Exhibit 10.1

TRANSITION AGREEMENT

THIS TRANSITION AGREEMENT is made and entered into as of March 5, 2012 (the
“Effective Date”) by and between MOUNTAIN NATIONAL BANK (the “Bank”) and
MOUNTAIN NATIONAL BANCSHARES, INC. (the “Company”), 300 E. Main Street,
Sevierville, Tennessee 37862; and DWIGHT GRIZZELL (“Grizzell”).

The Bank is organized and exists as a national bank under the laws of the United
States of America. The Company is a bank holding company under the laws of
Tennessee. Grizzell serves as President/CEO of the Bank and the Company and as a
member of their Boards of Directors.

Grizzell is 61 years of age, and the Bank and the Company and Grizzell have
agreed that it is appropriate to ensure continuity of management and successful
long-term performance of the Bank.

The Bank and Grizzell have agreed to a transition plan to accomplish those goals
and are entering into this Agreement to set forth the terms of the plan.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1. POSITION AND RESPONSIBILITIES.

(a) Effective the above date (the “Effective Date”), Grizzell would cease
serving as President and Chief Executive Officer of the Bank and the Company and
would accept such other appropriate title and responsibilities as the Boards of
the Company and the Bank may reasonably designate, commensurate with his years
of experience and status in the banking industry provided that such title and
responsibilities shall not cause the position to be within the definition of
“senior executive officer” in 12 CFR §5.51(a)(3). Grizzell also agrees that he
will resign from the Boards of the Bank and the Company on the Effective Date
and will resign as President and Chief Executive Officer of the Company as soon
as his successor shall be appointed. During the period from the date hereof to
September 30, 2012, Grizzell will provide information and advice to the persons
succeeding him as CEO and as President of the Company and the Bank so as to
maximize a coordinated transition of executive management, will provide services
on a full-time basis as a non-executive officer and employee of the Bank and be
subject to the normal fiduciary and other duties of an officer and employee,
including to act in the best interest of the Bank. Grizzell will continue to
work with the Companys’ investment bankers concerning capital injections and
potential strategic alternatives such as mergers, acquisitions, branch sales or
other strategic transactions, and with Bank personnel in connection with
business development, marketing and customer and community relations of the
Company and the Bank, provided, however, that Grizzell shall not exercise
significant influence over, or participate in, major policymaking decisions of
the Bank or the Company.

 

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(b) Grizzell agrees to retire as an officer and employee of the Bank and the
Company with an effective date of September 30, 2012 (the “Retirement Date”).

2. COMPENSATION AND REIMBURSEMENT.

(a) Base Salary. The Bank and the Company shall pay Grizzell as compensation a
salary at the rate of One Hundred and Ninety Eight Thousand ($198,000) Dollars
per year (“Base Salary”). The Base Salary will be payable in accordance with the
customary payroll practices of the Bank and will continue through September 30,
2012.

(b) Benefits. While employed by the Bank and the Company, Grizzell shall be
allowed to participate in any benefits offered to other employees of the Bank
and the Company on the same basis generally as other employees of the Bank and
the Company. Grizzell shall continue to be permitted the use of the bank-owned
vehicle he currently uses, under the Bank’s named vehicle use policies, and
shall surrender such vehicle upon his retirement.

(c) SERP Agreement. Grizzell and the Bank and the Company have entered into an
Amended and Restated Executive Salary Continuation Agreement dated January 19,
2007, which provides certain supplemental retirement benefits to Grizzell upon
his retirement from the Bank. That Agreement was amended on November 19, 2007
(as amended, the “SERP Agreement.”). The SERP Agreement satisfies the
requirements of 12 CFR §359.1(d)(2) and 12 CFR §359.1(f)(2)(iii) and payments
thereunder are not prohibited by 12 CFR §359.2. The SERP Agreement is one of a
series of similar agreements which provide certain benefits to members of senior
management of the Bank, and the Bank intends to fund its obligations under those
agreements through certain Bank-owned life insurance (the “BOLI”). The Bank
agrees to keep the BOLI in place and to permit the cash value of Grizzell’s
portion of the BOLI to continue to increase pending his retirement. It is
understood that by virtue of Grizzell’s agreement to retire on the Retirement
Date, no further accruals will be required in 2012 in order to fund the amounts
that will be vested for Grizzell under the SERP Agreement upon such retirement,
and the Bank will be able to recognize additional income from prior overaccrual.
It is the intention of the parties to structure Grizzell’s retirement in such a
manner that he is entitled to the full benefits under the applicable early
retirement provisions of the SERP Agreement and the related BOLI.

3. RELEASE.

On the Retirement Date, provided the Bank has continued to provide the
compensation and benefits to Grizzell required herein, and provided the Bank
confirms that Grizzell is entitled to receive continuing benefits in accordance
with the SERP Agreement, Grizzell agrees to execute a full release to the Bank,
its officers, directors, successors and assigns, releasing any and all claims
arising out of his employment with the Bank or the termination thereof, other

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than his rights under the SERP Agreement and his rights to indemnification as a
former officer and director of the Bank and the Company in the event of any
assertion of third party claims in accordance with the provisions hereof.

4. DISPUTE RESOLUTION

(a) In the event of a dispute concerning this Agreement or Grizzell’s
employment, the parties, recognizing the expense of litigation, prefer an
alternate resolution method. Therefore, neither party shall commence litigation
prior to the completion of the resolution steps set forth below. Grizzell and
the Bank shall have the right and option to elect to resolve any claim,
controversy or dispute arising out of or in connection with this Agreement, or
relating to or arising out of Grizzell’s employment with the Bank, (a) by
mediation, if the parties can agree, and in the event the parties cannot agree,
(b) by arbitration in Knoxville, Tennessee. If mediation is requested, the
parties, through counsel, shall select a mediator who shall conduct the
mediation in Knoxville, Tennessee or such other place as the parties agree. In
the event mediation is not chosen, the parties cannot agree, or after starting
mediation, and issues cannot be resolved, then the parties agree to arbitration.
Either party hereto may demand arbitration and such arbitration shall take place
within ninety (90) days of such demand unless the parties otherwise agree.

(b) In any dispute which is finally resolved through mediation, the expenses of
such mediation shall be borne as the parties agree. In the event arbitration is
necessary, each party shall have responsibility for their fees and expenses,
unless the arbitrator determines a party has acted in bad faith and, in such
case, such party shall bear the fees and expenses of the party not acting in bad
faith.

(c) Any payments under this Agreement which are delayed due to a dispute
hereunder must be paid to Grizzell (if so determined to be due and owing to
Grizzell as provided above) within ten (10) days after the Grizzell and the Bank
enter into a legally binding settlement of such dispute, the Bank concedes that
such disputed amount is payable to Grizzell or the Bank is required to make such
payment as a result of any determination of an arbitrator in any arbitration
conducted pursuant to this Section 4.

5. TERM.

The term of this Agreement shall commence on the date hereof and shall continue
until Grizzell’s retirement or Termination for cause, provided, however, that if
approval of or non-objection to this Agreement of or by any bank regulator shall
be required under any regulation, order or regulatory agreement, the
effectiveness of this Agreement shall be subject to such approval or
non-objection.

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6. BINDING EFFECT.

This Agreement shall be binding upon, and inure to the benefit of, Grizzell and
the Bank and the Company and their respective successors, heirs, executors and
assigns.

7. MODIFICATION AND WAIVER.

This Agreement may not be modified or amended except by an instrument in writing
signed by the parties hereto.

8. INDEMNIFICATION.

The Bank and the Company shall indemnify Grizzell to the fullest extent
permitted existing officers and directors under applicable Tennessee and federal
law and their respective Articles and Bylaws against all expenses and
liabilities reasonably incurred by him in connection with or arising out of any
action, suit or proceeding in which he or she may be involved by reason of his
having been a director or officer of the Bank (whether or not he or she
continues to be a director or officer at the time of incurring such expenses or
liabilities), such expenses and liabilities to include, but to be limited to,
judgment, court costs and attorneys’ fees and the cost of reasonable
settlements; provided however, that no indemnification payment may be made in
violation of Part 359 of the regulations of the Federal Deposit Insurance
Corporation or applicable federal or Tennessee law. The Bank and the Company and
shall continue to provide Grizzell with coverage provided to existing directors
and officers under a standard directors’ and officers’ liability insurance
policy at its expense, and to provide comparable tail coverage following
Grizzell’s retirement or termination for cause to the extent such coverage is
provided to the directors and officers of the Bank and the Company.

9. SUCCESSOR TO THE BANK AND THE COMPANY.

The Bank and the Company shall require any successor or assignee, whether direct
or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank and the Company, expressly
and unconditionally to assume and agree to perform the Bank’s and/or the Company
obligations under this Agreement, in the same manner and to the same extent that
the Bank and the Company would be required to perform if no such succession or
assignment had taken place.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and their seal to be affixed hereunto by a duly authorized officer or director,
and Grizzell has signed this Agreement, as of the Effective Date.

 

    MOUNTAIN NATIONAL BANCSHARES, INC.     By:   /s/ Charlie R. Johnson    
Name:   Charlie R. Johnson     Title:   Chairman

 

    MOUNTAIN NATIONAL BANK     By:   /s/ Charlie R. Johnson     Name:   Charlie
R. Johnson     Title:   Chairman

    GRIZZELL:    

/s/ Dwight B. Grizzell

    Dwight B. Grizzell