Document:

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                                                                    EXHIBIT 10.1
                             AMENDED AND RESTATED
                             MANAGEMENT AGREEMENT

     This Amended and Restated Management Agreement (this "Agreement") is made
effective as of the 1st day of January, 1999 ("Effective Date"), by and between
J. Gordon Gaines, Inc., a Delaware corporation (hereinafter referred to as
"Gaines") and Vesta Fire Insurance Corporation, Sheffield Insurance Corporation,
and Vesta Insurance Corporation (Alabama corporations), Vesta Lloyds Insurance
Company, a Texas Lloyds Company, The Hawaiian Insurance and Guaranty Company,
Limited (a Hawaiian corporation), The Shelby Insurance Company, Affirmative
Insurance Company, Insura Property and Casualty Insurance Company (Ohio
corporations), and Shelby Casualty Insurance Company, (an Indiana corporation)
(all hereinafter collectively referred to as the "Company" and each of which
hereby appoints Vesta Fire Insurance Corporation ("Vesta Fire") as Agent for the
purpose of this Agreement to act and sign on behalf of each of them).

                                   RECITALS

a.   Gaines and the Company (other than Shelby Casualty Insurance Company, which
     is added as a party by this Agreement) are parties to the Management
     Agreement dated November 15, 1993, as previously amended (the "Existing
     Management Agreement"), and now desire to amend and restate the Existing
     Management Agreement as set forth herein and as set forth in Article XI.

b.   Gaines and the Company are affiliated companies, each being a subsidiary of
     Vesta Insurance Group, a Delaware corporation ("Vesta"), a holding company
     for a group of property and casualty insurance companies.

c.   The Company is in the business of writing property and casualty insurance
     and reinsurance in the United States and certain other countries.

d.   Gaines is a general agency and desires to represent the Company for the
     purpose of marketing, underwriting, and providing all administrative
     services for the production and servicing of the various classes of
     property and casualty insurance and reinsurance contemplated by this
     Agreement.

e.   The Company has determined it is desirable and in its best interest to
     enter into this Agreement with Gaines, whereby the Company will take
     advantage of the experience and facilities of Gaines to provide the various
     administrative services as hereinafter set forth.  Gaines has concluded it
     is desirable and in its best interest to enter into this Agreement with the
     Company for the provision of the services and facilities.

f.   The Company is authorized to conduct the insurance and reinsurance business
     contemplated by this Agreement in the several states, territories and
     possessions of the United States and those certain other countries in which
     the parties to this Agreement propose to do business.

g.   Gaines has the required authority to represent the Company as contemplated
     by this Agreement.

                                       1

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     NOW THEREFORE, in CONSIDERATION of the premises and of the mutual covenants
and agreements contained herein, the parties do agree as follows:

                                   ARTICLE I
                             APPOINTMENT OF GAINES

1.01 Subject to the provisions hereof, the Company hereby appoints Gaines as
     its representative for the marketing, underwriting, and servicing of the
     insurance and reinsurance business contemplated under this Agreement.
     Gaines hereby agrees to represent the Company pursuant to the provisions of
     this Agreement.

1.02 Gaines shall represent the Company according to the provisions of this
     Agreement, and shall comply with all applicable laws and regulations of
     each state or other jurisdiction relative to Gaines' performance under this
     Agreement.

                                  ARTICLE II
                                  THE SERVICE

2.01 Gaines shall provide the following goods and services (herein "services")
     to the Company:

     (a)  Furniture and equipment for the Company as may reasonably be required;

     (b)  A computer and system sufficient to administer the insurance and
          reinsurance business, contemplated under this Agreement;

     (c)  A Personnel/Human Resources Department and staff sufficient to provide
          the services contemplated under this Agreement;

     (d)  Maintenance of properly staffed claims, accounting, underwriting,
          personnel/human resources departments and staff to provide other
          administrative services as may reasonably arise with regard to the
          services contemplated and agreed to be provided by Gaines under this
          Agreement;

     (e)  Its internal legal staff for legal advice and assistance;

     (f)  Its internal accounting staff for auditing and accounting advice and
          assistance;

     (g)  Its internal Risk Management/Corporate Insurance Department for advice
          and assistance in the placement of all insurance and other risk
          management services necessary for the operation of the business
          contemplated under this Agreement;

     (h)  Its internal employee benefit staff for advice and assistance in
          connection with employee benefits;

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     (i)  Its internal Treasury Department for advice and assistance with
          banking relations, cash management and corporate finance;

     (j)  Its internal Investment Department for advice and assistance in the
          maintenance and the management of the Company's assets and liabilities
          and the assets and liabilities of current employee benefit plans and
          any successor plans operated or established in whole or part for the
          benefit of the employees of Gaines or the Company;

     (k)  Its other staff, of any nature, for advice and assistance in
          connection with such other matters that the parties may from time to
          time require;

     (l)  Billing and collection of premiums;

     (m)  Adjustment and payments of losses and loss adjustment expenses;

     (n)  Receiving and processing applications and issuance of policies of
          insurance in accordance with guidelines and standards established by
          the Company;

     (o)  Maintenance of all necessary records relating to the property and
          casualty insurance and reinsurance contemplated and written through
          the Company pursuant to this Agreement, including policies,
          endorsements, cancellation notices, and other related evidences of
          insurance for a period of time mutually agreed to but not less than
          seven (7) years from date of expiration of coverage;

     (p)  Maintenance of agency records, including licensing of Agents and
          commission accounting;

     (q)  All information which the Company shall require or consider necessary
          for reports required by regulatory authorities;

     (r)  Maintenance of records of the insurance business under its supervision
          pursuant to this Agreement in a form and manner as required by the
          laws and regulations of the various jurisdictions in which the Company
          shall do business;

     (s)  The right to use the service mark of Vesta Insurance Group, Inc.;

     (t)  Such other administrative and other services performed by Gaines under
          this Agreement and those which may arise from time to time as
          contemplated by this Agreement, and although not specifically
          enumerated herein are nevertheless included herein.

2.02 Reports and Remittances; Settlement of Accounts
     -----------------------------------------------

     (a)  Gaines shall furnish the Company as of dates and on forms acceptable
          to Gaines and the Company, reports and accounts in a bordereau format
          within 30 days after the end of each calendar month or at such other
          intervals as the parties hereto may agree.

                                       3

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          The reports and accounts shall reflect the business processed by
          Gaines on behalf of the Company. These reports shall include, but not
          be limited to, the following:

          (1)  Services provided to the Company;

          (2)  Premium bordereaux;

          (3)  Loss and loss adjustment expense bordereaux;

          (4)  Premium and loss reserve reports; and

          (5)  Any other report as required by the Company.

     (b)  Gaines shall remit to the Company, within sixty (60) days of the close
          of the month, all funds due the Company as specified in the premium
          bordereaux (Section 2.02(a)(2)).  The Company shall remit to Gaines,
          within sixty (60) days of the close of the month, all funds due Gaines
          as specified in the loss and loss adjustment expense bordereaux
          (Section 2.02(a)(3)).

     (c)  In lieu of all or part of the requirements of Section 2.02(b), the
          Company shall empower Gaines to establish bank account(s), in the name
          of the Company and in banks approved by the Company, for the purpose
          of depositing or withdrawing funds as specified in Section 2.02(b).

2.03 Cost of Services.
     ----------------

     (a)  The Company agrees to reimburse Gaines for the services agreed to and
          provided by Gaines according to the following schedule:

          (1)  The actual cost incurred by Gaines in providing services under
               Section 2.01 to be paid on a monthly basis; plus

          (2)  An amount equal to 10% of the total actual cost incurred by
               Gaines for services under Section 2.01 to be paid on a monthly
               basis.

     (b)  Gaines agrees to maintain books and records as are necessary and
          appropriate to substantiate the charges made to the Company for
          services performed and expenses incurred by Gaines for the benefit of
          the Company.

2.04 Claims.
     ------

     (a)  Gaines will be responsible for the supervision, adjustment and payment
          of all claims arising under contracts of insurance and reinsurance
          entered into on behalf of the Company pursuant to the terms of this
          Agreement, including, but not limited to:  assignment and supervision
          of all adjusters and investigators; retention of legal counsel;
          negotiation of settlement; acceptance of Proofs of Loss; settlement of

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          subrogation and sale of salvage; the issuance of checks for claims
          settlements and payment of all allocated adjustment expenses.

     (b)  Gaines shall be responsible for providing the Company and its
          reinsurers with Notices of Loss and Proofs of Loss.  The Company shall
          be advised monthly of all claims established including reserves, paid
          losses and paid loss adjustment expenses by bordereaux.  Additionally,
          Gaines shall notify the Company and its reinsurers of each claim
          exceeding $25,000 (or lesser amounts if required by the Company).

     (c)  The power hereby granted Gaines with respect to claims handling is
          subject to the supreme authority and instruction of the Company,
          including but not limited to the designation of adjusters, the
          acceptance of declination of liability and the designation of counsel.

     (d)  All allocated loss adjustment expense shall be the responsibility of
          the Company and shall be paid by Gaines on behalf of the Company.

     (e)  Gaines shall be responsible for obtaining payment from reinsurers of
          the Company of that portion of claims and allocated loss adjustment
          expense payments made by Gaines on contracts entered into pursuant to
          this Agreement as shall be required by applicable reinsurance
          contracts of the Company.

     (f)  Gaines, on behalf of the Company, shall maintain claim files and
          records in the form or manner as are needed to supervise and adjust
          settlement of losses.  The records shall be maintained for a period
          not less than as required by the applicable period of limitations of
          the jurisdiction in which the contract of insurance was entered into,
          plus one year and in a place and in a form as is mutually agreed to by
          the parties.

     (g)  Gaines shall furnish the Company claim bordereaux accounts within
          fifteen (15) days from the close of each month showing the detail of
          new claims and reserves, reserve changes, claim and claim expense
          payments in the form as set out from time to time by the Company.
          Gaines shall provide this information monthly as long as there remains
          any liability to the Company under policies issued by Gaines under
          this Agreement.

2.05 Insurance Contracts.  Gaines shall process applications and issue policies
     -------------------
     of property and casualty insurance and reinsurance in accordance with
     guidelines established by the Company and on those classes of risks
     designated in Article VI of this Agreement.  Gaines shall continue to
     utilize current rates, application and policy forms which are presently in
     use.  The forms and rates may be modified from time to time by the Company.
     The Company shall give Gaines appropriate notice in advance of any change
     in rates or forms.  Subject to the terms of the contract of insurance and
     applicable law, the Company may at any time initiate cancellation of any
     contract of insurance issued pursuant to this Agreement.  The Company shall
     give Gaines appropriate notice of any such cancellations it wishes to
     affect.  Upon receipt of such notice, Gaines shall facilitate the
     cancellation of coverages as soon as practical subject to policy provisions
     and applicable law.

                                       5

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2.06 General.
     -------

     (a)  Gaines shall maintain a sufficient staff of competent and trained
          personnel, supplies and equipment to develop, supervise and service
          the business which is subject to this Agreement.

     (b)  Gaines shall use its best efforts to serve faithfully the Company and
          at all times promote and safeguard the best interest of the Company
          and perform all acts necessary to the proper conduct of the Company's
          business on behalf of the Company, including compliance with
          applicable statutes and regulations of the jurisdictions in which
          business is conducted.

     (c)  In jurisdictions in which the Company is licensed to do business,
          Gaines agrees to have properly licensed resident agents for
          countersigning purposes and to maintain Gaines non-resident agents or
          brokers license as may be required by the laws and regulations of the
          jurisdiction.

     (d)  In those jurisdictions in which the Company is operating as a non-
          admitted, foreign insurer, Gaines shall make surplus lines filings
          with the appropriate supervisory officials and pay such taxes as are
          required by the laws and regulations of each jurisdiction.

                                  ARTICLE III
                               OTHER AGREEMENTS

3.01 All expenses incurred by Gaines in the operation of the business covered
     by this Agreement shall be paid by Gaines unless otherwise set forth in
     this Agreement.  To the extent that such expenses actually incurred by
     Gaines relate directly to services performed for a particular Company, one
     hundred percent of this direct expense shall be paid by the Company for
     which the services were performed, except that so long as each of the
     entities comprising the Company in this Agreement cede 100% of their
     business to Vesta Fire, then those entities hereby appoint Vesta Fire
     Insurance Corporation as their agent to pay 100% of this direct expense.
     If expenses incurred by Gaines cannot be allocated to work performed for a
     particular Company, Gaines will be compensated for the expenses in the
     manner described above in Section 2.03 of this Agreement.

3.02 Gaines agrees not to publish or distribute any advertisements, circulars
     or other matter referring to the Company by name without first securing the
     Company's written approval.

3.03 The Company shall have the right and opportunity to inspect and audit all
     records of Gaines relating to this Agreement and all services performed
     hereunder and all charges, fees and allocations made hereunder upon
     reasonable notice to Gaines.  The Company also shall have the right to make
     copies of all such records.

3.04 Notwithstanding any other provision of this Agreement, it is understood
     that the business and affairs of the Company shall be managed by its Board
     of Directors, and to the extent

                                       6

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     delegated by the Board of Directors, by its appropriately designated
     officers. It is hereby specifically acknowledged and agreed by Gaines that
     the Board of Directors and officers of Gaines shall not have any management
     prerogatives or authority with respect to the business affairs and
     operations of the Company, except insofar as the directors or officers are
     acting within the scope of their authority as directors or officers of the
     Company.

                                  ARTICLE IV
                                 CONTRACT TERM

4.01 This Agreement shall continue indefinitely; provided, however, that either
     party may terminate this Agreement with ninety (90) days written notice
     given to the other by  registered mail.  Gaines will, thirty (30) days
     after receipt of notice of cancellation, cease writing any new business on
     behalf of the Company.  It is agreed that business in force pursuant to
     this Agreement will continue until its normal expiration date or next
     anniversary date, whichever comes first, which date shall not extend
     coverage for a period in excess of twelve (12) calendar months beyond the
     termination of this Agreement and Gaines agrees to continue such services,
     as required by this Agreement, applicable to such business.

4.02 It is agreed that during the existence of this Agreement and for a period
     of twelve (12) months after its termination, Gaines shall not solicit,
     accept, produce, or place business written of the type or similar type
     covered by this Agreement from or to any source other than the Company.

                                   ARTICLE V
                           TERMINATION OF AGREEMENT

5.01 In addition to the termination rights set forth in Section 4.01, either
     party shall have the right to terminate this Agreement immediately by
     giving written notice by registered mail to the other if, during the
     duration of this Agreement, either party:

     (a)  shall go into liquidation or if there be appointed for it or its
          assets a rehabilitator, receiver, liquidator, conservator, or trustee
          in bankruptcy or there be commenced against it proceedings for the
          appointment of any such officer or agent by whatever name known and
          such proceedings shall not be dismissed after a reasonable time;

     (b)  shall become insolvent or make an assignment for the benefit of
          creditors; or

     (c)  shall commit or omit any action which gives the other party a right to
          terminate for cause.  For purposes of this Agreement, "for cause"
          shall include (1) a willful violation of applicable insurance laws and
          regulations, (2) violation of any material provision of this
          Agreement, (3) dishonesty, (4) theft, (5) fraud, (6) embezzlement, (7)
          commission of a felony or a crime involving moral turpitude or
          trustworthiness, (8) conduct disloyal to the Company or (9) willful
          disregard of lawful instructions or directions of any officer or
          director of the Company relating to a material matter.

                                       7

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5.02 Upon termination of this Agreement:

     (a)  The Company shall be the owner of all insurance expirations and may
          make and retain copies of all records pertaining to such expirations,
          including agents' copies of dailies as those terms are used and
          understood in insurance parlance.

     (b)  All records that pertain to the business of the Company shall become
          the property of the Company and shall be returned to the Company as
          directed by the Company.

     (c)  Gaines shall supervise the runoff of the business and shall retain
          records or copies of records as may be necessary for that purpose.

     (d)  The Company shall continue to pay Gaines compensation as specified in
          this Agreement and reimburse Gaines for commissions paid to agents
          pursuant to the provisions of this Agreement hereof with regard to
          premium transactions on policies written by Gaines during the term of
          this Agreement.

                                  ARTICLE VI
                                CLASSES OF RISK

6.01 Gaines is authorized, subject to underwriting instructions, rates and
     guides provided in writing by the Company to take applications and issue
     policies of insurance and reinsurance which the Company is authorized to
     write in the various jurisdictions in which it does business.

6.02 Gaines is authorized to solicit on behalf of the Company applications for
     insurance and reinsurance as set out in Section 6.01 above, subject to
     maximum limits of liability as set out by the Company to Gaines from time
     to time.

6.03 Gaines is authorized to secure and execute facultative and other
     reinsurance on behalf of, and as directed by, the Company and in such
     amounts and in such manner as directed by the Company.

                                  ARTICLE VII
                                   INDEMNITY

7.01 Gaines shall indemnify, defend and hold the Company, its directors,
     officers and employees harmless from and against all damages, losses, and
     out-of-pocket expenses (including fees), caused by or arising out of any
     willful failure to perform any obligation or agreement of the Company
     herein.

7.02 The Company shall indemnify, defend and hold Gaines, its directors,
     officers and employees harmless from and against all damages, losses, and
     out-of-pocket expenses (including fees), caused by or arising out of any
     willful failure to perform any obligation or agreement of the Company
     herein.

                                       8

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                                 ARTICLE VIII
                           MISCELLANEOUS PROVISIONS

8.01 This Agreement may not be assigned by Gaines, in whole or in part, unless
     prior written consent is given by the Company.

8.02 Notices hereunder shall be in writing, and may be delivered by hand, first
     class, registered or certified mail, postage prepaid, express delivery, or
     telecopy or other telecommunication device capable of confirmation of
     receipt, addressed to Gaines or the Company, at the address set forth
     below, or at such other address as each party may furnish to the other in
     writing:

          TO GAINES:       Mr. Donald W. Thornton
                           Senior Vice-President and General Counsel
                           J. Gordon Gaines, Inc.
                           3760 River Run Drive
                           P. O. Box 43360
                           Birmingham, Alabama 35243

          TO THE COMPANY:  Mr. Norman Winn Gayle, III
                           President
                           Vesta Fire Insurance Corporation
                           3760 River Run Drive
                           P. O. Box 43360
                           Birmingham, Alabama 35243

                                  ARTICLE IX
                                  ARBITRATION

9.01 As a condition precedent to any right of action hereunder, in the event of
     any dispute or difference between Gaines and the Company hereafter arising
     with respect to this Agreement, it is hereby mutually agreed that the
     dispute or difference shall be submitted to arbitration.  One arbiter shall
     be chosen by the Company, the other by Gaines, and an umpire shall be
     chosen by the two arbiters before they enter upon arbitration, all of whom
     shall be active or retired disinterested executive officers of insurance or
     reinsurance companies.  In the event that either party should fail to
     choose an arbiter within 30 days following a written request by the other
     party to do so and 10 days following a second request, delivered to an
     officer of the party, the requesting party may choose two arbiters who
     shall in turn choose an umpire before entering upon arbitration.  If the
     two arbiters fail to agree upon the selection of an umpire within 30 days
     following their appointment, each arbiter shall nominate three candidates
     within 10 days thereafter, two of whom the other shall decline, and the
     umpire shall be chosen from the two remaining candidates by drawing lots.

9.02 The arbiters shall establish the procedures and rules under which the
     arbitration shall proceed.  The arbiters shall follow the customs and
     practices of the insurance industry and

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<PAGE>

     consider this Agreement as an honorable engagement rather than merely a
     legal obligation, are relieved of all judicial formalities, and may abstain
     from following the strict rules of law. The majority award of the umpire
     and arbiters shall be final and binding on both parties. Judgment upon the
     final award of the umpire and arbiters may be entered in any court of
     competent jurisdiction.

9.03 Each party shall bear the expenses of its own arbiter, and shall jointly
     and equally bear with the other expense of the umpire and of the
     arbitration.  In the event that the two arbiters are chosen by one party,
     as above provided, the expense of the arbiters, the umpire and the
     arbitration shall be equally divided between the two parties.

9.04 Any arbitration proceeding shall take place in Birmingham, Alabama or such
     other location as may be mutually agreed upon by the parties to this
     Agreement, but notwithstanding the location of the arbitration, all
     proceedings pursuant hereto shall be governed by the  laws of the State of
     Alabama.

                                   ARTICLE X
                                   STATE LAW

     This Agreement is entered into in accordance with the laws of the State of
Alabama and is to be construed accordingly.

                                  ARTICLE XI
                           AMENDMENT AND RESTATEMENT
                       OF EXISTING MANAGEMENT AGREEMENT

     The Existing Management Agreement is amended and restated effective on the
effective date of this Agreement.  This Agreement shall govern the relationship
of Gaines and the Company beginning on the effective date of this Agreement.
Provided, however, the effectiveness of this Amended and Restated Agreement is
subject to the approval of all appropriate regulatory authorities in all states
where approval is required.   If this Amended and Restated Agreement is not
approved by all required regulatory authorities, this Amended and Restated
Agreement shall be void and of no force and the relationship of Gaines and the
Company shall continue to be governed by the Existing Management Agreement.

                                      10

<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto have caused this Agreement
to be executed by its duly authorized officers effective as of the Effective
Date recited above, but actually executed on the dates set forth below.

                              VESTA FIRE INSURANCE CORPORATION,
                              INDIVIDUALLY AND AS AGENT FOR
                              SHEFFIELD INSURANCE CORPORATION, VESTA
                              INSURANCE CORPORATION, VESTA LLOYDS
                              INSURANCE COMPANY, THE HAWAIIAN
                              INSURANCE AND GUARANTY COMPANY,
                              LIMITED, THE SHELBY INSURANCE
                              COMPANY, AFFIRMATIVE INSURANCE
                              COMPANY, INSURA PROPERTY AND
                              CASUALTY INSURANCE COMPANY,
                              AND SHELBY CASUALTY INSURANCE
WITNESS:                      COMPANY

James E. Tait                 By    /s/ Norman W. Gayle, III
---------------------------      ----------------------------------------------
                                    President of Each Company other than
                                    Vesta Lloyds Insurance Company, and
                                    as authorized underwriter for Vesta Lloyds
                                    Insurance Company

                              Date Executed:   Oct. 4, 1999
                                             ----------------------------------

WITNESS:                      J. GORDON GAINES, INC.

James E. Tait                 By    /s/ Donald W. Thornton
---------------------------      ----------------------------------------------
                                    Senior Vice President

                              Date Executed:   Oct. 4, 1999
                                             ----------------------------------

                                      11<PAGE>

                                                                    Exhibit 10.1

STATE OF GEORGIA      )
                      )
COUNTRY OF RICHMOND   )

                      KEY OFFICER COMPENSATION AGREEMENT
                      ----------------------------------

        THIS AGREEMENT made and entered into as of the 1/st/ day of January
2000, between Georgia Bank & Trust Company of Augusta, a banking corporation
organized and existing under the laws of the State of Georgia (hereinafter
called the "Bank") and R. Daniel Blanton, a salaried employee of the Bank
(hereinafter called the "Executive"), pursuant to a duly authorized resolution
of the Compensation Committee of the Board of Directors of the Bank.

        In consideration of the mutual covenants hereafter set forth, the good
and valuable services to be rendered by the Executive to the Bank commencing on
the date of this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are acknowledged, the parties agree as follows:

        1.    EMPLOYMENT.
              ----------

                    The Bank hereby agrees to employ the Executive, and the
              Executive hereby agrees to work for the Bank, on the terms and
              conditions hereinafter set forth subject to the general
              supervision and direction of the Bank.

        2.    TITLE AND DUTIES OF POSITION.
              ----------------------------

                    The Executive shall have the title of President - Chief
              Executive Officer for Georgia Bank & Trust Company of Augusta, and
              Georgia Bank Financial Corporation ("GBFC"), and in this capacity,
              the Executive shall be required to perform all the duties and
              discharge all of the responsibilities which are described and
              detailed in the attached position description (see Schedule 1).

                    The Executive agrees to devote his full and exclusive time,
              effort and attention to the performance of his duties and to
              devote his best efforts and skills exclusively to the business and
              interests of the Bank and perform all duties required by this
              Agreement and as designated by the board of Directors of the Bank.
              The Executive agrees to hold such corporate offices with the Bank
              to which the Executive is from time-to-time elected and to
              discharge all duties imposed upon the Executive as set forth in
              the bylaws of the Bank. With the consent of the Board of directors
              of the Bank, the Executive may serve as a member of the Board of
              Directors of another company, or companies.

        3.    TERMS OF AGREEMENT.
              ------------------

                    The term of this Agreement shall commence as of the date of
              this Agreement and shall terminate on December 31, 2002. This
              contract shall be renewed for additional terms of three (3) years
              each upon the approval of the Compensation Committee of the Bank.
              Such approval shall occur on or before December 31/st/ of each
              year, and shall be acknowledged by the Compensation Committee
              recording the same in its meeting minutes. In the event the
              Compensation Committee fails to renew the term of this Agreement
              prior to December 31 of any year, the term of this Agreement shall
              expire on December 31, two (2) years later.

        4.    COMPENSATION.
              ------------

              a.    Base Salary. The Bank agrees that, as of the effective date
                    -----------
                    of this Agreement, it shall pay the Executive an annual base
                    salary of $140,0000.00 ("Base Salary"), which shall be paid
                    in equal semi-monthly installments. During the term of this
                    Agreement, the Bank shall review the Executive's Base Salary
                    annually and shall advise the Executive on or before
                    February 28/th/ of each year of any adjustment in salary,
                    with such adjustment, if any,
<PAGE>

                    retroactive to January 1/st/. It is anticipated that the
                    first salary review will occur no later than February 28,
                    2000 for the period beginning January 1, 2000.

              b.    Annual Incentive Compensation. Effective January 1, 2000 for
                    -----------------------------
                    the year ending December 31, 2000 and successive years under
                    this Agreement, it is the intention of the Bank to provide
                    the Executive with an annual incentive compensation award
                    ("Annual Incentive Compensation"), in addition to Base
                    Salary, in recognition of the efforts and production
                    achieved by the Executive. The amount of the Annual
                    Incentive Compensation to be paid to the Executive is to be
                    determined by the Compensation Committee of the Board of
                    Directors within two months after the end of each fiscal
                    year.

              c.    Stock Appreciation Rights and Incentive Stock Option. The
                    ----------------------------------------------------
                    Executive shall be eligible to participate in the Executive
                    Long-Term Incentive Plan adopted by Georgia Bank Financial
                    Corporation. The Executive has been previously awarded Stock
                    Appreciation Rights. Subsequent awards will be determined
                    annually by the Compensation Committee of the Board of
                    Directors.

              d.    Incentive Compensation - Change of Control. In the event of
                    ------------------------------------------
                    a change of control of the Bank as defined herein, Executive
                    shall be entitled (in addition to the benefits set forth
                    hereinabove) upon closing of the transaction effecting such
                    change of control to a cash payment of an amount equivalent
                    to two times the Executive's average base salary plus cash
                    bonuses paid during the last five (5) years (minus such
                    federal and state income tax withholding and social security
                    taxes as may be applicable to the Bank under federal or
                    state law) as a result of such financial transaction.

                           The payments provided for in this section shall be
                    payable by the Bank only to the extent that such payments
                    are deductible by the Bank and are not rendered non-
                    deductible by Section 280G(b)(1) of the Internal Revenue
                    Code of 1996 as amended. The cash payment provided for in
                    this section shall be paid by the Bank not later than ten
                    (10) days after the date of closing of the transaction
                    effecting the change of control of the Bank.

                    For the purpose of this section, "change of control" of the
                    Bank shall mean:

                    (i)   Any transaction, whether by merger, consolidation,
                    asset sale, tender offer, reverse stock split or otherwise,
                    which results in the acquisition or beneficial ownership, as
                    such term is defined under rules and regulations promulgated
                    under the Securities Exchange Act of 1934, as amended, by a
                    person or entity or any group of persons or entities acting
                    in concert, of 50% or more of the outstanding shares of
                    common stock of the GBFC.

                    (ii)  the sale of all or substantially all of the assets of
                    the Bank and/or GBFC.

                    (iii) approval by the shareholders of the GBFC of a plan of
                    liquidation of the GBFC or the Bank.

              e.    Non-qualified Defined Benefit Plan, with minimum monthly
                    ----------------------------------
                    benefit at retirement age of 65 of $10,000. This benefit
                    shall remain an obligation of the Bank and its successors,
                    and shall be fully funded to age 65 regardless of a "change
                    of control" referred to in Section 6(d) hereinbelow or
                    continued employment of the Executive after the "change of
                    control."

              f.    Other. The Executive shall be eligible to participate in the
                    -----
                    Group Medical and Life Insurance Plan, 401K Savings Plan,
                    and Cafeteria Plan, if and to the extent that such are
                    provided to all Bank employees. In the event of a "change of
                    control", the Executive has the option to take a reduced
                    benefit at early retirement, or defer to age 65 as defined
                    in the Non-qualified Defined Contribution Retirement Plan.
<PAGE>

        5.    REIMBURSEMENT OF BUSINESS EXPENSES.
              ----------------------------------

                    The Executive shall be reimbursed for all necessary business
              expenses, including payment of membership dues at the Augusta
              Country Club, and monthly dues of a civic club. The Executive
              shall also be provided an automobile for personal and business use
              commensurate with his position.

        6.    TERMINATION OF EMPLOYMENT.
              -------------------------

              a.    Death or Permanent Disability of Executive. In the event
                    ------------------------------------------
                    that the employment of the Executive shall be terminated by
                    reason of the death or permanent disability of the
                    Executive, then the Bank shall pay to the Executive's estate
                    (or beneficiary designated by the Executive in a written
                    notice to the Bank in the event of the Executive's death) or
                    to the Executive (in the event of permanent disability) an
                    amount equal to six months of the Executive's then current
                    Base Salary. Further, all cash amounts, if any, previously
                    earned and voluntarily or automatically deferred under the
                    Annual Incentive Compensation arrangement shall become 100%
                    vested and payable under the terms of such deferral
                    agreement(s). The term "permanent disability" as used in
                    this Agreement means the inability of the Executive to
                    perform the duties specified in this Agreement for three
                    hundred sixty (360) consecutive calendar days.

              b.    Discharge for Cause or Voluntary Termination by Executive.
                    ---------------------------------------------------------
                    The Executive may be discharged by the Bank for just cause;
                    in which event this Agreement and all of the rights and
                    obligations of the parties, unless otherwise provided, shall
                    forthwith terminate. The term "just cause", as used in this
                    Agreement, shall mean a substantial and objective act of
                    misfeasance or nonfeasance by the Executive which is plainly
                    sufficient, under sound banking principles (as recognized by
                    the Georgia Department of Banking and Finance and/or the
                    Federal Deposit Insurance Corporation to the extent said
                    agencies would no longer approve the Executive to hold a
                    comparable executive position), to conclude that the
                    Executive is unfit to continue in the capacities stated in
                    this Agreement. Notwithstanding the foregoing, however, the
                    rights, obligations and duties of the parties arising by
                    virtue of Paragraph 8 (as applicable) of this Agreement
                    shall not terminate and shall nevertheless remain binding
                    upon the parties to this Agreement as independent covenants.
                    In the event of termination by the Bank for just cause, or
                    voluntary termination by the Executive, the Executive shall
                    not be entitled to any severance compensation. Cash amounts,
                    if applicable, voluntarily deferred shall be payable in
                    accordance with the terms of such deferral agreement(s). The
                    rights of the Bank and Executive under the Executive Long-
                    Term Incentive Plan shall be exercisable in accordance with
                    the terms of the respective plans and award agreements.

              c.    Discharge Without Cause. If the employment of the Executive
                    -----------------------
                    is terminated by the bank for any reason other than just
                    cause, death or permanent disability, then the Bank, its
                    successor or the successor to Georgia Bank & Trust Company
                    of Augusta, shall pay the Executive his then current Base
                    Salary for two (2) years or the remaining term of this
                    Agreement, whichever is greater, which shall be paid by the
                    Bank to the Executive in consecutive monthly installments
                    commencing on the 1st day of the month following discharge
                    of the Executive without cause. Additionally, the Bank shall
                    continue to provide, at its expense, medical coverage then
                    in force for the Executive and his family for two (2) years
                    or the remaining term of this Agreement, whichever is
                    greater. Notwithstanding the foregoing, if the Executive
                    accepts other employment within the 24 month period during
                    which the Bank has agreed to pay the Executive, the Bank
                    shall be relieved of any obligation to pay the Executive all
                    remaining unpaid monthly installments of the Base Salary and
                    medical coverage benefits. All cash amounts, if any,
                    previously earned and voluntarily deferred shall become 100%
                    vested and payable in accordance with the terms of such
                    deferral agreement(s).
<PAGE>

              d.    Optional Termination ("Change of Control"). In the event
                    --------------------
                    that 50% of the issued and outstanding shares of the Bank or
                    its parent, GBFC, excluding the shares set aside pursuant to
                    an incentive stock option plan, are acquired by any one
                    entity or person, or group of persons or entities acting in
                    concert which are not shareholders on the effective date of
                    this Agreement, the Executive shall have certain rights, as
                    follows. If Executive is required by the Bank, its successor
                    or the successor to GBFC to (i) relocate to a geographical
                    area more than fifty (50) miles from 3530 Wheeler Road,
                    Augusta, Georgia or (ii) accept a reduction in Total Annual
                    Compensation below the rate in effect on the Take Over Date,
                    or (iii) perform duties and occupy a position other that
                    described in Paragraph 2 above, the Bank, its successor or
                    the successor to GBFC shall pay the Executive his Total
                    Annual Compensation (at the rate in effect on the Take Over
                    Date) and continue to pay medical insurance benefits then in
                    force for the Executive and his family for a term equal to
                    two (2) years or the remaining term of this Agreement,
                    whichever is greater. In the event the Executive
                    subsequently obtains medical insurance benefits through
                    other employment during the period that such benefits are
                    provided by the Bank under this Paragraph, the Bank shall be
                    relieved of its obligation to pay for medical insurance for
                    the Executive.

        7.    AGREEMENT NOT TO COMPETE AND TO SOLICIT EMPLOYEES.
              -------------------------------------------------

                    The Executive agrees that during the period applicable in
              Paragraph 6(c) following Discharge Without Cause of his employment
              by the Bank, for whatever reason (and regardless of whether this
              contract expires or is terminated), he will not, on his own behalf
              or in the service of others, compete with the Bank within a
              twenty-five (25) mile radius of the principal office of the Bank
              located at 3530 Wheeler Road, Augusta, Richmond County, Georgia,
              and he will not, on his own behalf or in the service of others,
              solicit, divert or hire away or attempt to solicit, divert or hire
              away, to any competing business and person employed by the Bank,
              whether such employment was for a determined period or at will.

        8.    COVENANT NOT TO DISCLOSE TRADE INFORMATION.
              ------------------------------------------

                    The Executive covenants and agrees that he will not, at any
              time, or in any manner, either directly or indirectly, divulge or
              disclose to any firm, individual or institution any information
              concerning or related to the business of the Bank, including its
              customers, shareholders, manner of operation, projections,
              accounting procedures or other information pertaining to the
              business or affairs of the Bank, all of which are deemed trade
              secrets which are deemed confidential material and important.
              Further, upon termination of this Agreement, with or without
              cause, the Executive agrees that he will continue to treat as
              private and privileged all information, data, figures,
              projections, customer lists, manner of operations and identity of
              shareholders each of which is a trade secret, and will not release
              any such information to any person, firm or institution, and the
              Bank shall be entitled to an injunction by any competent Court to
              enjoin and restrain the unauthorized disclosure of such
              information. The Executive agrees that upon termination of his
              employment, with or without cause, he will surrender to the Bank,
              in good condition, any record or records pertaining to the
              operation of the Bank kept by the Executive during the course of
              his employment.

        9.    BINDING ON HEIRS, ETC.
              ---------------------

                    This Agreement shall be binding upon, and shall inure to the
              benefit of the heirs, successors and assigns of the parties.
              However, the Executive acknowledges that this contract is a
              personal service contract and the rights, duties and
              responsibilities of the Executive hereunder including the right to
              receive compensation, may not be delegated or assigned, pledged or
              hypothecated without the express written consent of the Bank.
<PAGE>

        10.   MODIFICATION.
              ------------

                     As to matters specifically determined and covered by this
              Agreement, this Agreement represents the complete and entire
              agreement of the parties. It is understood that the Executive
              shall have the right to be temporarily absent from employment on
              vacations, sick leave, personal emergencies or for other normal
              causes or situations as defined in the Personnel Manual. As to
              matters specifically covered and determined by this contract,
              these matters shall be modified only by subsequent written
              agreement of the parties.

        IN WITNESS WHEREOF, the parties hereto have executed, acknowledged,
sealed and delivered this Agreement the date and year first set forth above.

                                      EXECUTIVE

                                                                     (L.S.)
                                      -------------------------------------

                                      BANK
                                      Georgia Bank & Trust Company of Augusta

                                      By:

                                      As its

        Georgia Bank Financial Corporation joins in this Agreement for the sole
and exclusive purpose of assenting to the provisions of Paragraph 4(c)
pertaining to Executive Long-Term Incentive Plan adopted by Georgia Bank
Financial Corporation and Paragraph 6(d) pertaining to Optional Termination.

                                      Georgia Bank Financial Corporation

                                      By:

                                      As its

<PAGE>

                                  Schedule 1

GEORGIA BANK FINANCIAL CORPORATION
                        Position Description- President/Chief Executive Officer

                                    SUMMARY

        The President/CEO is the Chief Executive Officer and responsible for the
overall leadership and strategic direction of the holding company, Georgia Bank
Financial Corporation.

        The President/CEO is accountable to the Board of Directors for the
conduct of holding company affairs. He shall provide information that accurately
reflects the condition and status of the holding company, and as appropriate,
deliver information that allows the Board of Directors to monitor the operations
of the holding company.

DUTIES

        Assure the continued operation of the holding company, as parent company
to the Bank, in a safe and sound manner consistent with regulatory expectations.

        Consult with the Executive Committee and the Board of Directors to
develop, as necessary, long range strategic planning for the holding company.
<PAGE>

GEORGIA BANK & TRUST COMPANY
                    Position Description- President/Chief Executive Officer

SUMMARY

        The President/CEO is the Chief Executive Officer and responsible for the
overall leadership and strategic direction of the affairs of Georgia Bank &
Trust Company.

        The President/CEO is accountable to the Board of Directors for the
financial performance and regulatory condition of the Bank. He shall provide
information to the Board of Directors that accurately reflects the condition of
the Bank, and as appropriate, deliver information that allows the Board of
Directors to monitor the operations of the Bank.

DUTIES

        Maintain a position of leadership within the Bank and retain an
effective management team to provide for the successful and profitable operation
of the Bank.

        Monitor overall asset quality to minimize the risk of loan losses and
resulting impacts on the profitability of the Bank.

        Assure compliance with all regulatory requirements for the continued
operation of the Bank in a safe and sound manner consistent with regulatory
expectations and the avoidance of regulatory criticism or actions.

        Function as Chairman of the Bank's Operating Committee composed of
senior management.

        Establish and maintain a position of leadership in the civic and
business community that enhances the visibility of the Bank projects the
commitment of the Bank to the welfare and continued growth of the community.

        Consult with the Executive Committee and the Board of Directors to
develop, as necessary long range strategic planning for the Bank.

        Work with various committees of the Board and the Board of Directors to
recommend and implement policy changes necessary to fulfill duties outlined
above.

        Build and maintain relationships with other bankers by participating in
trade association activities.

        The fulfillment of these duties is intended to result in the successful
and profitable operation of the Bank, thereby protecting and increasing the
value of shareholders interests.

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