Exhibit 10.1

EXECUTION COPY

 

 

SUBORDINATED NOTE AND SECURITIES PURCHASE AGREEMENT

DATED AS OF APRIL 28, 2008

BY AND AMONG

SECURITY BANK CORPORATION,

SECURITY INTERIM HOLDING CORPORATION

AND

THE PURCHASERS NAMED HEREIN

 

 

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TABLE OF CONTENTS

 

               Page SECTION 1 THE NOTES, WARRANTS AND STOCK APPRECIATION RIGHTS;
CLOSING    1    1.1    Purchase and Sale    1    1.2    Interest and Related
Fees    2    1.3    Payments    4    1.4    Repayments and Prepayments    4   
1.5    Taxes    5    1.6    Investment Pricing    6 SECTION 2 AFFIRMATIVE
COVENANTS    7    2.1    Compliance with Agreement    8    2.2    Use of
Proceeds    8    2.3    Capital Covenant    8    2.4    Compliance With Laws and
Contractual Obligations    8    2.5    Insurance    9    2.6    Organizational
Existence and Conduct of Business    9    2.7    Appointment of Director; Board
Observer    9    2.8    Shareholder Approval and Issuance of Non-Voting Warrants
   10    2.9    Payment of Taxes and Claims    11    2.10    Additional Purchase
Rights    11    2.11    Subordinated Debt    11    2.12    Affiliate
Transactions    12    2.13    Consents    12    2.14    Books and Records    12
   2.15    SEC Filings    12    2.16    Listing of Common Securities    12   
2.17    Exchange of Notes    12    2.18    Replacement of Notes    13    2.19   
Further Assurances.    13 SECTION 3 NEGATIVE COVENANTS    13    3.1    No
Restrictions on Subsidiary Distributions    13    3.2    Limitations on Dividend
Payments    14    3.3    Restriction on Organizational Documents    14    3.4   
Consolidation, Merger, Conveyance, Transfer or Lease    14    3.5    Conduct of
Business    15    3.6    Limitations on Subsequent Registration Rights    15
SECTION 4 FINANCIAL COVENANTS/REPORTING    15    4.1    Financial Statements and
Other Reports    15

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SECTION 5 SBKC AND COMPANY REPRESENTATIONS AND WARRANTIES

   16    5.1    No Material Adverse Effect    16    5.2    No Conflicts    16   
5.3    Default    17    5.4    Organization, Powers, Capitalization and Good
Standing    17    5.5    SEC Documents; Financial Statements    18    5.6   
Intellectual Property    19    5.7    Employee Matters    19    5.8    Use of
Proceeds; Margin Regulations    19    5.9    Litigation    20    5.10   
Brokerage    20    5.11    Absence of Undisclosed Liabilities    20    5.12   
ERISA.    20    5.13    Investment Company    22    5.14    Regulatory
Enforcement Actions    22    5.15    Private Offering    22    5.16   
Environmental Matters    22    5.17    Rights in Properties    23    5.18   
Taxes    23    5.19    Insurance    24    5.20    Material Contracts    24   
5.21    Compliance with Laws    24    5.22    Call Reports    24    5.23   
Internal Accounting Controls    24 SECTION 6 PURCHASER REPRESENTATIONS; TRANSFER
RESTRICTIONS    25    6.1    Authorization    25    6.2    Purchase for Own
Account    25    6.3    Investment Experience    25    6.4    Accredited
Investor    25    6.5    Investment Process    25    6.6    Restricted
Securities    25    6.7    Legends.    26    6.8    Transfer Restrictions    27
   6.9    Sufficient Funds    27 SECTION 7 DEFAULT, RIGHTS AND REMEDIES    27   
7.1    Event of Default    27    7.2    Acceleration and other Remedies    29   
7.3    Suits for Enforcement    30 SECTION 8 CONDITIONS TO CLOSING    30    8.1
   Conditions to Closing of the Purchasers    30    8.2    Conditions to Closing
of SBKC and the Company    32

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SECTION 9 SUBORDINATION    33 SECTION 10 MISCELLANEOUS    34    10.1   
Indemnities    34    10.2    Amendments and Waivers    34    10.3    Notices   
35    10.4    Failure or Indulgence Not Waiver; Remedies Cumulative    35   
10.5    Marshaling; Payments Set Aside    35    10.6    Severability    36   
10.7    Holders’ Obligations Several; Independent Nature of Holders’ Rights   
36    10.8    Headings    36    10.9    Applicable Law    36    10.10   
Successors and Assigns    36    10.11    No Fiduciary Relationship; Limited
Liability    36    10.12    Construction    37    10.13    Confidentiality    37
   10.14    CONSENT TO JURISDICTION    37    10.15    WAIVER OF JURY TRIAL    38
   10.16    Survival of Warranties and Certain Agreements    38    10.17   
Entire Agreement    38    10.18    Counterparts; Effectiveness    38    10.19   
No Control by the Purchasers; Short Sales    39    10.20    Maintenance of
Register    39

SECTION 11 DEFINITIONS

   39    11.1    Certain Defined Terms    39    11.2    Other Definitional
Provisions    48

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LIST OF EXHIBITS AND SCHEDULES

 

EXHIBITS      

Exhibit A

   —    Purchaser Information

Exhibit B

   —    Form of Note

Exhibit C

   —    Form of Warrant

Exhibit D

   —    Form of Stock Appreciation Right

Exhibit E

   —    Form of Non-Voting Warrant

Exhibit F

   —    Form of Amendment to Articles of Incorporation

Exhibit G

   —    Form of Registration Agreement

Exhibit H

   —    Form of Legal Opinion Schedules      

Schedule 5.1

   —    No Material Adverse Effect

Schedule 5.2

   —    No Conflicts

Schedule 5.4(B)

   —    Capitalization

Schedule 5.4(C)

   —    Subsidiaries

Schedule 5.10

   —    Broker Fees

Schedule 5.11

   —    Absence of Undisclosed Liabilities

Schedule 5.12

   —    ERISA Matters

Schedule 5.14

   —    Regulatory Enforcement Actions

Schedule 5.16

   —    Environmental Matters

Schedule 5.21

   —    Compliance with Laws

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SUBORDINATED NOTE AND SECURITIES PURCHASE AGREEMENT

This SUBORDINATED NOTE AND SECURITIES PURCHASE AGREEMENT (this “Agreement”) is
dated as of April 28, 2008, and entered into by and among SECURITY BANK
CORPORATION, a Georgia corporation (“SBKC”), Security Interim Holding
Corporation, a Georgia corporation and a wholly owned subsidiary of SBKC (the
“Company”), and the purchasers listed on Exhibit A hereto (who are each referred
to herein as a “Purchaser” and collectively, as the “Purchasers”). Capitalized
terms that are not otherwise defined shall have the meanings set forth in
Section 11 hereof.

R E C I T A L S:

WHEREAS, SBKC owns all of the outstanding Equity Securities of the Company; and

WHEREAS, subject to the terms and conditions hereof, the Purchasers desire to
purchase and SBKC and the Company desire that the Purchasers purchase
(A) subordinated notes of the Company that qualify as Tier 2 Capital under
applicable rules and regulations of the Board of Governors of the Federal
Reserve System (“FRB”), (B) detachable warrants of SBKC, and (C) detachable
stock appreciation rights of SBKC, with the proceeds from the sale of said
notes, warrants and stock appreciation rights to be used in accordance with
Section 2.2.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions
and covenants herein contained, SBKC and the Company agree with the Purchasers
as follows:

SECTION 1

THE NOTES, WARRANTS AND STOCK APPRECIATION RIGHTS; CLOSING

1.1 Purchase and Sale. Subject to the terms and conditions of this Agreement:

(A) The Company shall sell to the Purchasers and the Purchasers shall purchase
from the Company, on the Closing Date, the Company’s 9.5% Subordinated Notes due
2018, in the aggregate principal amount of $40,000,000, in substantially the
form attached hereto as Exhibit B, appropriately completed in conformity
herewith and duly and validly issued, authorized and executed by the Company in
the amounts and the purchase prices set forth opposite each Purchaser’s name on
Exhibit A hereto on the Closing Date (the “Initial Notes”). The term “Notes” as
used herein shall mean the Initial Notes and all notes issued in exchange or
substitution for such Initial Notes. The Notes, including the principal and
interest, shall be unsecured and subordinate and junior in right of payment to
the holders of the Senior Indebtedness to the extent set forth in Section 9
hereof.

(B) At the Closing and in consideration of the Purchasers’ purchase of the
Initial Notes from the Company hereunder, SBKC shall issue and deliver to each
Purchaser a warrant representing the right to purchase the number of shares of
common stock, $1.00 par

 

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value per share (the “Common Stock”) of SBKC as set forth opposite such
Purchaser’s name on Exhibit A hereto, subject to adjustment on the terms set
forth in the warrant, in substantially the form of Exhibit C, appropriately
completed in conformity herewith and duly and validly issued, authorized and
executed by SBKC (the “Initial Warrants”). The term “Warrants” as used herein
shall mean the Initial Warrants and all warrants issued upon the transfer or
division of, or in exchange or substitution for such Initial Warrants.

(C) (i) At the Closing and in consideration of the Purchasers’ purchase of the
Initial Notes from the Company hereunder, SBKC shall deliver to each Purchaser
the number of stock appreciation rights as set forth opposite such Purchaser’s
name on Exhibit A hereto, subject to adjustment on the terms set forth therein,
in substantially the form of Exhibit D, appropriately completed in conformity
herewith and duly and validly issued, authorized and executed by SBKC (the
“Initial SARs”). The term “SARs” as used herein shall mean the Initial SARs and
all stock appreciation rights issued upon the transfer or division of, or in
exchange or substitution for such Initial SARs.

(ii) Upon receipt of shareholder approval provided for in Section 2.8, the SARs
shall be exchanged for warrants to purchase shares of non-voting Common Stock of
SBKC (the “Non-Voting Warrant Shares”) upon the exercise of such warrants, which
warrants shall be in substantially the form of Exhibit E (the “Non-Voting
Warrants”).

(D) The closing of the purchase and sale of the Initial Notes and the delivery
by SBKC to the Purchasers of the Initial Warrants and the Initial SARs (the
“Closing”) shall take place at the offices of Patton Boggs LLP in Washington,
D.C. on April 28, 2008 or at such other place or on such other date as may be
mutually agreeable to SBKC and the Purchasers. The date on which the Closing
occurs is referred to herein as the “Closing Date.”

At the Closing, the Company will deliver to the Purchasers the Initial Notes and
SBKC will deliver to the Purchasers the Initial Warrants and the Initial SARs,
each registered in each Purchaser’s name as stated in Exhibit A (or in the name
of such Purchaser’s nominees as may be specified to SBKC at least forty-eight
(48) hours prior to the Closing Date), against payment by the Purchasers of the
purchase price of the Initial Notes, Initial Warrants and Initial SARs by wire
transfer of immediately available funds to such accounts as shall be specified
by SBKC at least forty-eight (48) hours prior to the Closing Date.

1.2 Interest and Related Fees.

(A) Interest. Except as provided in subsection 1.2(B), interest shall accrue on
the unpaid principal amount of the Notes, and on all other Obligations,
outstanding from time to time at the rate of 9.5% per annum, compounded
quarterly. Interest on the unpaid principal amount of the Notes outstanding from
time to time and on all other Obligations shall be calculated daily on the basis
of a three hundred sixty (360) day year for the actual number of days elapsed in
the period during which it accrues.

(B) Default Rate of Interest. At the election of Majority Holders, after the
occurrence of an Event of Default pursuant to subsection 7.1(F) and for so long
as it continues, the unpaid principal amount of the Notes outstanding from time
to time and the other Obligations

 

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shall bear interest at a rate per annum of 5.5% in excess of the rates otherwise
payable under the Transaction Documents with respect to such Notes or other
Obligations, all of which interest shall be payable in cash on demand. If,
pursuant to the terms of the Transaction Documents such other Obligations do not
bear interest, after the occurrence of an Event of Default pursuant to
subsection 7.1(F) and for so long as it continues, such Obligations shall bear
interest at the rate per annum from time to time borne by the Notes.

(C) Payment of Interest and Related Fees. The Company shall pay accrued interest
on the last day of each calendar quarter commencing June 30, 2008. In addition,
accrued and unpaid interest shall be payable on the maturity of the Notes,
whether by acceleration or otherwise, and on the date of any prepayment (with
respect to the amount prepaid).

(D) Excess Interest. Under no circumstances will the rate of interest chargeable
be in excess of the maximum amount permitted by law. If excess interest is
charged and paid in error, then the excess amount will be promptly refunded or
applied to repayment or prepayment of principal; provided, that to the extent
all or any portion of such excess amount is applied to repayment or prepayment
of principal, interest on the amount so prepaid will not be required to be paid
at such time.

(E) Deferral of Interest. So long as no Event of Default pursuant to subsection
7.1(F) has occurred and is continuing, the Company may, at its option and by
written notice to the Holders at least thirty (30) days prior to any date that
interest shall be due and payable under subsection 1.2(C) hereof, defer the
payment of any such quarterly interest payment for up to twelve (12) separate
quarters. Such written notice shall specify the amount of interest to be
deferred and shall show in reasonable detail the calculation of such amount. All
deferred interest shall be capitalized and thereby increase the outstanding
principal amount of the Initial Notes and interest shall accrue on all amounts
so deferred at the applicable rate set forth in subsection 1.2(A) and shall be
compounded quarterly; provided that, if an Event of Default pursuant to
subsection 7.1(F) has occurred and is continuing, the applicable rate shall be
increased by the rate set forth in subsection 1.2(B). In the event that the
Company elects to defer interest pursuant to this subsection 1.2(E), the Company
shall issue revised Notes, in the form attached hereto as Exhibit B, setting
forth the principal amount due on the Notes, including all interest capitalized
hereunder. Upon surrender of a Note by the Holder thereof to the Company for
reissuance pursuant to this subsection 1.2(E), the Company shall promptly
execute and deliver a revised Note to such Holder.

Notwithstanding this subsection 1.1(E), commencing with the first “accrual
period” (as defined for purposes of the IRC) ending after the fifth anniversary
of the Closing Date, the Company shall, in respect of the Notes, pay in cash, on
or before the end of each such accrual period, both the annual deferred interest
and the interest that accrued with respect to the deferred interest (including
original issue discount) as set forth in this subsection 1.2(E) with respect to
the applicable Notes, if, but only to the extent that, the aggregate amount of
the sum of (i) the deferred interest and (ii) the original issue discount (other
than deferred interest), in each case that has accrued and not been paid in cash
from the Closing Date through the end of such accrual period on such Notes,
exceeds the product of the “issue price” (as defined for purposes of the IRC)
for such Notes and the “yield to maturity” (as defined for purposes of the IRC)
on such Notes.

 

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(F) Expenses and Attorneys Fees. (i) On the Closing Date, SBKC and the Company
agree to pay or cause to be paid to the Purchasers all of the Purchasers’
reasonable out of pocket expenses incurred in connection with the transactions
contemplated by the Transaction Documents, including, without limitation, the
Purchasers’ legal and due diligence expenses, up to a maximum amount of
$400,000.

(ii) After the Closing Date, SBKC and the Company agree to pay or cause to be
paid promptly all reasonable out of pocket fees, costs and expenses (including
reasonable attorneys’ fees and expenses) incurred by the Holders in connection
with the exchange of SARs for Non-Voting Warrants and the conversion of the
Non-Voting Warrant Shares. SBKC and the Company agree to promptly pay or cause
to be paid all reasonable fees, costs and expenses (including reasonable
attorneys’ fees and expenses) incurred by the Holders in connection with any
action to enforce any Transaction Documents or to collect any payments due from
any other Related Party. All fees, costs and expenses for which the Company is
responsible under this subsection 1.2(F)(ii) shall be deemed part of the
Obligations when incurred.

(iii) In the event that this Agreement has been executed, but the transactions
contemplated by the Transaction Documents are not consummated, then SBKC shall
reimburse FSCP’s reasonable out of pocket legal and due diligence expenses
incurred in connection with the transaction in an amount of up to $250,000. SBKC
shall make such payment to FSCP in immediately available funds within two
(2) Business Days following the date that FSCP notifies SBKC that FSCP is due
payment under this subsection 1.2(F)(iii).

1.3 Payments. All payments by the Company of the Obligations shall be without
set off, deduction or counterclaim and shall be made in same day funds and
delivered to each Holder, as applicable, by wire transfer to the account set
forth on Exhibit A hereto for such Holder or such other place as such Holder may
from time to time designate in writing. The Company shall receive credit on the
day of receipt for funds received by such Holder by 1:00 p.m., Eastern Standard
Time. In the absence of timely receipt, such funds shall be deemed to have been
paid on the next Business Day. Whenever any payment to be made hereunder shall
be stated to be due on a day that is not a Business Day, the payment may be made
on the next succeeding Business Day and such extension of time shall be included
in the computation of the amount of interest due hereunder.

1.4 Repayments and Prepayments.

(A) Voluntary Prepayments of Notes. The Company may prepay the Notes at any time
after the fifth anniversary of the Closing Date, in whole or in part; provided,
however, that in the event of any prepayment of the Notes prior to the seventh
anniversary of the Closing Date, the Company shall pay to the Holders of the
Notes a premium equal to an amount determined by multiplying the percentage set
forth below corresponding to the date on which the prepayment is made by the
then outstanding principal amount of the Notes:

 

Period of Prepayment

   Percentage  

On or after the Fifth Anniversary of the Closing Date but prior to the Sixth
Anniversary of the Closing Date

   10 %

On or after the Sixth Anniversary but on or prior to the Seventh Anniversary of
the Closing Date

   5 %

 

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To exercise its option to make any voluntary prepayment hereunder, the Company
must give the Holders of the Notes written notice of such prepayment not less
than thirty (30) and not more than forty (40) days prior to the date fixed for
such prepayment, specifying the date of proposed prepayment and the Company’s
calculation of the applicable premium, if any. On the date so fixed for payment,
the principal amount of the Notes, the premium, if any, and the accrued interest
on the Notes shall be and become due and payable in full. Any prepayment of the
Notes under this subsection 1.4(A) will be made subject to receipt by the
Company of prior approval from the FRB if then required under applicable capital
guidelines or policies of the FRB.

(B) Scheduled Repayments. The Company shall pay the aggregate principal amount
of the Notes outstanding in full on April 30, 2018 (the “Maturity Date”).

(C) Pro Rata Payment. All payments to the Holders of the Notes (whether for
principal, interest, premium or otherwise) shall be made pro rata among such
Holders based upon the aggregate unpaid principal amount of the Notes held by
each such Holder.

1.5 Taxes.

(A) No Deductions. Any and all payments or reimbursements made hereunder or
under the Notes or any other Transaction Document shall be made free and clear
of and without deduction for any and all Taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto of any nature
whatsoever imposed by any taxing authority, excluding such Taxes to the extent
imposed on any Holder’s gross or net income by the jurisdiction in which such
Holder is organized, doing business or otherwise is subject to tax without
regard to the transactions contemplated by this Agreement (any such excluded
taxes described herein, “Excluded Taxes”). If the Company shall be required by
law to deduct any such amounts from or in respect of any sum payable hereunder
to any Holder, then the sum payable hereunder shall be increased as may be
necessary so that, after making all required deductions, such Holder receives an
amount equal to the sum it would have received had no such deductions been made.
Each Holder shall provide to the Company a properly completed Form W-9, and any
successor Holder shall provide to the Company a properly completed Form W-9 or
Form W-8 (or any successor thereto), as appropriate to such Holder’s status. All
such forms shall be completed in such a manner as to eliminate, to the fullest
extent permitted by law, the Company’s obligation to make a payment under this
subsection 1.5(A). The Company shall not be required to pay additional amounts
to any Holder pursuant to this subsection 1.5(A) to the extent that the
obligation to pay such additional amounts would not have arisen but for the
failure of such Holder to comply with this paragraph.

 

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(B) Changes in Tax Laws. In the event that, subsequent to the Closing Date,
(i) any changes in any existing law, regulation, treaty or directive or in the
interpretation or application thereof, (ii) any new law, regulation, treaty or
directive enacted or any interpretation or application thereof, or
(iii) compliance by any Holder with any request or directive (whether or not
having the force of law) from any Governmental Authority, agency or
instrumentality:

(a) does or shall subject any Holder to any tax of any kind whatsoever with
respect to this Agreement, the other Transaction Documents or any Obligations,
or change the basis of taxation of payments to such Holder of principal, fees,
interest or any other amount payable hereunder (except for Excluded Taxes); or

(b) does or shall impose on any Holder any other condition or increased cost in
connection with the transactions contemplated hereby or participations herein;

and the result of any of the foregoing is to increase the cost to such Holder of
continuing to hold any Note hereunder, or to reduce any amount receivable
hereunder, then, in any such case, the Company shall promptly pay to such
Holder, upon its demand, any additional amounts necessary to compensate such
Holder, on an after-tax basis, for such additional cost or reduced amount
receivable, as reasonably determined by such Holder with respect to this
Agreement or the other Transaction Documents. If such Holder becomes entitled to
claim any additional amounts pursuant to this subsection 1.5(B), it shall
promptly notify the Company of the event by reason of which such Holder has
become so entitled. A certificate as to any additional amounts payable pursuant
to the foregoing sentence submitted by such Holder to the Company shall, absent
manifest error, be final, conclusive and binding for all purposes. If a Holder
becomes entitled to any tax credit or receives any refund in respect of any
Taxes paid by the Company under this Section 1.5, such Holder shall return to
the Company an amount equal to the lesser of (x) the amount of such credit or
refund (including any interest evidenced therein), as the case may be, and
(y) the amount of Taxes so paid by the Company that gave rise to such credit or
refund. Any payment to be made by such Holder to the Company pursuant to the
preceding sentence shall be made at the time, and solely to the extent, that
(i) in the case of a refund, such refund is actually received by the Holder and
(ii) in the case of a credit, the payment of Taxes actually made by the Holder
to a Governmental Authority is reduced as a direct result of such credit. The
obligation of the Company to make a payment under this subsection 1.5(B) shall
be subject to the Holder’s obligations to submit documentation similar to that
described in the fourth sentence of subsection 1.5(A), as appropriate to reduce
such tax or increased cost to the lowest limit permitted by law. Additionally,
no payment shall be required under this subsection 1.5(B) to the extent that the
change in tax law that would, but for this sentence, have required such payment
occurred before the transfer of the Note to such Holder.

1.6 Investment Pricing. The parties intend that the Notes which are to be sold
to the Purchasers by the Company on the Closing Date pursuant to the terms and
conditions hereof, the Warrant and the SAR, which are to be issued to the
Purchasers by SBKC to be effective on the Closing Date pursuant to the terms and
conditions hereof, collectively shall constitute an “investment unit” (the
“Investment Unit”) within the meaning of Section 1273(c)(2) of the IRC, for
which the Purchasers have paid Forty Million and 00/100 Dollars
($40,000,000.00).

 

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The Purchasers, SBKC and the Company agree that the issue price of the
Investment Unit is Forty Million and 00/100 Dollars ($40,000,000.00), and the
issue price shall be allocated among the Notes sold to the Purchasers, the
Warrant and SAR issued to the Purchasers based on their relative fair market
values.

The fair market value of the Notes sold to the Purchasers is Thirty-One Million
Two Hundred Sixty-One Thousand Three Hundred Ninety-Seven and 00/100 Dollars
($31,261,397.00).

The fair market value of the Warrants issued to the Purchasers is Five Million
Five Hundred Sixty-Six Thousand Seven Hundred Eighty-Six and 00/100 Dollars
($5,564,923.00).

The fair market value of the SARs issued to the Purchasers is Three Million One
Hundred Seventy-Two Thousand Nine Hundred Nine and 00/100 Dollars
($3,173,680.00).

The allocation of the issue price pursuant to Treas. Reg. § 1.1273-2(h)(1) is
Thirty-One Million Two Hundred Sixty-One Thousand Three Hundred Ninety-Seven and
00/100 Dollars ($31,261,397.00) for the Notes sold to the Purchasers, Five
Million Five Hundred Sixty-Six Thousand Seven Hundred Eighty-Six and 00/100
Dollars ($5,564,923.00) for the Warrants issued to the Purchasers and Three
Million One Hundred Seventy-Two Thousand Nine Hundred Nine and 00/100 Dollars
($3,173,680.00) for the SARs issued to the Purchasers.

The Purchasers, SBKC and the Company acknowledge that this Section 1.6 is
intended to establish the allocation of the issue price of the Investment Unit
in accordance with Treas. Reg. § 1.1273-2(h)(1) and section 1273(c)(2) of the
IRC, which allocation is binding on the parties pursuant to Treas. Reg.
§ 1.1273-2(h)(2), but this Section 1.6 does not constitute recognition by any of
them that the amount allocated to each component shall be treated as its issue
price for any purpose other than United States federal income tax law.

SECTION 2

AFFIRMATIVE COVENANTS

Each of SBKC and the Company covenants and agrees that (i) so long as the Notes
or any Obligations relating thereto remain outstanding, each of the Company and
SBKC shall perform and comply in all material respects with all covenants in
this Section 2 applicable to them, and (ii) so long as the SBKC Securities or
any Obligations relating thereto remain outstanding, each of SBKC and the
Company shall perform and comply in all material respects with all covenants in
Sections 2.1 through 2.10, Sections 2.12 through 2.16 and Section 2.19; provided
that each of SBKC and the Company will comply with any such covenant that is
already qualified by a materiality qualifier in all respects.

 

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2.1 Compliance with Agreement. Timely perform the terms, representations,
warranties and covenants of this Agreement and all other Transaction Documents.

2.2 Use of Proceeds. With respect to the use of the proceeds of the sale of the
Notes, Warrants and SARs contemplated hereby, SBKC and the Company agree as
follows:

(A) approximately $8.5 million of the net proceeds will be used to pay in full
the outstanding balance on the line of credit from Silverton Bank, and
immediately thereafter, such line of credit shall be terminated and the
collateral securing such line of credit shall be released;

(B) approximately $2.0 million of the net proceeds will be used to pay in full
the outstanding balance on the line of credit from Thomasville National Bank,
and immediately thereafter, such line of credit shall be terminated and the
collateral securing such line of credit shall be released; and

(C) the remaining net proceeds will be retained by SBKC or the Company and used
for general corporate purposes, including contributions to the Banks by way of
capital contributions.

2.3 Capital Covenant. So long as the Notes and the SBKC Securities are
outstanding, SBKC and the Company shall maintain such capital as may be
necessary to exceed the minimum capital requirements under applicable FRB
regulations and policies, and SBKC and the Company shall cause each of the Banks
to maintain such capital as may be necessary to cause each such Bank to be
classified at all times as “well capitalized,” in accordance with the rules and
regulations of their primary federal regulators, as in effect from time to time.

2.4 Compliance With Laws and Contractual Obligations. SBKC and the Company will
(A) comply with, and cause each of their Subsidiaries to comply with, (i) in all
material respects, the requirements of all applicable laws, rules, regulations
and orders of any Governmental Authority (including, without limitation, all
laws, rules, regulations and orders relating to taxes, employer and employee
contributions, securities, ERISA, environmental protection matters, employee
health and safety, all regulations or orders of the FRB, the GDBF and the FDIC
and all state and federal laws and regulations governing the offer and extension
of credit, including, consumer credit and usury laws, the Truth in Lending Act,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act and the
USA Patriot Act) as now in effect and which may be imposed in the future in all
jurisdictions in which such Person is now doing business or may hereafter be
doing business and (ii) the obligations, covenants and conditions contained in
all Contractual Obligations of each such Person, as applicable, other than those
laws, rules, regulations, orders and obligations, covenants and conditions of
such Contractual Obligations the noncompliance with which could not be
reasonably expected to have, either individually or in the aggregate, a Material
Adverse Effect, and (B) maintain or obtain and, cause each of their Subsidiaries
to maintain or obtain, all licenses, qualifications and permits now held or
hereafter required to be held by such Person, for which the loss, suspension,
revocation or failure to obtain or renew, could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

 

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2.5 Insurance. At its sole cost and expense, SBKC and the Company will maintain,
and will cause each Subsidiary to maintain, bonds and insurance to such extent,
covering such risks as is usual and customary for owners of similar businesses
and properties in the same general area in which SBKC, the Company or a
Subsidiary operates, including, without limitation, insurance for fire and other
risks insured against by extended coverage, public liability insurance and
workers’ compensation insurance. All such bonds and policies of insurance shall
be in a form, in an amount and with issuers/insurers recognized as adequate by
prudent business persons.

2.6 Organizational Existence and Conduct of Business. Except as otherwise
permitted by Section 3.4, SBKC and the Company will, and will cause each of
their Subsidiaries to, at all times preserve and keep in full force and effect
such Person’s (i) organizational existence and all rights and franchises
material to such Person’s business, (ii) leases, privileges, franchises,
qualifications and rights that are necessary in the ordinary conduct of its
business, and (iii) conduct its business as presently conducted in an orderly
and efficient manner in accordance with good business practices.

2.7 Appointment of Director; Board Observer.

(A) At any time when a Purchaser owns any Note or any of the SBKC Securities,
the Purchasers collectively shall be entitled to designate one (1) individual to
serve as a member of the board of directors of each of SBKC and the Company
(collectively, the “Boards” and individually, a “Board”), and the Company and
SBKC shall cause their respective Boards to have taken all corporate actions
necessary to appoint the nominee of the Purchasers and recommend such nominee
for re-election so long as a Purchaser owns any Notes or any of the SBKC
Securities.

(B) At the annual meetings of the Boards of SBKC and the Company immediately
following the annual meeting of shareholders of SBKC to be held on May 15, 2008,
each of the Boards of SBKC and the Company shall take all corporate action
necessary and appropriate to appoint Gerald R. Francis to serve as a director of
each of SBKC and the Company.

(C) Subject to the conditions and limitations set forth in this Section 2.7, to
the extent that the Purchasers have not exercised their right under
subsection 2.7(A), the Purchasers may appoint one (1) individual to attend all
meetings of the Boards of SBKC and the Company (the “Observer”). The Observer
shall not have the right to vote on any matter presented to the Boards or any
committee thereof. The Company and SBKC shall give the Observer written notice
of each meeting thereof at the same time and in the same manner as the members
of such Boards or committees thereof, to the extent permitted by Nasdaq
Marketplace Rules, receive notice of such meetings, and the Company and SBKC, as
applicable, shall permit the Observer, subject to the conditions and limitations
set forth in this Section 2.7, to attend as an observer at all meetings thereof;
provided, however, that the Observer may be excluded from executive sessions
comprised solely of independent directors of SBKC to the extent required by
Nasdaq Marketplace Rule and the regulations promulgated thereunder. The Observer
shall be entitled, subject to the conditions and limitations set forth in this
Section 2.7, to receive all written materials and other information given to
members of the Boards, in connection with such

 

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meeting or otherwise, at the same time such materials and information are given
to the members of the Boards, and the Observer shall keep such materials and
information confidential and not use such information to the detriment of any
Related Party, except that nothing contained in this subsection 2.7(C) shall in
any way limit or restrict a Holder’s ability to exercise or enforce any rights,
remedies or obligations under the Transaction Documents. If either the Company
or SBKC proposes to take any action by written consent in lieu of a meeting of
either of the Boards, the Company or SBKC, as the case may be, shall give
written notice thereof to the Observer prior to the effective date of such
consent describing the nature and substance of such action and including the
proposed text of such written consents.

(D) The Company or SBKC, as applicable, shall pay the reasonable out-of-pocket
costs and expenses of the Purchasers’ designated member of the Boards or the
Observer, as applicable, incurred in connection with attending such meetings of
the Boards.

(E) The right of the Purchasers to designate one individual to serve as a member
of the Boards or appoint one individual to attend all meetings of the Boards as
an Observer granted pursuant to this Section 2.7 is a non-transferable right of
Purchasers.

2.8 Shareholder Approval and Issuance of Non-Voting Warrants.

(A) SBKC agrees to take, in accordance with applicable law and its articles of
incorporation and bylaws, all action necessary to convene as soon as reasonably
practicable, but in no event later than 270 days from the date hereof, an annual
or special meeting of its shareholders to consider and vote upon (i) an
amendment to its articles of incorporation authorizing a sufficient number of
shares of non-voting Common Stock to provide for the issuance of Non-Voting
Warrant Shares upon the exercise of the Non-Voting Warrants in full, which
amendment shall be in the form attached hereto as Exhibit F; and (ii) the
issuance of the Non-Voting Warrants and the underlying Common Stock of SBKC
issuable upon conversion of the Non-Voting Warrant Shares; provided, however,
nothing herein shall prevent SBKC from seeking subsequent shareholder approval
in the event the shareholders do not approve the amendment to the articles of
incorporation of SBKC within 270 days from the date hereof.

(B) Prior to the mailing of proxy materials in connection with the annual or
special meeting of shareholders required by subsection 2.8(A), SBKC shall
provide a copy of all proxy materials, including the proposed amendment to its
articles of incorporation, to the Purchasers and their legal counsel, and such
proxy materials shall be in form and substance reasonably satisfactory to the
Purchasers.

(C) Within fourteen (14) Business Days following receipt of the shareholder
approval contemplated by subsection 2.8(A), the Board of SBKC shall adopt all
resolutions necessary and appropriate to duly authorize the following actions:
the reservation of an appropriate number of Non-Voting Warrants as well as
Non-Voting Warrant Shares to be issued upon the exercise of such Non-Voting
Warrants and the reservation of a sufficient number of shares of voting Common
Stock to be issued upon the conversion of the Non-Voting Warrant Shares.

 

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(D) Non-Voting Warrant Shares that are converted into shares of voting Common
Stock of SBKC shall be entitled to the registration rights set forth in the
Registration Agreement, the form of which is attached as Exhibit G.

2.9 Payment of Taxes and Claims. The Company will pay or discharge, at or before
maturity or before becoming delinquent (A) all taxes, levies, assessments,
vault, water and sewer rents, rates, charges, levies, permits, inspection and
license fees and other Governmental Authority and quasi-governmental authority
charges and any penalties or interest for nonpayment thereof, heretofore or
hereafter imposed or which may become a Lien upon any property owned by the
Company or SBKC or arising with respect to the occupancy, use, possession or
leasing thereof (collectively the “Impositions”) and (B) all lawful claims for
labor, material, and supplies, which, if unpaid, might become a Lien upon any of
its property; provided, however, the Company will not be required to pay or
discharge any claim for labor, material, or supplies or any Imposition which is
being contested in good faith by appropriate actions or proceedings diligently
pursued, and for which adequate reserves in conformity with GAAP with respect
thereto have been established to the reasonable satisfaction of the Purchasers.
This Section 2.9 shall not preclude the Company or any of its Subsidiaries from
contesting any taxes or other payments, if they are being diligently contested
in good faith in a manner which stays enforcement thereof and if appropriate
expense and liability provisions have been recorded in conformity with GAAP.

2.10 Additional Purchase Rights. In the event SBKC, for purposes of raising
additional capital, makes an offering of Equity Securities of any class or
series or issues any rights, options, warranties or convertible or exchangeable
securities or instruments generally entitling the holder to acquire or purchase
shares of Equity Securities of any class or series, each Purchaser who is a
Holder immediately prior to such capital raising offering shall be granted and
shall have the right, but not the obligation, to purchase a number of shares of
Equity Securities in such offering such that the Purchasers will own, in the
aggregate, up to 9.9% of the total Common Stock issued and outstanding
immediately following completion of such capital raising offering, on a fully
diluted basis.

2.11 Subordinated Debt. If the Notes cease to be deemed to be Tier 2 Capital,
other than due to the limitation imposed by the FRB on the capital treatment of
subordinated debt during the five years immediately preceding the maturity date
of the subordinated debt: (a) the Company will immediately notify Holders, and
(b) SBKC, the Company and the Holders will work together in good faith to
immediately execute and deliver all such agreements (including, without
limitation, replacement notes) as reasonably necessary in order to restructure
the obligations evidenced by the Notes and this Agreement to qualify for Tier 2
capital treatment. In the event that the obligations evidenced by the Notes and
this Agreement cannot be restructured on terms and conditions that are
comparable to similar transactions that qualify for Tier 2 capital treatment, or
such qualification and restructuring for Tier 2 capital treatment contains any
conditions, restrictions or requirements which the Holders reasonably determine
in good faith, individually or in the aggregate, materially reduce the benefits
of the transactions contemplated by the Note and this Agreement to such a degree
that the Holders would not have entered into this Agreement had such conditions,
restrictions or requirements been known at the date hereof, then SBKC, the
Company and the Holders will work together in good faith to immediately

 

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execute and deliver all such agreements (including without limitation,
replacement notes) as Holders may reasonably request in order to restructure the
obligations evidenced by the Notes and this Agreement.

2.12 Affiliate Transactions. All transactions which are entered into after the
date hereof by and among the Related Parties and their respective directors,
officers and affiliates will comply with Sections 23A and 23B of the Federal
Reserve Act and Regulation W, promulgated by the FRB thereunder and similar
rules and regulations of and any agreements with, and commitments to, orders,
rulings, directives and decrees of, the FDIC and the GDBF.

2.13 Consents. The Company and SBKC will, and cause each of their Subsidiaries
to, use their reasonable best efforts to obtain all approvals and consents of
any Governmental Authority necessary (i) to effect the transactions contemplated
herein and in the Transaction Documents, and (ii) to permit the Banks to pay
dividends to Company in amounts sufficient to permit Company to pay timely
interest on its debt obligations (including the Notes) and to avoid any
defaults.

2.14 Books and Records. SBKC and the Company will, and cause their Subsidiaries
to, maintain accurate books and records and internal and disclosure controls as
required by law and to account for all transactions in accordance with GAAP.

2.15 SEC Filings. SBKC and the Company will permit the Holders to review any
press releases describing the transactions contemplated by the Transaction
Documents prior to its release. SBKC shall file on SEC Form 8-K, within the time
period required by the Exchange Act, each of the following Transaction
Documents: this Agreement, the Registration Agreement, the Initial Warrants and
the Initial SARs.

2.16 Listing of Common Securities. SBKC shall promptly secure the listing of all
of the Warrant Shares upon each national securities exchange upon which shares
of SBKC Common Stock are then listed (subject to official notice of issuance, as
required by each such national securities exchange) and, once secured, shall
maintain, so long as any other shares of SBKC Common Stock shall be so listed,
such listing of all Warrant Shares from time to time issuable under the terms of
the Transaction Documents. SBKC shall use all commercially reasonable efforts to
maintain SBKC’s authorization for listing its Common Stock on the Nasdaq.
Neither SBKC nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of SBKC’s Common
Stock from the Nasdaq, or the securities exchange on which it is then listed.
SBKC shall pay all fees and expenses in connection with satisfying its
obligations under this Section 2.16.

2.17 Exchange of Notes. The Company shall at any time, upon written request of
the Holder of a Note and surrender of the Note for such purpose, at the expense
of the Company, issue new Notes in exchange therefor in such denominations of at
least $100,000, as shall be specified by the Holder of such Note, in an
aggregate principal amount equal to the then unpaid principal amount of the Note
or Notes surrendered and substantially in the form of Exhibit B with appropriate
insertions and variations, and bearing interest from the date to which interest
has been paid on the Note surrendered.

 

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2.18 Replacement of Notes. Upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of any Note, and, in
the case of any such loss, theft or destruction, upon delivery of a bond of
indemnity reasonably satisfactory to the Company (provided that an institutional
Holder of a Note may instead deliver to the Company an indemnity agreement in
form and substance reasonably satisfactory to the Company), or, in the case of
any such mutilation, upon surrender and cancellation of the Note, as the case
may be, the Company will issue a new Note of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Note.

2.19 Further Assurances.

(A) Each of the parties hereto shall cooperate and use their respective
reasonable best efforts to prepare all documentation, to effect all filings and
to obtain all permits, consents, approvals and authorizations of all third
parties, the shareholders of SBKC and Governmental Authorities necessary to
consummate the transactions contemplated by the Transaction Documents. Each of
SBKC and the Purchasers shall have the right to review in advance, subject to
applicable laws relating to the exchange of information, with respect to all
written information submitted to any third party, the shareholders of SBKC or
any Governmental Authority in connection with the transactions contemplated by
the Transaction Documents. In exercising the foregoing right, each of such
parties agrees to act reasonably and as promptly as practicable. Each party
hereto agrees that it shall consult with the other parties hereto with respect
to the obtaining of all permits, consents, approvals, waivers and authorizations
of all third parties, the shareholder of SBKC and Governmental Authorities
necessary or advisable to consummate the transactions contemplated by the
Transaction Documents, and each party shall keep the other parties apprised of
the status of material matters relating thereto.

(B) The Company and SBKC shall, and shall cause each of its Subsidiaries to,
from time to time, execute such documents, agreements and reports as Majority
Holders may from time to time reasonably request to further evidence or
otherwise implement the Obligations or the Transaction Documents.

SECTION 3

NEGATIVE COVENANTS

Each of the Company and SBKC covenants and agrees that (i) so long as the Notes
or any Obligations relating thereto remain outstanding, unless Majority Holders
shall otherwise give their prior written consent, SBKC and the Company, as the
case may be, shall perform and comply with all covenants in this Section 3, and
(ii) so long as the SBKC Securities or any Obligations relating thereto remain
outstanding, unless Majority Holders shall otherwise give their prior written
consent, SBKC and the Company, as the case may be, shall perform and comply with
all covenants in Sections 3.3, 3.5 and 3.6.

3.1 No Restrictions on Subsidiary Distributions. Except as the FRB, FDIC or
GDBF, as applicable, may otherwise direct, or as provided herein and, in the
cases of clauses (ii), (iii) and (iv) below, SBKC and the Company will not, and
will not permit any of its Subsidiaries

 

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directly or indirectly to, create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind on the
ability of any such Subsidiary to: (i) pay dividends or make any other
distribution on any of such Subsidiary’s Equity Securities owned by SBKC, the
Company or any other Subsidiary; (ii) pay any Indebtedness owed to SBKC, the
Company or any other Subsidiary; (iii) make loans or advances to SBKC, the
Company or any other Subsidiary; or (iv) transfer any of its property or assets
to SBKC, the Company or any other Subsidiary other than restrictions existing
under, or by reason of, applicable law or as required by or pursuant to
agreements with FRB, FDIC and GDBF.

3.2 Limitations on Dividend Payments. If (i) there shall have occurred and be
continuing a Default or an Event of Default pursuant to Section 7.1 or (ii) the
Company shall have given notice of its election to defer payments of interest on
the Notes pursuant to subsection 1.2(E) and such period, or any extension
thereof, shall have commenced and be continuing, then neither SBKC nor the
Company may (A) declare or pay any dividends or distributions on, or redeem,
purchase, acquire, or make a liquidation payment with respect to, any of SBKC’s
or the Company’s Equity Securities, or (B) make any payment of principal of or
premium, if any, or interest on or repay, repurchase or redeem any Indebtedness
of SBKC or the Company that rank pari passu in all respects with or junior in
interest to the Notes (other than repurchases, redemptions or other acquisitions
of Equity Securities of SBKC or the Company in connection with any employment
contract, benefit plan or other similar arrangement with or for the benefit of
one or more employees, officers, directors or consultants, or a dividend
reinvestment or stockholder stock purchase plan).

3.3 Restriction on Organizational Documents. SBKC and the Company will not, and
will not permit any of their Subsidiaries directly or indirectly to, amend,
modify or waive any term or provision of their Organizational Documents,
including without limitation, as applicable, their articles or certificates of
incorporation or formation, certificates of designations pertaining to preferred
stock, or bylaws in any manner which does or could reasonably be expected to
impair the rights and benefits of the holders of the Common Stock or the
Non-Voting Warrant Shares; provided that nothing herein will prevent SBKC or the
Company from issuing Indebtedness or additional Common Stock or preferred stock
in the future.

3.4 Consolidation, Merger, Conveyance, Transfer or Lease. Neither SBKC nor the
Company shall consolidate with or merge into any other Person or convey,
transfer or lease their properties and assets substantially as an entirety to
any Person, and neither SBKC nor the Company shall permit any Person to
consolidate with or merge into SBKC or the Company or convey, transfer or lease
its properties and assets substantially as an entirety to SBKC or the Company,
unless:

(A) In case either SBKC or the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which SBKC or the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and assets
of SBKC or the Company substantially as an entirety (i) shall be a corporation,
partnership or trust, (ii) shall be organized and validly existing under the
laws of the United States of America, any State thereof or the District of
Columbia and (iii) shall expressly assume,

 

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in form reasonably satisfactory to the Holders, the due and punctual payment of
the principal of and any premium and interest on the Notes and all other
Obligations of SBKC and the Company hereunder; and

(B) Immediately after giving effect to such transaction and treating any
Indebtedness that becomes an obligation of SBKC, the Company or any of their
Subsidiaries as a result of such transaction as having been incurred by SBKC,
the Company or any of their Subsidiaries at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have occurred and be continuing.

3.5 Conduct of Business. SBKC and Company will not, and will not permit any of
their Subsidiaries directly or indirectly to, (A) engage in any business or
activity not permitted by all applicable laws and regulations, and (B) engage in
any unsafe or unsound banking practices as determined by a Governmental
Authority that is not addressed, remediated or cured by a plan of action
approved by such Governmental Authority within sixty (60) days of receipt of
notice from such Governmental Authority.

3.6 Limitations on Subsequent Registration Rights. From and after the date of
this Agreement, SBKC and the Company will not, without the prior written consent
of the Majority Holders, enter into any agreement with any holder or prospective
holder of any Equity Securities of SBKC or the Company that would provide such
holder or prospective holder with rights to register or to cause SBKC or the
Company to register any of its Equity Securities under the Securities Act, the
Exchange Act or any state securities or “blue sky” laws that (a) would permit
such holder or prospective holder to (i) include such Equity Securities in any
registration filed under Section 3 of the Registration Agreement, (ii) make a
demand registration that could result in such registration statement being
declared effective prior to the effective date of the first registration
statement in which Holders participate, or (b) are, in any individual respect or
in the aggregate, superior to those rights provided to the Holders pursuant to
the Registration Agreement.

SECTION 4

FINANCIAL COVENANTS/REPORTING

Each of SBKC and the Company covenants and agrees that so long as the Notes or
any Obligations relating thereto remain outstanding, unless Majority Holders
shall otherwise give their prior written consent, SBKC and the Company shall
perform and comply with all covenants in this Section 4.

4.1 Financial Statements and Other Reports. SBKC and the Company will maintain
and will cause each of its Subsidiaries to maintain a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP and
applicable banking regulations.

 

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(A) SEC Filings and Press Releases. Promptly upon their becoming available, SBKC
or the Company will deliver copies of (i) all financial statements, reports,
notices and proxy statements sent or made available by any Related Party to such
Person’s security holders generally, (ii) all regular and periodic reports and
all registration statements and prospectuses, if any, filed by any Related Party
with any securities exchange or with the SEC or any Governmental Authority, and
(iii) all press releases and other statements made available by any Related
Party to the public concerning developments in the business of any such Person.

(B) Events of Default. Promptly upon any executive officer of SBKC or the
Company obtaining knowledge of any of the following events or conditions, SBKC
or the Company shall deliver copies of all notices given or received by any
Related Party with respect to any such event or condition and a certificate of
an executive officer of SBKC or the Company specifying the nature and period of
existence of such event or condition and what action SBKC or the Company has
taken, is taking and proposes to take with respect thereto: (i) any condition or
event that constitutes, or which would reasonably be expected to result in, an
Event of Default or Default; (ii) any notice that any Person has given to SBKC,
the Company or any of their Subsidiaries or any other action taken with respect
to a claimed default or event or condition of the type referred to in
subsection 7.1(B); (iii) any event or condition that could reasonably be
expected to result in any Material Adverse Effect; or (iv) any default or event
of default with respect to any other Indebtedness of any Related Party.

SECTION 5

SBKC AND COMPANY REPRESENTATIONS AND WARRANTIES

To induce the Purchasers to enter into the Transaction Documents and consummate
the transactions contemplated thereby and to purchase the Initial Notes, the
Initial Warrants and the Initial SARs, SBKC and the Company represent and
warrant to the Purchasers (and on behalf of the Banks, as applicable) that the
following statements are and, as of the Closing Date, will be true, correct and
complete:

5.1 No Material Adverse Effect. Except as disclosed on Schedule 5.1, since
December 31, 2007 there have been no events or changes in facts or circumstances
affecting any Related Party which, individually or in the aggregate, have had or
could reasonably be expected to have a Material Adverse Effect and that have not
been disclosed herein, in the attached Schedules or in the SEC Documents.

5.2 No Conflicts. Except as disclosed on Schedule 5.2, the consummation of the
Related Transactions does not and will not (i) violate or conflict with any
Organizational Documents of any Related Party, (ii) violate or conflict with any
laws, rules, regulations or orders of any Governmental Authority (except such as
may be required for the registration of the Warrant Shares under the Securities
Act, the listing of such Warrant Shares for trading on Nasdaq and compliance
with the securities or Blue Sky laws of various jurisdictions, or violate,
conflict with, result in a breach of, or constitute a default (with due notice
or lapse of time or both) under any Contractual Obligation of any Related Party
except if such violations, conflicts, breaches or defaults could not reasonably
be expected to have, either individually or in the

 

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aggregate, a Material Adverse Effect or (iii) result in the creation or
imposition of any Lien upon any assets of any Related Party. No consent,
approval or authorization of, or registration, filing or declaration with, any
Governmental Authority or entity is required in connection with the Related
Transactions, other than those (x) that are set forth on Schedule 5.2 hereto
(all of which, except as otherwise disclosed on Schedule 5.2, have been
completed or obtained, as the case may be) or (y) the absence of which could not
reasonably be expected to result in a Material Adverse Effect.

5.3 Default. No Related Party is in violation of any material provision under
any loan agreement, indenture, mortgage, security agreement, lease, franchise,
permit, license or other Contractual Obligation to which it is a party or by
which any of its properties is bound, the violation of which could reasonably be
expected to result in a Material Adverse Effect. Each of the Related Parties is
paying its debts as they become due.

5.4 Organization, Powers, Capitalization and Good Standing.

(A) Organization and Powers. SBKC and the Company is or will be a “bank holding
company” under the Bank Holding Company Act of 1956, as amended, and the FICG,
and is duly registered as such with the FRB and the GDBF.

Each of the Banks is a commercial bank organized, existing and in good standing
under the laws of the State of Georgia supervised and regulated by the GDBF and
the FDIC (collectively, the “Regulatory Authorities”). Each of the Banks, after
giving effect to the transactions contemplated by this Agreement, will be “well
capitalized” for all purposes of its Regulatory Authorities.

Each Related Party is duly organized, validly existing and (if applicable) in
good standing under the laws of its jurisdiction of organization and qualified
to do business in all states where such qualification is required except where
failure to be so qualified could not reasonably be expected to have a Material
Adverse Effect. Each Related Party has all requisite corporate or organizational
power and authority to own and operate its properties, to carry on its business
as now conducted and proposed to be conducted, to enter into each Transactions
Document to which it is a party and to incur the Obligations and carry out the
Related Transactions, as applicable. This Agreement and the other Transaction
Documents and the transactions contemplated hereby and thereby and performance
by the Related Parties of their obligations hereunder and thereunder have been
duly and validly authorized by all necessary corporate or organizational action
on the part of each Related Party that is party hereto and thereto.

(B) Capitalization. The authorized Equity Securities of each Related Party as of
the Closing Date are as set forth on Schedule 5.4(B). All issued and outstanding
Equity Securities of each of SBKC and the Company were duly authorized and
validly issued, are fully paid and nonassessable, and such sales or offers of
Equity Securities prior to the date hereof were made in compliance with or were
the subject of an available exemption from the Securities Act and all other
applicable state and federal laws or regulations, or any proceedings under the
Securities Act, the Exchange Act or any state or federal laws or regulations in
respect of any such offers or sales are effectively barred by effective waivers
or statutes of limitation. All of the issued and outstanding Equity Securities
of the Company are free and clear of all Liens. The

 

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Warrants and the SARs have been duly authorized and validly issued, and the
Non-Voting Warrants, upon exchange of the SARs for such Non-Voting Warrants,
will be duly authorized and validly issued, and the Warrant Shares and the
Non-Voting Warrant Shares, upon the exercise of the Warrants and the Non-Voting
Warrants, respectively, in accordance with their terms, will be duly authorized
and validly issued, fully paid and nonassessable, and will be free and clear of
any preemptive or similar rights or any Liens. To the extent applicable, the
shares of Common Stock to be issued upon conversion of the Non-Voting Warrant
Shares will be duly authorized and validly issued, fully paid and nonassessable,
and will be free and clear of any preemptive or similar rights or any Liens. A
sufficient number of shares of Common Stock have been reserved for issuance upon
exercise of the Warrants and conversion of the Non-Voting Warrant Shares in
accordance with their terms. Promptly following receipt of the shareholder
approval contemplated in subsection 2.8(A), a sufficient number of shares of
non-voting Common Stock will be reserved for issuance upon exercise of the
Non-Voting Warrants.

(C) Subsidiaries. SBKC and the Company have no Subsidiaries other than as set
forth on Schedule 5.4(C). The issued and outstanding shares of capital stock or
other ownership interests of SBKC’s and the Company’s Subsidiaries were duly
authorized and validly issued, are fully paid and nonassessable and, except as
set forth on Schedule 5.4(C), are owned by SBKC, directly or indirectly, free
and clear of any Liens. No Equity Securities of any Subsidiary of SBKC or the
Company, other than those described above, are issued and outstanding. Except as
set forth on Schedule 5.4(C), as of the Closing Date, there are no preemptive or
other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from any Related
Party of any Equity Securities of any such entity.

(D) Binding Obligation. This Agreement is, and the other Transactions Documents
when executed and delivered will be, the legal, valid and binding obligations of
the Related Parties that are parties hereto and thereto, each enforceable
against each of such parties, as applicable, in accordance with their respective
terms, except to the extent that the enforceability thereof may be limited by
the application of bankruptcy, receivership, conservatorship, reorganization,
insolvency and similar laws affecting creditors’ rights generally and equitable
principles being applied at the discretion of a court before which any
proceeding may be brought, and to limitations on the rights to indemnity and
contribution hereunder that exist by virtue of public policy under federal and
state securities laws.

5.5 SEC Documents; Financial Statements. During the twelve (12) months prior to
the date hereof, SBKC has filed all reports and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Exchange
Act. As of their respective filing dates, the SEC Documents complied in all
material respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder. None of the SEC Documents, at the
time they were filed with the SEC, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. All of the
consolidated financial statements of SBKC included in the SEC Documents have
been or will be prepared in accordance with GAAP on a basis consistent with
prior periods and does or will present fairly, in all material respects, the
financial condition of the entities covered thereby as at the dates thereof and
the results of their operations for the periods then ended.

 

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5.6 Intellectual Property. Each Related Party owns, is licensed to use or
otherwise has the right to use, all patents, trademarks, trade names,
copyrights, technology, know-how and processes used in or necessary for the
conduct of its business as currently conducted that are material to the
condition (financial or other), business or operations of such Person
(collectively called “Intellectual Property”) and is fully protected and/or duly
and properly registered, filed or issued in the appropriate office and
jurisdictions for such registrations, filings or issuances. The use of such
Intellectual Property by the Related Parties does not and has not been alleged
by any Person to infringe on the rights of any Person. The Related Parties have
the exclusive right to use all of the Intellectual Property necessary to its
business as presently conducted, and, to the best knowledge of SBKC and the
Company, each Related Party’s use of the Intellectual Property does not infringe
on the rights of any other Person. To the best knowledge of SBKC and the
Company, no other person is infringing the rights of the Related Parties in any
of the Intellectual Property. The Related Parties own or possess all licenses,
permits, franchises, authorizations, patents, patent applications, copyrights,
service marks, trademarks and trade names, or rights thereto, that individually
or in the aggregate are material, without known conflict with the rights of
others; to the best knowledge of SBKC and the Company, no such license or
trademark has been declared invalid, been limited by order of any Governmental
Authority or by agreement, or is the subject of any infringement, interference
or similar proceeding or challenge; to the best knowledge of SBKC and the
Company, no product of the Related Parties infringes in any material respect any
license, permit, franchise, authorization, patent, copyright, service mark,
trademark, trade name or other right owned by any other Person; and to the best
knowledge of SBKC and the Company, there is no material violation by any Person
of any right of the Related Parties with respect to any patent, patent
applications, copyright, service mark, trademark, trade name or other right
owned or used by the Related Parties. The Related Parties owe no royalties,
honoraria or fees to any Person by reason of its use of the Intellectual
Property.

5.7 Employee Matters. (A) No Related Party nor any of their employees is subject
to any collective bargaining agreement, (B) no petition for certification or
union election is pending with respect to the employees of any Related Party and
no union or collective bargaining unit has sought such certification or
recognition with respect to the employees of any Related Party and (C) there are
no strikes, slowdowns, work stoppages or controversies pending or, to the best
knowledge of SBKC and the Company, threatened between any Related Party and
their employees, other than employee grievances arising in the ordinary course
of business which could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect.

5.8 Use of Proceeds; Margin Regulations. The Notes are an exempt transaction
under the Truth in Lending Act. No part of the proceeds of any Note will violate
FRB Regulations T, U or X or will be used for “buying” or “carrying” “margin
stock” within the respective meanings of such terms under FRB Regulation U as
now and from time to time hereafter in effect or for any other purpose that
violates the provisions of the regulations of the FRB.

 

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5.9 Litigation. There are no judgments, actions, charges, claims, demands,
suits, proceedings, petitions, governmental investigations or arbitrations now
pending or, to the best knowledge of SBKC and the Company after due inquiry,
threatened against any Related Party or affecting any property of any Related
Party which might individually or in the aggregate prevent or adversely affect
the transactions contemplated by this Agreement, or result in a Material Adverse
Effect. No Related Party is subject to any judgment, order or decree of any
court or other governmental agency and no Related Party has received any
opinion, memorandum or legal advice from legal counsel to the effect that it is
currently exposed, from a legal standpoint, to any liability which could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.

5.10 Brokerage. Except as set forth on Schedule 5.10, there are no rights to or
claims for broker’s, finder’s, due diligence, structuring, debt or equity
placement fees, commissions, or similar compensation payable with respect to the
consummation of the Related Transactions, other than fees payable to Holders.

5.11 Absence of Undisclosed Liabilities. Except as disclosed on Schedule 5.11,
none of the Related Parties has any obligation or liability (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due
and regardless of when asserted) required to be disclosed in a balance sheet
prepared in accordance with GAAP (including the notes thereto) arising out of
transactions entered into at or prior to the Closing, or any action or inaction
at or prior to the Closing, or any state of facts existing at or prior to the
Closing other than: (A) liabilities set forth on the balance sheet of SBKC dated
as of December 31, 2007 and included in SBKC’s Annual Report on Form 10-K for
the year ending December 31, 2007 (including any notes thereto), (B) liabilities
and obligations which have arisen after December 31, 2007 in the ordinary course
of business (none of which is a liability resulting from breach of contract,
breach of warranty, tort, infringement, claim or lawsuit, unless such liability
is either fully covered by insurance (subject to normal deductibles or
retentions) or is not, individually or in the aggregate with all such other
liabilities, material) and (C) other liabilities and obligations not expressly
prohibited hereunder.

5.12 ERISA.

(A) Except as set forth on Schedule 5.12:

(i) Multiemployer Plans. No Related Party nor any member of their Controlled
Group has any obligation to contribute to (or any other liability, including
current or potential withdrawal liability, with respect to) any Multiemployer
Plan.

(ii) Retiree Welfare Plans. No Related party nor any member of their Controlled
Group has any obligation to contribute to (or any other liability with respect
to) any plan or arrangement whether or not terminated, which provides medical,
health, life insurance or other welfare-type benefits for current or future
retired or terminated employees (except for limited continued medical benefit
coverage required to be provided under IRC Section 4980B or as required under
applicable state law).

 

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(iii) Defined Benefit Plans. No Related Party nor any member of their Controlled
Group maintains, contributes to or has any liability under (or with respect to)
any Pension Plan, whether or not terminated.

(iv) Unfunded Liability. No Plan maintained by any Related Party or any member
of their Controlled Group or to which such Person has an obligation to
contribute, or with respect to which such employer has any other liability, has
any material “unfunded liability” (i.e., accrued liabilities in excess of the
fair market value of its assets).

(v) Plan Qualification and Compliance. Each Qualified Plan has received a
favorable determination letter from the Internal Revenue Service as to the
qualification of such plan and, to the best knowledge of SBKC and the Company,
nothing has occurred since the date of such determination letter that could
reasonably be expected to adversely affect the qualification of such plan. Each
Plan has been maintained, funded and administered in compliance in all material
respects with its terms and with all applicable laws.

(vi) Prohibited Transactions. No Related Party nor any member of their
Controlled Group has any liability with respect to any non-exempt prohibited
transaction within the meaning of Section 406 of ERISA or IRC Section 4975.

(B) Except to the extent the failure of any of the following to be true and
correct, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect:

(i) During the six-consecutive-year period prior to the date of the execution
and delivery of this Agreement, (x) no ERISA Event has occurred or is expected
to occur and (y) no steps have been taken to terminate any Pension Plan. No
condition exists or event or transaction has occurred with respect to any Plan
which could result in the incurrence by any Related Party of any liability
(other than any liability to provide benefits pursuant to the terms of such
Plan), fine or penalty. No civil or criminal action is pending or, to the best
knowledge of SBKC and the Company, threatened in connection with any Plan or
against any Plan fiduciary or party in interest with respect to such Plan.

(ii) (x) All contributions (if any) have been made to each Pension Plan and
Multiemployer Plan that are required to be made by such Related Party or any
other member of the Controlled Group under the terms of the plan or of any
collective bargaining agreement or by applicable law; (y) no Related Party nor
any member of the Controlled Group has withdrawn or partially withdrawn from any
Multiemployer Plan, incurred any withdrawal liability with respect to any such
plan or received notice of any claim or demand for withdrawal liability or
partial withdrawal liability from any such plan, and no condition has occurred
which, if continued, might result in a withdrawal or partial withdrawal from any
such plan; and (z) no Related Party nor any member of the Controlled Group has
received any notice that any Multiemployer Plan is in reorganization, that
increased contributions may be required to avoid a reduction in plan

 

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benefits or the imposition of any excise tax, that any such plan is or has been
funded at a rate less than that required under IRC Section 412, that any such
plan is or may be terminated or that any such plan is or may become insolvent.

(iii) No Related Party is obligated to make payments, or is a party to an
agreement that could obligate it to make any payments, that would not be
deductible under IRC Section 280G.

5.13 Investment Company. None of the Related Parties or any Person controlling
any Related Party is an “investment company” within the meaning of the
Investment Company Act of 1940, as amended.

5.14 Regulatory Enforcement Actions. Except as described on Schedule 5.14, no
Related Party or any of their respective officers or directors is now operating
under any restrictions, agreements, memoranda, or commitments (other than
restrictions of general application) imposed by any Governmental Authority, nor
are (a) any such restrictions threatened or (b) any agreements, memoranda or
commitments being sought by any Governmental Authority.

5.15 Private Offering. No form of general solicitation or general advertising
was used by any Related Party or any representative thereof in connection with
the offer or sale of the Notes or the SBKC Securities. None of the Related
Parties, their Affiliates or any Person acting on their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would, and none of the foregoing shall
take any actions or steps that would, require registration of the offer and sale
of any of the Notes or SBKC Securities under the Securities Act or any state
securities or “blue sky” laws.

5.16 Environmental Matters. Except as described on Schedule 5.16:

(A) The property, assets and operations of each Related Party are and so long as
the same have been owned or operated by such Person, (i) have been, in
compliance with all applicable Environmental Laws, (ii) there are no Polluting
Substances stored or otherwise located in, on or under any of the property or
assets of any Related Party, including the groundwater, except in compliance
with applicable Environmental Laws, and (iii) to the knowledge of the Company,
there have been no releases or threatened releases of Polluting Substances in,
on or under any property adjoining any of the property or assets of any Related
Party or affecting the assets or properties of any Related Party, in each case
including the groundwater, which have not been remediated to the satisfaction of
the appropriate governmental authorities in each case of clauses (i), (ii) and
(iii) of this subsection 5.16(A) that could reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect.

(B) None of the property, assets or operations of any Related Party is the
subject of any Governmental Authority, federal, state, foreign or local
investigation evaluating whether (i) any remedial action is needed to respond to
a release or threatened release of any Polluting Substances by any Related Party
into the environment or (ii) any release or threatened release of any Polluting
Substances into the environment is in contravention of any

 

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Environmental Law in each case of clauses (i) and (ii) of this subsection
5.16(B) that could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.

(C) No Related Party has received any notice or claim, and there are not pending
or, to the knowledge of the Company, threatened lawsuits or proceedings against
any Related Party, with respect to violations of an Environmental Law or in
connection with any release or threatened release of any Polluting Substances
into the environment, and, except as set forth in Schedule 5.16, no Related
Party is or was the owner or operator of any property which (i) pursuant to any
Environmental Law has been placed on any list of Polluting Substances disposal
sites, including, without limitation, the “National Priorities List” or “CERCLIS
List,” (ii) has or had any subsurface storage tanks located thereon, or (iii) is
or has ever been used as or for a waste disposal facility, a mine, gasoline
service station or, other than for petroleum substances stored in the ordinary
course of business, a petroleum storage facility in each case of clauses (i),
(ii) and (iii) of this subsection 5.16(C) that could reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect.

(D) No Related Party has any present or contingent liability in connection with
the presence either on or off the property of any Related Party of any Polluting
Substances in the environment or any release or threatened release of any
Polluting Substances into the environment; in each case that could reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect.

For the purposes of this Section 5.16, the term “property” of Related Parties
includes, without limitation, property owned, operated or leased by any Related
Party.

5.17 Rights in Properties. Each of the Related Parties, has good and valid title
to all property (real, personal and mixed) owned by it, free and clear of all
Liens except those Liens, that are not materially burdensome and have not had
and will not result in a Material Adverse Effect. All property (real, personal
and mixed) held under leases by each of the Related Parties is held under valid,
subsisting and enforceable leases with only such exceptions as in the aggregate
are not materially burdensome and have not and will not result in a Material
Adverse Effect. There exists no default under any provision of any lease which
would permit the lessor thereunder to terminate any such lease or to exercise
any rights under such lease which, individually or together with all other such
defaults, could have a Material Adverse Effect.

5.18 Taxes. SBKC and the Company has filed all material tax returns (federal,
state, and local) required to be filed with respect to it or any other Related
Party, including, without limitation, information returns, reports and forms,
and has paid all of its tax liabilities, other than immaterial amounts and taxes
that are being contested by SBKC or the Company in good faith by appropriate
actions or proceedings diligently pursued, and for which adequate reserves in
conformity with GAAP with respect thereto have been established to the
reasonable satisfaction of the Purchasers. Neither SBKC nor the Company knows of
any pending investigation of any of the Related Parties by any taxing authority
or pending but unassessed tax liability of any Related Party. Neither SBKC nor
the Company has made presently any effective waiver extending any applicable
statute of limitations, and neither SBKC nor the Company is a party to any
tax-sharing agreement.

 

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5.19 Insurance. Each of the Related Parties maintains insurance on their
respective properties and businesses, including business interruption and
directors and officers’ insurance with insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which it is engaged; and none of the Related
Parties has reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at a
comparable cost to that currently paid.

5.20 Material Contracts. All material contracts to which each of the Related
Parties are a party and which would be required to be filed pursuant to the
Exchange Act, have been duly authorized, executed and delivered, constitute
valid and binding agreements of such Related Party and are enforceable against
it in accordance with the terms thereof, except as enforceability thereof may be
limited by the application of bankruptcy, receivership, conservatorship,
reorganization, insolvency and similar laws affecting creditors’ rights
generally and equitable principles being applied at the discretion of a court
before which any proceeding may be brought, and to limitations on the rights to
indemnity and contribution hereunder that exist by virtue of public policy under
federal and state securities laws. None of the Related Parties has received
notice or been made aware that any other party to such a contract is in breach
of or default under any such contract.

5.21 Compliance with Laws. Except as set forth in Schedule 5.21, each Related
Party is in material compliance with the requirements of all applicable laws,
rules, regulations and orders of any Governmental Authority including, without
limitation, (i) all regulations and orders of, or agreements with, the FRB, the
GDBF and the FDIC, and (ii) state and federal laws governing the offer and
extension of credit, including, without limitation, consumer credit and usury
laws, the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act,
the Bank Secrecy Act, and the USA Patriot Act; and (iii) all applicable laws,
regulations and orders related to the offer and sale of investments and
insurance and advice related thereto, and none of the Related Parties have
received any communication from any Governmental Authority asserting that it is
not in compliance with any law, regulation or order. Each Related Party
maintains all material licenses, qualifications and permits necessary to operate
its business. All transactions and contracts by and among the Related Parties
and their respective directors, officers and Affiliates comply in all material
respects with Federal Reserve Act, including Sections 23A and 23B thereof, FRB
Regulation W and similar rules and regulations of and any agreements with, and
commitments to, orders, rulings, directives and decrees of, the FDIC and the
GDBF and all other applicable Laws, orders and permits, licenses, franchises,
orders, approvals, consents and authorizations of Governmental Authorities.

5.22 Call Reports. Each of the Banks’ call reports (“Call Reports”) submitted to
its primary federal and state regulators conform in all material respects to the
Federal Financial Institutions Examination Council’s requirements for Call
Reports and all such Call Reports conform to the requirements of Section 37 of
the FDI Act and applicable regulations thereunder.

5.23 Internal Accounting Controls. Each Related Party maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed

 

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in accordance with management’s general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain accountability for assets,
(iii) access to assets is permitted only in accordance with management’s general
or specific authorizations, (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences, and (v) the internal accounting controls
otherwise comply with all applicable federal and state banking, securities and
other applicable laws, rules and regulations, including the Foreign Corrupt
Practices Act and the FDI ACT.

SECTION 6

PURCHASER REPRESENTATIONS; TRANSFER RESTRICTIONS

6.1 Authorization. Each of the Purchasers has full power and authority to enter
into this Agreement and the other Transaction Documents to which it is a party,
and each such agreement constitutes its valid and legally binding obligation,
enforceable in accordance with its terms, except to the extent enforceability
may be limited by the application of bankruptcy, receivership, conservatorship,
reorganization, insolvency and similar laws affecting creditors’ rights
generally and equitable principles being applied at the discretion of a court
before which any proceeding may be brought, and to limitations on the rights to
indemnity and contribution hereunder that exist by virtue of public policy under
federal and state securities laws.

6.2 Purchase for Own Account. Each of the Purchasers is acquiring the Notes and
the SBKC Securities for its own account and not with a view to the distribution
of such securities.

6.3 Investment Experience. Each of the Purchasers is an experienced investor in
securities of financial services companies and acknowledges that it can bear the
economic risk of its investment, and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the securities to be sold in accordance with this
Agreement.

6.4 Accredited Investor. Each of the Purchasers is an “accredited investor”
within the meaning of SEC Rule 501 of Regulation D under the Securities Act.

6.5 Investment Process. Each of the Purchasers has independently evaluated its
investment decision; followed its own investment procedures; conducted diligence
and received information it needs for an informed decision.

6.6 Restricted Securities. Each of the Purchasers understands that the
securities it is purchasing as contemplated hereby are “restricted securities”
under the federal securities laws and that such securities may be resold without
registration under the Securities Act only in certain limited circumstances. In
the absence of an effective registration statement covering the securities or an
available exemption from registration under the Securities Act, the securities
must be held indefinitely. In this connection, each Purchaser represents that it
is familiar with SEC Rule 144 and Rule 144A, as presently in effect, and
understands the resale limitations imposed thereby and by the Securities Act.

 

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6.7 Legends.

(A) (i) The Purchasers agree to the imprinting, so long as is required by this
Section 6.7, of a legend on the Notes purchased pursuant to this Agreement in
substantially the following form:

THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR APPLICABLE STATE LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE DISTRIBUTED FOR VALUE UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND/OR SUCH LAWS COVERING THIS INSTRUMENT
OR THE COMPANY, UPON ITS REQUEST, RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER
OF THIS INSTRUMENT STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT, OFFER, PLEDGE
OR OTHER DISTRIBUTION FOR VALUE IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF SUCH ACT AND APPLICABLE STATE LAWS.

THIS SUBORDINATED NOTE IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IT IS NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY FEDERAL AGENCY.

(ii) The Purchasers agree to the imprinting, so long as required by the terms of
the Initial Warrants, of a legend on the Warrants and the Warrant Shares
purchased pursuant to this Agreement in substantially the form set forth in such
Initial Warrants.

(iii) The Purchasers agree to the imprinting, so long as required by the terms
of the Initial SARs, of a legend on the SARs purchased pursuant to this
Agreement in substantially the form set forth in such Initial SARs.

(iv) To the extent applicable, the Purchasers agree to the imprinting, so long
as required by the terms of the Non-Voting Warrants, of a legend on the
Non-Voting Warrants received upon exchange of the SARs and Non-Voting Warrant
Shares acquired upon the exercise of such Non-Voting Warrants in substantially
the form set forth in the form of Non-Voting Warrants.

(B) Certificates evidencing the Notes, Warrants, Warrant Shares, SARs and, to
the extent applicable, the Non-Voting Warrants and the Non-Voting Warrant Shares
shall not contain any legend (including the legends described in subsection
6.7(A)), (i) while a registration statement covering the resale of such security
is effective under the Securities Act, or (ii) following any sale of such
securities pursuant to Rule 144, or (iii) if such securities are eligible for
sale under Rule 144(k), or (iv) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the SEC). SBKC and the Company, as
applicable, shall cause their counsel to issue a legal opinion to their transfer
agent if required by such transfer agent to effect the removal of the legend
hereunder. SBKC and the Company, as applicable, agree that at such time

 

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as such legend is no longer required under this subsection 6.7(B), it will, no
later than five (5) Business Days following the delivery by the Holder of such
security to SBKC or the Company, as applicable, or their transfer agent of a
certificate representing securities issued with a restrictive legend, deliver or
cause to be delivered to the Holder of such security a certificate representing
such securities that is free from all restrictive and other legends. Neither
SBKC nor the Company, as applicable, may make any notation on its records or
give instructions to its transfer agent that enlarge the restrictions on
transfer set forth in this Section 6.7.

6.8 Transfer Restrictions. For a period of one (1) year following the Closing
Date, the Purchasers shall not sell, transfer, assign or otherwise dispose of
the Notes, the Warrant, any of the Warrant Shares acquired by the exercise of
such Warrant or the SARs; provided, however, that the SARs may be exchanged for
Non-Voting Warrants as provided in subsection 1.1(C)(ii), in which case, the
remaining term, if any, of the initial one (1) year restricted period shall
apply to the Non-Voting Warrants and Non-Voting Warrant Shares. After one
(1) year following the date of this Agreement, the Notes, the Warrants, the
Warrant Shares and the SARs, and to the extent applicable, the Non-Voting
Warrants and Non-Voting Warrant Shares, may be sold, assigned, transferred or
otherwise disposed of, in whole or in part, by the holder thereof, in accordance
with applicable securities laws and subject to the provisions of this Agreement,
the Warrants, the Registration Agreement, the SARs and the Non-Voting Warrants,
respectively.

6.9 Sufficient Funds. As of the Closing Date, the Purchasers shall have
sufficient funds to make full payment for the Initial Notes.

SECTION 7

DEFAULT, RIGHTS AND REMEDIES

7.1 Event of Default. “Event of Default” shall mean the occurrence or existence
of any one or more of the following:

(A) Payment. (i) Failure to pay any installment or other payment of principal or
interest of any of the Notes, when due, or (ii) failure to pay any other amount
due under this Agreement or any of the other Transaction Documents (including,
without limitation, the cash payment owed in connection with the exercise of one
or more of the SARs); or

(B) Default in Other Agreements. (i) Failure of any Related Party to pay when
due or within any applicable grace period any principal or interest on
Indebtedness having a principal balance in excess of $2,500,000 or (ii) breach
or default of any Related Party, or the occurrence of any condition or event,
with respect to any Indebtedness of such Related Party, if the effect of such
breach, default or occurrence is to cause such Indebtedness having an aggregate
principal amount in excess of $2,500,000 to become or be declared due prior to
their stated maturity; or

(C) Breach of Certain Provisions. Failure of the Company or SBKC, as the case
may be, to perform or comply with the terms and conditions contained in
Section 2.3, Section 2.7, Sections 3.1 through 3.5 and Section 4.1; or

 

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(D) Breach of Warranty. Any representation, warranty, certification or other
statement made by any Related Party in any of the Transaction Documents or in
any statement or certificate at any time given by such Person in writing
pursuant to or in connection with any of the Transaction Documents is false in
any material respect on the date made or, if such representation, warranty,
certification or other statement relates to a date other than the date as of
which made, then as of such date, which in either case could reasonably be
expected to result in a Material Adverse Effect; or

(E) Other Defaults Under Transaction Documents. Any Related Party defaults in
the performance of or compliance with any material term contained in this
Agreement or the other Transaction Documents (other than occurrences described
in other provisions of this Section 7.1 for which a different grace or cure
period is specified or which constitute immediate Events of Default) and such
default is not remedied or waived within thirty (30) days after the earlier of
(i) receipt by the Company of notice from Majority Holders of such default or
(ii) actual knowledge of an executive officer of the Company or any other
Related Party of such default; or

(F) Bankruptcy.

(i) A court having jurisdiction in the premises shall enter a decree or order
for relief in respect of the Company in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator or
other similar official of the Company or for any substantial part of its
property, or orders the winding-up or liquidation of its affairs and such
decree, appointment or order shall remain unstayed and in effect for a period of
sixty (60) days; or

(ii) The Company shall commence a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any
such law, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of the Company or of any substantial part of its property, or
shall make any general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or

(iii) A court or administrative or governmental agency or body shall enter a
decree or order for the appointment of a receiver of a Major Depository
Institution Subsidiary or all or substantially all of its property in any
liquidation, insolvency or similar proceeding with respect to such Major
Depository Institution Subsidiary or all or substantially all of its property;
or

(iv) A Major Depository Institution Subsidiary shall consent to the appointment
of a receiver for it or all or substantially all of its property in any
liquidation, insolvency or similar proceeding with respect to it or all or
substantially all of its property.

 

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(G) Dissolution. Any order, judgment or decree is entered against SBKC, the
Company or a Major Depository Institution Subsidiary decreeing the dissolution
or split up of SBKC, the Company or a Major Depository Institution Subsidiary
and such order remains undischarged or unstayed for a period in excess of thirty
(30) days; or

(H) Solvency. SBKC, the Company or a Major Depository Institution Subsidiary
ceases to be solvent or admits in writing its present or prospective inability
to pay its debts as they become due or is notified that it is considered an
institution in “troubled condition” within the meaning of 12 U.S.C.
Section 1831i and the regulations promulgated thereunder; or

(I) Injunction. SBKC, the Company or a Major Depository Institution Subsidiary
is enjoined, restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any part of its
business for more than thirty (30) days unless such event or circumstance could
not reasonably be expected to have a Material Adverse Effect; or

(J) Invalidity of Transaction Documents. Any of the Transaction Documents for
any reason, other than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to be null and
void by any court of law having jurisdiction over such matters, or any Related
Party denies that it has any further liability under any Transaction Documents
to which it is party, or gives notice to such effect.

7.2 Acceleration and other Remedies.

(A) Non-Bankruptcy Defaults. When any Event of Default other than those set
forth in subsection 7.1(F) has occurred and is continuing, the Majority Holders
may, by written notice to the Company enforce any and all rights and remedies
available to the Holders under the Transaction Documents or applicable law;
provided, however, the Holders may not accelerate payment of the principal of,
or the accrued interest on, the Notes.

(B) Bankruptcy Defaults. When any Event of Default described in subsection
7.1(F) has occurred and is continuing, then the Notes, including both principal
and interest, and all fees, charges and other Obligations payable hereunder and
under the Transaction Documents, shall immediately become due and payable
without presentment, demand, protest or notice of any kind. In addition, the
Holders may exercise any and all remedies available to it under the Transaction
Documents or applicable law.

(C) Tier 2 Capital Characterization. If the Company receives a written
notification from the FRB that the Notes no longer constitute Tier 2 Capital of
the Company, other than due to the limitation imposed by the second sentence of
12 C.F.R. Section 250.166(e), which limits the capital treatment of subordinated
debt during the five years immediately preceding the maturity date of the
subordinated debt and the Notes and this Agreement cannot be restructured so as
to qualify the Notes for Tier 2 capital treatment as provided in Section 2.11,
and if thereafter any Event of Default shall occur under Section 7.1, the
Majority Holders may declare the Notes and any other amounts due Holders
hereunder immediately due and payable, whereupon the Notes and such other
amounts payable hereunder shall immediately become due and payable, without
presentments, demand, protest or notice of any kind.

 

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7.3 Suits for Enforcement. In case any one or more Events of Default shall have
occurred and be continuing, unless such Events of Default shall have been waived
in the manner provided in Section 10.2 hereof, Majority Holders, subject to the
terms of the subordination provisions of the Note, may proceed to protect and
enforce their rights under this Section 7 by suit in equity or action at law. It
is agreed that in the event of such action, or any action between the Holders of
the Notes and SBKC or the Company (including its officers and agents) in
connection with a breach or enforcement of this Agreement, the Holders of the
Notes shall be entitled to receive all reasonable fees, costs and expenses
incurred, including without limitation such reasonable fees and expenses of
attorneys (whether or not litigation is commenced) and reasonable fees, costs
and expenses of appeals.

SECTION 8

CONDITIONS TO CLOSING

The obligations of the Purchasers to purchase the Initial Notes, the Initial
Warrants and the Initial SARs on the Closing Date are subject to the
satisfaction of all conditions precedent set forth in this Section 8, all in
form and substance and in a manner reasonably satisfactory to the Purchasers.

8.1 Conditions to Closing of the Purchasers.

(A) The documents and other items listed below shall be in form and substance
reasonably satisfactory to the Purchasers, in quantities designated by the
Purchasers (except for the Initial Notes and the SBKC Securities, of which only
the originals shall be signed) and shall be duly authorized, executed and
delivered to the Purchasers on or before the Closing Date and shall be in full
force and effect as of the Closing Date:

(1) This Agreement and all Schedules and Exhibits hereto;

(2) The Initial Notes;

(3) The Initial Warrants;

(4) The Initial SARs;

(5) The Registration Agreement;

(6) The closing fee to be paid to the Purchasers pursuant to
subsection 1.2(F)(i) hereof;

(7) Certified copies of all Organizational Documents, including, but not limited
to, as applicable, all the certificates or articles of incorporation or
formation, bylaws, partnership agreements, operating agreements or other
organizational documents of each Related Party together with good standing
certificates or their equivalents from the respective states of organization and
the respective states in which the principal

 

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places of business of each is located and from all states in which the
activities of such Persons require them to be qualified and/or licensed to do
business, each to be dated a recent date prior to the Closing Date;

(8) Resolutions of each of the Boards of SBKC and the Company authorizing and
approving the execution, delivery and performance of each Transaction Document
to which such Person is a party, certified as of the Closing Date by its
corporate secretary as being in full force and effect without modification or
amendment;

(9) Signature and incumbency certificates of the officers of SBKC and the
Company executing the Transaction Documents;

(10) Copies of each required consent, waiver, approval and notice set forth on
Schedule 5.2 hereto;

(11) The written opinion of Alston & Bird LLP, counsel for SBKC and the Company,
dated as of the Closing Date, in the form attached hereto as Exhibit H;

(12) Pay-off letters from each holder of Indebtedness set forth in
subsection 2.2(A) and (B) in form and substance reasonably satisfactory to the
Purchasers; and

(13) Such other documents as the Purchasers may reasonably request.

(B) No event shall have occurred and be continuing or would result from
consummation of the Related Transactions that would constitute a Default or an
Event of Default.

(C) The representations and warranties contained in Section 5 of this Agreement
and in the Transaction Documents shall be true, correct and complete on the
Closing Date, and each of SBKC and the Company shall have delivered a
certificate certifying thereto, in form and substance satisfactory to the
Purchasers, executed by duly authorized officers of SBKC and the Company.

(D) SBKC and the Company shall have performed and complied with all agreements
or conditions required by this Agreement to be performed and complied with by it
as of the Closing Date.

(E) As determined by the Purchasers in good faith in their sole discretion, no
Material Adverse Effect shall have occurred at any time or times subsequent to
December 31, 2007, except as otherwise disclosed on Schedule 5.1.

(F) No action, claim, arbitration, litigation or governmental proceeding shall
be pending or, to the knowledge of SBKC or the Company, threatened against any
Related Party or any officer, director or executive (as applicable) thereof
(i) in connection with this Agreement which, in the sole opinion of the
Purchasers in good faith, is deemed material, or (ii) which, if adversely
determined, would, in the sole opinion of the Purchasers in good faith have a
Material Adverse Effect.

 

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(G) No legislation, injunction, writ, restraining order or any other order of
any nature relating to the transactions contemplated hereby or otherwise
materially adverse to SBKC or the Related Parties shall be instituted,
threatened or proposed before any court, arbitrator, governmental agency or
legislative body.

(H) All corporate and other proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transactions
shall be reasonably satisfactory in form and substance to the Purchasers, and
the Purchasers shall have received such other certificates, information and
reports as it shall reasonably request.

(I) The FRB and the applicable Governmental Authorities shall have confirmed to
the satisfaction of the Purchasers that (i) the transactions contemplated in the
Transaction Documents do not require any prior regulatory approval, (ii) none of
the Purchasers or their Affiliates will, as a result of the consummation of the
transactions contemplated by this Agreement, become a bank holding company or be
deemed or presumed to be in control of any of the Related Parties and (iii) the
Notes will fully constitute Tier 2 Capital.

8.2 Conditions to Closing of SBKC and the Company. The obligations of the
Company to sell the Initial Notes and the obligations of SBKC to issue the
Initial Warrants and the Initial SARs on the Closing Date are subject to the
satisfaction of all conditions precedent set forth in this Section 8.2, all in
form and substance and in a manner reasonably satisfactory to the Related
Parties.

(A) The documents and other items listed below shall be in form and substance
reasonably satisfactory to SBKC, and in quantities designated by SBKC (except
for the Initial Notes and the SBKC Securities, of which only the originals shall
be signed) and shall be duly authorized, executed and delivered to SBKC on or
before the Closing Date and shall be in full force and effect as of the Closing
Date.

(i) This Agreement and all Schedules and Exhibits hereto;

(ii) The Initial Warrants;

(iii) The Initial SARs;

(iv) The Registration Agreement; and

(v) Signature and incumbency certificates of the officers of the Purchasers
executing the Transaction Documents.

(B) Each Purchaser shall have delivered the purchase price for the SBKC
Securities as specified in Exhibit A hereto.

 

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(C) The representations and warranties contained in Section 6 of this Agreement
shall be true, correct and complete in all material respects on the Closing
Date, and the Purchasers shall have delivered a certificate certifying thereto,
in form and substance satisfactory to the SBKC, executed by a duly authorized
officer of the Purchasers.

(D) The Purchasers shall have performed and complied with all agreements or
conditions required by this Agreement to be performed and complied with by it as
of the Closing Date.

SECTION 9

SUBORDINATION

The Indebtedness of the Company evidenced by this Agreement and the Notes,
including the principal, interest and premium, if any, shall be subordinated and
junior in right of payment to the holders of the Senior Indebtedness. In the
event that any default occurs in the payment of principal, interest or any
premium, if any, on any Senior Indebtedness and, as a result thereof, (i) a
judicial proceeding shall have been instituted with respect to such defaulted
payment or (ii) the holders of the Senior Indebtedness can accelerate the Senior
Indebtedness and such default is continuing, then no payment shall be made by
the Company to the Holders on account of the principal, interest and premium, if
any, on the Notes. In the event of any insolvency, receivership,
conservatorship, reorganization, readjustment of debt, marshaling of assets and
liabilities or similar proceeding or any liquidation or winding up of, or
relating to, the Company, whether voluntary or involuntary, all Senior
Indebtedness shall be entitled to be paid in full before any payment shall be
made on account of the Obligations under this Agreement or the Notes. In the
event of any such proceedings, after payment in full of all sums owing on the
Senior Indebtedness, the Holders of the Notes shall be entitled to be paid from
the remaining assets of the Company the unpaid principal, interest and premium,
if any, and all Obligations under this Agreement before any payment or other
distribution, whether in cash, property or otherwise, shall be made on account
of any capital stock or any obligations of the Company ranking junior to the
Notes and the Obligations under this Agreement. Subject to the payment in full
of the Senior Indebtedness, the Holders of the Notes shall be subrogated to the
rights of the holders of the Senior Indebtedness to receive payment or
distributions of cash, property or other securities of the Company applicable to
the Senior Indebtedness until all amounts on the Notes and all Obligations
hereunder have been paid in full.

The provisions of this paragraph are intended solely for the purpose of defining
the relative rights of the Holders of the Notes, on the one hand, and the
holders of the Senior Indebtedness, on the other hand, and nothing herein shall
impair the obligation of the Company, which is absolute and unconditional, to
pay the principal, interest and premium, if any, on the Notes.

 

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SECTION 10

MISCELLANEOUS

10.1 Indemnities. In addition to and without limiting the terms of any other
provision of this Agreement, SBKC and the Company agree to indemnify, pay and
hold each Holder and their respective officers, directors, employees, partners,
agents and attorneys (the “Indemnitees”) harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs and expenses (including all reasonable fees and expenses of
counsel to such Indemnitees) of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Indemnitees or any of them by
an unrelated third party arising out of claims asserted against the Indemnitees
or any of them as a result of such Indemnitees being parties to this Agreement
or the transactions consummated pursuant to this Agreement or otherwise relating
to any of the Related Transactions; provided, that the Company shall have no
obligation to an Indemnitee hereunder with respect to liabilities to the extent
resulting from the gross negligence or willful misconduct of such Indemnitee as
determined by a court of competent jurisdiction or in binding arbitration. If
and to the extent that the foregoing undertaking may be unenforceable for any
reason, SBKC and the Company agree to make the maximum contribution to the
payment and satisfaction thereof which is permissible under applicable law;
provided further that this indemnity provision shall not apply to any third
party claim against Indemnitees from any of the Indemnitees’ Affiliates,
investors, limited partners, managers, retired managers, directors, former
directors, partners, retired partners, members, retired members, shareholders or
any of their family members. This Section 10.1 and all other indemnification
provisions contained within the Transaction Documents shall survive the
termination of this Agreement.

10.2 Amendments and Waivers. Except as otherwise provided herein, no amendment,
modification, termination or waiver of any provision of this Agreement, the
Notes, the SBKC Securities or any of the other Transaction Documents, or consent
to any departure by any Related Party therefrom, shall in any event be effective
unless the same shall be in writing and signed by Majority Holders and the
applicable Related Party; provided, that no amendment, modification, termination
or waiver shall, unless in writing and signed by all Holders, do any of the
following: (A) reduce the principal of or the rate of interest on any Note or
the fees hereunder; (B) extend any date fixed for any payment of principal,
interest or fees; (C) change the definition of the term Majority Holders or the
percentage of Holders which shall be required for Holders to take any action
hereunder; (D) amend or waive this Section 10.2 or the definitions of the terms
used in this Section 10.2 insofar as the definitions affect the substance of
this Section 10.2; or (E) consent to the assignment, delegation or other
transfer by any Related Party of any of its rights and obligations under any
Transaction Documents. Each amendment, modification, termination or waiver shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on the Company or any other Related
Party in any case shall entitle any Related Party to any other or further notice
or demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this Section 10.2
shall be binding upon each Holder of the Notes and SBKC Securities at the time
outstanding, each future Holder of the Notes and SBKC Securities and, if signed
by a Related Party, on such Related Party.

 

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10.3 Notices. Any notice or other communication required hereunder shall be in
writing addressed to the respective party as set forth below and may be
personally served, telecopied, sent by overnight courier service or U.S. mail
and shall be deemed to have been given: (A) if delivered in person, when
delivered; (B) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. Eastern Standard Time or, if not,
on the next succeeding Business Day (in either case to the extent electronic
confirmation of receipt is received); (C) if delivered by overnight courier, one
(1) Business Day after delivery to the courier properly addressed; or (D) if
delivered by U.S. mail, upon receipt.

Notices shall be addressed as follows:

If to any Related Party:

c/o Security Bank Corporation

4219 Forsyth Road

Macon, GA 31210

Attention: H. Averett (“Rett”) Walker

Telecopy: (478) 722-6250

With a copy (which shall not constitute notice) to:

Alston & Bird LLP

1201 West Peachtree Street

Atlanta, Georgia 30309

Attention: Randolph A. Moore, III

Telecopy: (404) 253-8340

If to any Holder:

To the address set forth on Exhibit A hereto or to such other address as shall
be designated in a written notice to SBKC.

10.4 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay
on the part of any Holder to exercise, nor any partial exercise of, any power,
right or privilege hereunder or under any other Transaction Document shall
impair such power, right, or privilege or be construed to be a waiver of any
Default or Event of Default. All rights and remedies existing hereunder or under
any other Transaction Documents are cumulative to and not exclusive of any
rights or remedies otherwise available.

10.5 Marshaling; Payments Set Aside. No Holder shall be under any obligation to
marshal any assets in payment of any or all of the Obligations. To the extent
that the Company makes payment(s) or any Holder exercises its right of set-off,
and such payment(s) or the proceeds of such set-off are subsequently
invalidated, declared to be fraudulent or preferential, set aside, or required
to be repaid by anyone, then to the extent of such recovery, the Obligations or
part thereof originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such set-off had not occurred.

 

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10.6 Severability. The invalidity, illegality, or unenforceability in any
jurisdiction of any provision under the Transaction Documents shall not affect
or impair the remaining provisions in the Transaction Documents.

10.7 Holders’ Obligations Several; Independent Nature of Holders’ Rights. The
obligation of each Holder hereunder is several and not joint and no Holder shall
be responsible for the obligation or commitment of any other Holder hereunder.
In the event that any Holder at any time should fail to purchase a Note or SBKC
Securities as herein provided, the Holders, or any of them, at their sole
option, may purchase the Note or SBKC Security that was to have been purchased
by the Holder so failing to make such purchase. Nothing contained in any
Transaction Documents and no action taken by any Holder pursuant hereto or
thereto shall be deemed to constitute Holders to be a partnership, an
association, a joint venture or any other kind of entity. The amounts payable at
any time hereunder to each Holder shall be separate and independent debts.

10.8 Headings. Section and subsection headings are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purposes or be given substantive effect.

10.9 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN SECTIONS 5-1401 AND
5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK).

ANY ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT SHALL BE BROUGHT
EXCLUSIVELY IN ANY STATE OR FEDERAL COURT IN NEW YORK CITY, NEW YORK. THE
PARTIES WAIVE ANY RIGHT TO A JURY TRIAL.

THIS AGREEMENT, THE TRANSACTION DOCUMENTS AND ALL TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY ARE SUBJECT TO PROVISIONS OF THE SECURITIES ACT, AND SHALL BE
GOVERNED THEREBY TO THE EXTENT OF ANY CONFLICT THEREWITH.

10.10 Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, that no Related Party may assign any of its rights or obligations
hereunder without the written consent of all Holders.

10.11 No Fiduciary Relationship; Limited Liability. No provision in the
Transaction Documents and no course of dealing between the parties shall be
deemed to create any fiduciary duty owing to any Related Party by any Holder.
SBKC and the Company agree that no Holder shall have liability to SBKC or the
Company (whether sounding in tort, contract or otherwise) for losses suffered by
SBKC or the Company in connection with, arising out of, or in any way

 

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related to the transactions contemplated and the relationship established by the
Transaction Documents, or any act, omission or event occurring in connection
therewith, unless and only to the extent that it is determined that such losses
resulted from the gross negligence or willful misconduct of such Holder as
determined by a court of competent jurisdiction or in binding arbitration. No
Holder shall have any liability with respect to, and SBKC and the Company hereby
waive, release and agree not to sue for or seek recovery of, any special,
indirect or consequential damages suffered by SBKC or the Company in connection
with, arising out of, or in any way related to the Transaction Documents or the
transactions contemplated thereby.

10.12 Construction. The Purchasers, SBKC and the Company acknowledge that each
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review the Transaction Documents with its legal
counsel and that the Transaction Documents shall be construed as if jointly
drafted by the Purchasers, SBKC and the Company.

10.13 Confidentiality. The Purchasers agree to use their best efforts to keep
any confidential information delivered pursuant to the Transaction Documents and
not to use or disclose such information to Persons other than those employed by
or engaged by the Purchasers and those employed by or engaged by the Purchasers’
assignees or participants, or potential assignees or participants. This
Section 10.13 shall not apply to disclosures required to be made by the
Purchasers to any regulatory or Governmental Authority or pursuant to legal
process; provided, that unless prohibited by law or process, the Purchasers
shall use commercially reasonable efforts to notify the Person whose
confidential information is to be disclosed and to cooperate in the efforts of
such Person to limit or prohibit disclosure. The obligations of the Purchasers
under this Section 10.13 shall be in addition to and shall not supersede and
replace the obligations of the Purchasers under any confidentiality agreement in
respect of this financing executed and delivered by the Purchasers prior to the
date hereof.

10.14 CONSENT TO JURISDICTION. EACH OF SBKC AND THE COMPANY HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN NEW YORK CITY, NEW
YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
TRANSACTION DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH OF SBKC AND THE
COMPANY EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID
COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS. IN ANY LITIGATION, TRIAL,
ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OF THE OTHER TRANSACTION DOCUMENTS, ALL DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS OF SBKC AND THE COMPANY OR OF ITS AFFILIATES SHALL BE DEEMED TO BE
EMPLOYEES OR MANAGING AGENTS OF THE COMPANY FOR PURPOSES OF ALL APPLICABLE LAW
OR COURT RULES REGARDING THE PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY
(WHETHER IN A DEPOSITION, AT TRIAL OR OTHERWISE). EACH OF SBKC AND THE COMPANY
AGREES THAT ANY HOLDER’S COUNSEL IN ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY
EXAMINE ANY OF THESE INDIVIDUALS AS IF UNDER CROSS-EXAMINATION AND THAT ANY
DISCOVERY DEPOSITION OF ANY OF THEM MAY BE USED IN THAT

 

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PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION. EACH OF SBKC AND THE COMPANY IN
ANY EVENT WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH
DISPUTE RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY ANY
HOLDER, ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM)
OR OTHER THINGS UNDER THEIR CONTROL AND RELATING TO THE DISPUTE.

10.15 WAIVER OF JURY TRIAL. EACH OF SBKC AND THE COMPANY AND EACH HOLDER HEREBY
WAIVES THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS.
EACH OF SBKC, THE COMPANY AND EACH HOLDER ACKNOWLEDGES THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER TRANSACTION
DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. EACH OF SBKC, THE COMPANY AND EACH HOLDER REPRESENTS AND
WARRANTS THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS.

10.16 Survival of Warranties and Certain Agreements. Unless otherwise provided
by their terms, the representations and warranties made herein shall survive the
execution and delivery of this Agreement for a period of two (2) years from the
date hereof (except for Section 5.4, which shall survive indefinitely);
provided, however, that the representations and warranties made herein shall be
used for determining the occurrence or existence of an Event of Default for as
long as any of the Notes are outstanding. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements set forth in
Sections 1.5, 1.6 and 10.1 shall survive the repayment of the Obligations and
the termination of this Agreement. The covenants and agreements of SBKC and the
Company, as applicable, shall exist and remain in effect to the extent and as
provided in the preamble paragraphs of each of Section 2, Section 3 and
Section 4 of this Agreement.

10.17 Entire Agreement. This Agreement, the Notes, the Warrants, the SARs and
the other Transaction Documents embody the entire agreement among the parties
hereto and supersede all prior commitments, agreements, representations, and
understandings, whether oral or written, relating to the subject matter hereof,
and may not be contradicted or varied by evidence of prior, contemporaneous or
subsequent oral agreements or discussions of the parties hereto.

10.18 Counterparts; Effectiveness. This Agreement and any amendments, waivers,
consents or supplements may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all of which
counterparts together shall constitute but one in the same instrument. This
Agreement shall become effective upon the execution of a counterpart hereof by
each of the parties hereto.

 

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10.19 No Control by the Purchasers; Short Sales. It is expressly understood that
the Purchasers shall not, and shall not be deemed to, own or control directly or
indirectly, more than 9.9% of any class of voting stock of the SBKC, the Company
or any Bank or more than 24.9% of any of SBKC’s, the Company’s or any Bank’s
total equity so as to trigger any obligation on the part of any Purchaser to be
or become a bank holding company or to be deemed or presumed to be in “control”
of any of SBKC, the Company or any Bank. Each Purchaser agrees that it will not,
and will not permit its Subsidiaries to, engage in any open market purchases of
shares of Common Stock which would cause or result in such Purchaser or any of
its Affiliates owning or controlling, directly or indirectly, more than 9.9% of
any class of voting stock of SBKC, the Company or any Bank, nor will a Purchaser
or its Affiliates take any action, or attempt to take any action, to control
SBKC, the Company or any Bank. Each Purchaser agrees that it will not, and will
not permit its Subsidiaries to, make any short sales with respect to shares of
the Common Stock.

 

10.20 Maintenance of Register.

(A) The Company or its duly appointed agent shall maintain a register for the
Notes in which it shall register the issuance and transfer of the Notes. All
transfers of the Notes shall be recorded on the register maintained by the
Company or its agent, and the Company shall be entitled to regard the registered
holder of such Note as the actual owner of the Note so registered until the
Company or its agent is required to record a transfer of such Note on its
register. The Company or its agent shall be required to record any such transfer
when it receives the Note to be transferred duly and properly endorsed by the
registered holder thereof or by its attorney duly authorized in writing.

(B) SBKC or its duly appointed agent shall maintain a register for each of the
Warrants and the SARs in which it shall register the issuance and transfer of
the Warrants and the SARs. All transfers of the Warrants and the SARs shall be
recorded on the register maintained by SBKC or its agent, and SBKC shall be
entitled to regard the registered holder of such Warrants or SARs as the actual
owner of the Warrants or the SARs so registered until SBKC or its agent is
required to record a transfer of such Warrants or SARs on its register. SBKC or
its agent shall be required to record any such transfer when it receives the
Warrants or the SARs to be transferred duly and properly endorsed by the
registered holder thereof or by its attorney duly authorized in writing.

SECTION 11

DEFINITIONS

11.1 Certain Defined Terms. The terms defined below are used in this Agreement
as so defined. Terms defined elsewhere in this Agreement are used in this
Agreement as so defined.

“Affiliate” means any Person (a) directly or indirectly controlling, controlled
by, or under common control with, SBKC or the Company; (b) directly or
indirectly owning or holding ten percent (10%) or more of any Equity Securities
of SBKC or the Company; or (c) ten

 

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percent (10%) or more of whose voting stock or other Equity Securities are
directly or indirectly owned or held by the Company. For purposes of this
definition, “control” (including with correlative meanings, the terms
“controlling”, “controlled by” and “under common control with”) means the
possession directly or indirectly of the power to direct or cause the direction
of the management and policies of a Person, whether through the ownership of
voting securities or by contract or otherwise. Notwithstanding the foregoing,
neither any Holder nor any of their respective Affiliates shall be considered an
Affiliate of SBKC, the Company or any of their Subsidiaries.

“Agreement” means this Agreement (including all schedules, annexes and exhibits
hereto), as the same may from time to time be amended, supplemented or otherwise
modified.

“Bank” and “Banks” means, individually and collectively as the context may
require, Security Bank of Bibb County, Security Bank of Gwinnett County,
Security Bank of Jones County, Security Bank of Houston County, Security Bank of
North Metro and Security Bank of North Fulton, each a wholly-owned Subsidiary of
Company.

“Bank Secrecy Act” shall mean The Federal Bank Secrecy Act of 1970, as amended,
and codified at 31 U.S.C. 5311, et seq., 12 U.S.C. 1818(a), 12 U.S.C. 1829(b),
and 12 U.S.C. 1951, et seq., and rules and regulations promulgated thereunder.

“Bankruptcy Code” means Title 11 of the United States Code entitled
“Bankruptcy”, as amended from time to time or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect and all rules and
regulations promulgated thereunder.

“Board” has the meaning ascribed to such term in Section 2.7.

“Business Day” means any day excluding Saturday, Sunday and any day which is a
legal holiday under the laws of the State of Georgia, or is a day on which
banking institutions located in the State of Georgia are closed.

“Call Reports” has the meaning ascribed to such term in Section 5.22.

“Closing” has the meaning ascribed to such term in subsection 1.1(D).

“Closing Date” has the meaning ascribed to such term in subsection 1.1(D).

“Common Stock” has the meaning ascribed to such term in subsection 1.1(B).

“Community Reinvestment Act” shall mean the Community Reinvestment Act of 1977,
as amended, and codified at 12 U.S.C. 2901, et seq., and rules and regulations
promulgated thereunder.

“Company” has the meaning ascribed to such term in the preamble of this
Agreement.

 

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“Contractual Obligations,” as applied to any Person, means any indenture,
mortgage, deed of trust, contract, undertaking, agreement or other instrument to
which that Person is a party or by which it or any of its properties is bound or
to which it or any of its properties is subject including, without limitation,
the Transactions Documents.

“Controlled Group” means all members of a controlled group of corporations and
all members of a controlled group of trades or businesses (whether or not
incorporated) under common control which, together with the Company, are treated
as a single employer under Section 414 of the IRC or Section 4001 of ERISA, but
excluding any Person that would otherwise be treated as a single employer with
the Company.

“Default” means a condition or event that, after notice or lapse of time or
both, would constitute an Event of Default if that condition or event were not
cured or removed within any applicable grace or cure period.

“Environmental Laws” means all federal, state, or local laws, ordinances, rules,
regulations, interpretations and orders of courts or administrative agencies or
authorities relating to pollution or protection of the environment (including,
without limitation, ambient air, surface water, ground water, land surface, and
subsurface strata), and other laws relating to (a) Polluting Substances or
(b) the manufacture, processing, distribution, use, treatment, handling,
storage, disposal, or transportation of Polluting Substances.

“Equal Credit Opportunity Act” shall mean the Equal Credit Opportunity Act, as
amended, and codified at 15 U.S.C. 1691, et seq., and rules and regulations
promulgated thereunder.

“Equity Documents” means the Warrants, the SARs, the Non-Voting Warrants and the
Registration Agreement, as the same may be amended, supplemented or otherwise
modified from time to time as permitted herein

“Equity Securities” means all shares of capital stock (whether denominated as
common stock, preferred stock, common units, preferred units or otherwise),
equity interests, beneficial, partnership or membership interests, joint venture
interests, participations or other ownership or profit interests in or
equivalents (regardless of how designated) of or in a Person (other than an
individual), whether voting or non-voting.

“ERISA” means the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and any rules and
regulations promulgated thereunder.

“ERISA Event” means, as to the Company and each member of the Controlled Group,
(a) a Reportable Event, (b) the withdrawal of the Company or any member of the
Controlled Group from a Pension Plan in which it was a “substantial employer” as
defined in Section 4001(a)(2) of ERISA or was deemed to be a “substantial
employer” under Section 4062(e) of ERISA, (c) the termination of a Pension Plan,
the filing of notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination under Section 4041 of ERISA, (d) the
institution of proceedings to terminate a Pension Plan by the

 

41

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PBGC, (e) the partial or complete withdrawal from a Multiemployer Plan by the
Company or any member of the Controlled Group, (f) the imposition of a Lien on
any property of the Company or any member of the Controlled Group, pursuant to
IRC Section 412 or Section 302 of ERISA, (g) any event or condition which
results in the reorganization or insolvency of a Multiemployer Plan, and (h) any
event or condition which results in the termination of a Multiemployer Plan, or
the institution by the PBGC of proceedings to terminate a Multiemployer Plan.

“Event of Default” has the meaning ascribed to that term in Section 7.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder.

“Excluded Taxes” has the meaning ascribed to such term in subsection 1.5(A).

“Fair Housing Act” shall mean Title VIII of the Civil Rights Act of 1968 (Fair
Housing Act), as amended, and codified at 42 U.S.C. 3601, et seq., and rules and
regulations promulgated thereunder.

“FDI Act” means the Federal Deposit Insurance Act, as amended or recodified.

“FDIC” means the Federal Deposit Insurance Corporation.

“FICG” means the Financial Institutions Code of Georgia.

“Foreign Corrupt Practices Act” shall mean the United States Foreign Corrupt
Practices Act of 1977, as amended, and codified at 15 U.S.C. 78, et seq., and
rules and regulations promulgated thereunder.

“FRB” shall have the meaning ascribed to such term in the recitals hereto and
shall include any other Governmental Authority that serves as the primary
federal regulator of Company from time to time while the Notes are outstanding.

“FSCP” means Financial Stocks Capital Partners IV L.P. or any of its Affiliates.

“GAAP” means generally accepted accounting principles as set forth in statements
from Auditing Standards No. 69 entitled “The Meaning of ‘Present Fairly in
Conformance with Generally Accepted Accounting Principles in the Independent
Auditors Reports’” issued by the Auditing Standards Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board that are applicable to the
circumstances as of the date of determination.

“GDBF” means Georgia Department of Banking and Finance.

“Governmental Authority” means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.

 

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“Holder” means any holder of a Note, Warrant, SAR or Non-Voting Warrant.

“Home Mortgage Disclosure Act” shall mean the Home Mortgage Disclosure Act of
1975, as amended, and codified at 12 U.S.C. 2801, et seq., and rules and
regulations promulgated thereunder.

“Impositions” has the meaning ascribed to such term in Section 2.9.

“Indebtedness” as applied to any Person, means: (a) all indebtedness for
borrowed money; (b) that portion of obligations with respect to capital leases
that is properly classified as a liability on a balance sheet in conformity with
GAAP; (c) any obligation under any lease (a “synthetic lease”) treated as an
operating lease under GAAP and as a loan or financing for United States income
tax purposes or creditors rights purposes; (d) all obligations evidenced by
bonds, debentures, notes or similar instrument or upon which interest charges
are customarily paid; (e) any obligation owed for all or any part of the
deferred purchase price of property or services other than current accounts
payable and accrued expenses arising in the ordinary course of business and not
more than ninety (90) days overdue; (f) “earnouts” and similar payment
obligations; and (g) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person, or is nonrecourse to the
credit of that Person, provided, that in the case of indebtedness pursuant to
this clause (g) which is non-recourse, the amount of such indebtedness shall be
limited to the value of property and assets securing such indebtedness/

“Indemnitees” has the meaning ascribed to such term in Section 10.1.

“Initial Notes” has the meaning ascribed to such term in subsection 1.1(A).

“Initial SARs” has the meaning ascribed to such term in subsection 1.1(C).

“Initial Warrants” has the meaning ascribed to such term in subsection 1.1(B).

“Intellectual Property” has the meaning ascribed to such term in Section 5.6.

“Investment Unit” has the meaning ascribed to such term in Section 1.6.

“IRC” means the Internal Revenue Code of 1986, as amended from time to time, and
all rules and regulations promulgated thereunder.

“Lien” means any lien, mortgage, pledge, security interest, charge, encumbrance
or governmental levy or assessment of any kind, whether voluntary or involuntary
(including any conditional sale or other title retention agreement and any lease
in the nature thereof), and any agreement to give any lien, mortgage, pledge,
security interest, charge or encumbrance.

 

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“Major Depository Institution Subsidiary” means any subsidiary of the Company
that (i) is a depository institution and (ii) meets the definition of
“significant subsidiary” within the meaning of Rule 405 under the Securities
Act.

“Majority Holders” means Holders holding more than fifty percent (50%) of the
aggregate outstanding principal balance of the Notes; provided, however, that
after payment in full of the Notes, Majority Holders shall mean Holders owning
(or owning the rights to acquire) more than fifty percent (50%) of the Warrants.

“Material Adverse Effect” means (a) a material adverse effect upon the business,
operations, properties, assets or financial condition of the Related Parties,
taken as a whole or (b) the material impairment of the ability of any Related
Party to perform its obligations under any Transaction Document to which it is a
party or of any Holder to enforce any Transaction Document or collect any of the
Obligations; provided, that the meaning shall exclude any changes from general
economic, industry, market or competitive conditions or changes in law, rules or
regulations affecting Persons in the Related Parties’ industries. In determining
whether any individual event would result in a Material Adverse Effect,
notwithstanding that such event does not of itself have such effect, a Material
Adverse Effect shall be deemed to have occurred if the cumulative effect of such
event and all other then existing events would result in a Material Adverse
Effect.

“Maturity Date” has the meaning ascribed to such term in subsection 1.4(B).

“Multiemployer Plan” means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, with respect to which the Company or any member of
the Controlled Group may have any liability.

“Nasdaq” means the Nasdaq Global Select Market.

“Non-Voting Warrants” has the meaning ascribed to such term in subsection
1.1(C)(ii).

“Non-Voting Warrant Shares” has the meaning ascribed to such term in subsection
1.1(C)(ii).

“Notes” has the meaning ascribed thereto in subsection 1.1(A).

“Obligations” means all obligations, liabilities and Indebtedness of every
nature of each Related Party from time to time owed to any Holder under the
Transaction Documents, including the principal amount of all debts, claims and
Indebtedness, the cash payment owed in connection with the exercise of one or
more of the SARs, accrued and unpaid interest and all fees, costs and expenses,
whether primary, secondary, direct, contingent, fixed or otherwise, heretofore,
now and/or from time to time hereafter owing, due or payable whether before or
after the filing of a proceeding under the Bankruptcy Code by or against any
Related Party.

“Observer” has the meaning ascribed to such term in Section 2.7.

 

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“Organizational Documents” means, (a) for any corporation, the certificate or
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, (b) for any partnership, the partnership
agreement and, if applicable, certificate of limited partnership, (c) for any
limited liability company, the operating agreement and articles or certificate
of formation or (d) any other document setting forth the manner of election or
duties of the officers, directors, managers or other similar persons, or the
designation, amount or relative rights, limitations and preference of the Equity
Securities of a Person.

“PBGC” means the Pension Benefit Guaranty Corporation and any entity succeeding
to any or all of its functions.

“Pension Plan” means a pension plan, as defined in Section 3(2) of ERISA, which
is subject to Title IV of ERISA (other than a Multiemployer Plan), and with
respect to which the Company or any member of the Controlled Group may have any
liability, including (but not limited to) any liability by reason of having been
a substantial employer within the meaning of Section 4063 of ERISA, or by reason
of being deemed to be a contributing sponsor under Section 4069 of ERISA.

“Person” means and includes natural persons, corporations, limited liability
companies, limited partnerships, limited liability partnerships, general
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof and their respective permitted successors and
assigns (or in the case of a governmental person, the successor functional
equivalent of such Person).

“Plan” means an employee benefit plan, as such term is defined in Section 3(3)
of ERISA (other than a Multiemployer Plan or an employee benefit plan which
ERISA Section 4(b)(3) exempts from application of Title I of ERISA), with
respect to which the Company or any member of the Controlled Group may have any
liability.

“Polluting Substances” means all pollutants, contaminants, chemicals, or
industrial, toxic or hazardous substances or wastes and shall include, without
limitation, any flammable explosives, radioactive materials, oil, hazardous
materials, hazardous or solid wastes, hazardous or toxic substances or related
materials defined in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act of 1976, the Hazardous and Solid
Waste Amendments of 1984, and the Hazardous Materials Transportation Act, as any
of the same are hereafter amended, and in the regulations adopted and
publications promulgated thereto; provided, in the event any of the foregoing
Environmental Laws is amended so as to broaden the meaning of any term defined
thereby, such broader meaning shall apply subsequent to the effective date of
such amendment and, provided, further, to the extent that the applicable laws of
any state establish a meaning for “hazardous substance,” “hazardous waste,”
“hazardous material,” “solid waste,” or “toxic substance” which is broader than
that specified in any of the foregoing Environmental Laws, such broader meaning
shall apply.

 

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“Purchaser” and “Purchasers” have the meaning ascribed to such terms in the
preamble.

“Qualified Plan” means a Plan which is intended to be, or has ever been treated
as, tax-qualified under IRC Section 401(a).

“Registration Agreement” means the Registration Agreement, dated as of the
Closing Date, by and between, SBKC and the Purchasers in substantially the form
of Exhibit G attached hereto, as amended, modified or supplemented from time to
time.

“Regulatory Authorities” means the FDIC and the GDBF.

“Related Parties” means, collectively, SBKC, the Company and each of their
Subsidiaries and “Related Party” means any one of the foregoing “Related
Parties.”

“Related Transactions” means the execution and delivery of the Transactions
Documents, the purchase and sale of the Initial Notes, Initial Warrants and the
Initial SARs on the Closing Date, the repayment of the Indebtedness set forth in
Section 2.2 hereof, which is to be paid in full on the Closing Date, and the
payment of all fees, costs and expenses associated with all of the foregoing.

“Reportable Event” means a reportable event as defined in Section 4043 of ERISA
other than a reportable event for which the requirement to provide notice to the
PBGC has been waived by regulation.

“SARs” has the meaning ascribed thereto in subsection 1.1(C).

“SBKC” has the meaning ascribed to such term in the preamble of this Agreement.

“SBKC Securities” means the Warrants and the SARs of SBKC purchased by the
Purchasers on the Closing Date, and, upon the exchange of the SARs for
Non-Voting Warrants, shall include the Non-Voting Warrants.

“SEC” means the U.S. Securities and Exchange Commission.

“SEC Documents” means such reports and other documents filed by SBKC with the
SEC during the twelve (12) months prior to the date hereof, including all
exhibits thereto and the documents incorporated by reference therein.

“Securities Act” means the Securities Act of 1933, as amended, and the
regulations promulgated thereunder.

“Senior Indebtedness” means, with respect to the Company, (i) the principal,
premium, if any, and interest in respect of (A) indebtedness for borrowed money
and (B) indebtedness evidenced by securities, debentures, notes, bonds or other
similar instruments issued by the Company; (ii) all capitalized lease
obligations of the Company; (iii) all obligations of the Company issued or
assumed as the deferred purchase price of property, all conditional sale

 

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obligations of the Company and all obligations of the Company under any title
retention agreement (but excluding trade accounts payable arising in the
ordinary course of business); (iv) all obligations of the Company for the
reimbursement of any letter of credit, any banker’s acceptance, any security
purchase facility, any repurchase agreement or similar arrangement, any interest
rate swap, any other hedging arrangement, any obligation under options or any
similar credit or other transaction; (v) all obligations of the type referred to
in clauses (i) through (iv) above of other Persons for the payment of which the
Company is responsible or liable as obligor, guarantor or otherwise; and
(vi) all obligations of the type referred to in clauses (i) through (v) above of
other Persons secured by any lien on any property or asset of the Company
(whether or not such obligation is assumed by the Company), whether incurred on
or prior to the date of this Agreement or thereafter incurred, unless, with the
prior approval of the FRB if not otherwise generally approved, it is provided in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, that such obligations are subordinated or are pari passu in right
of payment to the Notes.

“Subsidiaries” shall have the meaning provided in Rule 405 of the Securities
Act, as amended, and includes all direct and indirect subsidiaries of a Person.

“Tax” or “Taxes” means any federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, membership or partnership interest, license, payroll,
wage or other withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other taxes of any kind
whatsoever (including deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.

“Tier 2 Capital” has the definition provided in, and shall be determined in
accordance with, the rules and regulations of the FRB.

“Transaction Documents” means this Agreement, the Notes, the Equity Documents,
and all other instruments, documents and agreements executed by or on behalf of
any Related Party and delivered concurrently herewith or at any time hereafter
to or for the benefit of any Holder in connection with the transactions
contemplated by this Agreement, all as amended, supplemented or modified from
time to time.

“Truth in Lending Act” shall mean Title I of the Consumer Credit Protection Act,
as amended, and codified at 15 U.S.C. 1601, et seq., and rules and regulations
promulgated thereunder.

“USA Patriot Act” shall mean the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, P.L.
107-56, as amended and all rules and regulations promulgated thereunder.

“Warrants” has the meaning ascribed thereto in subsection 1.1(B).

“Warrant Shares” means the shares of Common Stock eligible to be purchased
pursuant to the Warrants.

 

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11.2 Other Definitional Provisions. References to “Sections,” “subsections,”
“Exhibits,” “Schedules” and “sub schedules” shall be to Sections, subsections,
Exhibits, Schedules and sub schedules, respectively, of this Agreement unless
otherwise specifically provided. Any of the terms defined in Section 11.1 may,
unless the context otherwise requires, be used in the singular or the plural
depending on the reference. References to an agreement shall include all
amendments, restatements, modifications and supplements to such agreement,
subject to such consents or approvals of Holders as may be required by the terms
of this Agreement. In this Agreement, “hereof,” “herein,” “hereto,” “hereunder”
and the like mean and refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word appears;
words importing any gender include the other gender; references to “writing”
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words “including,” “includes” and “include” shall be
deemed to be followed by the words “without limitation”; references to
agreements and other contractual instruments shall be deemed to include
subsequent amendments, assignments, and other modifications thereto, but only to
the extent such amendments, assignments and other modifications are not
prohibited by the terms of this Agreement or any other Transaction Documents;
references to Persons include their respective permitted successors and assigns
or, in the case of governmental Persons, Persons succeeding to the relevant
functions of such Persons; and all references to statutes and related
regulations shall include any amendments of same and any successor statutes and
regulations.

[Remainder of page blank; signature pages follow]

 

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Witness the due execution hereof by the respective duly authorized officers of
the undersigned as of the date and year first written above.

 

SECURITY BANK CORPORATION By:  

/s/ H. Averett Walker

Name:   H. Averett Walker Title:   President and Chief Executive Officer
SECURITY INTERIM HOLDING CORPORATION By:  

/s/ James R. McLemore

Name:   James R. McLemore Title:   Chief Financial Officer

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

The foregoing Agreement is hereby accepted

as of the date and year first above written.

 

FINANCIAL STOCKS CAPITAL PARTNERS IV L.P. By:   Finstocks Capital Management IV,
LLC,   Its Sole General Partner

 

By:  

/s/ Steven N. Stein

Name:   Steven N. Stein Title:   Chief Executive Officer

 

FINANCIAL STOCKS CAPITAL PARTNERS V L.P. By:   Finstocks Capital Management V,
LLC,   Its Sole General Partner

 

By:  

/s/ Steven N. Stein

Name:   Steven N. Stein Title:   Chief Executive Officer

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EXHIBIT A

 

Name and Address of Purchaser

   Principal
Amount of
Initial Notes    Purchase Price of
Initial Notes    Number of
Warrants    Purchase Price
of Initial
Warrants    Number of
SARs    Purchase Price
of the Initial
SARs

Financial Stocks Capital Partners IV L.P.

441 Vine Street, Suite 1300

Cincinnati, OH 45202

Attn: General Counsel

Telecopy: (513) 746-2201

   $ 5,000,000    $ 3,907,674.62    319,090    $ 695,615.37    440,789    $
396,710.00

Financial Stocks Capital Partners V L.P.

441 Vine Street, Suite 1300

Cincinnati, OH 45202

Attn: General Counsel

Telecopy: (513) 746-2201

   $ 35,000,000    $ 27,353,722.38    2,233,627    $ 4,869,307.63    3,085,521
   $ 2,776,970.00

With a copy to: Patton Boggs LLP 2550 M Street, N.W.

Washington, DC 20037

Attn: Norman B. Antin

          Jeffrey D. Haas

Telecopy: (202) 457-6315

                 

 

Wiring Instructions of the Purchasers:

                    (Bank)

                    (ABA Number)

                    (Account)

                    (Reference)