<PAGE>

                           SETTLEMENT AGREEMENT                     EXHIBIT 10.2
                                                                    ------------


        THIS SETTLEMENT AGREEMENT is made and entered into this 17th day of
April, 1996, by and between C. LLOYD CLAY ("Consultant"), FIRST CLAYTON BANK &
TRUST, a Georgia corporation (the "Bank") and FIRST CLAYTON BANCSHARES, INC., a
Georgia corporation ("First Clayton").


                             W I T N E S S E T H:


        WHEREAS, certain issues have arisen between Consultant, the Bank and
First Clayton, and Consultant, the Bank and First Clayton wish to resolve those
issues;


        NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements of the parties to this Agreement, and for other good and valuable
consideration, it is hereby agreed by and between Consultant, the Bank and First
Clayton as follows:

        1.  Purchase of Shares of Stock.  First Clayton, contemporaneously with
            ---------------------------
the execution of this Settlement Agreement, hereby purchases the shares of stock
of Consultant and of the members of Consultant's immediate family in the amount
of Seventeen and no/100 Dollars ($17.00) per share as follows:

            C. Lloyd Clay               8,500 Shares of Stock
            Patricia Clay               3,000 Shares of Stock
            C. Lloyd Clay Individual
               Retirement Account       1,927 Shares of Stock
            Patricia Clay Individual
               Retirement Account       1,640 Shares of Stock
            Charles Lloyd Clay, Jr.     3,200 Shares of Stock
            Christopher Thomas Clay     3,300 Shares of Stock
            Willard Coates Clay         2,635 Shares of Stock

The total shares of stock to be purchased will be 24,202, at a price per share
of $17.00, for a total payment by First Clayton in the aggregate amount of
$411,434.00. Payment will be made by First Clayton to the owners of the shares
of stock as indicated in this paragraph.

        2.  Resignation as Director. Consultant hereby resigns as a Director of
            -----------------------
First Clayton and agrees that he will not seek reelection to the Board of
Directors of First Clayton or its subsidiary, the Bank. Consultant expressly
agrees that he will not, from the date of this Settlement Agreement forward,
directly or indirectly, support, encourage, participate in, or assist in any way
in any effort to effect a change in the Board of Directors or management of
First Clayton or the Bank.

        3. Leased Space. Consultant agrees that he will, not later than June 1,
           ------------
1996, vacate the space presently being occupied by him on the premises of the
Bank. Consultant will remove

<PAGE>

all property, furniture and effects from said premises, and will leave the
premises in good repair, normal wear and tear excepted, and in broom-clean
condition.

     4.    COBRA Benefits. Consultant was a covered employee under the group
           --------------
health plan of the Bank, and received coverage under that plan for himself and
his immediate family. Consultant believes he is entitled to COBRA benefits as a
"qualified beneficiary," and that the group health plan of the Bank is required
to provide continuation coverage. Neither the Bank nor First Clayton make any
representation or warranty as to the availability of COBRA benefits or the
extent of coverage thereunder with respect to Consultant or any of his
dependents. In the event that COBRA benefits are available, the continuation
coverage will be for a minimum period of eighteen (18) months from the date of
this Settlement Agreement. If COBRA continuation coverage is available, First
Clayton (or the Bank) will reimburse Consultant for the cost of such premiums
for himself for this minimum period of 18 months, and Consultant will be
responsible for the payment of premiums for dependent coverage. If COBRA
continuation benefits are not available, First Clayton (or the Bank) will
reimburse Consultant for the equivalent cost of such premiums for Consultant,
but not for his dependent coverage. If continuation coverage is available for a
period greater than the minimum continuation period of 18 months, Consultant
will have the benefit of that additional continuation coverage, and Consultant
will be responsible for all premiums for himself and for any dependent coverage.

     5.    Release by Consultant. Except as set forth in this Agreement and in
           ---------------------
the Consulting and Non-Competition Agreement executed contemporaneously
herewith, Consultant hereby releases and forever discharges First Clayton, the
Bank and their directors, officers, agents, employees and representatives, from
any and all claims, costs, damages, liabilities or expenses of whatsoever
nature, whether in contract or in tort, arising out of or in connection with
First Clayton or the Bank, or any matter pertaining thereto; provided, that
nothing herein shall release the liability of the Bank to Consultant with
respect to any bank account maintained by Consultant with the Bank.

     6.    Release by the Bank and First Clayton. Except as set forth in this
           -------------------------------------
Settlement Agreement and in the Consulting and Non-Competition Agreement
executed contemporaneously herewith, the Bank and First Clayton hereby release
and forever discharge Consultant from any and all claims, costs, damages,
liabilities or expenses of whatsoever nature, whether in contract or in tort,
arising out of or in connection with Consultant's previous official services as
a Director of the Bank and a Director of First Clayton.

     7.    Consulting and Non-Competition Agreement. Consultant and First
           ----------------------------------------
Clayton shall execute and deliver the Consulting and Non-Competition Agreement,
a copy of which is attached hereto and made a part hereof, contemporaneously
herewith.

     8.    Confidentiality. Consultant, the Bank and First Clayton agree that
           ---------------
the terms of this Settlement Agreement and the Consulting and Non-Competition
Agreement, and the disputes, negotiations and discussions by and among
Consultant and members of the Board of Directors of First Clayton with respect
thereto, shall, to the extent permitted by law, remain confidential and shall
not be discussed by Consultant or First Clayton with any third parties except to
the extent expressly required by law.

                                      -2-
<PAGE>

        9.      Indemnification. Consultant shall be entitled to receive to all
                ---------------
rights and benefits of the indemnification obligations of the Bank contained in
Articles Nine and Thirteen of its Bylaws for any action, conduct, failure to act
or any other matter during the service by Consultant as a Director of the Bank
within the scope of those indemnification provisions. Consultant shall be
entitled to receive all rights and benefits of the indemnification obligations
of First Clayton contained in Article Nine of its Bylaws for any action,
conduct, failure to act or any other matter during the service by Consultant as
a Director of First Clayton within the scope of those indemnification
provisions. The Bank and First Clayton reserve the right to modify, amend or
otherwise deal with the provisions for indemnification, provided such
modification, amendment or other action will treat Consultant the same as other
existing and former Directors.

        10.     Modification and Waiver. Any term or condition of this Agreement
                -----------------------
may be waived at any time by the party hereto which is entitled to the benefit
of such term or condition. Any waiver on one occasion shall not be deemed to be
a waiver of the same or of any other breach on any future occasion. This
Agreement may be modified or amended only by a writing signed by all of the
parties hereto.

        11.     Counterparts and Headings. This Agreement may be executed
                -------------------------
simultaneous, in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
headings set out in this Agreement are for the convenience of reference only and
shall not be deemed to be a part of this Agreement.

        12.     Law to Govern and Time of Essence. The validity and effect of
                ---------------------------------
this Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Georgia, without giving effect to any rules
regarding conflicts of law. Time is of the Essence.

        13.     Successors and Assigns. Except as otherwise provided herein,
                ----------------------
this Agreement shall be binding upon, and shall inure to the benefit of, the
parties and their respective heirs, successors and permitted assigns.

        IN WITNESS WHEREOF, Consultant has executed this Agreement, and the
Bank and First Clayton have caused this Agreement to be executed by their
appropriate officers, under seal, all as of the day and year first above
written.

                                                  FIRST CLAYTON BANCSHARES, INC.

[CORPORATE SEAL]
                                                By: /s/ John R. Martin
                                                   -----------------------------
                                                    President
ATTEST:

/s/ Ronald E. Vandiver
------------------------
Secretary

                                      -3-





<PAGE>

                                        FIRST CLAYTON BANK & TRUST


[CORPORATE SEAL]

                                        By: /s/ J. Mark Smith
                                           ------------------------------------
                                              President


ATTEST:


/s/ Rodney R. Hickox
---------------------------
Secretary


                                CONSULTANT:


                                /s/ C. Lloyd Clay                  (SEAL)
                                ------------------------------------
                                C. Lloyd Clay
                                Signed 4-17-96


                                      -4-
<PAGE>

                   CONSULTANT AND NON-COMPETITION AGREEMENT

     THIS CONSULTING AND NON-COMPETITION AGREEMENT is made and entered into as
of the 17th day of April, 1996, by and between C. LLOYD CLAY ("Consultant"), and
FIRST CLAYTON BANCSHARES, INC., a Georgia corporation ("First Clayton").


                              W I N E S S E T H:

     WHEREAS, Consultant has served as a Director of First Clayton, and First
Clayton Bank & Trust (the "Bank"), since the organization of the Bank without
compensation other than regular director's fees; and,

     WHEREAS, Consultant has expended great effort on behalf of First Clayton
and the Bank in encouraging customers to utilize the services of First Clayton
and the Bank and has been responsible over time for the generation of
significant business for the Bank; and,

     WHEREAS, as a result of philosophical differences on the Board of Directors
as to the future policies of First Clayton and the Bank, Consultant has
determined to submit his resignation as a Director of First Clayton and the
Bank; and,

     WHEREAS, the continued goodwill of Consultant is of incalculable value to
the Bank; and,

     WHEREAS, a decision by Consultant to tender his registration and take other
actions in connection therewith in order to resolve the current policy dispute
on the Board of Directors and to enable First Clayton and the Bank to go forward
with their plans free of contested disputes is of significant value to First
Clayton and the Bank; and,

     WHEREAS, First Clayton desires that Consultant be available to assist it
and the Bank from time to time, and Consultant desires to provide such services
to First Clayton in accordance with the terms of this Agreement;

     NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements of the parties to this Agreement, and for other good and valuable
consideration, it is hereby agreed by and between Consultant and First Clayton
as follows:

     1.   Engagement As Consultant. Upon the terms and conditions contained in
this Agreement, First Clayton hereby retains Consultant to render consulting
services to First Clayton with respect to the banking and other operations of
First Clayton and the Bank, and Consultant hereby agrees to render such services
as directed by First Clayton until this Agreement expires or is terminated as
provided herein.

     2.   Scope of Consulting Services. During the term of this Agreement, the
general scope of Consultant's duties shall be to advise and consult with the
Chairman and the President of First Clayton and the Bank in connection with the
general banking and other operations and management matters of First Clayton and
the Bank, as reasonably requested, from time to time by the Chairman
<PAGE>

of the Board or the Chief Executive Officer of First Clayton (collectively, the
"Consulting Services"). The Consulting Services shall include but are not
limited to Consultant's general support of First Clayton in the Rabun County
market.

     3.  Duties of Consultant. During the term of this Agreement, Consultant
         --------------------
shall perform the Consulting Services herein described and all reasonable tasks
incidental thereto as the Chairman of the Board of the Chief Executive Officer
may from time to time reasonably require, at such time and place and on such
schedule as may be reasonably designated by Consultant; provided, that no
request by First Clayton shall require any specific duties of Consultant other
than to discuss issues with and advise the Chairman or the President of First
Clayton or the Bank with respect thereto. Consultant shall provide Consulting
Services hereunder solely at the request and direction of the Chairman of the
Board or the President of First Clayton.

     4.  Term. The term of Consultant's engagement shall commence as of the date
         ----
hereof and continue for a period of three years (unless earlier terminated in
accordance with Section 10 hereof.)

     5.  Consulting Fee. In consideration of Consultant's agreement to perform
         --------------
Consulting Services in accordance with this Agreement, First Clayton shall pay
to Consultant monthly payments of $4,033.67 (the "Consulting Fee"). Monthly
payments will be made for the period January 1 through May 1, 1996, in the
amount of $20,168.35. Payments will be made thereafter commencing June 1, 1996,
at the rate of $4,033.67. The total payment to be paid pursuant to this
Agreement is $145,212.00.

     6.  Taxes. Any and all sales, service, income and other taxes of any nature
         -----
whatsoever with respect to any payments made by First Clayton to Consultant
pursuant to this Agreement shall be the sole responsibility and liability of
Consultant.

     7.  Independent Contractor. Consultant's relationship with First Clayton
         ----------------------
and the Bank under this Agreement shall be that of an independent contractor,
not an employee. Except as may be provided and allowed for purposes of any COBRA
benefits, Consultant shall not be entitled to participate in any of the benefit
plans of First Clayton or the Bank. Consultant shall not be an agent of First
Clayton or the Bank and shall have no authority to act on behalf of or bind or
represent (other than as counsel with respect to matters as to which he is
specifically and separately retained and compensated) First Clayton or the Bank
in any way.

     8.  Covenants.
         ---------

     (a) Non-Competition. Consultant agrees that during the term of this
         ---------------
Agreement of three years, Consultant will not (except on behalf of or with prior
written consent of First Clayton), within the Area (as hereinafter defined),
either directly or indirectly, on his own behalf or in the service of or on
behalf of others, as a principal, partner, officer, director, manager,
supervisor, administrator, consultant, executive employee or in any other
capacity which involves duties and


                                      -2-
<PAGE>

responsibilities similar to those undertaken for First Clayton and the Bank,
engage in any business which is the same as or essentially the same as the
Business of First Clayton (as hereinafter defined), provided that nothing herein
shall be deemed to limit or prohibit the provision of legal services to any
third party.

     (b) Non-Solicitation of Customers. Consultant agrees that during the term
         -----------------------------
of this Agreement of three years and for two years thereafter, Consultant will
not (except on behalf of or with the prior written consent of First Clayton),
within the Area, on his own behalf or in the service or on behalf of others,
solicit, divert or appropriate or attempt to solicit, divert or appropriate,
directly or by assisting others, any business from any customers of First
Clayton or the Bank, for purposes of providing products or services that are
competitive with those provided by First Clayton.

     (c) Non-Solicitation of Employees. Consultant agrees that during the term
         -----------------------------
of this Agreement of three years and for a period of two years thereafter,
Consultant will not, within the Area, on his own behalf or in the service of or
on behalf of others, solicit, recruit or hire away or attempt to solicit,
recruit or hire away, directly or by assisting others, any employee of First
Clayton or the Bank, whether or not (i) such employee is a full-time employee or
a temporary employee of First Clayton, (ii) such employment is pursuant to
written agreement, and (iii) such employment is for a determined period or is at
will.

     (d) Community Support. Consultant expressly agrees that, during the term of
         -----------------
this Agreement of three years and for a period of two years thereafter, he will
use his best efforts to promote the business of First Clayton and the Bank
within the Area. Consultant will not make, publish or endorse any negative,
disparaging or derogatory comments concerning First Clayton, the Bank, or any
officer, director or agent of First Clayton or the Bank with respect to their
activities as such. Consultant hereby further specifically agrees that during
the term of this Agreement and for a period of two years thereafter he will not,
acting alone or in conjunction with others, initiate, support, cooperate with,
advise or represent any party in any matter in which the Bank or First Clayton
is an adverse party, or which has as a goal, result or objective, directly or
indirectly, a change in the ownership or in the Board of Directors or management
of First Clayton or the Bank.

     (e) Definitions.
         -----------
         (i)  "Area" shall mean the geographic area within the boundaries of
Rabun, Towns, White and Habersham Counties. It is the express intent of the
parties that the Area as defined herein is the area where Consultant performs
services on behalf of First Clayton or the Bank.

         (ii) "Business of First Clayton" shall mean the business conducted by
               -------------------------
First Clayton and the Bank, which is commercial banking.

                                      -3-
<PAGE>

     9.   Confidentiality.
          ---------------

     (a)  Confidential Information. As used herein, the term "Confidential
          ------------------------
Information" means all facts and information not generally available to the
public concerning any aspect of the business of First Clayton and the Bank,
including, without limitation, the terms and conditions of this Agreement or the
Settlement Agreement being executed in conjunction herewith, any information
obtained by Consultant in his capacity as a Director of First Clayton or the
Bank, or any methods and plans of operation, marketing and sales strategies,
research, know-how, costs, pricing strategies, business plans, financial data,
and lists of actual or potential customers (and including such information that
constitutes a "trade secret" under (S)10-1-761(4) of the Official Code of
Georgia Annotated  or any successor statute).

     (b)  Confidentiality Obligations. Consultant acknowledges that he may from
          ---------------------------
time to time have access to, or otherwise be provided with, Confidential
Information. Consultant agrees that, during the applicable "Nondisclosure
Period" (as described below), he shall neither use (except as necessary to
perform his obligations hereunder) nor disclose to any other person or entity
any Confidential Information without the prior written consent of an officer of
First Clayton. The Nondisclosure Period with respect to Confidential Information
that does not constitute a trade secret under Georgia law shall be the period of
Consultant's engagement hereunder and for a period of two years thereafter; the
Nondisclosure Period for Confidential Information constituting a trade secret
under Georgia law shall be the period of Consultant's engagement hereunder and
for so long thereafter as the pertinent Confidential Information remains a trade
secret under Georgia law. Neither the limited duration of the Nondisclosure
Period nor any other term or condition of this Agreement shall operate or be
construed as affording Consultant any right or license to use any Confidential
Information at the end of such Nondisclosure Period or otherwise.

     (c)  Exceptions. The foregoing confidentiality obligations shall not apply
          ----------
to (i) any information that, through no fault of Consultant, is disclosed in the
public domain; (ii) any information received by Consultant in good faith from a
third party who has legitimate possession of, and the unrestricted right to
disclose, such information; and (iii) any information that Consultant can
demonstrate through prior written records to have been within his legitimate
possession prior to the time of his engagement hereunder.

     (d)  Return of Information. Upon the request by an officer of First Clayton
          ---------------------
at any time, and in any event upon the termination of Consultant's engagement
for any reason, Consultant will deliver to First Clayton all written materials
and records and all other tangible items in his possession or control that
constitute or embody Confidential Information or that otherwise are the property
of First Clayton or the Bank, and will keep no copies or duplicates thereof,
except as may be expressly authorized in writing at that time by an officer of
First Clayton.

                                      -4-
<PAGE>

  10. Termination.
      -----------
  (a) Termination by First Clayton. Notwithstanding any provision hereof to the
      ----------------------------
contrary, the Board of Directors of First Clayton, in a duly convened meeting as
to which notice of the purpose of the meeting has been duly given, shall have
the right to terminate this Agreement, by written notice to Consultant, upon the
occurrence of one or more of the following events and the good-faith belief
after reasonable investigation by the Board of Directors of First Clayton, that
such events have in fact occurred and justify termination:

        (i) The commission by Consultant of any act involving dishonesty, fraud
or other act having a material detrimental financial effect with respect to the
business affairs of First Clayton or the Bank; or

        (ii) Consultant's breach of any term or provision of Sections 7
(Independent Contractor), 8 (Covenants) or 9 (Confidentiality) of this Agreement
(provided, however, that Consultant shall be afforded 30 days, after receipt of
written notice of such breach, to cure such breach).

  (b) Termination by Consultant. Notwithstanding any provision hereof to the
      -------------------------
contrary, Consultant shall have the right to immediately terminate this
Agreement, by written notice to First Clayton, upon the occurrence of one or
more of the following events:

        (i) The failure of First Clayton to make any consulting fee payment due
hereunder within 10 days after receipt of written notice of delinquency from
Consultant; or

        (ii) The breach by First Clayton of any other term or provision of this
Agreement (provided, however, that First Clayton shall be afforded 30 days,
after receipt of notice of such breach, to cure such breach).

  (c) Effect of Expiration or Termination. Except as otherwise provided herein,
      -----------------------------------
upon the expiration of this Agreement, First Clayton and Consultant will have no
continuing obligations to each other under this Agreement, except for any
unsatisfied rights accrued under this Agreement through the date of expiration,
and except for those rights and obligations set forth in Section 6, which shall
survive and remain in full force and effect. Upon termination by First Clayton
pursuant to Section 10(a) hereof, First Clayton shall have no further rights or
obligations to Consultant, and the provisions of Sections 8 and 9 shall continue
for an additional term of two years. Upon termination by Consultant pursuant to
Section 10(b) hereof, First Clayton shall immediately make all payments
remaining pursuant to Section 5 hereof within thirty days of such termination,
and thereupon neither First Clayton nor Consultant shall have any further
obligations under any provision of this Agreement other than Section 9 hereof,
which shall continue for an additional term of one year. Nothing in this
subsection (c) shall constitute liquidated damages or prevent either party
hereto from seeking damages with respect to any breach hereof.


                                      -5-

<PAGE>

      11. Modification and Waiver. Any term or condition of this Agreement may
          -----------------------
be waived at any time by the party hereto which is entitled to the benefit
such term or condition. Any waiver on one occasion shall not be deemed to be a
waiver of the same or of any other breach on any future occasion. This Agreement
may be modified or amended only by a writing signed by all of the parties
hereto.

      12. Counterparts and Headings. This Agreement may be executed
          -------------------------
simultaneously in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument. The
headings  set out in this Agreement are for the convenience of reference only
and shall not be deemed to be a part of this Agreement.

      13. Injunctive Relief. Consultant and  First Clayton acknowledge  that
          -----------------
any reach of the terms and conditions of this Agreement by either would result
in material harm or damage to the other, although it might be difficult to
establish the monetary value of the damage. Consultant and First Clayton
therefore agree that, in addition to any other available rights and remedies (at
law or in equity), either shall be entitled to obtain injunctive relief against
the other in the event of any such breach or threatened breach by either which
the other in good faith believes will or is likely to cause it irreparable harm.

      14. Law to Govern and Time of Essence. The validity and effect of this
          ---------------------------------
Agreement shall be governed  by and construed  and enforced  in accordance with
the laws of the State of Georgia, without giving effect to any rules regarding
conflicts of law. Time is of the essence.

      15. Successors and Assigns. Except as otherwise provided herein, this
          ----------------------
Agreement shall be binding upon, and shall inure to the benefit of, the parties
and their respective heirs, successors and permitted assigns. Upon the death or
disability of Consultant, First Clayton will make a lump-sum payment of the
total balance of any payments that would have otherwise been due to Consultant
under this Agreement, such payments will be made payable to the estate of
Consultant.

      16. Severability. This Agreement is intended to be performed in accordance
          ------------
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or particular circumstance, shall, for any reason and to
any extent, be invalid or unenforceable, it is the intention of the parties to
this Agreement that the remainder of this Agreement and the application of such
provisions to other persons or particular circumstances shall not be affected
thereby, but rather shall be enforced to the greatest extent permitted by law.

      17. Failure to Enforce. The failure of a party at anytime, or for any
          ------------------
period of time, to enforce the provisions of this Agreement shall not be
construed as a waiver of such provisions of the right of any such party
thereafter to enforce each and every such provisions.


                                      -6-
<PAGE>

     18.  Attorneys Fees.  In the event that either party brings any action for
          --------------
the breach of or to enforce any provision of this Agreement, reasonable
attorneys' fees, including all court costs, witness fees and other expenses,
shall be recovered by the prevailing party.

      IN WITNESS WHEREOF, Consultant has executed this Agreement, and First
Clayton has caused this Agreement to be executed by its appropriate officers,
under seal, all as of the day and year first above written.

                                 FIRST CLAYTON BANCSHARES, INC.


[CORPORATE SEAL]                 By:/s/ John R. Martin          4/29/96
                                 --------------------------------------


ATTEST:


/S/ Ronald E. Vandiver
----------------------
Secretary



                                 CONSULTANT:


                                 /s/ C. Lloyd Clay              (SEAL)
                                 -------------------------------
                                 C. Lloyd Clay
                                 Signed 4-17-96



                                      -7-