Document:

Exhibit 10.7
    

    
      

    

    
      PURCHASE AND ASSUMPTION AGREEMENT
    

    
      This Purchase and Assumption Agreement (this “Agreement”) is made and
      entered into this 1st day of September, 2009, by and between
      HeritageBank of the South, a Georgia-chartered savings bank (the
      “Purchaser”), and Atlantic Coast Federal Bank, a federally chartered
      stock savings bank (the “Seller”).
    

    
      WHEREAS, Seller owns and operates a branch facility located at
      463 West Duval Street, Lake City, Florida 32055 (the “Branch”); and
    

    
      WHEREAS, Seller desires to sell and Purchaser agrees to acquire
      the Branch and, in that regard, Seller desires to sell and Purchaser
      desires to acquire certain assets relating to the Branch, all as set
      forth in this Agreement; and
    

    
      WHEREAS, Seller desires to assign to Purchaser and Purchaser
      desires to assume from Seller certain liabilities relating to the
      Branch, all as set forth in this Agreement.
    

    
      NOW THEREFORE, in consideration of the premises and the mutual
      promises, Seller and Purchaser agree as follows:

    

    
      ARTICLE I
PURCHASE AND SALE OF ASSETS AND
ASSIGNMENT
      AND ASSUMPTION OF LIABILITIES
    

    
      1.1       Purchase and Sale of
      Assets.  Upon the terms and subject to the conditions set forth
      in this Agreement, Seller shall sell, convey, assign, transfer and
      deliver to Purchaser, and Purchaser shall purchase and accept from
      Seller, the following assets relating to the Branch (the “Assets”):
    

    
      A.        Personal Property.  The
      personal property, including furniture, fixtures, equipment and fixed
      assets contained in and used primarily for the operation of the Branch
      as described in Schedule 1.1A hereto (the “Personal Property”).
    

    
      B.        Loans.  
    

    
      1.        All whole loans carried on the books and records of the Branch
      as of the close of business on June 30, 2009, relating to customer
      relationships at the Branch as listed on Schedule 1.1B.1(a) as
      prepared and delivered by Seller (the “Existing Loans”), including all
      related escrow accounts and excluding:  (i) loans that are restructured,
      changed or modified after June 30, 2009, without Purchaser’s written
      consent; (ii) loans that are 30 days or more delinquent as of the third
      business day prior to the Closing Date (as defined in Section 1.7); and
      (iii) loans listed on Schedule 1.1B.1(b) (“Excluded Loans”) as
      prepared and delivered by Purchaser within 15 business days of the date
      of this Agreement.  Schedule 1.1B.1(a) shall provide
      the following information for each loan:  loan number and type, the
      borrower and outstanding principal balance on June 30, 2009.  Schedule
      1.1B.1(b) shall identify the Excluded Loans by loan number and
      borrower.  Within five business days of receiving Schedule
      1.1B.1(b), Seller shall prepare and provide to Purchaser a revised
      list of Existing Loans on Schedule 1.1B.1(a) that excludes the
      Excluded Loans.
    

    

    

    
      
        

        

      

      
        

        

        
          

        

      

      
        

        

      

    

    

    

    
      2.        All additional loans originated and entered on the books and
      records of the Branch relating to customer relationships at the Branch
      from June 30, 2009, to the close of business on the day immediately
      before the Closing Date, but excluding loans that are 30 days or more
      delinquent as of the third business day prior to the Closing Date (the
      “Interim Loans”).
    

    
      3.        For purposes of this Agreement, the Existing Loans and Interim
      Loans are collectively referred to as the “Purchased Loans.”  The
      Purchased Loans, together with interest accrued thereon but unpaid as of
      the close of business on the day immediately before the Closing Date
      (the “Accrued Loan Interest”), shall be purchased by Purchaser, subject
      to the 60-day put-back option described in Section 7.5G.  Seller will
      prepare for Closing Schedule 1.1B.3, which will provide the
      following information for the Purchased Loans: loan number and type, the
      borrower, outstanding principal balance and Accrued Loan Interest as of
      the close of business the day immediately before the Closing Date, which
      Schedule shall be current and made a part hereof as of the Closing Date.
    

    
      C.        Real Property.  The
      real property, and all improvements thereon, owned by Seller on which
      the Branch is located (the “Real Property”), which shall be sold and
      purchased at a price determined by an independent appraisal of the Real
      Property (“Appraised Value of Real Property”) pursuant to the terms
      detailed in Section 7.3 and Schedule 1.1C.
    

    
      D.        Cash on Hand.  The
      cash on hand maintained at the Branch at the start of business on the
      Closing Date (the “Cash on Hand”).
    

    
      E.        Records, Etc.  All
      records, files, books of accounts and other original documents and
      instruments pertaining to the Assets being transferred and the Assumed
      Liabilities, as defined below.
    

    
      F.        Rights Relating
      to Assets.  Any statutory or common law right, title and
      interest in and related to the Assets that Seller may have and assign,
      including, without limitation, claims, causes of action, rights of
      recovery or set-offs, and credit of any kind or nature relating to the
      Assets (the “Rights”).
    

    
      1.2       Assignment and
      Assumptions of Liabilities. Upon the terms and subject to the
      conditions set forth in this Agreement, Seller shall assign to
      Purchaser, and Purchaser shall accept and assume from Seller, the
      following liabilities relating to the Branch, which liabilities
      Purchaser agrees to perform and discharge (the “Assumed Liabilities”),
      as follows:
    

    

    

    
      
        

        

      

      
        
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      A.        Deposit
      Liabilities.  All liabilities for payment of deposits given an
      account number maintained at the Branch including, without limitation,
      all savings accounts, certificates of deposit, money market deposit
      accounts, checking and NOW accounts and IRA accounts, and all other
      deposit accounts given an account number maintained at the Branch or
      assigned to the Branch in the ordinary course pursuant to the Seller's
      accounting system (except to the extent of deposit liabilities
      transferred at the request of a depositor as provided in Section 4.2(A),
      in each case as of the close of business on June 30, 2009 (the “Cut-Off
      Date Deposits”), all of which shall be listed in full on Schedule
      1.2A.1 hereto (the “Deposit Balance”), together with any changes in
      the Cut-Off Date Deposits and all new deposits from June 30, 2009
      through the close of business on the day immediately before the Closing
      Date (the “Interim Deposits”) (the Cut-Off Date Deposits and Interim
      Deposits, in each case as of the close of business on the day
      immediately before the Closing Date are hereinafter collectively
      referred to as the “Deposits” or the “Deposit Liabilities”), in
      accordance with the terms of the agreements pertaining to such Deposits,
      together with interest accrued thereon but unpaid as of the close of
      business on the day immediately before the Closing Date (the “Accrued
      Deposit Interest”).  Said Deposit Liabilities and Accrued Deposit
      Interest shall be specified in Schedule 1.2A.2 to be prepared by
      Seller and be attached hereto and made a part hereof as of the Closing
      Date.
    

    
      B.        Contracts.  All
      obligations of the Seller relating to the period on and after the
      Closing Date under any and all contracts relating to the operation of
      the Branch that are assignable by Seller to Purchaser and are all listed
      on Schedule 1.2B to this Agreement (the “Contracts”).
    

    
      1.3       Purchase Price.  The
      purchase price to be paid by the Purchaser to Seller for the Assets
      acquired under this Agreement (the “Purchase Price”) shall be equal to
      the Book Value of the Personal Property, the Appraised Value of the Real
      Property, the unpaid principal and Accrued Loan Interest on the
      Purchased Loans and the amount of Cash on Hand.  The Purchaser also
      shall assume the Deposit Liabilities, Accrued Deposit Interest and
      Contracts and shall pay a 1% premium on the Deposit Liabilities
      (“Deposit Premium”).  For purposes of this Agreement, “Book Value” means
      the net book value on the books and records of the Seller in accordance
      with GAAP as of the month-end prior to the Closing Date.
    

    
      1.4       Transfer of Funds.  In
      connection with the acquisition by Purchaser of the Assets and the
      assumption by Purchaser of the Assumed Liabilities of Seller, Seller
      shall transfer to the Purchaser by wire transfer of immediately
      available funds on the Closing Date (or the business day immediately
      before the Closing Date, if the Closing Date occurs on a day when the
      funds cannot be wired for same day reinvestment) in accordance with
      Section 1.7 (the “Transfer Payment”) an amount equal to:
    

    
      A.        the estimated amount of the Deposit Liabilities; plus
    

    
      B.        the estimated amount of the Accrued Deposit Interest; minus
    

    
      C.        the Book Value of the Personal Property; minus
    

    

    

    
      
        

        

      

      
        
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      D.        the Appraised Value of the Real Property; minus
    

    
      E.        the estimated unpaid principal amount of the Purchased Loans; minus
    

    
      F.        the estimated amount of the Accrued Loan Interest; minus
    

    
      G.        the amount of Cash on Hand; minus
    

    
      H.        the Deposit Premium; plus
      or minus and
    

    
      I.         the estimated amount of prorations, as provided for in
      Section 1.6 hereof.
    

    
      The parties agree that if the sum of subsections A through I is less
      than zero, the Purchaser will transfer to the Seller, in accordance with
      Section 1.7, by wire transfer on the Closing Date (or the business day
      immediately before the Closing Date, if the Closing Date occurs on a day
      when funds cannot be wired for same day reinvestment), immediately
      available funds in the amount by which such sum is less than zero.  
    

    
                The Seller shall prepare and deliver to Purchaser on and as of
      the third business day before the Closing Date a provisional closing
      statement to be executed by the parties for the calculation for the
      Transfer Payment on the form in Exhibit 1.
    

    
      1.5       Adjustment Payment
      Date.
    

    
      A.        On the 15th day after the Closing Date or such earlier date as
      may be agreed to in writing by the parties (the “Adjustment Payment
      Date”), Seller shall deliver the following documents to Purchaser in
      order to determine the amount of any necessary adjustment to the
      Transfer Payment (“Adjusted Payment”):
    

    
      1.        A statement setting forth (a) the aggregate amount of Deposit
      Liabilities and the Accrued Deposit Interest thereon transferred to and
      assumed by Purchaser, calculated as of the close of business on the day
      immediately before the Closing Date; and (b) any corrections to the
      information contained in the Schedule 1.2A.2 delivered to the Purchaser
      on the Closing Date;
    

    
      2.        A statement setting forth the Purchased Loans as of the close
      of business on the day immediately before the Closing Date, setting
      forth (a) the aggregate unpaid principal amount of such Purchased Loans
      and the Accrued Loan Interest and listing, for each such Purchased
      Loans, the name and address of the borrower, the unpaid principal amount
      thereof, interest rate thereon and the amount of the Accrued Loan
      Interest; and (b) any corrections to the information contained in the
      Schedule 1.1B.3 delivered to the Purchaser on the Closing Date.
    

    
      3.        A statement of the actual proration amounts to be paid in
      accordance with Section 1.6 hereof as of the start of business on the
      Closing Date;
    

    

    

    
      
        

        

      

      
        
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      4.        A final closing statement of any other required adjustments to
      determine the Adjusted Payment for execution by the parties on the form
      in Exhibit 2.
    

    
                B.        If the final closing statement requires an Adjusted
      Payment, Seller or Purchaser, as the case may be, shall make the
      Adjusted Payment to the other party to correct any discrepancy between
      the amount of the Transfer paid under Section 1.4 and the amount of the
      Adjusted Payment determined under this Section 1.5.  Seller shall
      provide Purchaser with the worksheets it used to calculate the
      Adjustment Payment. Any Adjustment Payment due to either party on the
      Adjustment Payment Date pursuant to this provision shall be paid to such
      party on the Adjustment Payment Date by the other party by wire transfer
      on the first business day immediately following the execution of the
      final closing statement by Purchaser and Seller and shall bear interest
      from and including the Closing Date to the date of payment at the
      effective federal funds rate as published daily by the Federal Reserve
      Bank of Atlanta for the dates involved.
    

    
      1.6       Prorations.  It
      is the intention of the parties hereto that Seller shall operate for its
      own account the business being transferred pursuant to this Agreement
      until the close of business on the day immediately before the Closing
      Date, and that Purchaser shall operate for its own account the business
      being transferred pursuant to this Agreement from and after the Closing
      Date.  Thus, except as otherwise specifically provided in this
      Agreement, items of income and expense allocable to the Assets and
      Assumed Liabilities shall be prorated as of the close of business on the
      day immediately before the Closing Date using the accrual method of
      accounting, whether or not such adjustment would normally be made as of
      such time.  For purposes of this Agreement, items of proration and other
      adjustments shall include, but not be limited to; (i) personal property
      taxes; (ii) FDIC deposit insurance and FICO assessments (prorated in
      accordance with the number of days elapsed during the quarter in which
      the Closing Date occurs and applicable FDIC assessment rates for the
      Seller); and (iii) other accrued expenses (including but not limited to
      those under the Contracts) and prepaid expenses (but only including
      prepaids that will inure directly to the benefit of Purchaser and
      excluding all others, such as by way of example, prepaid advertising)
      for the Branch.  Seller shall deliver to Purchaser a preliminary
      proration schedule as of the end of the month preceding the Closing Date
      to enable the parties to agree on the types of prorations to apply at
      Closing.
    

    
      1.7       Closing Date:
      Closing; Real Estate Transfer.  The consummation of the purchase
      and assumption transactions provided for in this Agreement (the
      “Closing”), shall occur (i) no later than 15 calendar days after receipt
      by the parties of all required regulatory approvals and all other
      approvals required by law or contract for consummation of the
      transactions provided for herein and lapse of all required waiting
      periods associated therewith (such date referred to hereinafter as the
      “Closing Date”), with a target date of October 31, 2009 or (ii) such
      other date as is mutually agreed upon in writing by the parties hereto.
      In any event, the Closing Date may be extended to December 31, 2009, if
      regulatory approvals and waiting periods necessitate.  Delivery of the
      documents and instruments to be delivered by Seller and Purchaser,
      payment of the Transfer Payment by Seller or Purchaser, closing of the
      sale of the Real Property, and other transactions herein contemplated to
      take place concurrently with such deliveries, assumptions and payments,
      shall take place on the Closing Date at 8:00 a.m. (local time) at the
      offices of Seller in the State of Georgia (or at such other time and
      place as are agreed to by both parties), and all such transactions shall
      be deemed effective as of the close of business on the day immediately
      before the Closing Date; provided, however, that any payment to be made
      by either party to the other by wire transfer of immediately available
      funds on the Closing Date shall be made by wire transfer initiated prior
      to 10:00 a.m. (local time) on the Closing Date (or on the business day
      immediately before the Closing Date, if the Closing Date occurs on a day
      when funds cannot be wired for same day reinvestment).  Any deliveries,
      conveyances, assignments or transfers required under this Agreement,
      other than the foregoing, shall be made at the time and date specified
      in this Agreement (and where no time is specified, on or before the
      start of business on the date specified) and in the manner and place
      specified in this Agreement (where not specified, in the manner and
      place as reasonably requested in writing by the party that is to receive
      such delivery, conveyances, assignment or transfer).  
    

    

    

    
      
        

        

      

      
        
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      1.8       Limitations On
      Assumption of Liabilities.  The parties agree that Purchaser
      shall assume only the Assumed Liabilities.  Purchaser assumes no other
      liabilities of the Seller or Seller's banking operations.
    

    
      

      ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
    

    
      Seller hereby makes the following representations and warranties to
      Purchaser:
    

    
      2.1       Corporate Organization.  Seller
      is a federally chartered stock savings bank duly organized and existing
      under the laws of the United States and possesses full corporate power
      and all necessary approvals to own and operate the Branch and to carry
      on its business as presently owned, operated, and conducted by
      it.  Seller’s deposit liabilities are insured by the FDIC to the fullest
      extent permitted under federal law. No proceedings for the termination
      or revocation of such insurance are pending or to Seller's knowledge
      threatened, and Seller is not currently under any cease and desist order
      by any regulatory agency, nor to Seller's knowledge is any such action
      threatened that would preclude Seller from entering into or consummating
      this Agreement.
    

    
      2.2       Corporate Authority
      and Action.  Seller has full right, power and authority to sell,
      convey, assign, transfer and deliver the Assets and the Assumed
      Liabilities to Purchaser and to otherwise fully perform Seller's
      obligations under this Agreement, subject however to (i) Seller’s
      receipt of all required regulatory approvals and (ii) compliance by
      Purchaser with all of its obligations under this Agreement.  Seller has
      full right, power and authority to execute and deliver this Agreement
      and each of the documents and instruments contemplated hereby.  This
      Agreement, and each such other document and instrument, constitutes a
      valid and binding obligation of Seller enforceable in accordance with
      its terms except as the same may be limited by bankruptcy, insolvency,
      reorganization, or other laws relating to or affecting the enforcement
      of creditors' rights including, without limitation, the avoidance powers
      of the FDIC pursuant to the Federal Deposit Insurance Act and except as
      courts of equity may limit certain remedies such as specific
      performance.  This Agreement and the transactions contemplated hereby
      have been approved by the Board of Directors of Seller and no other
      corporate or member action is required on the part of Seller relating to
      this Agreement and the transactions contemplated hereby.
    

    

    

    
      
        

        

      

      
        
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      2.3       No Default Effected.  The
      execution and delivery of this Agreement by Seller and the consummation
      by Seller of the transactions contemplated hereby, subject to the
      fulfillment of the terms and compliance with the provisions hereof and
      all regulatory approvals, will not conflict with, or result in the
      material breach of, or a material default (or an occurrence which, with
      the lapse of time or action by a third party, could result in a breach
      or default) with respect to (i) any of the terms, conditions, or
      provisions of any laws applicable to Seller, or of the charter or bylaws
      of Seller; (ii) any agreement or other instrument to which Seller is a
      party or is subject, or by which Seller or any of its properties or
      assets are bound; or (iii) any order, judgment, injunction, decree,
      directive, or award of any court, arbitrator, government agency, or
      public official by which Seller is bound.
    

    
      2.4       Brokers.  All
      negotiations relative to this Agreement and the transactions
      contemplated hereby have been carried on by Seller without the
      intervention of any other person acting on behalf of Seller, other than
      Stevens & Company, in such manner as to give rise to any valid claim by
      any person against Seller or Purchaser for reimbursement of expenses or
      a finder's fee, brokerage commission, or other similar payment, and
      Seller shall pay all commissions, fees, costs and expenses, directly or
      indirectly, due any such person and indemnify Purchaser against all
      commissions, fees, costs, expenses, or other similar payments in
      connection therewith.
    

    
      2.5       Litigation.  There
      are no actions, causes of action, claims, suits or proceedings, pending
      or, to Seller's knowledge, threatened, against Seller affecting the
      Branch, the Assets or the Assumed Liabilities whether at law, in equity
      or before or by a governmental department, commission, board, bureau,
      agency or instrumentality, domestic or foreign, and to Seller's
      knowledge, there are no unresolved disputes under any written or oral
      agreement, whether express or implied, to which Seller is a party or by
      which it is bound that would adversely affect the Branch, the Assets,
      the Assumed Liabilities or the transactions contemplated hereby, and
      Seller has no knowledge of any state of facts or the occurrence of any
      event which would form the basis for any claim which would adversely
      affect the Branch, the Assets, the Assumed Liabilities or the
      transactions contemplated hereby.
    

    
      2.6       Deposits.  The
      Deposits are insured by the FDIC to the fullest extent permitted under
      federal law.  The Deposits (i) are in all respects genuine and
      enforceable obligations of Seller and have been acquired and maintained
      in material compliance with all applicable laws, including (but not
      limited to) the Truth in Savings Act and regulations promulgated
      thereunder; (ii) were acquired in the ordinary course of Seller's
      business; and (iii) are not subject to any claims that are superior to
      the rights of persons shown on the records delivered to Purchaser
      indicating the owners of the Deposits, other than claims against such
      Deposit owners, such as state and federal tax liens, garnishments, and
      other judgment claims, which have matured or may mature into claims
      against the respective Deposits.
    

    
      2.7       Title to Assets.  Seller
      has good and marketable title to the Assets, and complete and
      unrestrictive power to sell, transfer and assign the Assets to Purchaser
      subject to the receipt of all required regulatory approvals and free and
      clear of any and all claims, liens, encumbrances or rights of third
      parties, except as provided in Schedule 1.1C.  Without any investigation
      or inquiry, Seller has no knowledge of any defects in, or damage to, any
      of the Real Property or Personal Property, reasonable wear and tear
      excepted, other than such as would be plainly visible upon a due
      diligence inspection.  However, Seller makes no other representation
      relating to the physical condition of the Real Property or the Personal
      Property.  The Personal Property and the Real Property, except as
      otherwise expressly stated herein, including Section 4.10 and Schedule
      1.1C, shall be conveyed in “AS IS” condition without any representation
      as to suitability for any particular purpose.
    

    

    

    
      
        

        

      

      
        
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      2.8       Loans.  All
      notes and other evidences of indebtedness in favor of Seller in
      connection with the Purchased Loans, including, without limitation, any
      and all security agreements, guarantees, mortgages and other collateral
      documents accompanying the same, are correct in amount, genuine as to
      signatures of the makers, endorsers or signatories thereof or thereto,
      were given for a valid consideration and represent binding claims
      against such makers, endorsers or signatories for the full amount shown
      on the books and records of Seller.  All of the Purchased Loans have
      been made by Seller in accordance with Board of Director-approved loan
      policies.  Seller holds the Purchased Loans for its own benefit and no
      other person has any rights in the Purchased Loans.  The secured
      Purchased Loans include perfected liens having the priority indicated by
      their terms, subject, as of the date of recordation or filing of
      applicable security instruments, only to such exceptions as are
      discussed in attorneys’ opinions regarding title or in title insurance
      policies in the loan files relating to Purchased Loans secured by real
      property or are not material as to the collectability of such
      loans.  All of the Purchased Loans are with full recourse to the
      borrowers and guarantors, if any, and Seller has not taken any action
      that would result in a waiver or negation of any rights or remedies
      available by it against any borrower or guarantor, if any, on any
      Purchased Loan.  All applicable remedies against all borrowers and
      guarantors are enforceable, except as such enforcement may be limited by
      general principles of equity whether applied in a court of law or a
      court in equity and by bankruptcy, insolvency, fraudulent conveyance,
      and similar laws affecting creditors’ rights and remedies
      generally.  Seller has fulfilled in all material respects its
      contractual responsibilities and duties as servicer of the Purchased
      Loans and has complied in all material respects with its duties as
      required under applicable regulatory requirements.  Seller has properly
      perfected or caused to be properly perfected all liens or other
      interests in any collateral securing any secured Purchased Loan.  The
      loan file for each Purchased Loan (i) complies with the recordkeeping
      requirements of Seller’s primary bank regulator; (ii) is maintained in
      accordance with industry standards and practices and (iii) contains all
      documents, instruments and other information necessary or appropriate to
      (a) comply with the underwriting requirements applicable thereto and/or
      (b) enforce the rights of Seller under the notes, other evidences of
      indebtedness, security agreements, guaranties, mortgages and other
      collateral documents in favor of Seller in connection with such Loan.
    

    
      2.9       Proceedings Relating
      to Branch and Real Property.  No proceedings to take all or any
      part of the Branch premises or the Real Property by condemnation or
      right of eminent domain are pending or, to Seller's knowledge,
      threatened.  Seller's use of the Branch and Real Property are not (to
      the best of Seller’s knowledge without investigation or inquiry), and no
      complaints have been received by Seller that Seller is, in violation of
      applicable building, zoning, platting, subdivision, use, safety,
      building, energy and environmental or similar laws, ordinances,
      regulations and restrictions.  The Branch and Real Property are
      adequately serviced by all utilities necessary for effective operation
      as presently used for a financial institution branch office.
    

    

    

    
      
        

        

      

      
        
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      2.10      Contracts and Agreements.  A
      true and complete copy of each Contract to be assumed by Purchaser is
      included in Schedule 1.2B.  Each Contract is valid and enforceable
      according to its terms, Seller is not in default under any Contract and
      there has been no event which, with notice or the lapse of time, or
      both, would constitute a default under any Contract by Seller including,
      but not limited to, the consummation of the transactions contemplated by
      this Agreement.
    

    
      2.11      Compliance with Laws. Insofar
      as it may affect the transactions contemplated by this Agreement, to
      Seller’s knowledge, Seller is in material compliance with all laws
      applicable to the operation of its business as presently conducted at
      the Branch, specifically including, without limitation, compliance with
      all regulations concerning truth-in-savings, consumer protection,
      occupational safety, civil rights, and labor and/or employment laws.
    

    
      2.12      Governmental Reporting.  Seller
      has timely filed all applicable reports, returns and filing information
      data required to be filed with any and all federal and state banking
      authorities and any and all other governmental authorities and
      regulatory agencies.  For all completed calendar years, Seller has duly
      and timely sent to each owner of a Deposit all required Form 1099s.
    

    
      2.13      Environmental Matters.  There
      is no legal, administrative, arbitral or other proceeding, claim,
      action, cause of action or governmental investigation pending or, to
      Seller's knowledge, threatened which seeks to impose on Seller or any
      predecessor of Seller in connection with the Real Property any liability
      arising under any environmental laws, nor to Seller’s knowledge is there
      any basis for any of the foregoing.  Seller is not subject to any
      agreement, order, judgment, decree or memorandum by or with any court,
      governmental authority, regulatory agency or third party imposing any
      such liability with respect to the Real Property.  To Seller’s
      knowledge, without any investigation or inquiry, there are no
      environmental conditions such as above ground or under ground storage
      tanks, discharges or emissions or releases of hazardous materials
      present at, on, under, or above the Real Property, which constitute a
      violation of any environmental laws.
    

    
      2.14      Taxes.  Seller
      shall be entitled to the tax deduction (to the extent permitted by
      applicable law) for the accrued interest on the Deposit Liabilities
      prior to the Closing Date.  As of the Closing Date, the Deposit
      Liabilities shall not be subject to any tax liens or levies of any kind
      relating to obligations of Seller.
    

    
      2.15      Real Property.  There
      are no leases, subleases, licenses or similar agreements permitting any
      party to lease, use or occupy space in or on the Real Property, except
      for easements of record.  There are no outstanding options to purchase
      or similar agreements with respect to the Real Property.
    

    
      2.16      Employees.  Schedule
      2.16 lists the names of all employees at the Branch (“Employees”), their
      full-time or part-time status (including approximate hours per week),
      their job description and/or title, their compensation and benefits, any
      written or oral agreements with them, and their hire dates.  
    

    

    

    
      
        

        

      

      
        
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      2.17      Appointment of IRA Account
      Trustee or Custodian.  Seller has sole authority to appoint a
      successor trustee or custodian for all IRA Accounts (including SEP IRA,
      SIMPLE IRA and other retirement accounts over which Seller serves as
      trustee or custodian) included in the Assumed Liabilities.
    

    
      2.18      Application Status.  Seller
      knows of no reason why any governmental agency would not approve or
      consent to the transactions contemplated by this Agreement.  

    

    
      ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
    

    
      Purchaser hereby makes the following representations and warranties to
      Seller:
    

    
      3.1       Corporate Organization.
      Purchaser is a state-chartered savings bank duly organized and
      existing under the laws of the State of Georgia and possesses full
      corporate power and all necessary approvals to own and operate its
      properties and to carry on its business as presently owned, operated and
      conducted by it.  Purchaser's deposit accounts are insured by the FDIC
      to the fullest extent permitted under federal law.  No proceedings for
      the termination or revocation of such insurance are pending or to
      Purchaser's knowledge threatened, and Purchaser is not currently under
      any cease and desist order by any regulatory agency nor to Purchaser's
      knowledge is any such action threatened which would preclude Purchaser
      from entering into or consummating this Agreement.
    

    
      3.2       Corporate Authority
      and Action.  Purchaser has full right, power and authority to
      acquire the Assets and assume the Assumed Liabilities from Seller and to
      otherwise fully perform Purchaser's obligations under this Agreement,
      subject however, to (i) Purchaser’s receipt of all required regulatory
      approvals and (ii) compliance by Seller with all of its obligations
      under this Agreement.  Purchaser has full right, power and authority to
      execute and deliver this Agreement and each of the documents and
      instruments contemplated hereby.  This Agreement, and each such other
      document and instrument, constitutes a valid and binding obligation of
      Purchaser enforceable in accordance with its terms except as the same
      may be limited by bankruptcy, insolvency, reorganization, or other laws
      relating to or affecting the enforcement of creditors' rights including,
      without limitation, the avoidance powers of the FDIC pursuant to the
      Federal Deposit Insurance Act and except as courts of equity may limit
      certain remedies such as specific performance.  This Agreement and the
      transactions contemplated hereby have been approved by the Board of
      Directors of Purchaser and no other corporate or shareholder action is
      required on the part of Purchaser relating to this Agreement and the
      transactions contemplated hereby.
    

    
      3.3       No Default Effected.  The
      execution and delivery of this Agreement by Purchaser and the
      consummation by Purchaser of the transactions contemplated hereby,
      subject to the fulfillment of the terms and compliance with the
      provisions hereof and all regulatory approvals, will not conflict with,
      or result in the material breach of, or a material default (or an
      occurrence which, with the lapse of time or action by a third party,
      could result in a breach or default) with respect to (i) any of the
      terms, conditions or provisions of any laws applicable to Purchaser, or
      of the charter or bylaws of Purchaser; (ii) any agreement or other
      instrument to which Purchaser is a party or is subject or by which
      Purchaser or any of its properties or assets are bound; or (iii) any
      order, judgment, injunction, decree, directive, or award of any court,
      arbitrator, government agency or public official by which Purchaser is
      bound.
    

    

    

    
      
        

        

      

      
        
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      3.4       Brokers.  Negotiations
      relative to this Agreement and the transactions contemplated hereby have
      been carried on by Purchaser without the assistance of any other person
      acting as Purchaser’s broker.  Purchaser shall pay all commissions,
      fees, costs and expenses, directly or indirectly, due any such person
      acting as Purchaser’s broker and indemnify Seller against all
      commissions, fees, costs, expenses, or other similar payments in
      connection therewith.
    

    
      3.5       Litigation.  There
      are no actions, causes of action, claims, suits, or proceedings, pending
      or, to Purchaser's knowledge, threatened, against Purchaser which would
      adversely affect the transactions contemplated by this Agreement,
      whether at law, in equity or before or by a governmental department,
      commission, board, bureau, agency, or instrumentality, domestic or
      foreign, and to Purchaser's knowledge, there are no unresolved disputes
      under any written or oral agreement, whether express or implied, to
      which Purchaser is a party or by which it is bound that would adversely
      affect the transactions contemplated hereby, and Purchaser has no
      knowledge of any state of facts or the occurrence of any event which
      could form the basis for any claim which would adversely affect the
      transactions contemplated hereby.
    

    
      3.6       Compliance with Law.  Insofar
      as it may affect the transactions contemplated by this Agreement,
      Purchaser is in material compliance with all laws applicable to the
      operation of its business.
    

    
      3.7       Application Status.  Purchaser
      knows of no reason why any governmental agency would not approve or
      consent to the transactions contemplated by this Agreement.  

    

    
      ARTICLE IV
AGREEMENTS PENDING CLOSING
    

    
      4.1       Regulatory Approval
      and Standards.  Purchaser shall file an application with the
      FDIC and any required submissions with state banking regulators within
      20 days of the date hereof, seeking requisite approval of or authority
      to effect the transactions contemplated hereby. Purchaser shall provide
      Seller with a copy of the draft application at least two business days
      before the anticipated filing date.  Purchaser’s obligation to file the
      applications is extended to within three business days of receiving
      Seller’s clearance to file and executed signature page for the FDIC
      application.  Purchaser shall furnish Seller with copies of the final
      applications (except for the confidential portions thereof) and any
      amendments, as well as each material notice, order, opinion or other
      item of correspondence received by Purchaser from such regulatory agency
      with respect to such application which do not contain confidential
      information. Seller shall deliver to the Office of Thrift Supervision
      any required regulatory application or notice or informal notification
      respecting the sale of the Branch and provide Purchaser with a copy at
      least two business days prior to filing.
    

    

    

    
      
        

        

      

      
        
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      4.2       Notification of
      Customers.  Purchaser and Seller shall take such actions
      required by law or regulation to notify customers, creditors or
      depositors of the Branch of the transfers and assumptions to be effected
      pursuant to this Agreement.  Purchaser and Seller shall work together to
      develop the contents of any such notifications and shall issue any such
      notifications, at Seller’s expense, after all regulatory approvals have
      been obtained (or as otherwise mutually agreed to by the parties or
      required by applicable laws and regulations) but prior to the
      Closing.  The following specific notifications shall be provided:
    

    
      A.        Seller shall provide Purchaser with copies of all of its IRA
      Account forms (including SEP IRA Accounts, SIMPLE IRA accounts and any
      other type of retirement account for which Seller serves as custodian or
      trustee) currently in place within five business days of the date of
      this Agreement.  Within such period prior to the Closing Date as is
      required by applicable law or regulation or the account forms, Seller
      will, at its sole cost and expense, notify the depositors who maintain
      IRA Accounts at the Branch of Seller’s intent to resign as custodian or
      trustee as of Closing and to appoint Purchaser as successor custodian or
      trustee and the discharge and release of Seller from all liabilities as
      custodian or trustee from and after the effective time of its
      resignation. Purchaser will accept such appointment as successor
      custodian or trustee, unless the customer objects in writing to such
      appointment or to Purchaser's master IRA agreement. It is agreed that
      Seller is required to notify each such depositor only once, which
      notification will be by means of a letter approved by Purchaser and
      accompanied by all appropriate forms and documents necessary to effect
      such replacement and release and to adopt Purchaser's master agreement.
      The IRA Account of any customer not accepting the appointment of
      Purchaser and the Purchaser's master plan will not be included in the
      Deposit Liabilities.
    

    
      B.        Purchaser shall also be permitted to send or publish welcome
      letters and other marketing and instructional materials to the customers
      of the Branches relating to the transactions contemplated by this
      Agreement, and Seller shall assist Purchaser in such endeavor.
    

    
      4.3       Employment of
      Existing Employees.  Seller shall terminate the Employees to be
      effective as of the close of business on the business day before the
      Closing Date.  Purchaser agrees to extend offers of at-will employment
      to the Employees to be effective at the start of business on the Closing
      Date.  Purchaser’s employment offers shall provide the Employees with
      the same or similar benefits as the Purchaser offers to the Purchaser's
      other employees that are similarly situated in terms of their position
      and longevity including service at Seller as provided in Section
      7.4.  Seller shall be responsible for payment of all salaries, benefits
      and accrued leave of the Employees prior to the Closing Date.  Purchaser
      shall have no liability or obligation to the Employees relating to their
      employment by Seller.  Seller shall indemnify Purchaser for any damages,
      losses and expenses (including reasonable attorney fees) incurred by the
      Purchaser resulting from employment claims by the Employees against
      Purchaser relating to Seller's actions with respect to such employees
      prior to termination of employment, as required by this Section
      4.3.  The Purchaser shall indemnify Seller for any damages, losses and
      expenses (including reasonable attorney fees) incurred by Seller
      resulting from employment claims by the Employees against the Seller
      relating to Purchaser's actions with respect to such Employees from and
      after the Closing Date.
    

    

    

    
      
        

        

      

      
        
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      4.4       Operations.
    

    
      A.        No later than 30 days prior to the Closing Date, Seller
      shall supply such information as is necessary for Purchaser to conduct a
      conversion from Seller's data processing system to Purchaser's data
      processing system.  In addition, Seller shall supply Seller's personnel
      for a reasonable period of time to assist Purchaser in such conversion.
    

    
      B.        Purchaser agrees to use its best efforts at its expense
      to convert operations to its own data processing system on the Closing
      Date.  Purchaser shall be solely responsible for the cost of such
      conversion.
    

    
      C.        All of the Seller's Branch ATM/Debit/POS Cards and
      on-line account relationships with Branch customers shall be terminated
      as of 12:01 a.m. on the Closing Date.
    

    
      4.5       Real Property.  The
      parties agree to comply with the covenants and conditions respecting the
      sale of the Real Property included in Section 7.3 and Schedule 1.1C.
    

    
      4.6       Sales and Transfer
      Taxes.  Except for such taxes and assessments relating to the
      transfer of the Real Property, Purchaser and Seller agree that no sales
      or transfer tax is due on this transaction because it is not in the
      ordinary course of business of either Purchaser or Seller; however, in
      the event that a sales or transfer tax is imposed by a governmental
      authority having jurisdiction to impose such a tax, Seller shall be
      responsible for the full and timely payment of same and shall indemnify
      and hold harmless Purchaser for the amount of any such taxes due, and
      from any expenses, fines, penalties, fees, costs, or other damages
      resulting from the imposition of such tax or for any failure to make
      timely payment thereof.  Seller shall indemnify Purchaser and hold
      Purchaser harmless for the amount of any taxes attributable to its
      operations prior to the Closing Date, and from any expenses, fines,
      penalties, fees, costs or other damages resulting from the imposition of
      such tax or for any failure to make timely payment thereof provided that
      Purchaser promptly notifies Seller of same.
    

    
      4.7       Bulk Sales Act
      Indemnity.  Seller shall promptly pay when due all its creditors
      in order to avoid any claim by any such creditor against Purchaser or
      any of the Assets by virtue of the transactions contemplated by this
      Agreement or any bulk transfer provisions under applicable law.  Seller
      hereby agrees to indemnify and hold Purchaser harmless from any
      liability, loss or damage arising from failure of any applicable bulk
      transfer law to be satisfied or from Seller's failure to perform this
      covenant.
    

    
      4.8       Negative Operating
      Covenants.  Except as may be required by regulatory authorities,
      Seller shall not, without the prior written consent of Purchaser: (i)
      transfer to Seller's other banking facility any of the deposit
      liabilities maintained at the Branch except upon the unsolicited request
      of a depositor in the ordinary course of business; (ii) transfer to the
      Branch any of the deposits domiciled at its other banking facilities
      except upon the unsolicited request of a depositor in the ordinary
      course of business; (iii) transfer, assign, encumber or otherwise
      dispose of or enter into any contract, agreement or understanding to
      transfer, assign, encumber or otherwise dispose of any of the Assets;
      (iv) enter into any contract, commitment, or other transaction relating
      to the Branch, except for deposit-taking and lending activities in the
      ordinary course of business consistent with past practices; (v) offer
      interest rates on any deposit liabilities at the Branch in excess of
      those interest rates paid on similar deposits at Seller's other banking
      facilities; or (f) alter its current advertising or marketing programs
      at the Branch in any material respect, other than as part of a general
      advertising or marketing campaign implemented by Seller company-wide.
    

    

    

    
      
        

        

      

      
        
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      4.9       Affirmative Operating
      Covenants.  Seller shall use its best efforts to (i) cause the
      Deposits to be equal to or greater than the Deposit Balance, (ii)
      preserve the goodwill of customers and others doing business with the
      Branch and (iii) cause the Employees to continue their employment with
      Purchaser on and after the Closing Date.
    

    
      4.10      Damage or Destruction of
      Personal or Real Property.  If prior to Closing there
      is any damage to or destruction or theft of the Personal Property, or
      either Purchaser or Seller receives or obtains written notice of any
      proceeding that affects the Personal Property, then Purchaser shall be
      entitled to receive and will be assigned (i) all insurance proceeds
      payable with respect to the damage, destruction or theft of the Personal
      Property with Seller paying over to Purchaser any deductible under the
      applicable insurance policies; (ii) any award or payment received in
      connection with any proceeding and (iii) any additional amount necessary
      to repair, restore or replace the Personal Property in excess of the
      payments in (i) and (ii).  In the event insurance proceeds are not
      received by Seller within 120 days after the Closing Date, then Seller
      shall pay to Purchaser at such time the full amount spent by Purchaser
      to repair, restore or replace such Personal Property, and in such case,
      Seller shall retain the insurance proceeds.
    

    
      4.11      Assistance in Obtaining
      Regulatory Approvals.  Purchaser and Seller shall exercise their
      best efforts to obtain any required regulatory approvals.  Seller agrees
      to use all reasonable efforts to assist Purchaser in obtaining all
      regulatory approvals necessary to complete the transactions contemplated
      hereby, and Seller will provide to Purchaser and to the appropriate
      regulatory authorities all information reasonably required of Seller to
      be submitted by Purchaser in connection with such approvals.
    

    
      4.12      Other Relationships.  Except
      for the deposit relationships being transferred by Seller to Purchaser,
      as of the Closing Date neither Seller nor any of its affiliates will
      have any other business relationship with any holders of Deposits or
      borrowers of Purchased Loans, except for outstanding deposit or loan
      relationships at other banking offices of the Seller.
    

    
      4.13      Status of Purchased Loans.  Seller
      covenants that all of the Purchased Loans will be fully performing as of
      three business days before the Closing Date.
    

    
      4.14      No Breach.  Seller
      and Purchaser shall each not take or fail to take any action, that
      taking or failure would cause or constitute a breach or would, if it had
      been taken or failed to be taken prior to the date hereof, have caused
      or constituted a breach, of any of the applicable representations and
      warranties set forth in the Agreement or the covenants of each of Seller
      and Purchaser set forth in this Agreement.  Seller and Purchaser will
      each, in the event of, or promptly after becoming aware of the
      occurrence of, or the impending or threatened occurrence of, any event
      that would cause or constitute a breach or would, if it had occurred
      prior to the date hereof, have caused or constituted a breach of any of
      the applicable representations and warranties set forth in the Agreement
      or the covenants of Seller or Purchaser set forth in this Agreement, or
      which may result in the non-satisfaction of any condition set forth in
      Section 8.1 or 8.2 hereof, promptly give detailed notice thereof to the
      other party.  Seller or Purchaser, as the case may be, will use its
      commercially reasonable efforts to prevent or promptly to remedy such
      breach or failure, to perform such covenant or to satisfy such condition.

    

    
      
        

        

      

      
        
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      ARTICLE V
DOCUMENTS TO BE DELIVERED TO SELLER
    

    
      At or prior to the Closing, Purchaser shall deliver the following
      documents to Seller:
    

    
      5.1       Certified copies of resolutions of the Board of
      Directors of Purchaser approving and authorizing the execution, delivery
      and performance of this Agreement and any other documents required to be
      executed and delivered by Purchaser hereunder;
    

    
      5.2       Evidence of requisite regulatory approval for Purchaser
      to consummate the transactions contemplated hereby;
    

    
      5.3       An Instrument of Transfer, Assignment and Assumption,
      in the form in Exhibit 3, whereby Purchaser assumes and agrees to
      pay or perform the Assumed Liabilities; and
    

    
      5.4       All documents and other instruments as may be required
      to be delivered by Purchaser pursuant to the terms of the sale of the
      Real Property in Schedule 1.1C.

    

    
      ARTICLE VI
DOCUMENTS TO BE DELIVERED TO PURCHASER
    

    
      At or prior to the Closing, Seller shall deliver the following documents
      to Purchaser:
    

    
      6.1       A statement setting forth the aggregate amount of
      Deposit Liabilities and Accrued Deposit Interest thereon to be
      transferred to and assumed by Purchaser, as of the opening of business
      five business days prior to the Closing Date;
    

    
      6.2       A listing of the Purchased Loans, as of the opening of
      business five business days prior to the Closing Date, setting forth the
      aggregate unpaid principal amount of such Purchased Loans and accrued
      interest thereon and listing, for each Purchased Loan, the name and
      address of the borrower, the unpaid principal amount thereof, interest
      rate thereon and the amount of accrued but unpaid interest owing in
      regard thereto, the amount of escrows held by Seller with respect
      thereto, if any, and such other information as may be necessary for
      Purchaser to establish accounts therefore;
    

    

    

    
      
        

        

      

      
        
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      6.3       A statement of the Cash on Hand as of the close of
      business on the third business day prior to the Closing Date and of the
      estimated proration amounts determined in accordance with Section 1.6
      hereof,
    

    
      6.4       All records, files and documents of the Branch relating
      to the Deposit Liabilities and Purchased Loans to be assumed or
      purchased by Purchaser, including, but not limited to, signature cards,
      applications, certificates, notes, security agreements, pledge
      agreements, and properly executed assignments and endorsements with
      respect thereto, and actual physical possession of the Branch;
    

    
      6.5       All material consents reasonably necessary to authorize
      the transfer and assignment to Purchaser of, or the substitution of
      Purchaser for, Seller under, all material Contracts (without any
      material alterations required by any third party and preserving for
      Purchaser all material rights and privileges thereunder);
    

    
      6.6       Certified copies of resolutions of the Board of
      Directors of Seller approving and authorizing the execution, delivery
      and performance of this Agreement and any other documents required to be
      executed and delivered to the Seller hereunder;
    

    
      6.7       A provisional closing statement in the form in Exhibit
      1 for execution by the parties;
    

    
      6.8       A listing of the Deposits as of the close of business
      five business days prior to the Closing Date (the “Deposit Listing”) on
      hard copy or utilizing such other method of
    

    
      information transfer as the parties shall have agreed, which Deposit
      Listing shall include, for each Deposit, the name and address of the
      owner thereof, the account number, the principle balance, the accrued
      interest, the maturity date, if any, the interest rate, the tax
      identification number, and such other information as may be necessary
      for Purchaser to establish accounts therefore;
    

    
      6.9       An Instrument of Transfer, Assignment and Assumption in
      the form in Exhibit 3, and such other instruments of transfer
      reasonably requested by Purchaser as necessary to transfer good and
      marketable title to the Assets (other than the Real Property) free and
      clear of all claims, encumbrances and rights of third parties; and
    

    
      6.10      All documents and other instruments as may be required
      to be delivered by Seller pursuant to the terms of the sale of Real
      Property in Schedule 1.1C.
    

    
      6.11      Two executed instruments of transfer with respect to
      the transfer of the trusteeship or custodianship of IRA Accounts in the
      form of Exhibit 4.
    

    

    

    
      
        

        

      

      
        
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      ARTICLE VII
POST-CLOSING MATTERS
    

    
      7.1       Information In Usable
      Form.  Promptly following the Closing, Purchaser and Seller will
      use reasonable efforts to cause all information concerning the Purchased
      Loans and the Deposits to be transferred into a form usable by Purchaser.
    

    
      7.2       Covenants Not to
      Compete.  From the Closing Date and for a period of three years
      thereafter (the “Restrictive Period”), the Seller (and its affiliates,
      successors and assigns) shall not open any branch office, deposit-taking
      facility (including ATM), loan office or solicit any business in
      Columbia County, Florida (the “Restricted Area”).  Seller agrees that
      said time and geographic restrictions are reasonable and necessary to
      protect Purchaser's legitimate business concerns, that said covenants do
      not violate public policy, and do not place any unreasonable restraints
      upon Seller’s other ongoing business operations.  During the Restrictive
      Period, Seller (and its affiliates, successors, and assigns) shall not
      directly or indirectly (i) solicit any business from any of the holders
      of Deposits or any of the borrowers or guarantors of the Purchased
      Loans, (ii) undertake any targeted marketing or advertising in the
      Restricted Area or (iii) encourage any Employee or employee of Purchaser
      to cease employment with Purchaser or change such person's employment.
    

    
      7.3       Sales and Transfer
      Taxes, Etc.  All charges relating to the recordation of the
      assignment of the Purchased Loans by Purchaser shall be borne and paid
      by Purchaser.  If any sales, transfer or similar tax is imposed by a
      governmental authority relating to the transfer of any of the Assets or
      any of the Assumed Liabilities, Seller shall be responsible for the full
      and timely payment of same and shall hold Purchaser harmless from the
      amount of any such taxes due, and from any expenses, fines, penalties,
      fees, costs, or other damages resulting from the imposition of such tax
      or for any failure to make timely payment thereof.
    

    
      7.4       Employees.  Each
      Employee shall receive credit for his or her past service with Seller
      for purposes of eligibility, vesting and accrual of benefits under all
      of the employee benefit plans of Purchaser that are uniformly provided
      on a nondiscriminatory basis to similar employees of Purchaser, except
      (i) there shall be no accrual of benefit under any defined benefit plan
      of Purchaser and (ii) there shall be no credit during calendar year 2009
      for vacation time or sick days prior to the date of employment by
      Purchaser.  Seller shall cause Employees to be covered under Seller’s
      health and welfare plans until the first day of the month following the
      day of Closing on the same basis as they were covered prior to the
      Closing Date.  Purchaser shall withhold from each Employee his or her
      portion of the cost for such plans during this period and, on the first
      day of the month following the Closing, shall remit to Seller the entire
      amount of such employee’s withheld portion of such costs, along with the
      entire amount applicable to the employer’s portion of such costs for all
      Employees.  Other than as set forth in the preceding sentence, Employees
      will not be subject to any waiting period under the health and welfare
      plans of Purchaser and Purchaser shall use its reasonable best efforts
      to cause its health insurance carrier to cover any pre-existing
      condition of an Employee that was covered under Seller’s health
      insurance plan.
    

    

    

    
      
        

        

      

      
        
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      7.5       Transactions After
      Closing Date.  Seller and Purchaser hereby agree that, except as
      provided below or otherwise agreed in writing by the parties, for a
      period of 90 days after the Closing Date:
    

    
      A.        Subject to Section 7.5I, Seller agrees that it will transfer,
      convey, and assign to Purchaser on the date of its receipt all deposits
      received by Seller after the Closing Date for credit to any of the
      accounts for the Deposits, and all payments received by Seller after the
      Closing Date for application to or on account of any of the Assets.
    

    
      B.        Seller agrees to notify Purchaser on the date of its receipt
      of the return to it of any items deposited in, or cashed at, the Branch
      prior to the Closing Date and shall expeditiously forward any such items
      to Purchaser. If Purchaser cannot recover on such returned items after
      making a good faith effort to do so, Seller shall reimburse Purchaser
      for such return items upon assignment of such items by Purchaser to
      Seller. Purchaser’s good faith effort shall not include institution of
      any legal action with respect to such recovery.
    

    
      C.        To the extent permitted by law and the applicable contracts
      for the Deposits, Purchaser agrees that it will honor all properly
      payable checks, drafts, withdrawal orders and similar items drawn on
      Seller’s forms against the Deposits, which are presented to Purchaser by
      mail, over its counters, or through clearing houses.
    

    
      D.        Provided that such items have been timely delivered to
      Purchaser by Seller, Purchaser shall pay the items referred to in
      Section 7.5C to the extent of the balance of funds in the accounts.
      Seller shall deliver such checks and drafts to Purchaser at Purchaser’s
      address set forth in Section 9.9, no later than 4:00 p.m. Eastern Time
      one business day following the day they were received by Seller.
      Purchaser shall promptly reimburse Seller on a daily basis for the
      amount of all such checks and drafts paid by Seller. The parties shall
      share equally the cost of delivery of any items under this Section 7.5D.
    

    
      E.        As of the Closing Date, Purchaser will notify all Automated
      Clearing House (“ACH”) originators of the transfers and assumptions made
      pursuant to the Agreement; provided, however, that Seller may, at its
      option, notify all such originators itself (on behalf of Purchaser). For
      a period of 90 days beginning on the Closing Date, Seller will honor all
      ACH items related to accounts for Deposits assumed under this Agreement,
      which are routed or presented to Seller. Seller will make no charge to
      Purchaser for honoring such items, and will electronically transmit such
      ACH data to Purchaser on a daily basis. If Purchaser cannot receive an
      electronic transmission, Seller will make available daily to Purchaser
      at Seller’s operations center receiving items from the ACH tapes
      containing such ACH data. Seller and Purchaser shall make arrangements
      to provide for the daily settlement with immediately available funds by
      Purchaser of any ACH items honored by Seller, and Seller shall be held
      harmless and indemnified by Purchaser for acting in accordance with this
      arrangement to accept ACH items other than ACH items initiated by
      Seller. Seller agrees to settle any and all ATM transactions effected on
      or before the Closing Date, but processed after the Closing Date, as
      soon as practicable. Purchaser and Seller agree to remit the total net
      balance of such transactions to Seller or Purchaser, as the case may be,
      on the same date the transactions are settled. In instances in which an
      owner of a Deposit made an assertion of error regarding an account
      pursuant to the Electronic Funds Transfer Act and Federal Reserve Board
      Regulation E, and Seller, prior to the Closing Date, recredited the
      disputed amount to the relevant account during the conduct of the error
      investigation, Purchaser agrees to comply with a written request from
      Seller to debit such account in a stated amount and remit such amount to
      Seller, to the extent of the balance of funds available in the accounts.
    

    

    

    
      
        

        

      

      
        
          18
        

        
          

        

      

      
        

        

      

    

    

    

    
      F.        Seller shall provide Purchaser with a listing of each stop
      payment order in effect as to a Deposit or Purchased Loan on the Closing
      Date. Purchaser shall honor all stop payment orders relating to the
      Deposits or the Purchased Loans initiated prior to the Closing and
      reflected in the magnetic tape made available by Seller to Purchaser on
      the Closing Date. In the event that Purchaser shall make any payment in
      violation of a stop payment order initiated prior to the Closing but not
      reflected in stop payment documents and the magnetic tape made available
      by Seller to Purchaser prior to such payment, then Seller shall
      indemnify, hold harmless and defend Purchaser from and against all
      claims, losses and liabilities, including reasonable attorneys’ fees and
      expenses, arising out of any such payment. In the event that Purchaser
      shall make any payment in violation of a stop payment order initiated
      prior to the Closing that is reflected in stop payment documents and the
      magnetic tape made available by Seller to Purchaser prior to such
      payment, then Purchaser shall indemnify, hold harmless and defend Seller
      from and against all claims, losses and liabilities, including
      reasonable attorneys’ fees and expenses, arising out of any such payment.
    

    
      G.        After the Closing Date, Purchaser hereby agrees to process any
      and all “charge-back items” received subsequent to the Closing Date but
      arising prior thereto against any amount for Deposits, as covered under
      applicable charge-back regulations. “Charge-back items” shall include,
      but not be limited to, disputed items, purchases over limit, fraudulent
      use of a debit card, late presentations of sales slips, unpresented
      credit on sales returns and other adjustments as specified under the
      rules and regulations of MasterCard or Visa. If Purchaser cannot recover
      on any such charge-back items after making a good faith effort to do so,
      Seller shall reimburse Purchaser for such items upon assignment of such
      items by Purchaser to Seller. Purchaser’s good faith effort to recover
      on any such items shall not require that Purchaser take any legal action
      against any person.
    

    
      H.        Seller agrees that, following the date of this Agreement,
      Seller will not, without the consent of Purchaser, alter or change any
      business practice at the Branch related to overdrawn deposit accounts,
      except in connection with a change applicable to Seller generally and
      which is no more permissive than the current policy.
    

    
      I.        Purchaser and Seller agree that all amounts required to be
      remitted by either such party to the other party hereto pursuant to this
      Section 7.5 shall be settled on a daily basis. Any amounts to be paid by
      Seller to Purchaser shall be netted daily against any amounts to be paid
      by Purchaser to Seller, such that only one amount, representing the net
      amount due, shall be transferred on a daily basis by the party with the
      higher amount of remittances for such day in immediately available
      funds. Purchaser shall provide Seller with a daily net settlement figure
      for all such transactions from the immediately preceding business day by
      12:00 noon Eastern Time on each business day and the party obligated to
      remit any funds thereunder shall do so in immediately available funds by
      wire transfer by 2:00 p.m. Eastern Time on such day or by any other
      method of payment agreed upon by the parties; any such settlement shall
      be provisional pending receipt or review by the parties of the physical
      items relating to such settlement.
    

    

    

    
      
        

        

      

      
        
          19
        

        
          

        

      

      
        

        

      

    

    

    

    
      J.        If any uncollected item credited to a Deposit at the time of
      the transfer of such Deposit to Purchaser is subsequently returned
      resulting in an overdraft to the Deposit account, Seller agrees, not
      later than two business days after demand, to pay to Purchaser the
      amount of such uncollected item; provided, however, that Purchaser
      shall, upon Seller's making payment for such uncollected item, deliver
      such uncollected item to Seller and shall assign to Seller any and all
      rights which Purchaser may have or obtain in connection with such
      returned item.
    

    
      K.        If the balance due on any Purchased Loan transferred and
      assigned to Purchaser pursuant to the terms of the Agreement has been
      reduced as a result of the receipt of an item or items prior to the
      Closing Date, which are returned after the Closing Date as uncollected,
      the asset value represented by the Purchased Loan transferred shall be
      correspondingly increased, and an amount in cash equal to such increase
      shall be paid by Purchaser to Seller within two business days after
      receipt of such returned item.
    

    
      L.        If Seller receives payments, notices or correspondence with
      respect to any Purchased Loan after the Closing Date, Seller shall remit
      such payments, notices or correspondence to Purchaser in the same form
      received by Seller.
    

    
      M.        For a period of 30 days after the Closing Date, Seller agrees
      that, upon demand of Purchaser, Seller shall immediately pay to
      Purchaser the overdraft amount (negative balance) of any of the Deposits.
    

    
      N.        For a period of 60 days after the Closing Date, Seller agrees
      that, for any reason whatsoever, Purchaser may return to Seller for
      repurchase within three business days of Purchaser’s submission any of
      the Purchased Loans at a price equal to the amount of the unpaid
      principal and Accrued Loan Interest at Closing, as adjusted for interim
      payments on the returned loans since the Closing Date.
    

    
      O.        Purchaser shall file Form 1099s for the Deposits covering the
      year in which the Closing occurs only from the Closing Date to the end
      of that year.  Seller shall file Form 1099s for the Deposits from the
      first of the year in which the Closing occurs through the close of
      business the day before the Closing Date.
    

    
      
        

        

      

      
        
          20
        

        
          

        

      

      
        

        

      

    

    

    

    
      7.6       Maintenance of Records.  For
      a period of five years after the Closing, (i) Purchaser will preserve
      and safe keep the Records transferred to Purchaser that relate to the
      Assets and Assumed Liabilities as required by reasonable business
      practices for the joint benefit of Seller and Purchaser and (ii) Seller
      shall preserve and safe keep all tax records which are not transferred
      to Purchaser as required by reasonable business practices for the joint
      benefit of Seller and Purchaser.  Each of Seller and Purchaser shall
      cooperate from and after the Closing Date to provide to the other upon
      request such information and records in the possession of the
      non-requesting party which is reasonably necessary for the operation of
      business by the requesting party or the requesting party is required to
      produce to a third party in connection with legal, administrative or
      governmental proceedings.  The requesting party agrees to give the
      non-requesting party prompt notice of all requests for disclosure of
      such information or records that arise during legal, administrative or
      governmental proceedings involving the requesting party, so that the
      non-requesting party may seek a protective order with respect to the
      threatened disclosure.  If the requesting party is required to disclose
      such information or records, the requesting party agrees to give written
      notice to the non-requesting party as soon as possible of the
      information and records required to be disclosed and, at the
      non-requesting party’s request and expense, to use reasonable efforts to
      obtain assurances that such information and records required to be
      disclosed will be maintained on a confidential basis and will not be
      disclosed to a greater degree than required by law.  In addition to the
      foregoing, Seller will permit Purchaser and its tax or accounting
      representatives access to Seller’s journals and general ledgers relating
      to the Branch for financial and tax purposes during such five-year
      period.
    

    
      7.7       Further Assurances.  On
      and after the Closing Date, Seller shall (i) give such further
      assurances to Purchaser and shall execute, acknowledge and deliver all
      such bills of sale, deeds, acknowledgments and other instruments, and
      take such further action as may be necessary and appropriate to
      effectively vest in Purchaser the full legal and equitable title to the
      Assets and to the security interests, if any, relating to the Assets and
      (ii) use reasonable efforts to assist Purchaser in the orderly
      transition of the Branch operations being acquired by the Purchaser.  In
      order to comply with its obligations set forth in subsection (i) above,
      Seller will grant to specified employees of Purchaser, if necessary, a
      power of attorney (the “Power of Attorney”) for the limited purpose of
      signing and filing all such bills of sale, acknowledgments, assignments
      and other instruments.
    

    
      7.8       Signage.  All
      interior and exterior signs identifying the Seller will be covered or
      removed by Purchaser, at Purchaser’s expense, by the opening of business
      on the first business day after the Closing Date and all signs will be
      removed within 10 calendar days following the Closing Date. From and
      after the Closing Date, Purchaser will at its expense as soon as
      reasonably practicable change the name on all documents and facilities
      relating to the Branch to Purchaser's name.
    

    
      7.9       Indemnification by
      Purchaser.  For a period of two years after the Closing Date,
      Purchaser agrees to indemnify and hold Seller harmless from and against
      any and all damages, liabilities and losses which may be sustained by
      Seller by reason of Purchaser's breach of any representation, warranty
      or covenant to Seller under this Agreement.  Purchaser further agrees to
      indemnify and hold Seller harmless from and against any and all damages,
      liabilities and losses which may be sustained by Seller by reason of
      Purchaser's actions on and after the Closing Date with respect to the
      Assets or Assumed Liabilities transferred hereunder.  Purchaser's
      covenants shall not be deemed to be violated by discharge of Assumed
      Liabilities in accordance with normal trade practices or by forbearing
      to discharge any such obligation which Purchaser is disputing in good
      faith and for which Purchaser has provided adequate reserves, provided
      Purchaser indemnifies and holds Seller harmless in connection with the
      same as set forth above.
    

    

    

    
      
        

        

      

      
        
          21
        

        
          

        

      

      
        

        

      

    

    

    

    
      7.10      Indemnification by Seller.  For
      a period of two years after the Closing Date, Seller agrees to indemnify
      and hold Purchaser harmless from and against any and all damages,
      liabilities and losses which may be sustained by Purchaser by reason of
      Seller's breach of any representation, warranty or covenant to Purchaser
      under this Agreement.  Seller further agrees to indemnify and hold
      Purchaser harmless from and against any and all damages, liabilities and
      losses which may be sustained by Purchaser with respect to the Branch,
      the Assets or the Assumed Liabilities arising from acts, omissions or
      events occurring prior to the Closing Date, but not including any state
      of facts existing, or act or omission of Seller, with respect to: (a)
      the title to the Real Property and any claims, liens or encumbrances
      thereon (it being understood and agreed that Purchaser will rely upon
      title insurance for these purposes); or (b) the condition of the Real
      Property, which the parties acknowledge is being sold “AS IS,” except as
      provided in Section 4.10 and Schedule1.1C.
    

    
      7.11      Defense of Actions -
      Purchaser Indemnifications.  Seller shall notify Purchaser
      promptly of any lawsuit or claim against Seller which it has reasonable
      cause to believe would entitle it to indemnification
      hereunder.  Purchaser shall be entitled to assume at its expense the
      defense of, and to determine the terms of settlement of, any such suit
      or claim, except that no term awarding relief other than money damages
      against Seller may be agreed to without the consent of Seller, and no
      award of money damages against Seller shall be agreed to without
      satisfactory prior arrangements between Purchaser and Seller to assure
      Seller that Purchaser will have sufficient funds available to respond to
      the award.  If Purchaser promptly so elects to assume, and promptly so
      notifies Seller, and does assume, the defense of any such suit or claim,
      it shall not be liable for any legal expense or other expenses incurred
      by Seller with respect to such suit or claim and Seller shall be solely
      responsible for those expenses (whether incurred by Seller before or
      after Purchaser assumes the defense of any such suit or claim).  If
      Purchaser does not assume the defense of any such suit or claim, it
      shall thereafter be barred from disputing the nature and amount of the
      monetary damages ultimately incurred or determined to have been incurred
      by Seller in settling or litigating the suit or claim.
    

    
      7.12      Defense of Actions -
      Seller Indemnifications.  Purchaser shall notify Seller promptly
      of any lawsuit or claim against Purchaser which it has reasonable cause
      to believe would entitle it to indemnification hereunder.  Seller shall
      be entitled to assume at its expense the defense of and to determine the
      terms of settlement of, any such suit or claim, except that no term
      awarding relief other than money damages against Purchaser may be agreed
      to without the consent of the Purchaser, and no award of money damages
      against Purchaser shall be agreed to without satisfactory prior
      arrangements between Seller and Purchaser to assure Purchaser that
      Seller will have sufficient funds available to respond to the award.  If
      Seller promptly so elects to assume, and promptly so notifies Purchaser,
      and does assume, the defense of any such suit or claim, it shall not be
      liable for any legal expense or other expenses incurred by Purchaser
      with respect to such suit or claim and Purchaser shall be solely
      responsible for those expenses (whether incurred by Purchaser before or
      after Seller assumes the defense of any such suit or claim).  If the
      Seller does not assume the defense of any such suit or claim, it shall
      thereafter be barred from disputing the nature and amount of the
      monetary damages ultimately incurred or determined to have been incurred
      by the Purchaser in settling or litigating the suit or claim.
    

    

    

    
      
        

        

      

      
        
          22
        

        
          

        

      

      
        

        

      

    

    

    

    
      ARTICLE VIII
CLOSING CONDITIONS
    

    
      8.1       Conditions Precedent
      to Seller's Obligation to Close.  The obligation of Seller to
      close the transactions contemplated by this Agreement is subject to the
      satisfaction (unless waived in advance in writing by Seller) of each of
      the following conditions at or prior to Closing;
    

    
      A.        The representations and warranties of Purchaser shall be true
      and correct as of the date hereof and as of the time of Closing as if
      made anew at such time;
    

    
      B.        Purchaser shall have performed all of its covenants and
      agreements contained in this Agreement that require performance at or
      prior to Closing;
    

    
      C.        No adverse action or proceeding shall have been instituted
      pertaining to the transactions contemplated by this agreement;
    

    
      D.        All required regulatory approvals and notices, regardless of
      whether Seller or Purchaser was required to apply for the same, shall
      have been received without the imposition of any burdensome condition
      upon Seller and all applicable waiting periods shall have expired and
      all pre-closing conditions to be performed by Purchaser in such
      approvals have been met;
    

    
      E.        Purchaser shall have executed and delivered any documents
      required by this Agreement or reasonably requested by Seller;
    

    
      F.        Purchaser shall have acknowledged receipt of the Transfer
      Payment made under Section 1.4; and
    

    
      G.        The chief executive or financial officer of Purchaser and
      Seller shall have executed the provisional closing statement in the form
      of Exhibit 1 and the instrument of transfer, assignment and
      assumption in the form of Exhibit 3.
    

    
      H.        Purchaser shall have delivered to Seller a certificate of its
      chief executive officer certifying that the conditions in (A), (B), (C)
      and (D) have been satisfied.
    

    
      8.2       Conditions Precedent
      to Purchaser's Obligation to Close.  The obligation of Purchaser
      to close the transactions contemplated by this Agreement is subject to
      the satisfaction (unless waived in advance in writing by Purchaser) of
      each of the following conditions at or prior to Closing:
    

    

    

    
      
        

        

      

      
        
          23
        

        
          

        

      

      
        

        

      

    

    

    

    
      A.        The representations and warranties of Seller shall be true and
      correct as of the date hereof and as of the time of Closing as if made
      anew at such time;
    

    
      B.        Seller shall have performed all of its covenants and
      agreements contained herein which require performance at or prior to
      Closing;
    

    
      C.        No adverse action or proceeding shall have been instituted
      pertaining to the transactions contemplated by this Agreement;
    

    
      D.        All required regulatory approvals and notices, regardless of
      whether Seller or Purchaser was required to apply for the same, shall
      have been received without the imposition of any burdensome condition
      upon Purchaser and all applicable waiting periods shall have expired and
      all pre-closing conditions to be performed by Seller in such approvals
      have been met.  
    

    
      E.        Seller shall have executed and delivered any documents
      required by this Agreement or reasonably requested by Seller;
    

    
      F.        Seller shall have delivered to Purchaser a deed conveying
      title to the Real Property in accordance with Schedule 1.1C; and
    

    
      G.        Purchaser shall have executed two instruments of transfer
      delivered by Seller under Section 6.11 and delivered one of the executed
      instruments to Seller.
    

    
      H.        The chief executive or financial officer of Purchaser and
      Seller shall have executed the provisional closing statement in the form
      of Exhibit 1 and the instrument of transfer, assignment and
      assumption in the form of Exhibit 3.
    

    
      I.        Seller shall have delivered to Purchaser a certificate of its
      chief executive officer certifying that the conditions in (A), (B), (C)
      and (D) have been met.

    

    
      ARTICLE IX
MISCELLANEOUS
    

    
      9.1       Expenses.  Except
      as provided in Schedule 1.1C and Section 7.3, Seller and
      Purchaser each shall pay all of their own out-of-pocket expenses in
      connection with this Agreement, including accounting and legal fees and
      taxes, if any, whether or not the transactions contemplated by this
      Agreement are consummated.  Purchaser shall be responsible for payment
      of all costs associated with the filing and recording of bills of sale
      and other instruments necessary or desirable to be filed by Purchaser
      after the Closing.
    

    
      9.2       Termination;
      Extension of Closing Date.  This Agreement may be terminated:
    

    
      A.        By the non-defaulting party, if the other party hereto shall
      fail to perform or comply in a timely manner with its obligations under
      this Agreement, and such failure remains uncured on the tenth day
      following receipt of written notice of termination from the
      non-defaulting party.
    

    

    

    
      
        

        

      

      
        
          24
        

        
          

        

      

      
        

        

      

    

    

    

    
      B.        By mutual written consent of the parties hereto.
    

    
      C.        By Seller or Purchaser, if the Closing has not occurred as of
      November 30, 2009, unless the parties agree in writing to further extend
      the Closing; provided a defaulting party may not exercise a right of
      termination or extension under this paragraph if its material breach
      remains uncured.
    

    
      9.3       Modification and
      Waiver.  No modifications of any provision of the Agreement
      shall be binding unless in writing and executed by the party sought to
      be bound thereby.  Performance of or compliance with any covenant given
      herein or satisfaction of any condition to the obligations of either
      party hereunder may be waived by the party to whom such covenant is
      given or by whom such condition is intended to benefit, except to the
      extent any such condition is required by law, so long as any such waiver
      is in writing.
    

    
      9.4       Binding Effect,
      Assignment.  This Agreement shall be binding upon and shall
      inure to the benefit of the parties hereto and their respective
      successors and assigns, provided, however, that neither this Agreement
      nor any rights, privileges, duties or obligations of the parties hereto,
      and provided further that in the case of any such assignment the
      assigning party shall also remain responsible as a party hereto.
    

    
      9.5       Entire Agreement;
      Governing Law.  This Agreement, together with the Schedules and
      Exhibits attached hereto and made a part hereof, contains the entire
      Agreement between the parties hereto with respect to the transactions
      covered and contemplated hereunder, and supersedes all prior agreements
      or understandings between the parties hereto relating to the subject
      matter thereof.  This Agreement shall be governed by and construed in
      accordance with the laws of the State of Florida with respect to the
      sale of the Real Property, the federal banking laws of the United
      States, as appropriate, and otherwise in accordance with the laws of the
      State of Georgia.
    

    
      9.6       Headings.  The
      headings in this Agreement are intended solely for convenience of
      reference and shall be given no effect in the construction or
      interpretation of this Agreement.
    

    
      9.7       Severability.  In
      the event that any provision of this Agreement shall be held invalid,
      illegal or unenforceable in any respect, the validity, illegality and
      enforceability of the remaining provisions contained in this Agreement
      shall not in any way be affected or impaired thereby, and this Agreement
      shall otherwise remain in full force and effect.
    

    
      9.8       Counterparts.  This
      Agreement may be executed in original or facsimile signatures in one or
      more counterparts, all of which shall be considered one and the same
      agreement and shall become effective when one or more counterparts have
      been signed by each of the parties hereto.
    

    

    

    
      
        

        

      

      
        
          25
        

        
          

        

      

      
        

        

      

    

    

    

    
      9.9       Notices.  All
      notices, consents, requests, instruction, approvals, waivers,
      stipulations and other communications provided herein to be given by one
      party hereto to the other party shall be deemed validly given, made or
      served, if in writing and delivered personally or sent by certified
      mail, return receipt requested, if to
    

    
      Seller addressed to:            Atlantic Coast Bank
                                                                  505
      Haines Avenue
 
                                                                      Waycross,
      Georgia 31501
                                       
                                Attention:  Robert J. Larison, Jr., President
    

    
      Purchaser addressed to:      HeritageBank of the South
                                                                  721
      Westover Boulevard
                                                                  Albany,
      Georgia 31721
                                                                  Attention:
      O. Leonard Dorminey, Chief Executive Officer
    

    
      Notice by certified mail shall be deemed to be received three business
      days after mailing of the same. Either party may change the persons or
      addresses to whom or to which notices may be sent by written notice to
      the other.
    

    
      9.10      Survival.  All of
      the representations, warranties, covenants and agreements of the parties
      contained in this Agreement, except as otherwise stated, shall survive
      the Closing.
    

    
      9.11      Remedies.  In the
      event the transactions contemplated by this Agreement are not
      consummated due to the willful breach by a party hereto, then the
      non-breaching party shall be entitled to all remedies and relief, at law
      or in equity, including injunctive relief, against the breaching party
      with all remedies being deemed cumulative and no remedy being deemed
      exclusive.  Neither party shall be liable to the other party for such
      other party’s consequential or special damages, including without
      limitation, lost profits.
    

    
      The parties hereto have caused this Agreement to be executed, by their
      duly authorized representatives, as of the day and year first above
      written.
    

    
    	
          PURCHASER:
        	
           
        	
          SELLER:
        
	

        	

        	
           
        
	
          HERITAGEBANK OF THE SOUTH
        	

        	
          ATLANTIC COAST BANK
        
	

        	

        	
           
        
	
          
            By: /s/ O. Leonard Dorminey
          

        	

        	
          
            By: /s/ Robert J. Larison, Jr.
          

        
	

        	

        	
           
        
	
          
            Name: O. Leonard Dorminey
          

        	

        	
          
            Name: Robert J. Larison, Jr.
          

        
	
          
            Title: Chief Executive Officer
          

        	

        	
          
            Title: President
          

        

    

    

    

    
      
        

        

      

      
        
          26
        

        
          

        

      

      
        

        

      

    

    

    

    
      INDEX OF SCHEDULES AND EXHIBITS
    

    
    	
          Schedule 1.1A
        	
           
        	
          Personal Property
        
	

        	

        	
           
        
	
          Schedule 1.1B.1(a)
        	

        	
          Existing Loans
        
	

        	

        	
           
        
	
          Schedule 1.1B.1(b)
        	

        	
          Excluded Loans
        
	

        	

        	
           
        
	
          Schedule 1.1B.3
        	

        	
          Purchased Loans
        
	

        	

        	
           
        
	
          Schedule 1.1C
        	

        	
          Terms for Sale of Real Property
        
	

        	

        	
           
        
	
          Schedule 1.2A.1
        	

        	
          Deposit Liabilities as of June 30, 2009
        
	

        	

        	
           
        
	
          Schedule 1.2A.2
        	

        	
          Deposit Liabilities as of the Closing Date
        
	

        	

        	
           
        
	
          Schedule 1.2B
        	

        	
          Contracts
        
	

        	

        	
           
        
	
          Schedule 2.16
        	

        	
          Employees
        
	

        	

        	
           
        
	

        	

        	
           
        
	

        	

        	
           
        
	

        	

        	
           
        
	
          Exhibit 1
        	

        	
          Form of Provisional Closing Statement for Transfer Payment
        
	

        	

        	
           
        
	
          Exhibit 2
        	

        	
          Form of Final Closing Statement for Adjusted Payment
        
	

        	

        	
           
        
	
          Exhibit 3
        	

        	
          Instrument of Transfer, Assignment and Assumption
        
	

        	

        	
           
        
	
          Exhibit 4
        	

        	
          Successor Trustee Appointment and Consent AgreementEXECUTION COPY

FIRST
AMENDMENT

This
First Amendment dated as of August 28, 2009 (this "Amendment") amends the
Credit Agreement dated as of December 30, 2008 (the "Credit Agreement")
among MGE Energy, Inc. (the "Borrower"), various lenders and JPMorgan
Chase Bank, N.A., as administrative agent (in such capacity, the
"Administrative Agent"). Capitalized terms used but not defined herein
have the meanings assigned to such terms in the Credit Agreement.

WHEREAS,
the parties hereto have agreed to amend the Credit Agreement in certain respects
as more fully set forth below;

NOW,
THEREFORE, the parties hereto agree as follows:

Section
1.

Amendments.

Subject
to satisfaction of the conditions precedent set forth in Section 3, the
Credit Agreement is amended as follows:

1.1

Amendments
to Section 1.1. Section 1.1 is amended as follows: 

1.1.1

The
definition of "Aggregate Commitment" is amended by deleting the reference to
"$20,000,000" therein and substituting "$40,000,000" therefor.

1.1.2

The
definition of "Eurodollar Rate" is amended by deleting the reference to "1%" in
clause (ii) thereof and substituting "1.5%" therefor.

1.1.3

The
definition of "Facility Termination Date" is amended by deleting the reference
to "September 30, 2009" therein and substituting "August 27, 2010" therefor.

1.2

Amendments
to Section 2.4. Section 2.4 is amended by (a) deleting the reference to
"0.125%" in the first sentence thereof and substituting "0.10%" therefor and (b)
deleting the reference to "0.175%" in the second sentence thereof and
substituting "0.15%" therefor.

1.3

Amendment
of Schedule I. The existing Schedule I is replaced by Schedule I
hereto.

Section
2.

Representations
and Warranties. The Borrower represents and warrants as follows:

2.1

Authorization
and Validity. The Borrower has the power and authority and legal right to
execute and deliver this Amendment and to perform its obligations under this
Amendment and the Credit Agreement as amended hereby (the "Amended Credit
Agreement"). The execution and delivery by the Borrower of this Amendment
and the performance by the Borrower of its obligations under this Amendment and
the Amended Credit Agreement have been duly authorized by proper corporate
proceedings, and this Amendment and the Amended Credit Agreement constitute
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their terms, except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally or by equitable principles.

        2.2 No
Conflict; Government Consent. None of the execution and delivery by the
Borrower of this Amendment, the consummation of the transactions contemplated by
this Amendment and the Amended Credit Agreement or compliance by the Borrower
with the provisions of this Amendment and the Amended Credit Agreement will
violate (a) any law, rule, regulation, order, writ, judgment, injunction, decree
or award binding on the Borrower or any of its Principal Subsidiaries, (b) the
Borrower's or any Principal Subsidiary's articles or certificate of
incorporation, partnership agreement, certificate of partnership, articles or
certificate of organization, by-laws, or operating or other management
agreement, as the case may be, or (c) the provisions of any indenture,
instrument or agreement to which the Borrower or any of its Principal
Subsidiaries is a party or is subject, or by which it, or its Property, is
bound, or conflict with or constitute a default thereunder, or result in, or
require, the creation or imposition of any Lien in, of or on the Property of the
Borrower or a Principal Subsidiary pursuant to the terms of any such indenture,
instrument or agreement. No order, consent, adjudication, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, or other action in respect of any governmental or public body or
authority, or any subdivision thereof, that has not been obtained by the
Borrower or any of its Principal Subsidiaries, is required to be obtained by the
Borrower or any of its Principal Subsidiaries in connection with (i) the
execution and delivery of this Amendment, (ii) the borrowings under the Amended
Credit Agreement, (iii) the payment and performance by the Borrower of the
Obligations or (iv) the legality, validity, binding effect or enforceability of
this Amendment or the Amended Credit Agreement.

Section
3.

Effective
Date. This Amendment shall become effective as of the date on which the
Administrative Agent has received all of the following (the "Effective
Date"):

3.1

 counterparts
hereof executed by the Borrower and all Lenders;

3.2

 evidence
that the Borrower has paid all amounts outstanding under the Bilateral Facility
(as defined below) and the 8/29/08 Syndicated Facility (as defined below);

3.3

a
written opinion of the Borrower's counsel addressed to the Lenders,
substantially in the form of Exhibit A; 

3.4

a
certificate, executed by the chief financial officer or treasurer of the
Borrower, stating that no Default or Unmatured Default has occurred and is
continuing; 

3.5

a
certificate, executed by the Secretary or an Assistant Secretary of the
Borrower, attaching (a) the restated articles or the certificate of
incorporation of the Borrower, together with all amendments, (b) a copy of the
Borrower's by-laws, (c) a list of the names and titles of the officers of the
Borrower that are authorized to execute and deliver this Amendment and the
documents contemplated hereby and by the Amended Credit Agreement, together with
a specimen signature of each such officer, (d) resolutions authorizing the
execution of this Amendment and (e) a certificate of good standing certified by
the appropriate governmental officer in the Borrower's jurisdiction of
organization; and 

3.6

payment
(for the account of each Lender) of a non-refundable amendment fee in an amount
equal to .10% of such Lender's Commitment after giving effect to this
Amendment.

Section
4.

Miscellaneous.

4.1

Termination
of Other Facility. The parties hereto agree that, concurrently with the
effectiveness hereof, the Credit Agreement dated as of August 29, 2008
("8/29/08 Syndicated 

Facility")
among the parties hereto shall terminate and be of no further force or effect
(except for provisions thereof that by their terms survive termination
thereof).

4.2

Continuing Effectiveness. Except as expressly set forth
herein, the Credit Agreement shall remain in full force and effect and is
ratified, approved and confirmed in all respects.

4.3

Counterparts.
This Amendment may be executed in any number of counterparts, all of which taken
together shall constitute one agreement, and any of the parties hereto may
execute this Amendment by signing any such counterpart. Delivery to the
Administrative Agent of a counterpart hereof, or a signature page hereto, by
facsimile or electronically in a pdf or similar file shall be effective as
delivery of an original manually-executed counterpart hereof.

4.4

Incorporation
by Reference. The provisions of Section 9.6 and Article XV of the Credit
Agreement are incorporated herein by reference as if fully set forth herein,
mutatis mutandis.

4.5

Governing
Law. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF WISCONSIN, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO
NATIONAL BANKS.

4.6

Successors
and Assigns. This Amendment shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns.

[Signature Page Follows]

IN
WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date
first above written.

MGE
ENERGY, INC., as Borrower

By:
/s/ Jeffrey C. Newman

Name:
Jeffrey C. Newman

Title:
V.P., CFO, Secretary and Treasurer

JPMORGAN
CHASE BANK, N.A., as Administrative Agent and as a Lender

By:
/s/ David N. Slezewski

Name:
David N. Slezewski

Title:
Vice President

U.S.
BANK NATIONAL ASSOCIATION, as Syndication Agent and as a Lender

By:
/s/ Mary Pat Williams

Name:
Mary Pat Williams

Title:
Vice President

 

SCHEDULE
I

 

LENDERS AND COMMITMENTS

		
	
Lender

	
Commitment

	
JPMorgan Chase
Bank, N.A.
	
$20,000,000

	
U.S. Bank
National Association
	
$20,000,000

	

	

	
Total
	
$40,000,000

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