LOAN MODIFICATION AND
SETTLEMENT AGREEMENT
  This LOAN
MODIFICATION AND SETTLEMENT AGREEMENT (this “Agreement”) is
effective as of the 30th day of December, 2009 (the “Effective Date”), by
and between Nexity Bank, an Alabama state banking corporation, (“Nexity”) and First
National Bancshares, Inc., a South Carolina corporation (“First
National”).
  Recitals
  WHEREAS,
First National borrowed from Nexity a principal amount of up to $15,000,000.00
with an outstanding balance of $9,640,916.66, as evidenced by that certain
Promissory Note dated December 28, 2007, executed and delivered by First
National to Nexity (the “Note”) and that
certain Loan Agreement of even date therewith made by and between First National
and Nexity (the “Loan
Agreement” and, together with the Note and other documents relating to
the indebtedness evidenced by the Note, the “Loan
Documents”);
  WHEREAS,
the Note is secured by, without limitation, that certain Pledge Agreement dated
December 28, 2007, executed and delivered by First National to Nexity (the
“Pledge
Agreement”).  The Pledge Agreement grants to Nexity, without
limitation, a security interest in 1,100,000 shares of common stock of First
National Bank of the South, a national banking association, as evidenced by
Stock Certificate No. 001 for 1,100,000 shares of common stock of such bank (the
“Collateral”);
  WHEREAS,
First National defaulted under the Loan Documents for failure to make payment
when due and remains in default under terms of the Loan Documents as of the
Effective Date;
  WHEREAS,
except as provided herein, Nexity does not intend to, and does not, alter,
modify or waive any rights available to it by contract or law;
  WHEREAS,
First National and Nexity desire to amend the Loan Documents as provided herein
to provide for a full and final settlement of the Loan (as such term is defined
in the Loan Agreement) subject to all of the conditions herein being satisfied;
and
  WHEREAS,
each of the Recitals set forth above are expressly incorporated into the
Agreement section of this Agreement.
  Agreement
  NOW,
THEREFORE, in consideration of the foregoing and for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as
follows:
  1.           First
National waives any rights to contest, and hereby agrees that the indebtedness
owed to Nexity by First National pursuant to, without limitation, the Loan
Documents, is fully due and owing as of the Effective Date.  First
National further represents to Nexity that, as of the Effective Date, First
National has no defenses to such indebtedness due under the Loan Documents, and
otherwise releases Nexity from any claims related to or arising from the
transaction represented by, but not limited to, the Loan.
  
  2.           On
the Effective Date, First National shall remit to Nexity via wire transfer
$147,827.38 to satisfy interest owed to Nexity as of September 30,
2009.
  3.           Nexity
hereby forgives and waives demand for interest due from First National to Nexity
related to the Loan for the period beginning on October 1, 2009 and ending on
December 31, 2009 in the amount of $147,827.38.
  4.           Beginning
on January 1, 2010 and ending on the date full payment is made hereunder (the
“Payment
Date”), interest shall accrue on the Loan at a rate of $558.70 per day
(“2010
Interest”).  2010 Interest shall be calculated by multiplying
$558.70 times the number of days beginning on January 1, 2010 and ending on the
Payment Date, inclusive.  The Payment Date shall be the earlier of (i)
March 15, 2010 and (ii) the date the Settlement Amount (as defined herein) is
received by Nexity.
  5.           As
settlement for the indebtedness owed pursuant to the Loan and in full
satisfaction of the Loan, First National shall pay to Nexity an amount equal to
the sum of $3,500,000.00, plus all 2010 Interest on the Payment Date (together,
the “Settlement
Amount”).
  6.           Upon
receipt of regulatory approval as stated in Section 11 hereof, First National
anticipates that it is owed two federal tax refunds in an amount not less than
$3,500,000.00 (together, the “Tax Refunds”), and
that the Tax Refunds shall be payable to First National not later than March 15,
2010.  First National agrees to assign the Tax Refunds to Nexity so
that the Tax Refunds will be payable directly to Nexity and to execute and
deliver any and all documents necessary or appropriate, in Nexity’s discretion,
to effectuate such assignment, including without limitation FMS Form 234 and
Form 2848 promulgated by the Internal Revenue Service.
  7. First
National hereby grants to Nexity a first lien position in the Tax Refunds. Such lien
shall be in the amount of $3,500,000.00, and First National hereby agrees to
execute and deliver any and all documents necessary or appropriate to perfect
and enforce such lien in Nexity’s sole discretion; provided however that this
lien shall not be effective unless and until regulatory approval is received as
stated in Section 11 hereof.
  8.           In
the event the Tax Refunds are not successfully assigned or the Tax Refunds are
successfully assigned but the amount of the sum of the Tax Refunds is less than
the Settlement Amount, First National shall remit to Nexity via wire transfer
such funds as are necessary to satisfy the Settlement Amount.  Such
wire transfer shall occur on the same day that the Tax Refunds are received by
Nexity or First National, as appropriate.  In addition, if Nexity
shall receive the Tax Refunds and the amount of the Tax Refunds exceeds the
Settlement Amount, Nexity shall remit such excess funds to First National via
wire transfer within three (3) business days after such funds are
received.
  9.           Contemporaneous
with the execution of this Agreement, First National shall provide to Nexity
copies of all tax returns filed by First National relating to the Tax
Refunds.
  
 
 10.         In
consideration of Nexity’s commitments contained in this Agreement, the receipt
and sufficiency of which are hereby acknowledged, First National, and its
employees, directors, officers, agents, attorneys, predecessors, successors,
executors, heirs, administrators, and assigns hereby releases, acquits, and
forever discharges Nexity, its employees, directors, officers, agents,
attorneys, predecessors, successors and assigns, of and from any and all claims,
counterclaims, suits, causes of action, damages, demands, costs, expenses, and
compensation of every kind and nature, past, present, and future, known or
unknown, that First National now has or may have at any time hereafter on
account of or arising from the Loan Documents, all transactions and dealings
among First National and Nexity, and any other matter or thing that has occurred
before the signing of this Agreement, known or unknown; provided however that
the parties agree that the foregoing release shall not be construed to limit
Nexity’s interest obligations pursuant to certain subordinated notes held by
First National.
  11.         The
terms of this Agreement are subject to any and all necessary regulatory approval
which may include without limitation the approval of the State of Alabama
Banking Department, the Office of the Comptroller of the Currency, the Federal
Deposit Insurance Corporation, and/or the Federal Reserve.
  12.         Except
as expressly modified herein, all terms of the Loan Documents shall be and shall
remain in full force and effect and shall constitute the legal, valid, binding
and enforceable obligations of First National to Nexity.  This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.  Upon the satisfaction of
each and every term and condition hereof including without limitation the timely
payment of the Settlement Amount to Nexity by First National, the Loan shall be
satisfied and Nexity shall return the Collateral to First
National.  However, in the event that First National does not satisfy
each and every of its obligations pursuant to this Agreement (including without
limitation obtaining any and all regulatory approvals and full and timely
payment of the Settlement Amount), all rights and remedies available to Nexity
pursuant to this Agreement, the Loan Documents, applicable law, or otherwise
shall remain available to Nexity, and this Agreement shall not constitute a
waiver of any rights or remedies available to Nexity pursuant to the Loan
Documents or otherwise.
  13.         Should
a court of competent jurisdiction determine that any provision of this Agreement
is not enforceable in the manner set forth in this Agreement, such unenforceable
provision shall be enforceable to the maximum extent possible under applicable
law, and such provisions shall be reformed to make it enforceable in accordance
with the intent of the parties and consistent with the other terms and
conditions of this Agreement.  If any provision of this Agreement is
held to be invalid or unenforceable, such invalidation or unenforceability shall
not affect the validity or enforceability of the other portions of this
Agreement.
  14.         This
Agreement shall be construed and interpreted in accordance with the laws of the
State of Alabama.
  15.         Except
for the Loan Documents, this Agreement is the entire agreement between the
parties concerning the subject matter hereof and supersedes, revokes and
terminates any existing oral or written agreements between the
parties.
  
  16.         This
Agreement cannot be amended, supplemented, or modified, and no provision may be
waived, except by a written instrument executed by the party against whom
enforcement of any such amendment, supplement, modification, or waiver is
sought.
  17.         Each
of the parties has participated in the drafting of this
Agreement.  This Agreement is the product of arm’s length
negotiation.  Accordingly, the language of this Agreement shall not be
presumptively construed either in favor of or against any party on the grounds
that such party drafted this Agreement.
  18.         This
Agreement shall inure to the benefit of, and shall be binding upon, each of the
parties hereto and each of their successors and assigns.
  19.         This
Agreement is made and entered into for the protection and benefit of the parties
hereto and their successors and assigns, and no other person or entity shall be
a direct or indirect beneficiary of or have any direct or indirect cause of
action, defense or claim in connection with this Agreement or any related
agreement.
  20.         All
corporate action required to be taken by First National and its partners,
members, managers, respective officers, directors and stockholders and all
actions required to be taken by the principals of First National for the
authorization, execution, delivery and performance of this Agreement and any
other documents contemplated hereby have been taken.
  21.         This
Agreement is, and any documents executed pursuant hereto will be, legal, valid,
and binding obligations of the party or parties thereto, enforceable against
each such party in accordance with their respective terms, subject only to
bankruptcy, insolvency, reorganization, moratorium and other laws or equitable
principles affecting creditors’ rights generally.
  THE
UNDERSIGNED EACH WARRANTS TO THE OTHER THAT IT HAS READ THE TERMS OF THIS
AGREEMENT, HAS HAD THE ADVICE OF COUNSEL OR THE OPPORTUNITY TO OBTAIN SUCH
ADVICE IN CONNECTION WITH THE READING, UNDERSTANDING AND EXECUTION OF THIS
AGREEMENT AND HAS FULL KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS
AGREEMENT.
  [signature
pages follow]
  
  In
witness whereof, the undersigned has executed this Agreement as of the Effective
Date.
 
 NEXITY
      BANK, an Alabama state bankingcorporationBy:
                                  /s/
      J. Barry
Mason
 Print Name:
                                  J.
      Barry
Mason
  As its:
                                  Chief
      Executive
Officer
  STATE OF ALABAMA
                                        
                                        
                                        ))COUNTY
                                        )
 
 I, the
undersigned, a Notary Public in and for said county in said state, hereby
certify that ______________________, whose name as ____________________ of
Nexity Bank is signed to the foregoing instrument and who is known to me,
acknowledged before me on this day that, being fully informed of the contents of
the above and foregoing instrument, he, with full authority, executed the same
voluntarily for and as the act of said corporation on the day the same bears
date.
  Given
under my hand and seal on this the _____ day of _____________,
2009.
 
 Notary
      PublicMy commission expires:
  
 
 FIRST
      NATIONAL BANCSHARES, INC., aSouth
      Carolina corporationBy:
                      /s/
      J. Barry MasonPrint
      Name: J. Barry MasonAs
      its: Chief Executive
Officer
 
 STATE OF
                                    
                                    
                                    ))COUNTY
                                    )
 
 I, the
undersigned, a Notary Public in and for said county in said state, hereby
certify that ______________________, whose name as ____________________ of First
National Bancshares, Inc. is signed to the foregoing instrument and who is known
to me, acknowledged before me on this day that, being fully informed of the
contents of the above and foregoing instrument, he/she, with full authority,
executed the same voluntarily for and as the act of said corporation on the day
the same bears date.
  Given
under my hand and seal on this the _____ day of _____________,
2009.
 
 Notary
      PublicMy commission expires: