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

  



 


 


 


 


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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;

  



 


 


 


 


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  (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.


 


 


 


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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;

  



 


 


 


 


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  (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.


 


 


 


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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.


 


 


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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

  	
   

  



 


 


 


 


 


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