EXHIBIT 10.4


                              EMPLOYMENT AGREEMENT


     THIS  AGREEMENT  is made as of the 1st day of April,  1999 (the  "Effective
Date"),  between  FLAG  Financial   Corporation,   a  Georgia  corporation  (the
"Employer"),  and CHARLES O.  HINELY,  a resident  of the State of Georgia  (the
"Employee").

                                    RECITALS:

     The Employer desires to employ the Employee as the Executive Vice President
and Chief Operating  Officer of the Employer and the Employee  desires to accept
such employment.

     In  consideration   of  the  above  premises  and  the  mutual   agreements
hereinafter set forth, the parties hereby agree as follows:

1. Definitions.
---------------

     Whenever  used in this  Agreement,  the  following  terms and their variant
forms shall have the meaning set forth below:

     1.1  "Agreement"  shall mean this  Agreement and any exhibits  incorporated
herein together with any amendments  hereto made in the manner described in this
Agreement.

     1.2 "Affiliate" shall mean any business entity which controls the Employer,
is controlled by or is under common control with the Employer.

     1.3 "Area" shall mean,  as of any  applicable  date,  the counties in those
states  where the  Employer and Bank are then  transacting  business.  It is the
express  intent of the parties that the Area as defined herein is the area where
the Employee performs or performed services on behalf of the Employer under this
Agreement as of, or within a reasonable  time prior to, the  termination  of the
Employee's employment hereunder.

     1.4 "Average Monthly  Compensation"  shall mean the quotient determined (a)
by  dividing  the sum of the  Employee's  then  current  Base Salary (as defined
below) and most recently paid Incentive  Compensation  (as defined below) (b) by
twelve.

     1.5 "Bank" shall mean, collectively,  First Flag Bank of LaGrange, Citizens
Bank, and additional Partner Banks of the Employer,  if and when added, or their
successors.

     1.6  "Business of the  Employer"  shall mean the business  conducted by the
Employer,  which is the business of banking,  including the solicitation of time
and demand  deposits and the making of  residential,  consumer,  commercial  and
corporate loans.

     1.7. "Cause" shall mean:

          1.7.1 With respect to termination by the Employer:

               (a) A  material  breach  of the  terms of this  Agreement  by the
          Employee,  including,  without limitation,  failure by the Employee to


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          perform the Employees' duties and  responsibilities  in the manner and
          to the extent  required  under this  Agreement,  which breach  remains
          uncured  after the  expiration  of  thirty  (30)  days  following  the
          delivery  of  written  notice of such  breach to the  Employee  by the
          Employer;

               (b)  Conduct  by  the  Employee  that  (i)   constitutes   fraud,
          dishonesty, gross malfeasance of duty or conduct grossly inappropriate
          to the Employee's  office and (ii) is  demonstrably  likely to lead to
          material  injury  to the  Employer  or the  Bank  or  resulted  or was
          intended  to  result  in  direct  or  indirect  gain  to  or  personal
          enrichment of the Employee; provided, however, that such conduct shall
          not  constitute  "Cause" unless there shall have been delivered to the
          Employee a written notice setting forth with  specificity  the reasons
          that the Employer  believes the Employee's  conduct meets the standard
          set forth in this  Section  1.7.1(b),  the  Employee  shall  have been
          provided  with an  opportunity  to be heard in  person by the Board of
          Directors of the Employer (with the assistance of counsel, if desired)
          and, in the event of any such hearing, the decision of the Employer is
          evidenced by a resolution  adopted by two-thirds of the members of the
          Board of Directors of the Employer after the hearing;

               (c) Conduct  resulting  in the  conviction  of the  Employee of a
          felony; or

               (d) Conduct by the Employee that results in the permanent removal
          from the Employee's position as an officer or employee of the Employer
          pursuant to a written order by any regulatory agency with authority or
          jurisdiction over the Employer.

          1.7.2 With respect to termination by the Employee:

               (a) a material diminution in the powers, responsibilities, duties
          or total compensation of the Employee hereunder by the Employer, which
          condition  remains  uncured  after the  expiration of thirty (30) days
          following  the  delivery of written  notice of such  condition  to the
          Employer by the Employee; or

               (b) a  material  breach  of the  terms of this  Agreement  by the
          Employer,  which breach remains uncured after the expiration of thirty
          (30) days  following the delivery of written  notice of such breach to
          the Employer by the Employee.

     1.8  "Employer  Information"  means  Confidential   Information  and  Trade
Secrets.

     1.9 "Confidential  Information" means data and information  relating to the
business of the Employer  (which does not rise to the status of a Trade  Secret)
which is or has been  disclosed to the Employee or of which the Employee  became
aware as a consequence of or through the Employee's relationship to the Employer
and  which  has  value  to  the  Employer  and  is not  generally  known  to its
competitors.  Without  limiting the foregoing,  Confidential  Information  shall
include:

               (a) all items of information  that could be classified as a trade
          secret pursuant to law;

               (b)  The  names,   addresses  and  banking  requirements  of  the
          customers of the Bank and the nature and amount of business  done with
          such customers;

               (c) The names  and  addresses  of  employees  and other  business
          contacts of Bank;

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               (d) The particular names,  methods and procedures utilized by the
          Employer  and  the  Bank  in the  conduct  and  advertising  of  their
          business;

               (e)  Application,   operating  system,  communication  and  other
          computer  software  and  derivatives   thereof,   including,   without
          limitation,  sources and object  codes,  flow charts,  coding  sheets,
          routines,  subrouting  and  related  documentation  and manuals of the
          Employer and the Bank; and

               (f)  Marketing  techniques,   purchasing   information,   pricing
          policies,  loan policies,  quoting procedures,  financial information,
          customer data and other  materials or  information  relating to Bank's
          manner of doing business.

Confidential Information shall not include any data or information that has been
voluntarily  disclosed to the public by the Employer  (except  where such public
disclosure has been made by the Employee without authorization) or that has been
independently  developed and disclosed by others,  or that otherwise  enters the
public domain through lawful means.

     1.10 "Change in Control"  means any one of the following  events  occurring
after the Effective Date:

               (a) the acquisition by any person or persons acting in concert of
          the then outstanding voting securities of the Employer,  if, after the
          transaction, the acquiring person (or persons) owns, controls or holds
          with power to vote  twenty-five  percent (25%) or more of any class of
          voting  securities of the Employer or such other transaction as may be
          described  under  12  C.F.R.  Section  225.41(b)(1)  or any  successor
          thereto;

               (b) within any  twelve-month  period  (beginning  on or after the
          Effective  Date)  the  persons  who  were  directors  of the  Employer
          immediately  before the  beginning  of such  twelve-month  period (the
          "Incumbent  Directors")  shall cease to constitute at least a majority
          of such board of  directors;  provided that any director who was not a
          director as of the  Effective  Date shall be deemed to be an Incumbent
          Director if that  director was elected to such board of directors  by,
          or on  the  recommendation  of or  with  the  approval  of,  at  least
          two-thirds of the directors who then qualified as Incumbent Directors;
          and provided  further that no director  whose  initial  assumption  of
          office is in connection with an actual or threatened  election contest
          (as such terms are used in Rule 14a-11 of Regulation  14A  promulgated
          under the Securities Exchange Act of 1934) relating to the election of
          directors shall be deemed to be an Incumbent Director;

               (c)  the  approval  by  the  stockholders  of the  Employer  of a
          reorganization, merger or consolidation, with respect to which persons
          who were the  stockholders of the Employer  immediately  prior to such
          reorganization,   merger   or   consolidation   do  not,   immediately
          thereafter,  own more than fifty percent (50%) of the combined  voting
          power   entitled  to  vote  in  the   election  of  directors  of  the
          reorganized,  merged or consolidated company's then outstanding voting
          securities; or

               (d) the sale,  transfer or assignment of all or substantially all
          of the assets of the Employer and its subsidiaries to any third party.

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     1.11  "Initial  Term"  shall  mean that  period of time  commencing  on the
Effective  Date and  running  until  the day  immediately  preceding  the  third
anniversary of the Effective Date.

     1.12 "Permanent Disability" shall mean a condition for which benefits would
be  payable  under any  long-term  disability  coverage  (without  regard to the
application of any elimination period requirement) then provided to the Employee
by the Employer or, if no such coverage is then being provided, the inability of
the Employee to perform the material aspects of the Employee's duties under this
Agreement  for a period  of at least  180  consecutive  days as  certified  by a
physician chosen by the Employee and reasonably acceptable to the Employer.

     1.13. "Term" shall mean the term of this Agreement and shall consist of the
Initial Term; provided, however, that the Initial Term shall automatically renew
each day after the  Effective  Date so that the Term remains a  three-year  term
until either party  provides  written notice to the other of the intent that the
automatic  renewals  shall  cease,  in which case,  the Term shall expire on the
third anniversary of the date of the written notice so provided.

     1.14  "Trade  Secrets"  means  information  including,  but not limited to,
technical or nontechnical  data,  formulas,  patterns,  compilations,  programs,
devices, methods,  techniques,  drawings,  processes,  financial data, financial
plans,  product  plans or lists of actual or  potential  customers  or suppliers
which (a) derives economic value, actual or potential,  from not being generally
known to, and not being readily  ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use; and (b) is the subject
of efforts that are reasonable under the circumstances to maintain its secrecy.

2. Duties.
----------

      2.1 The Employee is employed  initially as the Executive Vice President of
the  Employer  and,  subject to the  direction  of the Board of Directors of the
Employer or its designee,  consistent with this Agreement and the designation of
Employee as Executive  Vice  President,  shall  perform and  discharge  well and
faithfully the duties which may be assigned to the Employee from time to time by
the  Employer in  connection  with the conduct of its  business.  The duties and
responsibilities of the Employee are set forth on Exhibit A attached hereto.

      2.2 In addition to the duties and responsibilities  specifically  assigned
to the Employee  pursuant to Section 2.1 hereof,  the Employee shall: (a) devote
substantially  all of the  Employee's  time,  energy  and skill  during  regular
business hours to the  performance  of the duties of the  Employee's  employment
(reasonable  vacations  and  reasonable  absences due to illness  excepted)  and
faithfully and  industriously  perform such duties;  (b)  diligently  follow and
implement all management policies and decisions  communicated to the Employee by
the Employer  which are consistent  with this  Agreement and the  designation of
Employee as Executive Vice President;  and (c) timely prepare and forward to the
Employer all reports and accounting as may be requested of the Employee.

      2.3 The  Employee  shall  devote  the  Employee's  entire  business  time,
attention  and energies to the Business of the Employer and shall not during the
term of this Agreement be engaged  (whether or not during normal business hours)
in any other business or professional activity,  whether or not such activity is
pursued for gain,  profit or other  pecuniary  advantage;  but this shall not be
construed as preventing the Employee from (a) investing the Employee's  personal
assets in businesses  which (subject to clause (b) below) are not in competition

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with the Business of the Employer and which will not require any services on the
part of the Employee in their  operation or affairs and in which the  Employee's
participation is solely that of an investor,  (b) purchasing securities or other
interests  in any entity  provided  that such  purchase  shall not result in the
Employee's  collectively  owning  beneficially  at any time five percent (5%) or
more of the equity  securities of any business in competition  with the Business
of the  Employer and (c)  participating  in civic and  professional  affairs and
organizations  and  conferences,  preparing  or  publishing  papers  or books or
teaching  so  long  as the  Board  approves  of  such  activities  prior  to the
Employee's engaging in them.

3. Term and Termination.
------------------------

     3.1  Term.This  Agreement  shall  remain in effect  for the Term or until a
termination of this Agreement  prior to the expiration of the Term in accordance
with the remaining provisions of this Section.

     3.2 Termination. During the Term, the employment of the Employee under this
Agreement may be terminated only as follows: -----------

          3.2.1  By the Employer:

               (a) For Cause,  following approval of such action by at least 75%
          of the  membership  of the Board of Directors of the Employer and only
          after  providing  Employee  with at least  thirty  (30) days'  written
          notice,  in which event the Employer shall have no further  obligation
          to the  Employee  except for the payment of any amounts  payable as of
          the effective date of termination; or

               (b) Without Cause at any time,  provided that the Employer  shall
          give the Employee  sixty (60) days' prior written notice of its intent
          to  terminate,  in which event the Employer  shall be required to meet
          its obligations to the Employee under Section 3.3 below.

          3.2.2  By the Employee:

               (a) For Cause, with no prior notice except as provided in Section
          1.7.2,  in which  event the  Employer  shall be  required  to meet its
          obligations to the Employee under Section 3.3 below; or

               (b) Without  Cause,  provided  that the  Employee  shall give the
          Employer  sixty  (60) days'  prior  written  notice of the  Employee's
          intent to terminate, in which event the Employer shall have no further
          obligation to the Employee  except for payment of any amounts  payable
          as of the effective date of the termination.

          3.2.3 By the Employee  within the period  commencing  three (3) months
     prior to and ending  twelve  (12)  months  after a Change in Control of the
     Employer (the  "Election  Period"),  provided that the Employee  shall give
     thirty (30) days written notice prior to the end of the Election  Period to
     the Employer of the Employee's  intention to terminate this  Agreement,  in
     which event the Employer  shall be required to meet its  obligations to the
     Employee under Section 3.3 below.

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<PAGE>

          3.2.4 At any time upon mutual,  written  agreement of the parties,  in
     which event the Employer  shall have no further  obligation to the Employee
     except for the payment of any amounts  payable as of the effective  date of
     the termination.

          3.2.5 Notwithstanding  anything in this Agreement to the contrary, the
     Term shall  expire  automatically  upon the  Employee's  death or Permanent
     Disability, in which event the Employer shall have no further obligation to
     the  Employee  except  for the  payment  of any  amounts  payable as of the
     effective  date of  termination  and, if the reason for  termination is the
     Employee's Permanent Disability,  the Employer shall pay to the Employee as
     liquidated damages an amount equal to Average Monthly Compensation for each
     full month following such termination  until the earlier of the month prior
     to the month for which the Employee's  long-term disability benefits become
     payable or six full months commencing with the month following the month in
     which the date of termination occurs.

     3.3 Termination  Payments.From  the Effective Date until December 31, 1999,
in the event Employee's  employment is terminated under this Agreement  pursuant
Section  3.2.1(b),  Section 3.2.2(a) or Section 3.2.3, the Employer shall pay to
the Employee as severance pay and liquidated  damages a lump sum amount equal to
twelve (12) months of Average  Monthly  Compensation.  From  January 1, 2000 and
thereafter,  in  the  event  Employee's  employment  is  terminated  under  this
Agreement prior to the expiration of the Term pursuant Section 3.2.1(b), Section
3.2.2(a) or Section  3.2.3,  the Employer shall pay to the Employee as severance
pay and liquidated damages a lump sum amount equal to the lesser of (a) eighteen
(18) months of Average Monthly  Compensation or (b) the number of whole calendar
months  remaining in the  unexpired  portion of the Term.  In  addition,  if the
Employee's  employment is so  terminated  as otherwise  provided in this Section
3.3,  the  Employer  shall  reimburse  the Employee for his cost of COBRA health
continuation  coverage for the Employee and eligible  dependents  for as long as
Employee is entitled to health continuation  coverage under the Employer's group
health plan.

     Notwithstanding  any other provision of this Agreement to the contrary,  if
the  aggregate of the  payments  provided  for in this  Agreement  and the other
payments  and  benefits  which the  Employee  has the right to receive  from the
Employer  (the "Total  Payments")  would  constitute a  "parachute  payment," as
defined in Section  280G(b)(2)  of the Internal  Revenue  Code,  as amended (the
"Code"),  the Employee shall receive the Total Payments unless the (a) after-tax
amount that would be retained by the  Employee  (after  taking into  account all
federal,  state and local income taxes payable by the Employee and the amount of
any excise  taxes  payable by the Employee  under  Section 4999 of the Code that
would be payable by the Employee  (the "Excise  Taxes")) if the Employee were to
receive the Total Payments has a lesser  aggregate  value than (b) the after-tax
amount that would be retained by the  Employee  (after  taking into  account all
federal,  state and local income taxes  payable by the Employee) if the Employee
were to receive the Total Payments reduced to the largest amount as would result
in no portion of the Total  Payments being subject to Excise Taxes (the "Reduced
Payments"),  in which case the  Employee  shall be entitled  only to the Reduced
Payments. If the Employee is to receive the Reduced Payments, the Employee shall
be entitled to determine which of the Total Payments,  and the relative portions
of each, are to be reduced.

4. Compensation.
----------------

     The Employee  shall  receive the following  salary and benefits  during the
Term:

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     4.1 Base Salary.  The Employee  shall be  compensated at a base rate of One
Hundred  Sixty  Thousand  Dollars  ($160,000)  per  year  ("Base  Salary").  The
Employee's  salary  shall be reviewed by the Board of  Directors of the Employer
annually,  and the Employee shall be entitled to receive annually an increase in
such  amount,  if any, as may be  determined  by the Board of  Directors  of the
Employer  based upon the  performance  of the  Employer and the  Employee.  Such
salary  shall be  payable  in  accordance  with the  Employer's  normal  payroll
practices.

     4.2 Incentive  Compensation.  The Employee shall be entitled to participate
in such bonus,  incentive and other executive  compensation programs as are made
available  to senior  management  of the Bank from time to time (the  "Incentive
Compensation").

     4.3 Stock  Options.  The Employer will grant to the Employee  stock options
commensurate  with the Employee's  position  taking into account options held by
the Employee as of the Effective  Date. Any such options shall be reflected by a
separate written award.

     4.4  Benefits.  The Employee  shall be entitled to such  benefits as may be
available  from time to time for  senior  executives  of the  Employer  and Bank
similarly  situated  to the  Employee.  All such  benefits  shall be awarded and
administered in accordance with the Employer's  standard policies and practices.
Such  benefits  may  include,  by way of example  only,  profit  sharing  plans,
retirement or investment funds,  dental,  health and life insurance benefits and
such other benefits as the Employer deems appropriate.

     4.5  Disability  Insurance.  The Employer  shall  provide the Employee with
amounts,  as  additional  compensation,  as and when  necessary,  to  allow  the
Employee  to pay the  premiums  that  become due under the  personal  disability
insurance policy currently owned by the Employee.

     4.6 Automobile.  The Employer shall provide the Employee with an automobile
comparable to the  automobile  provided to the Employee by Employer  immediately
prior to the Effective Date, with such automobile to be used by the Employee for
business and personal  purposes.  The  automobile  shall be replaced with a new,
comparable automobile no less frequently than every twenty-four (24) months. The
Employer will pay expenses  associated with the operation and maintenance of the
automobile, including taxes, insurance and repairs.

     4.7  Business  Expenses.  The  Employer  shall  reimburse  the Employee for
reasonable  business  (including  travel)  expenses  incurred by the Employee in
performance of the Employee's  duties  hereunder;  provided,  however,  that the
Employee  shall,  as a condition of  reimbursement,  submit  verification of the
nature and amount of such expenses in  accordance  with  reimbursement  policies
from time to time  adopted by the Employer  and in  sufficient  detail to comply
with rules and regulations promulgated by the Internal Revenue Service.

     4.8  Memberships.  The Employer shall reimburse the Employee for the annual
dues  associated  with  membership in one country or eating club selected by the
Employee; provided, however, that the aggregate annual dues for such memberships
shall not exceed five percent (5%) of the Employee's Base Salary then in effect,
and for memberships in such  professional  associations  which are  commensurate
with the Employee's position;  provided,  however, that the Employee shall, as a
condition of reimbursement, submit verification of the nature and amount of such
expenses in accordance with reimbursement  policies from time to time adopted by
the  Employer  and in  sufficient  detail to comply  with rules and  regulations
promulgated by the Internal Revenue Service.

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     4.9 Vacation. On a non-cumulative basis the Employee shall be entitled to a
minimum of four (4) weeks of  vacation  annually,  during  which the  Employee's
compensation shall be paid in full.

     4.10 Withholding. The Employer may deduct from each payment of compensation
hereunder all amounts  required to be deducted and withheld in  accordance  with
applicable federal and state income, FICA and other withholding requirements.

5. Employer Information.
------------------------

     5.1  Ownership  of  Information.   All  Employer  Information  received  or
developed by the Employee  while  employed by the Employer  will remain the sole
and exclusive property of the Employer.

     5.2  Obligations of the Employee.  The Employee agrees (a) to hold Employer
Information in strictest confidence,  and (b) not to use, duplicate,  reproduce,
distribute,  disclose  or  otherwise  disseminate  Employer  Information  or any
physical embodiments thereof and may in no event take any action causing or fail
to take any action  necessary in order to prevent any Employer  Information from
losing its  character  or ceasing to qualify as  Confidential  Information  or a
Trade Secret.  In the event that the Employee is required by law to disclose any
Employer  Information,  the Employee will not make such  disclosure  unless (and
then only to the extent that) the Employee has been advised by independent legal
counsel  that such  disclosure  is  required  by law and then only  after  prior
written  notice is given to the Employer  when the Employee  becomes  aware that
such  disclosure has been requested and is required by law. This Section 5 shall
survive  for a period  of  twelve  (12)  months  following  termination  of this
Agreement  with  respect  to   Confidential   Information,   and  shall  survive
termination  of this  Agreement for so long as is permitted by the  then-current
Georgia  Trade  Secrets Act of 1990,  O.C.G.A.  ss.ss.  10-1-760-10-1-767,  with
respect to Trade Secrets.

     5.3 Delivery upon Request or Termination. Upon request by the Employer, and
in any event upon  termination of the Employee's  employment  with the Employer,
the Employee will promptly deliver to the Employer all property belonging to the
Employer,  including  without  limitation all Employer  Information  then in the
Employee's possession or control.

6. Non-Competition.
-------------------

     The Employee  agrees that during his  employment by the Employer  hereunder
and, in the event of his  termination  other than by the Employer  without Cause
pursuant to Section  3.2.1(b),  by the  Employee  for Cause  pursuant to Section
3.2.2(a),  or by the Employee  pursuant to Section 3.2.3, for a period of twelve
(12) months  thereafter,  the Employee will not (except on behalf of or with the
prior written  consent of the  Employer),  within the Area,  either  directly or
indirectly,  on his own behalf or in the  service  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 responsibilities similar to those undertaken for the Employer, engage in any
business  which is the same as or  essentially  the same as the  Business of the
Employer.

7. Non-Solicitation of Customers.
---------------------------------

     The Employee  agrees that during the Employee's  employment by the Employer
hereunder and, in the event of Employee's termination other than by the Employer
without Cause pursuant to Section  3.2.1(b),  by the Employee for Cause pursuant
to Section 3.2.2(a),  or by the Employee pursuant to Section 3.2.3, for a period
of twelve (12) months thereafter,  the Employee will not (except on behalf of or

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with the prior  written  consent  of the  Employer),  within  the  Area,  on the
Employee's 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 of  the  Employer's  or the  Bank's
customers,  including  actively  sought  prospective  customers,  with  whom the
Employee  has or had  material  contact  during  the last  two (2)  years of the
Employee's  employment,  for purposes of providing products or services that are
competitive with those provided by the Employer and the Bank.

8. Non-Solicitation of Employees.
---------------------------------

     The Employee  agrees that during the Employee's  employment by the Employer
hereunder  and,  in the event of the  Employee's  termination  other than by the
Employer without Cause pursuant to Section  3.2.1(b),  by the Employee for Cause
pursuant to Section 3.2.3(a),  or by the Employee pursuant to Section 3.2.3, for
a period of twelve (12) months  thereafter,  the Employee  will not,  within the
Area,  on the  Employee's  own behalf or in the  service 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 the Employer or its Affiliates,
whether or not such employee is a full-time  employee or a temporary employee of
the Employer or its Affiliates and whether or not such employment is pursuant to
written  agreement and whether or not such employment is for a determined period
or is at will.

9. Remedies.
------------

     The Employee  agrees that the  covenants  contained in Sections 5 through 8
hereof  are of the  essence of this  Agreement;  that each of the  covenants  is
reasonable  and necessary to protect the business,  interests and  properties of
the  Employer;  and that  irreparable  loss and damage  will be  suffered by the
Employer should he breach any of the covenants.  Therefore,  the Employee agrees
and consents that, in addition to all the remedies provided by law or in equity,
the Employer  shall be entitled to a temporary  restraining  order and temporary
and permanent  injunctions to prevent a breach or contemplated  breach of any of
the covenants.  The Employer and the Employee agree that all remedies  available
to the  Employer  or the  Employee,  as  applicable,  shall  be  cumulative.  In
addition,  in the event the Employee  fails to comply with any of the  covenants
contained  in  Section  5 hereof  and  such  failure  shall  not be cured to the
reasonable satisfaction of the Employer within thirty (30) days after receipt of
written  notice  thereof  from the  Employer,  the Employer  shall  thereupon be
relieved of liability  for all  obligations  then  remaining  under  Section 3.3
hereof.

10. Severability.
-----------------

     The parties agree that each of the provisions included in this Agreement is
separate, distinct and severable from the other provisions of this Agreement and
that the invalidity or  unenforceability  of any Agreement  provision  shall not
affect the validity or  enforceability of any other provision of this Agreement.
Further, if any provision of this Agreement is ruled invalid or unenforceable by
a court of competent  jurisdiction  because of a conflict  between the provision
and any applicable law or public policy,  the provision shall be redrawn to make
the provision  consistent with and valid and enforceable under the law or public
policy.

11. No Set-Off by the Employee.
-------------------------------

     The  existence  of any  claim,  demand,  action  or cause of  action by the
Employee  against  the  Employer,  or any  Affiliate  of the  Employer,  whether
predicated  upon this Agreement or otherwise,  shall not constitute a defense to
the enforcement by the Employer of any of its rights hereunder.

12. Notice.
-----------

     All  notices and other  communications  required  or  permitted  under this
Agreement  shall be in writing  and,  if mailed by prepaid  first-class  mail or
certified mail, return receipt requested,  shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition,  notices hereunder may be delivered by

                                       8
<PAGE>


hand,  facsimile  transmission or overnight  courier,  in which event the notice
shall be deemed  effective when delivered or transmitted.  All notices and other
communications  under this Agreement shall be given to the parties hereto at the
following addresses:

               (a) If to the Employer, to it at:

                  101 North Greenwood Street
                  PO Box 3007
                  LaGrange, GA  30240-2699
                  Attn: Chairman of the Board
                        FLAG Financial Corporation

               (b) If to the Employee, to the Employee at:

                  3789 S. Rockridge Road
                  Stone Mountain, GA  30087

13. Assignment.
---------------

     Neither  party hereto may assign or delegate  this  Agreement or any of its
rights and obligations  hereunder without the written consent of the other party
hereto; provided,  however, that this Agreement shall be assumed by and shall be
binding upon any successor to the Employer.

14. Waiver.
-----------

     A waiver by the  Employer of any breach of this  Agreement  by the Employee
shall not be  effective  unless in writing,  and no waiver  shall  operate or be
construed as a waiver of the same or another breach on a subsequent occasion.

15. Arbitration.
----------------

     Any  controversy or claim arising out of or relating to this  contract,  or
the breach thereof,  shall be settled by binding  arbitration in accordance with
the Commercial  Arbitration Rules of the American Arbitration  Association.  The
Employer and the Employee  agree that they will seek to enforce any  arbitration
award in the Superior  Court of Troup  County.  The decision of the  arbitration
panel shall be final and binding  upon the parties and  judgment  upon the award
rendered  by  the  arbitration   panel  may  be  entered  by  any  court  having
jurisdiction.  The Employer and the Employee agree to share equally the fees and
expenses associated with the arbitration proceedings.

16. Attorneys' Fees.
--------------------

     With respect to  arbitration  of disputes and if litigation  ensues between
the parties concerning the enforcement of an arbitration award, each party shall
pay its own fees,  costs and expenses;  provided,  however,  the Employer  shall
advance to the Employee  reasonable  fees,  costs and  expenses  incurred by the
Employee in preparing for and in initiating or defending  against any proceeding
or suit brought to enforce  rights or obligations  set forth in this  Agreement.
Such advances  shall be made within thirty (30) days after  receiving  copies of
invoices  presented  by the  Employee  for such fees,  costs and  expenses.  The
Employee shall have the  obligation to reimburse the Employer  within sixty (60)
days following the final  disposition of the matter  (including  appeals) to the
full extent of the aggregate  advances unless the panel of arbitrators or court,
as the case may be,  has  ruled in favor of the  Employee  on the  merits of the
substantive issues in dispute.

17. Applicable Law.
-------------------

     This Agreement shall be construed and enforced under and in accordance with
the laws of the State of Georgia.  The parties agree that the Superior  Court of
Troup  County,  Georgia,  shall  have  jurisdiction  of any case or  controversy

                                       10
<PAGE>


arising under or in connection  with this  Agreement and shall be a proper forum
in which to  adjudicate  such case or  controversy.  The parties  consent to the
jurisdiction of such courts.

18. Interpretation.
-------------------

     Words  importing  any gender  includes all  genders.  Words  importing  the
singular  form shall  include the plural,  and vice versa.  The terms  "herein,"
"hereunder,"  "hereby,  "hereto,  "hereof"  and any similar  terms refer to this
Agreement.  Any captions,  titles or headings preceding the text of any article,
se or subsection  herein are solely for  convenience  of reference and shall not
constitute part of this Agreement or affect its meaning, construction or effect.

19. Entire Agreement.
---------------------

     This  Agreement  embodies the entire and final  agreement of the parties on
the subject matter stated in the Agreement. No amendment or modification of this
Agreement  shall be valid or binding upon the  Employer or the  Employee  unless
made in  writing  and  signed  by both  parties.  All prior  understandings  and
agreements relating to the subject matter of this Agreement are hereby expressly
terminated;  provided,  however,  that this Agreement shall not alter,  limit or
otherwise impair the Employee's rights under any  tax-qualified  retirement plan
in which the Employee is or may become a participant.

20. Rights of Third Parties.
----------------------------

     Nothing  herein  expressed  is intended to or shall be  construed to confer
upon or give to any person, firm or other entity,  other than the parties hereto
and their permitted  assigns,  any rights or remedies under or by reason of this
Agreement.

21. Survival.
-------------

     The obligations of the Employer  pursuant to Sections 3.2.5 and 3.3 and the
obligations of the Employee  pursuant to Sections 5, 6, 7, 8 and 9 shall survive
the  termination  of the  employment  of the Employee  hereunder  for the period
designated under each of those respective sections.

     IN  WITNESS  WHEREOF,  the  parties  hereto  have  hereunto  executed  this
Agreement in accordance with the provisions hereof.


                                        FLAG FINANCIAL CORPORATION

                                        /s/J. Daniel Speight, Jr.
                                        -------------------------
                                        Print Name:J. Daniel Speight, Jr.
                                        ---------------------------------
ATTEST:                                                President and CEO

                                        Date:March 18, 1999
                                        -------------------

          Ricky Smith
      -------------------
      SVP Asst. Secretary
      -------------------
      Date: March 18, 1999
      --------------------


                                      /s/ Charles O. Hinely
                                      ---------------------
                                          Charles O. Hinely



                                       11
<PAGE>


                                    Exhibit A


                             Duties of the Employee


o    Directs overall administration of the Employer.

o    Coordinates   activities  in  accordance  with  established   policies  and
     procedures; in the absence of the Chairman or President and Chief Executive
     Officer, acts in the Chairman or CEO's place.

o    Serves  as  chief  administrator  of  Fiscal/Accounting,  Human  Resources,
     Mortgage Lending,  Operations/Administration,  Audit/Loan Review, Treasury,
     Consulting, Information Services and FLAG Tech.

o    Oversees the development and  implementation of Employer operating policies
     and procedures.

o    Identifies   opportunities   for  corporate   growth  and  development  and
     coordinates the development of strategic plans to reach those goals.

o    Analyzes operational problems and develops procedures for their resolution.

o    Plans and oversees activities related to mergers and acquisitions.

o    Recommends   equipment   changes  and  reviews   and   approves   equipment
     expenditures.

o    Monitors  and ensures  efficient  operation  of data  processing  and other
     technical services as necessary.