to
terminate Vaught’s employment and this Agreement immediately for cause, which
shall include any of the following reasons:

 

(i)

 

At the option of the Company, at any time after Vaught shall suffer a permanent
disability as defined in Section 7 above, subject, however, to the terms of
Section 7;

 

 

 

(ii)

 

Upon the death of Vaught;

 

 

 

(iii)

 

In the event that the Vaught breaches this Agreement in any material way and
fails to cure such breach within ten (10) days of receiving written notice from
the Company regarding such breach;

 

 

 

(iv)

 

In the event that Vaught fails to perform his duties in a manner thatthe Company
requires so long as the Company has given Vaught written notice of his failure
to perform his duties and provided him with at least thirty (30) days to improve
performance to an acceptable level;

 

 

 

 

2

--------------------------------------------------------------------------------

 

(v)

 

In the event that Vaught commits an act of gross negligence that causes harm to
the Company;

 

 

 

(vi)

 

In the event that Vaught is convicted of, or pleads guilty (including a plea of
nole contendere) to, a criminal act which is a felony or which is a misdemeanor
involving moral turpitude;

 

 

 

(vii)

 

Excessive absenteeism; and

 

 

 

(viii)

 

Any misrepresentation or breach of the covenants and warranties contained in
this Agreement.

 

 

In the event the Company terminates Vaught’s employment for cause in accordance
with this Agreement, the Company shall have no further obligations to pay Vaught
except his accrued and unpaid salary through the termination date. Vaught
shallnot be entitled to receive payment for any accrued vacation time or any
unpaid bonus, or any deferred compensation benefits in the event that the
Company terminates Vaught’s employment for cause in accordance with this
Agreement.

 

B.                  Termination Without Cause. The Company shall have the right
at any time to terminate Vaught’s employment and this Agreement without cause
during the term of this Agreement. Vaught shall have the right to terminate his
employment by giving the Company sixty (60) days prior written notice. In the
event Vaught terminates his employment by giving such prior written notice, the
Company shall have no further obligation to pay Vaught except his accrued and
unpaid salary through the termination date and Vaught shall not be entitled to
receive payment for any accrued vacation time or any unpaid bonus. In the event
the Company terminates Vaught’s employment without cause, the Company shall have
no further obligations to pay Vaught except for a lump sum payment equal to one
year of salary plus an amount that is the average of the previous two years
bonus. All payments under this section shall be made no earlier than six
(6) months following the date of termination.

 

9.                   Termination After Change in Control. If within eighteen
(18) months following a Change in Control, as defined in this Agreement, the
Company or its successor terminates Vaught’s employment Without Cause or if
Vaught voluntarily resigns following a change in position, a reduction in title,
or a significant reduction in the duties which he is to perform for the Company
or its successor, then Company or its successor shall pay the Change in Control
Benefit described in Section 9(B) below.

 

A.                                        Definition of Change in Control. The
term Change in Control shall mean the Effective Date of a change in the
ownership of the Company, a change in the effective control of the Company or a
change in the ownership of a substantial portion of the assets of the Company as
provided under Section 409A of the Internal Revenue Code of 1986, as amended
from time to time, and any Internal Revenue Service guidance and regulations
issued in connection with Section 409A of the Internal Revenue Code of 1986, as
amended.

 

B.                                          Change in Control Benefit. The term
Change in Control Benefit shall mean a lump sum payment equal to 2.99 times
Vaught’s annual base salary and bonus for the year immediately preceding
termination. The Change in Control Benefit payment shall be made no earlier than
six (6) months following the date of termination. The Change in Control Benefit
shall be in lieu of any payments under Section 8(B) above. If the Change in
Control Benefit would create an excise tax under the excess parachute rules of
Section 4999 of the Internal Revenue Code, the Company shall pay to Vaught the
amount of such excise tax and all federal and state income or other taxes with
respect to any such additional amount (the “Gross-Up”). If Vaught incurs any
additional tax liability as a result of any Gross-Up payments under this
Section, the Company shall provide an additional payment to Vaught to offset any
such tax liability.

 

 

 

3

--------------------------------------------------------------------------------

 

10.                                 Return of Property. Upon termination of
employment for any reason, Vaught shall promptly return the Company’s property,
including, but not limited to, all documents, financial records, customer
records, or business records of any type, including electronically stored
records, that are related in any manner to the past, present, or anticipated
business of the Company, and any information of a confidential or proprietary
nature.

 

11.                                 Dispute Resolution. Except as provided in
this Section 11, any dispute, controversy or claim arising out of or in relation
to or connection to this Agreement, including without limitation any dispute as
to the construction, validity, interpretation, enforceability or breach of this
Agreement, including a claim for indemnification under Section 12, shall be
resolved either as provided by applicable law, or, at the option of either
party, by impartial binding arbitration. In the event that either the Company or
Vaught demands arbitration, Vaught and the Company agree that such arbitration
shall be the exclusive, final and binding forum for the ultimate resolution of
such claims, subject to any rights of appeal that either party may have under
the Federal Arbitration Act and/or under applicable state law dealing with the
review of arbitration decisions.

 

(a)                                  Arbitration. Arbitration shall be heard and
determined by one arbitrator, who shall be impartial and who shall be selected
by mutual agreement of the parties; provided, however, that if the dispute
involves more than $1,000,000, then the arbitration shall be heard and
determined by three (3) arbitrators. If three (3) arbitrators are necessary as
provided above, then (i) each side shall appoint an arbitrator of its choice
within thirty (30) days of the submission of a notice of arbitration and
(ii) the party-appointed arbitrators shall in turn appoint a presiding
arbitrator of the tribunal within thirty (30) days following the appointment of
the last party-appointed arbitrator. If any party fails or refuses to appoint an
arbitrator, the arbitration shall proceed with one (1) arbitrator.

 

(b)                                 Demand for Arbitration. In the event that
Vaught or the Company initially elects to file suit in any court, the other
party will have 60 days from the date that it is formally served with a summons
and a copy of the suit to notify the party filing the suit of the non-filing
party’s demand for arbitration. In that case, the suit must be dismissed by
consent of the parties or by the court on motion, and arbitration commenced with
the arbitrators. In situations where suit has not been filed, either Vaught or
the Company may initiate arbitration by serving a written demand for arbitration
upon the other party. Such a demand must be served within twelve months of the
events giving rise to the dispute. Any claim that is not timely made will be
deemed waived.

 

(c)                                  Proceedings. Unless otherwise expressly
agreed in writing by the parties to the arbitration proceedings:

 

(i)

 

The arbitration proceedings shall be held in the Knox County, Tennessee, area,
and at a site chosen by mutual agreement of the parties. If the parties cannot
reach agreement on a location within thirty (30) days of the appointment of the
last arbitrator, then at a site chosen by the arbitrators;

 

 

 

(ii)

 

The arbitrators shall be and remain at all times wholly independent and
impartial;

 

 

 

 

 

 

(iii)

 

The arbitration proceedings shall be conducted in accordance with the Employment
Arbitration Rules of the American Arbitration Association, as amended from time
to time;

 

 

 

(iv)

 

Any procedural issues not determined under the arbitral rules selected pursuant
to item (iii) above shall be determined by the law of the place of arbitration,
other than those laws which would refer the matter to another jurisdi

 

 

 

(v)

 

The costs of the arbitration proceedings (including attorneys’ fees and costs)
shall be borne in the manner determined by the arbitrators;

 

 

 

 

4

--------------------------------------------------------------------------------

 

(vi)

 

The arbitrators may grant any remedy or relief that would have been available to
the parties had the matter been heard in court;

 

 

 

(vii)

 

The decision of the arbitrators shall be reduced to writing; final and binding
without the right of appeal; the sole and exclusive remedy regarding any claims,
counterclaims, issues or accounting presented to the arbitrators; made and
promptly paid in United States dollars free of any deduction or offset; and any
costs or fees incident to enforcing the award shall to the maximum extent
permitted by law, be charged against the party resisting such enforcement;

 

 

 

(viii)

 

The award shall include interest from the date of any breach or violation of
this Agreement, as determined by the arbitral award, and from the date of the
award until paid in full, at 6% per annum; and

 

 

 

(ix)

 

Judgment upon the award may be entered in any court having jurisdiction over the
person or the assets of the party owing the judgment or application may be made
to such court for a judicial acceptance of the award and an order of
enforcement, as the case may be.

 

 

(d)               Acknowledgment of Parties. The Company and Vaught understand
and acknowledge that this Agreement means that neither can pursue an action
against the other in a court of law regarding any employment dispute, except for
claims involving workers’ compensation benefits or unemployment benefits, and
except as set forth elsewhere in this Agreement, in the event that either party
notifies the other of its demand for arbitration under this Agreement. The
Company and Vaught understand and agree that this Section 11, concerning
arbitration, shall not include any controversies or claims related to any
agreements or provisions (including provisions in this Agreement) respecting
confidentiality, proprietary information, non-competition, non-solicitation,
trade secrets, or breaches of fiduciary obligations by Vaught, which shall not
be subject to arbitration.

 

(e)                Consultation. Vaught has been advised of his right to consult
with an attorney prior to entering into this Agreement.

 

12.                                 Indemnification. Vaught shall be indemnified
and held harmless from any and all claims, damages and losses of whatsoever
kind, including without limitation court costs and reasonable attorneys fees
through appeal, resulting from any and all legal actions when he is either a
party, witness or a participant brought against the Company, its subsidiary
companies, Vaught, another employee or director of the Company, or any other
third party when such action relates to or arises from Vaught’s employment with
the Company or this Agreement. Vaught will also be protected through any
indemnity, insurance or other similar programs that cover the outside Board
members or other employees of the Company.

 

13.                                 Warranties and Representations. To induce
the Company to enter into this Agreement, Vaught warrants and  represents to the
Company that he is not under any obligation, contractual or otherwise, that
would prohibit or contravene in any way his acceptance of employment or
continued employment with the Company and the performance of his obligations
under this Agreement.

 

14.                                 Contract Terms To Be Exclusive. This
Agreement contains the sole and entire agreement between the parties and shall
supersede any and all other agreements between the parties with respect to the
subject matter of this Agreement. The parties acknowledge and agree that neither
of them has made any representation with respect to the subject matter of this
Agreement or any representations including the execution and delivery of this
Agreement except such representations as are specifically set forth in this
Agreement.

 

15.                                 Waiver or Modification Ineffective Unless in
Writing. No waiver or modification of this Agreement or of any covenant,
condition, or limitation contained in this Agreement shall be valid unless in
writing and duly executed by the party to be charged with it, and that no
evidence of any waiver or modification shall be offered or received in evidence
in any proceeding or litigation between the parties unless such waiver or
 modification is in writing and duly executed. The parties agree that the
provisions of this Section may not be waived except as set forth in this
Section.

 

 

 

5

--------------------------------------------------------------------------------

 

16.                                 Choice of Law and Venue. This Agreement
shall be construed and interpreted in accordance with the laws of the State of
Tennessee, without applying the conflict of laws rules of such state. In
addition, the parties consent to the jurisdiction of the State of Tennessee for
any lawsuit arising under this Agreement. The parties also agree that the venue
for any lawsuit arising under this Agreement shall be in Greene County,
Tennessee.

 

17.                                 Waiver of Breach. Failure to insist upon
strict compliance with any of the terms, covenants, or conditions of this
Agreement, shall not be deemed a waiver of such terms, covenants, or conditions,
nor shall any waiver or relinquishment of such right or power hereunder at any
time or times be deemed a waiver or relinquishment of such right or power at any
other time or times.

 

18.                                 Severability. The invalidity or
unenforceability of any provision of this Agreement shall in no way effect the
validity or enforceability of any other provision. Furthermore, to the extent
this Agreement is inconsistent with federal or state law, this Agreement shall
be deemed amended to the extent necessary to make it consistent and in
compliance with such laws.

 

19.                                 Binding Effect or Successors/Assignability.
The Company reserves the right to assign this Agreement to its successors and
assigns. Vaught may not assign this Agreement.

 

20.                                 Free Will. The undersigned parties have read
and understood the foregoing provisions
and are entering this Agreement on their own free will.

 

 

6

--------------------------------------------------------------------------------

 

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

 

 

 

 

GREEN BANKSHARES, INC.

 

 

 

By:

/s/ Terry Leaonard

 

Title:

Chairman of Commensation Commttiee

 

 

 

 

 

/s/ Kenneth R. Vaught

 

 

Kenneth R. Vaughtt

 

 

 

 

 

 

7

--------------------------------------------------------------------------------