**EXHIBIT 10.6**

**AMENDED AND RESTATED REVOLVING  CREDIT/TERM LOAN AGREEMENT**

**THIS AMENDED AND RESTATED REVOLVING  CREDIT/TERM LOAN AGREEMENT is** dated as of  July 31, 2000 between COMMUNITY BANKSHARES, INC., a Georgia corporation, whose  principal place of business is at 400 North Main Street, Cornelia,  Georgia  30531 (the "Borrower") and SUNTRUST BANK, f/k/a  SUNTRUST BANK, ATLANTA, a Georgia banking corporation whose principal place of  business is at 25 Park Place, Atlanta, Georgia  30303 (the  "Lender"). This Amended and Restated Revolving Credit/Term Loan  Agreement renews the Revolving Credit (the "Maturing Revolving  Credit") under and supersedes the Amended and Restated Revolving Credit  /Term Loan Agreement between the parties dated July 31, 1999.  The  parties hereto hereby agree as follows:

    **ARTICLE  I**

  **DEFINITIONS  AND ACCOUNTING TERMS**

**Section 1.01.  Defined Terms.**  As used in this Agreement, the following terms have the following meanings  (terms defined in the singular to have same meaning when used in the plural  and vice versa):

"Additional Term Loan" has the  meaning assigned to such term in Section 2.06.

"Additional Term Maturity Date"  means July 31, 2004.

"Additional Term Note" has the  meaning assigned to such term in Section 2.07.

"Affiliate" means any Person  (1) which directly or indirectly controls, or is controlled by, or is under  common control with the Borrower or a Subsidiary; (2) which directly or  indirectly beneficially owns or holds five percent (5.0%) or more of any class  of voting stock of the Borrower or any Subsidiary; or (3) five percent (5.0%)  or more of the voting stock of which is directly or indirectly beneficially  owned or held by the Borrower or a Subsidiary.  The term  "control" means the possession, directly or indirectly, of the power  to direct or cause the direction of the management and policies of a Person  whether through the ownership of voting securities, by contract, or otherwise.

"Agreement" means this Amended  and Restated Revolving Credit/Term Loan Agreement, as amended, supplemented,  or modified from time to time.

 

----

"Bank" means each Subsidiary of  Borrower that is listed on Exhibit A, attached hereto and incorporated  herein, and any Subsidiary acquired by Borrower from time to time after the  date hereof, which is a banking association or banking corporation organized  under either the laws of the United States or of a state in the United States.

"Business Day" means any day  other than a Saturday, Sunday, or other day on which commercial banks in  Georgia are authorized or required to close under the laws of the State of  Georgia.

"Call Reports" means, with  respect to any Bank, such Bank's Consolidated Reports of Condition and Income  filed with such Bank's applicable federal Regulatory Authority.

"Capital Lease" means all  leases which have been or should be capitalized on the books of the lessee in  accordance with generally accepted accounting principles.

"Code" means the Internal  Revenue Code of 1986, as amended from time to time, and the regulations and  published interpretations thereof.

"Collateral" means all property  which is subject to the Lien granted by any Loan Document, including, without  limitation, the personal property identified and described on Exhibit B  attached hereto and incorporated herein.

"Commonly Controlled Entity"  means an entity, whether or not incorporated, which is under common control  with the Borrower within the meaning of Section 414(b) or 414(c) of the Code.

"Debt" means without  duplication (1) indebtedness or liability of Borrower or any Subsidiaries for  borrowed money; (2) obligations of Borrower or any Subsidiaries evidenced by  bonds, debentures, notes, or other similar instruments; (3) obligations of  Borrower or any Subsidiaries for the deferred purchase price of property or  services (including trade obligations); (4) obligations of Borrower or any  Subsidiaries as lessee under Capital Leases; (5) liabilities of Borrower or  any Subsidiaries in respect of unfunded vested benefits under Plans covered by  ERISA; (6) all guarantees, endorsements (other than for collection or deposit  in the ordinary course of business), interest rate swaps, and other contingent  obligations of Borrower or any Subsidiaries to purchase, to provide funds for

2

----

payment, to supply funds to invest in any Person or entity, or otherwise to  assure a creditor against loss (except loans or letters of credit made or  issued in the ordinary course of business); and (7) obligations of Borrower or  any Subsidiaries, other than obligations as a lender, secured by any Liens,  whether or not the obligations have been assumed.  The term  "Debt" does not include any deposit liabilities of any Bank.

"ERISA" means the Employee  Retirement Income Security Act of 1974, as amended from time to time, and the  regulations and published interpretations thereof.

"Event of Default" means any of  the events specified in Section 8.01, provided that any requirement for the  giving of notice, the lapse of time, or both, or any other condition, has been  satisfied.

"Existing Term Loan" means that  portion of the credit established pursuant to the 1996 Agreement which remains  outstanding pursuant thereto and under the Existing Term Note.

"Existing Term Note" has the  meaning assigned to such term in Section 2.05.

"GAAP" means generally accepted  accounting principles in the United States.

"Governmental Authority" means  any nation or government, any state or political subdivision thereof and any  entity exercising executive, legislative, judicial, regulatory, or  administrative functions of or pertaining to government.

"Lien" means the charge,  encumbrance, security interest, or right of the Lender in property created by  any Loan Document or any other mortgage, deed of trust, pledge, security  interest, hypothecation, assignment, deposit arrangement, encumbrance, lien  (statutory or other), or preference, priority, or other security agreement or  preferential arrangement, charge, or encumbrance of any kind or nature  whatsoever (including, without limitation, any conditional sale or other title  retention agreement, any financing lease having substantially the same  economic effect as of the foregoing, or the filing of any financing statement  under the Uniform Commercial Code or comparable law of any jurisdiction to  evidence any of the foregoing).

"Loan" means collectively, the  Revolving Credit, the Existing Term Loan and the Additional Term Loan, as such  terms

3

----

are defined, respectively, in Sections 2.01, 2.03 and 2.06 of this  Agreement.

"Loan Documents" means this  Agreement, the Revolving Credit Note, the Existing Term Note, the Additional  Term Note, the Security Agreement, or any deed to secure debt, mortgage, deed  of trust, pledge agreement, security agreement, or other agreement evidencing  or securing the Loan (two or more of the foregoing being also referred to  collectively herein as the "Loan Documents").

"Multiemployer Plan" means a  Plan described in Section 4001(a)(3) of ERISA.

"1996 Agreement" means the  Revolving Credit/Term Loan Agreement by and between Borrower and Lender dated  January 10, 1996, as amended, supplemented, or modified from time to time.

"PBGC" means the Pension  Benefit Guaranty Corporation or any entity succeeding to any or all of its  functions under ERISA.

"Person" means an individual,  partnership, corporation, business trust, joint stock company, trust,  unincorporated association, joint venture, governmental authority, or other  entity of whatever nature.

"Plan" means any pension plan  which is covered by Title IV of ERISA and in respect of which the Borrower or  a Commonly Controlled Entity is an "employer" as defined in Section  3(5) of ERISA.

"Prime Rate" means the rate of  interest announced by the Lender from time to time as its prime commercial  lending rate, which rate is not necessarily the lowest rate of interest  charged by the Lender to its borrowers.

"Principal Office" means the  Lender's office at 25 Park Place, Atlanta, Georgia  30303.

"Prohibited Transaction" means  any transaction set forth in Section 406 of ERISA or Section 4975 of the Code.

"Real Estate Owned" has the  meaning assigned to such term in Section 4.15.

"Regulatory Authority" or  "Regulatory Authorities" means the Federal Reserve Board and, as  applicable, the

4

----

Department of Banking of a state of the United States, the  Federal Deposit Insurance Corporation, the Office of the Comptroller of the  Currency and any other agency with regulatory control over Borrower, any Bank  or any other Subsidiary.

"Reportable Event" means any of  the events set forth in Section 4043 of ERISA.

"Revolving Credit" has the  meaning assigned to such term in Section 2.01.

"Revolving Credit Note" shall  have the meaning assigned to such term in Section 2.01.01

"Revolving Maturity Date" means  July 31,2001.

"Security Agreement" means the  Amended and Restated Stock Pledge and Security Agreement executed by Borrower  in favor of Lender dated July 21, 1997.

"Subsidiary" means, as to the  Borrower, a corporation of which shares of stock having ordinary voting power  (other than stock having such power only by reason of the happening of a  contingency) to elect a majority of the board of directors or other managers  of such corporation are, at the time, owned, or the management of which  corporation is otherwise controlled, directly or indirectly, through one or  more intermediaries, or both, by the  Borrower. The term  "Subsidiary" shall specifically include the Banks.

"Tier I Capital" means those  components of the equity capital of the Borrower or of any Bank which, in the  aggregate, constitute the core or primary capital of the Borrower or Bank, as  those components are determined and defined from time to time by the Federal  Regulatory Authority having primary jurisdiction over the Borrower or any  Bank.

"Tier II Capital" means those  components of the equity capital of the Borrower or of any Bank which, in the  aggregate, constitute the supplementary capital of the Borrower or Bank, as  those components are determined and defined from time to time by the Federal  Regulatory Authority having primary jurisdiction over the Borrower or any  Bank.

"Total Capital" means the total  of the amounts of Tier I Capital and Tier II Capital that qualify, under the  applicable regulations of the Federal Regulatory Authority having primary  jurisdiction over the Borrower or any Bank, for inclusion in the

5

----

computation  of leverage capital requirements and risk-weighted capital requirements.

"Total  Non-Performing Assets" means the sum of (i) all loans that are at least  90 days past due and (ii) all non-accrual loans.

**Section 1.02.  Accounting Terms.**  All accounting terms not specifically defined herein shall be construed in  accordance with generally accepted accounting principles consistent with those  applied in the preparation of the financial statements referred to in Section  4.04, and all financial data submitted pursuant to this Agreement shall be  prepared in accordance with such principles.

  **ARTICLE  II**

   **AMOUNT  AND TERMS OF THE LOAN**

**Section 2.01.  Revolving Credit**.      Subject to and upon the terms and conditions set forth in this Agreement, the  Lender hereby establishes until the Revolving Maturity Date a revolving credit  facility in favor of the Borrower not to exceed THREE MILLION AND NO/100  DOLLARS ($3,000,000.00) in aggregate principal at any one time outstanding  (the "Revolving Credit"). Within the limits of the Revolving Credit,  the Borrower may borrow, repay and reborrow under the Revolving Credit  pursuant to the terms of this Agreement; provided, however, the Borrower may  neither borrow nor reborrow should there exist an Event of Default.

**Section 2.01.01. Revolving Credit  Note.**The Borrower's obligation to pay  interest and repay principal under the Revolving Credit shall be evidenced by  its Promissory Note  (the "Revolving Credit Note") a copy of  which is attached hereto and incorporated herein as Exhibit D.

**Section 2.02. Interest on the  Revolving Credit.** Interest shall accrue on  all advances under the Revolving Credit and shall be computed at an annual  rate of interest equal to the Prime Rate minus one percent (1.0%).   Accrued interest on the Revolving Credit shall be paid on the last day of each  consecutive three month period, commencing October 31, 2000 and on the  Revolving Maturity Date.    

**Section 2.03.  Existing Term  Loan.** The Existing Term Loan shall remain  outstanding and subject to the terms of th

6

----

 Existing Term Note and the terms  of this Agreement.  As of the date of this Agreement the outstanding  principal amount of the Existing Term Loan is $77,049.96.

**Section 2.04.  Interest on the  Existing Term Loan.** The Borrower shall pay  interest to the Lender on the outstanding and unpaid principal amount of the  Existing Term Loan made at a rate per annum equal to the Prime Rate minus one  percent (1%).

**Section  2.05. Existing Term Note.** The Borrower's obligation to repay the Existing  Term Loan shall be evidenced by its Revolving Credit/ Term Note dated January  10, 1996 (the "Term Note")a copy of which is attached hereto and  incorporated herein as Exhibit D-1.

**Section  2.06.     Additional Term Loan.**   Subject to and upon the terms and conditions set forth in this Agreement, the  Lender hereby establishes until the Additional Term Loan Maturity Date a term  loan facility in favor of the Borrower in the original principal amount of  Nine Hundred Thousand and no/100 Dollars ($900,000.00)(the "Additional  Term Loan").  The principal amount of the Additional Term Loan  represents the outstanding principal balance of the Maturing Revolving Credit  as of the date of this Agreement.

**Section  2.07.**     **Additional  Term Note**.  The Borrower's obligation to pay interest and repay  principal under the Additional Term Loan shall be evidenced by the Term Note  (the "Additional Term Note") a copy of which is attached hereto and  incorporated herein as Exhibit D-2.

**Section  2.08.     Principal and Interest on Additional Term Loan.**   The principal amount of the Additional Term Loan shall be repaid by the  Borrower in sixteen (16) consecutive equal installments, each in an amount  equal to Fifty Six Thousand Twenty Five and no/100 Dollars ($56,025.00), which  shall be due and payable on a quarterly basis.  The first such  installment of principal shall be due and payable on October 31, 2000 and on  the last day of each consecutive three month period thereafter through and  including the Additional Term Loan Maturity Date.  The Borrower shall pay  interest on the outstanding and unpaid principal balance of the Additional  Term Loan with each quarterly principal payment.  Interest shall be  computed at an annual rate of interest equal to the Prime Rate minus one  percent (1.0%).

**Section  2.09.  Changes in Interest Rate.** With  respect to the Revolving Credit, Existing Term Loan and Additional Term

7

----

Loan: (i) any change in the interest rate resulting from a change in the Prime Rate  shall become effective as of the opening of business on the day on which such  change in the Prime Rate shall become effective; (ii) Interest shall be  calculated on the basis of a year of three hundred sixty (360) days for the  actual number of days elapsed; and (iii) Any principal amount not paid when  due (at maturity, by acceleration, or otherwise) shall bear interest  thereafter until paid in full, payable on demand, at a rate which shall be two  percent (2.0%) above the rate which would otherwise be applicable.

**Section 2.10.  Method of Payment.**  The Borrower shall make each payment under this Agreement or the Loan, on the  date when due in lawful money of the United States to the Lender at its  Principal Office in immediately available funds.  The Borrower hereby  authorizes the Lender, if and to the extent payment is not made when due under  this Agreement or the Loan, to charge from time to time against any account of  the Borrower with the Lender any amount so due.  Whenever any payment to  be made under this Agreement or the Loan, shall be stated to be due on a day  other than a Business Day, such payment shall be made on the next succeeding  Business Day, and such extension of time shall in such case be included in the  computation of payment of interest.

**Section 2.11.  Use of Proceeds.**  Any and all proceeds of the Loan shall be used by the Borrower for general  corporate purposes.  The Borrower will not, directly or indirectly, use  any part of such proceeds for the purpose of purchasing or carrying any margin  stock within the meaning of Regulation U of the Board of Governors of the  Federal Reserve System or to extend credit to any Person for the purpose of  purchasing or carrying any such margin stock, or for any purpose which  violates, or is inconsistent with, Regulation X of such Board of Governors.

**ARTICLE  III**

**ADVANCES**

**Section 3.01.  Advances.**  The Borrower shall give the Lender at least one (1) Business Day's telephone  notice of a requested disbursement under the Revolving Credit, specifying the  date the disbursement is requested and the amount thereof.  The Lender  may rely upon such telephone request for disbursements received from the  individual(s) identifying themselves as and purporting to be Mr. Harry  Stephens, Chief

8

----

Financial Officer of the Borrower. The telephone request for  disbursement should be promptly confirmed in writing by Borrower by mailing or  transmitting by facsimile transmission a confirmation to the Lender at the  address designated hereinafter, as may be amended. Upon fulfillment of the  applicable conditions set forth below, and provided that (i) the request for  disbursement does not cause the Borrower to exceed the aggregate principal  amount of the Revolving Credit and (ii) no Event of Default exists, the Lender  will make such disbursements available to the Borrower in immediately  available funds by crediting the amount thereof to the Borrower's account, or  other designated account, with the Lender.

**Section 3.02.      Conditions Precedent to Initial Advance.**  The obligation of the Lender to make the initial advance under the Revolving  Credit is subject to the condition precedent that the Lender shall have  received on or before the day of such advance each of the following, in form  and substance satisfactory to the Lender and its counsel:

(1)     **Revolving  Credit Note.**  The Revolving Credit Note duly executed by the Borrower;

(2)     **Additional  Term Note.**  The Additional Term Note duly executed by the Borrower.

(3)     **Security  Agreement.**The Security Agreement shall remain in full force and effect.

(4)     **Evidence  of All Corporate Action by the Borrower.**  Certified (as of the date  of this Agreement) copies of all corporate action taken by the Borrower,  including resolutions of its Board of Directors, authorizing the execution,  delivery, and performance of the Loan Documents to which it is a party and  each other document to be delivered pursuant to this Agreement;

(5)     **Incumbency  and Signature Certificate of the Borrower.**  A certificate (dated as  of the date of this Agreement) of the Secretary of Borrower certifying the  names and true signatures of officers of the Borrower authorized to sign the  Loan Documents to which it is a party and each of the other documents to be  delivered by the Borrower under this Agreement;

(6)     **Opinion of  Counsel for the Borrower.** [Intentionally Omitted]

9

----

(7)     **Officer's  Certificate.**  A certificate signed by a duly authorized officer of  Borrower dated the date of this Agreement, in substantially the form of Exhibit  F;

(8)     **Additional  Documentation.**  Such other approvals, opinions, or documents as the  Lender may reasonably request;

(9)     **Request  for Advance.**  A request for advance pursuant to Section 3.01 hereof;

(10)     **Regulatory  Approval.**  Copies of any and all necessary Governmental Authority or  Regulatory Authority approvals;

**Section 3.03.  Conditions  Precedent to Subsequent Advances.** The  obligation of the Lender to make subsequent advances under the Revolving  Credit is subject to the conditions precedent that the Lender shall have  received, in form and substance satisfactory to it, each of the following  documents, and that each of the conditions described below is fulfilled to the  satisfaction of the Lender:  (i) if applicable, a request for advance  pursuant to Section 3.01 hereof; and (ii) the representations and warranties  contained in Article IV hereof and each of the other Loan Documents shall be  correct in all material respects on and as of the date of the request for the  advance and the date of the advance (if applicable),  with the same  effect as though made on and as of those dates, except to the extent that such  representations and warranties relate solely to an earlier date, and on each  of such dates, no event, act, or condition shall have occurred or be  continuing, or would result from the advance requested  which constitutes  an Event of Default or would constitute an Event of Default but for the  requirement that notice be given or time elapse, or both.  The submission  by the Borrower of an oral or written request for advance shall constitute a  representation and warranty as to the correctness of the above facts, and if  requested by the Lender with respect to the advance requested, the Borrower  shall furnish to the Lender a written certificate of an officer of the  Borrower, satisfactory in form and substance to the Lender, as to the  correctness of the above facts as a condition precedent to such advance.

 

 

10

----

**ARTICLE  IV**

**REPRESENTATIONS AND WARRANTIES**

In order to induce the Lender to enter  into the Agreement and to  make advances under the Revolving Credit, the  Borrower represents and warrants to the Lender that:

**Section 4.01.  Incorporation,  Good Standing, and Due Qualification.** The  Borrower and each of its non-bank Subsidiaries is a corporation duly  incorporated, validly existing, and in good standing under the laws of the  jurisdiction of its incorporation.  Each of the Banks set forth on Exhibit  A is a banking corporation and is duly organized, validly existing, and in  good standing under the laws of the state of incorporation listed on such Exhibit  A.  The Borrower and each of its Subsidiaries has the corporate power  and authority to own its assets and to transact the business in which it is  now engaged or proposed to be engaged; and is duly qualified as a foreign  corporation and in good standing under the laws of each other jurisdiction in  which such qualification is required.

**Section 4.02.   Corporate Power  and Authority.** The execution, delivery,  and performance by the Borrower of the Loan Documents and the creation of the  security interest provided for under the Security Agreement are within the  Borrower's corporate powers and have been duly authorized by all necessary  corporate action and do not and will not (1) require any consent or approval  of the stockholders of the Borrower; (2) contravene the Borrower's charter or  bylaws; (3) violate any provision of any law, rule, regulation (including,  without limitation, Regulations U and X of the Board of Governors of the  Federal Reserve System), order, writ, judgment, injunction, decree,  determination, or award presently in effect having applicability to the  Borrower; (4) result in a breach of or constitute a default under any  indenture or loan or credit agreement or any other agreement, lease, or  instrument to which Borrower is a party or by which it or its properties may  be bound or affected; (5) result in, or require, the creation or imposition of  any Lien, except as contemplated by the Security Agreement, upon or with  respect to any of the properties now owned or hereafter acquired by the  Borrower; or (6) cause the Borrower to be in default under any such law, rule,  regulation, order, writ, judgment, injunction, decree, determination, or award  of any such indenture, agreement, lease, or instrument.

11

----

**Section 4.03.  Legally  Enforceable Agreement.** This Agreement is,  and each of the other Loan Documents are legal, valid, and binding obligations  of the Borrower, and enforceable against the Borrower in accordance with their  respective terms, except to the extent that such enforcement may be limited by  (i) applicable bankruptcy, insolvency, liquidation, reorganization, moratorium  or other similar laws affecting creditors' rights generally, and (ii) general  principles of equity (whether applied in a proceeding at law or in equity).

**Section 4.04.  Financial  Statements.** The consolidated balance sheet  of the Borrower and its Subsidiaries as of December 31, 1999 and the related  consolidated statements of income, shareholder's equity, and cash flows of the  Borrower and its Subsidiaries for the fiscal year then ended, and the  accompanying footnotes, together with the opinion thereon, dated December 31,  1999 of Mauldin & Jenkins, independent certified public accountants,  copies of which have been furnished to the Lender, are complete and correct  and fairly present the financial condition of the Borrower and its  Subsidiaries as at such dates and the results of the operations of the  Borrower and its Subsidiaries for the periods covered by such statements, all  in accordance with GAAP; and since December 31, 1999, there has been no  material adverse change in the condition (financial or otherwise), business,  or operations of the Borrower or any Subsidiary.  There are no  liabilities of the Borrower or any Subsidiary, fixed or contingent, which are  material but are not reflected in the financial statements or in the notes  thereto, other than liabilities arising in the ordinary course of business  since December 31, 1999.  No information, exhibit, or report furnished by  the Borrower to the Lender in connection with the approval of the Loan or  negotiation of this Agreement contains any material misstatement of fact or  omitted to state a material fact or any fact necessary to make the statement  contained therein not materially misleading.

**Section 4.05.   Labor Disputes and  Acts of God.** Neither the business nor the  properties of the Borrower or any Subsidiary are affected by any fire,  explosion, accident, strike, lockout or other labor dispute, drought, storm,  hail, earthquake, embargo, act of God or of the public enemy, or other  casualty (whether or not covered by insurance) materially and adversely  affecting such business or properties or the operation of the Borrower or such  Subsidiary.

**Section 4.06.  Other Agreements.**  Neither the Borrower nor any Subsidiary is a party to any indenture, loan,  credit agreement, regulatory agreement or imposition, or to any lease

12

----

or other  agreement or instrument, or subject to any charter or corporate restriction  which could have a material adverse effect on the business, properties,  assets, operations, or conditions, financial or otherwise, of the Borrower or  any Subsidiary or the ability of the Borrower to carry out its obligations  under the Loan Documents to which it is a party.  Neither the Borrower  nor any Subsidiary is in material default in any respect in the performance,  observance, or fulfillment of any of the obligations, covenants, or conditions  contained in any agreement or instrument to which it is a party.

**Section 4.07.  Litigation.**  Except as is set forth expressly on Exhibit G attached hereto, no  action or proceeding is pending or, threatened against, or affecting, the  Borrower or any of its Subsidiaries before any court, board, commission,  governmental agency, or arbitrator, which may, in any one case or in the  aggregate, materially adversely affect the financial condition, operations,  properties, or business of the Borrower or any Subsidiary or the ability of  the Borrower to perform its obligation under the Loan Documents to which it is  a party.

**Section 4.08.  No Defaults on  Outstanding Judgments or Orders.** The  Borrower and its Subsidiaries have satisfied all material judgments, and  neither the Borrower nor any Subsidiary is in default with respect to any  judgment, writ, injunction, decree, rule, or regulation of any court,  arbitrator, federal, state, municipal, or other governmental authority,  commission, board, bureau, agency, or instrumentality, domestic or foreign,  which default shall materially and adversely affect the business or properties  of Borrower and its Subsidiaries.

**Section 4.09.  Ownership and  Liens.**The Borrower and each Subsidiary  have title to, or valid leasehold interests in, all of their properties and  assets, real and personal, including the properties and assets and leasehold  interests reflected in the financial statements referred to in Section 4.04  (other than any properties or assets disposed of in the ordinary course of  business), and none of the properties and assets owned by the Borrower or any  Subsidiary and none of their leasehold interests is subject to any Lien,  except such as may be permitted pursuant to Section 6.01 of this Agreement.

**Section 4.10.  Subsidiaries and  Ownership of Stock.**The Borrower's audited  and consolidated financial statement for the fiscal year ending December 31,  1999, as provided to the Lender, includes a complete and accurate list of the  Subsidiaries of the Borrower.  All of the outstanding capital stock of  each Subsidiary has been validly issued, is fully paid

13

----

and nonassessable, and  is owned by the Borrower free and clear of all Liens.

**Section 4.11.  ERISA.**With  respect to each Plan maintained by Borrower and each Subsidiary, the Borrower  and each Subsidiary are in compliance in all material respects with all  applicable provisions of ERISA.  Neither a Reportable Event nor a  Prohibited Transaction has occurred and is continuing with respect to any  Plan; no notice of intent to terminate a Plan has been filed, nor has any Plan  been terminated; no circumstances exist which constitute grounds entitling the  PBGC to institute proceedings to terminate, or appoint a trustee to  administer, a Plan, nor has the PBGC instituted any such proceedings; neither  the Borrower nor any Commonly Controlled Entity has completely or partially  withdrawn from a Multiemployer Plan; the Borrower and each Commonly Controlled  Entity have met their minimum funding requirements under ERISA with respect to  all of their Plans, and the present value of all vested benefits under each  Plan exceeds the fair market value of all Plan assets allocable to such  benefits, as determined on the most recent valuation date of the Plan and in  accordance with the provisions of ERISA; and neither the Borrower nor any  Commonly Controlled Entity has incurred any liability to the PBGC under ERISA.

**Section 4.12.  Operation of  Business.** The Borrower and its  Subsidiaries possess all licenses, permits, franchises, patents, copyrights,  trademarks, and trade names, or rights thereto, necessary in all material  respects to conduct their respective businesses substantially as now conducted  and as presently proposed to be conducted, and the Borrower and its  Subsidiaries are not to Borrower's knowledge, in violation of any valid rights  of others with respect to any of the foregoing.

**Section 4.13.  Taxes.**  The Borrower and each of its Subsidiaries have filed all tax returns (federal,  state, and local) required to be filed and have paid all taxes, assessments,  and governmental charges and levies shown thereon to be due, including  interest and penalties.  The federal income tax liabilities of the  Borrower and its Subsidiaries have been finally determined and satisfied for  all taxable years up to and including the taxable year ended December 31,  1999.

**Section 4.14.  Absence of  Undisclosed Liabilities.** Except as  reflected in the audited consolidated balance sheet of Borrower at December  31, 1999 (including the notes thereto), as of December 31, 1999, neither  Borrower nor any Subsidiary had any material liability or obligation  whatsoever, whether accrued, absolute, contingent, or otherwise that should,  in

14

----

accordance with GAAP, have been disclosed in such financial statements and  notes thereto.  Since December 31, 1999, neither Borrower nor any  Subsidiary has incurred any material liability or obligation, except for  liabilities and obligations incurred in the ordinary course of business or  that will not have a material adverse effect on Borrower.

**Section 4.15.  Environment.**  The Borrower and each Subsidiary have duly complied in all material respects  with, and their businesses, operations, assets, equipment, property,  leaseholds, other real estate owned, or other facilities are in compliance in  all material respects with, the provisions of all federal and state,  environmental, health, and safety laws, codes, and ordinances, and all rules  and regulations promulgated thereunder.  Neither the Borrower nor any  Subsidiary has received notice of, nor knows of or suspects, facts which might  constitute any violations of any federal or state environmental, health, or  safety laws, codes, or ordinances, and any rules or regulations promulgated  thereunder with respect to its businesses, operations, assets (including but  not limited to real property loan collateral), equipment, property,  leaseholds, or other facilities.  Set forth in Exhibit H is a list  of all real property owned by Borrower and/or the Subsidiaries other than real  property acquired pursuant to foreclosure of a lien in favor of Borrower or  any Subsidiary (or by deed in lieu thereof) ("Real Estate Owned") or  leased by the Borrower and its Subsidiaries, wherever located, and a brief  description of the business conducted at such location.

**Section 4.16.  Governmental  Approval.** All permits, consents,  authorizations, approvals, declarations, notifications, filings or  registrations with any Governmental Authority or  Regulatory Authority or  any third party which are necessary in all material respects in connection  with the consummation of this transaction have been obtained on or before the  date hereof.

**Section 4.17.  Regulatory  Compliance and Notice of Regulatory Action.**  The Borrower and each Subsidiary are in compliance in all material respects  with all laws, statutes, ordinances, and governmental rules, regulations, or  requirements relating to or affecting their business or operations.   There are no outstanding notices of charges, cease-and-desist orders  (temporary or otherwise), or orders to take affirmative action issued by any  Governmental Authority or Regulatory Authority against the Borrower, any Bank  or any other Subsidiary, or any director, officer, employee or agent of the  Borrower, any Bank or any other Subsidiary.  No agreement or memorandum  of

15

----

understanding has been entered into between any Governmental Authority or  Regulatory Authority and the Borrower, any Bank or any other Subsidiary or any  director, officer, employee or agent of the Borrower, any Bank or any other  Subsidiary.  No notice of intention to remove from office or notice of  intention to suspend from office has been served upon any officer or director  of the Borrower, any Bank or any other Subsidiary by any Governmental  Authority or Regulatory Authority.

**Section 4.18.  Securities  Activities.** The Borrower has not issued  any securities except as were (a) duly registered under the Securities Act of  1933, as amended, and applicable blue sky laws, or (b) validly exempt from  registration.

**Section 4.19.  Deposit Insurance.**  Each Bank is an "insured depository institution" within the meaning  of Section 3 (c)(2) of the Federal Deposit Insurance Act, as amended.

**ARTICLE V**

**AFFIRMATIVE COVENANTS**

So long as the Revolving Credit Note, the  Existing Term Note and/or the Additional Term Note shall remain unpaid or  Borrower is permitted to request advances under the Revolving Credit, the  Borrower will:

**Section 5.01.  Use of Proceeds.**  Use the proceeds of the Loan only for the purposes set forth herein, and will  furnish the Lender such evidence as it may reasonably require with respect to  such use.

**Section 5.02.  Maintenance of  Existence.** Preserve and maintain, and  cause each Subsidiary to preserve and maintain, its corporate existence and  good standing in the jurisdiction of its incorporation, and qualify and remain  qualified, and cause each Subsidiary to qualify and remain qualified, as a  foreign corporation in each jurisdiction in which the ownership of property or  the nature of its business makes such qualification necessary or required,  except where such failure to qualify shall not materially or adversely affect  the Borrower and its Subsidiaries taken as a whole.

**Section 5.03.  Maintenance of  Records.** Keep, and cause each Subsidiary  to keep, adequate records and books of account, in which complete entries will  be made in accordance with GAAP

16

----

consistently applied, reflecting all financial  transactions of the Borrower and its Subsidiaries.

**Section 5.04.  Maintenance of  Properties.** Maintain, keep, and preserve,  and cause each Subsidiary to maintain, keep, and preserve, all of its  properties (tangible and intangible) necessary or useful in the proper conduct  of its business in good working order and condition, ordinary wear and tear  excepted.

**Section 5.05.  Conduct of  Business.** Continue, and cause each  Subsidiary to continue, to engage in a business of the same general type as  now conducted by it on the date of this Agreement.

**Section 5.06.   Maintenance of  Insurance.** Maintain and see that its  Subsidiaries maintain, or cause to be maintained, insurance coverages  including, but not limited to, bankers' blanket bonds, public liability  insurance, and fire and extended coverage insurance on all assets owned by  them, all in such form and amounts, and with such insurers, as are reasonably  satisfactory to the Lender.

**Section 5.07.  Compliance with  Laws.** Comply, and cause each Subsidiary to  comply, in all material respects with all applicable laws, rules, regulations,  orders, and material agreements to which they are subject, such compliance to  include, without limitation, maintaining adequate cash reserves for the  payment of, and paying before the same become delinquent, all taxes,  assessments, and governmental charges imposed upon it or upon its property  except as contested in good faith.

**Section 5.08.  Right of  Inspection.** At any reasonable time and  from time to time with prior notice, permit the Lender or any agent or  representatives thereof to examine and make copies of and abstracts from the  records and books of account of, and visit the properties of, the Borrower and  any Subsidiary, and to discuss the affairs, finances, and accounts of the  Borrower and any Subsidiary with any of their respective officers and  directors and the Borrower's independent accountants.

**Section 5.09.  Deposit Insurance.**  The Borrower will cause each Bank to maintain federal deposit insurance and to  be a member of the Federal Deposit Insurance Corporation (or any successor  thereto).

17

----

**Section 5.10.  Reporting  Requirements.** Furnish to the Lender:

(1)  **Quarterly Financial  Statements.**  As soon as available and in any event within forty-five  (45) days after the end of each of the first three (3) quarters of each fiscal  year of the Borrower, interim unaudited consolidated and unconsolidated  balance sheets of Borrower, and related statements of income, shareholders  equity and cash flows of the Borrower for the prior quarter prepared in  accordance with GAAP.

(2)  **Call Reports.**  As  soon as available, and in any event within thirty (30) days after the end of  each fiscal quarter of the Borrower, copies of all Call Reports of the  Borrower and each Bank as filed with the Federal Deposit Insurance Corporation  (or any successor thereto) and/or the Comptroller of the Currency (or any  successor), signed by the chief financial officer of the Borrower and each  Bank.

(3)  **Annual Financial Statements.**   As soon as available and in any event within one hundred twenty (120) days  after the end of each fiscal year of the Borrower, consolidated and  consolidating balance sheets of the Borrower and its Subsidiaries as of the  end of such fiscal year and consolidated and consolidating statements of  income, shareholder's equity, and cash flows of the Borrower and its  Subsidiaries for such fiscal year, all in reasonable detail and stating in  comparative form the respective figures for the corresponding date and period  in the prior fiscal year and all prepared in accordance with GAAP and  accompanied by an opinion thereon acceptable to the Lender by Mauldin &  Jenkins or other accountants selected by the Borrower and acceptable to the  Lender;

(4)  **F.R.Y.-6 Annual Report.**   As soon as available, and in any event within ten (10) days after the filing  thereof, a copy of the Borrower's F.R.Y.-6 Annual Report to the Federal  Reserve System.

(5)  **Management Letters.**   Promptly upon receipt thereof, copies of any reports submitted to the Borrower  or any Subsidiary by independent certified public accountants in connection  with examination of the financial statements of the Borrower or any Subsidiary  made by such accountants;

(6)  **Certificate of No Default.**   Within forty-five (45) days after the end of each of the quarters of each  fiscal year of the Borrower, a certificate of the chief financial officer of  the Borrower, substantially in the form of Exhibit I

18

----

attached hereto  and made a part hereof (a) certifying, interalia, that (i) the  representations and warranties contained in Article IV hereof and in each of  the Loan Documents remain true and correct (except to the extent that such  representations and warranties relate solely to an earlier date), (ii) the  Borrower and Subsidiaries are in compliance with the covenants set forth  herein, and (iii) no Event of Default has occurred and is continuing or, if an  Event of Default has occurred and is continuing, a statement as to the nature  thereof and the action which is proposed to be taken with respect thereto; and  (b) with computations demonstrating compliance with the covenants contained in  Article VII;

(7)  **Accountant's Report.**   Simultaneously with the delivery of the annual financial statements referred  to in Section 5.10(3),  a statement of the independent public accountants  to the effect that, in making the examination necessary for the audit of such  statements, they have obtained no knowledge of any condition or event which  constitutes an Event of Default, or if such accountants shall have obtained  knowledge of any such condition or event, specifying in such certificate each  such condition or event, of which they have knowledge and the nature and  status thereof;

(8)  **Notice of Litigation.**   Promptly after the commencement thereof, notice of all actions, suits, and  proceedings before any court or governmental department, commission, board,  bureau, agency, or instrumentality, domestic or foreign, affecting the  Borrower or any Subsidiary which, if determined adversely to the Borrower or  such Subsidiary, could have a material adverse effect on the financial  condition, properties, or operations of the Borrower or such Subsidiary;

(9)  **Notice of Events of Default.**   The Borrower will notify the Lender immediately if it becomes aware of the  occurrence of any Event of Default or of any fact, condition, or event that  only with the giving of notice or passage of time, or both, could become an  Event of Default, or of the failure of the Borrower to observe any of its  undertakings hereunder;

(10)  **ERISA Reports.**  As  soon as possible, and in any event within thirty (30) days after the Borrower  knows or has reason to know that any circumstances exist that constitute  grounds entitling the PBGC to institute proceedings to terminate a Plan with  respect to the Borrower or any Commonly Controlled Entity, and promptly, but  in any event within five (5) Business Days of receipt by the Borrower or any  Commonly Controlled Entity of notice that the PBGC intends to terminate a Plan  or

19

----

appoint a trustee to administer the same, and promptly, but in any event  within five (5) Business Days of the receipt of notice concerning the  imposition of withdrawal liability in excess of ONE HUNDRED THOUSAND AND  NO/100 DOLLARS ($100,000.00) with respect to the Borrower or any  Commonly Controlled Entity, the Borrower will deliver to the Lender a  certificate of the chief financial officer of the Borrower setting forth all  relevant details and the action which the Borrower proposes to take with  respect thereto;

(11)  **Proxy Statements, Etc.**   Promptly after the sending or filing thereof, copies of all proxy statements,  financial statements, and reports which the Borrower or any Subsidiary sends  to its stockholders, and copies of all regular, periodic, and special reports,  and all registration statements which the Borrower or any Subsidiary files  with the Securities and Exchange Commission or any Governmental Authority  which may be substituted therefor, or with any national securities exchange;

(12)  **Reports to Regulatory  Agencies.**  Promptly after the sending or filing of the same, copies  of all call reports and other reports, including without limitation responses  to administrative enforcement actions, and modifications or amendments  thereto, that the Borrower or its Subsidiaries sends or files with any  Regulatory Authority; and

(13)  **Notice of Regulatory  Action.**  Promptly, written notice of (i) the issuance of any notice  of charges, cease-and-desist order (temporary or otherwise), or order to take  affirmative action by any Governmental Authority or Regulatory Authority  against the Borrower, any Bank or any other Subsidiary, or any director,  officer, employee or agent of the Borrower, any Bank or any other Subsidiary,  (ii) the service of any notice of intention to remove from office or notice of  intention to suspend from office by any Governmental Authority or Regulatory  Authority upon any director or officer of the Borrower, any Bank or any other  Subsidiary, (iii) the issuance of a notice of termination of the status of any  Bank as an insured bank under the Federal Deposit Insurance Corporation Act,  as amended, or (iv) the entering into of any agreement or memorandum of  understanding between any Governmental Authority or Regulatory Authority and  the Borrower, any Bank or any other Subsidiary, or any director, officer,  employee or agent of the Borrower, any Bank or any other Subsidiary.

(14)**   Adverse Changes**.   Promptly after the occurrence thereof and in no event later than ten (10) days  thereafter,

20

----

full disclosures of any material adverse changes in the finances  or business of Borrower or any of its Subsidiaries.

(15)  **General Information.**   Such other information respecting the condition or operations, financial or  otherwise, of the Borrower or any Subsidiary as the Lender may from time to  time reasonably request.

**Section 5.11.  Environment.**  Be and remain, and cause each Subsidiary to be and remain, in all material  respects, in compliance with the provisions of all federal and state  environmental, health, and safety laws, codes and ordinances, and all rules  and regulations issued thereunder; and notify the Lender immediately of any  notice of an environmental complaint received from any governmental agency or  any other party.

**Section 5.12.  Capital Adequacy.**  Maintain, and cause each Bank to maintain, at all times, the minimum levels of  regulatory capital necessary to maintain the regulatory capital classification  of "Well Capitalized," as such term is defined by the applicable  Regulatory Authority.

**ARTICLE  VI**

**NEGATIVE COVENANTS**

So long as the Revolving Credit Note, the  Existing Term Note and/or the Additional Term Note shall remain unpaid or  Borrower is permitted to request advances under the Revolving Credit, the  Borrower will not:

**Section 6.01.  Liens.**  Create, incur and assume, or suffer to exist, or permit any Subsidiary to  create, incur, assume, or suffer to exist, any Lien upon or with respect to  any of its properties (including, without limitation, any Lien upon all or any  part of the common or capital stock of any of the Banks), now owned or  hereafter acquired, except:

(1)     Liens in  favor of the Lender;

(2)     Liens for  taxes or assessments or other governmental charges or levies if not yet due  and payable or, if due and payable, if they are being contested in good faith  by appropriate proceedings and for which appropriate reserves are maintained;

21

----

(3)  Liens imposed by law, such as  mechanics', materialmen's, landlords', warehousemen's, and carriers' Liens,  securing obligations incurred in the ordinary course of business which are not  yet due and payable or which are being contested in good faith by appropriate  proceedings and for which appropriate reserves have been established;

(4)  Liens under workers'  compensation, unemployment insurance, Social Security, or similar legislation;

(5)  Liens, deposits, or pledges to  secure the performance of bids, tenders, contracts (other than contracts for  the payment of money), leases (permitted under the terms of this Agreement),  public or statutory obligations, surety, stay, appeal, indemnity, performance,  or other similar bonds, or other similar obligations arising in the ordinary  course of business;

(6)  Judgment and other similar  Liens arising in connection with court proceedings, provided the execution or  other enforcement of such Liens is effectively stayed and the claims secured  thereby are being actively contested in good faith and by appropriate  proceedings;

(7)  Easements, rights-of-way,  restrictions, and other similar encumbrances which, in the aggregate, do not  materially interfere with the occupation, use, and enjoyment by the Borrower  or any Subsidiary of the property or assets encumbered thereby in the normal  course of its business or materially impair the value of the property subject  thereto;

(8)     Liens  incidental to the conduct of banking business, not incurred in connection with  the borrowing of money, arising out of transactions in federal funds,  repurchase agreements, interbank credit facilities, bank deposits, or other  obligations to customers or depositors of the Borrower's Subsidiaries.

(9)     Liens  incurred in connection with the borrowing by a Subsidiary from the Federal  Reserve Bank, or the Federal Home Loan Bank, in the ordinary course of  business;

(10) Those Liens  specified in Exhibit J attached hereto and made a part hereof; and

(11)      Liens for  purchase money security interests or Liens incurred in connection with any  conditional sale or other title retention agreement or capital lease.

22

----

**Section 6.02.  Debt.**  Create, incur, assume, or suffer to exist, or permit any Subsidiary to create,  incur, assume, or suffer to exist, any Debt, except:

(1)  Debt of the Borrower under this  Agreement or the Loan;

(2)  Debt described in Exhibit K,  and any renewals, extensions, or refinancings of existing Debt on commercially  reasonable terms (but there shall be no voluntary prepayments of such Debt);

(3)   Debt of a Subsidiary to  the Federal Reserve Bank, or the Federal Home Loan Bank, in the ordinary  course of business;

(4)  Accounts payable to trade  creditors for goods or services which are not aged more than sixty (60) days  from the billing date and current operating liabilities (other than for  borrowed money) which are not more than sixty (60) days past due, in each case  incurred in the ordinary course of business, as presently conducted, and paid  within the specified time, unless contested in good faith and by appropriate  proceedings; and

(5)  Debt of the Borrower or any  Subsidiary secured by purchase money liens and security interests permitted by  Section 6.01 (11), which Debt shall not exceed FOUR HUNDRED THOUSAND AND  NO/100 DOLLARS ($400,000.00) in the aggregate at any one time outstanding.

**Section 6.03.  Mergers,  Acquisitions, Etc.** Wind up, liquidate, or  dissolve itself, reorganize, merge, or consolidate with or into, or convey,  sell, assign, transfer, lease, or otherwise dispose of (whether in one  transaction or in a series of transactions) all or substantially all of its  assets (whether now owned or hereafter acquired) to any Person, acquire all or  substantially all of the assets or the business of any Person, or commence or  acquire any new business not conducted by it on the date of this Agreement, or  permit any Subsidiary to do so, except that the Borrower or any Subsidiary may  merge into, consolidate with or acquire any other Person provided in each case  that immediately after giving effect thereto, no event shall occur and be  continuing which constitutes a Default or an Event of Default and, in the case  of any such merger with any other Person to which the Borrower or any  Subsidiary is a party, the Borrower or its Subsidiary is the surviving  corporation.

23

----

The Lender, in its sole discretion, may consent in writing  to additional exceptions.

**Section 6.04.  Leases.**  Create, incur, assume, or suffer to exist, or permit any Subsidiary to create,  incur, assume, or suffer to exist, any obligation as lessee for the rental or  hire of any real or personal property, except:  (1) leases existing on  the date of this Agreement and any extensions or renewals thereof; (2) leases  (other than Capital Leases) which do not in the aggregate require the Borrower  and its Subsidiaries on a consolidated basis to make payments (including  taxes, insurance, maintenance, and similar expense which the Borrower or any  Subsidiary is required to pay under the terms of any lease) in any fiscal year  of the Borrower in excess of FOUR HUNDRED THOUSAND AND NO/100 DOLLARS  ($400,000.00); (3) leases between the Borrower and any Subsidiary or between  any Subsidiaries.  The Lender, in its sole discretion, may consent in  writing to additional exceptions.

**Section 6.05.  Sale and  Leaseback.** Sell, transfer, or otherwise  dispose of, or permit any Subsidiary to sell, transfer, or otherwise dispose  of, any real or personal property to any Person and thereafter directly or  indirectly lease back the same or similar property.

**Section 6.06.  Dividends.**  After the date hereof, make any distribution in respect of its capital stock  or purchase, or redeem or otherwise acquire any shares of its outstanding  capital stock unless such action has been approved by the necessary Regulatory  Authorities, and further provided such distribution, redemption or acquisition  shall not impair Borrower's ability to service Debt nor create or result in  the occurrence of an Event of Default under this Agreement or any other Loan  Document. 

**Section 6.07.  Sale of Assets.**  Sell, lease, assign, transfer, pledge, mortgage, encumber, or otherwise  dispose of, or permit any Subsidiary to sell, lease, assign, transfer, pledge,  mortgage, encumber, or otherwise dispose of, any of its now owned or hereafter  acquired assets (including, without limitation, shares of stock and  indebtedness of Subsidiaries, receivables, and leasehold interest),  except:  (1) inventory disposed of in the ordinary course of business;  (2) the sale or other disposition of assets no longer used or useful in the  conduct of its business; (3) that any Subsidiary may sell, lease, assign, or  otherwise transfer its assets to the Borrower or to any other subsidiary in  the ordinary course of business consistent with past practices; and (4) sales  of loans in the

24

----

ordinary course of business and sales of Real Estate Owned and  all other foreclosed assets.  The Lender, in its sole discretion, may  consent in writing to additional exceptions.  The Borrower further agrees  not to enter into, or permit any Subsidiary to enter into, an agreement with  or undertaking in favor of any Person, other than the Lender, to refrain from  taking any action prohibited by this Section 6.07.

**Section 6.08.  Guaranties, Etc.**  Assume, guarantee, endorse, or otherwise be or become directly or contingently  responsible or liable, or permit any Subsidiary to assume, guarantee, endorse,  or otherwise be or become directly or contingently responsible or liable  (including, but not limited to, an agreement to purchase any obligation,  stock, assets, goods, or services, or to supply or advance any funds, assets,  goods, or services, or an agreement to maintain or cause such Person to  maintain a minimum working capital or net worth, or otherwise to assure the  creditors of any person against loss) for obligations of any Person, except  guaranties by endorsement of negotiable instruments for deposits or collection  or similar transactions in the ordinary course of business and except pursuant  to letters of credit or other similar items (banker's acceptances, etc.)  issued by the Banks in the ordinary course of business.

**Section 6.09.   Transactions with  Affiliates.** Enter into any transaction,  including, without limitation, the purchase, sale, or exchange of property or  the rendering of any services, with any Affiliate, or permit any Subsidiary to  enter into any transaction, including, without limitation, the purchase, sale,  or exchange of property or the rendering of any service, with any Affiliate,  except in the ordinary course of and pursuant to the reasonable requirements  of the Borrower's or such Subsidiary's business, upon fair and reasonable  terms no less favorable to the Borrower or such Subsidiary than would obtain  in a comparable arm's-length transaction with a Person not an Affiliate, and  in compliance with all applicable regulatory and statutory requirements.

# **ARTICLE VII**

**FINANCIAL COVENANTS**

So long as the Revolving Credit Note, the  Existing Term Note and/or the Additional Term Note shall remain unpaid or  Borrower is permitted to request advances under the Revolving Credit:

25

----

**Section 7.01.  Capital  Expenditures.** Neither the Borrower nor the  Borrower's bank Subsidiaries will make any expenditures for fixed or capital  assets if, after giving effect thereto, the aggregate of all such expenditures  made by the Borrower or any bank Subsidiary would exceed FOUR MILLION AND  NO/100 DOLLARS ($4,000,000.00) during any fiscal year of Borrower. Bank may,  in its sole discretion, approve in writing exceptions to this restriction.

**Section 7.02.  Capital Adequacy.**  Maintain, and cause each Bank to maintain, at all times, the minimum levels of  regulatory capital necessary to maintain the regulatory capital classification  of "Well Capitalized," as such term is defined by the applicable  Regulatory Authority.

**Section 7.03.  Return on Assets.**  Income from operations after taxes, divided by average assets, on a  consolidated basis shall not be less than one and one-tenth percent (1.10%).

**Section 7.04.  Return on Equity.**   Income from operations after taxes, divided by average equity, on a  consolidated basis shall not be less than twelve percent (12.0%).

**Section 7.05.**[Intentionally  Omitted].

**Section 7.06.**[Intentionally  Omitted].

**Section 7.07.**[Intentionally  Omitted].

**Section 7.08.  Reserves.**  Each Bank shall maintain at all times reserves equal to the greater of (i) one  and thirty-five one hundredths percent (1.35%) of total loans, (ii) one  hundred fifty percent (150%) of Total Non-Performing Assets, or (iii) the  minimum amount required by its primary regulator.

**Section 7.09.  Asset Quality.**  The ratio of loans 90 days past due + non accrual loans plus other real estate  owned divided by net loans plus other real estate owned for each Bank shall  not exceed one and five tenths percent (1.5%).

**Section 7:10.  Consolidated  Tangible Equity.**  Consolidated  Tangible Equity for Borrower and its Subsidiaries shall be greater than or  equal to $38,000,000.00.  For purposes of this Agreement, Tangible Equity  shall mean equity minus intangibles.

26

----

**Section 7.11.  Consolidated  Tangible Equity to Total Assets.**  Consolidated Tangible Equity for Borrower and its Subsidiaries shall be  greater than or equal to 8% of the total consolidated assets of Borrower and  its Subsidiaries.

**Section 7.12.  Minimum Liquidity  Requirements. **Borrower and each  Subsidiary shall maintain at least the minimum levels of liquidity required  for each such entity by any applicable Regulatory Authority.

**ARTICLE  VIII**

**EVENTS OF DEFAULT**

**Section 8.01.  Events of Default.**  An Event of Default shall be deemed to exist if any of the following events  shall occur:

(1)  The Borrower shall fail to pay  the principal of, or interest on, the Loan or any other indebtedness or  obligations, whether now existing or hereafter created, payable or owing to  the Lender, within five (5) days of the respective due date;

(2)  Any representation, warranty or  certification made or deemed made by the Borrower in this Agreement, the  Security Agreement, or any of the other Loan Documents, or which is contained  in any certificate, document, opinion, or financial or other statement  furnished at any time under or in connection with any Loan Document, shall  prove to have been incorrect, incomplete, or misleading in any material  respect on or as of the date made or deemed made;

(3)  The Borrower shall fail to  perform or observe any term, covenant, condition or agreement contained herein  or in any other of the Loan Documents and such failure remains unremedied for  thirty (30) days after the earlier of its discovery by the Borrower or written  notice thereof to the Borrower by the Lender;

(4)   Any Event of Default as  defined (and after giving effect to any applicable notice and/or cure periods)  in any other of the Loan Documents shall occur;

(5)  The Borrower or any of its  Subsidiaries shall (a) fail to pay any indebtedness for borrowed money (other  than the

27

----

Loan or any other indebtedness or obligation, whether now existing or  hereafter created, payable or owing to the Lender) in excess of TWO HUNDRED  FIFTY THOUSAND AND NO/100 DOLLARS ($250,000.00) of the Borrower or such  Subsidiary, as the case may be, when due (whether by scheduled maturity,  required prepayment, acceleration, demand, or otherwise); or (b) fail to  perform or observe any term, covenant, or condition on its part to be  performed or observed under any agreement or instrument relating to any such  indebtedness, when required to be performed or observed, if the effect of such  failure to perform or observe is to accelerate, or to permit the acceleration  of, after the giving of notice or passage of time, or both, the maturity of  such indebtedness, whether or not such failure to perform or observe shall be  waived by the holder of such indebtedness; or any such indebtedness shall be  declared to be due and payable, or required to be prepaid (other than by a  regularly scheduled required prepayment), prior to the stated maturity thereof  and Borrower or its Subsidiaries fails to pay such indebtedness in full;

(6)  The Borrower or any of its  Subsidiaries (a) shall generally not pay, or shall be unable to pay, or shall  admit in writing its inability to pay its debts as such debts become due; or  (b) shall make an assignment for the benefit of creditors, or petition or  apply to any tribunal for the appointment of a custodian, receiver, or trustee  for it or a substantial part of its assets; or (c) shall commence any  proceeding under any bankruptcy, reorganization, arrangement, readjustment of  debt, dissolution, or liquidation law or statute of any jurisdiction, whether  now or hereafter in effect; or (d) shall have had any such petition or  application filed or any such proceeding commenced against it in which an  order for relief is entered or an adjudication or appointment is made, and  which remains undismissed for a period of sixty(60) days or more; or (e) shall  take any corporate action indicating its consent to, approval of, or  acquiescence in any such petition, application, proceeding, or order for  relief or the appointment of a custodian, receiver, or trustee for all or any  substantial part of its properties; or (f) shall suffer any such  custodianship, receivership, or trusteeship to continue undischarged for a  period of sixty (60) days or more;

(7)  One or more judgments, decrees,  or orders for the payment of money in excess of ONE MILLION AND NO/100  DOLLARS($1,000,000.00) in the aggregate shall be rendered against the Borrower  or any of its Subsidiaries, and the amount of said judgment(s) not covered by  Borrower's or Subsidiaries' insurance is in excess of FIVE HUNDRED THOUSAND  AND NO/100

28

----

 DOLLARS ($500,000.00), and such judgments, decrees, or orders shall  continue unsatisfied and in effect for a period of thirty (30) consecutive  days without being vacated, discharged, satisfied, or stayed or bonded pending  appeal;

(8)  The Security Agreement shall at  any time after its execution and delivery and for any reason cease (a) to  create a valid and perfected first priority security interest in and to the  property purported to be subject to such Security Agreement; or (b) to be in  full force and effect or shall be declared null and void, or the validity or  enforceability thereof shall be contested by the Borrower, or the Borrower  shall deny it has any further liability or obligation under the Security  Agreement, or the Borrower shall fail to perform any of its obligations under  the Security Agreement;

(9)  Any of the following events  shall occur or exist with respect to the Borrower and any Commonly Controlled  Entity under ERISA: any Reportable Event shall occur; complete or partial  withdrawal from any Multiemployer Plan shall take place; any Prohibited  Transaction shall occur; a notice of intent to terminate  a Plan shall be  filed, or a Plan shall be terminated; or circumstances shall exist which  constitute grounds entitling the PBGC to institute proceedings to terminate a  Plan, or the PBGC shall institute such proceedings; and in each case above,  such event or condition, together with all other events or conditions, if any,  could subject the Borrower to any tax, penalty, or other liability which in  the aggregate may exceed FIVE HUNDRED THOUSAND AND NO/100 DOLLARS  ($500,000.00); or

(10)  If any Governmental  Authority  asserts or creates a Lien upon any or all of the assets,  equipment, property, leaseholds, or other facilities of the Borrower by reason  of the occurrence of a hazardous discharge or any environmental complaint; or  if any Governmental Authority  asserts a claim against the Borrower  and/or its assets, equipment, property, leaseholds, or other facilities for  damages or cleanup costs relating to a hazardous discharge or an environmental  complaint; provided, however, that such claim shall not constitute a default  if, within ten (10) Business Days of the occurrence giving rise to the claim,  (a) the Borrower can prove to the Lender's satisfaction that the Borrower has  commenced and is diligently pursuing either:  (i) a cure or correction of  the event which constitutes the basis for the claim, and continues diligently  to pursue such cure or correction to completion or (ii) proceedings for any  injunction, a restraining order, or other appropriate emergency relief  preventing such Governmental Authority from asserting such

29

----

claim, which relief  is granted within ten (10) Business Days of the occurrence giving rise to the  claim and the injunction, order, or emergency relief is not thereafter  resolved or reversed on appeal; and (b) in either of the foregoing events, the  Borrower has posted a bond, letter of credit, or other security satisfactory  in form, substance, and amount to both the Lender and the Governmental  Authority asserting the claim to secure the proper and complete cure or  correction of the event which constitutes the basis for the claim;

    (11)  If the  Borrower or any Bank, or the directors, officers, or employees thereof,  becomes subject to any regulatory enforcement action, which includes without  limitation, a memorandum of understanding, written agreement, supervisory  directive, capital directive, removal action, or cease and desist order, which  regulatory enforcement action limits or restricts the ability of Borrower or  any Bank to engage in its normal business;

(12) Borrower shall fail to maintain  senior management having sufficient skill and experience in Borrower's  industry to manage Borrower and each Subsidiary competently and efficiently.

(13)  If the ownership of Borrower  as presently constituted shall change such that more than twenty-five percent  (25%) of the outstanding voting stock shall be transferred to any Person other  than (i) an existing shareholder who prior to the transfer owned not less  than  twenty-five (25%) of the outstanding voting stock of Borrower or  (ii) an immediate family member of the transferring shareholder.

(14)  Any Bank shall be unable or  shall be deemed to be unable to declare and distribute dividends as a result  of restrictions imposed by applicable regulation or by any Regulatory  Authority.

**Section 8.02.      Remedies upon Event of Default**

Upon the occurrence of an Event of  Default, the Lender may:

(1)   By notice to the  Borrower, declare the Loan and all interest thereon, and all other amounts  payable under this Agreement to be forthwith due and payable, whereupon the  Loan, all such interest, and all such amounts shall become and be forthwith  due and payable, without presentment, demand, protest, or further notice of  any kind, all of which are hereby expressly waived by the Borrower;

30

----

(2)   At any time and from time  to time, without notice to the Borrower (any such notice being expressly  waived by the Borrower), set off and apply (i) any and all deposits (general  or special, time or demand, provisional or final) at any time held by the  Lender, and (ii) other indebtedness at any time owing by the Lender to or for  the credit or the account of the Borrower against any and all of the  obligations of the Borrower, now or hereafter existing under this Agreement,  or any other Loan Document, irrespective of whether or not the Lender shall  have made any demand under this Agreement, or under any other of the Loan  Documents and although such obligations may be unmatured;

(3)     Exercise from  time to time any and all rights and remedies available to a secured party when  a debtor is in default under a security agreement as provided in the Uniform  Commercial Code of Georgia, or available to Lender under any other applicable  law or in equity, including without limitation the right to any deficiency  remaining after disposition of the Collateral;

(4)   At its option, and  without notice or demand of any kind, exercise from time to time any and all  other rights and remedies available to it under this Agreement or any of the  other Loan Documents;

(5)     Borrower  shall pay all of the reasonable costs and expenses incurred by Lender in  enforcing its rights under this Agreement and the other Loan Documents.   In the event any claim under this Agreement or under any of the other Loan  Documents is referred to an attorney for collection, or collected by or  through an attorney at law, Borrower will be liable to Lender for all expenses  incurred by it in seeking to enforce its rights hereunder, under any other of  the Loan Documents or in the Collateral, including without limitation  reasonable attorneys' fees; and

(6)   Any proceeds from  disposition of any of the Collateral may be applied by Lender first to the  payment of all expenses and costs incurred by Lender in enforcing the rights  of Lender under each of the Loan Documents and in collecting, retaking,  holding, preparing the Collateral for and advertising the sale or other  disposition of and realizing upon the Collateral, including without limitation  reasonable attorneys' fees actually incurred, as well as all other legal  expenses and court costs.  Any balance of such proceeds may be applied by  Lender toward the payment of the Loan and in such order of application as the  Lender may from time to time elect.  Lender

31

----

shall pay the surplus, if  any, to Borrower.  Borrower shall upon demand pay the deficiency, if any,  to Lender.

# **ARTICLE IX**

# **MISCELLANEOUS**

**Section 9.01.   Amendments, Etc.**  No amendment, modification, termination, or waiver of any provision of any  Loan Document to which the Borrower is a party, nor consent to any departure  by the Borrower from any Loan Document to which it is a party, shall in any  event be effective unless the same shall be in writing and signed by the  Lender , and then such waiver or consent shall be effective only in the  specific instance and for the specific purpose for which given.

**Section 9.02.  Notices, Etc.**  All notices and other communications provided for under this Agreement and  under the other Loan Documents shall be in writing (including telex and  facsimile transmissions) and mailed or transmitted or delivered as follows:

> 
If to the Borrower:

400 North Main Street  Cornelia, Georgia 30531  Attention: Mr. Harry Stephens  Executive Vice President & Chief  Financial Officer

Facsimile:(706) 776-1423

If to the Lender:

25 Park Place  Mail Code: 121  Atlanta, Georgia 30303  Attention: Southeastern Financial  Institutions

Facsimile:(404)581-1775

or, as to each party, at such other  address as shall be designated by such party in a written notice to the other  party complying as to delivery with the terms of this Section 9.02.   Except as otherwise provided in this Agreement, all such notices and  communications shall be effective when deposited in mails or sent, answer back  received via telecopier, with the original deposited in the mail,  respectively, addressed as aforesaid,

32

----

except that notices to the Lender  pursuant to the provisions of Section 3.01 shall not be effective until  received by the Lender.

**Section 9.03.  No Waiver.**  No failure or delay on the part of the Lender in exercising any right, power,  or remedy granted hereunder shall operate as a waiver thereof; nor shall any  single or partial exercise of any such right, power, or remedy preclude any  other or further exercise thereof or the exercise of any other right, power,  or remedy hereunder. 

**Section 9.04.   Successors and  Assigns.**This Agreement shall be binding  upon and inure to the benefit of the Borrower and the Lender and their  respective successors and assigns, except that the Borrower may not assign or  transfer any of its rights under any Loan Document to which the Borrower is a  party without the prior written consent of the Lender.

**Section 9.05.  Costs, Expenses,  and Taxes.** The Borrower agrees to pay on  demand all costs and expenses incurred by the Lender in connection with the  preparation, execution, delivery, filing, and administration of the Loan  Documents, and of any amendment, modification, or supplement to the Loan  Documents, including, without limitation, the fees and out-of-pocket expenses  of counsel for the Lender incurred in connection with advising the Lender as  to its rights and responsibilities hereunder.  The Borrower also agrees  to pay all such costs and expenses, including court costs and other litigation  expenses, incurred in connection with enforcement of the Loan Documents, or  any amendment, modification, or supplement thereto, whether by negotiation,  legal proceedings, or otherwise.  In addition, the Borrower shall pay any  and all stamp and other taxes and fees payable or determined to be payable in  connection with the execution, delivery, filing, and recording of any of the  Loan Documents and the other documents to be delivered under any such Loan  Documents, and agrees to hold the Lender harmless from and against any and all  liabilities with respect to or resulting from any delay in paying or omission  to pay such taxes and fees. This provision shall survive termination of this  Agreement.

**Section 9.06.  Integration.**  This Agreement and the Loan Documents contain the entire agreement between the  parties relating to the subject matter hereof and supersede all oral  statements and prior writing with respect thereto.

**Section 9.07.  Indemnity.**  The Borrower hereby agrees to defend, indemnify, and hold the Lender harmless  from and against any and all claims, damages, judgments, penalties,

33

----

costs, and  expenses (including reasonable attorney's fees and litigation expenses  actually incurred now or hereafter arising from the aforesaid enforcement of  this clause) arising directly or indirectly from the activities of the  Borrower and its Subsidiaries, and its predecessors in interest, or arising  directly or indirectly from the Borrower's or any Subsidiaries', or any  predecessors in interest's, violation of any environmental protection, health,  or safety law, whether such claims are asserted by any governmental agency or  any other person.  This indemnity shall survive termination of this  Agreement.

**Section 9.08.  Governing Law.**  This Agreement and the other Loan Documents shall be governed by, and  construed in accordance with, the laws of the State of Georgia and the  applicable laws of the United States of America.

**Section 9.09.  Severability of  Provisions.** Any provision of any Loan  Document which is prohibited or unenforceable in any jurisdiction shall, as to  such jurisdiction, be ineffective to the extent of such prohibition or  unenforceability without invalidating the remaining provisions of such Loan  Document or affecting the validity or enforceability of such provision in any  other jurisdiction.

**Section 9.10.  Headings.**  Article and Section headings in the Loan Documents are included in such Loan  Documents for the convenience of reference only and shall not constitute a  part of the applicable Loan Documents for any other purpose.

**Section 9.11.  Jury Trial Waiver.**  THE LENDER AND THE BORROWER HEREBY WAIVE TRIAL BY JURY IN ANY ACTION,  PROCEEDING, CLAIM, OR COUNTERCLAIM, WHETHER IN CONTRACT OR TORT, AT LAW OR IN  EQUITY, ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE LOAN  DOCUMENTS.  NO OFFICER OF THE LENDER HAS AUTHORITY TO WAIVE, CONDITION,  OR MODIFY THIS PROVISION.

**[REMAINDER OF PAGE  INTENTIONALLY BLANK]**

34

----

**IN WITNESS WHEREOF,**  the parties have caused this Agreement to be executed by their respective  officers thereunto duly authorized, as of the date first above written.

> 
                          COMMUNITY BANKSHARES, INC.

                          By:                                                             Title:

                          And:                                                             Title:

 

                          SUNTRUST BANK

                          By:                                                             Title:

                          And:                                                             Title:

35