EXHIBIT 10.6

                          SEPARATION AGREEMENT BETWEEN

                J. PRESTON MARTIN AND FLAG FINANCIAL CORPORATION


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                              SEPARATION AGREEMENT



         THIS  SEPARATION  AGREEMENT is made and effective this 13th day of May,
1998 (the "Effective Date") by and between FLAG FINANCIAL  CORPORATION ("FLAG"),
a Georgia  corporation (the  "Employer"),  and J. Preston Martin, an employee of
the Employer (the "Executive").


                           STATEMENT OF BACKGROUND INFORMATION

          A. The Executive  currently serves as an officer of the Employer or of
one of its wholly owned subsidiaries.

         B. The Employer and the Executive  desire to enter into this  agreement
to  document  certain  terms  and  conditions  of  the  Executive's   employment
relationship with the Employer.

                             STATEMENT OF AGREEMENT

        NOW, THEREFORE, in consideration of the foregoing,  the mutual covenants
and promises herein contained,  and other good and valuable  consideration,  the
sufficiency and receipt of which are hereby  acknowledged,  the parties agree as
follows:


ARTICLE I.  TERM OF AGREEMENT

         This  Agreement  shall  remain in effect for an initial  term of twelve
(12) months;  provided that, at the end of the initial  twelve-month period, and
at the end of each twelve-month period thereafter during which this Agreement is
in effect,  this  Agreement  shall  automatically  be extended for an additional
twelve-month period commencing at the end of the initial  twelve-month period or
any subsequent  extension  thereof,  unless either party gives written notice to
the other of its intent not to extend this Agreement.  Such written notice shall
be  given  not less  than  ninety  (90)  days  prior  to the end of the  initial
twelve-month  period  or  any  subsequent  twelve-month  period  to  which  this
Agreement  has been  extended.  In the event  that  notice of  non-extension  is
properly given,  this Agreement shall terminate at the end of the remaining term
then in effect.


ARTICLE II.  SEVERANCE BENEFIT

         In the event of the Executive's  Involuntary  Termination of employment
with the Employer during the term of this Agreement for the reasons specified in
Article III below,  the Employer  shall pay to the  Executive an amount equal to
the Executive's base salary and bonus paid over the last three full fiscal years
(or the compensation  paid to the Executive for such shorter period as Executive
has been employed) of the Employer or its subsidiary bank immediately  preceding
such involuntary  termination (the "Severance  Benefit").  The Severance Benefit
shall  be paid in cash in a lump sum  within  thirty  (30)  days  following  the
Involuntary Termination.

         The Employer shall be entitled to withhold  appropriate  employment and
income taxes, if required by applicable law, should the Severance Benefit become
payable.
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         In addition, the insurance policy on The Executive being transferred to
FLAG Financial  Corporation will be maintained by the Bank and will totally vest
to The  Executive  following  seven (7) years  from the date of this  Agreement;
however,  provided that in the event of the Executive's  Involuntary Termination
of  employment  with the  Employer  during  the term of this  Agreement  for the
reasons  specified in Article III below,  the policy will become fully vested to
the Executive.


ARTICLE III.  PAYMENT EVENTS

         The  Severance  Benefit  described  in  Article II above  shall  become
payable if (a) the Executive's employment is Involuntarily Terminated and either
(i) such Involuntary Termination occurred within six (6) months prior to one (1)
year following a Change in Control as defined in Section  5.1(2) below,  or (ii)
such Involuntary  Termination occurred within one (1) year following the date of
this Agreement.


ARTICLE IV.  PROTECTIVE COVENANTS

        4.1 Confidential  Information.  As a senior  management  employee of the
Employer,  the  Executive  has access to  Confidential  Information  (as defined
herein).   The  Executive  agrees  to  maintain  the   confidentiality   of  all
Confidential  Information  throughout  the Term and for a period of one (1) year
after the termination of this Agreement.  For purposes of this Section, the term
"Confidential  Information" means data and information  relating to the business
of the Employer  which is or has been disclosed to the Executive or of which the
Executive  has  become  aware as a  consequence  of or  through  his  employment
relationship  with the Employer and which has value to the  Executive and is not
generally known to its competitors.  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  was effected by the  Executive
without authorization) or that has been independently developed and disclosed by
others or that otherwise enters the public domain through law means.

         4.2 Covenant Not to Compete.  The Executive  agrees,  acknowledges  and
understands that the nature, kind and character of the business conducted by the
Employer is highly competitive.  Incident to the Executive  engagement hereunder
and for the considerations contained herein, the Executive agrees that:

                  (1)      during the term of this Agreement and for a period of
                           twelve  (12)  months   following  the  later  of  the
                           termination of this  Agreement or the  resignation or
                           Involuntary  Termination of Executive,  the Executive
                           will not, in the Georgia counties of Telfair,  Dooly,
                           Crisp, Macon, Troup or Dodge:

                           (a)      enter into any employment  relationship with
                                    any bank, thrift  institution,  other entity
                                    providing financial services or an affiliate
                                    of  any  of  the  foregoing  in  a  capacity
                                    identical with or  substantially  similar to
                                    the capacity in which he was employed by the
                                    Employer at the time of his  termination  of
                                    employment;

                           (b)      directly or indirectly, on his own behalf or
                                    in  the  service  or on  behalf  of  others,
                                    solicit,  divert,  appropriate or attempt to
                                    solicit, divert or appropriate, any business
                                    from any of the  Employer's  customers  with
                                    whom the Executive has had material  contact
                                    during   the  past  two  (2)  years  of  the

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                                    Executive's  employment,   for  purposes  of
                                    providing  products  or  services  that  are
                                    competitive   with  those  provided  by  the
                                    Employer; or

                           (c)      on his 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,  whether  or not
                                    such  employee  is  a  full-time   employee,
                                    part-time  or  temporary   employee  of  the
                                    Employer, and whether or not such employment
                                    is pursuant to a written agreement or is for
                                    a determined period or at will.

         The Executive  acknowledges that the foregoing covenants are reasonable
and necessary to protect the interests of the Employer.

                  (2)      by virtue of the duties and special  knowledge of the
                           affairs  and  operations  of the  Employer  that  the
                           Executive  has and will  obtain  as a  result  of his
                           employment  relationship with the Employer,  a breach
                           or threatened breach by him of the provisions of this
                           covenant  not  to  compete  shall  cause  irreparable
                           injury  to  the  Employer   and  shall   entitle  the
                           Employer,   in  addition  to  any  other  remedy,  to
                           injunctive  relief  against such breach or threatened
                           breach.


ARTICLE V.  MISCELLANEOUS

         5.1  Definitions.  For purposes of this  Agreement  the terms set forth
below shall have the following meanings ascribed to them:

                  (1)      "Cause"  means  conduct  (a)  constituting  fraud  or
                           dishonesty   resulting  in  financial   harm  to  the
                           Employer or any of its affiliates; (b) constituting a
                           gross  dereliction of the  Executive's  duties in the
                           capacity in which he is employed by the Employer;  or
                           (c)  which   results  in  the   successful   criminal
                           prosecution  by federal,  state or local  authorities
                           for  anything  other than a  misdemeanor  relating to
                           public safety laws.

                  (2)      "Change in  Control"  means any one of the  following
                           events which occurs during the term of this Agreement
                           or any extension:

                           (a)      the  acquisition  by any  person or  persons
                                    acting in  concert  of the  then-outstanding
                                    voting shares of FLAG Financial Corporation,
                                    after the transaction,  the acquiring person
                                    or persons  own,  control or hold with power
                                    to vote twenty-five percent (25%) or more of
                                    any  class  of  voting  securities  of  FLAG
                                    Financial    Corporation   or   such   other
                                    transactions  as may be  described  under 12
                                    C.F.R.  ss.  225.41(b)(1)  or any  successor
                                    thereto; or,

                           (b)      the  approval  by  the  stockholders of FLAG
                                    Financial Corporation  of  a reorganization,
                                    merger, share exchange or consolidation,with
                                    respect to which persons who were the share-
                                    holders  of FLAG Financial  Corporation
                                    immediately prior to such reorganization,
                                    merger, share exchange or consolidation, do 
                                    not, immediately  thereafter,  own more than
                                    fifty  percent (50%) of the combined  voting
                                    power  entitled  to  vote at the election of

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                                    directors of the reorganized, merged, 
                                    exchanged  or consolidated   company's  then
                                    outstanding  voting securities; or

                           (c)      the sale,  transfer or  assignment of all or
                                    substantially  all of  the  assets  of  FLAG
                                    Financial Corporation to any third party.

                  (3)      "Involuntary   Termination"   means   termination  of
                           Executive  by the  Employer for any reason other than
                           for Cause,  and shall  include  for  purposes of this
                           Agreement a material  diminution in the compensation,
                           duties  and   responsibilities   of  Executive  or  a
                           transfer of the  Executive to another  location  more
                           than  thirty  (30)  miles  from the  location  of the
                           office  where  Executive  employed at the time of the
                           Change in Control.

         5.2 Amendment.  This Agreement may not be amended (in whole or in part)
orally or by course of performance,  but only by a written  instrument signed by
both parties.

         5.3 Notice.  Except as otherwise  required  under this  Agreement,  any
notice  required or permitted to be given  pursuant to this  Agreement  shall be
sufficiently given:

                  (1)      to  the  Executive  if  in  writing  and   personally
                           delivered,  or mailed (and if mailed  shall be deemed
                           given  three  (3)   business   days  after   mailing)
                           registered  or  certified   mail   addressed  to  the
                           Executive  at the  Executive's  residence as shown in
                           the records of the Employer or at such address as the
                           Executive  shall designate in a written notice to the
                           Employer; and

                  (2)      to  the   Employer  if  in  writing  and   personally
                           delivered to the Chairman or President and CEO of the
                           Employer  or mailed  (and if mailed,  shall be deemed
                           given  three  (3)   business   days  after   mailing)
                           registered  or  certified   mail  addressed  to  FLAG
                           Financial Corp.,  P.O. Box 3007,  LaGrange,  Georgia,
                           30241, Attn: Chairman or President.

         5.4 Binding Effect. This Agreement shall inure to the benefit of and be
binding upon the Executive and upon the Employer and its successors and assigns.
The Executive may not assign his rights and  obligations  hereunder  without the
written consent of the Employer.

         5.5 Applicable Law. This Agreement shall be governed by and interpreted
in  accordance  with the laws of the State of Georgia.

         5.6 No Defense.  The  existence  of any claim or cause of action of the
Executive  against  the  Employer,  whether  predicated  on  this  Agreement  or
otherwise,  shall not constitute a defense to the enforcement by the Employer of
any covenant contained in this Agreement.

         5.7  Survival.   The   provisions  of  Article  IV  shall  survive  any
termination of this Agreement.


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         IN WITNESS WHEREOF, the Employer has executed and delivered by its duly
authorized  officer,  and the Executive has signed, this Agreement all as of the
day and year first above written.

                                FLAG FINANCIAL CORPORATION
                                 
                                By: /s/ John S. Holle
                                ---------------------
                                Title:  President, Chairman of the Board

                                EXECUTIVE:
                                /s/ Charles O. Hinely                (SEAL)
                                --------------------------------
                                Print Name:  Charles O. Hinely
                                Senior Vice President and C.O.O.



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