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                                                                    EXHIBIT 10.7

                      [SOUTHERNBANK HOLDINGS LETTERHEAD]

                                February 8, 2000

Ms. Rita B. Gray
2029 Shields Road
Dalton, GA  30720

Dear Rita:

It is my pleasure to confirm the terms of your employment as the Chief
Financial Officer for SouthernBank Holdings, Inc. and subsequently as Chief
Financial Officer for SouthernBank, N.A. when it is formed. My interest in
having you come on board immediately is tempered by the recognition that you
have specific issues and activities to address prior to your departure from
your current bank employer.

You and I are in complete agreement that your commitment to North Georgia
National Bank is likely to require your being there into early March. It is very
important for you to transition out of the bank with as little disruption as
possible, and I therefore do not expect that you would be able to begin your
responsibilities here prior to the week of March 6th.

Your salary will be $80,000.00 per annum to be earned and paid on a monthly
basis ($6,666.67 per month). A performance and salary review will be conducted
at least annually.

In addition, within thirty days of joining our organization, you will be paid a
signing bonus of $5,000.00. Should your employment terminate in less than six
(6) months, you agree to repay a pro rata portion portion of this signing bonus
at a rate of $833.33 per month for each month less than six (6) months that you
are employed. You will also be paid a bonus of $5,000.00 after you have been
employed for six (6) full months. You agree to repay a pro rata portion of this
bonus at a rate of $833.33 per month for each month less than twelve (12) but
more than six (6) months that you are employed should your employment terminate
in less than twelve (12) months.

You will participate in stock options after the bank has opened as the Board of
Directors determines such options for the executive officers of the bank. We
expect that the number of share to be 10,000 subject to an even vesting schedule
over ten (10) years.

You will participate in benefits such as a retirement plan, ESOP, and/or 401-K,
medical, and life insurance, long-term disability, vacation, and sick leave as
such benefits are adopted and approved by the Board of Directors. At the outset
of your employment, SouthernBank Holdings, Inc. will pay your COBRA coverage.

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Ms. Rita B. Gray
February 8, 2000
Page 2

You will be provided membership in civic/service organization(s) and/or club(s)
to be mutually agreed upon. Specifically, we would want you to be active in
Rotary as you have been, and we would provide a membership in the 1818 Club.

Even though your employment is for no set or guaranteed time period, resignation
by you would be expected to be preceded by written notification one (1) month in
advance. If you were terminated for just cause (reasons such as dishonesty,
violation of any law or regulation of policy), there would be no notice or pay
in lieu of notice. If you were terminated for other than just cause, then you
would receive one (1) month notice or pay in lieu of notice.

Rita, I am genuinely pleased with your decision to join SouthernBank Holdings,
Inc. and look forward to the excitement and challenges of our building a
quality organization.

                                           Sincerely,

                                           /s/ M. Lauch McKinnon
                                           -------------------------------------
                                           President

Accepted:

/s/ Rita B. Gray                           Date:    February 9, 2000
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Rita B. Gray<PAGE>   1
                                                                   EXHIBIT 10.8

                          SOUTHERNBANK HOLDINGS, INC.

                               STOCK OPTION PLAN

                                   ARTICLE I

                 PURPOSE, SCOPE AND ADMINISTRATION OF THE PLAN

         1.1      Purpose. The purpose of this Stock Option Plan is to promote
the long-term success of SouthernBank Holdings, Inc. (the "Company"), and its
affiliates and to encourage growth in shareholder value by providing financial
incentives to selected members of its and its affiliates' boards of directors,
employees, consultants and advisers who are in positions to make significant
contributions toward that success. It is intended that the Company will,
through the grant of options to purchase its common stock, attract and retain
(and allow its affiliates to attract and retain) highly qualified and competent
employees and directors and motivate such employees and directors to exert
their best efforts on behalf of the Company and its affiliates.

         1.2      Definitions. Unless the context clearly indicates otherwise,
for purposes of this Plan:

                  (a)      "Board of Directors" means the Board of Directors of
the Company.

                  (b)      "Code" means the Internal Revenue Code of 1986, as
amended.

                  (c)      "Committee" means a committee of the Board of
Directors, which shall be composed of two or more members appointed from time
to time by the Board of Directors from among its members. If the Board of
Directors does not appoint a such a committee, all references in this Plan to
the "Committee" shall be deemed to be references to the Board of Directors
where the context so permits or requires.

                  (d)      "Common Stock" means the Common Stock of the
Company, $1.00 par value per share, or such other class of shares or other
securities to which the provisions of the Plan may be applicable by reason of
the operation of Section 3.1 hereof.

                  (e)      "Company" means the Company and any affiliates of
the Company, including affiliates of the Company which become such after
adoption of this Plan; provided, however, that for purposes of granting
Incentive Stock Options, the term "Company" shall include only the Company and
its subsidiaries that are corporations in which the Company directly or
indirectly owns stock possessing 50 percent or more of the total combined
voting power of all classes of stock in such corporation as provided in Code
Section 424(f).

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                  (f)      "Fair Market Value" of a share of Common Stock on a
specified date means:

                           (i)      if the Common Stock is then traded on a
                  national securities exchange, the closing price on such date
                  of a share of the Common Stock as traded on the largest
                  securities exchange on which it is then traded; or

                           (ii)     if the Common Stock is not then traded on a
                  national securities exchange, the mean between the closing
                  composite inter-dealer "bid" and "ask" prices for Common
                  Stock, as quoted on the NASDAQ National Market System (A) on
                  such date, or (B) if no "bid" and "ask" prices are quoted on
                  such date, then on the next preceding date on which such
                  prices were quoted; or

                           (iii)    if the Common Stock is not then traded on a
                  national securities exchange or quoted on the NASDAQ National
                  Market System, the value determined in good faith by the
                  Committee.

                  (g)      "Grant Date," as used with respect to a particular
Option, means the date as of which the Option is granted by the Committee
pursuant to the Plan.

                  (h)      "Grantee" means the person to whom an Option is
granted by the Committee pursuant to the Plan.

                  (i)      "Incentive Stock Option" means an Option, or any
portion thereof, granted to an employee of the Company which qualifies as an
Incentive Stock Option as described in Section 422 of the Code, unless the
Committee expressly designates the Option, or such portion thereof, as a
Nonqualified Stock Option.

                  (j)      "Nonqualified Stock Option" means any option granted
under this Plan, other than an Incentive Stock Option.

                  (k)      "Option" means an Option granted by the Committee
pursuant to Article II to purchase shares of Common Stock, which shall be
designated at the time of grant as either an Incentive Stock Option or a
Nonqualified Stock Option, as provided in Section 2.1 hereof.

                  (l)      "Option Agreement" means the agreement between the
Company and a Grantee under which the Grantee is granted an Option pursuant to
the Plan. Option Agreements need not be identical with other Option Agreements,
either in form or substance, and need only conform to the terms and conditions
of this Plan.

                  (m)      "Option Period" means, with respect to any Option
granted hereunder, the period beginning on the Grant Date and ending at such
time not later than the tenth anniversary of the Grant Date as the Committee in
its sole discretion shall determine and during which the Option may be
exercised.

                  (n)      "Plan" means the SouthernBank Holdings, Inc. Stock
Option Plan as set forth herein and as amended from time to time.

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         1.3      Aggregate Limitation.

                  (a)      The maximum number of shares of Common Stock with
respect to which Options may be granted shall not exceed a total of one hundred
thousand (100,000) shares in the aggregate, subject to possible adjustment in
accordance with Section 3.1.

                  (b)      Any shares of Common Stock to be delivered by the
Company upon the exercise of Options shall, at the discretion of the Board of
Directors, be issued from the Company's authorized but unissued shares of
Common Stock or transferred from any available Common Stock held in treasury.

                  (c)      The Committee may grant new Options hereunder with
respect to any shares for which an Option expires or otherwise terminates prior
to being exercised.

         1.4      Administration of the Plan.

                  (a)      The Plan shall be administered by the Committee,
which shall have the authority:

                           (i)      To determine the directors, employees,
                  consultants and advisers of the Company to whom, and the
                  times at which, Options shall be granted, and the number of
                  shares of Common Stock to be subject to each such Option,
                  taking into consideration the nature of the services rendered
                  by the particular Grantee, the Grantee's potential
                  contribution to the long-term success of the Company and such
                  other factors as the Committee in its discretion may deem
                  relevant;

                           (ii)     To interpret and construe the provisions of
                  the Plan and to establish rules and regulations relating to
                  it;

                           (iii)    To prescribe the terms and conditions of
                  the Option Agreements for the grant of Options (which need not
                  be identical for all Grantees) in accordance and consistent
                  with the requirements of the Plan; and

                           (iv)     To make all other determinations necessary
                  or advisable to administer the Plan in a proper and effective
                  manner.

                  (b)      All decisions and determinations of the Committee in
the administration of the Plan and on other matters concerning the Plan or any
Option shall be final, conclusive and binding on all persons, including (but
not by way of limitation) the Company, the shareholders and directors of the
Company, and any persons having any interest in any Options. The Committee
shall be entitled to rely in reaching its decisions on the advice of counsel
(who may be counsel to the Company).

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         1.5      Eligibility for Awards. The Committee shall in accordance
with Article II designate from time to time the directors, employees,
consultants and advisers of the Company who are to be granted Options. In no
event may a person who is not an employee of the Company be granted an
Incentive Stock Option under the Plan.

         1.6      Effective Date and Duration of Plan. The Plan shall become
effective on the date of its adoption by the Board of Directors; provided, that
any grant of Options under the Plan prior to approval of the Plan by the
shareholders of the Company is subject to such shareholder approval within 12
months of adoption of the Plan by the Board of Directors. Unless previously
terminated by the Board of Directors, the Plan (but not any Options then
outstanding) shall terminate on the tenth anniversary of its adoption by the
Board of Directors.

                                   ARTICLE II

                                 STOCK OPTIONS

         2.1      Grant of Options.

                  (a)      The Committee may from time to time, subject to the
provisions of the Plan, grant Options to directors, employees, consultants and
advisers of the Company under appropriate Option Agreements to purchase shares
of Common Stock up to the aggregate number of shares of Common Stock set forth
in Section 1.3(a).

                  (b)      The Committee may designate as an Incentive Stock
Option any Option (or portion thereof) granted to an employee of the Company
which satisfies the requirements of Sections 2.2 and 2.3 hereof. Any portion of
an Option that is not designated as an Incentive Stock Option (or otherwise
does not qualify as an Incentive Stock Option) shall be a Nonqualified Stock
Option. A Nonqualified Stock Option must satisfy the requirements of Section
2.2 hereof, but shall not be subject to the requirements of Section 2.3.

         2.2      Option Requirements.

                  (a)      An Option shall be evidenced by an Option Agreement
specifying the number and class of shares of Common Stock that may be purchased
upon its exercise and containing such other terms and conditions consistent
with the Plan as the Committee may determine to be applicable to that Option.

                  (b)      No Option shall be granted under the Plan on or
after the tenth anniversary of the date upon which the Plan was adopted by the
Board of Directors.

                  (c)      An Option shall expire by its terms at the
expiration of the Option Period and shall not be exercisable thereafter.

                  (d)      The Committee may provide in the Option Agreement
for the expiration or termination of the Option prior to the expiration of the
Option Period, upon the occurrence of any event specified by the Committee.

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                  (e)      The Committee may provide in the Option Agreement
for vesting periods which require the passage of time and/or the occurrence of
events in order for the Option to become exercisable.

                  (f)      The option price per share of Common Stock of an
Incentive Stock Option shall not be less than the Fair Market Value of a share
of Common Stock on the Grant Date. The option price per share of Common Stock
of a Nonqualified Stock Option shall be such price as shall be determined by
the Committee at the time any such Nonqualified Option is granted, and may be
greater than, equal to, or less than the Fair Market Value of a share of Common
Stock at the time such Nonqualified Option is granted.

                  (g)      An Option shall not be transferable other than by
will or the laws of descent and distribution, except that any vested portion of
Nonqualified Stock Options may be transferred if the transfer is approved in
advance in writing by the Committee or Board of Directors in their sole
discretion. Unless transferred with approval as provided in the preceding
sentence, during the Grantee's lifetime an Option shall be exercisable only by
the Grantee or, if the Grantee is disabled and the Option remains exercisable,
by his or her duly appointed guardian or other legal representative. Upon the
Grantee's death, but only to the extent that the Option is otherwise
exercisable hereunder, an Option may be exercised by the Grantee's legal
representative or by a person who receives the right to exercise the Option
under the Grantee's will or by the applicable laws of descent and distribution.

                  (h)      Each Option Agreement shall contain an agreement
that, upon demand by the Committee for such a representation, the Grantee (or
any person acting on the Grantee's behalf) shall deliver to the Committee at
the time of any exercise of an Option a written representation that the Common
Stock to be acquired upon such exercise is to be acquired for investment and
not for resale or with a view to the distribution thereof or such other
representation as may be required by the Committee. Upon such demand, delivery
of such representation prior to the delivery of any Common Stock issued upon
exercise of an Option and prior to the expiration of the Option period shall be
a condition precedent to the right of the Grantee or such other person to
purchase any shares of Common Stock.

                  (i)      A person electing to exercise an Option shall give
written notice of election to the Company in such form as the Committee may
require, accompanied by payment of the full purchase price of the shares of
Common Stock for which the election is made. Payment of the purchase price
shall be made in cash or in such other form as the Committee may specify in the
applicable Option Agreement.

         2.3      Incentive Stock Option Requirements.

                  (a)      An Option granted to an employee of the Company and
designated by the Committee as an Incentive Stock Option is intended to qualify
as an "incentive stock option" within the meaning of Section 422 of the Code
and shall satisfy, in addition to the conditions of Section 2.2 above, the
conditions set forth in this Section 2.3.

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                  (b)      An Incentive Stock Option shall not be granted to an
individual who on the Grant Date owns stock possessing more than ten percent of
the total combined voting power of all classes of stock of the Company, unless
the option price per share of Common Stock will not be less than 110% of the
Fair Market Value thereof on the Grant Date and the Option Period does not
extend beyond five years from the Grant Date.

                  (c)      The aggregate Fair Market Value, determined on the
Grant Date, of the shares of Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by a Grantee during any calendar
year (under the Plan or any other plan of the Company or any parent or
subsidiary thereof) shall not exceed $100,000.

                                  ARTICLE III

                               GENERAL PROVISIONS

         3.1      Adjustment Provisions.

                  (a)      In the event of:

                           (i)      payment of a stock dividend in respect of
                  Common Stock; or

                           (ii)     any recapitalization, reclassification,
                  split-up or consolidation of or other change in the Common
                  Stock; or

                           (iii)    any exchange of the outstanding shares of
                  Common Stock in connection with a merger, consolidation or
                  other reorganization of or involving the Company or a sale by
                  the Company of all or a portion of its assets, for a
                  different number or class of shares of stock or other
                  securities of the Company or for shares of the stock or other
                  securities of any other corporation;

then the Committee shall, in such manner as it may determine in its sole
discretion, appropriately adjust the number and class of shares or other
securities which shall be subject to Options and the purchase price per share
which must be paid thereafter upon exercise of any Option. Any such adjustments
made by the Committee shall be final, conclusive and binding upon all persons,
including (but not by way of limitation) the Company, the shareholders and
directors of the Company, and any persons having any interest in any Options
which may be granted under the Plan.

                  (b)      Except as provided above in subparagraph (a) of this
paragraph 3.1, issuance by the Company of shares of stock of any class or
securities convertible into shares of stock of any class shall not affect the
Options.

         3.2      Additional Conditions. Any shares of Common Stock issued or
transferred under any provision of the Plan may be issued or transferred
subject to such conditions, in addition to those specifically provided in the
Plan, as the Committee or the Company may impose, and may require as a
condition to exercise of the Option that the Grantee (or any person acting on
the

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Grantee's behalf) enter into any agreement or execute any acknowledgment that
the Committee shall deem necessary to ensure that the shares of Common Stock
acquired pursuant to the Option will be subject to any shareholders agreement
as may be in effect at the time such Option is exercised.

         3.3      No Rights as Shareholder or to Employment. No Grantee or any
other person authorized to purchase Common Stock upon exercise of an Option
shall have any interest in or shareholder rights with respect to any shares of
the Common Stock which are subject to any Option until certificates evidencing
the shares have been issued and delivered to the Grantee or any such person
upon the exercise of the Option. Furthermore, an Option shall not confer upon
any Grantee any rights to employment or any other relationship with the
Company, including without limitation any right to continue in the employ of
the Company, nor affect the right of the Company to terminate the employment or
other relationship of the Grantee with the Company at any time with or without
cause.

         3.4      Legal Restrictions. If in the opinion of legal counsel for
the Company the issuance or sale of any shares of Common Stock pursuant to the
exercise of an Option would not be lawful for any reason, including (but not by
way of limitation) the inability or failure of the Company to obtain from any
governmental authority or regulatory body the authority deemed necessary by
such counsel for such issuance or sale, the Company shall not be obligated to
issue or sell any Common Stock pursuant to the exercise of an Option to a
Grantee or any other authorized person unless the Company receives evidence
satisfactory to its legal counsel that the issuance and sale of the shares
would not constitute a violation of any applicable securities laws. The Company
shall in no event be obligated to take any action which may be required in
order to permit, or to remedy or remove any prohibition or limitation on, the
issuance or sale of such shares to any Grantee or other authorized person.

         3.5      Rights Unaffected. The existence of the Options shall not
affect: the right or power of the Company and its shareholders to make
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; any issuance of bonds, debentures,
preferred or prior preference stocks affecting the Common Stock or the rights
thereof; the dissolution or liquidation of the Company, or sale or transfer of
any part of its assets or business; or any other corporate act, whether of a
similar character or otherwise.

         3.6      Withholding Taxes. As a condition to exercise of an Option,
the Company may in its sole discretion withhold or require the Grantee to pay
or reimburse the Company for any taxes which the Company determines are
required to be withheld in connection with the grant or any exercise of an
Option.

         3.7      Choice of Law. The validity, interpretation and
administration of the Plan and of any rules, regulations, determinations or
decisions made thereunder, and the rights of any and all persons having or
claiming to have any interest therein or thereunder, shall be determined
exclusively in accordance with the laws of the State of Georgia. Without
limiting the generality of the foregoing, the period within which any action in
connection with the Plan must be commenced shall be governed by the laws of the
State of Georgia, without regard to the place where the act or

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omission complained of took place, the residence of any party to such action or
the place where the action may be brought or maintained.

         3.8      Amendment, Suspension and Termination of Plan. The Plan may
from time to time be terminated, suspended or amended by the Board of Directors
in such respects as it may deem advisable, including any such amendment
effected (i) so that the Incentive Stock Options granted hereunder shall be
"incentive stock options" as such term is defined in Section 422 of the Code,
or (ii) to conform to any change in any law or regulation governing the Plan,
or the Options granted hereunder; provided, however, that no such amendment
shall change the following unless approved by the shareholders of the Company
within twelve months following the date such amendment is adopted:

                  (a)      The maximum aggregate number of shares for which
         Options may be granted under the Plan, except as required under any
         adjustment pursuant to Section 3.1 hereof; or

                  (b)      The requirements as to eligibility for participation
         in the Plan in any material respect.

         3.9      Headings. The headings in this Plan are for convenience only
and are not to be used in interpreting the meaning or effect of any provisions
hereof.

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