Unassociated Document


    

     

    300 Parkbrooke Place-Suite 350

    Woodstock, GA 30189

    Office: (678) 556-0700

    Fax: (678) 556-0704

     

    
 

    January 7, 2009

     

     

    Ms. Kitty
Payne

    Chief
Financial Officer

    First
National Bancshares, Inc. 

    215 N.
Pine Street 

    Spartanburg,
SC 29302

     

     

     

    
      	
              Re:

            	
              Loan
      and Stock Pledge Agreement (the "Agreement") dated December 31, 2007
      between First National Bancshares, Inc. ("Borrower") and Nexity Bank
      ("Lender"), and a Commercial Promissory Note ("Note") of even date in the
      original principal amount of
$15,000,000.

            


    

    
      Dear
Kitty:

    

     

    This
letter will follow up and confirm our recent conversation concerning Borrower's
financial covenant defaults and our commitment to continue the Agreement subject
to certain modifications.

    


    The
Agreement provides for Borrower to maintain certain financial covenants
throughout the term of the loan. As of September 30, 2008, we calculated
compliance for First National Bancshares, Inc. and found the following covenants
in violation of the Agreement:

     

    
    

     

    
      	
              Covenant
      Description 

            	
              Value
      at 9/30/08

            
	Weighted Average Return on Assets will be
      greater than or equal to 0.50%	
              (0.22%)

            
	Non-performing Loans
      to Total Loans not to exceed 2.0%	
              4.53%

            
	Non-performing
      Assets to Total Assets not to exceed 1.5%	
              4.72%

            


    

     

    Accordingly,
Borrower is in default under the Note and the Agreement. Borrower and Lender
agree that beginning January 1, 2009
and continuing through the calendar quarter in which Borrower certifies that all
financial covenants as of the most recent quarter end have been met, the
interest rate on the Note shall be the Prime Rate plus One percent as published
in the Wall Street Journal with a floor of six-percent (6%). Upon receipt of
notice from Borrower certifying that Borrower is in full compliance with all
covenants and conditions of the Agreement, Lender shall modify the Note interest
rate to the original contract rate effective the first day of the succeeding
calendar quarter. Borrower shall make all payments under the Note as modified
herein. Nothing in this letter constitutes a waiver by Lender of any rights it
has under the Note or the Agreement.

     


    
      
        
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      Until all
covenants and conditions under the Note and the Agreement as set forth in the
preceding paragraph have been
met, Lender will allow further advances of funds under the Note and Agreement for interest payments due and
payable to this account if needed.

       

      If you
agree with the matters as described above, please indicate your acceptance by
signing below and returning a copy of this correspondence to the undersigned.
Subject to receipt of your acceptance Lender agrees to waive the specific
covenant defaults for the period ending September 30, 2008 and until we complete
our quarterly review for the period ending December 31, 2008. All other
covenants and conditions shall remain in full force and effect. Lender will
periodically review Borrower's financial information and may provide waivers of
future covenant defaults; however, nothing contained herein should be construed
as an agreement to provide such waivers.



     

    Sincerely,

     

    
      
        
          	 	 	 	 	 
	 	 	 	
                  /s/
      Hammond Edwards

                	 
	
                   

                	 	 	
                  Hammond
      Edwards

                	 
	
                   

                	 	 	
                  Senior
      Vice President

                	 


        

      

    

    
    

     

     

     

     

    Borrower's
Acceptance:

    The
undersigned hereby agrees to the terms as set forth above:

     

    
      
        
          	 	 	 	 	 
	
                  /s/
      Kitty Payne

                	 	Date:	
                  3/30/09

                	 
	
                  by:
      Kitty Payne

                	 	 	 	 
	
                   

                	 	 	
                   

                	 


        

      



     


    
      
        
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