**EXHIBIT 10.1**

 

**NON-COMPETITION AGREEMENT**

 

THIS AGREEMENT is executed on the 10th day ofAugust, 2004, (“Effective Date”), by and between **GREENECOUNTY BANCSHARES, INC.**(“Company”) and **Kenneth R.Vaught**(“Employee”), but shall not become effective until the purchaseby Company of the insurance products needed to fund the deferred compensationbenefits for Employee described in Schedule A, which purchase shall be madewithin sixty (60) days of the date hereof.

 

INTRODUCTION

 

Whereas, the Board of Directors of Company(the “Board”) has determined that it is in the best interests of Company toretain Employee’s services and to reinforce and encourage the continuedattention and dedication of Employee to his assigned duties; and

 

Whereas, the Board has previously enteredinto an employment agreement with Employee dated November 19, 2003, buteffective January 4, 2004, governing Employee’s compensation and salary (the “EmploymentAgreement”); and

 

Whereas, Employee is willing to provideCompany with a covenant that he will not engage in competition with Company inexchange for Company’s willing to provide him with certain deferredcompensation benefits pursuant to the attached Schedule A.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of thepremises and the mutual covenants herein contained, Company and Employee herebyagree as follows:

 

1.                                       **Definitions**:The following definitions shall apply to this Agreement:

 

(a)                                  **Termination for Cause**.  Termination for Cause shall be defined to betermination of Employee’s employment with Company for commission of a felony orof a misdemeanor involving moral turpitude.

 

(b)                                 **Change in Control**.  The term Change in Control shall have thefollowing meaning:

 

(i)                                     Anyperson or entity or group of affiliated persons or entities (other than Company)becomes a beneficial owner, directly or indirectly, of 20% or more of Company’svoting securities or all or substantially all of the assets of Company;

 

(ii)                                  Companyenters into a definitive agreement which contemplates the merger, consolidationor combination of Company with an unaffiliated entity in which either or bothof the following is to occur:  (i) theBoard of Directors of Company, as applicable, immediately prior to such merger,consolidation or combination will constitute less than a majority of the boardof directors of the surviving, new or combined entity; or (ii) less than 75% ofthe outstanding voting securities of the surviving, new or combined entity willbe beneficially owned by the stock holders of Company immediately prior to suchmerger, consolidation or combination; provided, however, that if any definitiveagreement to merge, consolidate or combine is terminated without consummationof the transaction, then no Change in Control shall be deemed to have occurredpursuant to this paragraph;

 

(iii)                               Companyenters into a definitive agreement which contemplates the transfer of all orsubstantially all of Company’s assets, other than to a wholly-owned Subsidiaryof Company; provided, however, that if any definitive agreement to transferassets is terminated without consummation of the transfer, then no Change inControl shall be deemed to have occurred

 

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pursuant to this paragraph; or

 

(iv)                              Amajority of the members of the Board of Directors of Company shall be personswho: (i) were not members of such Board on the date this plan is approved bythe stock holders of Company (“current members”); and (ii) were not nominatedby a vote of such Board which included the affirmative vote of a majority ofthe current members on such Board at the time of their nomination (“futuredesignees”) and (iii) were not nominated by a vote of such Board which includedthe affirmative vote of a majority of the current members and future designees,taken as a group, on such Board at the time of their nomination.

 

2.                                       **Non-Competition**:For and in consideration of the deferred compensation benefits granted byCompany to Employee under the terms of this Agreement, if (1) Companyterminates Employee’s employment other than for cause and Employee does notrenounce his right to the deferred compensation benefits provided for hereinwithin thirty (30) days of his termination, or (2) Employee resignsvoluntarily, then Employee agrees that he will not, during the term of Employee’semployment with Company and during the period from the termination of Employee’semployment by resignation or otherwise until his forty-sixth (46th)birthday, directly or indirectly engage in the business of banking, or anyother business in which Company directly or indirectly engages during the termof Employee’s employment with Company, in any county of any state in whichCompany has an office or branch at the time of termination.  For purposes of this section, Employee shallbe deemed to engage in a business if he directly or indirectly, engages orinvests in, owns, manages, operates, controls or participates in the ownership,management, operation or control of, is employed by, associated or in anymanner connect with, or renders services or advice to, any business engaged inbanking or financial services; provided, however, that Employee may invest inthe securities of any enterprise (but without otherwise participating in theactivities of such enterprise) if two conditions are met:  (A) such securities are listed on any national or regional securitiesexchange or have been registered under Section 12(g) of the Securities ExchangeAct of 1934; and (B) Employee does not beneficially own as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934 in excess of 1% ofthe outstanding capital stock of such enterprise. The provisions of thissection shall remain binding after termination of Employee’s employmentregardless of the reason for Employee’s termination.

 

3.                                       **Confidential Information**.  Employee recognizes and acknowledges that hewill have access to certain information of Company and that such information isconfidential and constitutes valuable, special and unique property of Company.  Employee shall not at any time, either duringor subsequent to the term of this Agreement, disclose to others, use, copy orpermit to be copied, except as directed by law or in pursuance of Employee’sduties for or on behalf of Company, its successors, assigns or nominees, anyConfidential Information of Company (regardless of whether developed byEmployee), without the prior written consent of Company.

 

The term “Confidential Information” withrespect to any person means any Company secret or confidential information orknow-how and shall include, but shall not be limited to, the plans; customers;customer specific information; customer specific loan pricing, loan needs, andmaturity dates; costs, prices, rates, uses, and applications of products andservices; customer specific deposit information; results of investigations;studies owned or used by such person; and all products, processes,compositions, computer programs, and servicing, marketing or operationalmethods and techniques at any time used, developed, investigated, made or soldby such person, before or during the term of this Agreement, that are notreadily available to the banking industry or that are maintained asconfidential by such person.  Employeeshall maintain in confidence any Confidential Information of third partiesreceived as a result of Employee’s employment with Company in accordance withCompany’s obligations to such third parties and the policies established byCompany.

 

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4.                                       **Delivery of Documents uponTermination**.  Employeeshall deliver to Company or its designee at the termination of Employee’semployment all correspondence, memoranda, notes, records, drawings, sketches,plans, customer lists, product compositions, and other documents and all copiesthereof, made, composed or received by Employee, solely or jointly with others,that are in Employee’s possession, custody, or control at termination and thatare related in any manner to the past, present, or anticipated business ofCompany.  The foregoing notwithstanding,Employee may retain the original of any document which is primarily of apersonal nature or relates to his personal business or employment, providedthat a copy of the same is given to Company and Company is advised thatEmployee is retaining the original. Further, Employee may retain a copy of any document that a similarlysituated prudent person would keep, but shall advise Company of each such copyso retained.  In keeping with theprovisions of Section 3, Employee shall keep confidential any ConfidentialInformation contain in the retained documents except to the extent disclosureof the same is necessary to defend Employee against a claim made by Company orothers.

 

5.                                       **No Solicitation**.For and in consideration of the deferred compensation benefits granted byCompany to Employee under the terms of this Agreement, Employee agrees that hewill not, during the term of Employee’s employment with Company and, ifEmployee’s employment with Company terminates for any reason other than theevents expressly defined in Section 9 of this Agreement, during the period fromthe termination of Employee’s employment until his forty-sixth birthday,solicit the employment or services of, hire, or assist in the hiring of anyperson eligible for Company’s compensation or benefit plans for senior officersor executives, directly or indirectly for the benefit of any bank or financialinstitution or any company or other entity affiliated, directly or indirectly,with another bank or financial institution other than Company.

 

6.                                       **No Tampering**.For and in consideration of the deferred compensation benefits granted byCompany to Employee under the terms of this Agreement, Employee agrees that hewill not, during the term of Employee’s employment with Company and, ifEmployee’s employment with Company terminates for any reason other than theevents expressly defined in Section 9 of this Agreement, during the period fromthe termination of Employee’s employment until his forty-sixth birthday,directly or indirectly (a) request, induce or attempt to influence any existingor prospective customers, vendors or licensors of Company to curtail or cancelany business they may transact with Company; or (b) request, induce or attemptto influence any senior or executive employee of Company to terminate thatemployee’s employment with Company.  Forpurposes of this Section 6, “prospective customers” shall mean individuals orentities whom Company or its affiliates have contacted regarding specificbusiness within the twelve (12) months immediately preceding the termination ofthis Agreement.

 

7.                                       **Remedies**.Employee acknowledges that a remedy at law for any breach or attempted breachof Employee’s obligations under **Sections 2 through 6** may be inadequate, agrees thatCompany may be entitled to specific performance and injunctive and otherequitable remedies in case of any such breach or attempted breach and furtheragrees to waive any requirement for the securing or posting of any bond inconnection with the obtaining of any such injunctive or other equitablerelief.  Employee agrees and stipulatesthat if Company can prove a violation of any one covenant, that it shall beentitled to injunctive relief on all such covenants and that proof of one suchviolation is satisfactory to show that Company will suffer immediate andirreparable harm if injunctive relief is not granted.  Company shall have the right to offsetagainst amounts to be paid to Employee pursuant to the terms hereof any amountsfrom time to time owing by Employee to Company. The termination of Employee’s employment pursuant to this Agreementshall not be deemed to be a waiver by Company of any breach by Employee of thisAgreement or any other obligation owed Company, and notwithstanding such atermination, Employee shall be liable for all damages attributable to such abreach.   Upon the breach of thisAgreement by Company of any of its obligations arising hereunder to Employee,Employee shall be entitled to pursue a claim for benefits due under Section 8in addition to, and without any reduction for, the release of Employee’sobligations under Section 9.

 

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8.                                       **Deferred CompensationBenefits**:  Inconsideration of the covenants contained herein, Company agrees to providedeferred compensation benefits to Employee, in addition to all other suchbenefits provided to Employee by Company, in the amount set forth in Schedule Aunder the column “Annual Benefit Upon Termination” for the age specified insaid schedule (the “Benefit Amount”) upon the termination of his employment.With respect to a Change in Control as defined in Section 1, Employee will beentitled to the benefits in the amount set forth in Schedule A under the column“Change in Control Annual Benefit” (the “Change in Control Benefit Amount”).Both the Benefit Amount and Change in Control Benefit Amount shall be paid forten (10) consecutive years. If Employee dies after he has commenced drawing thebenefits contemplated herein, then said benefits shall continue to be paid forthe balance of the ten (10) year period to his named beneficiary. However, ifEmployee’s employment is Terminated for Cause as defined in Section 1, thenCompany shall be released from its duty to pay the benefits contemplated inthis section.

 

Notwithstanding anything herein to thecontrary, Employee or his beneficiaries may not begin to receive any benefitsuntil Employee reaches, or, in the event of his death, would have reached agefifty (50). In the alternative, if Employee is still employed by Company on hisfiftieth (50th) birthday, Employee may agree to continue to be boundby the non-competition provisions contained herein, in which case his deferredcompensation benefit shall continue to accrue until age sixty (60) as providedin the attached Schedule A.

 

9.                                       **Release of Covenants**:Employee shall be released from the covenants contained in Sections 2, 5, and 6upon the occurrence of any of the following events: (i) the Termination forCause of Employee’s employment by the Company as defined in Section 1; (ii) aChange in Control as defined in Section 1; or (iii) any material breach byCompany of its obligations to Employee arising under this Agreement or theEmployment Agreement, including (a) any amendments or addenda related to eitherthis Agreement or the Employment Agreement or (b) any future non-competitionagreement or employment agreement, if said breach remains uncured for more thanthirty (30) days after Employee gives Company written notice of breachspecifying the nature of the breach.

 

10.                                 **Miscellaneous Provisions**.

 

(a)                                  **Employee’s Heirs, etc**.  Employee may not assign Employee’s rights ordelegate Employee’s duties or obligations hereunder without the written consentof Company, which consent shall not be unreasonably withheld.  This Agreement shall inure to the benefit ofand be enforceable by Employee’s personal or legal representatives, executors,administrators, successors, heirs, distributees, devisees and legatees.  If Employee should die prior to his receiptof all benefits due him hereunder, said unpaid benefits shall be paid toEmployee’s designee or, if there be no such designee, to Employee’s estate.

 

(b)                                 **Notices**.  Any notice or communication required orpermitted under the terms of this Agreement shall be in writing and shall bedelivered personally, or sent by registered or certified mail, return receiptrequested, postage prepaid, or sent by nationally recognized overnight carrier,postage prepaid, or sent by facsimile transmission to Company at Company’sprincipal office and facsimile number in Greeneville, Tennessee listed below orto Employee at the address and facsimile number listed below with a copy to hisattorney.  Such notice or communicationshall be deemed given (a) when delivered if personally delivered; (b) fivemailing days after having been placed in the mail, if delivered by registeredor certified mail; (c) the business day after having been placed with anationally recognized overnight carrier, if delivered by nationally recognizedovernight carrier, and (d) the business day after transmittal when transmittedwith electronic confirmation of receipt, if transmitted by facsimile.  Any party may change the address or facsimilenumber to which notices or communications are to be sent to it by giving noticeof such change in

 

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the manner herein provided for givingnotice.  Until changed by notice, thefollowing shall be the address and facsimile number to which notices shall besent:

 
|   | If to Company, to:  | Greene County Bancshares                |
|--------|---------------------|-----------------------------------------|
|   |                | 100 N. Main Street                      |
|   |                | Greeneville, TN 37743                   |
|   |                |                                    |
|   | If to Employee, to: | Kenneth R. Vaught                       |
|   |                | 3619 Helmsley Court                     |
|   |                | Maryville, TN 37803                     |
|   |                |                                    |
|   | With a copy to:     | C. Coulter Gilbert, Esq.                |
|   |                | Kennerly, Montgomery & Finley, P.C. |
|   |                | 4th Floor, Bank of America  Building    |
|   |                | 550 Main Street                         |
|   |                | Knoxville, TN 37902                     |

 

(c)                                  **Amendment or Waiver**.  No provisions of this Agreement may bemodified, waived or discharged unless such waiver, modification or discharge isagreed to in writing signed by Employee and an authorized officer of Company(other than Employee).  No waiver byeither party hereto at any time of any breach by the other party hereto of orcompliance with, any condition or provision of this Agreement to be performedby such other party shall be deemed a waiver of similar or dissimilarprovisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral orotherwise, express or implied, with respect to the subject matter hereof havebeen made by either party that are not set forth expressly in this Agreement.

 

(d)                                 **Invalid Provisions**.  Should any portion of this Agreement beadjudged or held to be invalid, unenforceable or void, such holding shall nothave the effect of invalidating or voiding the remainder of this Agreement andthe parties hereby agree that the portion so held invalid, unenforceable orvoid shall if possible, be deemed amended or reduced in scope, or otherwise bestricken from this Agreement to the extent required for the purposes ofvalidity and enforcement thereof.

 

(e)                                  **Counterparts**.  This Agreement may be executed in one or morecounterparts, each of which shall be deemed to be an original but all of whichtogether will constitute one and the same instrument.

 

(f)                                    **Survival of Employee’sObligations**.  Except asotherwise provided herein, Employee’s obligations under this Agreement shallsurvive regardless of whether Employee’s employment by Company is terminated,voluntarily or involuntarily, by Company or Employee, with or without Cause.

 

(f)                                    **Governing Law**.  This Agreement and any action or proceedingrelated to it shall be governed by and construed under the laws of the State ofTennessee.  The parties agree that venuein any litigation shall be in Knox County, TN, the parties having agreed andstipulated that Knox County, TN is a neutral and fair venue to both sides.  The parties also hereby agree to waive anyobjection to or defense against Knox County, TN as the place of venue.

 

(h)                                 **Captions and Gender**.  The use of Captions and Section headingsherein is for purposes of convenience only and shall not effect theinterpretation or substance of any provisions contained herein.

 

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Similarly, the use of the masculine genderwith respect to pronouns in this Agreement is for purposes of convenience andincludes either sex who may be a signatory.

 

(i)                                     **Entire Agreement**.  This Agreement, along with the EmploymentAgreement and any attached schedules, represents the entire agreement betweenCompany and Employee concerning the subject matter of Employee’s employment andsupersedes any prior agreements.

 

IN WITNESS WHEREOF, Employee and a dulyauthorized Company officer have signed this Agreement.

 
| THE EMPLOYEE:           |       | THE COMPANY:                       |
|-------------------------|------------|------------------------------------|
| ** **              | ** ** | **Greene County Bancshares, Inc.** |
|                    |       |                               |   |
| /s/ Kenneth R. Vaught   |       | By:                                | /s/ R. Stan Puckett |   |   |
| **Kenneth R. Vaught**   |       |                               |   |
| **President & COO** |       | Title:                             | Chairman of the Board and Chief Executive Officer |   |
|                    |       |                               |   |
|                    |       |                               |   |
| ** **              | ** ** | **Greene County Bank**             |
| ** **              | ** ** | ** **                         |   |
|                    |       |                               |   |
|                    |       | By:                                | /s/ Terry Leonard |   |
|                    |       |                               |   |   |
|                    |       | Title:                             | Chairman of Compensation Committee |   |
|                         |            |                                    |  |  |  |  |

 

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Schedule A – Summary ofBenefits for Non Compete Agreement

 
| **Period  Ending  Aug of** | ** ** | **Age** | ** ** | **Accrued  Liability** | ** ** | **%  Vested  in  Accrued  Liability** | ** ** | **Value of  Vested  Benefit** | ** ** | **Annual  Benefit  Upon  Termination  (1)** | ** ** | **Change  in  Control  Annual  Benefit  (1)** | ** ** | **Preretirement  Annual  Death  Benefit  (2)** | ** ** |
|----------------------------|------------|---------|------------|------------------------|------------|---------------------------------------|------------|-------------------------------|------------|---------------------------------------------|------------|-----------------------------------------------|------------|------------------------------------------------|------------|
|                       |       |    |       |                   |       |                                  |       |                          |       |                                        |       |                                          |       |                                           |       |
| 2004                       |       | 40      |       | $                      | 0          |                                  | 100.00     | %                             | $          | 0                                           |       | $                                             | 0          |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2005                       |       | 41      |       | $                      | 60,821     |                                  | 100.00     | %                             | $          | 60,821                                      |       | $                                             | 14,613     |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2006                       |       | 42      |       | $                      | 125,715    |                                  | 100.00     | %                             | $          | 125,715                                     |       | $                                             | 28,309     |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2007                       |       | 43      |       | $                      | 194,955    |                                  | 100.00     | %                             | $          | 194,955                                     |       | $                                             | 41,146     |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2008                       |       | 44      |       | $                      | 268,832    |                                  | 100.00     | %                             | $          | 268,832                                     |       | $                                             | 53,177     |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2009                       |       | 45      |       | $                      | 347,656    |                                  | 100.00     | %                             | $          | 347,656                                     |       | $                                             | 64,452     |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2010                       |       | 46      |       | $                      | 431,760    |                                  | 100.00     | %                             | $          | 431,760                                     |       | $                                             | 75,020     |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2011                       |       | 47      |       | $                      | 521,497    |                                  | 100.00     | %                             | $          | 521,497                                     |       | $                                             | 84,924     |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2012                       |       | 48      |       | $                      | 617,243    |                                  | 100.00     | %                             | $          | 617,243                                     |       | $                                             | 94,207     |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2013                       |       | 49      |       | $                      | 719,402    |                                  | 100.00     | %                             | $          | 719,402                                     |       | $                                             | 102,907    |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 7/2014                     |       | 50      |       | $                      | 819,046    |                                  | 100.00     | %                             | $          | 819,046                                     |       | $                                             | 111,000    |                                           | $          | 111,000 |   | $ | 111,000 |   |
| 2015                       |       | 51      |       | $                      | 853,446    |                                  | 100.00     | %                             | $          | 853,446                                     |       | $                                             | 115,662    |                                           | $          | 115,662 |   | $ | 115,662 |   |
| 2016                       |       | 52      |       | $                      | 889,291    |                                  | 100.00     | %                             | $          | 889,291                                     |       | $                                             | 120,520    |                                           | $          | 120,520 |   | $ | 120,520 |   |
| 2017                       |       | 53      |       | $                      | 926,641    |                                  | 100.00     | %                             | $          | 926,641                                     |       | $                                             | 125,582    |                                           | $          | 125,582 |   | $ | 125,582 |   |
| 2018                       |       | 54      |       | $                      | 965,560    |                                  | 100.00     | %                             | $          | 965,560                                     |       | $                                             | 130,856    |                                           | $          | 130,856 |   | $ | 130,856 |   |
| 2019                       |       | 55      |       | $                      | 1,006,114  |                                  | 100.00     | %                             | $          | 1,006,114                                   |       | $                                             | 136,352    |                                           | $          | 136,352 |   | $ | 136,352 |   |
| 2020                       |       | 56      |       | $                      | 1,048,370  |                                  | 100.00     | %                             | $          | 1,048,370                                   |       | $                                             | 142,079    |                                           | $          | 142,079 |   | $ | 142,079 |   |
| 2021                       |       | 57      |       | $                      | 1,092,402  |                                  | 100.00     | %                             | $          | 1,092,402                                   |       | $                                             | 148,046    |                                           | $          | 148,046 |   | $ | 148,046 |   |
| 2022                       |       | 58      |       | $                      | 1,138,283  |                                  | 100.00     | %                             | $          | 1,138,283                                   |       | $                                             | 154,264    |                                           | $          | 154,264 |   | $ | 154,264 |   |
| 2023                       |       | 59      |       | $                      | 1,186,091  |                                  | 100.00     | %                             | $          | 1,186,091                                   |       | $                                             | 160,743    |                                           | $          | 160,743 |   | $ | 160,743 |   |
| 2024                       |       | 60      |       | $                      | 1,235,906  |                                  | 100.00     | %                             | $          | 1,235,906                                   |       | $                                             | 167,494    |                                           | $          | 167,494 |   | $ | 167,494 |   |
|                       |       |    |       |                   |       |                                  |       |                          |       |                                        |       |                                          |       |                                           |       |

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(1)          If termination occurs at or before age 50, payments commence at age 50and are payable to the officer or his beneficiary in equal annual installmentsfor 10 years.  If termination occursafter age 50, payments commence the month following termination and are payablein equal annual installments for 10 years. After age 50, the benefit payments grow at 4.20%.

 

(2)          If Employee dies prior to July 2, 2014 while still employed by theCompany, death benefit payments commence August 1, 2014.  If Employee dies after July 1, 2014 whileemployed by the Company, benefit payments commence within 90 days of the dateof receipt of the death certificate.  Ineither case, the listed annual benefit amount is to be paid in equal monthly installmentfor 10 years.

 

Note:      The Accrued Liability balance is based on theaccruals required under Generally Accepted Accounting Principles (GAAP).  It is based on a plan commencement date ofSeptember 1, 2004, the interest method of accounting, and a 6.50% discountrate, compounded monthly.

 

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