10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
________________________

FORM 10-K

(Mark One)

[X]       ANNUAL REPORT PURSUANT TO SECTION 13 or 15(D) OF THE SECURITIES EXCHANGE 
             ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

[  ]        Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number 000-28496
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Community Financial Group, Inc. (Exact name of registrant as specified in its charter)

Tennessee	62-1626938
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

401 Church Street, Suite 200
Nashville, Tennessee 37219-2213
(Address of principal executive offices including zip code)

(615) 271-2000
(Registrant's telephone number, including area code)
________________________

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $6.00 per share
(Title of class)
________________________

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x]   No [  ].

________________________

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K  Yes [x]  No [_]. 

________________________

    As of March 22, 2002, the number of outstanding shares of Common Stock was 3,080,709. As of such date, the aggregate market value of the shares of Common Stock held by non-affiliates, based on the closing price of the Common Stock on the Nasdaq National Market System on such date, was approximately $38,907,359.

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Company's Proxy Statement for the 2002 Annual Meeting of Shareholders (Part III, Items 10-13)

PART I

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

Statements and financial discussion and analysis contained in this Annual Report on Form 10-K and documents incorporated herein by reference that are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Certain of the matters discussed in this document and in documents incorporated by reference herein, including matters discussed under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Community Financial Group, Inc. (the "Company" or "CFGI") to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words "expect," "anticipate," "intend," "plan," "believe," "seek," "estimate," and similar expressions are intended to identify such forward-looking statements. The Company's actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation: (i) the effects of future economic conditions on the Company and its customers; (ii) governmental monetary and fiscal policies, as well as legislative and regulatory changes; (iii) the risks of changes in interest rates on the level and composition of deposits, loan demand, and the values of loan collateral, securities and interest rate protection agreements, as well as interest rate risks; (iv) the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in the Company's market area and elsewhere, including institutions operating locally, regionally, nationally and internationally, together with such competitors offering banking products and services by mail, telephone, computer and the Internet; and (v) the failure of assumptions underlying the establishment of the allowance for loan and lease losses and estimations of values of collateral and various financial assets and liabilities. The Company undertakes no obligation to publicly update or otherwise revise any forward-looking statements. All written or oral forward-looking statements attributable to the Company are expressly qualified in their entirety by these cautionary statements.

ITEM 1.     BUSINESS

THE COMPANY

General. The Company was incorporated in Tennessee on December 13, 1995 as a bank holding company pursuant to Section 3(a)(1) of the Bank Holding Company Act of 1956, as amended, for The Bank of Nashville (the "Bank"). On April 30, 1996, the Company executed a plan of exchange with the Bank, whereby it became the holding company of the Bank. The Bank is a state-chartered bank incorporated in 1989 under the laws of the state of Tennessee. The Bank owns 100% of the stock of T BON-Mooreland Joint Venture, LLC ("TBON-Mooreland"), a title agency, and has a majority interest in Machinery Leasing Company of North America, Inc. ("TBON Leasing"). The Company's headquarters are located at 401 Church Street, Suite 200, Nashville, Tennessee 37219, and its telephone number is (615) 271-2000.

The Company's mission is to create long-term shareholder value by providing superior financial services through committed professionals who work in an environment which enables them to achieve their fullest potential while being involved, concerned citizens.

Business Strategy. The Company provides an array of sophisticated banking and financial services, including commercial and consumer banking, real estate construction and mortgages, lease financing, title services, and financial and investment services - through its relationship with Legg Mason Financial Partners, Inc. ("LMFP"), a registered broker-dealer subsidiary of the investment banking firm Legg Mason Wood Walker, Inc.  The Company has four locations, including its Main branch located in downtown Nashville, and suburban branches in Green Hills, Brentwood, and Hendersonville. These locations are complemented by the Company's four "Bank-on-Call" mobile branches which operate throughout the market area with at-your-door banking convenience and a network of eleven automated teller machines ("ATMs") strategically located throughout the Nashville metropolitan area. In addition to the four existing branch locations, the Company has received regulatory approval to establish an additional suburban Nashville branch in the Cool Springs area which is expected to open during the first half of 2002. Additionally, the Company has entered into a contract, subject to regulatory approval, to open a sixth branch, in the Donelson/Hermitage area.

The Company is focused on serving small and middle-sized businesses and individuals in the middle Tennessee market, with a primary service area comprising the Metro Nashville-Davidson County Metropolitan Statistical Area ("MSA"). Nashville, located in the north central part of the State, is the State's largest MSA. Situated midway between the Mississippi delta to the west and the Great Smoky Mountains to the east, Metropolitan Nashville is comprised of Davidson county and seven surrounding counties. Over half of the population of the U.S. is located within a 600-mile radius of the city and the central location has contributed to the emergence of Nashville as an important transportation, tourism and distribution center. The Nashville economy is well diversified with music, entertainment, printing and publishing, healthcare, automobile manufacturing, financial services, real estate development and construction, education, government, tourism, hospitality, manufacturing, warehousing, distribution and various service sectors all being major contributors to the economic vitality of the area.

The Company seeks credits of good quality within its target market exhibiting good historical trends, stable cash flows, and secondary sources of repayment from tangible collateral. The Company extends credit for the purpose of establishing and continuing long-term relationships. Lenders are provided with detailed underwriting policies for all types of credit risks accepted by the Company and must obtain appropriate approvals for credit extensions in excess of assigned individuals' lending limits. The Company also maintains strict documentation requirements and extensive credit quality assurance practices in order to identify credit portfolio weaknesses as early as possible so any exposures that are discovered might be reduced.

The Company outsources certain non-core competencies. Currently, item processing and imaging functions are outsourced to The Intercept Group, Inc. (Nasdaq: "ICPT"). In June 2001, the Company entered upon an agreement with Fiserv Solutions, Inc. to provide core data and item processing as well as imaging services. In the first quarter 2002, the Company decided to cancel the proposed outsourcing agreement with Fiserv and continue its outsourcing arrangement with Intercept. The accounting, financial reporting and the internal audit functions have been outsourced to the Nashville-based certified public accounting firm of Kraft Bros., Esstman, Patton & Harrell, PLLC, an independent member of RSM McGladrey, Inc. The relationship with this certified independent public accounting firm provides the Company with access to both the resources of a large national accounting and consulting firm while at the same time receiving the individualized attention and fee structure provided by a local firm. In March 2001, the Company entered upon an agreement with Professional Bank Services, Inc. ("PBS") to provide loan review services to complement the services provided by the in-house loan review department.

Management is of the opinion that by outsourcing non-core competencies to professional organizations with expertise in their respective field of operations, it can avail itself of professional skills and state-of-the-art systems and technologies that would otherwise not be cost efficient because of economies of scale. The Company believes that these outsourcing agreements have allowed it to remain a customer driven organization, while at the same time continue improving the quality of its management information systems, the timeliness of reports needed by management to run the organization and better control over non-interest expenses.

The Company has a five-part strategy for growth. First, the Company will continue to focus on maintaining high asset quality and to further diversify credit risk by broadening its consumer practice and expanding its product offerings.

Second, the Company will continue to concentrate its efforts on small and medium sized businesses, their owners and employees, and private banking customers for loan and deposit opportunities as it has successfully done since its onset. The commercial banking sector is generally characterized by privately held companies with annual revenues ranging from $5 million to $50 million and borrowings ranging from $50,000 to $7 million, but primarily in the $150,000 to $3 million range. The Company's target market customers seek a relationship with a local independent bank that is sensitive to their needs and understands their business philosophy. These customers desire a long-term relationship with localized decision-making and loan officers who are responsive and experienced and have ready access to the bank's senior management. In implementing this part of its strategy, the Company continues to explore opportunities to solidify existing and build new customer relationships by providing new services and expanding its base of services in the professional and executive market to meet the demands of that sector.

Third, capitalizing on its reputation of superior customer service, the Company intends to enhance its delivery systems by selectively expanding the branch and ATM network in areas that demographically complement its existing and targeted customer base. As other local banks are acquired by out-of-state organizations, the Company believes that the establishment of branches will better meet the needs of customers in many Nashville area neighborhoods who feel disenfranchised by larger regional or national organizations. The Company intends to also complement the traditional brick-and-mortar branch system with alternative delivery systems, including but not limited to financial kiosks, enhanced Internet banking services, ACH originations, voice response services, and a telephone-banking center.

Fourth, the Company intends to continue to use state-of-the-art technology to diversify and enhance its delivery channels, improve products and services and reduce operating costs. To accomplish this, in 2001, the Company retained Brintech, Inc., a technology consulting firm, to assist in conducting a technology assessment plan and help in the identification and selection of a new core processing system capable of delivering a broad array of financial products while at the same time reducing processing costs and response time. To defray the costs associated with the new core processing and telecommunications systems, during the year ended December 31, 2001, the Company pursued a leveraged strategy by acquiring investment securities and funding such investments with increased borrowings from the Federal Home Loan Bank of Cincinnati (the "FHLB"). As a result of this, the investment portfolio increased from $62.8 million to $113.4 million, which resulted in $1.2 million in additional interest income from investment securities.

During the year-ended December 31, 2001, the Company completed two of the four stages related to the core system conversion program by implementing a new general ledger structure and improving its telecommunication system. Management is of the opinion that, over time, the new systems should result in improved efficiency and enhanced profits. The Company also began implementation of the third and fourth stages, which comprise network servers and the new core processing system. The new core processing system is expected to be fully operational during the second quarter of 2002.

Fifth, the Company may pursue selected acquisitions of depository and non-depository financial institutions. The Company intends to conduct thorough studies and reviews of any possible acquisition candidates to assure that they are consistent with the Company's existing goals, both from an economic and strategic perspective. The Company believes market and regulatory factors may present opportunities for the Company to acquire other financial institutions.

At December 31, 2001, the Company reported a total risk-based capital ratio of 11.07%, the Tier 1 risk-based capital ratio of 9.82% and the Tier 1 leverage ratio of 8.55%. These capital ratios exceed the current regulatory minimum requirements of 8.0%, 4.0% and 3.0%, respectively, for a bank holding company to be adequately capitalized. 

During the year 2001, the Company declared dividends of $.068 per share, which resulted in a dividend payout ratio of 66.7%, compared with 75.6% during the year 2000.

THE BANK

The Bank has accomplished its growth internally through the establishment of de-novo branches in areas meeting its target market characteristics and predominantly serving small and mid sized businesses, their owners, and employees. The Bank's community banking approach is characterized by providing an array of product offerings specifically designed to appeal to its customer base enhanced with personalized service. The Company believes that it has developed a reputation as the premier provider of financial products and services to small and medium-sized businesses and consumers located in the communities that it serves. Each of its lines of business is an outgrowth of the Company's expertise in meeting the particular needs of its customers. The Company's principal product offerings are the following:

Commercial Loans. The primary lending focus of the Company is to small and medium-sized businesses in a variety of industries. The Company's commercial lending emphasis includes loans to the real estate industry and building contractors, health and business service companies as well as non-depository financial institutions. The Company makes available to businesses a broad range of short and medium-term commercial lending products, including working capital lines (for financing inventory and accounts receivable), purchases of machinery and business expansion (including acquisitions of real estate and improvements). As of December 31, 2001, the Company's commercial loan portfolio totaled $138.3 million or 40.7% of gross loans.

Commercial Mortgage Loans. The Company makes commercial mortgage loans to finance the purchase of real property, which generally consists of developed real estate. The Company's commercial mortgage loans are secured by first liens on real estate, typically have variable rates and amortize over a 15 to 20 year period, with balloon payments due at the end of three to seven years. As of December 31, 2001, the Company had a commercial real estate mortgage portfolio of $99.0 million, representing 29.1% of gross loans.

Construction Loans. The Company makes loans to finance the construction of residential and non-residential properties. The majority of the Company's residential construction loans are for single-family dwellings which are pre-sold or are under earnest money contract. The Company also originates loans to finance the construction of commercial properties such as multi-family, office, industrial, warehouse and retail centers. As of December 31, 2001, the Company had a real estate construction portfolio of $45.5 million or 13.4% of gross loans, of which $3.8 million and $41.7 million were residential construction loans and commercial construction loans, respectively.

Equipment Leasing. In 1999, the Company acquired the majority of the stock of TBON Leasing to provide equipment lease financing to small and medium-sized businesses. At December 31, 2001, outstanding lease receivables totaled $8.6 million or 2.5% of gross loans. TBON Leasing generally leases machinery under noncancelable, full payment leases which provide, through rentals, for full recovery of the cost of the machinery leased. Such leases are accounted for as direct financing leases whereby the contracts receivable and unearned interest income are recorded when lease contracts become effective.

Consumer Financing. The Company offers a variety of loan and deposit products and services to retail customers. Loans to retail customers include residential mortgage loans, residential construction loans, automobile loans, lines of credit and other personal loans. As of year-end December 31, 2001, the retail or consumer loan portfolio totaled $32.5 million. Retail deposit products and services include checking and money market accounts, time deposits, ATM cards, debit cards and on-line banking. In January 2001, Management established TBON Mortgage as an operating division of the Bank, primarily to originate and sell, on a servicing released basis, residential mortgage loans. For the year ended December 31, 2001, origination volume was $32.4 million, of which $3.5 million was retained in portfolio, $26.5 million was sold to third party investors, and $2.4 million was held-for-sale.

Investment Services. In 1993, the Company established a relationship with LMFP. Through LMFP, licensed professionals provide investment products and services, including mutual funds, annuities, stocks, bonds and other investments to individual consumers and systematic savings plans through a variety of pension plans, including simplified Employee Pension, 401(k) programs and other retirement services. In 2000, this division was renamed The Bank of Nashville Investment Group. At December 31, 2001 and 2000, total assets under management were $315.0 million and $239.9 million, respectively.

The Bank maintains a strong community orientation by, among other things, supporting active participation of all employees in local charitable, civic, and school activities.

The Bank is well capitalized as demonstrated by a total risk-based capital ratio of 10.30%, Tier 1 risk-based capital ratio of 9.04% and Tier 1 leverage ratio of 7.88% at December 31, 2001. These capital ratios exceed the current regulatory minimum requirements of 10.0%, 6.0% and 5.0%, respectively, for a bank to be well capitalized.

COMPETITION.

The banking business is highly competitive and the profitability of the Company depends principally on the Company's ability to compete in the market areas in which its banking operations are located. The Company competes with other commercial banks, savings banks, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking firms, asset-based lenders, non-bank lenders and certain other non-financial entities, including retail stores which may maintain their own credit programs and certain governmental organizations which may offer more favorable financing than the Company. The principal methods of competition centers around such aspects as interest rates on loans and deposits, decision-making relationship management, customer services and other service oriented fee based products. The Company has been able to compete effectively with other financial institutions by emphasizing customer service, technology a nd local office decision-making; by establishing long-term customer relationships and building customer loyalty; and by providing products and services designed to address the specific needs of its customers. The competition from both financial and nonfinancial institutions is expected to continue.

EMPLOYEES.

As of December 31, 2001, the Company had 101 full-time equivalent employees, compared with 98 at year-end 2000, 35 of whom were officers classified as vice president or above. The Company provides medical and hospitalization insurance to its full-time employees. The Company has also provided most of its employees with the benefit of Common Stock ownership through the Company's contributions to a 401(k) plan, in which 84 of its employees were participating at December 31, 2001, an Employee Stock Purchase Plan and a Non-qualified Stock Option Plan. The Company considers its relations with its employees to be excellent.

ECONOMIC CONDITIONS

The Company's economic success is dependent to a significant extent upon general economic conditions in the Nashville metropolitan area. The banking industry in Nashville and Tennessee is affected by general economic conditions such as inflation, recession, unemployment, real estate values and other factors beyond the Company's control. An economic recession over a prolonged period of time in the Nashville area could cause increases in non-performing assets, thereby causing operating losses, impairing liquidity and eroding capital. There can be no assurance that future adverse changes in the local economy would not have a material adverse effect on the Company's consolidated financial condition, results of operations or cash flows.

SUPERVISION AND REGULATION

The federal and state banking laws contain numerous provisions affecting various aspects of the business and operations of the Company and the Bank. The following description and references herein to applicable statutes and regulations, which are not intended to be complete descriptions of these provisions or their effects on the Company or the Bank, are brief summaries and are qualified in their entirety by reference to such statutes and regulations.

The Company

The Company is a bank holding company registered under the Bank Holding Company Act of 1956 (the "BHCA") and is subject to supervision and regulation by the Federal Reserve Bank of Atlanta (the "Federal Reserve"). The BHCA and other Federal laws subject bank holding companies to particular restrictions on the types of activities in which they may engage and to a range of supervisory requirements and activities, including regulatory enforcement actions for violations of laws and regulations. As a bank holding company, the Company's activities and those of its banking and nonbanking subsidiaries have in the past been limited to the business of banking and activities closely related or incidental to banking. Under recent banking legislation, see - "Gramm-Leach-Bliley Act" below, however, member banks will have broadened authority, subject to limitations on investment, to engage in activities that are financial in nature (other than insurance underwriting, merchant or insurance portfolio investment, real estate development and real estate investment) through subsidiaries if the bank is well capitalized, well managed and has at least a satisfactory rating under the Community Reinvestment Act.

Because the Company is a legal entity separate and distinct from its subsidiaries, its right to participate in the distribution of assets of any subsidiary upon the subsidiary's liquidation or reorganization will be subject to the prior claims of the subsidiary's creditors. In the event of a liquidation or other resolution of the Bank, the claims of depositors and other general or subordinated creditors of the Bank are entitled to a priority of payment over the claims of holders of any obligation of the institution to its shareholders, including any depository institution holding company (such as the Company) or any shareholder or creditor thereof.

Safe and Sound Banking Practices. Bank holding companies are not permitted to engage in unsafe and unsound banking practices. For example, unless the company meets certain criteria, the Federal Reserve's Regulation Y requires a holding company to give the Federal Reserve prior notice of any redemption or repurchase of its own equity securities, if the consideration to be paid, together with the consideration paid for any repurchases or redemptions in the preceding 12 months, is equal to 10% or more of the company's consolidated net worth. The Federal Reserve may oppose the transaction if it believes that the transaction would constitute an unsafe or unsound practice or would violate any law or regulation. As another example, a holding company could not impair its subsidiary bank's soundness by causing it to make funds available to nonbanking subsidiaries or their customers if the Federal Reserve believed it not prudent to do so.

The Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") expanded the Federal Reserve's authority to prohibit activities of bank holding companies and their nonbanking subsidiaries which represent unsafe and unsound banking practices or which constitute violations of laws or regulations. Notably, FIRREA increased the amount of civil money penalties which the Federal Reserve can assess for certain activities conducted on a knowing and reckless basis, if those activities caused a substantial loss to a depository institution. The penalties can be as high as $1,000,000 for each day the activity continues. FIRREA also expanded the scope of individuals and entities against which such penalties may be assessed.

Anti-Tying Restrictions. Bank holding companies and their affiliates are prohibited from tying the provision of certain services, such as extensions of credit, to other services offered by a holding company or its affiliates.

Annual Reporting; Examinations. The Company is required to file an annual report with the Federal Reserve and such additional information as the Federal Reserve may require pursuant to the BHCA. The Federal Reserve may examine a bank holding company or any of its subsidiaries and charge the company for the cost of such an examination.

Capital Adequacy Requirements. The Federal Reserve has adopted a system using risk-based capital guidelines to evaluate the capital adequacy of bank holding companies. Under the guidelines, specific categories of assets and certain off-balance sheet assets such as letters of credit are assigned different risk weights, based generally on the perceived credit risk of the asset. These risk weights are multiplied by corresponding asset balances to determine a "risk-weighted" asset base. The guidelines require a minimum total risk-based capital ratio of 8.0% (of which at least 4.0% is required to consist of Tier 1 capital elements).

In addition to the risk-based capital guidelines, the Federal Reserve uses a leverage ratio as an additional tool to evaluate the capital adequacy of bank holding companies. The leverage ratio is a company's Tier 1 capital divided by its total consolidated average assets. Bank holding companies must maintain a minimum leverage ratio of at least 3.0%, although most organizations are expected to maintain leverage ratios that are 100 to 200 basis points above this minimum ratio.

The federal banking agencies' risk-based and leverage ratios are minimum supervisory ratios generally applicable to banking organizations that meet certain specified criteria, assuming that they have the highest regulatory rating. Banking organizations not meeting these criteria are expected to operate with capital positions well above the minimum ratios. The federal bank regulatory agencies may set capital requirements for a particular banking organization that are higher than the minimum ratios when circumstances warrant. Federal Reserve guidelines also provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels, without significant reliance on intangible assets. In addition, the regulations of the Federal Reserve provide that concentration of credit risk and certain risks arising from nontraditional activities, as well as an institution's ability to manage these risks, are important factors to be taken into account by regulatory agencies in assessing an organization's overall capital adequacy. The Federal Reserve recently adopted amendments to its risk-based capital regulations to provide for the consideration of interest rate risk in the agencies' determination of a banking institutions' capital adequacy.

Gramm-Leach-Bliley Act. Traditionally, the activities of bank holding companies have been limited to the business of banking and activities closely related or incidental to banking. On November 12, 1999, however, the Gramm-Leach-Bliley Act was signed into law which, effective March 11, 2000, relaxed the previous limitations permitting bank holding companies to engage in a broader range of financial activities. Specifically, bank holding companies may elect to become financial holding companies which may affiliate with securities firms and insurance companies and engage in other activities that are financial in nature. Among the activities that will be deemed "financial in nature" are, in addition to traditional lending activities, securities underwriting, dealing in or making a market in securities; sponsoring mutual funds and investment companies, insurance underwriting and agency activities, merchant banking activities and activities which the Federal Reserve considers to be closely related to banking. A bank holding company may become a financial holding company under the new statute only if each of its subsidiary banks is well capitalized, is well managed and has at least a satisfactory rating under the Community Reinvestment Act. A bank holding company that falls out of compliance with such requirement may be required to cease engaging in certain activities. Any bank holding company which does not elect to become a financial holding company remains subject to the current restrictions of the Bank Holding Company Act.

Under this new legislation, the Federal Reserve serves as the primary "umbrella" regulator of financial holding companies with supervisory authority over each parent company and limited authority over its subsidiaries. The primary regulator of each subsidiary of a financial holding company depends on the type of activity conducted by the subsidiary. For example, securities regulators regulate broker-dealer subsidiaries and insurance authorities regulate insurance subsidiaries. Implementing regulations under the Gramm-Leach-Bliley Act have not yet been finalized and the Company cannot predict the full sweep of the new legislation and has not yet determined whether it will ever elect to become a financial holding company.

Enforcement Powers of the Federal Banking Agencies. The Federal Reserve and the Federal Deposit Insurance Corporation (the "FDIC") have broad enforcement powers, including the power to terminate deposit insurance, impose substantial fines and other civil and criminal penalties, and appoint a conservator or receiver. Failure to comply with applicable laws, regulations and supervisory agreements could subject the Company or the Bank, as well as officers, directors and other institution-affiliated parties of these organizations, to administrative sanctions and potentially substantial civil money penalties. The appropriate federal banking agency may appoint the FDIC as conservator or receiver for a banking institution (or the FDIC may appoint itself, under certain circumstances) if any one or more of a number of circumstances exist, including, without limitation, the fact that the banking institution is undercapitalized and has no reasonable prospect of becoming adequately capitalized; fails to become adequately capitalized when require d to do so; fails to submit a timely and acceptable capital restoration plan; or materially fails to implement an accepted capital restoration plan.

Imposition of Liability for Undercapitalized Subsidiaries. The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") requires bank regulators to take "prompt corrective action" to resolve problems associated with insured depository institutions whose capital declines below certain levels. In the event an institution becomes "undercapitalized," it must submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators unless each company having control of the undercapitalized institution guarantees the subsidiary's compliance with the capital restoration plan. Under FDICIA, the aggregate liability of all companies controlling an undercapitalized bank is limited to the lesser of 5% of the institution's assets at the time it became undercapitalized or the amount necessary to cause the institution to be "adequately capitalized." The guarantee and limit on liability expire after the regulators notify the institution that it has remained adequately capitalized for each of four consecutive calendar quarters. FDICIA grants greater powers to the bank regulators in situations where an institution becomes "significantly" or "critically" undercapitalized or fails to submit a capital restoration plan. For example, a bank holding company controlling such an institution can be required to obtain prior Federal Reserve approval of proposed dividends, or might be required to consent to a consolidation or to divest the troubled institution or other affiliates. At December 31, 2001, the Bank met the requirements of a "well-capitalized" institution and, therefore, these requirements presently do not apply to the Company.

Acquisitions by Bank Holding Companies. The BHCA requires every bank holding company to obtain the prior approval of the Federal Reserve before it may acquire all or substantially all of the assets of any bank, or direct or indirect ownership or control of more than 5% of any class of voting shares of any bank.

The Federal Reserve will allow the acquisition by a bank holding company of an interest in any bank located in another state only if the laws of the state in which the target bank is located expressly authorize such acquisition. Tennessee law permits, in certain circumstances, out-of-state bank holding companies to acquire banks and bank holding companies in Tennessee.

Expanding Enforcement Authority. One of the major effects of FDICIA was the increased ability of banking regulators to monitor the activities of banks and their holding companies. In addition, the Federal Reserve and FDIC have extensive authority to police unsafe or unsound practices and violations of applicable laws and regulations by depository institutions and their holding companies. For example, the FDIC may terminate the deposit insurance of any institution which it determines has engaged in an unsafe or unsound practice. The agencies can also assess civil money penalties, issue cease and desist or removal orders, seek injunctions and publicly disclose such actions.

Effect of Economic Environment. The policies of regulatory authorities, including the monetary policy of the Federal Reserve, have a significant effect on the operating results of bank holding companies and their subsidiaries. Among the means available to the Federal Reserve to affect the money supply are open market operations in U.S. Government securities, changes in the discount rate on member bank borrowings and changes in reserve requirements against member bank deposits. These means are used in varying combinations to influence overall growth and distribution of bank loans, investments and deposits and their use may affect interest rates charged on loans or paid for deposits. Federal Reserve monetary policies have materially affected the operating results of commercial banks in the past and are expected to continue to do so in the future. The nature of future monetary policies and the effect of such policies on the business and earnings of the Company and its subsidiaries cannot be predicted.

The Bank

As a state bank, the Bank is principally supervised, examined, and regulated by the Tennessee Department of Financial Institutions ("TDFI"). The Bank is a member of the Federal Reserve System and as such, its primary federal regulator is the Board of Governors of the Federal Reserve System through the Federal Reserve Bank of Atlanta. The TDFI and the Federal Reserve regularly examine such areas as capital adequacy, reserves, loan portfolio, investments and management practices. The Bank must also furnish quarterly and annual reports to the TDFI and the Federal Reserve, and the TDFI and the Federal Reserve may exercise cease and desist and other enforcement powers over the Bank if its actions represent unsafe or unsound practices or violations of law. Since the deposits of the Bank are insured by the Bank Insurance Fund ("BIF") of the FDIC, the Bank is also subject to backup regulation and supervision by the FDIC.

Restrictions on Transactions with Affiliates and Insiders. The Bank is subject to certain federal statutes limiting transactions with the Company and its nonbanking affiliates. Section 23A of the Federal Reserve Act affects loans or other credit extensions to, asset purchases from and investments in affiliates of the Bank. Such transactions with the Company or any of its nonbanking subsidiaries are limited in amount to ten percent of the Bank's capital and surplus and, with respect to the Company and all of its nonbanking subsidiaries together, to an aggregate of twenty percent of the Bank's capital and surplus. Furthermore, such loans and extensions of credit, as well as certain other transactions, are required to be secured in specified amounts.

In addition, Section 23B of the Federal Reserve Act requires that certain transactions between the Bank, including its subsidiaries and its affiliates must be on terms substantially the same, or at least as favorable to the Bank or its subsidiaries, as those prevailing at the time for comparable transactions with or involving other nonaffiliated persons. In the absence of such comparable transactions, any transaction between the Bank and its affiliates must be on terms and under circumstances, including credit standards, that in good faith would be offered to or would apply to nonaffiliated persons. The Bank is also subject to certain prohibitions against any advertising that indicates the Bank is responsible for the obligations of its affiliates.

Loans to One Borrower. Tennessee law generally prohibits loans in excess of 15% of the Bank's capital, surplus and undivided profits. With approval of the Bank's Board of Directors, the limit may be increased to 25% of the Bank's capital.

The restrictions on loans to directors, executive officers, principal shareholders and their related interests (collectively referred to herein as "insiders") contained in the Federal Reserve Act and Regulation O now apply to all insured institutions and their subsidiaries and holding companies. These restrictions include limits on loans to one borrower and conditions that must be met before such loans can be made. There is also an aggregate limitation on all loans to insiders and their related interests. These loans cannot exceed the institution's total unimpaired capital and surplus and the Federal Reserve may determine that a lesser amount is appropriate. Insiders are subject to enforcement actions for knowingly accepting loans in violation of applicable restrictions. 

Interest Rate Limits. Under the laws of the State of Tennessee, the maximum annual interest rate that may be charged on most loans made by the Bank is based on the "formula rate" established from time to time by the Commissioner of Financial Institutions. The formula rate is an annual rate of interest four percentage points above the average prime loan rate as published by the Federal Reserve, not to exceed 24% per annum. The Bank may charge interest on certain consumer loans at the rate allowed to Tennessee Industrial Loan and Thrift Companies, which is generally up to 24% per annum. State usury laws (but not late charge limitations) have been preempted by federal law for loans secured by a first lien on residential real property.

Examinations. The Federal Reserve periodically examines and evaluates member banks. Based upon such an evaluation, the Federal Reserve may revalue the assets of a member bank and require that it establish specific reserves to compensate for the difference between the Federal Reserve-determined value and the book value of such assets. Onsite examinations are to be conducted every 12 months, except that certain well-capitalized banks may be examined every 18 months. FDICIA authorizes the Federal Reserve to assess the institution for its costs of conducting the examinations.

Prompt Corrective Action. In addition to the capital adequacy guidelines, FDICIA requires the Federal Reserve to take "prompt corrective action" with respect to any member bank which does not meet specified minimum capital requirements. The applicable regulations establish five capital levels, ranging from "well capitalized" to "critically undercapitalized," which authorize and in certain cases require, the Federal Reserve to take certain specified supervisory action. Under regulations implemented under FDICIA, a member bank is considered well capitalized if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater and a leverage ratio of 5.0% or greater and it is not subject to an order, written agreement, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure. A member bank is considered adequately capitalized if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of at least 4.0% and a leverage capital ratio of 4.0% or greater (or a leverage ratio of 3.0% or greater if the institution is rated composite 1 in its most recent report of examination, subject to appropriate federal banking agency guidelines) and the institution does not meet the definition of an undercapitalized institution. A member bank is considered undercapitalized if it has a total risk-based capital ratio that is less than 8.0%, a Tier 1 risk-based capital ratio that is less than 4.0%, or a leverage ratio that is less than 4.0% (or a leverage ratio that is less than 3.0% if the institution is rated composite 1 in its most recent report of examination, subject to appropriate federal banking agency guidelines). A significantly undercapitalized institution is one which has a total risk-based capital ratio that is less than 6.0%, a Tier 1 risk-based capital ratio that is less than 3.0%, or a leverage ratio that is less than 3.0%. A critically undercapitalized institution is one which has a ratio of tangible equity to total assets that is equal to or less than 2.0%. Under certain circumstances, a well capitalized, adequately capitalized or undercapitalized institution may be treated as if the institution were in the next lower capital category.

With certain exceptions, member banks will be prohibited from making capital distributions or paying management fees to a holding company if the payment of such distributions or fees will cause them to become undercapitalized. Furthermore, undercapitalized member banks will be required to file capital restoration plans with the Federal Reserve. Such a plan will not be accepted unless, among other things, the banking institution's holding company guarantees the plan up to a certain specified amount. Any such guarantee from a depository institution's holding company is entitled to a priority of payment in bankruptcy. Undercapitalized member banks also will be subject to restrictions on growth, acquisitions, branching and engaging in new lines of business unless they have an approved capital plan that permits otherwise. The Federal Reserve also may, among other things, require an undercapitalized member bank to issue shares or obligations, which could be voting stock, to recapitalize the institution or, under certain circumstances, to divest itself of any subsidiary.

The Federal Reserve is authorized by FDICIA to take various enforcement actions against any significantly undercapitalized member bank and any member bank that fails to submit an acceptable capital restoration plan or fails to implement a plan accepted by the Federal Reserve. These powers include, among other things, requiring the institution to be recapitalized, prohibiting asset growth, restricting interest rates paid, requiring primary approval of capital distributions by any bank holding company which controls the institution, requiring divestiture by the institution of its subsidiaries or by the holding company of the institution itself, requiring new election of directors and requiring the dismissal of directors and officers.

Significantly and critically undercapitalized member banks may be subject to more extensive control and supervision. The Federal Reserve may prohibit any such institution from, among other things, entering into any material transaction not in the ordinary course of business, amending its charter or bylaws, or engaging in certain transactions with affiliates. In addition, critically undercapitalized institutions generally will be prohibited from making payments of principal or interest on outstanding subordinated debt. Within 90 days of a member bank becoming critically undercapitalized, the Federal Reserve must appoint a receiver or conservator unless certain findings are made with respect to the prospect for the institution's continued viability.

As of December 31, 2001, the Bank exceeded the capital requirements of a "well-capitalized" institution.

Dividends Restrictions. Federal and Tennessee laws limit the payment of dividends by banks. Under Tennessee law a state bank shall have such capital structure as the Commissioner of Financial Institutions (the "Commissioner") shall deem adequate. A state bank may be required to increase its capital structure to the point deemed adequate by the Commissioner before receiving approval for an application for a branch office, charter amendment, change of location or trust powers. The payment of dividends by any bank is dependent upon its earnings and financial condition and also may be limited by federal and state regulatory agency protections against unsafe or unsound banking practices. The payment of dividends could, depending upon the financial condition of the bank, constitute an unsafe or unsound banking practice. The FDIC prohibits a state bank, the deposits of which are insured by the FDIC, from paying dividends if it is in default in the payment of any assessment due the FDIC. Subject to the foregoing requirements, the board of directors of a state bank may declare dividends, provided dividends declared in any calendar year may not exceed the total of the bank's net income for that year combined with its retained net income of the preceding two years without the prior approval of the Commissioner.

The Federal Reserve also imposes dividend restrictions on the Bank as a state member bank of the Federal Reserve. The Bank may not declare or pay a dividend if that dividend would exceed the Bank's undivided profits, unless the Bank has received the prior approval of the Federal Reserve and at least two-thirds of the shareholders of each class of stock outstanding. Additionally, the Bank may not permit any portion of its "permanent capital" to be withdrawn, unless the withdrawal has been approved by the Federal Reserve and at least two-thirds of the shareholders of each class of stock outstanding. "Permanent capital" is defined as the total of a bank's perpetual preferred stock and related surplus, common stock and surplus and minority interest in consolidated subsidiaries. Finally, if the Bank has a capital surplus in excess of that required by law, that excess may be transferred to the Bank's undivided profits account and be available for the payment of dividends, so long as (i) the amount came from the earnings of prior periods, excluding earnings transferred as a result of stock dividends and (ii) the Bank's Board and the Federal Reserve approved the transfer.

Deposit Insurance. The deposits of the Bank are insured by the FDIC through the BIF to the extent provided by law. Under the FDIC's risk-based insurance system, BIF-insured institutions are currently assessed premiums of between zero and twenty-seven cents per $100 of eligible deposits, depending upon the institution's capital position and other supervisory factors. Congress recently enacted legislation that, among other things, provides for assessments against BIF-insured institutions that will be used to pay certain Financing Corporation ("FICO") obligations. In addition to any BIF insurance assessments, BIF-insured banks are expected to make payments for the FICO obligations as assessed by the FDIC. For the first quarter of 2002, the FICO assessment is 0.01960 per $100 of eligible deposits. Insured banks have recently not been required to pay BIF Insurance premiums. However, the BIF Insurance fund is reported to be nearing the pre-established limit at which may require banks to again be assessed for BIF insurance premiums in the near future.

Conservator and Receivership Powers. FDICIA significantly expanded the authority of the federal banking regulators to place depository institutions into conservatorship or receivership to include, among other things, appointment of the FDIC as conservator or receiver of an undercapitalized institution under certain circumstances. In the event the Bank is placed into conservatorship or receivership, the FDIC is required, subject to certain exceptions, to choose the method for resolving the institution that is least costly to the BIF.

Brokered Deposit Restrictions. FIRREA and FDICIA generally limit institutions which are not well capitalized from accepting brokered deposits. In general, undercapitalized institutions may not solicit, accept or renew brokered deposits. Adequately capitalized institutions may not solicit, accept or renew brokered deposits unless they obtain a waiver from the FDIC. Even in that event, they may not pay an effective yield of more than 75 basis points over the effective yield paid on deposits of comparable size and maturity in the institution's normal market area for deposits accepted from within that area, or the national rate paid on deposits of comparable size and maturity for deposits accepted from outside the institution's normal market area.

Consumer Laws and Regulations. In addition to the laws and regulations discussed herein, the Bank is also subject to certain consumer laws and regulations that are designed to protect consumers in transactions with banks. While the list set forth herein is not exhaustive, these laws and regulations include the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Community Reinvestment Act, the Equal Credit Opportunity Act and the Fair Housing Act, among others. These laws and regulations mandate certain disclosure requirements and regulate the manner in which financial institutions must deal with customers when taking deposits or making loans to such customers. The Bank must comply with the applicable provisions of these consumer protection laws and regulations as part of their ongoing customer relations.

USA Patriot Act. On October 26, 2001, President George W. Bush signed into law the USA Patriot Act ("Patriot Act"). Title III of the Patriot Act concerns money-laundering provisions that may affect many community banks. These provisions include: (i) the Secretary of the Treasury is authorized to impose special measures, such as record keeping or reporting, on domestic financial institutions that are a primary concern; (ii) financial institutions with private or correspondent accounts with non-U.S. citizens must establish policies and procedures to detect money laundering through those accounts; (iii) financial institutions  are barred from maintaining correspondent accounts for foreign shell banks (that is, a bank that does not have a physical presence in any country); (iv) the Secretary of the Treasury is required to prescribe regulations to further encourage cooperation among financial institutions, regulators, and law enforcement agencies and officials to share information about terrorist acts and money laundering activities; (v) the Secretary of the Treasury is required to issue regulations to establish minimum procedures for financial institutions to use in verifying customer identity during the account-opening process; (vi) depository institutions are permitted to provide information to other institutions concerning the possible involvement in potentially unlawful activity by a current or former employee; (vii) the Secretary of the Treasury is required to establish a secure website to receive suspicious activity reports and currency transaction reports, and to provide institutions with alerts and other information regarding suspicious activity that warrant immediate attention; and (viii) the federal bank regulators are required to consider the anti-money laundering record of each depository institution in evaluating applications under the Bank Merger Act.

ITEM 2.      PROPERTIES

FACILITIES

The Company is headquartered in the downtown central business district of Nashville. The Company occupies space in the second, third and twenty-third floors of the L & C Tower, located at 401 Church Street, a location which also serves as the Main branch. During 2000, the Company expanded its presence in downtown Nashville through the addition of 11,123 square feet of contiguous space in the building adjacent to L&C Tower which formerly housed the Nashville Area Chamber of Commerce. This space serves as the Company's Headquarters and general office space. The Company has four locations including its Main branch and suburban Nashville branch locations in Green Hills, Brentwood and Hendersonville. These locations are complemented by the Company's four "Bank on Call" mobile branches which operate throughout the market area with at-your-door banking convenience and a network of eleven ATMs strategically located throughout the Nashville metropolitan area. In addition to the four existing branch locations, the Company has received regulatory approval to establish an additional suburban branch office in the Cool Springs area which is expected to open during the second half of 2002. Additionally, the Company has entered in to a contract, subject to regulatory approval, to open a sixth branch, in the Donelson/Hermitage area. Management plans to continue to seek attractive branch locations to further expand its delivery systems and increase its market share. 

The following table sets forth specific information on each such location.

Location	Owned/Leased	Term Years	Sq. Ft.	Deposits at  December 31, 200	Address	Date Opened
				(Dollars in Thousands)
Main/Corporate	Leased	10	32,679	$  218,585	401 Church Street	November 1989
Green Hills	Leased	5	4,670	65,184	3770 Hillsboro Road	January 1997
Brentwood	Leased	20	4,000	34,984	5105 Maryland Way	September 1998
Hendersonville	Owned	NA	3,800	31,195	100 Maple Drive N.	May 1999

ITEM 3.      LEGAL PROCEEDINGS

Neither the Company nor the Bank is currently a party to any material legal proceedings.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

PART II

ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's Common Stock began trading on the Nasdaq National Market System ("Nasdaq NMS") on June 4, 1998 and is quoted in such Market under the symbol "CFGI." Prior to being listed on the Nasdaq NMS, the Company stock was traded on the Nasdaq Small Cap Market. Prior to the formation of the Company as the holding company for the Bank, commencing on December 8, 1989, the Bank's common stock traded on the Nasdaq Over-the-Counter System under the symbol "TBON."

As of the date of this Form 10-K, there were 3,080,709 shares outstanding and 723 shareholders of record. The number of beneficial owners is unknown to the Company at this time. The high and low closing prices were as follows:

	2001		2000
	High	Low	High	Low
Fourth quarter	$ 15.22	$ 14.07	$ 12.69	$ 10.13
Third quarter	14.93	13.69	13.00	11.63
Second quarter	14.03	13.44	13.75	12.88
First quarter	13.79	12.67	14.13	11.63

CAPITAL STOCK

The authorized capital stock of the Company consists of 50,000,000 shares of common stock (the "Common Stock"), $6.00 per share par value, of which 3,077,071 shares were issued and outstanding as of December 31, 2001. An additional 442,187 shares of Common Stock were issuable upon exercise of the Company's outstanding stock options issued to the Company's board of directors and staff.

In January 1998, the Company adopted a shareholder rights plan authorizing the distribution of a dividend of one common share purchase right for each outstanding share of Common Stock. The rights are exercisable in the event of the acquisition by a third party of 15% or more of the Common Stock or if such third party announces a tender offer, the consummation of which would result in an ownership of 15% or more of the Common Stock. The rights are designed to ensure that all shareholders receive fair and equal treatment in the event of a proposed takeover of the Company and to safeguard against partial tender offers, squeeze-outs, open market accumulations and other abusive tactics to gain control of the Company without paying all shareholders an appropriate control premium.

In March 1999, to facilitate the management of its capital position, the Company announced a stock repurchase program. The initial plan called for the repurchase of 400,000 shares (the "March 23, 1999 Plan") with an original expiration date of December 31, 1999. On January 26, 2000, the Company extended the expiration date of the March 23, 1999 Plan until March 31, 2000 to allow for the completion of the plan. On March 15, 2000, the Company announced that it had completed the March 23, 1999 Plan and announced a second stock repurchase plan for the acquisition of an additional 500,000 shares of common stock with an expiration date of December 31, 2000 (the "March 15, 2000 Plan"). On December 20, 2000, the Company announced the extension of the March 15, 2000 Plan to December 31, 2001 to provide for the acquisition of 16,000 shares remaining to be repurchased under the March 15, 2000 Plan and an additional 400,000 shares, for a total of up to 416,000 shares of common stock. At December 31, 2001, the Company had repurchased 845,904 shares under the March 15, 2000 Plan and 1,245,904 shares since commencing it s stock repurchase program in March 1999.

DIVIDENDS

Holders of Common Stock are entitled to receive dividends if declared by the Company's Board of Directors out of funds legally available. The Company has historically paid dividends on its Common Stock. During the years ended December 31, 2001 and 2000, the Company paid $2.2 million or $0.68 per share in dividends, respectively. The Company anticipates continuing to pay quarterly dividends of $0.17. There is no assurance, however, that the Company will continue to pay dividends in the future.

The principal sources of cash to the Company are derived from short-term investments resulting from its capital position and operating revenues. Furthermore, the Company may receive dividends paid by the Bank with respect to the Bank's capital stock. There are, however, certain restrictions on the payment of such dividends imposed by federal banking laws, regulations and authorities.

Dividends Restrictions. Federal and Tennessee laws limit the payment of dividends by banks. Under Tennessee law a state bank shall have such capital structure as the Commissioner of Financial Institutions (the "Commissioner") shall deem adequate. A state bank may be required to increase its capital structure to the point deemed adequate by the Commissioner before receiving approval for an application for a branch office, charter amendment, change of location or trust powers. The payment of dividends by any bank is dependent upon its earnings and financial condition and also may be limited by federal and state regulatory agency protections against unsafe or unsound banking practices. The payment of dividends could, depending upon the financial condition of the bank, constitute an unsafe or unsound banking practice. The FDIC prohibits a state bank, the deposits of which are insured by the FDIC, from paying dividends if it is in default in the payment of any assessment due the FDIC. Subject to the foregoing requirements, the board of directors of a state bank may declare dividends, provided dividends declared in any calendar year may not exceed the total of the bank's net income for that year combined with its retained net income of the preceding two years without the prior approval of the Commissioner.

The Federal Reserve also imposes dividend restrictions on the Bank as a state member bank of the Federal Reserve. The Bank may not declare or pay a dividend if that dividend would exceed the Bank's undivided profits, unless the Bank has received the prior approval of the Federal Reserve and at least two-thirds of the shareholders of each class of stock outstanding. Additionally, the Bank may not permit any portion of its "permanent capital" to be withdrawn, unless the withdrawal has been approved by the Federal Reserve and at least two-thirds of the shareholders of each class of stock outstanding. "Permanent capital" is defined as the total of a bank's perpetual preferred stock and related surplus, common stock and surplus and minority interest in consolidated subsidiaries. Finally, if the Bank has a capital surplus in excess of that required by law, that excess may be transferred to the Bank's undivided profits account and be available for the payment of dividends, so long as (i) the amount came from the earnings of prior periods, excluding earnings transferred as a result of stock dividends and (ii) the Bank's Board and the Federal Reserve approved the transfer.

As of December 31, 2001, an aggregate of approximately $14.1 million was available for payment of dividends by the Bank to the Company under applicable restrictions, without regulatory approval. Regulatory authorities could impose administratively stricter limitations on the ability of the Bank to pay dividends to the Company if such limits were deemed appropriate to preserve certain capital adequacy requirements. In the future, the declaration and payment of dividends on the Common Stock will depend upon the earnings and financial condition of the Company, liquidity and capital requirements, the general economic and regulatory climate, the Company's ability to service any equity or debt obligations senior to the Common Stock and other factors deemed relevant by the Company's Board of Directors. - See "Business - Supervision and Regulation."

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

The following Selected Consolidated Financial Data should be read in conjunction with the consolidated financial statements and the notes thereto, appearing elsewhere in this Annual Report on Form 10-K and the information contained in "Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations." The Consolidated Historical Financial Data as of and for each of the five years ended December 31, 2001 are derived from the Company's Consolidated Financial Statements which have been audited by independent accountants. Certain prior year amounts have been reclassified to conform to the 2001 presentation.

	Years Ended December 31,
	2001		2000		1999		1998		1997
	(Dollars in thousands, except per share data)
Income Statement Data:
Interest income	$    33,510		$    28,281		$    20,975		$    16,591		$    15,260
Interest expense	16,856		13,925		9,053		8,035		7,956
Net interest income	16,654		14,356		11,922		8,556		7,304
Provision for loan and lease losses	2,216		1,256		106		128		100
Noninterest income	4,301		2,785		2,675		1,805		1,421
Noninterest expense	13,226		10,542		8,845		6,071		5,236
Income before provision for income taxes	5,513		5,343		5,646		4,162		3,389
Provision for income taxes	2,187		2,086		2,145		1,581		1,331
Net income	$    3,326		$    3,257		$    3,501		$    2,581		$    2,058
	========		========		========		========		========
Per Share Data:
Net income, Basic	$      1.02		$      0.90		$      0.86		$      1.08		$      0.93
Net income, Diluted	1.02		0.90		0.85		0.78		0.89
Book value (1)	12.47		12.32		12.31		12.06		10.74
Cash dividends	0.68		0.68		0.46		0.24		0.20
Weighted average shares outstanding, Basic	3,251		3,619		4,068		2,394		2,205
Weighted average shares outstanding, Diluted	3,268		3,635		4,129		3,321		2,324
Balance Sheet Data:
Investment securities	$ 113,356		$  62,775		$  74,877		$  71,662		$  66,059
Gross loans (2)	339,937		270,568		205,511		152,675		122,749
Allowance for loan and lease losses	(5,098)		(4,622)		(4,062)		(3,646)		(3,128)
Net loans	334,839		265,946		201,449		149,029		119,621
Total assets	482,310		354,620		308,106		238,185		204,887
Total deposits	349,948		273,036		229,141		162,553		164,099
Total shareholders' equity	38,625		42,281		47,315		51,171		24,052
Average Balance Sheet Data:
Investment securities	$ 102,135		$  74,124		$  68,421		$  59,117		$  61,587
Gross loans (2)	308,303		235,432		176,027		133,660		114,835
Allowance for loan and lease losses	(4,974)		(4,447)		(3,945)		(3,389)		(3,006)
Net loans	303,329		230,985		172,082		130,271		111,829
Total assets	436,795		324,738		269,137		209,501		190,766
Total deposits	319,047		252,523		199,089		167,294		152,640
Total shareholders' equity	40,724		43,205		49,200		27,313		22,846
Performance Ratios:
Return on average assets	0.76	%	1.00	%	1.30	%	1.23	%	1.08	%
Return on average equity (1)	8.20		7.39		7.09		9.56		9.05
Net interest margin	4.01		4.62		4.67		4.28		3.96
Efficiency ratio (3)	64.52		61.50		60.59		58.50		59.95
Performance Ratios:
Nonperforming assets to total assets	0.82	%	0.38	%	0.09	%	0.19	%	0.60	%
Net loan charge-offs (recoveries) to average loans	0.56		0.30		(0.12)		(0.29)		(0.13)
Allowance for loan and lease losses to total loans	1.50		1.71		1.98		2.39		2.55
Allowance for loan and lease losses to nonperforming     loans	161.94		595.62		1,395.88		893.63		285.92
Capital Ratios:
Leverage ratio	8.55	%	12.14	%	16.13	%	23.04	%	11.84	%
Tier 1 risk-based capital ratio	9.82		14.17		21.10		30.30		17.50
Total risk-based capital ratio	11.07		15.43		22.40		31.60		18.80
______________________

(1)    Exclusive of accumulated other comprehensive income (loss), net of taxes.
(2)    Net of unearned discounts and loan fees.
(3)    Calculated by dividing total non-interest expenses by net interest income plus non-interest income, excluding net securities gains and losses.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Management's Discussion and Analysis of Financial Condition and Results of Operations of the Company analyzes the major elements of the Company's balance sheets and statements of operations. This section should be read in conjunction with the Company's Consolidated Financial Statements and accompanying notes and other detailed information appearing elsewhere in this document.

CRITICAL ACCOUNTING POLICIES

Management has determined that the accounting for the allowance for loan and lease losses is a critical accounting policy with respect to the determination of financial condition and reporting of results of operations.

Management determines the required allowances by classifying loans according to credit quality and collateral security and applying historical loss percentages to each category. Additionally, as necessary, management determines specific allowances related to impaired loans based on the present value of expected future cash flows discounted at the loan's effective interest rate, or the fair value of the collateral if the loan is collateral dependent. A key component in the accounting policy is management's ability to timely identify changes in credit quality, which may impact the Company's financial results.

Management recognizes that in making loans, credit losses will be experienced and that the risk of loss will vary with, among other things, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a secured loan, the quality of the security for the loan. Management's policy is to maintain an appropriate allowance for estimated loan and lease losses on the portfolio as a whole. The allowances are based on estimates of the historical loan loss experience, evaluation of economic conditions and regular periodic reviews of the Bank's loan portfolio by both internal personnel and a third party review firm. The Bank's loan portfolio consists mostly of commercial loans to companies in various industries, whose financial performance may be impacted differently by the local, regional or national economies and stage of the economic cycle. Management believes that the effects of any reasonably likely changes in the economy would be limited somewhat due to the diversification of the loan portfolio and the Bank's normal collateral requirements for such loans. While management uses available information to recognize losses on loans, future adjustments in the allowance may be necessary based on changes in economic conditions which could have a significant detrimental impact to the Company's financial condition and results of operation. See "--Allowance for Loan and Lease Losses."

For the Years Ended December 31, 2001, 2000 and 1999

OVERVIEW

From December 31, 1998 to December 31, 2001, the Company experienced consistent growth as assets increased from $238.2 million at December 31, 1998 to $482.3 million at December 31, 2001, an increase of $244.1 million or 102.5%. The increase was driven by growth in the loan portfolio primarily due to the expansion of the branch network and greater number of product lines and services available to customers. The Company opened two branches during this period, expanding into the Nashville suburbs of Brentwood in 1998, and Hendersonville in 1999. In each of these endeavors, the Company has met or exceeded growth and profitability expectations. Loans accounted for the majority of the Company's asset growth, increasing from $152.7 million to $339.9 million over the three-year period ending December 31, 2001. Supporting this substantial expansion was an increase in deposits, which rose from $162.6 million to $349.9 million, representing a 115.2% increase during the period. Shareholders' equity decreased to $38.6 million, a decrease of $12.6 million or 24.6% at December 31, 2001, compared with $51.2 million as of December 31, 1998, as the result of the stock repurchase program and increased dividend payments.

Net income available to shareholders was $3.3 million, $3.3 million and $3.5 million for the years ended December 31, 2001, 2000 and 1999, respectively, and diluted net income per common share was $1.02, $0.90, and $0.85, for these same periods. Earnings per share growth from 1999 to 2001 resulted primarily from the stock repurchase program. The Company posted returns on average assets of 0.76%, 1.00%, and 1.30% and returns on average equity of 8.20%, 7.39%, and 7.09% for the years ended December 31, 2001, 2000 and 1999, respectively. 

RESULTS OF OPERATIONS

Net Interest Income

Net interest income represents the amount by which interest income on interest-earning assets, including securities and loans, exceeds interest expense incurred on interest-bearing liabilities, including deposits and other borrowed funds. Net interest income is the principal source of the Company's earnings. Interest rate fluctuations, as well as changes in the amount and type of earning assets and liabilities, combine to affect net interest income.

2001 versus 2000. Interest income increased to $33.5 million in 2001 from $28.3 million in 2000. The increase was driven by growth in the average loan portfolio of $72.9 million or 31.0% while the Company experienced a decrease in the yield on average loans to 8.70% in 2001 from 9.78% in 2000 resulting from the decreasing rate environment prevalent in 2001. The average investment securities portfolio increased by $24.3 million or 32.7%, while its yield declined 50 basis points from 6.93% in 2000 to 6.43% in 2001 also due to decreases in interest rates. Interest expense increased by $2.9 million to $16.9 million in 2001 compared with $13.9 million in 2000. The increase resulted from a $42.5 million growth in average time deposits coupled with a $52.0 million increase in average FHLB borrowings in 2001.

Net interest income totaled $16.7 million in 2001 compared with $14.4 million in 2000, an increase of $2.3 million or 16.0%. The increase resulted primarily from a $3.8 million or 16.5% increase in interest income on loans primarily due to growth in loans. Interest expense increased by $2.9 million or 21.0% due to a $57.7 million increase in the level of interest-bearing deposits. The increase in time deposits, coupled with the origination of loans during a period of declining rates,  resulted in a decline in net interest margins which decreased from 4.62% to 4.01% and in net interest spread which decreased from 3.61% to 3.34%, for 2000 and 2001, respectively.

2000 versus 1999. Net interest income totaled $14.4 million in 2000, compared with $11.9 million in 1999, an increase of $2.5 million or 21.0%. The increase resulted primarily from a $7.0 million or 44.0% increase in interest income on loans primarily due to growth in commercial loans. Interest expense increased $4.9 million while interest income increased $7.3 million. Net interest margins were 4.62% and 4.67% and net interest spreads were 3.61% and 3.62% for 2000 and 1999, respectively. Interest income increased to $28.3 million in 2000 from $21.0 million in 1999. The increase was driven by growth in the average loan portfolio of $59.4 million or 33.8% while the Company experienced an increase in the yield on average loans to 9.78% in 2000 from 9.09% in 1999. The average securities portfolio increased by $5.7 million or 8.3%, while its yield rose 51 basis points from 6.40% in 1999 to 6.91% in 2000.

The following table presents the total dollar amount of interest income from average interest-earning assets and the resultant yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates. Tax-equivalent adjustments were made and all average balances are daily average balances. Non-accruing loans are included in the tables as loans carrying a zero yield.

	Years Ended December 31,
	2001			2000			1999
	Average Outstanding Balance	Interest Earned/ Paid	Average  Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Average  Yield/ Rate	Average Outstanding Balance	Interest Earned/ Paid	Average  Yield/ Rate
	(Dollars in Thousands)
	ASSETS
Interest-earning assets:
Total loans	$ 308,303	$ 26,821	8.70%	$ 235,432	$ 23,035	9.78%	$ 176,027	$ 15,995	9.09%
Taxable securities	96,021	6,148	6.40%	71,883	4,960	6.90%	67,122	4,287	6.39%
Tax-exempt securities(1)	2,375	177	7.46%	2,241	176	7.86%	1,299	132	10.15%
Federal funds sold and other temporary    investments	10,599	424	4.00%	2,585	170	6.58%	12,200	626	5.13%
Total interest-earning assets	417,298	33,570	8.04%	312,141	28,341	9.08%	256,648	21,040	8.20%
Less allowance for loan and lease losses	(4,974)			(4,447)			(3,945)
Total interest-earning assets, net of    allowance for loan losses	412,324			307,694			252,703
Non-earning assets	24,471			17,044			16,434
Total assets	$ 436,795			$ 324,738			$ 269,137
	========			========			========
	LIABILITIES AND  SHAREHOLDERS' EQUITY
Interest-bearing liabilities:
NOW and money market accounts	$ 122,631	$  4,113	3.35%	$ 107,500	$  4,904	4.56%	$ 106,281	$  4,196	3.95%
Time deposits	163,841	9,318	5.69%	121,322	7,431	6.13%	73,220	3,925	5.36%
Federal funds purchased	1,167	56	4.80%	6,777	468	6.91%	3,102	156	5.03%
FHLB and other borrowings	71,251	3,369	4.73%	19,206	1,122	5.84%	15,376	776	5.05%
Total interest-bearing liabilities	358,890	16,856	4.70%	254,805	13,925	5.47%	197,979	9,053	4.58%
Noninterest- bearing liabilities:
Noninterest-bearing demand deposits	32,582			23,701			19,588
Other liabilities	4,599			3,027			2,370
Total liabilities	396,071			281,533			219,937
Shareholders' equity	40,724			43,205			49,200
Total liabilities and shareholders' equity	$ 436,795			$ 324,738			$ 269,137
	========			========			========
Net interest income (1)		$ 16,714			$ 14,416			$ 11,987
		======			======			======
Net interest spread			3.34%			3.61%			3.62%
			=====			=====			=====
Net interest margin (1)			4.01%			4.62%			4.67%
			=====			=====			=====
_____________________ (1)  Tax equivalent basis.

The following table presents the dollar amount of changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities and distinguishes between the increase related to higher outstanding balances and changes in interest rates. For purposes of this table, changes attributable to both rate and volume have been allocated to rate.

	Years Ended December 31,
	2001 vs. 2000			2000 vs. 1999
	Increase (Decrease)  Due to			Increase (Decrease)  Due to
	Volume	Rate	Total	Volume	Rate	Total
	(Dollars in thousands)
Interest-earning assets:
Total loans	$  6,339	$ (2,553)	$  3,786	$  5,812	$ 1,228	$  7,040
Taxable securities	1,545	(357)	1,188	329	344	673
Tax-exempt securities	10	(9)	1	74	(30)	44
Federal funds sold and other temporary       investments	321	(67)	254	(632)	176	(456)
Total increase (decrease) in interest               income	8,215	(2,986)	5,229	5,582	1,719	7,301
Interest-bearing liabilities:
NOW and money market accounts	507	(1,298)	(791)	56	652	708
Time deposits	2,418	(531)	1,887	2,946	560	3,506
Federal funds purchased	(269)	(143)	(412)	254	58	312
FHLB and other borrowings	2,461	(214)	2,247	224	122	346
Total increase (decrease) in interest             expense	5,117	(2,186)	2,931	3,480	1,393	4,872
Total increase in net interest income	$ 3,098	$   (800)	$   2,298	$ 2,102	$      326	$ 2,429
	======	======	======	======	======	======

Provision for Loan and Lease Losses

Provisions for loan and lease losses are charged to income to bring the Company's allowance for loan and lease losses to a level deemed appropriate by management based on the factors discussed under "--Allowance for Loan and Lease Losses."

The 2001 provision for loan and lease losses increased by $960,000 to $2.2 million as a result of higher net charge offs and a $69.4 million increase in loans. The 2000 provision for loan losses increased from $106,000 to $1.3 million, reflecting a 31.7% loan growth.

Noninterest Income

Noninterest income for the years ended December 31, 2001, 2000 and 1999, was $4.3 million and $2.8 million and $2.7 million, respectively. The $1.5 million or 53.4% increase in noninterest income in 2001 resulted from the gain on sale of mortgage loans held for sale derived from the newly established mortgage banking subsidiary, greater service fees on accounts realized through an improvement in monitoring the accounts subject to service fees and gains on the sale of investment securities. The following table presents the major categories of noninterest income:

	Years Ended December 31,
	2001	2000	1999
	(Dollars in thousands)
Investment center income	$  1,555	$  1,589	$  1,345
Service fees income	1,200	884	879
Income from foreclosed assets	--	83	3
Gain on sale of mortgage loans held for sale	487	--	--
Trust income	--	--	93
Gain on sale of other real estate owned	126	10	29
Gain (loss) on sale of investment securities, net	457	(97)	(5)
Other noninterest income	476	316	331
Total noninterest income	$  4,301	$  2,785	$  2,675
	======	======	======

Noninterest Expense

For the years ended December 31, 2001, 2000 and 1999, noninterest expense totaled $13.2 million, $10.5 million and $8.8 million, respectively. The $2.7 million or 25.7% increase in 2001 was primarily due to higher employee compensation and benefits and occupancy expense related to new branches. The Company's efficiency ratios were 64.52%, 61.50% and 60.59% in 2001, 2000 and 1999, respectively. A lower efficiency ratio reflects higher efficiency. The deterioration in the efficiency ratio for the year 2001 and 2000 is a reflection of increased operating expenses for new bank services offered in 2001 and 2000 and the costs associated with the branches opened in 1999.

The following table presents the major categories of noninterest expense:

	Years Ended December 31,
	2001	2000	1999
	(Dollars in thousands)
Salaries and employee benefits	$   7,154	$   5,864	$  4,687
Non-staff expenses:
Occupancy	1,712	1,525	1,298
Insufficient check losses	486	50	184
Audit, tax and accounting	392	252	262
Other outside services	390	290	222
Advertising and marketing	381	319	336
Data and item processing	361	207	175
Loan related	313	281	183
Legal services	287	117	72
Telecommunications	257	179	170
Other noninterest expense	1,493	1,458	1,256
Total non-staff expenses	6,072	4,678	4,158
Total noninterest expense	$ 13,226	$  10,542	$  8,845
	=======	=======	======

The higher compensation expenses in 2001, when compared with 2000, relates to additional lending and credit administration staff and annual salary increases for the staff. The increase in 2000 resulted primarily from the costs associated with establishment of the Hendersonville branch which opened in May 1999, increased expenses related to expansion of the Company's loan programs including loan officers and support staff and higher commission expenses paid to investment center staff. Total full-time equivalent employees at December 31, 2001, 2000 and 1999 were 101, 98 and 80, respectively.

Non-staff expenses for 2001, 2000, and 1999 were $6.1 million, $4.7 million and $4.2 million, respectively, reflecting increases of $1.4 million or 29.8%, $500,000 or 11.9% and $1.4 million or 53.2%, respectively. The increase in occupancy expense in 2001 resulted primarily from the additional space leased for the Company's Headquarters. The increase in 2000 was primarily due to higher occupancy expenses resulting from a full year of operations of the Hendersonville branch. The increase in insufficient check losses was due to a $425,000 uncollected overdraft item. Subsequent to year-end December 31, 2001, on February 21, 2002, the Company recovered $325,000 of this amount.

Income Taxes

Income tax expense includes the regular federal income tax at the statutory rate plus the income tax component of the State tax. The amount of federal income tax expense is influenced by the amount of taxable income, the amount of tax-exempt income, the amount of non-deductible interest expense and the amount of other non-deductible expenses.

In 2001, income tax expense was $2.2 million, reflecting a $100,000 increase over 2000. The effective tax rate for 2001, 2000 and 1999 was approximately 39.7%, 39.0% and 38.0%, respectively.

Impact of Inflation

The effects of inflation on the local economy and on the Company's operating results have been relatively modest for the past several years. Since substantially all of the Company's assets and liabilities are monetary in nature, such as cash, securities, loans and deposits, their values are less sensitive to the effects of inflation than to changing interest rates, which do not necessarily change in accordance with inflation rates. The Company tries to control the impact of interest rate fluctuations by managing the relationship between its interest rate sensitive assets and liabilities. See " - Financial Condition - Interest Rate Sensitivity and Interest Rate Risk Management" below.

FINANCIAL CONDITION

Securities

At the date of purchase, the Company is required to classify debt and equity securities into one of three categories: (i) available-for-sale, (ii) held-to-maturity, or (iii) trading. At each reporting date, the appropriateness of the classification is reassessed. The Company does not have any investment securities classified as held-to-maturity or trading. At December 31, 2001 and 2000, all of the Company's investments are classified as available-for-sale and measured at fair value in the financial statements with unrealized gains and losses reported, net of tax, as a component of accumulated other comprehensive income in shareholders' equity until realized.

The Company uses its investment securities as a source of income and contingent liquidity. To facilitate this process, the Company maintains all securities classified as available-for-sale. At December 31, 2001, investment securities totaled $113.4 million, reflecting an 80.6% increase from $62.8 million in 2000, due to the execution of a financial leveraging strategy designed to increase interest income.

The following table summarizes the contractual maturity of investment securities at amortized cost and their weighted average yields. Other debt securities include collateralized mortgage obligations ("CMOs") whose maturities are not segregated since they have staggered maturity dates. Investments in equity securities include stock of the Federal Reserve Bank and Federal Home Loan Bank. Maturities of equity securities are not segregated since they have no stated maturity.

	As of December 31, 2001
	Within One Year		After One Year But Within Five           Years		After Five Years But Within Ten           Years		After Ten Years		Total
	Amount	Yield	Amount	Yield	Amount	Yield	Amount	Yield	Amount	Yield
	(Dollars in thousands)
U.S. agency securities	$  682	6.20%	$ 11,070	5.65%	$ 23,131	5.84%	$ 49,426	6.19%	$ 84,309	6.02%
Other debt securities	--	--	--	--	--	--	--	--	19,638	5.48
Municipal securities(1)	--	--	--	--	360	8.05	1,932	7.20	2,292	7.33
Equity securities	--	--	--	--	--	--	--	--	6,184	5.46
Total securities	$ 682	6.20%	$ 11,070	5.65%	$ 23,491	5.87%	$ 51,358	6.23%	$112,423	5.92%
	=====	=====	======	======	======	======	=====	=====	======	=====
(1) Yield on a tax equivalent basis.

The following table presents the amortized cost of investment securities classified as available-for-sale and their approximate fair values as of the dates shown:

	As of December 31, 2001				As of December 31, 2000
	Amortized       Cost	Gross  Unrealized       Gain	Gross  Unrealized        Loss	Fair  Value	Amortized       Cost	Gross  Unrealized       Gain	Gross  Unrealized        Loss	Fair  Value
	(Dollars in thousands)
U.S. agency securities	$  84,309	$    889	$   211	$    84,987	$   33,928	$  227	$   154	$   34,001
Other debt securities	19,638	242	30	19,850	23,463	152	187	23,428
Municipal securities	2,292	43	--	2,335	2,291	59	--	2,350
Equity securities	6,184	--	--	6,184	2,996	--	--	2,996
Total securities	$ 112,423	$ 1,174	$   241	$ 113,356	$  62,678	$ 438	$   341	$  62,775
	========	========	=======	========	========	=======	========	========

U.S. Government agency securities include mortgage-backed securities principally issued by federal agencies such as the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. These securities are deemed to have high credit ratings and certain minimum levels of regular monthly cash flows of principal and interest are guaranteed by the issuing agencies.

At December 31, 2001 and 2000, 56.8% and 65.3%, respectively, of the mortgage-related securities held by the Company had scheduled final maturities of more than ten years. However, unlike U.S. Treasury and U.S. Government agency securities, which have a lump sum payment at maturity, mortgage-backed securities provide cash flows from regular principal and interest payments and principal prepayments throughout the lives of the securities. Mortgage-related securities which are purchased at a premium will generally suffer decreasing net yields as interest rates drop because homeowners tend to refinance their mortgages. Consequently, the premium paid must be amortized over a shorter time period. Conversely, securities purchased at a discount will produce higher net yields in a decreasing interest rate environment. As interest rates rise, the opposite is generally true. Typically, during periods of rising interest rates, fixed rate mortgage-backed securities do not experience heavy principal prepayments and consequently, their average life may be extended.

Derivatives

On January 1, 2001, the Company adopted "Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). Accordingly, all derivatives are recorded in the financial statements at fair value. Additional information on derivative hedging activity is included in Note I to the consolidated financial statements. 

The Company monitors its sensitivity to changes in interest rates and may use derivative instruments such as interest rate swaps to hedge this risk. Interest rate swap transactions generally involve the exchange of fixed and floating interest rate payment obligations without the exchange of the underlying principal amounts. Entering into interest rate contracts involves not only interest rate risk, but also the risk of counterparties' failure to fulfill their legal obligations. Notional principal amounts often are used to express the volume of these transactions, however, the amounts potentially subject to credit risk are significantly smaller.

At December 31, 2001, the Company had three-interest rate swap contracts with a consolidated notional amount outstanding of $35.0 million. There were no interest rate swap contracts outstanding at December 31, 2000. The derivative financial instruments are reported at their fair values, and are included as other assets and other liabilities, respectively, on the face of the balance sheet.

On March 26, 2001, the Company entered into a $10.0 million interest rate swap which matures on October 17, 2008 under which the Company pays the counter party a variable rate of three-month LIBOR plus five basis points and will receive a fixed rate of 6.00%. Interest payments are settled and variable rates reset quarterly. The counter party has the option to terminate the swap, in whole or in part, on April 17, 2002 and semi-annually thereafter. Management designated the interest rate swap as a fair value hedge of $10.0 million of brokered time deposits issued by the Company on March 26, 2001. The 6.00% fixed rate, brokered time deposits mature on October 17, 2008 and are callable by the Company on March 26, 2002 and semi-annually thereafter. At December 31, 2001, the Company had an unrealized loss of $120,000 for the market value adjustment on this fair value hedge instrument that was offset by a $120,000 decrease in the market value of the 6.00% fixed rate, brokered time deposits.

On May 24, 2001, the Company entered into a $15.0 million interest rate swap agreement which matures on November 25, 2002 under which the Company will pay the counter party a fixed rate of 4.53% and will receive a variable rate of three-month LIBOR less six basis points. Interest payments are settled and variable rates reset quarterly. Management designated the interest rate swap as a cash flow hedge of $15.0 million in variable rate FHLB advances entered into by the Company on May 24, 2001. As of December 31, 2001, the cash flow hedge of the FHLB advances resulted in a decrease of $216,000 in other comprehensive income, net of taxes of $132,000, and a $348,000 increase to other liabilities.

On July 19, 2001, the Company entered into a $10.0 million interest rate swap agreement which matures on October 19, 2002 under which the Company will pay the counter party a fixed rate of 4.205% and will receive a variable rate of three-month LIBOR. Interest payments are settled and variable rates reset quarterly. Management designated the interest rate swap as a cash flow hedge of $10.0 million in variable rate FHLB advances entered into by the Company on July 19, 2001. As of December 31, 2001, the cash flow hedge of FHLB advances resulted in a decrease of $122,000 in other comprehensive income, net of taxes of $76,000, and a $199,000 increase to other liabilities.

The high degree of effectiveness of the Company's derivative financial instruments resulted in no impact to consolidated net income for the year ended December 31, 2001.

Loan Portfolio

During the year ended December 31, 2001, the Company reclassified its loan portfolio to reflect the business purpose of the loans. The loan portfolio at December 31, 2000 was reclassified for comparative purposes. The reclassifications in 2001 and 2000 do not affect earnings. Prior to the year 2000, the Company's loan portfolio records had been classified by collateral codes and reclassifications of such data was not practical.

Total loans increased by $69.4 million or 25.6% to $340.0 million at December 31, 2001. This compares with an increase of $65.1 million or 31.7% to $270.6 million at December 31, 2000. The growth in loans can be attributed to the Company's investment in loan production capacity and new lending products. For the years ended December 31, 2001, 2000 and 1999, the ratio of total loans to total deposits was 97.1%, 99.1% and 89.7%, respectively. For the same periods, total loans represented 70.5%, 76.3%, and 66.7% of total assets, respectively. 

The following table summarizes the loan portfolio of the Company by type of loan:

	As of December 31, 2001
	2001		2000		1999		1998		1997
	Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent	Amount	Percent
	(Dollars in thousands)
Commercial	$  138,327	40.69%	$  110,105	40.69%	$  70,166	34.14%	$  51,970	34.04%	$  38,571	31.42%
Real estate mortgage:
Residential	15,988	4.70	11,082	4.10	30,642	14.91	30,774	20.16	22,529	18.35
Commercial	98,977	29.12	77,180	28.53	71,834	34.95	48,681	31.89	48,526	39.53
Real estate construction:
Residential	3,767	1.11	5,745	2.12	6,092	2.96	4,538	2.97	2,801	2.28
Commercial	41,714	12.27	31,974	11.82	13,596	6.62	10,129	6.63	6,625	5.40
Consumer	32,539	9.57	24,785	9.16	5,870	2.86	6,583	4.31	3,697	3.01
Lease financing	8,625	2.54	9,697	3.58	7,311	3.56	--	--	--	--
Total loans	$  339,937	100.00%	$  270,568	100.00%	$  205,511	100.00%	$  152,675	100.00%	$  122,749	100.00%
	========	=======	========	======	=======	======	=======	======	=======	=======

At year-end December 31, 2001 and 2000, the Company had gross loan concentrations (greater than 25% of capital) in the following industries:

	As of December 31
	2001	2000
	(Dollars in thousands)
Real estate industry	$    43,324	$  34,119
Health services	17,154	16,195
Building contractors	29,240	16,082
Non-depository financial institutions	8,912	12,404
Business services	19,213	11,352
All other	222,094	180,416
Gross loans	$  339,937	$  270,568
	========	========

Adjustable rate loans, utilizing the Prime-lending rate as an index, comprise approximately 76.0% of the commercial and real estate portfolio. The contractual maturity ranges of the commercial and real estate portfolio and the amount of such loans with predetermined interest rates and floating rates in each maturity range as of December 31, 2001 are summarized in the following table: 

	As of December 31, 2001
	One Year or Less	After One Through Five Years	After Five Years	Total
	(Dollars in thousands)
Commercial	$   84,380	$   41,498	$   12,449	$  138,327
Real estate mortgage
Residential	1,119	3,358	11,511	15,988
Commercial	14,847	17,816	66,314	98,977
Real estate construction
Residential	3,353	264	150	3,767
Commercial	38,377	2,503	834	41,714
Total	$  142,076	$   65,439	$   91,258	$  298,773
	=======	=======	=======	=======
Fixed Rate Loans	$   10,396	$   43,778	$   13,950	$    71,706
Variable Rate Loans	131,680	21,661	77,308	227,067
Net Loans	$  142,076	$   65,439	$   91,258	$  298,773
	=======	=======	=======	=======

Nonperforming Assets

The Company believes that it has procedures in place to maintain a high credit quality loan and lease portfolio. These procedures include the approval of lending policies and underwriting guidelines by the Board of Directors, review by an independent internal loan review department, reviews by an independent outside loan review company, the Asset Review Committee of the Board of Directors approval for large credit relationships and loan documentation procedures. The loan review department reports credit risk grade changes on a monthly basis to Management and the Board of Directors. The Company performs monthly and quarterly concentration analyses based on industries, collateral types, business lines, credit sizes and officer portfolio loads. There can be no assurance, however, that the Company's loan portfolio will not be subject to increasing pressures from a deteriorating credit environment due to a decline in the general economic conditions.

The Company generally places a loan on nonaccrual status and ceases accruing interest when, in the opinion of Management, full payment of loan principal and interest is in doubt. All loans past due more than 90 days are placed on nonaccrual status unless the loan is both well-secured by cash or marketable securities and in the process of collection. Cash payments received while a loan is classified as nonaccrual are recorded as a reduction of principal as long as significant doubt exists as to collection of the principal. Otherwise, interest is recognized on a cash basis. In determining the adequacy of the allowance for loan and lease losses, the Company evaluates on an ongoing basis nonaccrual loans and other loans which are considered potential problem loans. Other potential problem loans consist of loans that are currently not considered nonperforming, but where certain information has caused the Company to have concerns as to the ability of the borrower to fully comply with present repayment terms and, depending on economic changes and future events, these loans and others, which may not be presently identified, could become future nonperforming loans.

The Company updates appraisals on loans secured by real estate as these are reviewed, prior to foreclosure or as necessary. In instances where updated appraisals reflect reduced collateral values, an evaluation of the borrower's overall financial condition is made to determine the need, if any, for possible write-downs or appropriate additions to the allowance for loan and lease losses and the need for greater provisions for loan and lease losses. The Company records other real estate at fair value at the time of acquisition less estimated cost to sell.

2001 versus 2000. At December 31, 2001 and 2000, nonperforming assets were $4.0 million and $1.3 million, respectively. The increase was the result of eleven loans placed on nonaccrual, the largest of which was $1.7 million, other real estate owned of $319,000 and repossessed equipment totaling $485,000. At December 31, 2001 and 2000, other potential problem loans totaled $1.5 million and $429,000, respectively.

2000 versus 1999. At year-end December 31, 2000 and 1999, nonperforming assets were $1.3 million and $291,000, while the ratio of nonperforming assets to total loans and foreclosed properties were 0.49% and 0.14%, respectively.

The following table presents information regarding nonperforming assets at the periods indicated:

	As of  December 31,
	2001	2000	1999	1998	1997
	(Dollars in thousands)
Nonaccrual loans	$    3,148	$      776	$      291	$      408	$  1,094
Repossessed equipment	485	213	--	--	--
Other real estate owned	319	355	--	52	133
Total nonperforming assets	3,952	1,344	291	460	1,227
	========	=======	=======	=======	======
Nonperforming assets to total loans and other      real estate	1.16%	0.49%	0.14%	0.30%	1.00%
Nonperforming assets to total assets	0.82	0.38	0.09	0.19	0.60

Allowance for Loan and Lease Losses

Allowance for Loan and Lease Losses. The allowance for loan and lease losses is established through charges to earnings in the form of a provision for loan and lease losses. Management has established an allowance for loan and lease losses which, it believes, is adequate for estimated losses inherent in the loan portfolio. Based on an evaluation of the loan portfolio, Management presents a quarterly review of the allowance for loan and lease losses to the Board of Directors, indicating any change in the allowance since the last review and any recommendations as to adjustments in the allowance. In making its evaluation, Management considers the industry diversification of the loan portfolio, the effect of changes in the local real estate market on collateral values, the results of recent regulatory examinations, the effects on the loan portfolio of current economic conditions and their probable impact on borrowers, the amount of charge-offs for the period, the amount of nonperforming loans and related collateral security, delinquency trends, the evaluation of its loan portfolio and loan growth by lending staff and credit administration as well as the internal and external loan review functions and the result of examinations by banking regulatory agencies. Charge-offs occur when loans are deemed to be uncollectible.

The Company follows a loan review program utilizing both Company staff and independent third party consultants to ensure adequate coverage of all credit exposure and to adequately evaluate the credit risk in the loan portfolio. Through the loan review process, the Company maintains a list of loans classified as substandard, doubtful or losses, which, along with the delinquency list of loans, help Management in assessing the overall quality of the loan portfolio and the adequacy of the allowance for loan and lease losses. Loans classified as substandard are those loans with clear and defined weaknesses such as a highly-leveraged position, unfavorable financial ratios, uncertain repayment sources or poor financial condition, which may jeopardize recoverability of the debt. Loans classified as doubtful are those loans which have characteristics similar to substandard loans but with an increased risk that a loss may occur, or at least a portion of the loan may require a charge-off if liquidated. Both substandard and doubtful loans include some loans that are delinquent at least 30 days or on nonaccrual status. Loans classified as "loss" are those loans which are in the process of being charged off.

In addition to the list of delinquent loans and classified loans, the Company maintains a list of criticized or "Special Mention" loans. These loans have marginal quality which represent a higher level of credit risk, but not sufficient to warrant adverse classification. A separate "Watch" list is also maintained which further aids the Company in monitoring the loan portfolio. Watch list loans show warning elements where the present status portrays one or more deficiencies that require attention in the short-term or where pertinent ratios of the loan account have weakened to a point where more frequent monitoring is warranted. These loans do not have all of the characteristics of a classified loan (substandard or doubtful) but show weakened elements compared with those of a satisfactory credit. The Company reviews these loans to assist in assessing the adequacy of the allowance for loan and lease losses.

The Company uses a migration analysis to assess the adequacy of the allowance for loans and lease losses taking into account the net charge off rates of homogenous loan pools over predetermined historical periods. Due to recent deterioration of the economy, during the third quarter of 2001, the Company began utilizing average historical charge off rates for the previous eight quarters. Prior to the third quarter of 2001, the Company was utilizing average historical charge off rates for the previous nine years. The resulting allowance is then subjectively evaluated through an analysis of criticized, adversely classified and non-homogenous loan pools. Consequently, the Company's allowance for loan and lease losses reflects both qualitative and quantitative estimates of potential credit losses expected over the life of the loans within each risk-rating category for each loan pool in the portfolio. Additionally, Management establishes specific impairment allowances for loans and leases, which in its opinion require an allowance different from those allocated through the use of the migration analysis. To accomplish this, Management takes into consideration, among others, the classification, the delinquency status of the loans, availability, type, value and ability to perfect the supporting collateral, prevalent economic conditions and the financial strength of the borrowers and guarantors.

The allowance for loan and lease losses is comprised of an allocated and unallocated portion. Both portions of the allowance are available to support inherent losses in the loan portfolio. The allocated allowance is determined for each classification of both performing and nonperforming loans and leases within the portfolios. This methodology includes but is not limited to: (i) the application of allowance allocations for commercial, consumer and real estate loans as well as leases and is calculated using the weighted average loss rates over the previous eight quarters, based upon the analysis of averages of historical net loan charge-offs incurred within the portfolios by credit quality grade; (ii) a detailed review of all adversely criticized, nonperforming, and impaired loans and leases to determine if a specific allowance allocation is required on an impaired loan.

The unallocated allowance is established for loss exposure that exists in the remainder of the portfolios but has yet to be identified and to compensate for the uncertainty in estimating loan losses, including the possibility of changes in risk ratings of credits. The unallocated allowance is based on Management's best efforts in evaluating various conditions, including but not limited to local and regional economic, unemployment and interest rate environments, the effects of which are not directly measured in determining the allocated allowance. The evaluation of the inherent loss related to these conditions involves a higher degree of uncertainty because they are not associated with specific problem credits or portfolio segments. The unallocated allowance represents prudent recognition of the fact that allowance estimates, by definition, lack precision.

At December 31, 2001 and December 31, 2000, the allowance for loan and lease losses aggregated $5.1 million and $4.6 million, or 1.50% and 1.71% of total loans, respectively. As of December 31, 2001, the allocated and unallocated portions of the allowance were $4.0 million and $1.1 million, respectively. The unallocated portion of the reserve represented 21.6% of the total allowance at December 31, 2001 compared with 23.5% at December 31, 2000. During 2001, the impact of the net charge offs and change in historical statistics utilized on the migration analysis performed on the loan portfolio resulted in a shift in the allowance from the unallocated to the allocated portion of the allowance. Due to the subjectivity involved in the determination of the unallocated portion of the allowance for loan and lease losses, the relationship of the unallocated component to the total allowance may fluctuate from period to period. Presently, management is of the opi nion that the allowance is appropriate considering the current level of loans and leases and overall asset quality reflected in the portfolio. Furthermore, while the allowance for loan and lease losses and the amount of the provision for loan and lease losses are established on a quarterly basis, given the inherent uncertainties of such estimation process, no assurance can be given as to the adequacy or the ultimate amount of the allowance at any future date.

For the year ended December 31, 2001, net loan charge-offs were $1.7 million or 0.56% of average loans compared with net loan charge offs of $696,000 or 0.30% of average loans for 2000 and net recoveries of $218,000, or 0.12% of average loans for 1999. During 2001, the provision for loan losses increased by $1.0 million to $2.2 million. In 2000, the Company recorded a provision for loan losses of $1.3 million compared with $106,000 for 1999. For 2000, the increase was primarily related to loan growth net of the impact of $814,000 in charge-offs related to 13 loans. The following table presents an analysis of the allowance for loan and lease losses and other related data:

	Years Ended December 31,
	2001	2000	1999	1998	1997
	(Dollars in thousands)
Average loans outstanding	$    308,303	$    235,432	$    176,027	$    133,660	$    114,835
	==========	==========	==========	==========	==========
Total loans outstanding at end of period	$    339,937	$    270,568	$    205,511	$    152,675	$    122,749
	==========	==========	==========	==========	==========
Allowance for loan losses at beginning of period	$       4,622	$       4,062	$       3,646	$       3,128	$       2,878
Provision for loan losses	2,216	1,256	106	128	100
Charge-offs:
Commercial	(1,717)	(523)	(608)	(41)	(169)
Real estate - mortgage	(77)	(232)	(129)	(38)	--
Consumer	(132)	--	(20)	(5)	--
Lease financing	(71)	(59)	(15)	--	--
Total charge-offs	(1,997)	(814)	(772)	(84)	(169)
Recoveries:
Commercial	210	90	988	222	317
Real estate - mortgage	14	--	--	2	--
Consumer	33	8	2	250	2
Lease financing	--	20	--	--	--
Total recoveries	257	118	990	474	319
Net loan (charge-offs) recoveries	(1,740)	(696)	218	390	150
Purchased reserve of TBON Leasing	--	--	92	--	--
Allowance for loan losses at end of period	$     5,098	$     4,622	$     4,062	$     3,646	$     3,128
	========	========	========	========	========
Allowance to end of period total loans	1.50%	1.71%	1.98%	2.39%	2.55%
Net loan charge-offs (recoveries) to average loans	0.56	0.30	(0.12)	(0.29)	(0.13)
Allowance to end of period nonperforming loans	161.94	595.62	1,395.88	893.63	285.92

The following table describes the allocation of the allowance for loan and lease losses among various categories of loans and certain other information. The allocation is made for analytical purposes and is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to absorb losses from any segment of the credit portfolio. The following chart represents the allocation of the balance of the allowance for loan and lease losses by specific loan portfolio.

	As of December 31, 2001
	2001		2000		1999		1998		1997
	Amount	Percent of Loans to Gross  Loans	Amount	Percent of  Loans to  Gross  Loans	Amount	Percent of  Loans to  Gross   Loans	Amount	Percent of  Loans to  Gross   Loans	Amount	Percent of  Loans to  Gross  Loans
	(Dollars in thousands)
Commercial	$  2,460	40.69%	$  1,515	40.69%	$  1,663	34.14%	$    918	34.04%	$    916	31.42%
Real estate mortgage	1,015	33.82	1,575	32.63	1,160	49.86	1,006	52.04	967	57.89
Real estate construction	226	13.38	240	13.94	212	9.58	133	9.61	128	7.68
Consumer	182	9.57	111	9.16	54	2.86	47	4.31	79	3.01
Lease financing	86	2.54	97	3.58	103	3.56	--	--	--	--
Unallocated	1,129	--	1,084	--	870	--	1,542	--	1,038	--
Total allowance	$  5,098	100.00%	$  4,622	100.00%	$  4,062	100.00%	$  3,646	100.00%	$  3,128	100.00%
	========	=======	========	======	=======	======	=======	======	=======	=======

Deposits

During the year ended December 31, 2001, total deposits increased by 28.2%, or $76.9 million, to $349.9 million compared with $273.0 million in 2000. This increase resulted from the Brentwood and Hendersonville branches, which grew deposits by 51.9% and 47.6%, respectively, and to a lesser degree from the Green Hills and Main branch whose deposits grew by 23.0% and 24.3%, respectively.

At December 31, 2001, the Company's lending and investing activities were funded principally by deposits, approximately 48.2% of which were demand and money market deposits, compared with 51.4% at year-end December 31, 2000. Average non-interest-bearing deposits for the year ended December 31, 2001 were $32.6 million compared with $23.7 million in 2000, an increase of $8.9 million or 37.6%. For the year ended December 31, 2001 and 2000, approximately 10.2% and 9.4%, respectively, of average deposits were non-interest-bearing.

The Company actively solicits time deposits from its customers. In addition, the Company receives time deposits from government municipalities and utility districts. These time deposits generally renew at maturity and have provided a stable base of time deposits. The Company believes that based on its historical experience time deposits greater than $100,000 have core-type characteristics. Of the $80.6 million of time deposits greater than $100,000 at December 31, 2001, approximately $56.3 million or 69.6% have been with the Company longer than one year. In pricing time deposits, the Company seeks to be competitive but generally prices near the middle of the given market.

The following are the average daily balances and weighted average rates on deposits.

	As of December 31,
	2001		2000		1999
	Amount	Rate	Amount	Rate	Amount	Rate
	(Dollars in thousands)
Interest-bearing deposits:
NOW accounts	$  27,395	2.53%	$  17,619	3.17%	$  14,222	2.90%
Money market deposit accounts	95,236	3.59	89,881	4.83	92,059	4.11
Time deposits less than $100,000	90,678	5.88	54,985	6.04	37,687	5.39
Time deposits $100,000 and over	73,163	5.45	66,337	6.20	35,533	5.33
Total interest-bearing deposits	286,472	4.69	228,822	5.39	179,501	4.52
Noninterest-bearing deposits	32,582	--	23,701	--	19,588	--
Total deposits	$ 319,054	4.21%	$  252,523	4.88%	$  199,089	4.08%
	========	=======	========	=======	========	=======

The following table sets forth the amount of the Company's time deposits that are $100,000 or greater by time remaining until maturity:

	As of December 31, 2001
	(Dollars in thousands)
Three months or less	$   33,444
Over three through six months	24,198
Over six through 12 months	13,786
Over 12 months	9,205
Total	$  80,633
	========

Federal Home Loan Bank and Other Borrowings

The Bank maintains an arrangement with the FHLB to provide for certain borrowing needs and diversify the funding sources. The arrangement requires the Bank to hold stock in the FHLB and requires the Bank to pledge investment securities, to be held by the FHLB, or loans as collateral.

At December 31, 2001, and 2000, indebtedness to the FHLB totaled $89.0 million and $34.7 million, respectively. During the year ended December 31, 2001, the Company repaid four loans totaling $34.7 million, of which one, for $20.2 million, had a fixed interest rate of 6.61% and the remaining three, totaling $14.5 million, were at the three month LIBOR less five basis points. Also during the year ended December 31, 2001, the Company entered into seven new loans with the FHLB totaling $89.0 million. Of this amount, five loans totaling $54.0 million are fixed rate advances, whose interest rate is fixed for periods between two and three years bearing an average weighted rate of 4.56% and two loans totaling $35.0 million reprice quarterly at the three-month LIBOR less six basis points. In addition to FHLB loans at December 31, 2000, the Company had a $1.5 million loan from a financial institution to partially fund TBON Leasing's lease portfolio.

On December 31, 2001 and 2000, the Company had available for its use $38.5 million, and $34.5 million, respectively, of unsecured short-term bank lines of credit. Such short-term lines serve as backup for temporary loan and investment needs. There are no compensating balance requirements. These lines facilitate federal funds borrowings and bear a rate equal to the current lending rate for federal funds purchased.  There were no amounts outstanding under these lines of credit at December 31, 2001 and 2000, respectively, and $5.0 million outstanding at December 31, 1999.

	Years Ended December 31,
	2001	2000	1999
	(Dollars in thousands)
Federal funds purchased:
At December 31	$         --	$         --	$    5,000
Average during the year	1,167	6,777	3,102
Maximum month-end balance during the year	8,500	32,000	18,100
FHLB notes:
At December 31	$  89,000	$  34,700	$  24,500
Average during the year	69,910	17,847	15,376
Maximum month-end balance during the year	98,500	34,700	24,500
Other short-term borrowings:
At December 31	$         --	$    1,536	$         --
Average during the year	1,341	1,359	--
Maximum month-end balance during the year	2,138	1,919	--

Interest Rate Sensitivity and Interest Rate Risk Management

The Company's Funds Management Policy provides Management with the necessary guidelines for effective funds Management, and the Company has established a measurement system for monitoring its net interest rate sensitivity position. The Company manages its sensitivity position within established guidelines.

The Company's Asset and Liability Committee ("ALCO"), comprised of directors and senior officers of the Company, is charged with the management of Interest rate risk in accordance with policies approved by the Company's Board of Directors. The ALCO formulates strategies based on appropriate levels of interest rate risk. In determining the appropriate level of interest rate risk, the ALCO considers the impact on earnings and capital of the current outlook on interest rates, potential changes in interest rates, regional economy, liquidity, business strategies and other factors. The ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the ALCO reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. 

Management uses two methodologies to manage interest rate risk: (i) an analysis of relationships between interest-earning assets and interest-bearing liabilities and (ii) an interest rate shock simulation model. The Company has traditionally managed its business to reduce its overall exposure to changes in interest rates, however, under current policies of the Company's Board of Directors, Management has been given some latitude to increase the Company's interest rate sensitivity position within certain limits if, in Management's judgment, it will enhance profitability. As a result, changes in market interest rates may have a greater impact on the Company's financial performance in the future than they have had historically.

An interest rate sensitive asset or liability is one that, within a defined time period, either matures or experiences an interest rate change in line with general market interest rates. The management of interest rate risk is performed by analyzing the maturity and repricing relationships between interest-earning assets and interest-bearing liabilities at specific points in time ("GAP") and by analyzing the effects of interest rate changes on net interest income over specific periods of time by projecting the performance of the mix of assets and liabilities in varied interest rate environments. Interest rate sensitivity reflects the potential effect on net interest income of a movement in interest rates. A company is considered to be asset sensitive, or having a positive GAP, when the amount of its interest-earning assets maturing or repricing within a given period exceeds the amount of its interest-bearing liabilities also maturing or repricing within that time period. Con versely, a company is considered to be liability sensitive, or having a negative GAP, when the amount of its interest-bearing liabilities maturing or repricing within a given period exceeds the amount of its interest-earning assets also maturing or repricing within that time period. During a period of rising interest rates, a negative GAP would tend to affect adversely net interest income, while a positive GAP would tend to result in an increase in net interest income. During a period of falling interest rates, a negative GAP would tend to result in an increase in net interest income. During a period of falling interest rates, a negative GAP would tend to result in an increase in net interest income, while a positive GAP would tend to affect net interest income adversely.

GAP reflects a one-day position that is continually changing and is not indicative of the Company's position at any other time. While the GAP position is a useful tool in measuring interest rate risk and contributes toward effective asset and liability management, it is difficult to predict the effect of changing interest rates solely on that measure, without accounting for alterations in the maturity or repricing characteristics of the balance sheet that occur during changes in market interest rates. For example, the GAP position reflects only the prepayment assumptions pertaining to the rate environment prevalent at the time of the measurement. Assets tend to prepay faster during periods of declining interest rates than during periods of rising interest rates; because of this and other risk factors not contemplated by the GAP position, an institution could have a matched GAP position in the current rate environment and still have its net interest inc ome exposed to increased rate risk. The following table sets forth an interest rate sensitivity analysis for the Company at December 31, 2001:

Volumes Subject to Repricing Within

	0-30 Days	31-180 Days	181-365 Days	1-3  Years	3-5 Years	6-10 Years	Over 10 Years	Total
(Dollars in thousands)
Interest-earning assets:
Securities	$    5,649	$    9,712	$   11,657	$ 34,751	$   20,136	$   18,250	$ 13,201	$ 113,356
Total loans	185,545	15,686	16,954	73,619	43,022	7,604	480	339,937
Federal funds sold and other      temporary investments	4,550	--	--	--	--	--	- --	4,550
Total interest-earning                  assets	$ 192,771	$   25,398	$    28,611	$ 108,370	$ 63,158	$  25,854	$  13,681	$ 457,843
	=======	=======	=======	=======	======	=======	=======	=======
Interest-bearing liabilities:
Demand, money market and       NOW accounts	$ 129,983	$          --	$            --	$          --	$          --	$          --	$          -	$ 129,983
Time deposits	25,542	87,397	30,320	19,701	9,432	10,000	--	181,392
Other borrowings	10,000	39,000	- --	- --	- --	40,000	- --	89,000
Total interest-bearing                   liabilities	$ 164,525	$ 126,397	$   30,320	$   19,701	$   9,432	$   50,000	$         --	$ 400,375
	=======	=======	=======	=======	=======	=======	=======	=======
Period GAP	$   28,246	$ (100,999)	$   (1,709)	$   88,669	$  53,726	$ (24,146)	$ 13,681	$   57,468
Cumulative GAP	28,246	(72,753)	(74,462)	14,207	72,254	48,108	61,789
Period GAP to total assets	5.86%	(21.34)%	(0.36)%	18.73%	11.35%	(5.10)%	2.89%	--%
Cumulative GAP to total         assets	5.86%	(17.37)	(14.82)	3.00	14.35	9.25	12.14	11.91
Interest-earning assets to interest-bearing liabilities	117.17	20.09	94.36	550.07	669.61	51.71	NM	114.35

The preceding table provides Management with repricing data within given time frames. The purpose of this information is to assist Management in the elements of pricing and of matching interest sensitive assets with interest sensitive liabilities within time frames. The table indicates that at December 31, 2001, the Company was asset sensitive up to a 30-day period and liability sensitive for the period between 31 days up to and including one year. The cumulative negative GAP for the time periods up to and including one year was $74.5 million. With this condition, in a declining or stable rate environment the Company would see net income improve up to a one-year period, as more liabilities would reprice at lower rates.

As a financial institution, the Company's primary component of market risk is interest rate risk, or the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. Ultimately, fluctuations in interest rates will impact liquidity, the level of income and expense recorded on most of the Company's assets and liabilities, and the market value of interest-earning assets and interest-bearing liabilities -- other than those which have a short term to maturity. The Company is not subject to foreign exchange or commodity price risk. The Company does not own any trading assets.

The Company's exposure to market risk is reviewed on a regular basis by the ALCO. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income. Management realizes certain risks are inherent and that the goal is to identify, monitor, and manage the risks.

The Company applies an economic value of equity ("EVE") methodology to gauge its interest rate risk exposure as derived from its simulation model. Generally, EVE is the discounted present value of the difference between incoming cash flows on interest-earning assets and other investments and outgoing cash flows on interest-bearing liabilities. The application of the methodology attempts to quantify interest rate risk by measuring the change in the EVE that would result from a theoretical instantaneous and sustained 200 basis point shift in market interest rates.

Presented below, as of December 31, 2001, is an analysis of the Company's interest rate risk as measured by changes in EVE for parallel shifts of 200 basis points in market interest rates:

Change in Rates	$ Change in EVE (In Thousands)	% Change in EVE	EVE as a % of Present Value of Assets
			EVE Ratio	Change
-200 bps.	$  3,835	9.95%	7.86%	60 bps.
0 bps.	---	---	7.25%	---
+200 bps.	$ (3,971)	(9.89)%	6.61%	(65) bps.

The percentage change in EVE as a result of a 200 basis point decrease in interest rates at December 31, 2001 was 9.95% compared with 5.01% as of December 31, 2000. The percentage change in EVE as a result of a 200 basis point increase in interest rates on December 31, 2001 of 9.89% compared with 4.74% change as of December 31, 2000.

The Company's EVE is most directly affected by the convexity and duration of its investment portfolio. The duration and negative convexity of the Company's investment portfolio produce disproportionate effects on the value of the portfolio with changes in interest rates. Convexity measures the percentage of portfolio price appreciation or depreciation relative to a decrease or increase in interest rates. The higher the negative convexity, the greater the decline in the value of a fixed income security as interest rates increase. The Company's investment portfolio is primarily comprised of long-term, fixed income securities, the value of which would be adversely affected in a rising interest rate environment.

Management believes that the EVE methodology overcomes three shortcomings of the typical maturity GAP methodology. First, it does not use arbitrary repricing intervals and accounts for all expected future cash flows. Second, because the EVE method projects cash flows of each financial instrument under different interest rate environments, it can incorporate the effect of cash flow fluctuations on mortgage related securities on an institution's interest rate risk exposure. Third, it allows interest rates on different instruments to change by varying amounts in response to a change in market interest rates, resulting in more accurate estimates of cash flows.

As with any method of gauging interest rate risk, however, there are certain shortcomings inherent to the EVE methodology. The model assumes interest rate changes are instantaneous parallel shifts in the yield curve. In reality, rate changes are rarely instantaneous. The use of the simplifying assumption that short-term and long-term rates change by the same degree may also misstate historical rate patterns which rarely show parallel yield curve shifts. Further, the model assumes that certain assets and liabilities of similar maturity or repricing will react identically to changes in rates. In reality, the market value of certain types of financial instruments may adjust in anticipation of changes in market rates, while any adjustment in the valuation of other types of financial instruments may lag behind the change in general market rates. Additionally, the EVE methodology does not reflect the full impact of contractual restrictions on changes in rate s for certain assets, such as adjustable rate loans. When interest rates change, actual loan prepayments and actual early withdrawals from time deposits may deviate significantly from the assumptions used in the model. Finally, this methodology does not measure or reflect the impact that higher rates may have on the ability of adjustable-rate loan clients to service their debt. All of these factors are considered in monitoring the Company's exposure to interest rate risk.

The prime rate in effect for both December 31, 2001 and December 31, 2000 was 4.75% and 9.50%, respectively. Management believes that in the short term the prime rate will remain relatively stable.

Liquidity

Liquidity involves the Company's ability to raise funds to support asset growth or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate the Company on an ongoing basis. Liquidity is managed to ensure there is sufficient funding to satisfy demand for credit, deposit withdrawals and attractive investment opportunities. A large, stable core deposit base, and a strong capital position are the solid foundation for the Company's liquidity position.

The Company's liquidity needs are met primarily by financing activities, consisting mainly of core deposits, but also include borrowed funds and cash flows from operations. Customer-based core deposits, the Company's largest and most cost-effective source of funding, totaled $239.5 million representing 68.4% of total deposits at December 31, 2001 compared to $191.2 million or 70.0% at December 31, 2000. Net borrowed funds, which primarily include short-term funds purchased and sold, wholesale and brokered domestic deposits, FHLB and other short-term borrowings, were $89.0 million at December 31, 2001, compared with $36.2 million at December 31, 2000. Cash flows from operations are also a significant source of liquidity. Net cash from operations primarily results from net income adjusted for noncash items such as depreciation and amortization, provision for loan and lease losses, and deferred tax items.

Liquidity is strengthened by ready access to a diversified base of wholesale funding sources. These sources include federal funds purchased, securities sold under agreements to repurchase, certificates of deposit, and FHLB advances. Liquidity is also available through unpledged loans and securities in the investment portfolio.

The Company has a contingency funding plan that stress-tests liquidity needs that may arise from certain events such as rapid loan growth or significant deposit runoff. The plan also provides for continual monitoring of net borrowed funds dependence and available sources of liquidity. Management believes the Company has the funding capacity to meet operational and contingent liquidity needs.

Subject to certain limitations, the Bank is eligible for certain borrowing programs through the FHLB. Generally, most advances require delivery of eligible securities as collateral. Maturities under these programs range from one day to 20 years. FHLB advances can be particularly attractive as a longer-term funding source to balance interest rate sensitivity and reduce interest rate risk. During the year ended December 31, 2001, the Company used the FHLB borrowing proceeds to acquire fixed income securities in an effort to utilize its leverage capacity and increase earnings and minimize the results that a declining rate environment would have on its income stream, and to diversify its funding costs.

At December 31, 2001, the Company was using three of the 17 borrowing programs for which it is eligible through the FHLB totaling $89.0 million. The first, the LIBOR Advance is a source of term financing priced at a spread to the prevailing rates on one- and three-month LIBOR, with maturities ranging from 12 months up to a maximum of 120 months. At December 31, 2001 the Company had two loans totaling $35.0 million under this program. The second program, the Repo Advance is a source of liquidity with terms and conditions comparable to those available in the market for short-term repurchase agreements. Borrowers specify term to maturity from one day to one year. The interest rate is fixed for the term of the advance. At December 31, 2001 and 2000, the Company had one loan for $14.0 million outstanding under this program. The third program, the Convertible Fixed Rate Advance, provides the Company with a fixed rate loan for a determined period of time afte r which it converts to a floating rate advance. Upon such event, the Company is able to prepay the advance without incurring a penalty fee. At December 31, 2001, the Company had four loans totaling $40.0 million outstanding under this program. As a requirement to these advances, the Company currently maintains some of its investment securities in safekeeping at the FHLB.

The following table summarizes the Company's total contractual obligations and commercial commitments as of December 31, 2001.

	Year ended December 31, 2001
	Within One  Year	After one but within three years	After three years but within five years	After five years	Total
	(Dollars in thousands)
Short term FHLB debt	$  14,000	$          --	$          --	$          --	$ 14,000
Long-term FHLB debt	--	35,000	--	40,000	75,000
Operating leases	826	1,709	1,687	3,539	7,761
Other long-term obligations	--	--	--	--	--
Total contractual cash               obligations	$  14,826	$ 36,709	$  1,687	$ 43,539	$ 96,761
	========	=======	======	======	=======

	Year ended December 31, 2001
	Within One   Year	After one but within three years	After three years but within five years	After five years	Total
	(Dollars in thousands)
Standby letters of credit	$   6,160	$    660	$          --	$          --	$     6,820
Undisbursed construction loans	15,377	--	--	--	15,377
Unused lines of credit	74,735	1,730	--	13,951	90,416
Other loan commitments	490	--	203	--	693
Total loan commitments and               letters of credit	$ 96,762	$ 2,390	$      203	$ 13,951	$ 113,306
	=======	======	======	======	========

Due to the nature of the Company's unfunded loan commitments, including unfunded lines of credit, the amounts presented above do not necessarily represent amounts the Company anticipates funding in the time periods presented above.

Capital Resources

Capital management consists of providing equity to support both current and future operations. The Company is subject to capital adequacy requirements imposed by the Federal Reserve Board and the Bank is subject to capital adequacy requirements imposed by the Federal Reserve and the TDFI. The Federal Reserve Board, the Federal Reserve and the TDFI have adopted risk-based capital requirements for assessing bank holding company and bank capital adequacy. These standards define capital and establish minimum capital requirements in relation to assets and off-balance sheet exposure, adjusted for credit risk. The risk-based capital standards currently in effect are designed to make regulatory capital requirements more sensitive to differences in risk profiles among bank holding companies and banks, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk c ategories, each with appropriate relative risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items.

The risk-based capital standards of the Federal Reserve Board require all bank holding companies to have a "Leverage Ratio" of at least 3.0%, "Tier 1 capital" of at least 4.0% and "total risk-based" capital (Tier 1 and Tier 2) of at least 8.0% of total risk-adjusted assets. Leverage ratio is calculated by dividing total assets into total equity, excluding other comprehensive income. "Tier 1 capital" generally includes common shareholders' equity and qualifying perpetual preferred stock together with related surpluses and retained earnings, less deductions for goodwill and various other intangibles. "Tier 2 capital" may consist of a limited amount of intermediate-term preferred stock, a limited amount of term subordinated debt, certain hybrid capital instruments and other debt securities, perpetual preferred stock not qualifying as Tier 1 capital and a limited amount of the general valuation allowance for loan and lease losses. The sum of Tier 1 capital and Tier 2 capital is "total risk-based capital."

The Federal Reserve Board has also adopted guidelines which supplement the risk-based capital guidelines with a minimum ratio of Tier 1 capital to average total consolidated assets ("leverage ratio") of 3.0% for institutions with well diversified risk, including no undue interest rate exposure; excellent asset quality; high liquidity; good earnings; and that are generally considered to be strong banking organizations, rated composite 1 under applicable federal guidelines and that are not experiencing or anticipating significant growth. Other banking organizations are required to maintain a leverage ratio of at least 4.0% to 5.0%. These rules further provide that banking organizations experiencing internal growth or making acquisitions will be expected to maintain capital positions substantially above the minimum supervisory levels and comparable to peer group averages, without significant reliance on intangible assets.

Pursuant to FDICIA, each federal banking agency revised its risk-based capital standards to ensure that those standards take adequate account of interest rate risk, concentration of credit risk and the risks of nontraditional activities, as well as reflect the actual performance and expected risk of loss on multifamily mortgages. The Bank is subject to capital adequacy guidelines of the Federal Reserve that are substantially similar to the Federal Reserve Board's guidelines. Also pursuant to FDICIA, the Federal Reserve has promulgated regulations setting the levels at which an insured institution such as the Bank would be considered "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized" and "critically undercapitalized." The Bank is classified "well capitalized" for purposes of the Federal Reserve's prompt corrective action regulations. See "Supervision and Regulation - -- The Company" and " -- The Bank."

Shareholders' equity decreased from $42.3 million at December 31, 2000 to $38.6 million at December 31, 2001, a decrease of $3.7 million or 8.75%. This decrease was the result of the stock repurchase program commenced in 1999, which continued during 2001, coupled with $2.2 million in dividends paid, these were partially offset by net income of $3.3 million for the year ended December 31, 2001.

The following table provides a comparison of the Company's and the Bank's leverage and risk-weighted capital ratios as of December 31, 2001 to the minimum and well-capitalized regulatory standards:

	Minimum Required	Well Capitalized	Actual Ratio at December 31, 2001
The Company
Leverage ratio(1)	3.00%	N/A	8.55%
Tier 1 risk-based capital ratio	4.00	N/A	9.82
Risk-based capital ratio	8.00	N/A	11.07
The Bank
Leverage ratio(1)	3.00%	5.00%	7.88%
Tier 1 risk-based capital ratio	4.00	6.00	9.04
Risk-based capital ratio	8.00	10.00	10.30
(1) The Federal Reserve Board may require the Company and Bank to maintain a leverage ratio of up to 200 basis points above the       required minimum.

NEW ACCOUNTING PRONOUNCEMENTS.

Business Combinations, Goodwill, and Intangible Assets. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement No. 141 ("SFAS 141"), Business Combinations, and Statement No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also specifies criteria that intangible assets, acquired in a purchase method business combination, must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. SFAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS 142. SFAS 142 will also require that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.

The Company adopted the provisions of SFAS 141 in 2001 and is required to adopt SFAS 142 effective January 1, 2002. Upon adoption of SFAS 142, goodwill and intangible assets determined to have an indefinite useful life acquired in a purchase business combination will not be amortized, but will continue to be evaluated for impairment.

Upon adoption of SFAS 142, the Company must evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in SFAS 141 for recognition apart from goodwill. The Company will also be required to reassess the useful lives and residual values of all intangible assets acquired, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of SFAS 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

In connection with SFAS 142's transitional goodwill impairment evaluation, SFAS 142 will require the Company to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To accomplish this, the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's statement of earnings.

At December 31, 2001, the Company had unamortized goodwill of $201,840, which will be subject to the transition provisions of SFAS 141 and 142. Amortization expense related to goodwill was $15,941 for the year ended December 31, 2001. Because of the small amount of unamortized goodwill at December 31, 2001, the Company does not expect SFAS 142 to have a significant impact on its financial statements.

Asset Retirement Obligations. In July 2001, the FASB issued SFAS No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations". That standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity will capitalize a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The standard is effective for fiscal years beginning after June 15, 2002, with earlier adoption permitted. The Company does not expect SFAS 143 to have a significant impact on its financial statements.

Impairment. In August 2001, the FASB issued SFAS No. 144 ("SFAS 144"), Accounting for the Impairment or Disposal of Long-Lived Assets, which supersedes both SFAS No. 121("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("Opinion 30"), for the disposal of a segment of a business (as previously defined in that Opinion). SFAS 144 retains the fundamental provisions in SFAS 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS 121. For example, SFAS 144 provides guidance on how a long-lived asset that is used, as part of a group should be evaluated for impairment, establishes criteria for when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be d isposed of other than by sale. SFAS 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business).

The Company is required to adopt SFAS 144 no later than January 1, 2002. Management does not expect the adoption of SFAS 144  to have a material impact on the Company's financial statements because the impairment assessment under SFAS 144 is largely unchanged from SFAS 121. 

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

For information regarding the market risk of the Company's financial instruments, see "-- Management's Discussion and Analysis of Financial Condition and Results of Operations - Interest Rate Sensitivity and Interest Rate Risk Management." The Company's principal market risk exposure is to interest rates.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to the financial statements, the reports thereon, the notes thereto and supplementary data commencing at page F-1 of this Form 10-K, which financial statements, reports, notes and data are incorporated herein by reference.

QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table represents summarized data for each of the quarters during fiscal years 2001 and 2000.

	2001
	For the three months ended
	December 31	September 30	June 30	March 31
	(In thousands, except per share data)
Interest income	$      8,504	$      8,664	$      8,456	$      7,886
Interest expense	4,012	4,450	4,352	4,042
Net interest income	4,492	4,214	4,104	3,844
Provision for loan and lease losses	616	658	687	255
Net interest income after provision for loan and            lease losses	3,876	3,556	3,417	3,589
Noninterest income	1,528	977	1,025	771
Noninterest expense	4,039	3,166	3,045	2,976
Income before provision for income taxes	1,365	1,367	1,397	1,384
Provision for income taxes	598	522	534	533
Net income	$        767	$        845	$        863	$        851
	=======	=======	=======	=======
Income per share:
Basic	$     0.25	$     0.26	$     0.26	$     0.25
Diluted	$     0.25	$     0.26	$     0.26	$     0.25
Weighted Average Common Shares Outstanding:
Basic	3,015	3,232	3,285	3,418
Diluted	3,064	3,254	3,306	3,425

	2000
	For the three months ended
	December 31	September 30	June 30	March 31
	(In thousands, except per share data)
Interest income	$      7,828	$      7,410	$      6,780	$      6,263
Interest expense	3,926	3,724	3,364	2,911
Net interest income	3,902	3,686	3,416	3,352
Provision for loan and lease losses	449	360	237	210
Net interest income after provision for loan and            lease losses	3,453	3,326	3,179	3,142
Noninterest income	795	712	660	618
Noninterest expense	2,943	2,715	2,466	2,418
Income before provision for income taxes	1,305	1,323	1,373	1,342
Provision for income taxes	531	523	522	510
Net income	$        774	$        800	$        851	$        832
	=======	=======	=======	=======
Income per share:
Basic	$     0.23	$     0.23	$     0.23	$     0.21
Diluted	$     0.23	$     0.23	$     0.23	$     0.21
Weighted Average Common Shares Outstanding:
Basic	3,450	3,519	3,632	3,875
Diluted	3,451	3,521	3,649	3,920

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There have been no disagreements with accountants on any matter of accounting principles or practices or financial statement disclosures during the two-year period ended December 31, 2001.

PART III

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The information under the captions "Election of Directors", "Continuing Directors and Executive Officers" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive Proxy Statement for its 2002 Annual Meeting of Shareholders to be filed with the Commission pursuant to Regulation 14A under the Securities and Exchange Act of 1934, as amended (the "2002 Proxy Statement"), is incorporated herein by reference in response to this item.

ITEM 11.    EXECUTIVE COMPENSATION

The information under the caption "Executive Compensation and Other Matters" in the 2002 Proxy Statement is incorporated herein by response to this item.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information under the caption "Beneficial Ownership of Common Stock by Management of the Company and Principal Shareholders" in the 2002 Proxy Statement is incorporated herein by response to this item.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information under the caption "Interests of Management and Others in Certain Transactions" in the 2002 Proxy Statement is incorporated herein by response to this item.

PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(A) CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

Reference is made to the Consolidated Financial Statements, the reports thereon, the notes thereto and supplementary data commencing at page F-1 of this Annual Report on Form 10-K. Set forth below is a list of such Consolidated Financial Statements:

    Independent Auditors' Report

    Consolidated Balance Sheets as of December 31, 2001 and 2000

    Consolidated Statements of Income for the Years Ended December 31, 2001, 2000 and 1999

    Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income for the Years Ended 
         December 31, 2001, 2000 and 1999

    Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999

    Notes to Consolidated Financial Statements

FINANCIAL STATEMENT SCHEDULES

All supplemental schedules are omitted as inapplicable or because the required information is included in the Consolidated Financial Statements or notes thereto.

(B) REPORTS ON FORM 8-K

Not applicable

(C) EXHIBITS

Each exhibit marked with an asterisk is filed with this Annual Report on Form 10-K.

EXHIBIT		COMMENTS
1	-	Not required.
2	-	Plan of acquisition, reorganization, arrangement, liquidation, or succession. None
3		Articles of Incorporation and By-Laws, incorporated by reference to exhibit 3 to the Registrants' Annual Report Form 10-K for the year ended December 31, 2000.
4		Instruments defining the rights of security holders, including indentures.
4.01		Form of specimen Certificate of Common Stock, incorporated by reference to exhibit 4.01 to the Registrant's Annual Report Form 10-K for the year ended December 31, 2000.
4.02		Community Financial Group, Inc., and Registrar and Transfer Company, as Rights Agent, Shareholders Rights Agreement dated as of January 21, 1998, incorporated by reference to Exhibit 4.1 to the Registrant's Form 8-A dated January 26, 2998.
5		Not required.
6		Not required.
7		Not required.
8		Not required.
9		Voting Trust Agreement. None.
10	-	Material Contracts.
10.01*	-	Lease Agreement dated November 20, 2000 between The Bank of Nashville and Carothers at Bakers Bridge, LLC.
10.02*	-	Option Agreement dated July 16, 1996 by and between Community Financial Group, Inc., and Mack S. Linebaugh, Jr., incorporated by reference to exhibit 10.03 to the Registrant's Annual Report Form 10-KSB for the year ended December 31, 1996 (SEC File No. 000-28496, Film No. 97566529), and amendments thereto dated August 22, 2000, incorporated by reference to exhibit 10.01 to the Registrant's Annual Report Form 10-K for the year ended December 31, 2000. Amendments to Non-Qualified Stock Option Agreement dated February 8, 2000, May 13, 1999, April 21, 1998, and April 29, 1997, all of which Amendments are dated August 22, 2000 incorporated by reference to exhibit 10.01 to the Registrant's Annual Report Form 10-K for the year ended December 31, 2000.
10.03*	-	Option Agreement dated July 16, 1996 by and between Community Financial Group, Inc., and Julian C. Cornett incorporated by reference to exhibit 10.04 to the Registrant's Annual Report Form 10-KSB for the year ended December 31, 1996 (SEC File No. 000-28496, Film No. 97566529), and amendments thereto dated August 22, 2000, incorporated by reference to exhibit 10.01 to the Registrant's Annual Report Form 10-K for the year ended December 31, 2000. Amendments to Non-Qualified Stock Option Agreement dated February 8, 2000, May 13, 1999, April 21, 1998, and April 29, 1997, all of which Amendments are dated August 22, 2000 incorporated by reference to exhibit 10.02 to the Registrant's Annual Report Form 10-K for the year ended December 31, 2000.
10.05		Option Agreement by and between Community Financial Group, Inc. and J. Hunter Atkins dated August 20, 2000, incorporated by reference to exhibit 10.03 to the Registrant's Annual Report Form 10-K for the year ended December 31, 2000.
10.06		Option Agreement by and between Community Financial Group, Inc. and Attilio F. Galli dated August 21, 2000, incorporated by reference to exhibit 10.04 to the Registrant's Annual Report Form 10-K for the year ended December 31, 2000.
10.07*		Option Agreement by and between Community Financial Group, Inc. and J. Hunter Atkins dated June 19, 2001.
10.08*		Option Agreement by and between Community Financial Group, Inc. and Attilio F. Galli dated June 19, 2001.
10.09*		Option Agreement by and between Community Financial Group, Inc. and Julian C. Cornett dated June 19, 2001.
10.10*		Lease Agreement dated January 23, 2002 by and between The Bank of Nashville and Richard W. Carpenter, Sr., and Richard S. Davis, Jr.
10.11		Lease Agreement dated July 19, 1989 between The Bank of Nashville and Metropolitan Life Insurance Company, incorporated by reference to Exhibit 10.05 to the Registrant's Annual Report Form 10-KSB for the year ended December 31, 1996 (SEC File No. 000-28496, Film No. 97566529). Metropolitan Life Insurance Company has been succeeded as property owner by LC Tower, L.L.C.
10.12		Lease Agreement dated August 7, 1996 between The Bank of Nashville and Coleman Partners, a Tennessee Partnership, incorporated by reference to Exhibit 10.06 to the Registrant's Annual Report Form 10-KSB for the year ended December 31, 1996 (SEC File No. 000-28496, Film No. 97566529).
10.13		The Bank of Nashville Retirement Savings Plan, incorporated by reference to Exhibit 10.07 to the Registrant's Annual Report Form 10-KSB for the year ended December 31, 1996 (SEC File No. 000-28496, Film No. 97566529) and amendment No. 1 to said plan filed as Exhibit 99.1 to Registrant's Form S-8 filed July 27, 2000 (SEC File No. 333-42328, Film No. 679755).
10.14		Associates' Stock Purchase Plan, incorporated by reference to Exhibit 10.08 to the Registrant's Annual Report Form 10-KSB for the year ended December 31, 1996 (SEC File No. 000-28496, Film No. 97566529).
10.15		Community Financial Group, Inc. 1997 Nonstatutory Stock Option Plan, incorporated by reference to Exhibit 10.09 to the Registrant's Form S-2 (SEC File No. 333-24309) dated April 1, 1997.
10.16		Lease Agreement dated August 4, 1997 between The Bank of Nashville and Graystone, LLC. Incorporated by Exhibit 10.10 to the Registrant's Annual Report Form 10KSB (SEC File No. 000-28496, Film No. 98579662).
10.17		First Amendment to the Lease Agreement dated April 13, 1999 between The Bank of Nashville and LC Tower, LLC. Incorporated by reference to Exhibit 10.23 to the Registrant's Annual Report Form 10K for the year ended December 31, 1999 (SEC File No. 000-28496, Film No. 585946).
10.18		Second Amendment to the Lease Agreement dated June 20, 2000 between The Bank of Nashville and LC Tower, LLC. Incorporated by reference to Exhibit 10.18 to the Registrant's Annual Report Form 10-K for the year ended December 31, 2000.
10.19*		Executive Termination Agreement by and between Community Financial Group, Inc., The Bank of Nashville, and Julian C. Cornett dated March 1, 2002.
10.20*		Executive Termination Agreement by and between Community Financial Group, Inc., The Bank of Nashville, and C. Blake Parks initially entered into on March 1, 2001 and extended on March 1, 2002.
10.21*		Executive Employment Agreement by and between Community Financial Group, Inc., The Bank of Nashville, and J. Hunter Atkins initially entered into on September 15, 2000 as extended on March 1, 2002.
10.22*		Executive Employment Agreement by and between Community Financial Group, Inc., The Bank of Nashville, and Attilio F. Galli initially entered into on March 1, 2001 as amended and extended on March 1, 2002.
11	-	Statement re computation of earnings per share, included as Note (L) to the Consolidated Financial Statements on Page F-8 of this Form 10K.
12	-	Statement re computation of ratios. Not applicable.
13	-	Not required.
14	-	Not required.
15	-	Not required.
16	-	Letter re change in certifying accountant. Not applicable.
17	-	Not required.
18	-	Letter re change in accounting principles. Not applicable.
19	-	Not required.
20	-	Not required.
21	-	Subsidiaries of the registrant.
22	-	Published report regarding matters submitted to vote of security holders. None.
23	-	Consent of KPMG, LLP
24	-	Power of Attorney. None.
25	-	Not required.
26	-	Not required.
99	-	Additional Exhibits. None

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 Community Financial Group Inc, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Nashville and State of Tennessee on March 19, 2002.

                                                                                                     COMMUNITY FINANCIAL GROUP, INC.

                                                                                                     By: /s/ J. HUNTER ATKINS                             

                                                                                                                             J. Hunter Atkins

                                                                                                            President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the indicated capacities on March 19, 2002.

Signature Position

/s/ J. HUNTER ATKINS	President and Chief Executive Officer
J. Hunter Atkins	(principal executive officer)

/s/ ATTILIO F. GALLI	Chief Financial Officer
Attilio F. Galli	(principal financial officer)

MACK S. LINEBAUGH
Mack S. Linebaugh	Director

L. LEON MOORE
L. Leon Moore	Director

J. B. BAKER
J. B. Baker	Director

/s/ PERRY W. MOSKOVITZ
Perry W. Moskovitz	Director

/s/ JO D. FEDERSPIEL
Jo D. Federspiel	Director

RICHARD H. FULTON
Richard H. Fulton	Director

/s/ C. NORRIS NIELSEN
C. Norris Nielsen	Director

/s/ DAVID M. RESHA
David M. Resha	Director

/s/ G. EDGAR THORNTON
G. Edgar Thornton	Director

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES

	PAGE
Report of Management's Responsibility for Financial Reporting	F - 2
Independent Auditors' Report	F - 3
Consolidated Balance Sheets as of December 31, 2001 and 2000	F - 4
Consolidated Statements of Income for the Years Ended December 31, 2001, 2000 and 1999	F - 5
Consolidated Statements of Changes in Shareholders' Equity and Comprehensive Income for the Years Ended         December 31, 2001, 2000 and 1999	F - 6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999	F - 7
Notes to Consolidated Financial Statements	F - 8

REPORT OF MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The Management of Community Financial Group, Inc. and subsidiaries (the "Company") is responsible for preparing the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America. The amounts therein are based on Management's best estimates and judgments. Management has also prepared other information in the annual report and is responsible for its accuracy and consistency with the consolidated financial statements.

The Company maintains a system of internal accounting control which Management believes, taken as a whole, is sufficient to provide reasonable assurance that assets are properly safeguarded and that transactions are executed in accordance with proper authorization and are recorded and reported properly. In establishing and maintaining any system of internal accounting control, estimates and judgments are required to assess the relative costs and expected benefits. The Company also maintains a program that independently assesses the effectiveness of its internal controls.

The Company's consolidated financial statements have been audited by independent certified public accountants. Their Independent Auditors' Report, which follows, is based on an audit made in accordance with auditing standards generally accepted in the United States of America and expresses an opinion as to the fair presentation of the Company's consolidated financial statements. In performing their audit, the Company's independent certified public accountants consider the Company's internal control to the extent they deem necessary in order to issue their opinion on the consolidated financial statements.

The Board of Directors pursues its oversight role for the consolidated financial statements through the Audit Committee, which consists solely of outside directors. The Audit Committee meets periodically with both Management and the independent certified public accountants to assure that each is carrying out its responsibilities.

/s/ J. Hunter Atkins

J. Hunter Atkins
President and CEO

March 19, 2002

F - 2

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Community Financial Group, Inc.:

We have audited the accompanying consolidated balance sheets of Community Financial Group, Inc. and subsidiaries (the Company) as of December 31, 2001 and 2000, and the related consolidated statements of income, changes in shareholders' equity and comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2001. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Community Financial Group, Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America.

/s/ KPMG LLP
Nashville, Tennessee
January 15, 2002

F - 3

COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)

	December 31,
	2001	2000
ASSETS
Cash and due from banks	$    18,217	$     10,738
Federal funds sold and other temporary investments	4,550	8,300
Investment securities available-for-sale      (amortized cost of $112,423 in 2001 and $62,678 in 2000)	113,356	62,775
Residential mortgage loans held-for-sale	2,366	--
Loans and leases (net of unearned income of $2,590 in 2001 and $2,886 in 2000
Commercial	138,327	110,105
Real estate - mortgage loans	114,965	88,262
Real estate - construction loans	45,481	37,719
Consumer	32,539	24,785
Lease financing	8,625	9,697
Loans and leases, net of unearned income	339,937	270,568
Less allowance for loan and lease losses	(5,098)	(4,622)
Total net loans and leases	334,839	265,946
Premises and equipment, net	4,166	3,471
Accrued interest receivable and other assets	4,817	3,390
Total assets	$  482,310	$ 354,620
	========	=======
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing	$  38,572	$   27,866
NOW accounts	36,562	21,074
Money market accounts	93,421	91,447
Time deposits less than $100,000	100,759	70,636
Time deposits greater than $100,000	80,633	62,013
Total deposits	349,948	273,036
Federal Home Loan Bank and other borrowings	89,000	36,236
Accounts payable and accrued liabilities	4,738	3,067
Total liabilities	443,685	312,339
Commitments and contingencies	--	--
Shareholders' equity:
Common stock, $6 par value; authorized 50,000,000 shares; issued and outstanding            shares of 3,077,071 in 2001 and 3,425,850 in 2000	18,462	20,555
Additional paid-in capital	10,640	13,507
Retained earnings	9,282	8,159
Accumulated other comprehensive income, net of tax	241	60
Total shareholders' equity	38,625	42,281
Total liabilities and shareholders' equity	$  482,310	$  354,620
	========	========

See accompanying notes to consolidated financial statements

F - 4

COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, Except Per Share Data)

	Years Ended December 31,
	2001	2000	1999
Interest income:
Interest and fees on loans	$      26,821	$      23,035	$      15,995
Federal funds sold and other temporary investments	424	170	626
Interest on investment securities:
U.S. government agency obligations	5,805	4,602	4,101
States and political subdivisions, tax-exempt	117	116	67
Other securities	343	358	186
Total interest income	33,510	28,281	20,975
Interest expense:
Interest-bearing demand deposits	4,113	4,904	4,196
Time deposits less than $100,000	5,329	3,319	2,031
Time deposits greater than $100,000	3,989	4,112	1,894
Federal Home Loan Bank and other borrowings	3,369	1,122	156
Federal funds purchased	56	468	776
Total interest expense	16,856	13,925	9,053
Net interest income	16,654	14,356	11,922
Provision for loan and lease losses	2,216	1,256	106
Net interest income after provision for loan and lease losses	14,438	13,100	11,816
Noninterest income:
Service fee income	1,200	884	879
Trust income	--	--	93
Investment center income	1,555	1,589	1,345
Gain/(loss) on sale of investment securities, net	457	(97)	(5)
Gain on sale of mortgage loans held for sale	487	--	--
Income from foreclosed assets	--	83	3
Gain on sale of other real estate owned	126	10	29
Other noninterest income	476	316	331
Total noninterest income	4,301	2,785	2,675
Noninterest expense:
Salaries and employee benefits	7,154	5,864	4,687
Occupancy	1,712	1,525	1,298
Insufficient check losses	486	50	184
Audit, tax and accounting	392	252	262
Other outside services	390	290	222
Advertising and marketing	381	319	336
Data and item processing	361	207	175
Loan related	313	281	183
Legal services	287	117	72
Telecommunications	257	179	170
Other noninterest expense	1,493	1,458	1,256
Total noninterest expense	13,226	10,542	8,845
Income before provision for income taxes	5,513	5,343	5,646
Provision for income taxes	2,187	2,086	2,145
Net income	$      3,326	$      3,257	$      3,501
	=======	=======	=======
Net income per common share:
Basic	$     1.02	$     0.90	$     0.86
Diluted	$     1.02	$     0.90	$     0.85
Weighted average shares outstanding:
Basic	3,251	3,619	4,068
Diluted	3,268	3,635	4,129

See accompanying notes to consolidated financial statements

F - 5

COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
AND
COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(In thousands)

	Common Stock               Shares        At Par		Additional Paid-in    Capital	Retained   Earnings	Accumulated Other Comprehensive Income(loss)      net of tax	Total
Balance at January 1, 1999	4,216	$  25,299	$    19,773	$     5,759	$       340	$    51,171
Issuance of common stock	12	70	85	--	--	155
Repurchase of common stock	(305)	(1,827)	(2,477)	--	--	(4,304)
Comprehensive income:
Other comprehensive loss	--	--	--	--	(1,327)	--
Net income	--	--	--	3,501	--	--
Total comprehensive income					--	2,174
Dividends, $0.46 per share	--	--	--	(1,881)	--	(1,881)
Balance at December 31, 1999	3,924	23,542	17,381	7,379	(987)	47,315
Issuance of common stock	82	490	321	--	--	811
Repurchase of common stock	(580)	(3,477)	(4,195)	--	--	(7,672)
Comprehensive income:
Other comprehensive income	--	--	--	--	1,047	--
Net income	--	--	--	3,257	--	--
Total comprehensive income						4,304
Dividends, $0.68 per share	--	--	--	(2,477)	--	(2,477)
Balance at December 31, 2000	3,426	20,555	13,507	8,159	60	42,281
Issuance of common stock	13	79	98	--	--	177
Repurchase of common stock	(362)	(2,172)	(2,965)	--	--	(5,137)
Comprehensive income:
Other comprehensive income	--	--	--	--	181
Net income	--	--	--	3,326	--
Total comprehensive income						3,507
Dividends, $0.68 per share	--	--	--	(2,203)	--	(2,203)
Balance at December 31, 2001	3,077	$  18,462	$    10,640	$    9,282	$         241	$  38,625
	======	======	=======	======	=======	======

See accompanying notes to consolidated financial statements

F - 6

COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Years ended December 31,
	2001	2000	1999
Cash flows from operating activities:
Interest received	$   33,410	$   28,273	$   20,809
Fees received	3,599	2,785	2,675
Interest paid	(16,660)	(13,921)	(8,469)
Cash paid to suppliers and associates	(15,017)	(10,218)	(10,869)
Net cash provided by operating activities	5,332	6,919	4,146
Cash flows from investing activities:
Maturities of investment securities available for sale	25,219	18,252	52,153
Sales of investment securities available for sale	25,047	10,395	8,203
Purchases of investment securities available for sale	(99,511)	(14,740)	(65,648)
Net cash paid for TBON Leasing	--	--	(1,250)
Residential mortgage loans held-for-sale	(2,366)	--	--
Loans and leases originated by customers, net	(71,097)	(64,646)	(46,541)
Capital expenditures	(1,407)	(573)	(1,361)
Net cash used by investing activities	(124,115)	(51,312)	(54,444)
Cash flows from financing activities:
Net increase in demand deposits, NOW and money market accounts	28,168	13,996	23,780
Net increase in certificates of deposit	48,743	29,899	42,808
Repayment of advances from Federal Home Loan Bank	(36,236)	(10,000)	(4,720)
Advances from the Federal Home Loan Bank and other borrowings	89,000	21,736	10,000
Net proceeds from issuance of common stock	177	656	155
Repurchase of common stock	(5,137)	(7,672)	(4,304)
Cash dividends paid	(2,203)	(2,477)	(1,881)
Net cash provided by financing activities	122,512	46,138	65,838
Net increase (decrease) in cash and cash equivalents	3,729	(1,745)	15,540
Cash and cash equivalents at beginning of year	19,038	20,783	5,243
Cash and cash equivalents at end of year	$   22,767	$   19,038	$   20,783
	=======	=======	=======
Reconciliation of net income to net cash provided by operating activities:
Net income	$    3,326	$    3,257	$    3,501
Adjustments to reconcile net income to net cash provided by operating activities:
(Gain)/loss on sale of investment securities	(457)	97	5
Depreciation and amortization	866	767	695
Provision for loan and lease losses	2,216	1,256	106
Provision for deferred income taxes	(941)	(437)	(161)
Gain on sale of other real estate owned	(126)	(10)	(29)
Stock dividend income	(245)	(131)	(117)
Changes in assets and liabilities:
Decrease/(increase) in accrued interest receivable and other assets	(242)	1,686	(1,064)
Increase in accounts payable and accrued liabilities	935	434	1,210
Net cash provided by operating activities	$    5,332	$    6,919	$    4,146
	=======	=======	=======
Supplemental Disclosure
Non Cash Transactions:
Change in unrealized gain/(loss) on investment securities          available for sale and derivative financial instruments, net of tax	$    181	$      1,047	$ (1,327)
Foreclosures of loans during the year	804	568	--
Cash paid for:
Income taxes	$    2,849	$  2,410	$  2,186
Interest	$  16,660	$  13,921	$  8,469

See accompanying notes to consolidated financial statements

F - 7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999

A.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Operations

Community Financial Group, Inc. (CFGI) is a registered bank holding company under the Federal Reserve Holding Company Act of 1956, as amended. CFGI owns The Bank of Nashville (the Bank) and its subsidiaries, all of which are collectively referred to as the Company. The Bank owns 100% of TBON-Mooreland Joint Venture, LLC (TBON-Mooreland), and an 80% interest in Machinery Leasing Company of North America, Inc. (TBON Leasing). The Bank is a state-chartered bank incorporated in 1989 under the laws of the state of Tennessee.

The Bank primarily provides commercial banking services to small business customers located in the Middle Tennessee market. The Bank competes with numerous financial institutions within its market place.

TBON Leasing buys, sells and leases machinery and equipment. TBON-Mooreland underwrites title insurance on the Bank's loans.

Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of CFGI and the Bank and its subsidiaries TBON Leasing and TBON-Mooreland (collectively the Company) after elimination of material intercompany accounts and transactions.

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Management has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. Following is a summary of the more significant accounting policies of the Company.

Cash and Cash Equivalents

For purposes of the consolidated statements of cash flows, cash and liquid investments with maturities of three months or less when purchased are considered to be cash and cash equivalents. Cash and cash equivalents consist primarily of cash and due from banks and federal funds sold and other temporary investments.

Investment Securities

At December 31, 2001 and 2000, the Company has classified its entire investment securities portfolio as available for sale. Available for sale investment securities are reported at fair value. Unrealized gains and losses on investment securities available for sale are reflected in accumulated other comprehensive income, net of applicable income taxes. The adjusted fair value of a specific investment security sold is used to compute the gain or loss on the sale of that security at which time the unrecognized gain or loss included in the other comprehensive income is realized and recorded in the income statement as a component of noninterest income. Investment security purchases and sales are recorded on their trade date. Purchased premiums and discounts are amortized and accreted into interest income on a constant yield over the life of the investment securities taking into consideration prepayment assumptions. A decline in the fair value of any available-for-sale or held to maturity investment security below cost that is deemed to be other than temporary, results in a reduction in carrying amount to fair value. The impairment is charged to earnings and a new cost basis for the security is established. In 1998, the Company acquired stock as an equity investment in American Growth Finance, Inc. (AGF), a factoring company which was carried on the cost basis. During 2001, 90% of the Company's investment in AGF was redeemed.

Loans and Leases

Loans are carried at the principal amount outstanding net of unearned income. Interest income on loans and amortization of unearned income is computed by methods which result in level rates of return on principal amounts outstanding. Management, considering current information and events regarding the borrowers' ability to repay their obligations, considers a loan to be impaired when it is probable that the Company will be unable to collect all amounts due according to contractual terms of the loan agreement. When a loan is considered impaired, the amount of the impairment is based on the present value of the expected future cash flows at the loan's effective interest rate or at the loan's market price or fair value of collateral if the loan is collateral-dependent. Impairment losses are included in the allowance for loan and lease losses through a charge to the provision for loan and lease losses. Interest income is accrued on loans except when doubt as to collectability exists, in which case the respective loans are placed on nonaccrual status. The decision to place a loan on nonaccrual is based on an evaluation of the borrower's financial condition, collateral liquidation value, and other factors that affect the borrower's ability to pay. At the time a loan is placed on nonaccrual, the accrued but unpaid interest is charged against current income. Thereafter, interest on nonaccrual loans is recognized as interest income only as received, unless the collectability of outstanding principal is doubtful, in which case such interest received is applied as a reduction of principal until the principal has been recovered, and is recognized as interest income thereafter.

TBON Leasing generally leases machinery under noncancelable, full payment leases which provide, through rentals, for full recovery of the cost of the machinery leased. For financial statement purposes, such leases are accounted for as direct financing leases whereby the contracts receivable and unearned interest income are recorded when lease contracts become effective. Unearned income for this type of lease is computed on the aggregate rentals less the cost of the machinery and is recognized as income over the life of the lease by the interest method. For income tax purposes, the Company reports lease income under the operating lease method or under the installment sales method, depending on the terms of the contract. When the operating lease method is used, depreciation is computed by the declining-balance or MACRS method. Included in the allowance for loan and lease losses is an amount provided to cover losses incurred in the collection of existing lease contracts receivable and the disposal of the related machinery.

Residential mortgage loans held-for-sale are carried at the lower of cost or market. Such loans are sold, servicing released, on a non-recourse basis and any gain on the sale of such loans is calculated based on sales proceeds received and origination fees recognized.

Allowance for Loan and Lease Losses

An allowance for loan and lease losses reflects an amount which, in management's judgment, is adequate to provide for estimated loan and lease  losses. Management's evaluation of the loan and lease portfolio consists of evaluating current delinquencies, the adequacy of underlying collateral, current economic conditions, risk characteristics, and management's internal credit review process. The allowance is established through a provision charged against earnings. Loans are charged off as soon as they are determined to be uncollectible. Recoveries of loans previously charged off are added to the allowance. While management uses available information to recognize losses on loans, future adjustments to the allowance may be necessary based on changes in economic conditions. In addition, various regulatory agencies, as part of their examinations, periodically review the Company's allowance for loan and lease losses. Such agencies may require the Company to adjust the allowance based on their judgment and information available to them at the time of their examinations.

Other Real Estate Owned

Other real estate owned includes property acquired in situations in which the Company has physical possession of a debtor's assets (collateral). Such assets are carried at the lower of cost or fair value less estimated cost to sell and are included in other assets. Cost includes the fair value of the property at the time of foreclosure, foreclosure expense, and expenditures for future improvements. Losses arising from the acquisition of such property are charged against the allowance for loan losses. Declines in value subsequent to foreclosure are recorded as a valuation allowance. Provisions for further declines or losses from disposition of such property are recognized in non-interest expense.

Premises and Equipment

Premises and equipment is stated at cost less accumulated depreciation and amortization. For financial reporting purposes, depreciation and amortization are computed using the straight-line method over the estimated useful lives of those assets. Leasehold improvements are amortized over the lease terms or the estimated useful lives whichever is less. The estimated lives are as follows:

	Years
Buildings and improvements	3 - 20
Furniture and equipment	3 - 10

Goodwill

For business combinations accounted for as purchases, the net assets have been adjusted to their estimated fair values as of the respective acquisition dates and the resulting adjustments are amortized over the life of the specific asset. The excess of the purchase price over the net assets acquired (goodwill) is recorded in other assets and is being amortized on a straight-line basis over 15 years.

The carrying value of goodwill is periodically reviewed for impairment. If this review indicates that the goodwill will not be recoverable, as determined based on the undiscounted cash flows of the entity acquired over the remaining amortization period, the Company's carrying value of the goodwill will be reduced by the estimated shortfall of the discounted cash flows with a corresponding charge to earnings.

Income Taxes

The Company accounts for income taxes in accordance with the asset and liability method of accounting. Under such method, deferred tax assets and liabilities are recognized for the estimated future tax effects attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

Net Income Per Common Share (EPS)

Basic EPS is computed by dividing net income available to common shareholders (numerator) by the weighted average number of common shares outstanding (denominator). The denominator used in computing diluted EPS reflects the dilutive effect of common stock options outstanding.

Business Segments

Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information" establishes standards for the way public business enterprises report information about operating segments in annual financial statements. SFAS No. 131 defines operating segments as components of an enterprise about which separate financial information is available that is regularly evaluated by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company operates in one business segment, commercial banking and has no additional individually significant business segments.

Stock-Based Compensation

The Company accounts for all stock-based compensation plans under Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees." Compensation cost for stock-based awards is measured by the excess, if any, of the fair market value of the stock, at the time the option is granted, over the amount the employee is required to pay. Compensation cost for the Company is measured at the grant date as all options are fixed awards.

Comprehensive Income

During 2001, 2000, and 1999 the components of comprehensive income, other than net income, is unrealized gains or losses on investment securities available for sale and derivative instruments, net of taxes.

Derivative Financial Instruments

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." ("SFAS No. 133"). In June 2000, the FASB issued SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," an Amendment of SFAS 133. SFAS No. 133 and SFAS No. 138 standardize the accounting for derivative instruments, including certain derivative instruments embedded in other contracts. Under the standards, entities are required to carry all derivative instruments on the balance sheet at fair value. The accounting for changes in fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and if so, on the reason for holding it. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair values, cash flows, or foreign currencies. If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of change, together with the offsetting loss or gain on the hedged item attributable to the risk being hedged. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of accumulated other comprehensive income (outside earnings), and subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness, as well as the ineffective portion of the gain or loss are reported in earnings immediately. If the derivative instrument is not designated as a hedge, the gain or loss is recognized in earnings in the period of change.

The Company adopted SFAS No. 133 and SFAS No. 138 on January 1, 2001.

The Company utilizes both fixed and variable rate deposits and other borrowings as funding. These obligations expose the Company to variability in interest payments and fair values due to changes in interest rates. If interest rates increase, interest expense increases and fair values decrease. Conversely, if interest rates decrease, interest expense decreases while fair values increase. Management believes it is prudent to limit the variability of its interest payments and changes in fair values of certain funding sources. To meet this objective, management enters derivative instruments to manage fluctuations in cash flows and fair values resulting from interest rate risk. These instruments include interest rate swaps. Under the interest rate swaps designated to hedge cash flows, the Company receives variable interest rate payments and makes fixed interest rate payments, thereby creating fixed-rate debt. Under the interest rate swap designated as a fair value hedge, the Company receives fixed interest rate payments and makes variable rate payments.

Interest rate swap transactions generally involve the exchange of fixed and floating interest rate payment obligations without the exchange of the underlying principal amounts. Entering into interest rate contracts involves not only interest rate risk, but also the risk of counterparties' failure to fulfill their legal obligations. Notional principal amounts often are used to express the volume of these transactions, however, the amounts potentially subject to credit risk are significantly smaller.

The Company does not enter into derivative instruments for any purpose other than cash flow or fair value hedging purposes. That is, the Company does not speculate using derivative instruments. The Company assesses interest rate cash flow and fair value risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows or fair values and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate cash flow and fair value risks attributable to both the Company's outstanding funding sources as well as the Company's offsetting hedge positions.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141 ("SFAS 141"), Business Combinations, and Statement No. 142 ("SFAS 142"), Goodwill and Other Intangible Assets. SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001. SFAS 141 also specifies criteria that intangible assets acquired in a purchase method business combination, must meet to be recognized and reported apart from goodwill, noting that any purchase price allocable to an assembled workforce may not be accounted for separately. SFAS 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS 142. SFAS 142 will also require that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment.

The Company adopted the provisions of SFAS 141 in 2001 and is required to adopt SFAS 142 effective January 1, 2002. Upon adoption of SFAS 142, goodwill and intangible assets determined to have an indefinite useful life acquired in a purchase business combination will not be amortized, but will continue to be evaluated for impairment.

Upon adoption of SFAS 142, the Company must evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and to make any necessary reclassifications in order to conform with the new criteria in SFAS 141 for recognition apart from goodwill. The Company will also be required to reassess the useful lives and residual values of all intangible assets acquired, and make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition to the extent an intangible asset is identified as having an indefinite useful life, the Company will be required to test the intangible asset for impairment in accordance with the provisions of SFAS 142 within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

In connection with SFAS 142's transitional goodwill impairment evaluation, SFAS 142 will require the Company to perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To accomplish this, the Company must identify its reporting units and determine the carrying value of each reporting unit by assigning the assets and liabilities, including the existing goodwill and intangible assets, to those reporting units as of the date of adoption. The Company will then have up to six months from the date of adoption to determine the fair value of each reporting unit and compare it to the reporting unit's carrying amount. To the extent a reporting unit's carrying amount exceeds its fair value, an indication exists that the reporting unit's goodwill may be impaired and the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's statement of earnings. 

At December 31, 2001, the Company had unamortized goodwill of $201,840 which will be subject to the transition provisions of SFAS 141 and 142.  Amortization expense related to goodwill was $15,941for the year ended December 31, 2001. Because of the small amount of unamortized goodwill at December 31, 2001, the Company doe snot expect SFAS 142 to have a significant impact on its financial statements.

In July 2001, the FASB issued No. 143 ("SFAS 143"), "Accounting for Asset Retirement Obligations". That standard requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the entity will capitalize a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity either settles the obligation for its recorded amount or incurs a gain or loss upon settlement. The standard is effective for fiscal years beginning after June 15, 2002, with earlier adoption permitted. The Company does not expect SFAS 143 to have a significant impact on its financial statements.

In August 2001, the FASB issued Statement No. 144 ("SFAS 144"), Accounting for the Impairment or Disposal of Long-Lived Assets , which supersedes both SFAS No. 121 ("SFAS 121"), Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("Opinion 30"), for the disposal of a segment of a business (as previously defined in that Opinion). SFAS 144 retains the fundamental provisions in SFAS 121 for recognizing and measuring impairment losses on long-lived assets held for use and long-lived assets to be disposed of by sale, while also resolving significant implementation issues associated with SFAS 121. For example, SFAS 144 provides guidance on how a long-lived asset that is used, as part of a group should be evaluated for impairment, establishes criteria for when a long-lived asset is held for sale, and prescribes the accounting for a long-lived asset that will be disposed of other than by sale. SFAS 144 retains the basic provisions of Opinion 30 on how to present discontinued operations in the income statement but broadens that presentation to include a component of an entity (rather than a segment of a business).

The Company is required to adopt SFAS 144 no later than January 1, 2002. Management does not expect the adoption of SFAS 144 to have a material impact on the Company's financial statements because the impairment assessment under SFAS 144 is largely unchanged from SFAS 121.

Reclassifications

Certain reclassifications have been made in the consolidated financial statements for prior years to conform to the 2001 presentation. During the year ended December 31, 2001, the Company reclassified its loan portfolio to reflect the business purpose of the loans and reclassified the categorization at December 31, 2000 for comparative purposes. Such reclassifications do not affect earnings. The Company's loan portfolio records were historically classified by collateral codes.

B.     JOINT VENTURE AND BUSINESS COMBINATIONS

In April 1999, the Bank formed TBON-Mooreland, as a joint venture of the Bank and Mooreland Title Company, LLC (Mooreland), providing title services within the office of Mooreland. This new title agency has the ability to underwrite title insurance on most real estate loan transactions. The Bank owns 100% of the title agency and consolidates all of its operations, and participates in a revenue sharing agreement with Mooreland for 50% of the revenue. In June 1999, the Bank acquired 80% ownership in TBON Leasing for $1.3 million in cash. The transaction has been accounted for using the purchase method of accounting and its operations are included in the consolidated financial statements of the Company from the date of acquisition. The primary asset acquired was an equipment lease portfolio of approximately $6.0 million. The excess of the purchase price over the fair value of the net assets acquired was $215,000 and was recorded as goodwill. Goodwill is being amortized over 15 years, respectively. Minority interest in TBON Leasing in 2001 and 2000 was not significant.

C.     CASH RESTRICTIONS

The Company is required to maintain reserves in the form of average vault cash and balances with the Federal Reserve Bank. The average amounts of these balances maintained during the years ended December 31, 2001 and 2000, were $1,822,000 and $3,259,000, respectively. The required balance at December 31, 2001 was $250,000.

D.     INVESTMENT SECURITIES

The amortized cost, gross unrealized gains and losses, and estimated fair values of investment securities at December 31, 2001 and 2000 are shown in the following table (in thousands). Other debt securities include collateralized mortgage obligations whose maturities are not segregated since they have staggered maturity dates. Investments in equity securities include stocks of the Federal Reserve Bank and Federal Home Loan Bank. Maturities of equity securities are not segregated since they have not stated maturity.

	As of December 31, 2001				As of December 31, 2000
	Amortized       Cost	Gross  Unrealized       Gain	Gross  Unrealized        Loss	Estimated Fair  Value	Amortized       Cost	Gross  Unrealized       Gain	Gross  Unrealized        Loss	Estimated Fair  Value
	(Dollars in thousands)
U.S. agency securities	$  84,309	$    889	$   211	$  84,987	$   33,928	$  227	$   154	$   34,001
Other debt securities	19,638	242	30	19,850	23,463	152	187	23,428
Municipal securities	2,292	43	--	2,335	2,291	59	--	2,350
Equity securities	6,184	--	--	6,184	2,996	--	--	2,996
Total securities	$ 112,423	$ 1,174	$   241	$ 113,356	$  62,678	$ 438	$   341	$  62,775
	=========	========	=======	========	========	========	=========	=========

Proceeds from the sales of securities during 2001, 2000, and 1999 were $25.0 million, $10.4 million, and $8.2 million, respectively. Gross gains of $497,000, $4,000, and $16,000 and gross losses of $40,000, $101,000, and $21,000 were realized on those sales in 2001, 2000, and 1999, respectively.

The amortized cost and fair value of debt securities by contractual maturity at December 31, 2001, are shown in the following table (in thousands). Expected maturities will differ from contractual maturities because borrowers on the underlying mortgages under the mortgage backed securities may have the right to call or prepay obligations with or without call or prepayment penalties. Collateralized mortgage obligations with a weighted average effective yield of 6.70% are disclosed as a separate line item due to their staggered maturity dates. Equity securities are also disclosed as a separate line due to no stated maturity. Investment securities with an aggregate amortized cost of approximately $100.3 million and $51.7 million were pledged to secure public deposits, Federal Home Loan Bank borrowings and for other purposes as required by law at December 31, 2001 and 2000, respectively. All investment securities are classified as available-for-sale.

	As of December 31, 2001
	Amortized Cost	Fair Value
Within one year	$        682	$        684
Within two to five years	11,070	11,157
Within six to ten years	23,491	23,361
After ten years	51,358	52,120
Total	$   86,601	$   87,322
Collateralized mortgage obligations	19,638	19,850
Equity securities	6,184	6,184
Total investment securities	$  112,423	$  113,356
	=========	=========

E.     LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The Bank makes commercial, real estate and other loans and leases to commercial and individual customers throughout the markets it serves. Most of the Company's business activity is with customers located in the Middle Tennessee region. Generally, loans are secured by stocks, real estate, time certificates of deposit, or other assets. The loans are expected to be repaid from cash flow or proceeds from the sale of selected assets of the borrowers. Real estate mortgage and construction loans reflected in the accompanying consolidated balance sheets are comprised primarily of loans to commercial borrowers.

Selected information regarding the loan portfolio as of December 31, 2001and 2000 is presented below (in thousands):

	December 31,
	2001	2000
Variable rate loans	$    258,352	$   182,791
Fixed rate loans	81,585	87,777
Total loans	$    339,937	$   270,568
	========	========

Changes in the allowance for loan and lease losses are as follows (in thousands):

	December 31,
	2001	2000	1999
Balance at beginning of year	$   4,622	$   4,062	$   3,646
Provision for loan and lease losses	2,216	1,256	106
Charge-offs	(1,997)	(814)	(772)
Recoveries	257	118	990
Purchased reserve of TBON Leasing	--	--	92
Balance at end of year	$   5,098	$   4,622	$   4,062
	========	=======	=======

At December 31, 2001 and 2000, nonaccrual loans amounted to $3.1 million and $776,000, respectively. The effect of nonaccrual loans was to reduce interest income by approximately $309,000 in 2001, $219,000 in 2000, and $10,000 in 1999. There were no material commitments to lend additional funds to customers whose loans were classified as nonaccrual at December 31, 2001 and 2000.

At December 31, 2001, the Company had 14 impaired loans totaling $3.1 million of which $525,000 had an allocated specific reserve. The average recorded investment in impaired loans for the years ended December 31, 2001 and 2000 was $1.1 million and $387,000, respectively. Interest payments received on impaired loans are recorded as reductions in principal outstanding or recoveries of principal previously charged off. Once the entire principal has been collected, any additional payments received are recognized as interest income. No interest income was recognized on impaired loans in 2001 or 2000.

The impaired loans and their related valuation reserve as of December 31, 2001 and 2000 are as follows (in thousands):

	As of December 31,
	2001	2000
Impaired loans with no specific valuation reserve	$    2,623	$   776
Impaired loans with a specific valuation reserve	525	208
Total recorded investment in impaired loans	$    3,148	$   984
	=======	=====
Valuation allowance related to all impaired loans	525	166
	=======	=====

In the ordinary course of business, the Company makes loans to directors, executive officers, and principal shareholders, including related interests. In Management's opinion, these loans are made on substantially the same terms, including interest and collateral, as those prevailing at the time for comparable transactions with other borrowers and they did not involve more than the normal risk of uncollectability or present other unfavorable features at the time such loans were made. During 2001, $1.1 million of new loans were made while repayments and other reductions totaled $752,000. Outstanding loans to executive officers and directors, including their associates and affiliated companies, were $6.0 million and $6.3 million at December 31, 2001 and 2000, respectively. Unfunded lines to executive officers and directors were $3.7 million and $3.9 million at December 31, 2001 and 2000, respectively.

At December 31, 2001 and 2000, the directors, executive officers, and principal shareholders had $2.7 million and $7.9 million, respectively in deposits with the Company. The terms of such deposits are comparable to those available to other depositors.

F.     PREMISES AND EQUIPMENT

Premises and equipment are summarized as follows (in thousands):

	As of December 31,
	2001	2000
Furniture, fixtures and equipment	$    4,243	$     3,089
Building and improvements	1,039	1,039
Land	638	638
Leasehold improvements	1,259	1,030
Accumulated depreciation and amortization	(3,013)	(2,325)
Premises and equipment, net	$  4,166	$  3,471
	======	======

The Company occupies space under noncancelable operating leases. The leases provide annual escalating rents for periods through 2009 with options for renewals. Rent expense is recognized in equal monthly amounts over the lease term. Rent expense was $694,000, $600,000, and $469,000 for 2001, 2000, and 1999, respectively. 

Future minimum lease payments under non-cancelable operating leases at December 31, 2001 are payable as follows (in thousands):

2002	$      826
2003	850
2004	859
2005	869
2006	869
Thereafter	3,489
	$   7,762
	=======

G.     LONG TERM DEBT AND LINES OF CREDIT

The Bank maintains an arrangement with the Federal Home Loan Bank (FHLB) to provide for certain borrowing needs and diversify the funding sources. The arrangement requires the Bank to hold stock in the FHLB and requires the Bank to pledge investment securities, to be held by the FHLB, or loans as collateral. 

At December 31, 2001, and 2000, indebtedness to the FHLB and other borrowings totaled $89.0 million and $36.2 million, respectively. During the year ended December 31, 2001, the Company repaid four loans totaling $34.7 million, of which one, for $20.2 million, had a fixed interest rate of 6.61% and the remaining three, totaling $14.5 million, were at the three-month LIBOR less five basis points. Also during the year ended December 31, 2001, the Company entered into seven new loans with the FHLB totaling $89.0 million. Of this amount, five loans, totaling $54.0 million are fixed rate advances, whose interest rate is fixed for periods between two and three years bearing an average weighted rate of 4.56% and two loans totaling $35.0 million reprice quarterly at the three-month LIBOR less six basis points, with an average weighted rate of 2.15% at December 31, 2001. The maturity dates on long-term debt for the five years subsequent to December 31, 2001are as follows (in thousands):

2002	$  14,000
2003	35,000
2004	--
2005	--
2006	--
	$ 49,000

On December 31, 2001, the Company had available for its use $38.5 million of unsecured short-term bank lines of credit. Such short-term lines serve as backup for loan and investment needs. There are no compensating balance requirements. These lines facilitate federal funds borrowings and bear a rate equal to the current lending rate for federal funds purchased. No amounts were outstanding under these lines of credit at December 31, 2001.

H.     INCOME TAXES

Actual income tax expense for the years ended December 31, 2001, 2000, and 1999 differed from an "expected" tax expense (computed by applying the U.S. Federal corporate tax rate of 34% to income before provision for income taxes) as follows (in thousands):

	As of December 31
	2001		2000		1999
	Amount	%	Amount	%	Amount	%
Federal income tax expense at statutory rate	$  1,874	34.0%	$  1,817	34.0%	$  1,920	34.0%
State taxes, net of federal benefit	220	4.0	218	4.1	215	3.8
Other, net	93	1.7	51	0.9	10	0.2
Provision for income taxes	$  2,187	39.7%	$  2,086	39.0%	$  2,145	38.0%
	========	=======	=======	======	=======	======

Significant temporary differences and carry forwards that give rise to the deferred tax assets and liabilities are as follows (in thousands):

	As of December 31,
	2001	2000
Deferred tax assets:
Unrealized loss on derivative instruments	$   208	$     --
Deferred fees, principally due to timing differences in the recognition of income	353	278
Loans, principally due to provision for loan and lease losses	1,220	421
Net operating loss carry forward	175	218
Premises and equipment, principally due to differences in depreciation methods	41	49
Other	31	19
Total gross deferred tax assets	2,028	985
Deferred tax liabilities:
Unrealized gain on investment securities available for sale	(353)	(37)
Discount on investment securities deferred for tax purposes	(92)	(99)
Leases, principally due to differences in basis acquired and the recognition of income	(55)	(260)
FHLB stock dividends	(264)	(159)
Total gross deferred tax liabilities	(764)	(555)
Net deferred tax assets	$ 1,264	$    430
	=====	=====

Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these deductible differences at December 31, 2001. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The Bank has provided no valuation allowance for the net deferred tax assets at December 31, 2001 or 2000 due primarily to its ability to offset reversals of net deductible temporary differences against income taxes paid in previous years and expected to be paid in future years. The components of income tax expense (benefit) were as follows (in thousands):

	Years ended December 31,
	2001	2000	1999
Current income tax expense:
Federal	$   2,645	$   2,124	$   1,947
State	483	399	359
Total current income tax expense	3,128	2,523	2,306
Deferred income tax benefit:
Federal	(793)	(368)	(127)
State	(149)	(69)	(34)
Total deferred income tax benefit	(942)	(437)	(161)
Total income tax expense	$ 2,187	$ 2,086	$ 2,145
	======	======	======

I.    DERIVATIVE FINANCIAL INSTRUMENTS

At December 31, 2001, the Company had three interest rate swap contracts with a consolidated notional amount outstanding of $35.0 million. There were no interest rate swap contracts outstanding at year-end December 31, 2000. The derivative financial instruments are reported at their fair values and are included as other assets and other liabilities, respectively, on the face of the balance sheet.

On March 26, 2001, the Company entered into a $10.0 million interest rate swap which matures on October 17, 2008 under which the Company pays the counterparty a variable rate of three-month LIBOR plus five basis points and will receive a fixed rate of 6.00%. Interest payments are settled and variable rates reset quarterly. The counter party has the option to terminate the swap, in whole or in part, on April 17, 2002 and semi-annually thereafter. Management designated the interest rate swap as a fair value hedge of $10.0 million of brokered time deposits issued by the Company on March 26, 2001. The 6.00% fixed rate, brokered time deposits mature on October 17, 2008 and are callable by the Company on March 26, 2002 and semi-annually thereafter. At December 31, 2001, the Company had other liabilities of $120,000 reflecting the fair value adjustment on this hedge instrument with an offset of $120,000 decreasing the recorded value of the 6.00% fixed rate, brokered time deposits.

On May 24, 2001, the Company entered into a $15.0 million interest rate swap agreement which matures on November 25, 2002 under which the Company pays the counterparty a fixed rate of 4.53% and will receive a variable rate of three-month LIBOR less six basis points. Interest payments are settled and variable rates reset quarterly. Management designated the interest rate swap as a cash flow hedge of $15.0 million  in variable rate FHLB advances entered into by the Company on May 24, 2001. As of December 31, 2001, the cash flow hedge of FHLB advances resulted in a decrease of $216,000 in other comprehensive income, net of taxes of $132,000, and a $348,000 increase to other liabilities.

On July 19, 2001, the Company entered into a $10.0 million interest rate swap agreement which matures on October 19, 2002 under which the Company pays the counterparty a fixed rate of 4.205% and will receive a variable rate of three-month LIBOR. Interest payments are settled and variable rates reset quarterly. Management designated the interest rate swap as a cash flow hedge of $10.0 million in variable rate FHLB advances entered into by the Company on July 19, 2001. At December 31, 2001, the cash flow hedge of FHLB advances resulted in a decrease of $122,000 in other comprehensive income, net of taxes of $76,000, with a $199,000 increase to other liabilities.

The high degree of effectiveness of the Company's cash flow derivative financial instruments resulted in no impact to consolidated net income for the year ended December 31, 2001.

J.     FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized on the balance sheets. The contract amounts of those instruments reflect the extent of involvement and the related credit risk the Company has in particular classes of financial instruments. The Company, through regular reviews of these arrangements, does not anticipate any material losses as a result of these transactions.

At December 31, 2001, outstanding commitments to sell mortgage loans amounted to approximately $2,366,000. Such commitments are entered into to reduce the exposure to market risk arising from potential changes in interest rates, which could affect the fair value of residential mortgage loans held-for-sale and outstanding commitments to originate residential mortgage loans held-for-sale. The outstanding commitments to sell mortgage loans are at fixed prices and are scheduled to settle at specific dates which generally do not exceed 15 days.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer's credit worthiness on a case-by-case basis. The amounts of collateral obtained, if deemed necessary by the Company, upon extension of credit is based on Management's credit evaluation of the customer.

Standby letters of credit or guarantees are commitments issued by the Company to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. Approximately 90.3% of the guarantees have maturities less than one year, the remaining 9.7% mature within three years. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Unused lines of credit include home equity lines of credit ("HELOCS"). 

Loan commitments and letters of credit at December 31, 2001 and 2000 include the following (in thousands):

	December 31,
	2001	2000
Standby letters of credit	$      6,820	$      5,574
Undisbursed construction loans	15,377	10,735
Unused lines of credit	90,416	81,724
Other loan commitments	693	274
Total loan commitments and letters of credit	$  113,306	$  98,307
	========	=======

K.     EMPLOYEE BENEFITS

The Company maintains for its employees an Associates Stock Purchase Plan (the "ASPP"), and a Retirement Savings Plan 401(k) (the "401 (k) Plan"). The 401(k) Plan provides for the maximum deferral of employee compensation allowable by the IRS under provisions of Section 401(A) and 401(k). The 401(k) Plan is available to all associates who meet the plan eligibility requirements. The Company provides various levels of employer matching of contributions up to 4% of the associate's compensation. Employer contributions are invested exclusively in the Company's common stock. Associates fully vest in the employer's contributions after three years of service as defined in the 401(k) Plan. Total plan expense for 2001, 2000 and 1999 was approximately $186,000, $157,000 and $119,000, respectively.

The ASPP under which 100,000 shares of the Company's common stock may be issued, allows associates to purchase the Company's common stock through payroll deductions at 84% of the existing market value, not to fall below par value. The difference between the purchase price and the market value on the date of issue is recorded as compensation expense. Compensation expense of $25,000, $28,000, and $25,000 was recorded in 2001, 2000 and 1999, respectively. The Company pays incidental expenses regarding the administration of the plan.

In 1997, the Board of Directors adopted the 1997 Nonstatutory Stock Option Plan (Plan), which initially reserved 150,000 shares of the Company's common stock for use under the Plan (plus 10% of any additional shares of stock issued after the effective date of the Plan). Total shares reserved under this plan at December 31, 2001 were 601,003 shares. Stock issued pursuant to the Plan may be either authorized but unissued shares or shares held in the treasury of the Company. Options are granted at an option price of no less than the fair market value of the stock at the date of grant. Each grant of an option is evidenced by a stock option agreement specifying the number of shares, the exercise price, and a vesting schedule. During 2001, 2000 and 1999, 27,000 options, 281,000 options, and 106,900 options, respectively, were granted under the Plan.

As of December 31, 2001, the Company's Board of Directors had approved the issuance of stock options to purchase 442,187 shares of the Company's common stock. Compensation expense was not recorded in connection with the issuance of these options, as the option price was equal to or exceeded the market price of the Company's common stock at the date of grant. The following table presents information on stock options:

	Total Options        /Shares	Exercisable     Options	Option Price                                          Range		Weighted  Average       Price
Options outstanding at January 1, 1999	142,627	87,015	$  6.000	$  14.750	$  10.320
Granted	106,900	21,380	12.420	12.880	12.710
Options that became exercisable	--	16,525	10.125	14.750	13.060
Options exercised	(220)	(220)	11.625	11.625	11.625
Options expired	(1,130)	(430)	11.625	14.750	13.840
Options outstanding at December 31, 1999	248,177	124,270	6.000	14.750	11.330
Granted	281,000	56,200	11.580	13.894	13.403
Options that became exercisable	--	55,236	10.125	14.750	13.028
Options exercised	(67,000)	(67,000)	6.000	11.625	6.983
Options expired	(38,850)	(13,600)	11.625	14.750	13.487
Options outstanding at December 31, 2000	423,327	155,106	$ 10.125	$ 14.750	$ 13.197
Granted	27,000	5,400	13.190	13.890	13.803
Options that became exercisable	--	79,785	11.625	14.750	13.278
Options exercised	(2,000)	(2,000)	11.625	12.880	12.504
Options expired	(6,140)	(3,580)	12.880	14.750	13.806
Options outstanding at December 31, 2001	442,187	234,711	$ 10.125	$ 14.750	$ 13.228
	=======	=======	=======	=======	=======

The stock options have five year vesting schedules and become exercisable in full in the event of a merger, sale, or change in majority control of the Company. The options expire during the years 2002 through 2011 or within 90 days of cessation of employment. At December 31, 2001, the weighted average remaining life was approximately 7.8 years.

The Company accounts for its stock option plan and ASPP in accordance with the provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense related to stock options would be determined on the date of grant only if the current market price of the underlying stock exceeded the exercise price. Had the Company used the provisions of SFAS No. 123, Accounting for Stock-Base Compensation, the Company would have recognized, as expense over the vesting period, the fair value of all stock-based awards on the date of grant. The Company has elected to continue to apply the provisions of APB No. 25. As such, proforma disclosures of net income and earnings per share as if the fair value based method of SFAS No. 123 had been used, are as follows:

	For the years ended December 31,
	2001	2000	1999
Net income - as reported	$   3,326,000	$   3,257,000	$   3,501,000
	==========	==========	==========
Net income - proforma	$   3,046,000	$   3,023,000	$   3,401,000
	==========	==========	==========
Earnings per share:
Basic, as reported	$   1.02	$   0.90	$   0.86
Basic, proforma	0.94	0.84	0.84
Diluted, as reported	$   1.02	$   0.90	$   0.85
Diluted, proforma	0.93	0.83	0.82

The weighted average fair values of options granted during 2001, 2000, and 1999 were $4.15; $4.72; and, $5.09 per share, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	For the years ended December 31,
	2001	2000	1999
Expected dividend yield	4.46%	6.04%	3.61%
Expected stock price volatility	23.05	23.00	25.00
Risk-free interest rate	4.74	6.55	5.07
Expected life of options (years)	5	5	5

L.     SHAREHOLDERS' EQUITY AND EARNINGS PER SHARE

The Company can issue common stock pursuant to various plans such as employee stock purchase, contributions to the 401(k) plan, and payment of directors' fees. Under these plans, 11,125, 14,710 and 11,609 shares were issued during 2001, 2000 and 1999, respectively.

The following table is a reconciliation of net income and average shares outstanding used in calculating basic and diluted earnings per share (in thousands except per share data).

	Years ended December 31,
	2001	2000	1999
Net income available to common shareholders	$   3,326	$   3,257	$   3,501
	=======	=======	=======
Weighted average common shares outstanding - basic	3,251	3,619	4,068
Dilutive effect of options	17	16	61
Weighted average common shares outstanding - diluted	3,268	3,635	4,129
	=======	=======	=======
Antidilutive options	36	175	175
	=======	=======	=======
Net income per share:
Basic	$     1.02	$     0.90	$     0.86
Diluted	1.02	0.90	0.85

In January 1998, the Company's Board of Directors adopted a Shareholder Rights Plan which authorizes the distribution of a dividend of one common share purchase right for each outstanding share of CFGI's common stock. The rights will be exercisable only if a person or group acquires 15% or more of CFGI's common stock or announces a tender offer, the consummation of which would result in ownership by a person or group of 15% or more of the common stock. The rights are designed to assure that all of CFGI's shareholders receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against partial tender takeovers, squeeze outs, open market accumulations and other abusive tactics to gain control of the Company without paying all shareholders an appropriate control premium.

If the Company were acquired in a merger or other business combination transaction, each right would entitle its holder to purchase, at the right's then current exercise price, a number of the acquiring company's common shares having a market value of twice such a price. In addition, if a person or group acquires 15% or more of CFGI's common stock, each right would entitle its holder (other than the acquiring person or members of the acquiring group) to purchase, at the right's then current exercise price, a number of CFGI's common shares having a market value of twice that price. After a person or group acquires beneficial ownership of 15% or more of CFGI's common stock and before an acquisition of 50% or more of the common stock, the Board of Directors would exchange the rights (other than rights owned by the acquiring person or group), in whole or in part, at an exchange ratio of one share of common stock per right.

Until a person or group has acquired beneficial ownership in excess of 15%, the rights will be redeemable for $0.01 per right at the option of the Board of Directors. The rights are intended to enable all CFGI's shareholders to realize the long-term value of their investment in the Company. The Company believes they will not prevent a takeover, but should encourage anyone seeking to acquire the Company to negotiate with the Board prior to attempting a takeover.

In March 1999, to facilitate the management of its capital position, the Company announced a stock repurchase program. The initial plan called for the repurchase of 400,000 shares (the "March 23, 1999 Plan") with an original expiration date of December 31, 1999. On January 26, 2000, the Company extended the expiration date of the March 23, 1999 Plan until March 31, 2000 to allow for the completion of the plan. On March 15, 2000, the Company announced that it had completed the March 23, 1999 Plan and announced a second stock repurchase plan for the acquisition of an additional 500,000 shares of common stock with an expiration date of December 31, 2000 (the "March 15, 2000 Plan"). On December 20, 2000, the Company announced the extension of the March 15, 2000 Plan to December 31, 2001 to provide for the acquisition of 16,000 shares remaining to be repurchased under the March 15, 2000 Plan and an additional 400,000 shares, for a total of up to 416,000 shares of common stock. At December 31, 2001, the Company had repurchased 845,904 shares under the March 15, 2000 Plan and 1,245,904 shares since commencing it s stock repurchase program in March 1999.

M.     RESTRICTIONS ON RETAINED EARNINGS, REGULATORY MATTERS, AND LITIGATION

To declare dividends the Bank must transfer a minimum of ten percent of current net income from retained earnings to additional paid-in capital until additional paid-in capital equals common stock. Accordingly, the Bank transferred $326,000 and $307,000 from retained earnings to surplus during 2001 and 2000, respectively. At December 31, 2001, approximately $14.1 million of the Bank's retained earnings were available for dividend declaration and payment, without regulatory approval. Approximately $21,591,000 of the Company's investment in the Bank is restricted as to the payment of dividends.

CFGI and the Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Company's consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and the Bank must meet specific capital guidelines that involve quantitative measures of the Company's and the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's and the Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and the Bank to maintain minimum amounts and ratios (set forth in the following table) of total and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes the Company and the Bank meet all capital adequacy requirements to which they are subject as of December 31, 2001.

As of December 31, 2001, the most recent notification from the Federal Reserve Bank categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the table below. There are no conditions or events since that notification that Management believes have changed the Bank's category. The Company's and the Bank's actual capital amounts and ratios are also presented in the table (Dollars in thousands).

	Actual		To be adequately capitalized		To be well capitalized
	Amount	Ratio	Amount	Ratio	Amount	Ratio
As of December 31, 2001:
Total capital (to risk weighted assets)
Community Financial Group, Inc.	$  41,947	11.07%>	$  30,311	N.A.  >	$  37,889	N.A.  >
The Bank of Nashville	38,998	10.30   >	30,303	8.0   >	37,879	10.0% >
Tier 1 capital (to risk weighted assets)
Community Financial Group, Inc.	$  37,210	9.82%>	$  15,156	N.A.  >	$  22,733	N.A.  >
The Bank of Nashville	34,261	9.04   >	15,152	4.0   >	22,727	6.0% >
Leverage ratio
Community Financial Group, Inc.	$  37,210	8.55%>	$  13,060	N.A.  >	$  21,767	N.A.  >
The Bank of Nashville	34,261	7.88   >	13,044	(1)    3.0   >	21,740	5.0% >
As of December 31, 2000:
Total capital (to risk weighted assets)
Community Financial Group, Inc.	$  45,721	15.43%>	$  23,705	8.0%>	$  29,631	N.A.  >
The Bank of Nashville	35,616	12.03   >	23,685	8.0   >	29,606	10.0% >
Tier 1 capital (to risk weighted assets)
Community Financial Group, Inc.	$  42,005	14.17%>	$  11,891	4.0%>	$  17,837	N.A.  >
The Bank of Nashville	31,905	10.78   >	11,839	4.0   >	17,758	6.0% >
Leverage ratio
Community Financial Group, Inc.	$  42,005	12.14%>	$  10,380	3.0%>	$  17,300	N.A.  >
The Bank of Nashville	31,905	9.29   >	8,879	(2)    3.0   >	14,798	5.0% >
______________________________________ (1)  The Federal Reserve Board may require the Company and Bank to maintain a leverage ratio of up to 200 basis points above the required        minimum.

From time to time there are legal proceedings pending against the Company. In the opinion of Management, the liabilities, if any, arising from such proceedings presently pending would not have a material adverse effect on the consolidated financial statements.

N.     FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," requires disclosure of fair value information about financial instruments for both on and off-balance sheet assets and liabilities for which it is practicable to estimate fair value. The techniques used for this valuation are significantly affected by the assumptions used, including the amount and timing of future cash flows and the discount rate. Such estimates involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets. Accordingly, the aggregate fair value amounts presented are not meant to represent the underlying value of the Company.

The following table presents the carrying amounts and the estimated fair value of the Company's financial instruments at December 31, (in thousands):

	As of December 31,
	2001		2000
	Carrying       Amount	Estimated    Fair             Value	Carrying         Amount	Estimated   Fair            Value
Financial assets:
Cash, due from banks, federal funds sold and          other temporary investments	$  22,767	$  22,767	$  19,038	$  19,038
Investment securities	113,356	113,356	62,775	62,775
Residential mortgage loans held-for-sale	2,366	2,366	--	--
Loans, net of unearned income	339,937	347,631	270,568	267,747
Financial liabilities:
Deposits	349,948	356,366	273,036	273,416
FHLB and other borrowings	89,000	91,107	36,236	36,303
Derivatives	667	667	--	--

 

	As of December 31,
	2001		2000
	Contractual or Notional       Amounts	Estimated    Fair             Value	Contractual or Notional        Amounts	Estimated   Fair            Value
Off-balance items:
Commitments to extend credit	$  106,486	(1)	$   92,733	(1)
Standby letters of credit	6,820	(1)	5,574	(1)
_____________________________ (1)  With the exception of HELOCS, commitments are negotiated at current market rates and terms and are relatively short-term        in nature. Therefore, the estimated value of loan commitments approximates the fees charged. The estimated fair value of        these items was not significant at December 31, 2001 and 2000.

The following summary presents the methodologies and assumptions used to estimate the fair value of the Company's financial instruments presented above.

Cash, Due from Banks and Federal Funds Sold

For cash, due from banks and federal funds sold, the carrying amount is a reasonable estimate of fair value. These instruments expose the Company to limited credit risk, carry interest rates which approximate market, and have short maturities.

Investment Securities

In estimating fair values, management makes use of prices or dealer quotes for U.S. government agency securities, collateralized mortgage obligations, securities of states and political subdivisions, and equity securities. As required, investment securities available for sale are recorded at fair value.

Loans

The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings for the same remaining maturities adjusted for differences in loan characteristics. The risk of default is measured as an adjustment to the discount rate, and no future interest income is assumed for nonaccrual loans. The fair value of loans does not include the value of the customer relationship or the right to fees generated by the account.

Residential mortgage loans

The fair value of residential mortgage loans held-for-sale is based on the underlying rates and commitments to sell such loans.

Deposits

The fair value of deposits with no stated maturities (which includes demand deposits, NOW accounts, and money market deposits) is the amount payable on demand at the reporting date. The fair value of fixed-rate certificates of deposit is estimated using a discounted cash flow model based on the rates currently offered for deposits of similar maturities. The fair value of variable rate certificates of deposit would approximate their carrying value because these investments reprice with market rates.

Federal Home Loan Bank and Other Borrowings

The fair value of Federal Home Loan Bank borrowings is estimated using discounted cash flows, based on current incremental borrowing rates for similar types of borrowing arrangements.

O.     OTHER COMPREHENSIVE INCOME

Comprehensive income includes net income and other comprehensive income which is defined as non-owner related transactions in equity. The Company's unrealized gains and losses (net of tax) on investment securities available for sale and derivative instruments are included in other comprehensive income (loss). The amounts of other comprehensive income (loss) along with the related tax effect are set forth in the following table (in thousands):

	Gain (Loss)    Before Tax	Tax Expense         (Credit)	Net of          Tax
Year ended December 31, 2001:
Net unrealized gain on investment securities available for sale during 2001	$   1,296	$   495	$   801
Net unrealized loss on derivative instruments	(546)	(208)	(338)
Less: reclassification adjustment for net gains included in net income	457	175	282
Other comprehensive income	$      293	$   112	$   181
	=======	=======	=======
Year ended December 31, 2000:
Net unrealized gain on investment securities available for sale during 2000	$   1,591	$    604	$    987
Plus: reclassification adjustment for net losses included in net income	97	37	60
Other comprehensive income	$   1,688	$   641	$ 1,047
	=======	======	=======
Year ended December 31, 1999:
Net unrealized loss on investment securities available for sale during 1999	$   (2,134)	$ (810)	$   (1,324)
Less: reclassification adjustment for net losses included in net income	(5)	(2)	(3)
Other comprehensive loss	$   (2,139)	$   (812)	$   (1,327)
	=======	======	=======

P.     PARENT COMPANY FINANCIAL INFORMATION

Condensed financial information for Community Financial Group, Inc., (Parent Company only) as of December 31, 2001 and 2000, and for the years ended December 31, 2001, 2000 and 1999 was as follows (in thousands):

CONDENSED BALANCE SHEET

	December 31,
	2001	2000
Assets
Cash	$    2,693	$    9,372
Investment in bank subsidiary, at cost	35,676	32,237
Investment securities available-for-sale	100	500
Other assets	187	235
Total assets	$  38,656	$  42,344
	=======	=======
Liabilities
Other liabilities	31	63
Total liabilities	31	63
Total shareholders' equity	38,625	42,281
Total liabilities and shareholders' equity	$  38,656	$  42,344
	========	========

CONDENSED INCOME STATEMENT

	Years Ended December 31,
	2001	2000	1999
Income:
Dividends from bank subsidiary	$        --	$        --	$        --
Interest income	270	683	939
Loss on sale of  investment securities, net	--	(34)	(20)
Total interest income	270	649	919
Expenses:
Other expenses	136	191	225
Total expenses	136	191	225
Income before provision for income taxes	134	458	694
Increase to consolidated income taxes arising from parent     company taxable income	66	174	264
Equity in undistributed earnings of subsidiary bank	3,258	2,973	3,071
Net income	$  3,326	$  3,257	$  3,501
	=======	=======	=======

CONDENSED STATEMENT OF CASH FLOWS

	Years ended December 31,
	2001	2000	1999
Cash flows from operating activities:
Net income	$   3,326	$   3,257	$   3,501
Adjustments to reconcile net income to net cash provided by             operating activities:
Equity in undistributed earnings of subsidiary bank	(3,258)	(2,973)	(3,071)
Loss on sale of investment securities	--	34	20
Depreciation and amortization	--	164	56
Decrease (increase) in other assets	48	214	(270)
(Decrease) increase in other liabilities	(32)	10	3
Net cash provided by operating activities	84	706	239
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale	400	10,376	5,126
Purchases of investment securities available for sale	--	--	(30,832)
Maturities of investment securities available for sale	--	--	25,051
Net cash provided by (used in) investing activities	400	10,376	(655)
Cash flows from financing activities:
Repurchase of common stock	(5,137)	(7,672)	(4,304)
Net proceeds from issuance of common stock	177	656	155
Cash dividends paid	(2,203)	(2,477)	(1,881)
Net cash used in financing activities	(7,163)	(9,493)	(6,030)
Increase (decrease) in cash	(6,679)	1,589	(6,446)
Cash at beginning of year	9,372	7,783	14,229
Cash at end of year	$    2,693	$    9,372	$    7,783
	=======	=======	=======

EX-1

Exhibit 10.01

LEASE

 CAROTHERS at BAKERS BRIDGE, LLC,
LANDLORD

THE BANK OF NASHVILLE,
TENANT

CAROTHERS AT BAKERS BRIDGE SHOPPING CENTER

LOCATED AT CAROTHERS PARKWAY
AND BAKERS BRIDGE
FRANKLIN, TN.

TABLE OF CONTENTS

ARTICLE I. BASIC LEASE PROVISIONS

Section 1. Basic Lease Provisions

1.1 Shopping Center

1.2 Premises

1.3 Square Footage

1.4 Term

1.4a Option

1.5 Commencement Date

1.6 Expiration Date

1.7 Possession Date

1.8 Use

1.9 Base Rent

1.10 Percentage Rent

1.11 Trade Name

1.12 Security Deposit

1.13 Notices

1.14 Guarantor

1.15 Broker

1.16 Common Area Maintenance Charge

1.17 Real Estate Tax Charge

1.18 Insurance Cost

1.19 Monthly Marketing Fund

1.19a Merchant Assessment

1.20 Radius Restriction

1.21 Rent Payment Address

1.22 Exhibit List

ARTICLE II PREMISES; USE; PROPORTIONATE SHARE; COMMON AREA

Section 2.1. Premises.

Section 2.2. Proportionate Share.

Section 2.3. Use.

Section 2.4. Common Area.

Section 2.5. Anchor Tenant.

Section 2.6. Relocation of Premises

Section 2.7 Option

Section 2.8 Exclusive Use

ARTICLE III LEASE TERM

Section 3.1. Term.

Section 3.2. Lease Year Defined.

Section 3.3. Change in Possession Date/Commencement Date.

Section 3.4. Confirmation of Dates.

ARTICLE IV SECURITY DEPOSIT

ARTICLE V BASE RENT AND PERCENTAGE RENT

Section 5.1. Payment.

Section 5.2. Past Due Base Rent and Late Charge.

Section 5.3. Base Rent.

Section 5.4. Percentage Rent.

Section 5.5. Additional Rent.

ARTICLE VI UTILITIES

ARTICLE VII MARKETING FUND; MERCHANTS ASSOCIATION

Section 7.1. Marketing Fund

Section 7.2. Merchant Association

ARTICLE VIII ACCEPTANCE OF POSSESSION

ARTICLE IX LABOR RELATIONS

ARTICLE X OTHER OPERATIONS

ARTICLE XI ASSIGNMENT OR SUBLETTING

ARTICLE XII CONDUCT OF BUSINESS

Section 12.1. Operations/Trade Name.

Section 12.2. Business Hours.

Section 12.3 Tenant Advertising.

ARTICLE XIII COMMON AREA MAINTENANCE CHARGES; REAL ESTATE TAX CHARGES

Section 13.1. Common Area Maintenance Charges

Section 13.2. Real Estate Tax Charges

Section 13.3. Additional Taxes

Section 13.4. Tenant's Right to Audit

Section 13.5. Tenant's Taxes

ARTICLE XIV DEFAULT BY TENANT/LANDLORD

Section 14.1. Tenant Default/Right to Reenter and Remedies.

Section 14.2. Tenant Default/Right to Relet.

Section 14.3. Legal Expenses.

Section 14.4. Tenant Default/Default in Other Centers

Section 14.5. Landlord Default

ARTICLE XV INSURANCE

Section 15.1. By Landlord.

Section 15.2. By Tenant.

Section 15.3. Mutual Waiver of Subrogation Rights.

Section 15.4. Mutual Waiver of Claims.

Section 15.5. Increase in Fire Insurance Premium.

Section 15.6. Mutual Indemnification.

ARTICLE XVI NO PERSONAL LIABILITY OF LANDLORD

ARTICLE XVII ACCESS TO PREMISES

ARTICLE XVIII ALTERATIONS

Section 18.1. Alterations by Tenant.

Section 18.2. Roof and Walls.

ARTICLE XIX REPAIRS AND MAINTENANCE

Section 19.1. Landlord's Obligations.

Section 19.2. Tenant's Obligations.

ARTICLE XX LIENS

ARTICLE XXI DESTRUCTION OF PREMISES

Section 21.1. Fire, Explosion or Other Casualty.

Section 21.2. Repair of Landlord's and Tenant's Work.

Section 21.3. Determination of Damage.

ARTICLE XXII CONDEMNATION

ARTICLE XXIII FORCE MAJEURE

ARTICLE XXIV LANDLORD'S LIEN

ARTICLE XXV SUCCESSION TO LANDLORD'S INTEREST

Section 25.1. Attornment.

Section 25.2. Subordination.

Section 25.3. Mortgagee's Approval.

Section 25.4. Estoppel Certificate.

ARTICLE XXVI SURRENDER OF DEMISED PREMISES

Section 26.1. Condition of Demised Premises.

Section 26.2. Hold Over.

ARTICLE XXVII SIGNS, AWNINGS, CANOPIES, FIXTURES

Section 27.1. Fixtures.

Section 27.2. Removal and Restoration by Tenant.

Section 27.3. Signs, Awnings and Canopies.

ARTICLE XXVIII MISCELLANEOUS

Section 28.1. Partial Invalidity.

Section 28.2. Successors and Assigns.

Section 28.3. Waiver.

Section 28.4. No Partnership.

Section 28.5. Time Is Of The Essence.

Section 28.6. Broker's Commission.

Section 28.7. Entire Agreement.

Section 28.8. Applicable Law.

Section 28.9. Notices.

Section 28.10. Quiet Enjoyment.

Section 28.11. Compliance with Law.

Section 28.12. Recording.

Section 28.13. Tenant and Guarantor.

Section 28.14. Objections to Statements.

Section 28.15. Execution of Lease.

Section 28.16. Accord and Satisfaction.

Section 28.17. Corporate Tenant.

Section 28.18. REIT Qualifications.

Section 28.19. Waiver of Jury Trial.

Section 28.20. Default Rate.

ARTICLE XXIX ENVIRONMENTAL MATTERS

ARTICLE XXX AMERICANS WITH DISABILITIES ACT

CAROTHERS at BAKERS BRIDGE
FRANKLIN, TN.

LEASE

THIS LEASE is made as of the 20^th day of November, 2000 by and between Carothers at Bakers Bridge, LLC ("Landlord") and The Bank of Nashville ("Tenant"),:

ARTICLE I
BASIC LEASE PROVISIONS AND EXHIBITS

Section 1. Basic Lease Provisions.

The descriptions, capitalized words and amounts set forth below are qualified by their language elsewhere in this Lease, including those Articles and/or Sections referred to in parentheses:

1.1	Shopping Center (Section 2.1):Carothers at Bakers Bridge, Franklin, TN. and legally described on Exhibit B (the "Shopping Center")
1.2	Premises (Section 2.1): Space Number: A-1
1.3	Square Footage (Section 2.1): approximately, 3,800 square feet
1.4	Term (Section 3.1): 10 Lease Years, plus the partial calendar month occurring prior to the Commencement Date.
1.4a	Option (Section 2.7) : Two Five (5) year options
1.5	Commencement Date (Section 3.1): 120 days after Landlord has delivered premises or when Tenant opens for business whichever is first.
1.6	Expiration Date (Section 3.1): 120 months after Commencement Date
1.7	Possession Date (Section 3.3 & Article VIII):
1.8	Permitted Use (Section 2.3): For general business use with the exclusive right within the shopping center to operate a full service financial institution, which shall include any service or activity approved by Tenant's regulatory authorities, but no other purpose shall be permitted without Landlords prior written consent.

1.9	Base Rent (Section 5.1):
Monthly		Annually
$7,283.33	Commencement date to forty-eight months	$87,400.00
$7,916.67	Forty-nine months to ninety-six months	$95,000.00
$8,233.33	Ninety-seven months to one hundred and twenty months	$98,800.00

1.9a	Option (Section 2.7):
	Tenant to be granted two (2) five (5) year options at market rate not to exceed the CPI index increase over the same time period.
1.10	Percentage Rent (Section 5.4):	NA
1.11	Trade Name (Section 12.1):	The Bank of Nashville
1.12	Security Deposit (Article IV):	NA
1.13	Notices (Section 28.9):
	Tenant Notices:	The Bank of Nashville
		Attn. Corporate Secretary
		P. O. Box 198986
		Nashville, TN 37219
	Landlord Notices:	Carothers at Bakers Bridge, LLC
		c/o Southland Management Co.
		PO Box 680515
		Franklin, IN. 37068
1.14	Guarantor(s):	NA
1.15	Brokers (Section 28.6):	Grub Ellis Centennial.
1.16	Common Area Maintenance Charge (Section 13.1):	Tenant's Estimated Monthly Charge - $395.83
1.17	Real Estate Tax Charge (Section 13.2):	Tenant's Estimated Monthly Charge -$475.00
1.18	Insurance Costs (Section 15.1):	Tenant's Estimated Monthly Charge -$46.67
1.19	Monthly Marketing Fund (Section 7.1):	NA
1.19a	Merchant Assessment (Section 7.2):	$ NA
1.20	Radius Restriction (Article X):	NA miles from any exterior boundary of the Shopping Center.
1.21	Rent Payment Address:	Carothers at Bakers Bridge, LLC
		c/o Southland Management &
		Development Co.
		P.O. Box 680515
		Franklin, TN. 37068

1.22 The following exhibits are attached hereto and made a part of this Lease:

Exhibit A	A site plan of the Shopping Center showing generally the location of the Premises.
Exhibit B	Legal description of the Shopping Center.
Exhibit C	Landlords Work
Exhibit D	Tenant's Work.
Exhibit E	Tenant Sign Criteria.
Exhibit F	HVAC Maintenance Contract Requirements
Exhibit G	Rules & Regulations

ARTICLE II

PREMISES; USE; PROPORTIONATE SHARE; 
COMMON AREA

Section 2.1. Premises.

Landlord leases to Tenant, and Tenant rents from Landlord, the space in the Shopping Center designated at Section 1.2 hereof and crosshatched on the site plan attached hereto as Exhibit A (herein called the "Premises").

The Premises contains the approximate number of square feet set forth in Section 1.3, measured to the center line of all party or common walls, to the exterior faces of all other walls, and to the lease line where there is no wall. Landlord shall have the right to verify the actual square feet in the Premises from time to time during the Term of this Lease and to adjust the Base Rent payable hereunder based upon the actual square feet of the Premises as determined by such measurement; however, the adjustment shall not exceed a ten percent (10%) increase or decrease from the square footage of the Premises specified in Section 1.3 hereof.

The legal description of the Shopping Center contained on Exhibit B may exclude from the description of the Shopping Center certain real estate, outlots and other real property not owned by Landlord. Landlord reserves the right, at any time during the term of this Lease, and from time to time, to acquire all or any part of said real estate, outlots or other real property, and to include same as part of the Shopping Center, at Landlord's sole discretion. Provided, however, that any such acquisition shall not result in an increase to Tenant s common area maintenance charges. Further, Exhibit A is provided for informational purposes only, and shall not be deemed to be a warranty, representation or agreement by Landlord that the Shopping Center or buildings and/or stores will be exactly as indicated on said Exhibit, or that the other tenants which may be referenced on said Exhibit will be occupants of the Shopping Center. The shopping center shall be simil ar to Exhibit A as it relates to the leased premises in square footage, exterior appearance and interior layout.

Section 2.2. Proportionate Share.

Tenant's proportionate share of the Leasable area of the Shopping Center shall be the percentage equal to a fraction, the numerator of which shall be the square footage of the Premises specified in Section 1.3 and the denominator of which shall be the square footage of the constructed Leasable area of the Shopping Center. Said percentage shall hereinafter be referred to as Tenant's "Proportionate Share". Tenant's Proportionate Share may be adjusted from time to time as the square footage of the Leasable area of the Premises or of the Shopping Center changes, for whatever reason.

Section 2.3. Use.

Tenant is permitted to use the Premises for the purposes specified in Section 1.8, and for no other purpose whatsoever. The specific use specified in Section 1.8 is a material consideration to Landlord in order that there be maintained within the Shopping Center an appropriate tenant mix so as to achieve the maximum Gross Sales for all tenants and to assure the continued operation of a full service shopping center development. Tenant shall obtain, at its own expense, all necessary governmental licenses and permits for such use. Tenant acknowledges that no representations have been made to Tenant that any other tenant will lease space within the Shopping Center.

Section 2.4. Common Area.

The "Common Area" shall mean all areas of the Shopping Center which are now or hereafter made available by Landlord, from time to time, for the common and joint use and benefit of Landlord, the Anchor Tenants, the Tenant, other lessees within the Shopping Center, and any other persons or owners of other real estate, outlots or other real property outside the boundaries of the Shopping Center, if any, their respective customers and invitees. The Common Area shall include, but shall not be limited to, package pickup stations, elevators, escalators, stairways, pedestrian sidewalks, parking areas and structures (whether in tiers or at, or below grade), curbs, driveways and roads, malls, arcades, concourses, service corridors, loading platforms and truck docks, delivery areas, directory signs and equipment, public restrooms, courts and ramps, landscaped and vacant areas, retaining walls, retention and detention ponds, building enclosures and roofs cover ing Shopping Center buildings, perimeter walls and fences, bus stops, first-aid and comfort stations, lighting facilities, sewer lines, water mains, drinking fountains, mechanical equipment, pipes, ducts, conduit wires, and other improvements.

The Shopping Center and the Common Area shall at all times be subject to the exclusive control and management of Landlord. So long as the Lease remains in effect and Tenant is not in default hereunder, Tenant and its business invitees, employees and customers shall have the nonexclusive right, in common with Landlord and all others to whom Landlord has granted or may hereafter grant rights, to use the Common Area subject to such reasonable regulations as Landlord may from time to time impose and the rights of Landlord set forth herein. Tenant shall comply with the rules and regulations set forth in Exhibit G attached hereto and all reasonable amendments thereto. Tenant agrees to cause its concessionaires, officers, employees, agents, customers and invitees to abide by such rules and regulations. Tenant agrees to participate in any parking validation program initiated by Landlord.

Without limiting the generality of the foregoing, Landlord has the right in its management, control and operation of the Shopping Center and Common Area to do and perform such acts in and to the Shopping Center and Common Area as Landlord determines to be advisable for the Shopping Center and the Common Area, including, but not limited to: obstructing or closing off all or any part of the Common Area or the Shopping Center for the purpose of maintenance, repair, construction, to prevent the acquisition of public rights therein or for other reasonable purposes; using any part of the Common Area or Shopping Center for merchandising, display, decorations, entertainment, and structures designed for retail selling or special features or promotional activities; changing the area, level, location, arrangement or use of Shopping Center, Common Area or any part thereof; constructing other buildings, structures, or improvements in the Shopping Center or the Comm on Area and making alterations thereof, additions thereto, subtractions therefrom, or rearrangements thereof; build additional stories on any building, and constructing additional buildings or facilities adjoining or proximate to the Shopping Center or the Common Area; constructing multiple deck, elevated or underground parking facilities, and expand, reduce or alter same in any manner whatsoever; erecting both temporary and permanent kiosks; exclude, expand, change, modify, add to or subtract from (I) the size and dimensions of the Shopping Center, the Common Area, any part thereof or any property adjoining the same, (ii) the number, location and dimensions of the stores and floors in the Shopping Center,( iii) the identity and type of stores and tenants in the Shopping Center, (iv) the signs (pylon and otherwise) installed or to be installed in the Shopping Center, and (v) the design or decorating of any portion of the Shopping Center or the Common Area. Landlord's rights under this paragraph may be perfor med so long as access to the Premises is not unreasonably denied. Tenant shall not interfere with Landlord's or other tenants' rights to use any part of the Common Area.

Notwithstanding any provision in this Lease to the contrary, Landlord shall not obstruct or close any part of the shopping center which impedes ingress and egress to the Leased Premises during normal business hours.

Section 2.5, Anchor Tenant.

This section lined through (deleted)

Section 2.6, Relocation of Premises

This section lined through (deleted)

Section 2.7. Option to Extend Term

A. Tenant, by written notice to Landlord given no later than six (6) full calendar months before the Expiration Date, shall have the option to renew this Lease for an additional Five (5) Year period (the "First Option Period") commencing on the expiration of the Term of this Lease, pursuant to all of the terms, covenants, and conditions of this Lease and at the Option Price set forth in Section 1.9a hereof, provided that at the time the notice hereinabove referred to is given and at the time the First Option Period commences, Tenant is open and operating the Premises for the use set forth in Section 2.3 and is not materially in default hereunder.

B. Tenant, by written notice to Landlord given no later than six (6) full calendar months before the expiration of the First Option Period, shall have the option to renew this Lease for an additional Five (5) Year period (the "Second Option Period") commencing on the expiration of the First Option Period, pursuant to all of the terms, covenants, and conditions of this Lease and at the Option Price set forth in Section 1.9a hereof, provided that at the time the notice hereinabove referred to is given and at the time the First Option Period commences, Tenant is open and operating the Premises for the use set forth in Section 2.3 and is not materially in default hereunder.

Section 2.8. Tenant Exclusive.

So long as Tenant is open and operating its business as provided for in this Lease (condemnation and casualty excepted) and is not otherwise in default under this Lease (after the expiration of any applicable cure periods), then Landlord covenants and agrees that during the Term hereof, no space in the Shopping Center will be leased or allowed to be leased for a full service financial institution as described in Section 1.8.

Landlord acknowledges that in the event of a breach of this restriction, Tenant shall give Landlord written notice of such breach and Landlord shall have thirty (30) days from the date of said notice (or such longer period as may be reasonably required if Landlord is diligently attempting to remedy same) to remedy same. If Landlord fails to remedy such breach within said thirty (30) day period (or such longer period as may be reasonably required if Landlord is diligently attempting to remedy same), Tenant shall have the rights set forth in the next paragraph as its sole and exclusive remedy because of such breach. So long as Landlord is diligently attempting to remedy the breach of said restriction, Tenants remedies shall be postponed.

In the event Landlord fails to proceed with all diligence to remedy such violation, then, upon the expiration of thirty (30) days from the date of Tenants notice, Tenant shall have, as its sole and exclusive remedy under this Lease, the right to either (i) decrease annual Base Rent by 50% during the period such store (the "Competing Store") is open and operating (although Tenant shall still pay Landlord all Percentage Rent and Additional Rent due under this Lease), or (ii) terminate this Lease, which right Tenant shall elect by delivering to Landlord further written notice of its intention. If Tenant elects (ii) above, then this Lease shall terminate as of the 90th day after Tenants election, and neither Tenant nor Landlord shall have any further obligation under this Lease. If Tenant elects (i) above, then Tenant shall resume paying full Base Rent on the date such Competing Store ceases violating the restriction. If such Competing Store continues to v iolate the restriction for 180 days after the date said Competing Store opened for business, then Tenant shall have the further right to terminate this Lease by delivering to Landlord, no earlier than 180 days, and no later than 210 days after the date the Competing Store opened for business, written notice of its intention to terminate and this Lease shall terminate on the 90th day after Tenant's notice to Landlord. If Tenant fails to provide Landlord with written notice of its intention to terminate this Lease under this Section by the 210th day after the date the Competing Tenant opens for business, then Tenant's right to terminate the Lease under this Section shall be null and void and Tenant shall immediately begin paying to Landlord full Base Rent.

ARTICLE III

LEASE TERM

Section 3.1. Term.

The Term of this Lease shall be as set forth in Section 1.4, commencing on the Commencement Date specified in said Section 1.5 and ending on the Expiration Date specified in said Section 1.6, unless sooner terminated pursuant to any provision of this Lease.

Section 3.2. Lease Year Defined.

The term "Lease Year" means a period of twelve (12) consecutive calendar months, the first full Lease Year shall commence on the first day of the calendar month immediately following the Commencement Date, and each succeeding Lease Year shall commence upon the anniversary date of the first Lease Year.

Section 3.3. Change in Possession Date/Commencement Date.

If for any reason Landlord cannot deliver possession of the Premises to Tenant on the Possession Date set forth in Section 1.7, Landlord shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of the Tenant hereunder. However, and in such case, Tenant shall not be obligated under the provisions of Article V of this Lease until the passage, from the actual Possession Date, of the same number of days as between the Possession Date set forth in Section 1.7 and the Commencement Date set forth in Section 1.5, which date shall be the new Commencement Date, (unless Tenant shall open the Premises for business prior to such new Commencement Date, in which event, the date of Tenant's opening shall be the new Commencement Date) and the Expiration Date shall remain unchanged. In the event that Landlord shall permit Tenant to occupy Premises prior to said new Commencement Date, such occupancy s hall be subject to all of the provisions of this Lease. Said early possession shall not advance the Expiration Date.

If Landlord is unable to deliver possession of the Premises within 210 days of the execution of this agreement, Tenant shall have the right to terminate this lease without further liabilities or obligations.

Section 3.4. Confirmation of Dates

Upon the request of either party, both Tenant and Landlord agree to execute a written installment certifying the Possession Date, the Commencement Date, the Expiration Date of this Lease as well as the date Tenant opened the Premises for business to the general public, provided that this Lease shall not be affected in any manner if either party fails or refuses to execute such instrument.

ARTICLE IV

SECURITY DEPOSIT

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ARTICLE V

BASE RENT

Section 5.1. Payment.

All Base Rent shall be payable in advance, without prior demand or any right of offset or deduction, in monthly installments on the first day of each calendar month of the Term hereof. Tenant shall pay all Base Rent to Landlord in lawful money of the United States of America at the address stated in Section 1.21 or to such other persons or at such other places as Landlord may designate in writing.

Notwithstanding anything to the contrary contained herein, after the Expiration Date or earlier termination of this Lease, Landlord shall have the right to reconcile all Base Rent and Additional Rent (defined hereinafter) billed, paid and/or owed by Tenant during the Term hereof and thereafter submit a final billing to Tenant. Upon receipt thereof, Tenant shall submit payment in full to Landlord within thirty (30) days. The provisions of this paragraph shall survive the expiration or sooner termination of this Lease.

Tenant s covenant to pay Base Rent and Additional Rent under this Lease is an independent covenant of Tenant and shall not be subject to any abatement, deduction, counterclaim, reduction, set off or defense of any kind whatsoever, except as set forth herein.

Section 5.2. Past Due Base Rent and Late Charge.

Any Base Rent or Additional Rent to be paid by Tenant which is not paid when due shall bear interest from the date due until the date paid at the Default Rate. In addition, if Tenant shall fail to pay any Base Rent or Additional Rent within seven (7) days after the same is due, Tenant shall be obligated to pay a late payment charge equal to the Fifty Dollars ($50.00) to reimburse Landlord for its additional administrative costs.

Any payment by Tenant or acceptance by Landlord of a lesser amount then shall be due from Tenant to Landlord shall be treated as a payment on account. The acceptance by Landlord of a check for a lesser amount with an endorsement or statement thereon, or upon any letter accompanying such check, that such lesser amount is payment in full shall be given no effect, and Landlord may accept such check without prejudice to any other rights or remedies which Landlord may have against Tenant.

The Fifty Dollar ($50.00) additional administrative fee set forth above is intended as reasonable estimate of Landlord's administrative costs and damages because of Tenant's failure to pay Base Rent or Additional Rent on a timely basis. The parties agree that this administrative fee is reasonable, bears significant relation to the actual administrative costs that Landlord might sustain, which administrative costs Tenant and Landlord agree would be uncertain and difficult to prove, and is not a penalty for Tenant's failure to pay Base Rent and Additional Rent. The acceptance by Landlord of said administrative fee shall not preclude Landlord from seeking and pursuing any other remedy under this Lease.

Section 5.3. Base Rent.

Payment of Base Rent shall begin on the Commencement Date. If the Commencement Date occurs on a day other than the first day of a calendar month, then Base Rent (as well as all Additional Rent) shall be prorated for the balance of that month based upon the actual number of days from the Commencement Date through the last day of said calendar month. The amount of each monthly installment of Base Rent for the Premises for the Term of this Lease shall be as specified in Section 1.9.

Section 5.4. Percentage Rent.

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Section 5.5. Additional Rent.

Tenant and Landlord agree that all other sums excepting Base Rent which may become due under this Lease shall be deemed "Additional Rent". Additional Rent shall include, and shall not be limited to: late charges, interest, Common Area Maintenance Charges, Real Estate Tax Charges, Tenant's Proportionate Share of Insurance Costs, attorneys' fees and security deposits and any other sum coming due to or advanced by Landlord in performance of its obligations. Additional Rent shall be payable monthly in advance on the first (1st) day of each month on and after the Commencement Date.

ARTICLE VI

UTILITIES

Tenant shall make application for, obtain, pay for and be solely responsible for all utilities required, used or consumed in the Premises, including, but not limited to, gas, water, (including water for domestic uses and for fire protection), telephone, electricity, sewer service, garbage collection services and any similar service. Landlord shall bear the expense of providing access to all such utilities and connections thereto up to the Leased Premises. In the event that any charge for any utility supplied to the Premises is not paid by Tenant to the supplier when due, then Landlord may, but shall not be required to, pay such charge for and on behalf of Tenant, with any such amount paid by Landlord being repaid by Tenant to Landlord as Additional Rent promptly upon demand. Additionally, if Landlord shall elect to supply any utilities to the Premises, then Tenant shall pay to Landlord the cost of its utility consumption. Landlord agrees that the c ost to Tenant of any utilities supplied by Landlord shall not exceed the amount Tenant would have paid if it independently obtained such service from the local utility supplier to the extent that a relationship exists.

Landlord and Tenant hereby agree that Landlord shall not be liable for any interruptions or curtailment in utility services due to causes beyond its reasonable control or due to Landlord's alteration, repair or improvement of the Premises or the Shopping Center unless such interruption or curtailment continues for more than five (5) business days, in which event Tenant s rental obligation shall be proportionately abated until such interruption or curtailment is fully restored.

ARTICLE VII

MARKETING FUND; MERCHANDISE' ASSOCIATION

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ARTICLE VIII

ACCEPTANCE OF POSSESSION

Section 8.1. Landlord's Work.

Landlord shall, at its expense, construct the Premises in substantial accordance with plans and specifications prepared by Landlord's architect, incorporating in such construction all work described in Exhibit C attached hereto as being required of Landlord (herein called "Landlord's Work"). All construction work to be performed by Landlord hereunder shall be performed in a good and workmanlike manner in full compliance with all applicable laws, codes and building requirements of the local authorities.

Section 8.2. Tenant's Work.

All work not provided herein to be done by Landlord shall be performed by Tenant, at Tenant's expense, and deemed to be "Tenant's Work". The performance of Tenant's Work, if any, shall include all work designated as Tenant's Work in Exhibit D. All Tenants Work shall be performed diligently and promptly at Tenant's expense and in accordance with the following provisions.

Section 8.3. Tenant's Obligations Before Commencement Date.

Before performing any Tenant Work in the Premises, Tenant shall prepare plans and specifications of Tenant's Work (which plans and specifications shall be prepared consistent with Exhibit D hereof) and submit same to Landlord within a time frame allowing for (a) a reasonable time for the Landlord's review, approval and resubmittals by Tenant, required by the term of this Section 8.3.A and (b) a sufficient time for completion of Tenant's Work and Tenant's opening for business on or before the Commencement Date, but in no event shall such plans and specifications be submitted later than ninety (90) business days after the date of this Lease or ninety (90) days after the date Landlord provides Tenant with plans and specifications in form sufficient to allow Tenant to prepare the plans and specifications for Tenant's work, whichever is later. Tenant's submission to Landlord will include a reproducible (sepia) set of plans and specifications and four (4 ) prints of Tenant's Work to be done. As soon as reasonably possible thereafter, Landlord shall notify Tenant of any failure of Tenant's plans to meet with Landlord's approval. Tenant shall, within fifteen (15) days after receipt of any such notice, cause Tenant's plans to be revised and resubmitted to the Landlord for Landlord's approval. When Landlord or its designated agent has approved the original or revised Tenant's plans, Landlord shall initial and return one set of approved Tenant's plans to Tenant and the same shall become a part hereof as Exhibit D-1. Tenant shall not commence any of Tenant's Work until Landlord has approved Exhibit D-1. Tenant shall not be permitted to commence any work in the Premises until Tenant's plans and specifications have been submitted and approved by Landlord. Landlord shall review Tenant s plans within five (5) business days after receipt of said plans. Failure by Tenant to timely submit plans shall not delay the occurrence of the Commencement Date.

Section 8,4, Tenant's Construction.

Landlord shall substantially complete Landlord's Work, and Tenant shall take possession of the Premises, on the Possession Date set forth in Section 1.7 hereof. Tenant shall commence Tenant's Work on the Possession Date or as soon as reasonably possible agree all plans have been approved, complete the same in strict accordance with applicable Exhibits, install all store and trade fixtures, signs, equipment, stock in trade, merchandise and inventory, and open for business therein not later than the Commencement Date. In no event shall Tenant's failure to fulfill its obligations under Section 8.3.A affect the Commencement Date or any obligation of Tenant hereunder, and no such failure shall be construed in any way to extend the Lease Term.

Notwithstanding anything contained in this Lease to the contrary, if Tenant shall (with Landlord's consent) accept possession of the Premises prior to either (I) the Possession Date; or (ii) receipt of a fully executed original of this Lease, then and in either of such events, Tenant agrees (a) to be bound by all of the terms, covenants and conditions in this Lease from and after any such acceptance of possession, and (b) that the dates herein provided for the Commencement of Tenant's obligations arising prior to the Commencement Date, and any time limits for performance imposed upon Tenant hereunder, shall be deemed to have commenced as of the date of such acceptance of the Premises.

Prior to opening its Premises for business to the public, Tenant shall deliver to Landlord a certificate, satisfactory in form and substance to the Landlord for insurance purposes, certifying to the full insurable value of all of the Tenant's Work described in Exhibits D and D-I.

All construction work to be performed by Tenant hereunder shall be performed in a good and workmanlike manner in full compliance with all applicable laws, codes and building requirements of the local authorities. Tenant agrees to procure and pay for all necessary permits, licenses and consents required in connection with such construction and that Tenant's Work shall not unreasonably interfere with the conduct of Landlord's or any other tenant's business in the Shopping Center.

Section 8.5. Condition of Premises.

Tenant's taking possession of the Premises shall be conclusive evidence of Tenant's (i) acceptance thereof in good order and satisfactory condition; (ii) acknowledgment that the same are in the condition called for hereunder; and (iii) agreement that the obligations of Landlord imposed hereunder, if any, have been fully performed, except for latent defects and punch list items. Tenant agrees that except as specifically set forth herein, no representations respecting the condition of the Premises and no promises to decorate, alter, repair or improve the Premises either before or after the execution hereof have been made by Landlord or its agents to Tenant.

ARTICLE IX

LABOR RELATIONS

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ARTICLE X

OTHER OPERATIONS

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ARTICLE XI

ASSIGNMENT OR SUBLETTING

Tenant shall not voluntarily or by operation of law transfer, assign, sublet, license, concession, mortgage or otherwise transfer or encumber all or any part of Tenant's interest (to include the sale or other transfer of stock in any percentage sufficient to change the effective voting control of Tenant) in this Lease or in the Premises (collectively a "Transfer) without Landlord's prior written consent, which consent shall not be unreasonably withheld, nor shall Tenant suffer or permit the Premises or any part thereof to be used or occupied by others without Landlord's prior written consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, however, Tenant shall have the right to lease, assign, or sublease a portion of the Leased Premises to any third party, so long as the third party does not violate the use provision outlined in Section 1.8 and so long as Tenant remains Liable under the terms and conditions of this Lease. Any attempted Transfer without such consent shall be void and shall constitute a breach of the Lease. Regardless of Landlord's consent, no Transfer shall release Tenant of Tenant's obligation or alter the primary liability of Tenant to pay Base Rent and Additional Rent and to perform all other obligations to be performed by Tenant hereunder.

This Article XI shall not prohibit any acquirer or successor in interest of Tenant to continue operation of the Leased Premises to continue operation of the Leased Premises in accordance with all of the terms and conditions of this Lease as long as such acquirer of successor in interest shall be of equal or greater financial condition in the opinion of the Landlord which shall not be unreasonably withheld.

ARTICLE XII

CONDUCT OF BUSINESS

Section 12.1. Operation/Trade Name.

A. Tenant covenants and agrees that, continuously and uninterruptedly from and after its initial opening for business, it will operate and conduct within the Premises the business it is permitted to operate and conduct under the provisions of this lease, except while the Premises are untenantable by reason of fire or other casualty. Tenant agrees to conduct its business at all times in a first class manner consistent with reputable business standards, and that it will at all times keep and maintain within and upon the Premises an adequate stock of merchandise and trade fixtures to service and supply the usual and ordinary demands and requirements of its customers and that it will keep the Premises in a neat, clean and orderly condition. Tenant also agrees to conduct Tenant's business under the trade name as stated in Section 1.11 hereof and for the use stated in Section 1.8 hereof. Tenant shall not conduct any secondhand, auction, distress, fire, b ankruptcy or going-out-of-business sales.

Section 12.2. Business Hours.

Tenant agrees to keep open the Premises and to operate the business conducted therein during normal business hours except legal bank holidays.

Section 12.3. Tenant Advertising.

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ARTICLE XIII

COMMON AREA MAINTENANCE CHARGES;

REAL ESTATE TAX CHARGES

Section 13.1 Common Area Maintenance Charges.

"Common Area Maintenance Charges", as used herein, shall mean Tenant's Proportionate Share of all operating expenses incurred by Landlord regarding the Common Area and Shopping Center. The operating expenses of the Common Area and Shopping Center are those amounts paid or payable in connection with the management, maintenance, repair, replacement and operation of the Common Area and the Shopping Center. Said Common Area Maintenance Charges include, but shall not be limited to, those costs and expenses associated with: landscaping; sprinklers; security; repaving, replacing, repairing and restriping parking lots; public utilities; insuring the Shopping Center (including, but not limited to, fire and extended coverage insurance on the Shopping Center, rent loss, insurance against liability for personal injury, death and property damage and workman's compensation insurance as set forth in Article XV); roof repairs and replacements; all repairs to the b uildings located on the Shopping Center; lighting; maintenance; removal of snow, trash, rubbish, garbage and other refuse; repair, replacement and maintenance of machinery and equipment used in maintenance including all heating, ventilating and air conditioning machinery and equipment if any; personnel to implement services, salary expenses, including unemployment taxes, social security taxes, disability benefits, hospitalization, group insurance; uniforms of personnel directly servicing the Shopping Center; direct parking of the Shopping Center; Landlord's compliance with present and future laws and ordinances; cleaning, and painting the Common Area and the improvements located on the Shopping Center; maintenance of sanitary sewers, storm sewers, domestic water, storm water, detention, retention basins, water filtration and treatment facilities, if any; pylon sign (except the individual sign panels); directional and traffic signs and signals; security and security patrols; fire protection; installing, maint aining and repairing burglar or fire alarm systems; and fifteen percent (15%) of all the foregoing costs as and for Landlord's administrative and overhead costs. Tenant shall pay to Landlord, on the first day of each calendar month, commencing on the Commencement Date and continuing throughout the term of the Lease, Tenant s Proportionate Share of Common Area Maintenance Charges as reasonably estimated by Landlord, which may be adjusted from time to time. On an annual or other basis, Landlord shall deliver to Tenant a statement of reconciliation of Common Area Maintenance Charges and a calculation of Tenant's Proportionate Share thereof for the preceding calendar year. Tenant shall pay Landlord for Tenant's Proportionate Share, less any previous payments attributable to that period, of estimated Common Area Maintenance Charges for the fiscal period to which such expenses apply, within ten (10) days after receipt thereof. Tenant's obligations shall be prorated to account for any fractional portion of a fiscal period included in the term of its Lease. Tenant shall also pay to Landlord, on the first day of each calendar month, commencing on the Commencement Date and continuing throughout the term of the Lease, Tenant's Proportionate Share of the estimated Common Area Maintenance Charges which may be adjusted by Landlord from time to time. Common Area Maintenance Charges shall be deemed Additional Rent hereunder.

Notwithstanding the foregoing, Common Area Maintenance Charges shall not, however, include (I) interest and amortization on mortgages and other debt costs; (ii) improvements, repairs or alterations to spaces leased to other tenants; (iii) the cost of providing any service directly to and paid directly by, any tenant; (iv) costs of items to the extent Landlord receives reimbursement from insurance proceeds; (v) any duplicative charges or expenses; and (vi) capital expenditures, as defined by generally accepted accounting principals (except those made primarily to reduce Common Area Maintenance Charges, or to comply with present and future laws and ordinances or other governmental requirements).

If Landlord elects to exclude from the determination of Tenant s Proportionate Share any floor area in the Shopping Center which is leased to Anchor Tenants or is not owned by Landlord (pursuant to Section 2.2 hereof), Common Area Maintenance Charges shall be reduced by the amounts actually received by Landlord as contributions toward Common Area Maintenance Charges from said Anchor Tenants or parties.

Section 13.2 Real Estate Tax Charges.

"Real Estate Tax Charges", as used herein, shall mean Tenant's Proportionate Share of general and special taxes, assessments, duties and levies charged and levied upon or assessed against the Shopping Center and/or any improvement situated on the real property on which the Shopping Center stands, any leasehold improvement, and all costs and fees (including, without limitation, reasonable attorneys fees) incurred by Landlord in contesting or negotiating with the public authorities as to same; provided that if the Premises are part of a tax parcel that is separate from the rest of the Shopping Center, Real Estate Tax Charges in such instance, and at Landlord s option, shall mean Tenant's Pro Rata Share of general and special taxes, assessments, duties and levies charged and levied upon or assessed against the separate tax parcel on which the Premises stands, and all costs and fees (including, without limitation, reasonable attorneys fees) incurred by Landlord in contesting or negotiating with the public authorities as to same and "Tenant s Pro Rata Share" shall mean the percentage equal to a fraction, the numerator of which shall be the square footage of the Premises specified in Section 1.3 and the denominator of which shall be the square footage of the constructed leasable area of all buildings existing on the separate tax parcel of which the Premises are part.

Tenant shall pay to Landlord, on the first day of each calendar month, commencing on the Commencement Date and continuing throughout the term of the Lease, the estimated Real Estate Tax Charges which may be adjusted from time to time. Upon receipt of the tax bill(s), Landlord shall deliver to Tenant a statement of Real Estate Tax Charges, along with a copy of the tax bill, and Landlord's calculation of Tenant's Proportionate Share thereof. Tenant shall pay Landlord for Tenant's Proportionate Share, less any payments of estimated Real Estate Tax Charges for the fiscal year to which such Real Estate Tax Charges apply, within ten (10) days after receipt thereof. Tenant obligations shall be prorated for any fractional portion of a tax fiscal year included in the term of its Lease. Real Estate Tax Charges shall be deemed Additional Rent hereunder.

In the event of the enactment, adoption or enforcement by any governmental authority of any assessment, levy or tax, whether sales, use or otherwise, on or in respect of the Base Rent and Additional Rent set forth herein, or on or in respect of the right to lease or occupy the Shopping Center, the Premises, or both, Tenant shall pay such assessment, levy or tax to Landlord, or at Landlord's option, Tenant shall pay such assessment, levy or tax directly to the governmental authority. If such assessment, levy or tax is imposed on or in respect of all of the Base Rent derived from the Shopping Center, or is imposed on or in respect of the Shopping Center as a whole, Tenant shall pay to Landlord Tenant's Proportionate Share of such assessment, levy or tax. Notwithstanding the foregoing, this shall not impose upon Tenant the obligation to reimburse Landlord for any income, gift, inheritance or estate tax as such taxes are now structured.

If Landlord elects to exclude from the determination of Tenant s Proportionate Share any floor area in the Shopping Center which is leased to Anchor Tenants (pursuant to Section 2.2 hereof), Real Estate Tax Charges shall be reduced by the amounts actually received by Landlord as contributions toward Real Estate Tax Charges from said Anchor Tenants.

Section 13.3 Additional Taxes.

If Landlord is assessed additional taxes or if its present taxes are increased as a result of any value placed on Tenant's leasehold, fixtures or furnishings, or goods and services, then immediately upon demand Tenant shall pay to Landlord the amount of said additional tax, or the amount of the increase.

Section 13.4 Tenant Right to Audit.

Tenant shall have the right, at Tenant's sole cost and expense, to audit the Landlord's records of Common Area Maintenance Charges ("CAM Costs") provided that all the following criteria are met: (a) before conducting any audit, Tenant must pay the full amount of any Common Area Maintenance Charges due, and must not be in default of any other provisions of this Lease; (b) in conducting the audit, Tenant must utilize an independent certified public accountant ("CPA") experienced in auditing shopping center records, which CPA will be subject to Landlord's reasonable prior approval; (c) the audit shall be conducted at Landlord's main offices or such other site as Landlord may determine; (d) upon receipt thereof, Tenant will deliver to Landlord a copy of the audit report and all accompanying data; (e) Tenant will keep confidential all agreements involving the rights provided in this section and the results of any audit conducted hereunder, and shall cause t he CPA conducting said audit to keep such information confidential; (f) Tenant shall not conduct an audit more often than once each calendar year; and (g) Tenant's audit rights shall not cover a period of time in excess of the one calendar year immediately preceding the audit.

If in the course of an audit, it is determined that Landlord has overcharged Tenant for CAM Costs, Landlord shall refund to Tenant the amount of the overcharge within thirty (30) days of the verification of the overcharge.

Section 13.5 Tenant's Taxes.

Tenant shall pay all such taxes which may be lawfully charged, assessed or imposed upon its fixtures and equipment of every type and also upon all of its personal property in the Premises.

ARTICLE XIV

DEFAULT BY TENANT/LANDLORD

Section 14.1. Tenant Default/Right to Reenter and Remedies.

In the event of (a) any failure of Tenant to pay any Base Rent, Additional Rent or any other amount due hereunder for more than five (5) days after written notice of such default shall have been given to Tenant, or (b) any failure to perform any other of the terms, conditions or covenants of this Lease to be observed or performed by Tenant for more than thirty (30) days after written notice of such default shall have been given to Tenant, or an agent of Tenant shall falsify any report required to be furnished to Landlord pursuant to the terms of this Lease, or (d) if Tenant or any guarantor of this Lease shall become insolvent, or file any debtor proceedings or take or have taken against Tenant or any guarantor of this Lease in any court pursuant to any statute of any state a petition for reorganization or for the appointment of a receiver or trustee of all or a portion of Tenant's or any such guarantor's property, or (e) if Tenant or any such guar antor makes an assignment for the benefit of creditors, or petitions for or enters into an agreement, or (f) if Tenant shall abandon the Premises, or suffer this Lease to be taken under any writ of execution, or does not do business in the Premises for a period of ten (10) consecutive days, or (g) if Tenant during the Term hereof shall have been in default in the payment of Base Rent, Additional Rent or other amount due hereunder more than two (2) times in any calendar year and because of such defaults Landlord shall have served upon Tenant two (2) or more five (5) day notices (a default of this provision shall be deemed non-curable), or (h) if Tenant breaches or violates the provisions of Article XXIX hereof for more than five (5) business days after written notice from Landlord, then Landlord, in addition to other rights or remedies it may have, shall have the immediate right to terminate Tenant's right to possession of the Premises and to reenter and may remove all persons and property from the Premises. Such property may be removed and stored in a public warehouse or elsewhere at the cost of, and for the account of, Tenant, all without service of notice (except as provided herein) or resort to legal process and without being deemed guilty of trespass or becoming liable for any loss or damage which may be occasioned thereby.

Section 14.2. Tenant Default/Right to Relet.

Should Tenant be in default as provided in Section 14.1 above and Landlord elects to reenter, as herein provided, or should it take possession pursuant to legal proceedings or pursuant to any notice provided for by law, or should Tenant fail to cure a default (after expiration of the applicable notice period) it may either terminate this Lease or may, from time to time without terminating this Lease, make such alterations and repairs as may be necessary in order to relet the Premises, and relet the Premises or any part thereof for such term or terms (which may be for a term extending beyond the Lease Term) and at such rental or rentals and upon such other terms and conditions as Landlord, in its sole discretion may deem advisable. Upon each such reletting, all rentals received by Landlord therefrom shall be applied: first, to any indebtedness other than Base Rent due hereunder from Tenant to Landlord; second, to pay any costs and expenses of relett ing, including Additional Rent, concessions, or abatements, brokers' fees and attorneys' fees, and of costs of such alterations and repairs; third, to the payment of Base Rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future Base Rent as the same may become due and payable hereunder. If such rentals received from such reletting during any month shall be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No such reentry or taking possession of the Premises by Landlord shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant or unless the termination thereof be decreed by a court of competent jurisdiction. Landlord should be entitled to recover from Tenant any Base Rent which would otherwise have been payable under the terms of this Lease but for concessions or abatements previously granted by Landlord to Tenant. Notwithstanding any such reletting without termination, Landlord may at any time thereafter elect to terminate this Lease for such previous breach. Should Landlord at any time terminate this Lease for any breach, in addition to any other remedies it may have, it may recover from Tenant all damages it may incur by reason of such breach, including the cost of recovering the Premises, reasonable attorneys' fees, and including the worth at the tune of such termination of the excess, if any, of the amount of Base Rent reserved in this Lease for the remainder of the Lease Term over the then reasonable rental value of the Premises for the remainder of the Lease Term, all of which amounts shall be immediately due and payable from Tenant to Landlord. If Tenant has previously paid Percentage Rent to Landlord, then in determining the Base Rent which would be payable by Tenant hereunder subsequent to default the Base Rent for each year of the unexpired Term shall be e qual to the average annual Base and Percentage Rents payable by Tenant from the commencement of the Lease Term to the time of default, or during the preceding three (3) full calendar years, whichever period is shorter.

Nothing contained herein shall prevent the enforcement of any claim Landlord may have against Tenant for anticipatory breach of the unexpired term of this Lease. In the event of a breach or anticipatory breach by Tenant of any of life covenants or provisions hereof, Landlord shall have the right of injunction and the right to invoke any remedy allowed at law or in equity as if re-entry, summary proceedings and other remedies were not provided for herein.

Mention in this Lease of any particular remedy shall not precede Landlord from any other remedy at law, in equity or by statute. Tenant hereby acknowledges that Landlord shall have the right to exercise any remedy available to it under this Lease, at law, in equity or by statute and unless clearly stated to the contrary in this Lease, no right or remedy conferred upon or reserved to the Landlord under this Lease is intended to be exclusive of any other right or remedy given herein or now or hereinafter existing at law, in equity or by statute.

Section 14.3. Legal Expenses.

If suits shall be brought for recovery of possession of the Premises, for the recovery of Base Rent, Additional Rent or any other amount due under the provisions of this Lease, or because of the breach of any term, covenants or condition herein contained on the part of either party to be kept or performed, and a breach shall be established, the defaulting party shall pay all expenses incurred therefor, including reasonable attorneys' fees.

Section 14.4. Tenant Default/Default in Other Centers.

This Section was lined through (deleted).

Section 14.5. Landlord Default.

Landlord shall not be in default in the performance of any of its obligations under his Lease unless and until Landlord shall have failed to perform such obligation within thirty (30) days or such additional time as is reasonably required to correct such default after written notice by Tenant to Landlord stating with specificity the nature of Landlord s failure to perform such obligation. In the event of a Landlord default, Tenant shall be entitle to exercise all rights and remedies available to it under this Lease, at law or in equity.

ARTICLE XV

INSURANCE

Section 15.1. By Landlord.

Landlord shall carry Commercial General Liability insurance on the Common Area and Shopping Center providing coverage for each such area of not less than Two Million Dollars and 00/100 ($2,000,000) against liability for bodily injury, personal injury or death, property damage or destruction (including loss of use thereof) per occurrence.

Landlord shall also carry insurance for fire, extended coverage, vandalism, malicious mischief and other coverage and endorsements deemed advisable by Landlord, insuring all improvements owned by Landlord in the Shopping Center (excluding Tenant's merchandise, trade fixtures, furnishings, equipment, personal property, Tenant's Work or betterments and plate glass) for the full insurable value thereof, with such deductibles as Landlord reasonably deems advisable.

To the extent not included in Tenant's Proportionate Share of Common Area Maintenance Charges pursuant to Section 13.1 hereof, Tenant agrees to pay Landlord, upon the Commencement Date, as Additional Rent hereunder, Tenant's Proportionate Share of the cost for such public liability, fire and other peril insurance carried by Landlord on the Shopping Center, as well as the cost to maintain such other insurance coverages and endorsements deemed advisable by Landlord, in equal installments on the first day of every calendar month during the Lease Term (herein referred to as "Tenant's Proportionate Share of Insurance Costs"). At the end of the first full calendar year, and each calendar year thereafter, the amount of Tenant's Proportionate Share of Insurance Costs shall be adjusted in direct ratio to the increase or decrease in the cost of the premiums paid by Landlord for the aforesaid insurance coverage.

Section 15.2. By Tenant.

Tenant agrees to carry Commercial General Liability insurance on the Premises during the Term hereof, covering the Tenant and naming the Landlord, Landlord's mortgagee, Landlord's agents and beneficiaries and such other parties as reasonably requested by Landlord as additional insureds with terms and companies satisfactory to Landlord for limits of not less that Two Million Dollars and 00/100 ($2,000,000) for bodily injury, including death, and personal injury for any one occurrence, One Million Dollars and 00/100 ($1,000,000) property damage insurance or combined single limit of Two Million Dollars and 00/100 ($2,000,000). Tenant shall also carry contractual liability coverage recognizing this Lease, products and/or completed operations liability and shall provide that Landlord and Tenant shall be given a minimum of thirty (30) days' written notice by the insurance company prior to cancellation, termination or change in such insurance. Tenant also agrees to carry insurance against fire, sprinkler damage and such other risks as are from time to time included in standard "all risk" and/or "special peril" forms of insurance (including business interruption, business income and extra expense coverage and insuring against flood and all other forms of water damage) for the full insurable value, covering all of Tenant's Work and betterments, Tenant's merchandise, trade fixtures, furnishings, wall coverings, plate glass, floor coverings, carpeting, drapes, equipment and all items of personal property of Tenant located on or within the Premises. Tenant's business interruption coverage shall also include coverage for off Premises public utility interruption and said business interruption insurance shall have limits sufficient to pay Base Rent, Percentage Rent and Additional Rent for a period of not less than twelve (12) months. At the Commencement Date, Tenant shall provide Landlord with copies of the policies or certificates evidencing that such insurance is in full force and effect and stating the terms thereof. The minimum limits of the comprehensive general liability policy of insurance shall in no way limit or diminish Tenant's liability under Section 15.6 hereof and Tenant's insurance obligation shall be subject to increases, additional and/or different types of insurance at any time, and from time to time, during the Term hereof if Landlord, in the exercise of its reasonable judgment, shall deem same necessary for adequate protection. Within twenty (20) days after demand therefor by Landlord, Tenant shall furnish Landlord with evidence that such demand has been complied with.

Section 15.3. Mutual Waiver of Subrogation Rights.

Whenever any loss, cost, damage or expense resulting from fire, explosion or any other casualty or occurrence (including negligence) is incurred by either of the parties to this Lease in connection with the Premises or the Shopping Center, and such loss, cost, damage or expense is required to covered by insurance under this Lease, then the party so damaged hereby releases the other party from any liability it may have on account of such loss, cost, damage or expense and waives any right of subrogation which might otherwise exist in or accrue to that party on account thereof, provided that such release of liability and waiver of the right of subrogation shall not be operative in any case where the effect thereof is to invalidate such insurance coverage or increase the cost thereof (provided that in the case of increased cost, the other party shall have the right, within thirty (30) days following written notice, to pay such increased cost and thereu pon keeping such release and waiver in full force and effect).

Section 15.4. Mutual Waiver of Claims A.

A. To the extent permitted by law, Landlord, its agents and employees, shall not be liable for, and Tenant hereby releases the Landlord from any liability whatsoever, and hereby waives all claims for losses and damages, including, but not limited to, actual and consequential loss and damage to property (including betterments and including the loss of use thereof) sustained by Tenant resulting from any accident or occurrence (including the negligence of Landlord) in or upon any part of the Premises, the Common Area or the Shopping Center, including any right of subrogation which might otherwise exist in or accrue to any person on account thereof. It is the intention of this Section 15.4 that all property of Tenant kept in the Premises, the Common Area and the Shopping Center shall be so kept at Tenant's sole risk.

B. To the extent permitted by law, Tenant, its agents and employees, shall not be liable for, and Landlord hereby releases the Tenant from any liability whatsoever, and hereby waives all claims for losses and damages, including, but not limited to, actual and consequential loss and damage to property (including the loss of use thereof) sustained by Landlord resulting from any accident or occurrence (including the negligence of Tenant) in or upon any part of the Premises, the Common Area or the Shopping Center, including any right of subrogation which might otherwise exist in or accrue to any person on account thereof.

Section 15.5. Increase in Fire Insurance Premium.

Tenant agrees that it will not keep, use, sell or offer for sale in or upon the Premises any article which may be prohibited by the standard form of fire insurance policy. Tenant agrees to pay any increase in premiums for fire and extended coverage or other insurance that may be charged during the Lease Term on the amount of such insurance which may be carried by Landlord on the Premises or the Shopping Center resulting from the type of merchandise sold by Tenant in the Premises, whether or not Landlord has consented to the same. In determining whether increased premiums are the result of Tenant's use of the Premises, a schedule, issued by the organization making the insurance rate on the Premises showing the various components of such rate, shall be conclusive evidence of the several items and charges which make up the fire insurance rate on the Premises.

In the event Tenant's occupancy causes any increase of premium for the public liability, fire and other peril insurance rates on the Premises or Shopping Center or any part thereof above the rate for the least hazardous type of occupancy legally permitted in the Premises, the Tenant shall pay the additional premium on such insurance policies by reason thereof. Bills for such additional premiums shall be rendered by Landlord to Tenant at such times as Landlord may elect, and shall be due from Tenant when rendered, and the amount thereof shall be deemed to be, and be paid as, Additional Rent.

Section 15.6. Mutual Indemnification.

A. Except to the extent caused by Landlord's negligence, Tenant shall indemnify and forever save harmless Landlord, its agents and employees from and against any and all third party personal injury and third party personal property liabilities, liens, claims, demands, damages, expenses, attorneys' fees, costs, suits, proceedings, actions and causes of action of any and every kind and nature arising or growing out of, or in any way connected with, Tenant's use, occupancy, management or control of the Premises or Tenant's conduct or activities in the Shopping Center or Common Area or any part thereof, or occasioned wholly or in part by any act or omission of Tenant, its invitees, agents, contractors, employees or servants.

B. Except to the extent caused by Tenant's negligence, Landlord shall indemnify and forever save harmless Tenant, its agents and employees from and against any and all third party personal injury and third party personal property liabilities, liens, claims, demands, damages, expenses, attorneys' fees, costs, suits, proceedings, actions and causes of action of any and every kind and nature arising or growing out of, or in any way connected with, Landlord's management and control of the Shopping Center or Common Area or any part thereof, or Landlord's conduct or activities in the Premises or occasioned wholly or in part by any act or omission of Landlord, its invitees, agents, contractors, employees or servants.

ARTICLE XVI

NO PERSONAL LIABILITY OF LANDLORD

"Landlord", as used in this Lease insofar as covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner or owners at the time in question of the Premises. In the event of any transfer of title, the Landlord named herein shall automatically be freed and relieved from and after the date of such transfer of conveyance of all liability as respects the performance of any Covenants or obligations on the part of Landlord contained in this Lease thereafter to be performed, provided that any funds in the hands of such Landlord at the time of such transfer shall be turned over to the grantee. Tenant shall look solely to the estate or interest of Landlord in the Shopping Center of which the Premises are a part for the satisfaction of Tenant's remedies for collection of a judgement or other judicial process requiring the payment of money by Landlord in the event of any default or breach by Landlord of an y of the terms, covenants and conditions of Lease to be observed and/or performed by Landlord, and no other property or assets of Landlord, its partners or agents shall be subject to levy, execution or other enforcement procedure for the satisfaction of Tenant's remedies.

ARTICLE XVII

ACCESS TO PREMISES

Landlord, its agents, representatives and designees shall have the right to enter the Premises at any time upon reasonable prior notice to examine and inspect the same, or to make such repairs, additions or alterations as Landlord may reasonably deem necessary or proper for the safety, improvement or preservation thereof. Landlord shall also have the right to enter the Premises upon reasonable prior notice during Tenant's regular business hours, to exhibit same to prospective purchasers, mortgages, lessees and tenants. During the ninety (90) days prior to the Expiration Date, Landlord may place upon the Premises "For Lease" or other similar signs which Tenant shall permit to remain thereon displayed.

ARTICLE XVIII

ALTERATIONS

Section 18.1. Alterations By Tenant.

Tenant shall not make any structural or mechanical alterations in any portion of the Premises, nor make any alterations in the storefront or the exterior of the Premises. Tenant shall not make any interior alterations at a cost in excess of Five Thousand Dollars ($5,000.00) without first obtaining the written consent of Landlord, which shall not be unreasonably withheld. Any such interior alterations made by Tenant without Landlord's consent shall be subject to the following conditions: (i) such alterations shall not affect the mechanical, electrical, plumbing or utility systems in the Premises; (ii) Tenant shall deliver not less than thirty (30) days prior written notice to Landlord of such proposed alterations specifying in detail the nature thereof; and (iii) any such alterations shall comply with the provisions of this Lease and the design criteria supplied by Landlord. All alterations, additions and improvements provided for herein shall becom e, upon completion, the property of Landlord subject to the terms of this Lease.

At any time Tenant either desires to or is required to make repairs or alterations in accordance with this Lease, Landlord may require Tenant, at Tenant's sole cost and expense, to obtain and provide to Landlord a lien and completion bond (or such other security acceptable to Landlord) in an amount equal to the estimated cost of such improvements to insure Landlord against liability including but not limited to liability for mechanics' and materialmen's liens and to insure completion of the work.

Tenant will not create, permit to be created or to remain, and will discharge, any lien (including, but not limited to, the liens of mechanics, laborers or materialmen for work or materials alleged to be done or furnished in connection with the Premises), encumbrance or other charge upon the Premises or any part thereof and upon Tenant's leasehold interest therein and performed by or through Tenant, provided that Tenant shall not be required to discharge any such liens, encumbrances or charges as may be placed upon the Premises by the act of Landlord.

Section 18.2 Roof and Walls.

Landlord shall have the exclusive right to use all or any part of the roof or exterior walls and floor of the Premises for any purpose, including, but not limited to: erecting signs or other structures on or over all or any part of the same; erecting scaffolds and other aids to the construction, maintenance and installation of the same; and in installing, maintaining, using, repairing and replacing pipes, ducts, conduits and wires and all other mechanical equipment leading through, to or from the Premises and serving other parts of the Shopping Center in locations which do not materially interfere with Tenant's use of the Premises.

ARTICLE XIX

REPAIRS AND MAINTENANCE

Section 19.1. Landlord's Obligations.

Subject to reimbursement by Tenant pursuant to Article XIII hereof, Landlord shall keep or cause to be kept the foundations, roof and structural portions of the walls of the Premises in good order, repair and condition except for damage thereto due to the act or omissions of Tenant, its employees, agents, contractors or invitees. Landlord shall commence required repairs as soon as reasonably practicable after receiving written notice from Tenant thereof. This Section shall not apply in case of damage or destruction by fire or other casualty or condemnation or eminent domain, in which event the obligations of Landlord shall be controlled by Articles XXI and XXII. Except as provided in this Section 19.1, Landlord shall not be obligated to make repairs, replacements or improvements of any kind upon the Premises, or to any equipment, merchandise, stock in trade, facilities or fixtures therein, all of which shall be Tenant's responsibility, but Tenant s hall give Landlord prompt written notice of any accident, casualty, damage or other similar occurrence in or to the Premises or the Common Area of which Tenant has knowledge. Landlords costs and expenses to comply with this Section 19.1 may be included in Common Area Maintenance Charges as set forth in Section 13.1 hereof.

Section 19.2. Tenant's Obligations.

Tenant shall at all times keep the Premises (including all entrances and vestibules) and all partitions, windows and window frames and moldings, signs, glass, doors, door openers, fixtures, equipment and appurtenances thereof (including lighting, electrical, plumbing, heating, ventilating and air conditioning fixtures and systems ("HVAC") and other mechanical equipment and appurtenances serving the Premises exclusively) and all parts of the Premises not required herein to be maintained by Landlord, in good order, condition and repair, and clean (including redecorating), orderly, sanitary and safe, damage by unavoidable casualty excepted (including, but not limited to, doing such things, at Tenant's sole cost and expense, as are necessary to cause the Premises to comply with applicable laws, ordinances, rules, regulations, directions, requirements and orders of governmental and public bodies and agencies which are now in force or which may hereafter be in force, which shall impose any duty upon Tenant with respect to the use, occupation or alteration of the Premises, such as, but not limited to, the Williams-Steiger Occupational Safety and Health Act and the Americans with Disabilities Act).

If replacement of equipment, fixtures, units, systems and appurtenances thereto are necessary, Tenant shall replace the same with equipment, fixtures, units, systems and appurtenances of the same quality, and shall repair all damages done in or by such replacement. Tenant shall be obligated to pay the cost of replacing or altering the HVAC system for the Premises which occurs as a result of any governmental mandatory regulation, law or the like, related to the elimination of chlorofluorocarbons in the HVAC system.

If Tenant refuses or neglects to make repairs and/or to maintain the Premises or any part thereof in a manner reasonably satisfactory to Landlord, Landlord shall have the right, but not the obligation, upon giving Tenant not less than ten (10 business days written notice of its election to do so, to make such repairs or perform such maintenance on behalf of and for the account of Tenant. Such work shall be paid for by Tenant, as Additional Rent, promptly upon receipt of a bill therefor with a ten (10%) administration charge added to the total.

Tenant shall, as part of its maintenance and repair obligations hereunder, enter into a service contract with a local, approved contractor for service, maintenance and repair of the HV AC equipment within and servicing the Premises, which shall provide for servicing by such contractor no less often than quarterly. Such Maintenance Contract for the HV AC shall include but not be limited to those requirements appearing on Exhibit F attached hereto and made a part hereof.

ARTICLE XX

LIENS

Tenant shall not suffer liens of any kind to be placed upon the Premises or the Shopping Center. If any lien is placed upon the Premises or the Shopping Center as a result of any work done, or materials furnished to, on behalf of Ten ant, or as a result of any goods or services sold or rendered to Tenant, then Tenant shall, within ten (10) days of the imposition of the lien, cause said lien to be released of record, at Tenant's sole expense. If permitted by taw, Landlord may post on the Premises in one or more locations a notice of non-responsibility with respect to the cost, expense and payment of any work done in the Premises by Tenant or at the direction of the Tenant.

Tenant shall indemnify and forever save harmless Landlord, its agents and employees from and against any and all liabilities, liens, claims, demands, damages, expenses, attorneys' fees, costs, suits, proceedings, actions and causes of action of any and every kind and nature arising or growing out of, or in any way connected with, any work done, or materials furnished to the premises, on behalf of Tenant, or as a result of any goods or services sold or rendered to Tenant in the Premises or the Shopping Center by persons other than Landlord, or its employees, agents or contractors. In case Landlord shall be made a party to any litigation commenced against Tenant by regarding same, then Tenant shall protect and forever hold Landlord, its agents and employees harmless and shall pay all costs, expenses and reasonable attorneys' fees incurred or paid by Landlord in connection with such litigation.

ARTICLE XXI

DESTRUCTION OF PREMISES

Section 21.1. Fire, Explosion or Other Casualty.

In the event the Premises are damaged by fire, explosion or any other casualty to an extent which is less than fifty percent (50%) of the cost of replacement of the Premises, the damage, except as is otherwise provided in this Article XXI, shall promptly be repaired by Landlord at Landlord's expense, provided that Landlord shall not be obligated to expend for such repair an amount in excess of the insurance proceeds recovered as a result of such damage and that in no event shall Landlord be required to repair or replace Tenant's Work or betterments, Tenant's stock in trade, fixtures, furniture, furnishings, floor coverings, equipment or plate glass. In the event of any such damage and (a) Landlord is not required to repair as hereinabove provided; (b) the Premises shall be damaged to the extent of fifty percent (50%) or more of the cost of replacement; or (c) the Shopping Center or the Common Area are damaged to the extent of twenty-five percent (2 5%) or more of the cost of replacement; or (d) if the premises of any Anchor Tenant is substantially destroyed or rendered unfit for business for a period of one hundred eighty (180) days or more, either party may elect to terminate this Lease upon giving notice of such election in writing to Tenant within ninety (90) days after the occurrence of the event causing the damage. If the casualty, repairing or rebuilding shall render the Premises untenantable, in whole or in part, and the damage shall not have been due to the fault or neglect of Tenant, a proportionate abatement of Base Rent shall be allowed from the date when the damage occurred until the date Landlord completes its work, said proportion to be computed on the basis of the relation which the gross square foot area of the space rendered untenantable bears to the square footage of the Premises as set forth in Section 1.3 hereof.

Section 21.2, Repair of Landlord's and Tenant's Work.

The provisions of this Article XXI with respect to repair by Landlord shall be limited to such repair as is necessary to place the Premises in the condition that existed on the Possession Date, and when placed in such condition, the Premises shall be deemed restored and rendered tenantable. Within ninety (90) days thereafter, Tenant, at Tenant's expense, shall complete Tenant's Work, replace its stock in trade, fixtures, furniture, furnishings, floor coverings, equipment and plate glass, and, if Tenant has closed, Tenant shall reopen for business within such ninety (90) day period.

Section 21.3 Determination of Damage,

If all or any part of the Premises, Shopping Center or Common Area is destroyed or damaged as set forth in Section 21.1, an architect designated by Landlord shall determine the extent of the destruction or damage and provide Landlord with a certificate attesting to the condition of the Premises, Common Area or Shopping Center, as the case may be. Said certificate shall bind the parties as to:

(a) the percentage of area of the Shopping Center, Premises or Common Area damaged or destroyed; and

(b) the estimated replacement cost for any damaged or destroyed areas; and

(c) whether any Anchor Tenant's premises has been wholly or substantially destroyed, or will be rendered unfit for business for a period of one hundred eighty (180) days or more after the occurrence of the damage or destruction.

ARTICLE XXII

CONDEMNATION

If the Premises shall be taken by right of eminent domain, in whole or in part, for public purposes or should be sold by Landlord under the threat of the exercise of such power, then this Lease, at the option of Landlord, shall terminate and all Base Rent and Additional Rent shall be properly apportioned to the date of such taking, and the Landlord shall receive the entire award for the lands and improvements so taken, or the entire amount of any payment made under the threat of the exercise of power of eminent domain, and Tenant shall have no claim for the value of any portion of its leasehold estate so terminated except any claim to which Tenant is solely entitled not affecting Landlord's claim. If either party does not terminate this Lease as provided above and if less than a substantial part of the Premises shall be taken, this Lease shall not terminate but Landlord, at its sole expense, shall promptly restore and reconstruct the Premises, prov ided such restoration and reconstruction shall make the same reasonably suitable for the uses for which the Premises are leased, but in no event shall Landlord be required to expend any amount greater than the amount received by Landlord as compensation for the portion of the Premises taken by the condemnor. Tenant's rental obligations during the unexpired portion of this Lease shall be adjusted proportionately to reflect the gross leasable area remaining in the Premises, as of the date on which the condemning authority takes title or possession. Notwithstanding anything contained herein to the contrary, if, in Landlord's determination, any significant portion of the Shopping Center or the floor area of the building in which the Premises are located shall be taken by the exercise, or under the threat of the exercise of, the power of eminent domain, Landlord may, by notice in writing to Tenant delivered on or before the day of surrendering possession to the public authority, terminate this Lease, and Base Ren t shall be paid or refunded as of the date of termination.

ARTICLE XXIII

FORCE MAJEURE

In the event that either party hereto shall be delayed or hindered in or prevented from the performance of any act required hereunder by reason of strikes, lockouts, inability to procure materials, loss of utility services, restrictive governmental laws or regulations, riots, insurrection, war, acts of God, or other reason of a like nature not the fault of the party delayed in performing work or doing acts required under the terms of this Lease then performance of any such act shall be extended for a period equivalent to the period of such delay. The provisions of this Section shall not operate to excuse Tenant from the prompt payment of Base Rent, Additional Rent or any other charges under this Lease.

ARTICLE XXIV

LANDLORD'S LIEN

This Article was lined through (deleted).

ARTICLE XXV

SUCCESSION TO LANDLORD'S INTEREST

Section 25.1. Attornment.

Upon receipt of a Non-Disturbance Agreement Tenant shall attorn and be bound to any of Landlord's successors under all the terms, covenants and conditions of this Lease for the balance of the remaining Term.

Section 25.2. Subordination.

(A) Mortgage. This lease shall be subject and subordinate to the liens of any mortgages or any lien resulting from any method of financing or refinancing (hereinafter collectively referred to as "Mortgage") now or hereafter existing against all or any part of the Shopping Center owned by the Landlord, and to all renewals, modifications, replacements, consolidations and extensions thereof. Tenant shall execute and deliver all documents requested by any such mortgagee or security holder, provided such mortgagee or security holder agrees in writing with Tenant not to disturb Tenant's possession while Tenant is not in default hereunder. The foregoing notwithstanding any mortgagee or beneficiary may at its option subordinate such Mortgage, trust, deed or other financing instrument to this Lease.

(B) Construction, Operation and Reciprocal Easement Agreements. This Lease may be subject and subordinate to one or more construction, operation and easement or similar agreements (hereinafter referred to as "Operating Agreements") between Landlord and other owners or lessees of real estate within or near the Shopping Center and to any and all easements and easement agreements which may be or have been entered into with or granted to any persons heretofore or hereafter, whether such persons are located within or upon the Shopping Center and Tenant shall execute such instruments as Landlord requests to evidence such subordination. At lease execution date there are no existing Construction, Operation or Reciprocal Easement Agreements in place. Landlord agrees to notify Tenant if any such agreements are executed that would effect the Shopping Center.

Section 25.3. Mortgagee's Approval.

If any mortgagee of the Shopping Center requires any modification of the terms and provisions of this Lease as a condition to such financing as Landlord may desire, then Landlord shall have the right to cancel this Lease if Tenant fails or refuses to approve and execute such modification(s) within one hundred twenty (120) days after Landlord's request therefor, provided said request is made prior to the Commencement Date specified in Section 1.5 hereof. Upon such cancellation by Landlord, this Lease shall be null and void and neither party shall have any liability either for damages or otherwise to the other by reason of such cancellation. In no event, however, shall Tenant be required to agree, and Landlord shall not have any right of cancellation for Tenant's refusal to agree, to any modification of the provisions of this Lease relating to the amount of Base Rent, Additional Rent or other charges reserved herein, the size and/or location of the P remises, the duration of, and/or commencement date of, the Lease Term, or the improvements to be made by Landlord to the Premises prior to delivery and possession.

Section 25.4. Estoppel Certificate.

Within ten (10) days after request therefor by Landlord or in the event that upon any sale, assignment, or hypothecation of the Premises and/or the land thereunder by Landlord an estoppel certificate shall be required from Tenant, Tenant agrees to deliver in recordable form a certificate to any proposed mortgagee or purchaser, or to Landlord, certifying that this Lease is unmodified and in full force and effect (or if modified, that the same is in full force and effect as modified, and stating the modifications), that there are no defenses or offsets thereto (or stating those claimed by Tenant), the dates to which Base Rent and Additional Rent have been paid, and such other reasonable matters as Landlord or other such party shall request.

ARTICLE XXVI

SURRENDER OF PREMISES

Section 26.1. Condition of Premises.

At the expiration or earlier termination of this Lease, Tenant shall surrender the Premises to Landlord broom clean and in the same condition as when tendered by Landlord on the Possession Date, reasonable wear and tear and insured casualty excepted. Tenant shall promptly repair any damage to the Premises caused by the removal of any furniture, trade fixtures or other personal property placed in the Premises and Tenant's obligations hereunder shall survive the expiration or sooner termination of this Lease.

Section 26.2. Hold Over.

If Tenant holds over or occupies the Premises beyond the Term (it being agreed there shall be no such holding over or occupancy without Landlord's written consent), Tenant shall pay Landlord for each day of such holding over a sum equal to 125% of the Base Rent prorated for the number of days of such holding over, plus Tenant's Proportionate Share of all Additional Rent which Tenant would have been required to pay hereunder had this Lease been in effect. In addition thereto, Tenant shall be liable to Landlord for any and all damages which Landlord shall suffer by reason thereof, and Tenant will indemnify Landlord against all claims and demands made by any succeeding tenants against Landlord, founded upon delay by Landlord in delivering possession of the Premises to such succeeding tenant. If Tenant holds over with or without Landlord's written consent, Tenant shall occupy the Premises on a tenancy from month to month and all other terms and provisi ons of this Lease shall be applicable to such period.

ARTICLE XXVII

SIGNS, AWNINGS, CANOPIES, FIXTURES

Section 27.1. Fixtures.

All fixtures installed by Tenant shall be new or completely reconditioned in condition satisfactory to Landlord.

Section 27.2. Removal and Restoration by Tenant.

Any alterations, changes, additions and improvements made by Tenant to the Premises shall upon the termination of this Lease, or be deemed abandoned by Tenant and such abandoned property shall, at Landlord's option, become Landlord's property.

Section 27.3. Signs, Awnings and Canopies.

Tenant will not place or permit on any exterior door or window or any wall of the Premises visible from the exterior of the Premises or otherwise, any sign, awning, canopy, advertising matter, decoration, lettering or other thing of any kind which does not comply with the Design Criteria for Tenant's signs in Exhibit E. In the event Tenant installs any signage in violation of either the provisions of this Section 27.3 or the Tenant's Sign Criteria, the Landlord shall have the right to remove the same after the giving of five (5) days prior written notice.

Prior to or simultaneously with the execution of this Lease, Tenant may submit to Landlord Tenant's proposed signage which Landlord shall approve, consistent with the Design Criteria set forth in Exhibit E.

ARTICLE XXVIII

MISCELLANEOUS

Section 28.1. Partial Invalidity.

If any term, covenant or condition of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition to persons or circumstance other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition of this Lease shall be valid and be enforced to the fullest extent permitted by law.

Section 28.2. Successors and Assigns.

Except as otherwise provided herein, this Lease shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, executors, successors and assigns.

Section 28.3. Waiver.

The waiver by Landlord of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of any subsequent breach of the same or any other term, covenant or condition herein contained. No covenant, term or condition of this Lease shall be deemed to have been waived by Landlord, unless such waiver be in writing by Landlord.

Section 28.4. No Partnership.

Landlord does not, in any way or for any purpose, become a partner, employer, principal, master, agent or joint venturer of or with Tenant.

Section 28.5. Time Is Of The Essence.

Time is of the essence of this agreement.

Section 28.6. Broker's Commission.

Tenant and Landlord warrant each to the other that it has had no dealings with any broker or agent in connection with this Lease except as designated in Section 1.15, which Landlord shall compensate. Each party covenants to pay, hold harmless and indemnify the other from and against any and all costs expense or liability for any compensation, commissions and charges claimed by any broker or agent with respect to this Lease or the negotiation thereof other than the Broker listed in Section 1.15.

Section 28.7. Entire Agreement.

This Lease and the Exhibits attached hereto and forming a part hereof, set forth all the covenants, promises, agreements, conditions and understandings between Landlord and Tenant concerning the Premises and there are no covenants, promises, agreements, conditions or understanding, either oral or written, between them other than as are herein set forth. No subsequent alteration, amendment, change or addition to this Lease shall be binding upon Landlord or Tenant unless reduced to writing and signed by them.

Landlord and Tenant acknowledge that this Lease has been highlighted to show the changes, alterations, deletions and additions to Landlord s initial form draft. The highlighting has been computer generated and may consist of (I) lines drawn through certain numbers and words, (ii) lines drawn under certain numbers and words and (iii) the shading or bolding of certain numbers and words. The lines drawn through certain numbers and words is intended to delete those words and numbers. The lines drawn under, and shading or bolding of words and numbers is intended to show the addition of these words and numbers to this document. These highlighted provisions are intended to benefit Landlord's agents, lenders and prospective purchasers only. When interpreting this Lease: (a) the highlighted provisions that are intended to delete certain words and numbers should be construed as though said words and numbers are deleted, and (b) the highlighted provisions that ar e intended to show the addition of words and numbers to this document should be construed (x) as though said words and numbers are part of this document and (y) without giving said words and numbers any special emphasis or consideration.

Section 28.8. Applicable Law.

The validity, performance and enforcement of this Lease shall be governed by the laws of the state in which the Shopping Center is located.

Section 28.9. Notices.

Whenever under this Lease provision is made for any demand, notice or declaration of any kind, or where it is deemed desirable or necessary by either party to give or serve any such notice, demand or declaration to the other party, it shall be in writing and sent either by (I) certified mail, return receipt requested, postage prepaid, (ii) personal delivery, or (iii) via an overnight carrier delivery (such as Federal Express or Airborne Express) to the address set forth in Section 1.13 hereof, or to such other address as may be given by a party to the other by proper notice hereunder. The (I) day after the certified mail is deposited with the United States Postal Service, (ii) the day personal delivery is attained, or (ii) the date the notice is delivered by the overnight carrier shall be the date on which any notice hereunder shall be deemed given.

Section 28.10. Quiet Enjoyment.

Tenant, on payment of the sums due hereunder and performance of all the covenants, conditions and provisions on Tenant's part to be observed and performed hereunder, shall peacefully and quietly have, hold and enjoy the Premises during the Term of this Lease and any extension or renewal hereof, subject, nevertheless, to the terms of this Lease.

Section 28.11. Compliance With Law.

Landlord and Tenant shall comply with all present and future laws, ordinances and regulations (specifically including, but not limited to, the Americans with Disabilities Act) applicable to the use or occupancy of the Shopping Center and the Premises, as appropriate, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of nuisance in, upon or connected with the Premises, all at Tenant's sole expense.

Section 28.12. Recording.

The parties shall not record this Lease.

Section 28.13. Tenant and Guarantor.

In the event that there is a guarantor of this Lease, said guarantor shall have the same obligations as Tenant under this Lease. If Tenant is not a corporation, the liability of each party executing this Lease shall be joint and several.

Section 28.14. Objection to Statements.

Tenant's failure to object to any statement, invoice or billing rendered by Landlord within a period of thirty (30) days after receipt thereof shall constitute Tenant's acquiescence with respect thereto and shall render such statement, invoice or billing an account stated between Landlord and Tenant.

Section 28.15. Execution of Lease.

The submission of this Lease for examination or signature does not constitute a reservation of or option for the Premises and this Lease shall become effective as a lease only upon full execution thereof by both Landlord and Tenant, and the delivery of same to each other.

Section 28.16. Accord and Satisfaction.

Landlord is entitled to accept, receive and cash or deposit any payment made by Tenant for any reason or purpose or in any amount whatsoever, and apply the same at Landlord's option to any obligation of Tenant and the same shall not constitute payment of any amount owed except that to which Landlord has applied the same.

No endorsement or statement on any check or letter of Tenant shall be deemed an accord and satisfaction or otherwise recognized for any purpose whatsoever. The acceptance of any such check or payment shall be without prejudice to Landlord's right to recover any and all amounts owed by Tenant hereunder and Landlord's right to pursue any other available remedy.

Section 28.17 Corporate Tenant.

If Tenant is a corporation, (I) Tenant shall furnish Landlord with such evidence as Landlord reasonably requires to evidence the binding effect on Tenant of the execution and delivery of this Lease; (ii) the persons executing this Lease on behalf of Tenant hereby covenant, represent and warrant that Tenant is a duly incorporated or duly qualified (if foreign) corporation and is authorized to do business in the State where the Shopping Center is located, and that the person executing this Lease on behalf of Tenant is an officer of such Tenant, and is duly authorized to sign and execute this Lease.

Section 28.18 REIT Qualifications.

Tenant and Landlord agree that Base Rent, Percentage Rent and all items of Additional Rent (hereinafter referred to in this Section as "Rent") paid to Landlord under this Lease shall qualify as "rents from real property" as defined in the Internal Revenue Code ("Code") Section 856 (d) and as further defined in Treasury Regulation ("Regulation") Section 1.856-4. Should the requirements of the Code section and Regulation section be amended so that any Rent payable to Landlord under this Lease no longer qualifies as "rents from real property" for the purposes of the Code and associated Regulation, such Rent payable to Landlord under this Lease shall be adjusted so that it will qualify as "rents from real property" under the Code and Regulation, as amended; provided, however, that any adjustments required pursuant to this Article shall be made so as to produce the equivalent (in economic terms) Rent as payable prior to such adjustment. Tenant and Landl ord shall enter into such amendment or amendments required to effect the foregoing provisions.

Section 28.19 Waiver of Jury Trial.

The parties hereto shall and they hereby do waive trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other on any matters whatsoever arising out of or in any way connected with the non-payment of any money due under this Lease. In the event Landlord commences any proceedings for nonpayment of any rent, Tenant will not interpose any counterclaim of whatever nature or description in any such proceedings. This shall not, however, be construed as a waiver of the Tenant's right to assert such claims in any separate action or actions brought by the Tenant.

Section 28.20 Default Rate.

The "Default Rate" as used herein, shall mean two (2%) percent per annum in excess of the "Prime Rate" published in the Wall Street Journal.

ARTICLE XXIX

ENVIRONMENTAL MATTERS

Tenant shall not use or permit the use of the Premises or any portion of the Shopping Center for any activities involving, directly or indirectly, the use, generation, treatment, storage, or disposal of any hazardous or toxic chemical, material, substance or waste, including without limitation, (1) asbestos in any form; (2) urea formaldehyde foam insulation; (3) transformers or other equipment which contain dielectric fluid containing polychlorinated byphenyls; (4) any other hazardous or toxic chemical, material, substance or waste, exposure to which is prohibited, limited or regulated by any Federal, State, County, Regional or Local authority (all being hereinafter referred to collectively as "Hazardous Substances").

During the term of this Lease Landlord shall have the option to retain a consultant who will conduct an investigation of the Shopping Center to verify that no portion of the Shopping Center (including the Premises) is being used for any activities involving, directly or indirectly, the use, generation, treatment, storage or disposal of any Hazardous Substance. Tenant hereby grants to Landlord, its agents, employees, consultants and contractors the right to enter upon the Premises and to perform such tests on the Premises as are reasonably necessary to conduct any such investigation.

Tenant covenants to Landlord that the Premises shall not at any time prior or subsequent to the Commencement Date, be used by Tenant, any subtenant or any other person or entity, claiming by, through or under Tenant, for any activities involving, directly or indirectly, the use, generation, treatment, storage or disposal of any Hazardous Substance.

Tenant agrees to indemnify, defend, and forever hold Landlord harmless from and against any claims, losses, damages, actions, liabilities, causes of action, suits, investigations and judgments of any nature whatsoever, including, without limitation, reasonable attorneys' fees and costs of litigation, incurred by Landlord in connection with any breach of the provisions contained in this Article. The foregoing indemnity shall survive the expiration or earlier termination of this Lease.

ARTICLE XXX

AMERICANS WITH DISABILITIES ACT

The parties hereto acknowledge that the Americans With Disabilities Act of 1990 (42 U.S.C. Section 12101 et seq.) and regulations and guidelines promulgated thereunder, as all of the same may be amended or supplemented from time to time (collectively referred to as "ADA") establish requirements for business operations, accessibility and barrier removal, and that such requirements may or may not apply to the Premises and the Shopping Center depending on, among other things: (a) whether Tenant's business is deemed a "public accommodation" or "commercial facility", (b) whether such requirements are "readily achievable", and (c) whether a given alteration affects a "primary function area" or triggers "path of travel" requirements. The parties hereby agree that: (I) Landlord shall be responsible for ADA Title III compliance in the Common Areas, except as provided below; (ii) Tenant shall be responsible for ADA Title III compliance in the Premises, including any leasehold improvements or other work to be performed in the Premises under or in connection with this Lease, and (iii) Landlord may perf orm, or require that Tenant perform, and Tenant shall be responsible for the cost of, ADA Title III "path of travel" requirements triggered by alterations in the Premises. Tenant shall be solely responsible for requirements under Title I of the ADA relating to Tenant's employees.

IN WITNESS WHEREOF, the parties have subscribed their respective signatures in execution hereof, on the day and year written.

Carothers at Bakers Bridge, LLC:

By: _________________________
Its: Chief Manager

The Bank of Nashville:

By: /s/ JOAN B. MARSHALL
Its: SVP and Corp. Secretary

EXHIBIT A

SITE PLAN

CAROTHERS AT BAKERS BRIDGE SHOPPING CENTER

Picture of site plan.

EXHIBIT B

LEGAL DESCRIPTION

CAROTHERS AT BAKERS BRIDGE SHOPPING CENTER

Picture of property and surrounding area with descriptions.

EXHIBIT C

LANDLORD'S WORK

EXHIBIT C

CAROTHERS AT BAKERS BRIDGE SHOPPING CENTER
DESCRIPTION OF LANDLORD'S WORK

The following work shall be performed for or by the Landlord, except as otherwise specified. Refer to Tenant Print Package for additional information on individual spaces. Each Tenant has the responsibility to visit the building and verify all existing conditions prior to the preparation of its Construction Documents.

I. STRUCTURE

A. Masonry exterior walls.

B. Exposed concrete block on interior faces of exterior walls.

C. Structural steel columns, beams, joists and metal roof deck.

D. Insulated built-up tar and gravel roof, or other at Landlord's option.

E. Demising partitions between tenants shall be 1 hour U.L. rated construction of metal studs, 16" on center, 5/8" gypsum board taped and sanded, ready for Tenant finishes. Columns in demising partitions shall be furred with gypsum board, taped and sanded, ready for Tenant finished. Demising walls will not be closed up by Landlord until Tenant has installed all electrical, cabling, and phone conduit and other Tenant furnished items to be located within the wall cavity.

F. Floor shall be existing concrete slab on grade, with trowel finish. Finish elevation shall be +/- 1/4" in 10 ft. Floor shall be structurally strong enough to hold a 4 '0" x 6'0" vault.

G. Storefront materials will consist of masonry, aluminum, or other bulkhead material selected by Landlord, plate glass or tempered glass where required by codes, and hinged aluminum and glass door in aluminum frame.

H. Ceiling. Metal suspension system (white enamel) non-combustible 2' x 2' 4' lay-in acoustical panels at building standard ceiling height.

2. PLUMBING

A. Two toilet rooms with construction of metal or wood studs at 16" on center and gypsum board partitions and acoustical tile ceiling, wood door in metal frame with privacy hardware, mirror and toilet paper holder.

B. Fixtures shall consist of a water closet, lavatory, floor drain and electric hot water heater, piped to floor drain; all connected to water service and sanitary sewer.

3. ELECTRIC

A. Electric service: 120/208 volt, 3-phase general service, sized to accommodate approximately 11 watts per square foot of the Leased Premises. Distribution panel to be located at the rear wall complete with circuit breakers. Meter and meter socket provided by Landlord. Any additional electrical service required by Tenant shall be provided by Landlord or Tenant, at Landlord's option, at Tenant's expense.

B. Conduit and wires shall be provided to service Landlord supplied HVAC equipment, lighting fixtures, and duplex wall outlets. Duplex wall outlets shall be provided and located approximately 20' on centers on demising partitions.

C. Ceiling lighting: recessed 2' x 2" lay-in fluorescent light fixtures, with parabolic 18 cell lens approximately one per 70 square feet of floor area, switched from distribution panel.

4. HVAC

A. Landlord shall furnish a rooftop gas heating and electric cooling unit set in place on a flashed and roofed curb. System shall include single trunk ductwork, ceiling grilles and thermostat, connected, wired and ready for use.

B. Landlord has designed the HVAC system in accordance with the following minimum design requirements: outside air 0.1 CFM per square foot; inside design conditions 68 degrees F 50% RH for heating based on -10 degrees F outside temperature, 78 degrees F 50% RH for air conditioning based on 94 degrees F outside temperature.

C. Toilet rooms shall have an exhaust fan with exhaust ductwork to rear wall, or roof.

5. FIRE PROTECTION

A. A Landlord-designed automatic fire sprinkler system with pendant heads designed for 130 square feet of coverage per head. Coverage shall be in compliance with code requirements for leased space as shown in the Tenant Print Package. Additional heads required by code for Tenant's store configuration shall be added by Landlord's contractor at Tenant's expense and with Landlord's prior written approval.

6. GENERAL

A. Landlord shall have the right to run roof drainage lines, utility lines, pipes, conduits, ductwork and/or component parts of all mechanical and electrical systems where necessary or desirable below floor, above finished ceiling, through attic space, column space or other parts of the Premises, to repair, alter, replace or remove the same.

B. Any equipment and/or fixtures hung from the ceiling or soffit shall be attached to structural members only, and not from any ductwork, decking, ceiling, etc.

C. If Tenant requests credits from Landlord for Landlord installed work prior to installation, credits shall be based on the unit prices established between Landlord and its General Contractor.

D. Any deviation from Landlord's standard plans shall be at Tenant's sole expense and shall only be permitted with prior written approval from the Landlord.

E. Landlord's standard plans shall govern in the event of a discrepancy with the provisions of this Exhibit "C".

7. TENANT PRINT PACKAGE

A. When and to the extent reasonably available, Landlord will issue Tenant Print Package containing information provided by Landlord's Architect to identify dimensions of the Leased Premises and basic design criteria. Tenant shall verify all physical dimensions, field conditions and service connections at the job. If Tenant finds any variations, Tenant shall notify Landlord prior to the start of Tenant's construction.

B. Tenant shall be responsible for the preparation and submittal to Landlord of its

construction drawings, specifications and finish material samples in a timely manner. Landlord shall be allowed ten (10) working days to review, approve or otherwise comment on Tenant's documents upon receipt of same. Tenant's failure to complete and submit its documents in a timely manner shall in no way alleviate Tenant of its obligations under Lease Article 1.5.

C. At Landlord's option or by reason of code, the as-built construction in the leased space may differ in some instances from what is shown on the initial drawings. The scope of Landlord's Work shall not vary from this Exhibit "C".

The Above description of Landlord's Work, entitled Exhibit "C", shall be a part of, and is hereby attached to the Lease.

EXHIBIT D

TENANT'S WORK

EXHIBIT "D"

CAROTHERS AT BAKERS BRIDGE

DESCRIPTION OF TENANTS WORK

TENANTS WORK: All Work required to complete and place the Leased Premises in a finished condition for opening for business is to be done by Tenant, at Tenant's expense, in accordance with plans and specifications to be submitted to and approved by Landlord and thereafter attached to the Lease as Exhibit "D- I". Tenant shall verify all existing conditions prior to preparation of construction drawings and acceptance of same.

Tenant's Work includes, but is not limited to, the following:

1. SHOW WINDOWS

All show window work, show window backs, floors and ceilings and show window lighting installations. No alterations to the storefronts shall be made without prior written approval by Landlord. Any storefront alterations required by Tenant or code shall be done by Landlord at Tenant's expense.

2. CEILINGS

Tenant shall provide any ceilings and soffits in addition to those specified in Landlord's Work and required by Tenant's plans. All material shall be non-combustible acoustic tile or gypsum board or other approved material suspended by adequate non-combustible suspension systems to conform to applicable codes. The space above the ceiling, which is not occupied by or allotted to Landlord's Work may be used for the installation of the suspended ceilings and recessed light fixtures. All construction materials above the ceiling or exposed to the ceiling attic space shall be non-combustible and code approved.

3. INTERIOR WALLS

Tenant shall provide partitions between Sales Area and stock Area. All interior walls, metal studs and 5/8" fire code gypsum board with taped joints shall be of non-combustible construction, in conformance with applicable codes. No exposed concrete block is permitted except in stock areas. Interior walls for food service facilities shall meet all applicable code requirements.

4. COLUMNS

Centerline of Tenant demising walls may or may not be on the centerline of columns. Any special treatment or finishes of those columns occurring in the Tenant demising walls over and above standard drywall finish shall be by the Tenant, in accordance with applicable building and fire codes.

5. INTERIOR PAINTING

All interior painting and decoration, including taping and sanding of wall partitions, except taping and sanding of demising partitions by Landlord. All interior decor shall be in accordance with the drawings and sample board submitted by Tenant and approved in writing by Landlord.

6. FURNITURE, FIXTURES, AND SIGNS

All furnishings and related parts shall be first-quality and installed by Tenant. Location and design of all signs shall be subject to prior written consent of the Landlord and in conformance with Exhibit "E". No fixtures shall be attached to or supported from demising partitions or roof structure unless adequate structural provisions are incorporated into Tenant's plans and approved by Landlord.

7. ROOF OPENING AND ACCESSORIES

Roof hatches, covers, curbs at openings, support framing, special venting or openings through roof and counter flashing, if required by Tenant's Work and if approved in writing by Landlord, shall be installed by Landlord's contractor only, at Tenant's expense. Antennas and satellite dishes, where required to conduct Tenant's business, must be approved in writing by Landlord as to location, size, and height and design of mounting or support and grounding, such approval shall not be unreasonably withheld. Antennas and satellite dishes not approved may be removed by Landlord without notice to Tenant.

8. FLOORS

A. Tenant shall provide a finish floor covering of carpet, wood, ceramic tile, quarry tile or other Landlord-approved material in the Sales Area of the Premises. Exposed concrete surfaces are permitted in non-sales areas only and shall have 2 coats of an epoxy resin sealer by Tenant. Tenant is responsible for all floor penetrations and patching necessary to facilitate additional utility connections. Any additional floor patching to accommodate Tenant's floor tile will be Tenant's responsibility.

B. Floor cutting shall be performed only with prior written consent of the Landlord. Where Tenant cuts a slab-on-grade, any excavated material shall be removed and replaced with granular backfill at 95% compaction and a wire mesh reinforced concrete slab to match thickness of existing slab or 4" minimum. Concrete mix shall be designed to achieve 3000 PSI at 28 days.

9. SPECIAL EQUIPMENT

Alarm systems or other protective devices, P.A. systems, fire extinguishers, conveyors, time clock, delivery door buzzers, storm enclosures, dry chemical fire protection systems, etc., shall be installed by Tenant at its expense.

10. PLUMBING

Any plumbing in addition to the Work set forth in Exhibit "C".

11. ELECTRICAL

Tenant shall furnish any electrical fixtures including lighting fixtures, lamps and equipment required, transformers, meters, disconnect switches and installation of service in addition to that provided by Landlord. Tenant shall furnish and install all systems where required for telephones, intercommunications, music, antenna, material handling or conveyor, burglar alarm, vault wiring, fire protection alarm and clock, time clocks and all necessary disconnect switches for all motors. Tenant electrical load shall be approved by Landlord prior to any installation. Tenant to secure all permits required for electrical work performed in Tenant space other than work performed by Landlord. Landlord assumes no responsibility for Tenant Work performed in space other than Work specifically installed by Landlord.

12. HVAC

Tenant at its own expense, may modify the existing ductwork system provided by Landlord and shall provide all special systems, facilities and equipment if required by its plans and specifications. Tenant shall be responsible for maintaining balanced conditions in its space if area is subdivided with partition.

13. FIRE PROTECTION

A. Any modifications and additions to Landlord's sprinkler system required by Tenant's construction drawings and applicable codes, and approved by Landlord, its fire protection consultant and its insurance underwriter, shall be performed by Landlord's contractor at Tenant's expense.

B. Fire Extinguishers. Each Tenant will furnish and install fire extinguishers throughout its Leased Premises to meet applicable code requirements. This requirement is necessary for insurance ratings, and locations must be approved by Landlord's fire protection consultant.

14. TELEPHONE

A. Tenant, at its expense, shall make its own arrangements directly with the telephone company for extension of service to and in the Leased Premises and for installation of equipment.

B. If Tenant provides a telephone for public use, it shall be indicated on the plans and the location approved by Landlord.

C. All conduit or wires shall be concealed within walls or ceilings.

D. Landlord shall provide a standard telephone board in the demised premises.

15. ADDITIONAL REQUIREMENTS FOR FOOD TENANTS

A. Each Food Tenant shall modify its plumbing, electrical, HVAC and fife protection systems to comply with its design drawings and all applicable code requirements.

B. The necessary exhaust, make-up air and additional cooling equipment shall be mounted on rooftop curbs-with all required roof deck openings, framing and roofing repairs performed by Landlord's contractor, at Tenant's expense. Location of equipment to be as approved by Landlord.

C. Roof exhaust fans shall be up-blast type, with a drainage area at the bottom of the unit and a residue trough to be regularly cleaned by Tenant. Exhaust fans shall be no less than 20' from any air intakes to avoid contaminating air supplies of other Tenants.

D. Make-up air units utilizing exposed ductwork over the roof or side draft HVAC equipment shall be mounted on equipment supports as manufactured by Thycurb or Landlord-approved equal. Equipment supports will extend a minimum of 12' on either side of equipment or ductwork and be located so as to occur over joists supporting roof deck.

E. Kitchen exhaust hoods and ductwork shall have automatic fire extinguishing equipment installed in accordance with NFPA Standard 96, latest edition, Section 10. The system shall be U.L. CO2 or dry chemical system and shall provide protection for ranges, grilles, broilers and deep-fat fryers.

F. If Tenant's equipment requires larger capacity electric service then provided by Landlord, Tenant shall make direct arrangements with each utility company. Modifications to these services shall be at Tenant's expense, after it obtains Landlord's approval of revisions.

G. All food spaces shall have grease interceptors, as required by the Health Department and local ordinances, connected to the Landlord's sanitary sewer at Tenant's expense.

H. Tenants requiring gas service of a larger capacity than provided by Landlord shall make arrangements directly with the local gas utility company for connection and extension of service from the utility gas main at Tenant's expense. Any roof gas piping shall be mounted or creosoted 4" x 4" timbers placed on roof protection boards.

I. If additional HVAC equipment is required by Tenant's plans, it shall be of the same manufacturer as the Landlord supplied equipment.

16. TENANT CONSTRUCTION DOCUMENTS

A. Tenant shall submit for approval within forty five (45) business days from receiving final plans from Landlord, all working drawings, specifications, sign designs and necessary calculations for revisions to mechanical, heating, cooling and electrical equipment prepared by licensed architect and engineer(s). Drawings shall consist of 2 sepias and 5 sets of prints submitted to Landlord. Tenant shall also submit a sample board indicating all interior finishes for Landlord's review and approval. Tenant's failure to complete and submit its documents in a timely manner shall in no way alleviate Tenant of its obligations under Lease Article 1.5.

B. Tenant shall not commence construction until all documents are approved in writing by Landlord and Tenant has obtained required permits from all applicable local authorities.

C. Tenant shall prepare all its documents and perform all Work to comply with all governing statutes, ordinances, regulations, codes, insurance rating boards and Tenant Print Package; take out all necessary permits and obtain Certificates of Occupancy for the Work performed by it. Landlord's approval of Tenant's plans does not relieve Tenant from its obligation to complete the development in accordance with the terms of its Lease, nor does it relieve Tenant of the necessity of complying with the laws, rules, regulations and requirements of local governing authorities. Certificates of Occupancy or copies thereof are mandatory and shall be filed with Landlord before Tenant opens for business.

D. Any revisions, addition or cutting of Landlord's structure shall be designed by Tenant's structural engineer, be clearly identified on drawings and specifically requested in writing when transmitting drawings to Landlord. Any costs for review by Landlord's structural engineer shall be reimbursed by Tenant to Landlord.

E. Tenant shall describe in its transmittal letter, or attach to submittal drawings, a list of any variations proposed from the standards set forth in the Lease Exhibits.

F. Incomplete or sketchy submittals will not be considered a submittal for approval by Landlord, Interior of Food Premises exposed to outside shall be approved for a store layout, materials and colors.

G. Tenant is responsible for verifying all dimensions, field conditions and service collections at the job, prior to preparation and submittal of its documents. Refer to Tenant Print Package for additional information on individual spaces.

H. Tenant's contractor shall construct leased premises using drawings stamped and approved by the local building department and the Landlord.

17. PERMITS

It is each Tenant's responsibility to verify code requirements and to procure permits for its Premises. Tenant shall present such permits and receipts of fees paid at the time Tenant assumes possession of the Leased Premises.

18. CHANGES AND ALTERATIONS

Landlord reserves the right to require changes in Tenant's Work when necessary by reason of code requirements, building facilities or directives of Landlord's insurance underwriters. Tenant shall comply with all code requirements requested prior to issuance of permit and requested during construction.

19. TEMPORARY SERVICES

During Tenant's construction period, Tenant shall provide and pay for heat, electric and water and for connections and meters for water and electric service. Additional temporary capacities required by Tenant shall be provided by Tenant at Tenant's expense. Landlord may elect to provide all or part of these services, in which case the cost will be paid by Tenant.

20. GENERAL PROVISIONS

All Work performed by Tenant shall be governed in all respects by, and be subject to, the following:

A. Approvals and Coordination.

(1) Tenant shall not commence Work until it has secured Landlord's written approval, which approval shall not be unreasonably withheld, of all contractors to be used in performing the Work and of the plans and specifications required. Landlord's approval of plans and specifications does not relieve Tenant from full responsibility of complying with all design criteria required under this Lease and under the documents provided. No approval by Landlord shall be deemed valid unless the same shall be in writing and signed by the Landlord or its agent.

(2) Tenant Work shall be coordinated with the Work being done by the Landlord and/or other Tenants of Landlord to such degree that such Work will not interfere with or delay the completion of Work by Landlord and/or other Tenants of Landlord. Tenant and/or its contractor and/or subcontractors are limited to performing the Work, including any office or storage for construction purposes, to the use of the Premises only. Landlord shall have the right to require Tenant to furnish a bond or other security in form satisfactory to Landlord for prompt and faithful performance by Tenant of its Work.

(3) Tenant shall permit Landlord to inspect its Leased Premises during the Tenant's construction period.

(4) Landlord's approvals are for conformance to Landlord's design and construction standards only. Landlord does not represent nor warrant the methods of construction, conformance to codes, ordinances, or regulations, design methods or construction safety precautions.

(5) Tenant shall apply and pay for all utility meters except for water and sewer.

(6) Landlord shall have the right to order any Tenant or Tenant's General Contractor who willfully violates the requirements herein to cease work and to remove himself, his equipment, and his employees from the Landlord's property, after proper written notice to Tenant and Tenant has had reasonable time to correct the violation.

B. Compliance with Codes. All Tenant's Work shall conform to applicable statutes, ordinances, regulations, codes and the requirements of Landlord's fire underwriter. Tenant shall obtain and convey to Landlord all approvals with respect to electrical, gas, water, heating and cooling, sprinkler or fire protection and telephone work, all as may be required by the utility company supplying the service or Landlord's underwriter. Tenant shall comply with any existing or future city, state, county or federal regulations or legislation regarding the control of pollution and with all current provisions of the Occupational Safety and Health Act (OSHA) that may apply to its operations.

C. Workmanship and Warranties.

(1) Tenant's Work shall be performed in a first-class, workmanlike manner and shall be in good and usable condition at the date of completion thereof. Tenant shall require any party performing any such Work to guarantee the same to be free from any and all defects in workmanship and materials for one (1) year from the date of completion thereof. Tenant shall also require any such party to be responsible for the replacement or repair, without additional charge, of any and all Work done or furnished by or through such party which shall become defective within one (1) year after substantial completion of the Work. The correction of such Work shall include, without additional charge all expenses and damages in connection with such removal, replacement or repair of any part of the Work which may be damaged or disturbed thereby.

(2) All warranties or guarantees of materials or workmanship on or with respect to Tenant's Work shall be contained in the contract or subcontract which shall be written so that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant.

(3) All contractors engaged by Tenant shall be bondable, licensed contractors, capable of performing quality workmanship and working in harmony with Landlord's General Contractor and other contractors on the job.

D. Tenant Work by Landlord. Landlord shall have the right (but shall not be obligated) to cause the performance by its own contractor or subcontractor, on behalf of and for the account of Tenant, any Tenant Work which Landlord determines should be performed and Landlord shall notify Tenant prior to Lease execution. Generally, such Work shall be Work which effects any structural components or Work of other Tenants, or the general utility systems for the building in which the Premises are located. If Landlord so determines, it shall so notify Tenant prior to the commencement of such Work. Tenant shall promptly, on demand, reimburse Landlord for all costs of planning and performing such Work when and as incurred by Landlord, and for all permits in connection therewith.

E. Pre-Construction Requirements.

Tenant or Tenant's General contractor shall complete and submit the following information and items to Landlord's Field Representative, at least five (5) days prior to the commencement of construction.

(I) The names and addresses of all contractors Tenant has engaged in the construction of Tenant's Work.

(2) Certificate indicating the total cost of the construction, complete with a trade-by-trade

breakdown.

(3) The actual commencement date of construction and the estimated date of completion of construction work and fixturing.

(4) Certificates of insurance as called for herein. Tenant shall not permit its contractors(s) to commence any Work until all required insurance has been obtained and certified copies of policies or certificates have been delivered to Landlord.

(5) Payment and performance bonds for Tenant's contractors, if required by Landlord.

(6) Copy of Tenant's construction drawings bearing stamp and approval of the local building department and Landlord.

(7) Copy of City issued building permit and receipts of fees paid.

(8) Statement indicating that the Tenant or its representative has accepted the space and that Landlord's Work has been completed. This information to be included on form prepared by Landlord and signed by Tenant or its representative.

F. Insurance. Prior to commencement of Tenant's Work and until completion thereof commencement of the Lease Term, whichever is the last to occur, Tenant shall effect, maintain, and provide the certificates of insurance policies as set forth in the Lease: Builder's Risk Insurance to cover Landlord, Landlord's Architect, Landlord's agents and beneficiaries, Landlord's general contractor, and Tenant and Tenant's contractor, as their interests may appear, against loss or damage by fire, vandalism and malicious mischief and such other risks as are customarily covered by a so- called "extended coverage endorsement" upon all Tenant's Work in place and all material stored at the site of Tenant's Work and builder's machinery, tools and equipment, all while forming a part or contained in such improvements or temporary structures while on the Leased Premises or within one hundred (100) feet thereof, or when adjacent thereto, or while on malls, drives, sidewalks, streets or addition, Tenant agrees to require all contractors and subcontractors engaged in the performance of Tenant's Work to effect and maintain and deliver to Tenant Certificates evidencing the existence of, prior to the commencement of Tenant's Work and until completion thereof, the following coverages:

(1) Workman's Compensation Insurance in accordance with the laws of the State of Tennessee including Employer's Liability Insurance to the limit of $300,000.00.

(2) Comprehensive General Liability Insurance, excluding "Automobile Liability", against personal injury, including death resulting therefrom, to the limits of $1,000,000.00 for any one person and $2,000,000.00 for more than one person in any one accident, and against property damage to the limit of $150,000.00.

(3) Automobile Insurance, including "non-owned" automobiles, against personal injury, including death resulting therefrom to the limits of $500,000.00 for anyone person and $1,000,000.00 for more than one person in anyone accident, and against property damage to the limit of $150,000.00.

(4) All insurance Certificates of Tenant, Tenant's General contractor and all subcontractors shall name the following Additionally Insured for all coverages and include the paragraph below:

CAROTHERS CORNER PARTNERSHIP, LLC Partnership
c/o Southland Management Co.
PO. Box 680515
Franklin, 1N. 37068

And all principals, beneficiaries and agents of all of the foregoing "The coverage afforded the Additional Insureds under this policy shall be primary insurance. If the Additional Insured has other insurance which is applicable to the loss, such other insurance shall be on an excess basis. The amount of the company's liability under this policy shall not be reduced by the existence of such other insurance."

Protection of Work and Property.

(I) The Tenant's contractor shall continuously maintain adequate protection of all its Work from damage and shall protect the Landlord's property from injury of loss arising in connection with the Contract. It shall promptly make good any such damage, injury or loss. It shall adequately protect adjacent property as provided by law and the Contract Documents.

(2) Should the Tenant's contractor cause damage to any separate contractor on the Work, the Tenant's contractor agrees, upon due notice, to settle with such contractor by agreement. The Landlord shall determine responsibilities where no agreement is reach, and its decision shall be final.

(3) Tenant's contractor shall not make any attachments to or penetrations through the roof deck.

H. Fire Protection and Prevention. The Tenant's contractor shall take all necessary fire precautions and shall adhere to the requirements set forth by the State Fire Marshall or any other governmental authority, as well as the Landlord, should it find it necessary to impose requirements.

I. Clean Up. Tenant shall be responsible for keeping the Premises clean and in a workmanlike condition at all times during its portion of the construction. Tenant shall be responsible for promptly removing all rubbish and debris from the Premises and from the Shopping Center Site using its own containers. No accumulation of rubbish will be permitted within the Premises or Shopping Center Site. If Landlord finds it necessary to remove Tenant's accumulated trash, the charge to Tenant shall be 1.5 times the Landlord cost.

J. Tenant Closeout Process. Before the construction account can be closed, Tenant shall complete all Work in accordance with the Lease, Exhibits, Plans and Specifications, have the Premises open for business with all signs installed and operating and make payments for all rent charges and construction charges due. Within thirty (30) days of the actual store opening date, Tenant shall submit to Landlord the following items:

(I) Properly executed statement and estoppel certificate pursuant to the Lease;

(2) Tenant's Affidavit setting forth the names and addresses of all parties with whom the Tenant contracted for the furnishing of labor and materials, the nature of each contract and the amount paid thereunder;

(3) General contractor's Original Sworn Statement for Contractor and Subcontractor to Owner from each of the parties named in Tenant's statement;

(4) Contractor's Original Affidavit for each subcontractor named on the General Contractor's Sworn Statement;

(5) Original Waivers of Lien from the General contractor and all subcontractors, subsubcontractors and materialmen.

(6) Record sepia drawings indicating dimensioned locations of concealed piping, ductwork and other equipment revised from locations shown on construction drawing.

The above Description of Tenant's Work, entitled Exhibit "D", shall be a part of, and is hereby attached to the Lease.

EXHIBIT "E"

Sign Criteria

CAROTHERS AT BAKERS BRIDGE
Franklin, Tennessee

GENERAL

This sign criteria is intended to encourage and develop creative and diversified signing for the stores in the Center which provides for not only effective store identification, but also a good design practice. Any deviations in this criteria must be approved in writing by Landlord.

SIGNS

I. The design and location of all signs must be approved in writing by Landlord and shall be subject to Landlord's sole discretion as to design, size, and location. All signs shall be individual letters mounted to a raceway which is to be attached to the "sign band". Raceway is to be painted to match existing brick facia. Signs shall be limited in length to a maximum of seventy-five percent (75%) of space designated as "sign facade" at leased premises. Tenant shall submit sign working drawings to Landlord and no sign shall be installed until Landlord's written approval has been obtained by Tenant. The working drawings must indicate the following:

a. The type and sizes of all lettering.

b. The location of the sign in relation to the store facade.

c. Section through the sign to show its construction.

d. Colors, Finishes and types of all materials.

e. Wattage and light intensity.

2. Illuminated sign cabinets or modules or signs of the flashing, rotating, moving, blinking or animated type signs are not permitted. "Troffer" or surface mounted "box" signs are not allowed,except for box signs that identify a corporate logo.

3. Tenant's sign shall be located within the limits of Tenant's storefront and shall be mounted to the sign raceway. Signs are not to be mounted to any brick in the sign area.

4. Printed signs on storefront or show windows are prohibited.

5. Painted signs on the exterior surface of any wall of the Demised Premises are prohibited.

6. Paper, cloth material or cardboard signs, stickers, banners or flags are prohibited.

7. No exposed raceways, ballast boxes or electrical transformers will be permitted except as required by code.

8. Sign company names or stamps shall be concealed if permitted by code.

9. Only one sign for each Tenant at sign facade will be permitted unless otherwise approved by Landlord in writing.

10. No roof mounted signs will be permitted.

11. Painted signs on exterior masonry walls are prohibited.

12. Tenant to" provide at Tenant's expense an under canopy sign. Design must be approved by Landlord.

EXHIBIT F

MINIMUM SERVICES REQUIRED FOR MAINTENANCE CONTRACT

OF THE HVAC EQUIPMENT

INCLUDING

ROOF TOP, FAN COILS AND EXHAUST SYSTEM

 Lessee will provide (4) inspections per year, with a qualified and licensed contractor, which will include the following items:

LUBRICATE MOTORS & BEARINGS AS APPLICABLE.

CHANGE AIR FILTERS.

CHECK BELTS FOR WEAR. ADJUST TO 1" DEFLECTION.

INSPECT EVAPORATOR & CONDENSING COILS. CLEAN AS REQUIRED.

(USE FOAM ACTION CLEANER OF H.P. CLEANER OF 300 psi. MAX)

INSPECT FAN & COMPRESSOR CONTACTORS FOR ARCING DAMAGE. CLEAN OR REPLACE IF EVIDENCED.

CHECK ATMOSPHERIC BURNERS AND PILOT ASSEMBLY. CLEAN AS REQUIRED.

INSPECT EVAPORATOR & CONDENSOR FAN BLADES & WHEELS FOR BALANCED OPERATION & CLEANLINESS. CLEAN AS REQUIRED.

INSPECT REFRIGERANT PIPING & INSULATION FOR DETERIORATION AND EVIDENCE OF REFRIGERANT LEAKAGE.

CHECK THERMOSTAT ACCURACY (+ or -2 degrees)

CHECK OPERATING PRESSURES, O.A. TEMP., SUCTION, DISCHARGE.

CHECK GENERAL CONDITION OF CABINETRY, DUCTlNG, CURB FLASHING AND UTILITY OPENING.

VISUALLY INSPECT WHEEL FOR EXCESSIVE DIRT OR GREASE BUILD-UP. CLEAN AS REQUIRED.

CHECK GREASE DRAINS, FIRE DAMPERS & FUSIBLE LINKS (KITCHEN FANS ONLY)

CHECK EXTERNAL MOUNTING PLATES, BOLTS, COVER HOLD-DOWNS FOR FATIGUE OR STRESS CRACKS OR EXCESSIVE VIBRATION.

VISUALLY INSPECT COUPLINGS & SPRINGS FOR FATIGUE OR WATER/OIL LEAKAGE.

VISUALLY INSPECT FOR LEAKAGE, FATIGUE CRACKS & GASKET FAILURE.

PHYSICALLY REMOVE ANY EXTERIOR DIRT ACCUMULATION.

EXHIBIT "G"

CAROTHERS AT BAKERS BRIDGE

RULES & REGULATIONS

A. GENERAL PROVISIONS:

1. Definitions: For purposes of these Rules & Regulations, the following terms shall be defined as set forth below:

Tenant: Any person(s) or entity leasing or subleasing space within a building located in the Center.

Landlord: Carothers Comer, LLC.

Developer: Southland Management & Development Co. Premises: Any leasable building area leased by Tenant.

Center: The entire improvements and real property comprising the retail shopping center called Carothers Comer.

2. Applicability: These Rules & Regulations shall apply to all Tenants of Carothers Comer except as specifically provided herein to the contrary. The Landlord/Developer of the Center shall be permitted (but not required) to grant relief to one or more Tenants within the Center upon written request therefor and good cause shown in the sole opinion of the Landlord/Developer.

3. Additional Rules and Amendments: The Landlord/Developer reserves the right to make such other reasonable rules and regulations which it determines, from time to time, are necessary or appropriate for the safety, care, protection, cleanliness or good order of the Center. Any such additional rules & regulations shall be binding upon each Tenant with the same force and effect as if the same had been included herein and in existence at the time the Tenant acquired its interest in the Premises. The Landlord/Developer reserves the right at any time to modify or revoke any existing rules or regulations.

B. OPERATION OF PREMISES:

1. Hours of Operation: All Tenants of the Center shall be open for business daily, fully fixtured, stocked and staffed (Sundays, Christmas Day, New Years Day, Thanksgiving and national holidays excepted). Refer to Section 12.2 in the attached lease for specific hours of operation.

2. Illumination of Signs and Displays: All Tenants of the center shall keep their display windows, shadow boxes, if any, and exterior signs lighted until at least 10:00 P.M. local time of each business day. All Tenants of the Premises within the Center shall maintain night lights within the Premises at all times during which the same are not open for business.

3. Signs and Advertising: No signs or advertising of any kind shall be placed within twelve inches (12") of the interior surface of any display window or the front customer doors except for banners relating to the promotion of Center special events within the display window. No signs or advertising matter of any nature shall be placed on the surface of any display window or customer door. No "For Sale" or "For Rent" or similar sign shall be displayed in any Premises so as to be visible outside the Premises.

4. Character of Operations: In order to establish and preserve the character of the Center as a high quality development, no Tenant will conduct an auction, fire, bankruptcy, going out of business or closeout sales nor conduct business in a manner which is commonly known and accepted in a retail trade as a wholesale store, outlet store or surplus store; provided, however, this provision shall not preclude the conduct of periodic, seasonal, promotional, or clearance sales nor shall it be deemed to give Landlord/Developer a right to approve or disapprove the price at which any business offers its merchandise for sale.

5. Deliveries: Each Tenant shall use its best efforts to cause all delivery vehicles serving the Premises to load and unload all supplies, goods, packages, furniture, equipment and all other items being delivered to the Tenant prior to 10:00 o'clock A.M. Delivery during other business hours shall not be absolutely prohibited, provided such deliveries do not, in the reasonable opinion of the Landlord/Developer, constitute a nuisance to the operation of the Center.

6. Theft or Loss: Each Tenant is fully responsible for the protection of its Premises and the contents thereof from robbery, theft, vandalism, pilferage or other loss.

C. RESTRICTIONS AND PROHIBITIONS:

1. Nuisances: No business will use or permit the use of any apparatus for sound production or transmission or any exterior lighting such as flashing lights, search lights, etc. or television or radio broadcast or permit live entertainment within or outside of the Premises in such a manner so that the media may be heard or experienced outside the Premises. No Tenant will cause or permit objectionable odors to emanate or be dispelled from the Premises.

2. Television and Radio Equipment: No Tenant shall be permitted to install any antenna, satellite dish or aerial wire, or radio or television equipment outside the Premises without the prior written approval of the Landlord/Developer which may specify the terms and conditions for any such installation.

3. Vending Machines: No Tenant may operate for use by the general public any coin or token operated vending machine or similar device for the sale of any goods, wares, merchandise, food, beverages or services including, but not limited to, pay telephones, pay lockers, pay toilets, scales, amusement devices, machines for the sale of beverages, foods, candy, cigarettes, or other commodities without the prior written consent of Landlord/Developer. Any tenant may install said vending machine or devices for the use only by such Tenant and its employees, provided such installation is in a non-sales area.

4. Trash and Garbage: No Tenant shall permit the accumulation of rubbish, trash garbage and other refuse in and around its premises. Every Tenant will remove the same at its own expense to areas designated by the Landlord/Developer and the Landlord/Developer shall make arrangements for removal of such rubbish, trash, garbage, and other refuse from such designated areas. No burning of trash, refuse or waste material shall be allowed.

5. Hazardous Substances or Conditions: No Tenant shall overload the floor of its Premises or use or operate any machinery, equipment or other device which is harmful to the Premises. No Tenant shall keep in its Premises any inflammable, combustible or explosive substance nor any substance which could create or tend to create a dangerous or combustible condition. Furthermore, no Tenant shall install electrical or other equipment which the Landlord/Developer determines might cause impairment or interference with the provision of service to the Center. Any Tenant whose business requires use or possession of extra hazardous substances or entails extra hazardous operations or conditions, shall advise the Landlord/Developer and shall obtain its consent prior to bringing such substance onto or creating such condition within the Premises. Any damage to persons or property resulting or arising out of such use shall be the sole responsibility of such Tenant.

6. Animals: No animals shall be permitted within any of the Leased Premises except in the event of a pet store, veterinary clinic, or similar business specifically approved by the Landlord/Developer.

7. Exterior Painting and Decorating: Following completion of its Premises, no Tenant shall change the color, type of paint or stain or other covering in any part of the exterior of its premises or otherwise change the architectural treatment thereof, without first obtaining the Landlord/Developer written approval ,which shall not be unreasonable withheld, of any such painting or decorating. Upon notice from the Landlord/Developer, any tenant will promptly remove any paint or decoration or alteration which has been so applied or installed without the Landlord/Developer written approval, or take such action with reference thereto as the Landlord/Developer may direct.

8. Insurance Rates: No Tenant shall permit or suffer anything to be done or kept in its Premises which will increase the rate of insurance for such Premises or the Center.

D. USE OF COMMON AREAS AND OPERATION OF CENTER:

1. Use of Sidewalks and parking Areas: No Tenant may use any sidewalk, or walkway or any vestibule or entrance of its Premises, for keeping, displaying, advertising or sale of any merchandise, equipment, devices or objects. Every Tenant's right to use all sidewalks, vestibules, entrances, parking areas, corridors and other common areas of the Center is limited to ingress and egress and parking for such Tenant and its employees, licensees and invitees and for no other use. No Tenant shall permit the encumbrance or obstruction of any portion of the common areas. The Landlord/Developer reserves the right to control and operate all common areas in such a manner as it deems best for the benefit of the Center generally. No Tenant shall obstruct, litter, mar, or damage any part of the hallways, corridors, exterior doors or walls, landscaped areas, or any portion of the common areas, and any Tenant shall be responsible for any such damage caused by it or its e mployees, agents or contractors.

2. Employee Parking: The Landlord/Developer shall have the right from time to time to designate those spaces which shall be used for parking by employees of Tenants. In the event such designation is made, no employees may park in any parking area other than that specifically designated for their use. Any employees vehicle parked in any un designated area shall be subject to such fines as are established by the Landlord/Developer.

3. Security: The Landlord/Developer may take all the measures it may deem reasonably necessary or appropriate for the security of the Center, the Tenants and their invitees, licensees, or employees including, but not limited to, searching for cause or suspected cause of any person entering, leaving or within the Center, the evacuation of the Center, or any part thereof for drill purposes or otherwise, the temporary denial to Tenants and their invitees, employees or licensees of access to the Center or any portion thereof, and the closing of the Center on non-business days, legal holidays, and after business hours.

4. Solicitations: Solicitation, including the distribution of hand bills or other advertising matter by any Tenant is prohibited within the entirety of the Center unless specifically authorized in advance by the Landlord/Developer and any cost incurred to clean up, if done, will be paid by Tenant.

E. ENFORCEMENT:

1. Compliance: Every Tenant shall comply with these rules & regulations as set forth herein and any and all rules & regulations which from time to time may be adopted. Failure of Tenant to so comply shall be grounds for action which may include, without limitation, an action to recover sums due for damages, injunctive relief or any combination thereof.

EX-2

Exhibit 10.07

NON-QUALIFIED STOCK OPTION AGREEMENT

EX-3

Exhibit 10.08

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement") is made as of the 19^th day of June, 2001 (the "Date of Grant"), by and between Community Financial Group, Inc., a Tennessee corporation ("Corporation"), and Attilio F. Galli ("Participant").

WHEREAS, Corporation has adopted its 1997 Nonstatutory Stock Option Plan (the "Plan"); as amended, and

WHEREAS, the committee chosen by Corporation to administer the Plan (the "Committee") has determined that Participant is eligible to receive an option to purchase shares of common stock of Corporation ("Stock") under a non-qualified stock option and has determined that it is in the best interest of Corporation to grant the stock option documented herein to Participant.

NOW, THEREFORE, in consideration of the foregoing, of the mutual promises hereinafter set forth and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

I. Grant of Option. Corporation hereby grants to Participant the right to purchase two thousand five hundred ( 2,500 ) shares of Stock (the "Option Shares") at a price of ($ 13.89 ) per Option Share (the "Option Price"), in accordance with the terms of this Agreement and the Plan (the "Option"). The Committee, exercising good faith, has determined that the Option Price is equal to at least one hundred percent (100%) of the fair market value of a share of Stock on the date hereof. The Option is not intended by the parties hereto to be, and shall not be treated as, an incentive stock option (as such term is defined under section 422 of the Internal Revenue Code of 1986 (the "Code")).

II. Termination of Qption.

(i) Termination Date. The Option and all rights hereunder with respect thereto, to the extent such rights shall not have been previously exercised or otherwise terminated, shall terminate and become null and void on June 19, , 2011 at 5 :00 P.M. (the "Termination Date"), subject to the limitation that any Option may not be exercisable more than three (3) months after Participant ceases to be an employee, director, or officer of Corporation, except as set forth in Section II (ii), and only to the extent that the Option would otherwise have been exercisable by, Participant upon the date of termination.

(ii) Death or Disability. Upon Participant's death or disability (within the meaning of Section 22(e)(3) of the Code), the Option may be exercised, to the extent not previously exercised, by the Participant, the Participant's legal representative, the legatees of the Option under Participant's Will or the distributees of the Option under the applicable laws of descent and distribution until the Termination Date, but only to the extent that the Option would otherwise have been exercisable by Participant. At the time of termination, the Committee may extend the exercise period for up to the earlier of three (3) years after termination or the Termination Date.

III. Vesting. Subject to such further limitations as are provided herein, the Option shall vest and become exercisable in five (5) installments, Participant having the right hereunder to purchase from Corporation the following number of Option Shares upon exercise of the Option, on and after the following dates, in cumulative fashion:

(i) upon execution of this Agreement, up to one-fifth (ignoring fractional shares) of the total number of Option Shares;

(ii) on and after the first anniversary of the Date of Grant, up to an additional one-fifth (ignoring fractional shares) of the total number of Option Shares;

(iii) on and after the second anniversary of the Date of Grant, up to an additional one-fifth (ignoring fractional shares) of the total number of Option Shares;

(iv) On and after the third anniversary of the Date of Grant, up to an additional, one-fifth (ignoring fractional shares) of the total number of Option Shares; and

(v) on and after the fourth anniversary of the Date of Grant, the remaining Option Shares.

Any portion of this Option that is not vested shall vest immediately upon any one of the following events:

a. the participant's death or disability (within the meaning of Section 22(e)(3) of the Code); or

b. the closing of a transaction resulting in a majority change of control of Corporation or The Bank of Nashville, including any merger, sale of assets, transfer of stock, or any reorganization as defined in Section 368 of the Code.

IV Exercise of 0ption. The Option, or any portion of the Option eligible to be exercised by the Participant and not previously exercised, may be exercised at any time or times prior to the termination of the Option pursuant to the provisions hereof. The Option may be exercised only if compliance with all Federal and state securities and banking laws can be effected and only by (i) Participant's completion, execution and delivery to Corporation of a notice of exercise and "investment letter" in the form attached hereto as Exhibit A, and (ii) Participant's payment to Corporation of an amount or with a fair market value (the average between the bid and asked price) equal to the sum of the amount obtained by multiplying the Option Price by the number of Option Shares being purchased plus any withholding tax required by law as determined by Corporation. Payment shall be made by check payable to Corporation, shares of Common Stock of the Corp oration, or such other medium of payment as the Committee shall approve. Additionally, the Participant may choose a "dry option" whereby the Participant receives a number of shares of Stock equal to the fair market value of the Stock times the number of shares exercisable under the Option divided by the value of the Option. The value of the Option is the difference between the fair market value of the shares and the Option Price multiplied by the number of shares exercisable under the Option. Upon the exercise of the Option by Participant, or as soon thereafter as is practicable, Corporation shall issue and deliver to Participant a certificate or certificates evidencing such number of Option Shares as Participant has so elected to purchase, but in the event Participant has not made a cash payment sufficient to cover applicable withholding taxes, the Corporation may retain sufficient stock to liquidate and pay such taxes. Such certificate or certificates shall be registered in the name of Participant and shal l bear any legend required by any Federal or state securities law or agreement as Corporation shall determine.

V. Transferability of Option. The Option may not be transferred, assigned, pledged or hypothecated (whether by operation of law or otherwise), except that the Option may be transferred upon the death of Participant as provided by Participant's Will or the applicable laws of descent or distribution. The Option shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option, or levy of attachment or similar process upon the Option not specifically permitted herein shall be null and void and without effect. Notwithstanding the provisions of this Section, Participant, at any time prior to his death, may assign all or any portion of the Option to (i) his spouse or lineal descendant, (ii) the trustee of a trust for the primary benefit of his spouse and lineal descendant, (iii) a partnership of which his spouse and lineal descendants are the only partners, or (iv) a tax exempt organization as described in Section 501(c)(3) of the Code. Any such assignment will be permitted only if (i) Participant does not receive any consideration therefore, and (ii) the assignment is permitted by the Plan. Any such assignment shall be evidenced by an appropriate written document executed by Participant, and a copy thereof shall be delivered to Corporation prior to the effective date of the assignment. Any permitted transferee will be entitled to all of the rights of Participant with respect to the assigned portion of the Option, and such portion of the Option will continue to be subject to all of the then existing terms, conditions and restrictions applicable to the Option, as set forth herein and in the Plan.

VI. Adjustments. In the event of the declaration of any stock dividend on the Stock or in the event of any reorganization, merger, consolidation, acquisition, separation, recapitalization, split-up, combination or exchange of shares of Stock, or like adjustment, the number of shares of Stock and the class of shares of Stock available pursuant to the Option, and the Option Price, shall be adjusted proportionately as determined by the Committee, whose determination shall be conclusive. Notwithstanding the foregoing, in the event of such a reorganization, merger, consolidation, acquisition, separation, recapitalization, split-up, combination or exchange of shares of stock, or like adjustment which results in substantially all the shares of the Stock of Corporation being exchanged for, or converted into cash or other property, the Committee or Corporation shall have the right to terminate the Option as of the date of the exchange or conversion in which case the Option shall convert into the right to receive such cash or property net of the Option Price of the Options.

Vll. Termination, Suspension or Amendment of Option. The Committee or Corporation may at any time terminate, suspend or amend the Plan or this Agreement.

VIII. Postponement of Exercise. The Committee or Corporation may postpone any exercise of the Option for such time as it may deem necessary in order to permit Corporation (i) to obtain any required approvals of the exercise from bank or bank holding company regulators, (ii) to effect, amend or maintain any necessary registration of the Plan or the shares of Stock issuable upon the exercise of the Option under the Securities Act of 1933, as amended (the" Act"), or the securities laws of any applicable jurisdiction, (iii) to permit any action to be taken in order to (A) list such shares of Stock on a stock exchange if shares of Stock are then listed on such exchange or (B) comply with restrictions or regulations incident to the maintenance of a public market for its shares of Stock, including any rules or regulations of any stock exchange on which the shares of Stock are listed, or (iv) to determine that such shares of Stock and the Plan are exe mpt from such registration or that no action of the kind referred to in (iii)(B) above needs to be taken; and Corporation shall not be obligated by virtue of any terms and conditions of this Agreement or any provision of the Plan to recognize the exercise of the Option or to sell or issue shares of Stock in violation of the Act or any state's securities laws. Any such postponement may, upon determination of Corporation, extend the terms of the Option but neither Corporation nor its directors or officers or the Committee shall have any obligation or liability to Participant or to any other person with respect to any shares of Stock as to which the Option shall lapse because of such postponement.

IX. Participant's Rights. The granting of the Option shall impose no obligation upon Participant to exercise such Option. Participant shall have no equity interest in Corporation, nor shall Participant have any voting, dividend, liquidation or dissolution rights with respect to any capital stock of Corporation solely by reason of having the Option or having executed this Agreement. Upon the issuance and delivery of a certificate for Option Shares after exercise of the Option, Participant shall have the rights of a stockholder with respect to such Option Shares and to receive all dividends or other distributions paid or made with respect thereto. Nothing in this Agreement or the Plan shall confer upon Participant the right to continue as an employee, director, or officer or affect any right which Corporation may have to remove such Participant as such.

X. Elimination of Fractional Shares. If this Agreement requires a computation of the number of shares of Stock subject to the Option, and the number so computed is not a whole number of shares of Stock, such number of shares of Stock shall be rounded down to the next whole number.

XI. Incorporation of Plan by Reference. The Option is granted pursuant to the terms of the Plan, a copy of which is attached hereto as Exhibit "B" and the terms of which are incorporated herein by reference. The Option shall in all respects be interpreted in accordance with the Plan. The Committee shall interpret and construe the Plan and this Agreement, and its interpretations and determinations shall be conclusive and binding on the parties hereto and any other person claiming an interest hereunder, with respect to any issue arising hereunder or thereunder. The provisions of the Plan shall control in the event of any inconsistencies between this Agreement and the Plan.

XII. Reservation of Stock. Corporation covenants that while the Option is exercisable, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the delivery of Stock pursuant to the exercise of this Option.

XIII. Entire Agreement. This Agreement sets forth all of the promises, agreements, conditions, understandings, warranties and representations between the parties hereto with respect to the Option and the Shares. This Agreement is an integration of any and all prior agreements or understandings, oral or written, with respect to the Option and the Shares.

XIV. Notices. Any and all notices provided for herein shall be sufficient if in writing, and sent by hand delivery or by certified or registered mail (return receipt requested and first class postage prepaid), in the case of Corporation, to its principal office, and, in the case of Participant, to Participant's address as shown on Corporation's records.

XV. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Tennessee.

XVI. Modifications. Except as otherwise provided in Section V, VI and VII herein, no change or modification of this Agreement shall be valid unless the same is in writing and signed by the parties hereto.

XVII. Successors. This Agreement shall be binding on all permitted successors and assigns of Participant including any estate, executors or administrators, trustees, or personal or legal representatives, and, in such event all references herein to Participant shall, to the extent applicable, be deemed to refer to and include such estate, executors or administrators, trustees or personal or legal representatives, as the case may be.

IN WITNESS WHEREOF, Corporation and Participant have executed this Agreement as of the day and year first above written.

COMMUNITY FINANCIAL GROUP, INC.

By:  /s/  J. HUNTER ATKINS
Title: President and CEO

PARTICIPANT:

/s/  ATTILIO F. GALLI

EX-4

Exhibit 10.09

NON-QUALIFIED STOCK OPTION AGREEMENT

THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this" Agreement") is made as of the 19th day of June, 2001 (the "Date of Grant"), by and between Community Financial Group, Inc., a Tennessee corporation ("Corporation"), and Julian C. Cornett ("Participant").

WHEREAS, Corporation has adopted, its 1997 Nonstatutory Stock Option Plan (the "Plan"); as amended, and

WHEREAS, the committee chosen by Corporation to administer the Plan (the "Committee") has determined that Participant is eligible to receive an option to purchase shares of common stock of Corporation ("Stock") under a non-qualified stock option and has determined that it is in the best interest of Corporation to grant the stock option documented herein to Participant.

NOW, THEREFORE, in consideration of the foregoing, of the mutual promises hereinafter set forth and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do hereby agree as follows:

I. Grant of Option. Corporation hereby grants to Participant the right to purchase two thousand five hundred (2,500 ) shares of Stock (the "Option Shares") at a price of ($13 .89 ) per Option Share (the "Option Price"), in accordance with the terms of this Agreement and the Plan (the "Option"). The Committee, exercising good faith, has determined that the Option Price is equal to at least one hundred percent (100%) of the fair market value of a share of Stock on the date hereof. The Option is not intended by the parties hereto to be, and shall not be treated as, an incentive stock option (as such term is defined under section 422 of the Internal Revenue Code of 1986 (the "Code")).

II. Termination of Option.

(i) Termination Date. The Option and all rights hereunder with respect thereto, to the extent such rights shall not have been previously exercised or otherwise terminated, shall terminate and become null and void on June 19 , 2011 at 5:00 P.M. (the "Termination Date"), subject to the limitation that any Option may not be exercisable more than three (3) months after Participant ceases to be an employee, director, or officer of Corporation, except as set forth in Section II (ii), and only to the extent that the Option would otherwise have been exercisable by Participant upon the date of termination.

(ii) Death or Disability. Upon Participant's death or disability (within the meaning of Section 22(e)(3) of the Code), the Option may be exercised, to the extent not previously exercised, by the Participant, the Participant's legal representative, the legatees of the Option under Participant's Will or the distributees of the Option under the applicable laws of descent and distribution until the Termination Date, but only to the extent that the Option would otherwise have been exercisable by Participant. At the time of termination, the Committee may extend the exercise period for up to the earlier of three (3) years after termination or the Termination Date.

III. Vesting. Subject to such further limitations as are provided herein, the Option shall vest and become exercisable in five (5) installments, Participant having the right hereunder to purchase from Corporation the following number of Option Shares upon exercise of the Option, on and after the following dates, in cumulative fashion:

(i) upon execution of this Agreement, up to one-fifth (ignoring fractional shares) of the total number of Option Shares;

(ii) on and after the first anniversary of the Date of Grant, up to an additional one-fifth (ignoring fractional shares) of the total number of Option Shares;

(iii) on and after the second anniversary of the Date of Grant, up to an additional one-fifth (ignoring fractional shares) of the total number of Option Shares;

(iv) On and after the third anniversary of the Date of Grant, up to an additional one-fifth (ignoring fractional shares) of the total number of Option Shares; and

(v) on and after the fourth anniversary of the Date of Grant, the remaining Option Shares.

Any portion of this Option that is not vested shall vest immediately upon any one of the following events:

a. the participant's death or disability (within the meaning of Section 22(e)(3) of the Code); or

b. the closing of a transaction resulting in a majority change of control of Corporation or The Bank of Nashville, including any merger, sale of assets, transfer of stock, or any reorganization as defined in Section 368 of the Code.

IV. Exercise of Option. The Option, or any portion of the Option eligible to be exercised by the Participant and not previously exercised, may be exercised at any time or times prior to the termination of the Option pursuant to the provisions hereof. The Option may be exercised only if compliance with all Federal and state securities and banking laws can be effected and only by (i) Participant's completion, execution and delivery to Corporation of a notice of exercise and "investment letter" in the form attached hereto as Exhibit A, and (ii) Participant's payment to Corporation of an amount or with a fair market value (the average between the bid and asked price) equal to the sum of the amount obtained by multiplying the Option Price by the number of Option Shares being purchased plus any withholding tax required by law as determined by Corporation. Payment shall be made by check payable to Corporation, shares of Common Stock of the Corporation, or such other medium of payment as the Committee shall approve. Additionally, the Participant may choose a "dry option" whereby the Participant receives a number of shares of Stock equal to the fair market value of the Stock times the number of shares exercisable under the Option divided by the value of the Option. The value of the Option is the difference between the fair market value of the shares and the Option Price multiplied by the number of shares exercisable under the Option. Upon the exercise of the Option by Participant, or as soon thereafter as is practicable, Corporation shall issue and deliver to Participant a certificate or certificates evidencing such number of Option Shares as Participant has so elected to purchase, but in the event Participant has not made a cash payment sufficient to cover applicable withholding taxes, the Corporation may retain sufficient stock to liquidate and pay such taxes. Such certificate or certificates shall be registered in the name of Participant and shall bear any legend requ ired by any Federal or state securities law or agreement as Corporation shall determine.

V. Transferability of Option. The Option may not be transferred, assigned, pledged or hypothecated (whether by operation of law or otherwise), except that the Option may be transferred upon the death of Participant as provided by Participant's Will or the applicable laws of descent or distribution. The Option shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option, or levy of attachment or similar process upon the Option not specifically permitted herein shall be null and void and without effect. Notwithstanding the provisions of this Section, Participant, at any time prior to his death, may assign all or any portion of the Option to (i) his spouse or lineal descendant, (ii) the trustee of a trust for the primary benefit of his spouse and lineal descendant, (iii) a partnership of which his spouse and lineal descendants are the only partners, or (iv) a tax exempt or ganization as described in Section 501(c)(3) of the Code. Any such assignment will be permitted only if (i) Participant does not receive any consideration therefore, and (ii) the assignment is permitted by the Plan. Any such assignment shall be evidenced by an appropriate written document executed by Participant, and a copy thereof shall be delivered to Corporation prior to the effective date of the assignment. Any permitted transferee will be entitled to all of the rights of Participant with respect to the assigned portion of the Option, and such portion of the Option will continue to be subject to all of the then existing terms, conditions and restrictions applicable to the Option, as set forth herein and in the Plan.

VI. Adjustments. In the event of the declaration of any stock dividend on the Stock or in the event of any reorganization, merger, consolidation, acquisition, separation, recapitalization, split-up, combination or exchange of shares of Stock, or like adjustment, the number of shares of Stock and the class of shares of Stock available pursuant to the Option, and the Option Price, shall be adjusted proportionately as determined by the Committee, whose determination shall be conclusive. Notwithstanding the foregoing, in the event of such a reorganization, merger, consolidation, acquisition, separation, recapitalization, split-up, combination or exchange of shares of stock, or like adjustment which results in substantially all the shares of the Stock of Corporation being exchanged for, or converted into cash or other property, the Committee or Corporation shall have the right to terminate the Option as of the date of the exchange or conversion in which case the Option s hall convert into the right to receive such cash or property net of the Option Price of the Options.

VII. Termination, Suspension or Amendment of Option. The Committee or Corporation may at any time terminate, suspend or amend the Plan or this Agreement.

VIII. Postponement of Exercise. The Committee or Corporation may postpone any exercise of the Option for such time as it may deem necessary in order to permit Corporation (i) to obtain any required approvals of the exercise from bank or bank holding company regulators, (ii) to effect, amend or maintain any necessary registration of the Plan or the shares of Stock issuable upon the exercise of the Option under the Securities Act of 1933, as amended (the "Act"), or the securities laws of any applicable jurisdiction, (iii) to permit any action to be taken in order to (A) list such shares of Stock on a stock exchange if shares of Stock are then listed on such exchange or (B) comply with restrictions or regulations incident to the maintenance of a public market for its shares of Stock, including any rules or regulations of any stock exchange on which the shares of Stock are listed or (iv) to determine that such shares of Stock and the Plan are exempt from such registrati on or that no action of the kind referred to in (iii)(B) above needs to be taken; and Corporation shall not be obligated by virtue of any terms and conditions of this Agreement or any provision of the Plan to recognize the exercise of the Option or to sell or issue shares of Stock in violation of the Act or any state's securities laws. Any such postponement may, upon determination of Corporation, extend the terms of the Option but neither Corporation nor its directors or officers or the Committee shall have any obligation or liability to Participant or to any other person with respect to any shares of Stock as to which the Option shall lapse because of such postponement.

IX. Participant's Rights. The granting of the Option shall impose no obligation upon Participant to exercise such Option. Participant shall have no equity interest in Corporation, nor shall Participant have any voting, dividend, liquidation or dissolution rights with respect to any capital stock of Corporation solely by reason of having the Option or having executed this Agreement. Upon the issuance and delivery of a certificate for Option Shares after exercise of the Option, Participant shall have the rights of a stockholder with respect to such Option Shares and to receive all dividends or other distributions paid or made with respect thereto. Nothing in this Agreement or the Plan shall confer upon Participant the right to continue as an employee, director, or officer or affect any right which Corporation may have to remove such Participant as such.

X. Elimination of Fractional Shares. If this Agreement requires a computation of the number of shares of Stock subject to the Option, and the number so computed is not a whole number of shares of Stock, such number of shares of Stock shall be rounded down to the next whole number.

XI. Incorporation of Plan by Reference. The Option is granted pursuant to the terms of the Plan, a copy of which is attached hereto as Exhibit "B" and the terms of which are incorporated herein by reference. The Option shall in all respects be interpreted in accordance with the Plan. The Committee shall interpret and construe the Plan and this Agreement, and its, interpretations and determinations shall be conclusive and binding on the parties hereto and any other person claiming an interest hereunder, with respect to any issue arising hereunder or thereunder. The provisions of the Plan shall control in the event of any inconsistencies between this Agreement and the Plan.

XII. Reservation of Stock. Corporation covenants that while the Option is exercisable, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the delivery of Stock pursuant to the exercise of this Option.

XIII. Entire Agreement. This Agreement sets forth all of the promises, agreements, conditions, understandings, warranties and representations between the parties hereto with respect to the Option and the Shares. This Agreement is an integration of any and all prior agreements or understandings, oral or written, with respect to the Option and the Shares.

XIV. Notices. Any and all notices provided for herein shall be sufficient if in writing, and sent by hand delivery or by certified or registered mail (return receipt requested and first class postage prepaid), in the case of Corporation, to its principal office, and, in the case of Participant, to Participant's address as shown on Corporation's records.

XV. Governing Law. This Agreement shall be construed and enforced in accordance with the laws of the State of Tennessee.

XVI. Modifications. Except as otherwise provided in Section V, VI and VII herein, no change or modification of this Agreement shall be valid unless the same is in writing and signed by the parties hereto.

XVII. Successors. This Agreement shall be binding on all permitted successors and assigns of Participant including any estate, executors or administrators, trustees, or personal or legal representatives, and, in such event all references herein to Participant shall, to the extent applicable, be deemed to refer to and include such estate, executors or administrators, trustees or personal or legal representatives, as the case may be.

IN WITNESS WHEREOF, Corporation and Participant have executed this Agreement as of the day and year first above written.

COMMUNITY FINANCIAL GROUP, INC.

By:        /s/  J. HUNTER ATKINS                      
Title: President and CEO

PARTICIPANT:

/s/ JULIAN C. CORNETT

EX-5

Exhibit 10.10

AGREEMENT

THIS LEASE is made as of January 23, 2002, between Richard W. Carpenter, Sr. and Richard S. Davis, Jr. as Tenants in Common, with an address of 5480 Chemin de Vie, Atlanta, GA 30342 ("Landlord") and The Bank of Nashville, with an address of 401 Church Street, Nashville, Tennessee, ("Tenant").

ARTICLE 1 - Definitions

Whenever used in this Lease, the following terms shall have the meanings indicated below:

Building: Building to be constructed consisting of 3,894 square feet on one (1) floor, plus a drive-through canopy of 1,215 square feet, and an eyebrow canopy of 117 square feet, and otherwise in size, dimension and located as set forth on the site plan which is attached hereto and incorporated herein by this reference as Exhibit A ("Site Plan").

Project: The real property comprising not less than 1.05 acres described on Exhibit A-I (the "Land") together with the Building and Project Common Areas to be constructed thereon, as shown on the Site Plan.

Premises: The Premises consists of the Building, Project Common Areas, and the Land.

Parking Spaces: At least 21 full sized parking spaces for the exclusive use by Tenant's employees and licensees and visitors in the parking lot adjacent to the Building, as further shown on the Site Plan. Landlord represents and warrants to Tenant that the parking ratio meets applicable zoning ordinance.

Term: The Term shall commence on the Commencement Date and expire on the last day of the 240th full calendar month thereafter.

Lease Year: The period beginning on the Commencement Date and ending on the last day of the twelfth (12th) full calendar month of the Term, and each 12-month period thereafter during the Term.

Landlord's Work: As described in Article 3 hereof. It is understood and agreed between Landlord and Tenant that the Project is to be constructed on a "turn-key" basis, with Landlord fully completing construction of the Building, including all tenant improvements, as further described herein.

Commencement Date: The date that is one-hundred-twenty-days (120) after the last to occur of: (i) Landlord's Work is complete substantially in accordance with the Plans and Specifications (except for minor punch list items the completion of which does not materially interfere with Tenant's ability to use the Premises as contemplated by this Lease), based on Tenant's architect's certificate of substantial completion, and (ii) receipt by Landlord of a Final Use and Occupancy Permit (the "U & 0") from the appropriate governmental authorities for the Building and the Premises.

Base Rent: Twelve (12%) percent of the Project Cost for Lease Years 1-5 with rental escalations of five (5%) percent in each additional five (5) year period of the Term and each Renewal Term. This Lease will be amended in writing to reflect the actual Base Rent once the Project Cost is determined. In the event the parties have not entered into said amendment by March 8, 2002, either party may terminate this lease by written notice to the other.

Tenant's Share: 100%

Broker: Grubb & Ellis/Centennial, Inc.

Permitted Use: General office including, without limitation, use as a branch banking facility, and uses ancillary thereto.

Project Common Areas: Parking and landscaped areas including the sidewalks and private internal drives contained within and which are common to the Project, and the drives into and out of the Project from the adjoining streets and shopping center.

Project Cost: The cost of Landlord's Work, as defined in the attached Exhibit C and C-l, and as set forth in the Construction Contract, defined hereinafter, plus Land cost of $575,000, and the costs specified in the Letter of Intent and Pro Forma attached as Exhibit B.

Exhibits and Schedules:

Exhibit A -Site Plan
Exhibit A-1 -Legal Description of the Land
Schedule B - Letter of Intent and Pro Forma
Exhibit C -1 Landlord's Work
Exhibit C-l - Plans and Specifications
Exhibit D - Commencement Date Agreement

ARTICLE 2 -Lease Grant

Section 2.1 -Grant - Subject to the terms set forth in this Lease, Landlord leases to Tenant and Tenant leases and takes from Landlord the Premises for the Term of this Lease.

Tenant shall have the right to install and use microwave satellite dish(es) and/or antenna(e) occupying not more than 36 square feet of space (collectively, a "Dish") on the roof of the Building. Landlord shall enable Tenant to install wires, conduits and appurtenant facilities in the Project Common Areas at no cost to Tenant and to have reasonable access to the roof for the installation, replacement and maintenance of the Dish and its associated equipment. No such installation shall be permitted which might void Landlord's warranty on the roof of the Building. In addition, Landlord shall install during the construction phase of the roof, at no cost to Tenant, such vertical roof penetrations as may be necessary to connect the Dish with the Premises.

Tenant may, at Tenant's cost and expense, install a security system in the Premises, with Landlord's consent, which consent shall not unreasonably be withheld, conditioned or delayed.

ARTICLE 3 -Construction

Section 3.1 - Plans and Specifications - Construction Plans and Specifications prepared by Gould Turner Group, PC, dated January 23, 2002, and entitled "Bank of Nashville, Hermitage Branch, Nashville, Tennessee" (the "Plans and Specifications").

Section 3.2 -Landlord's Work

A. Landlord shall perform all work set forth on Exhibit C and C-1 ("Landlord's Work"), at its sole expense, in constructing the Project, including without limitation, all related improvements such as parking, roadways, entrances, and landscaping, all as set forth on the Site Plan and in accordance with the Plans and Specifications. The terms and provisions of Exhibit C and Schedules C-1 are incorporated by reference into this Lease. All such work shall be performed in a good and workmanlike manner and in compliance with all applicable laws, codes, rules, regulations and ordinances, including zoning. Landlord shall use only new and first-class materials for all of its installations. Landlord shall secure all necessary governmental approvals in connection with the construction of the Building and will obtain the Final Use & Occupancy certificate. Landlord shall pay all utility hook-up, tap fees, and other similar charges, regardless whether Landlord or Tenant performs work in connecting utilities for the Premises. Landlord shall promptly commence construction and proceed diligently to completion. Delivery of the Premises by Landlord to Tenant is estimated to be January 1, 2003. Upon the delivery of the Premises to Tenant, Tenant shall have the right to submit a "punch list" to Landlord setting forth uncompleted items of work which are part of Landlord's Work. Upon receipt of this punch list, Landlord shall endeavor in good faith with all due diligence to expeditiously correct all punch list items and any defects in Landlord's Work, within thirty (30) days of the submission of said punch list.

Tenant may, but without obligation, inspect the Project at any time and from time to time during the course of construction, including, without limitation, all construction contracts and construction related books and records. Landlord shall provide to Tenant one (1) full set of as-built scaled drawings in AutoCad format, if available, within three (3) business days of their completion.

B. Upon completion of Landlord's Work, Landlord shall deliver possession of the Premises to Tenant in broom clean and good condition with all utilities in place at the Premises as may be necessary for the conduct of Tenant's business. Hook-up of all utilities shall be Landlord's responsibility; commencement of utility services, including electrical, water and sewer, shall be the Tenant's responsibility.

C. The parties anticipate that the Premises shall be completed so that the Commencement Date can be April 30, 2003. Landlord may change said date based upon change orders required by Tenant, delays caused by the Tenant, and circumstances beyond the reasonable control of Landlord.

D. Upon delivery and acceptance of possession of the Premises, Tenant may construct certain other tenant improvements to the Premises.

For all of Tenant's work, Tenant shall have the right to make substitutions of material of equivalent grade and quality if desired by Tenant, and to make changes necessitated by conditions met in the construction process, provided that Landlord gives its written consent to same, said consent not to unreasonably be withheld, conditioned or delayed.

3.3 Condition of the Premises. Landlord hereby represents and warrants that as the Commencement Date, the Project, including the roof and all other structural portions thereof, will comply with all applicable law, and shall be in good condition and that all equipment and systems serving the Project, including, but not limited to mechanical, HVAC, plumbing and electrical shall be in good condition and in normal working order.

3.4 Tenant's Compliance with Laws. Notwithstanding anything to the contrary contained in the Lease, it is agreed that Tenant shall not be responsible for:

i. complying with any present laws, orders, rules or regulations of federal, state, county, municipal or other governments or governmental authorities or any of their departments, commissions, boards, or agencies or with any direction or recommendation of any public officer or officers pursuant to law or with any orders or notices of the National Board of Fire Underwriters or any requirements of any insurer of the Premises or any part thereof (collectively, the "Requirements"), with respect to either the Project or the Building; (a) which Landlord or any affiliate, predecessor in interest, invitee, servant, employee or agent of Landlord has violated; or (b) where a notice of violation or order was issued prior to the Commencement Date of the Lease and was not related to any work performed by or on behalf of the Tenant; or (c) which require any work, investigation(s) or certification(s) to be made on a building-wide basis under a law enacted after the d ate of the Lease; or (d) which require any structural work to be performed unless such compliance is required by reason of Tenant's specific manner of use of the Premises or method of operation therein, or by the negligence, acts or omissions of Tenant; or

ii. correcting any work performed by Landlord with respect to the Project where Landlord's work did not comply with such Requirements; or

iii. investigating, certifying, monitoring, encapsulating, removing or in any way dealing with asbestos or hazardous substances unless such asbestos or hazardous substances were introduced into the Premises by Tenant; or

iv. complying with The Americans With Disabilities Act of 1990 in effect as of the Commencement Date, except with respect to improvements made by Tenant within the Premises.

Notwithstanding anything to the contrary contained in the foregoing, Tenant shall also not be responsible for any new, modified or amended law, order, rule, regulation, including without limitation, the American with Disabilities Act, which is enacted or comes into effect within the last three (3) years of the term of this Lease, including any extensions.

Section 3.5 - Hazardous Substances - For the purposes hereof, "Hazardous Substances" means any toxic or hazardous wastes, pollutants, material or substance: (i) defined or listed as a "hazardous substance" or "toxic substance" or similarly identified in or pursuant to the Comprehensive Environmental Response Compensation and Liability Act of 1980 (42 U.S.C. Section 9601 et seq.) and amendments thereto and regulations promulgated thereunder; (ii) defined or listed as a "hazardous waste" identified in or pursuant to the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) and amendments thereto and regulations promulgated thereunder; (iii) hazardous materials identified in or pursuant to the Hazardous Materials Transportation Act (49 U.S.C. Section 1802 et sea.) and amendments thereto and regulations promulgated thereunder; (iv) any chemical substance or mixture regulated under the Toxic Substance Control Act of 1976 (15 U.S.C. Section 2601 et seq.), and amendments thereto and regulations promulgated thereunder; (v) any toxic pollutant under the Clean Water Act (33 U.S.C. Section 1251 et. seq.) and amendments thereto and regulations promulgated thereunder (vi) containing gasoline, oil, diesel fuel or other petroleum products and by-products; (vii) containing polychlorinated biphenuls (PCBs); (viii) containing asbestos; (vix) which is radioactive; (x) the presence of which requires investigation or remediation by any federal, state, or local authority.

Landlord warrants and represents that the Building, Premises and Project do not and shall not contain friable asbestos or other Hazardous Substances. In the event any friable asbestos or other Hazardous Substances are found in the Building, the Premises or the Project, unless arising at the instance of or due to the activities of Tenant, its agents, contractors or employees, Landlord shall, at its sole cost and expense, undertake such measures as may be necessary to eliminate any risk of exposure thereto in accordance with all applicable laws, rules, regulation and ordinances. Landlord shall indemnify, defend and hold harmless Tenant and its respective agents, employees, officers and directors for, from and against any and all losses, liabilities (including, but not limited to, strict liability), damages, injuries, expenses (including, but not limited to, court costs, litigation expenses, reasonable attorneys' fees and costs of settlement or judgment), suits and claims of any and every kind whatsoever paid, incurred or suffered by, or asserted against, Tenant by any person, entity or governmental agency for, with respect to, or as a direct or indirect result of, the presence in or the escape, leakage, spillage, discharge, emission or release from the Project of any Hazardous Substances or the presence of any Hazardous Substances placed on or discharged from the Project by Landlord, its successors or assignees or their respective agents, employees, or contractors.

Tenant shall not create or store friable asbestos or other Hazardous Substances on or about the Premises or the Building. Tenant shall indemnify Landlord from or against any and all claims, damages, losses, costs and expense (including reasonable attorney's fees and court costs) incurred by Landlord as a result of the existence of any friable asbestos or other Hazardous Substances on or about the Premises or the Building arising at the instance of or due to the activities of Tenant, its agents, contractors or employees.

Landlord shall permit Tenant to conduct such environmental studies on the Project as Tenant shall desire. If Landlord or Tenant has any environmental studies or reports at the time of the execution of this Lease or at any time during the term hereof, each shall provide a copy of same to the other.

ARTICLE 4 -Term, Etc.

Section 4.1 - Term - The Term of the Lease shall commence on the Commencement Date. When the Commencement Date has been determined, the parties shall sign an agreement specifying the commencement and expiration dates of the Term, in form as set forth on Exhibit D.

Section 4.2 - Renewal - Tenant shall have two. (2) options to extend the Term of the Lease for a period of five (5) years (each, a "Renewal Term") upon the same terms and conditions as contained in this Lease provided Tenant gives Landlord notice of the exercise of the option not less than one hundred eighty (180) days prior to the beginning of a Renewal Term.

Section 4.3 - Holdover - If Tenant remains in possession of all or any part of the Premises after the expiration of the Term, such tenancy shall be from month-to-month and rent shall continue at a rate equal to 150% of the monthly installment of Base Rent in effect immediately preceding the expiration of the Term.

ARTICLE 5 - Rent and Other Charges

Section 5.1 - Base Rent - Beginning on the Commencement Date, Tenant shall pay the annual Base Rent, as set forth in Article 1 of this Lease, in equal monthly installments on the first day of each month in the Term without deduction or set-off except as otherwise provided herein. For any partial months, Base Rent shall be pro-rated. Tenant shall also pay all applicable Tennessee sales taxes which may in the future be due on Base Rent, at the time of and together with the payment of Base Rent to Landlord.

Section 5.2 - Repairs, Maintenance and other Expenses

A. Tenant will keep the interior and exterior of the Premises and the Project Common Areas in good order and repair (excepting, however all repairs made necessary by reason of fire, casualty the elements or Landlord's default under the terms of this lease), including, all heating, ventilating, air conditioning and other mechanical equipment and systems furnished by Landlord (including replacement of the compressor and other major components), sprinkler systems (including any testing of same) and any water, plumbing, gas or electrical lines or conduits permanently embedded in the walls, floor or ceiling, the roof and structural components of the building, parking lot and landscaped areas at its own cost and expense. Notwithstanding the foregoing, Landlord shall make all necessary repairs to the Premises, including all fixtures and systems (except for fixtures and systems installed by Tenant) located therein, for a period of one (1) year following the Co mmencement Date; provided, however, Landlord shall not make any repairs necessitated by the negligence of Tenant, its agents or employees. Following said one (1) year period, Landlord agrees to assign to Tenant all warranties for any labor or materials used on or in the Premises or Project Common Areas.

The costs and expenses incurred by Tenant in connection with the maintenance and repair of the Premises and the Project Common Areas shall be accounted as between Landlord and Tenant in accordance with generally accepted accounting principles ("GAAP"), such that, if appropriate in accordance with GAAP, the costs and expenses for capital items shall be amortized over a useful life determined in accordance with GAAP, whether or not Landlord or Tenant so elects for its tax purposes, and, to the extent that the useful life of a capital item extends beyond the Term of this Lease, Landlord shall reimburse Tenant for the portion of the amortized cost that is allocable to that period beyond the Term..

Notwithstanding anything to the contrary contained herein, Tenant shall not be liable to pay any portion of any cost and expense which arises as a result of any improper construction or installation of any portion of the Project, whether or not such item(s) are insured or under warranty or Landlord has any recourse against any contractors or subcontractors for deficient materials and/or workmanship.

Notwithstanding any other provision hereof, Tenant shall not be required to pay the following types of expenses: late fees incurred by Landlord for late payments of bills; any cost or expense which Landlord incurs which is reimbursed to Landlord from any source or for which Landlord is otherwise compensated, including costs for which Landlord receives reimbursement from insurance proceeds; income, profit, franchise, excise, corporate, capital stock, estate, inheritance and any other taxes imposed on, or measured by the income of Landlord from the operation of the Premises; costs associated with any changes in law or of Landlord's compliance with such new or changed law(s); costs arising from the gross negligence or willful misconduct of Landlord or its agents, employees or contractors; interest and principal payments on any mortgage, deed of trust or indebtedness of Landlord; depreciation; payments made under any ground lease; any management or adminis trative fees and charges; costs representing an amount paid to an affiliate of Landlord which is in excess of the amount which would have been paid in the absence of such relationship; and any other costs or expenses incurred by Landlord which are not chargeable in accordance with generally recognized industry practices to the management, operation, maintenance or repair of the Premises. Further, Tenant shall not be obligated to pay any expense incurred by Landlord which is not invoiced to Tenant within six (6) months of the date of such incurrence.

B. Landlord shall promptly make all repairs due to fire, casualty, the elements or Landlord's failure to comply with the terms of this Lease. Notwithstanding the foregoing, if any of the aforementioned repairs are made necessary by reason of Tenant's gross negligence or willful misconduct, such repairs shall be made by Tenant at its own cost and expense, and Landlord shall provide any insurance proceeds in connection therewith.

C. In the event the need for emergency repairs arises, and such repairs are the obligation of Landlord, Tenant may proceed to have such repairs promptly made and Landlord shall reimburse Tenant for the repair cost within sixty (60) days after receipt of a request for reimbursement from Tenant. Tenant shall use reasonable efforts to give Landlord telephonic or such other notice as may be practical under the circumstances prior to making such emergency repairs.

D. Property Taxes and Insurance - Landlord shall pay and Tenant shall reimburse Landlord for the actual cost of all Real Property Taxes, as defined below, and all property, casualty and liability insurance premiums required to be paid for the Premises and Project Common Areas as described in Article 6.

The term "Real Property Taxes" shall mean all ordinary ad valorem taxes levied against the land, buildings and improvements comprising the Premises, and any sales tax on gross rents from the Premises which are in lieu of ad valorem taxes. Notwithstanding the foregoing, the term Real Property Taxes shall not include, and Tenant shall not be obligated to pay, any income, profit, franchise, excise, corporate, capital stock, estate, inheritance and any other taxes imposed on, or measured by the income (not including taxes on gross rents in lieu of ad valorem taxes) of Landlord from the operation of the Premises. Upon Tenant's request, Landlord shall show proof of payment of Landlord's tax bill.

E. In the event services are interrupted in excess of four (4) consecutive days due to the negligence of Landlord, Rent shall be abated until the services are restored. All Rent shall abate during such time as the Premises are wholly or partially untenantable as a result of the negligence or activities of Landlord.

ARTICLE 6 - Landlord's Additional Covenants

Section 6.1 - Compliance with Laws - Landlord represents that the Building, the Premises and the Project comply with all applicable laws including, without limitation, the Americans with Disabilities Act of 1990, and the rules and regulations promulgated thereunder (the "ADA"). Landlord agrees to indemnify, defend and hold Tenant harmless from and against any and all claims, causes of action, suits, damages, liabilities, judgments, costs and expenses of any kind (including, without limitation, reasonable attorneys' fees, disbursements and court costs) to the extent the same arise out of Landlord's breach of the foregoing obligation.

Section 6.2 - Insurance - Landlord agrees to maintain and keep in full force and effect, with a reputable insurance company licensed to do business in the state in which the Building is located, and rated at least A-, X by A.M. Best Insurance Rating Company, the following insurance: (a) comprehensive general liability insurance (including a contractual liability and fire legal liability insurance endorsement) against claims for bodily injury, death, property damage and personal injury in amounts not less than $3,000,000.00 combined single limit; (b) "Causes of Loss - Special Form" property insurance in an amount equal to one- hundred-percent (100%) replacement cost of the Project, including the Premises and all leasehold improvements, as such may change from time to time, with no co-insurance and with reasonable and customary deductibles only.

Landlord's obligations under this Lease, including without limitation, its obligations to repair and replace in the event of casualty loss, shall assume that, to the extent Landlord maintains insurance in amounts less than full replacement cost, Landlord shall promptly fund and pay the difference in such amounts in performing its obligations under this Lease.

Landlord and Tenant hereby release the other from any and all liability or responsibility to the other or anyone claiming through or under them by way of subrogation or otherwise for any loss or damage to property covered by insurance then in force, even if any such fire or other casualty occurrence shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible. Landlord and Tenant further agree to provide for or endorse said insurance polices required hereunder agreeing to the waiver of subrogation.

Section 6.3 - Quiet Enjoyment - Landlord covenants, warrants and represents that Landlord has full right and power, and lawful authority to enter into, execute and perform this Lease for the full term granted herein and for all extensions provided herein, free and clear of all occupancies and tenancies, and to grant the estate demised herein; and upon Tenant's paying the rent and observing all of the terms of this Lease to be observed by Tenant, Tenant may peaceably and quietly hold and enjoy the Project, and all rights, easements, covenants, and privileges belonging or in any way appertaining thereto without hindrance or molestation by the Landlord ,or any person or entity claiming by, through or under the Landlord.

Section 6.4 - Subordination - Tenant agrees to subordinate this lease to any first mortgage placed on the Project, provided only that so long as this lease is in full force and effect (1) Tenants tenancy shall not be disturbed, nor will this lease be affected by any default under such mortgage; (2) The rights of Tenant hereunder shall expressly survive and shall not be cut off; and (3) this Lease shall, in all respects, remain in full force and effect.

ARTICLE 7 - Tenant's Additional Covenants and Rights

Section 7.1 - Affirmative Covenants

A. Use and Premises - Tenant shall only use the Premises for the Permitted Use.

B. Repair -Tenant shall maintain the Premises in good order and repair, ordinary wear and tear, damage due to casualty or condemnation excepted. If Tenant fails to maintain the Premises as required by this Lease, which failure is not corrected after written notice to Tenant and the expiration of default cure periods as stated below, Landlord may, on ten (10) days prior notice (except that no notice shall be required in case of emergency), enter the Premises and perform such maintenance on behalf of Tenant. In such case, Tenant shall reimburse Landlord for all reasonable costs incurred in performing such maintenance or repair immediately on demand.

C. Insurance - The Tenant covenants to maintain property insurance for Tenant's personal property and the leasehold improvements at the Premises against loss or damage by fire and other hazards. A certificate of insurance, including additional and renewal certificates, shall be delivered to Landlord.

D. Tenant's Compliance with Laws and Usage - Tenant, will not engage in any activity which would materially violate any applicable laws or cause Landlord's insurance to be canceled or the rate to be increased and Tenant will not knowingly commit or permit waste in the Building. In addition and notwithstanding anything to the contrary contained in this Lease, Tenant shall comply with all laws, ordinances and regulations which are applicable to Tenant's specific use and occupancy of the Building and Premises.

E. Attornment - If any purchaser or transferee succeeds to the rights of Landlord under this Lease, then at the request of such party Tenant shall attorn to and recognize such party as landlord under this Lease, provided such party recognizes this Lease, does not disturb Tenant's use and possession, and assumes all of Landlord's obligations.

F. Surrender of Premises - At the expiration or earlier termination of this Lease, Tenant shall surrender to Landlord the Premises in good order and condition (ordinary wear and tear, damage due to casualty and taking due to condemnation excepted) provided however, Tenant shall repair and restore all vertical roof penetrations to the Building, and hereby agrees to employ Landlord's approved roofing contractor for any such roof work, at reasonable market rates only.

G. Utilities - Tenant shall pay for all gas, heat, light, power, telephone, sprinkler charges and other utilities and services used in or from the Premises, together with any taxes, penalties, surcharges or the like pertaining thereto and any maintenance charges for utilities.

Section 7.2 - Assignment and Subletting - Tenant shall not, without the written consent of the Landlord, assign this Lease or sublease the Premises. Landlord's consent shall not be unreasonably withheld, delayed or conditioned. No sublease or assignment shall release Tenant from any liability. Tenant shall have the right, without Landlord's consent, to assign the Lease or sublet all or any part of the Premises to any entity which: (i) is Tenant's parent organization; or (ii) is a wholly-owned subsidiary of Tenant or Tenant's parent organization; or (iii) results from a consolidation or merger with Tenant's parent organization; or (iv) is any successor in interest of all or substantially all of the assets, stock or business of Tenant.

Section 7.3 - Additional Rights

A. Alterations - Landlord's consent shall not be required for alterations or improvements ("Alterations") which do not affect the Building's systems or structure, provided, however, that (i) Tenant shall give Landlord prior written notice of any such intended alterations, and (ii) Tenant shall allow or cause no lien to be placed upon the Project or the Building. For other Alterations, Landlord shall not unreasonably withhold or condition or unduly delay its consent thereto. Landlord may not charge any fee for review, administration, coordination and/or supervision. Landlord shall cooperate with Tenant to expedite the procurement of building permits. Tenant may, at the expiration of this Lease, remove its trade fixtures, furniture, and equipment provided Tenant reasonably repairs any damage thereby caused. Any such trade fixtures, furniture and equipment of Tenant not removed by Tenant within thirty (30) days after the expiration of this Lease shall bec ome the Property of landlord.

B. Signage - Tenant shall be permitted to affix signs to the Building and in the Project Common Areas as permitted by the "OEA" (as hereinafter defined) and applicable zoning ordinances.

C. Access to Premises - Tenant shall have access to the Premises at all times.

D. Tenant's Right to "Go Dark" - Notwithstanding anything contained herein, so long as Tenant is not in default, Tenant may vacate the Premises during the primary lease term or any option period so long as Tenant provides Landlord with thirty (30) days prior written notice and agrees to the following:

1) Tenant shall surrender the Premises to Landlord ninety (90) days after Landlord's receipt of Tenant's notice to vacate the Premises; and,

2) Tenant will continue to pay Rent and Additional Rent until such time as Landlord has re-leased the Premises to a "New Tenant" and that New Tenant is paying Landlord rent and additional rent. (i.e. If the New Tenant requires free rent, Tenant shall continue to pay base rent and additional rent until the end of said free rent period). However, Landlord has no obligation to re-lease the Premises, and if so chooses, may allow the Premises to remain vacant throughout the remainder of the Lease term with Tenant being fully obligated to continue paying Rent and Additional Rent for the remainder of the Lease term.

E. Right of Tenant to Purchase Premises. Landlord covenants and agrees not to sell or otherwise dispose of the Premises or any part thereof during the term of the Lease, unless Landlord shall have first received a bona fide offer for the purchase of the Premises, acceptable to Landlord in all respects, and shall have notified Tenant in writing of the names of the party or parties making the same, together with a true and complete copy of such bona fide offer setting forth the price, terms, and conditions thereof; and Landlord agrees that Tenant shall thereupon have the prior right to purchase the Premises at the same price and upon the same terms and conditions as are contained in such bona fide offer, which said right may be exercised by giving notice to Landlord of exercise at any time within fifteen (15) days after Tenant's notice of said offer from Landlord is effective in accordance with Section 10.1(D). Upon the exercise of such option to purchas e, Tenant shall have a period of thirty (30) days thereafter before being obliged to make payment for or to accept title to the Premises unless by the terms and conditions of said offer, a period of more than thirty days is specified for the closing in which case Tenant shall have such longer period. Any sums owing by Landlord to Tenant at the time of closing, by virtue of any provision of this Lease, shall be deducted from the purchase price. This prior right to purchase shall continue in full force and effect throughout the term of this Lease, including any extensions, regardless of the number of offers and/or sales of the Premises by Landlord, its successors and assigns, and Tenant's said prior right of purchase shall apply with respect to each and every new offer for the Premises, as specified above, and shall be binding on Landlord and each of its successors and assigns.

ARTICLE 8 - Destruction/Condemnation

Section 8.1 - Damage by Fire or Other Casualty - If the Building shall be damaged or destroyed by fire or other casualty to the extent of more than eighty percent (80%), then each party shall have the right to terminate this Lease. If this Lease is not terminated, Landlord shall, with all due diligence, repair and reconstruct the Premises and the Building to the condition which existed prior to such damage or destruction. If damage to the Building is less than eighty percent (80%) Landlord shall rebuild or repair the Building and any other improvements damaged as a result of the casualty. Landlord shall commence any repairs and replacements promptly, but in no event more than sixty (60) days after the casualty event, and shall diligently pursue such repairs and replacements to completion. If such rebuilding or repairs cannot be completed within 240 days from the date of the casualty as reasonably determined by Landlord's contractor, then Tenant shall h ave the option to terminate this Lease upon written notice to Landlord within sixty (60) days after Tenant's receipt of any such determination and Tenant shall have sixty (60) days from the date of said notice to vacate the Premises. Tenant shall be allowed an abatement of rent from the date of such damage or destruction: (i) up until the date Tenant actually vacates the Premises, if the Premises are not repaired and reconstructed, or (ii) until thirty (30) days after the Landlord delivers the Premises to Tenant and Tenant accepts the Premises as being in the condition as set forth in Exhibit C and C-l, if the Premises are to be repaired and reconstructed under the terms of this Lease.

Section 8.2 - Eminent Domain - If the entire Building is taken under power of eminent domain or is sold in lieu of condemnation, or if a portion of the Building is so taken and the portion remaining in the Building shall not be adequate for Tenant to reasonably operate its business, then this Lease shall terminate as of the date of such taking. Tenant shall have the right to receive from any compensation award or sale proceeds, an amount equal to the value of its leasehold improvements and relocation expenses. Tenant waives any right to recover the value of the unexpired Term of this Lease. If there is no termination of this lease, the rent and other charges shall be abated in proportion to the part of the Building or Premises so taken."

ARTICLE 9 - Default

Section 9.1 - Default - All rights and remedies of Landlord herein enumerated shall be cumulative, and none shall exclude any other rights or remedies allowed by law or in equity. The occurrence of any of the following shall constitute a default and breach of this Lease by Tenant:

(a) Tenant shall fail, neglect or refuse to pay any installment of Rent within ten (10) days and in the amount as herein provided, or to pay any other monies agreed to by it to be paid within ten (10) days when and as the same shall become due and payable under the terms hereof; or if

(b) Tenant shall fail, neglect or refuse to keep and perform any of the other covenants, conditions, stipulations or agreements herein contained, and such default shall continue for a period of more than thirty (30) days after notice thereof is given in writing to Tenant by Landlord (provided, however, that if the cause for giving such notice involves the making of repairs or other matters reasonably requiring a longer period of time than said thirty (30) day period, Tenant shall be deemed to have complied with such notice so long as it has commenced to comply with said notice within said thirty (30) day period and is diligently prosecuting compliance of said notice);

Section 9.2 - Acceleration of Rent - In the event of any such default or breach of this Lease by Tenant, Landlord shall have the right and option to declare the entire Rent due for the balance of the term hereof together with the costs of suit and reasonable attorney's fees immediately due and payable by Tenant, and shall have any or all of the remedies hereunder set forth, and further, in the event of such default or breach of this Lease by Tenant, the Tenant does hereby authorize and fully empower Landlord or Landlord's agent to cancel or annul this Lease at once and re-enter the Premises and remove all persons and their property therein, and such property may be stored in a public warehouse or elsewhere at the cost of the Tenant, all without being deemed guilty of any manner of trespass and without prejudice to any remedies which might otherwise be used by Landlord.

Section 9.3 - Reletting - The Landlord may, however, at its option at any time after Tenant's default and the expiration of applicable cure periods, re-enter and take possession of said Premises and remove any property contained therein without such re-entry working a forfeiture of the Rents to be paid and the covenants, agreements and conditions to be kept and performed by Tenant for the full term of this Lease. In such event, Landlord shall have the right, but not the obligation, to divide or subdivide the Premises in any manner Landlord may determine and to lease or let the same or portions thereof for such periods of time and at such rentals and for such use and upon such covenants and conditions as Landlord may elect at its reasonable discretion, applying the net rentals from such letting first to the payment of Landlord's expense incurred in dispossessing Tenant, including, without limitation, reasonable attorney fees, and the cost and expense of making such improvements, alterations and repairs in the Premises as may be reasonably necessary in order to enable Landlord to re-let the same, and to the payment of any ordinary and customary brokerage commissions or other reasonable necessary expenses of Landlord in connection with such re- letting. The balance, if any, shall be applied by Landlord, from time to time, on account of the payments due or payable by Tenant hereunder with the right reserved to Landlord to bring such action or proceedings for the recovery of any deficits remaining unpaid as Landlord may deem favorable from time to time without obligation to await the end of the term hereof for the final determination of Tenant's account. The failure or refusal of Landlord to re-let the Premises or any part or parts thereof shall not release or affect Tenant's liability for damages. Landlord may make such alterations, repairs, replacements and/or decorations in the Premises as Landlord, in Landlord's reasonable judgment, considers advisable and necessary for the purpose of re-letting the Premises; and the making of such alterations, repairs, replacements, and/or decorations shall not operate or be construed to release Tenant from liability hereunder as aforesaid. In any actions or proceedings against Tenant for any of the above deficits or "Final Damages", Landlord shall be entitled to recover reasonable attorneys fees incurred.

Section 9.4 - Final Damages - Any balance remaining, however, after full payment and liquidation of Landlord's account as aforesaid, shall be paid to Tenant from time to time with the right reserved to Landlord at any time to give notice in writing to Tenant of Landlord's election to cancel and terminate this Lease and require Tenant to pay "Final Damages" upon the giving of such notice and the simultaneous payment by Tenant to Landlord of "Final Damages" this Lease shall and the obligations thereunder on the part of either party to the other shall terminate.

"Final Damages" means the present worth of the amount by which "Final Credits" exceeds "Final Debits." "Final Credits" means the annual rent that would have been payable from the date on which the above election is exercised to the date on which the term of this Lease would have expired if this Lease had not been terminated. "Final Debits" means the fair rental value of the Premises for the same period. Present worth shall be discounted at a rate equal to the "Base Rate" on the date on which the election is exercised. The discount shall be compounded monthly. The "Base Rate" means the Base Rate of SunTrust Bank of Tennessee ("SunTrust") (or its successor) as publicly announced from time to time. If SunTrust ceases to publicly announce its base rate, the Base Rate shall be the average prime rate on short term business loans for the month prior to the month in which the option is exercised as set forth in the Federal Reserve Statistical Release published by the Board of Governors of the Federal Reserve System.

Section 9.5 - Landlord's Obligation to Mitigate Damages -Anything herein to the contrary notwithstanding, nothing herein shall be construed to limit any legal obligations of Landlord to mitigate Landlord's damages or to cause a waiver of any rights or defenses available to Tenant.

Section 9.6 - Interest of Unpaid Rent - All payments due under this Lease shall be deemed to be due and payable by Tenant to Landlord with interest thereon from ten (10) days after the date when the particular amount became due to the date of payment thereof to Landlord. The aforesaid interest shall be the lesser of highest legal rate then in effect in the State of Tennessee or the "Prime Rate" quoted by the Wall Street Journal plus three percent (3%) but not more than the maximum permitted by applicable law.

Section 9.7 - Bankruptcy of Tenant -

(a) If there shall be filed against Tenant, in any court, pursuant to any statute, either of the United States or of any state, a petition in bankruptcy or insolvency or for reorganization or for the appointment -of a receiver or trustee of all or any portion of Tenant's property and Tenant fails to secure a discharge thereof within ninety (90) days from the date of such filing, or if Tenant shall voluntarily file any such petition nor make an assignment for the benefit of creditors or petition for or enter into an arrangement, then, in any of such events, this Lease, at the option of Landlord, may be canceled and terminated. In the event of a termination of this Lease' pursuant to this Paragraph, neither Tenant nor any person claiming through or under Tenant (whether by virtue of any statute or any order of any court or otherwise) shall be entitled to acquire or remain in possession of the Premises, as the case may be, and Tenant or any other such per son shall forthwith quit and surrender the Premises. If this Lease shall be so canceled or terminated, Landlord, in addition to the other rights and remedies of Landlord contained elsewhere in this Lease, or under any statute or rule of law, may retain as liquidated damages any Rent, security deposit and any other money received by Landlord from Tenant or others on behalf of Tenant.

(b) In the event of a proceeding involving Tenant under the Bankruptcy Code, 11 U.S.A. 101 et seq., if this Lease is assumed by Tenant's trustee in bankruptcy (after such trustee has cured all existing defaults, compensated Landlord for any reasonable, compensable loss resulting therefrom and provided adequate assurance of future performance), then this Lease may not be assigned by the trustee to a third party, unless such party (a) executes and delivers to Landlord an agreement in recordable form whereby such party assumes and agrees with Landlord to discharge all obligations of Tenant under this Lease, including, without limitation, the provisions of Paragraph 7 relating to the permitted use of the Premises and the manner of operation thereof; and (b) has a net worth and operating experience at least comparable to that possessed by Tenant named herein as of the execution of this Lease.

ARTICLE 10 - Miscellaneous

Section 10.1 - Mutual Covenants -

A. Brokers -Landlord and Tenant warrant and represent that they have not dealt with any broker or agent in connection with this Lease other than any Broker named in Article I above, whose commissions, if any, shall be paid by Landlord, and agree to indemnify and hold each other harmless from any and all costs or liability for compensation claimed by any such broker or agent employed by it or claiming to have been engaged by it in connection with this Lease.

B. Estoppel Certificate - Either party shall, upon not less than twenty (20) days prior written request by the other, deliver a statement in writing certifying that this Lease is unmodified and in full force and effect; whether there are then any set-offs or defenses against enforcement of any of the terms hereof; the dates to which rent and other charges have been paid in advance; and whether the requesting party is in default under any provisions of this Lease.

C. Indemnification - Tenant and Landlord agree to indemnify and hold harmless each other and their respective agents, employees, and contractors against any and all claims, demands, expenses, losses, suits and damages as may be occasioned by reason of (i) any accident or matter occurring on or about the Project, causing injury to persons or damage to property resulting in whole or in part from the negligence or otherwise tortious act of the indemnifying party or its agents, servants or employees, (ii) the failure of the indemnifying party to fully and faithfully to perform the obligations and observe the material conditions of this Lease, and (iii) the negligence or otherwise tortious act of the indemnifying party, its agents, servants or employees.

D. Notices - All notices shall be in writing, and sent to the addresses of the parties herein. Notices shall be sent by overnight air courier, or by certified mail return receipt requested. Notices shall be deemed effective on the first business day after tender (if sent by air courier) or on the fifth business day after posting (if sent by certified mail). Either party may change its notice address by sending written notice to the other party.

Landlord's Address is:
5480 Chemin de Vie
Atlanta, Georgia 30342

Tenant's Address is:
401 Church Street
Nashville, Tennessee
Attn: Joan Marshall, Senior Vice President

With a copy to:
Hollins & Associates
401 Church Street, Suite 2720
Nashville, Tennessee 37219
Attn: N. Courtney Hollins, Esq.

Section 10.2 - Miscellaneous-

A. "Governing Laws - This Lease shall be governed by the laws of the State of Tennessee.

B. Waiver, Merger, Etc. - No failure by either party to insist upon the strict performance of any obligation of the other party under this Lease or to exercise any right or remedy, shall constitute a waiver of any such right or remedy. This Lease constitutes the entire agreement of the parties and may not be amended except in writing signed by the parties hereto. No other terms or conditions, express or implied, exist between the parties. If any provision of this Lease is held to be invalid, void or unenforceable, the remainder of the provisions shall remain the full force.

C. Authority/Successors - The parties warrant and represent that their undersigned representatives have all due power and authority to execute this Lease on their behalf. This Lease shall be binding and inure to the benefit of the successors and assigns of the parties.

D. Limitation of Liability - In case Landlord shall be a joint venture, partnership, tenancy-in- common, association or other form of joint ownership, the members of any such joint venture, partnership, tenancy-in-common, association or other form of joint ownership, shall have no personal liability with respect to any provision of this Lease or any obligation or liability arising from this Lease or in connection with this Lease in the event of a breach or default by Landlord of any of its obligations. Tenant shall look solely to the equity of the Landlord and/or the proceeds of insurance of Landlord, as appropriate, for the satisfaction of any claims of Tenant.

E. Right of Entry; Inspection - Upon advance notice to Tenant (except in case of an emergency), Landlord and Landlord's agents and representatives shall have the right to enter and inspect the Premises at any reasonable time during business hours, to ascertain the condition of the Premises, to make such repairs as may be required or permitted to be made by Landlord under the terms of this Lease, or to show the Premises to prospective purchasers or tenants, provided, however, Landlord shall use reasonable efforts to minimize any disruption to Tenant's business and repair any damages caused in a good and workmanlike manner. Landlord shall have the right to place or erect in the common areas of the Project a suitable sign indicating the Premises are available for rent during the last two (2) months of the Term.

F. Operation and Easement Agreement - Tenant acknowledges that the Premises is encumbered by an Operation and Easement Agreement (the "OEA") of record in Book 9852, page 151, R.O.D.C.T., and by certain easements as set forth on that certain Plat of record in Book 9700, page 526, R.O.D.C.T. Tenant agrees not to take any action which would constitute a violation of the material provisions of said OEA.

Except the OEA and the Plat, Tenant shall not be obligated to comply with any restrictions, covenants, and easements, whether or not of record, which affect the Project. Tenant shall have no obligation to perform independent title searches or other due diligence on the Project or to make any investigation as to the restrictions, covenants and easements which apply to the Project or to which Landlord is otherwise bound.

G. Surrender of Premises - Upon termination of the Term of this Lease, Tenant shall surrender possession of the Premises to Landlord in good condition with all systems in working order, ordinary wear and tear and damage by casualty or condemnation excepted.

H. Counterparts - This Lease may be executed in one or more counterparts which, when taken together, shall constitute one document.

I. No Joint Venture - The terms of this Lease shall not be interpreted to mean that Landlord and Tenant are partners or joint venturers; it being understood that the relationship of the parties hereto is that of landlord and tenant.

J. Memorandum of Lease - This Lease shall not be recorded but a Memorandum hereof describing the property hereby demised and setting forth the Term hereof and any renewal rights shall be executed by Landlord and Tenant in recordable form at the request of either party. Either party shall have the right to record such Memorandum and all recording fees shall be paid by the party so requesting recordation. All conveyance fees and transfer taxes which are due and payable as a result of the execution and delivery of this Lease shall be paid for by the party requesting recording.

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease.

WITNESSES:
/s/ REBECCA LOVE
/s/ KAREN C. WELLS

LANDLORD:
/s/ RICHARD W. CARPENTER, SR.
/s/ RICHARD S. DAVIS, JR.

TENANT:

The Bank of Nashville

By: /s/ J. HUNTER ATKINS
Name: J. Hunter Atkins

Title: CEO

EXHIBIT A

SITE PLAN

Picture of Site.

EXHIBIT A-1

LEGAL DESCRIPTION

Lot 12 on the Final Plat of Jackson Downs Commercial of record in Plat Book 9700, page 526, Register's Office for Davidson County, Tennessee.

Retail Property Management, Inc

May 4, 2001

RE: Bank of Nashville at Jackson Downs

HAND DELIVERED

Mr. David McDowell
Grubb & Ellis/Centennial, Inc.
2300 West End Avenue
Nashville, Tennessee 37203

Dear Mr. McDowell:

SUBJECT: LETTER OF INTENT TO LEASE

The purpose of this letter is to formalize our intent to build-to-suit for the Bank of Nashville at Jackson Downs on Lot 12 of the Jackson Downs Commercial Subdivision. The Lessor, an LLC to be formed by Richard W. Carpenter and Richard S. Davis, Jr., shall purchase Lot 12 and construct a branch banking facility as specified in plans and specifications to be provided by the Lessee, or developed jointly by the parties. The Lessee, The Bank of Nashville, and Lessor agrees to execute a formal lease agreement containing substantially all of the terms and conditions contained herein.

Property: 1.05 acres, Parcel 12 of the Jackson Downs Commercial Subdivision.

Term: Twenty (20) years from the "Date of Occupancy" as defined in the lease, The Lessee shall have the option to extend the lease for two additional five (5) year terms by providing written notice to Lessor six months prior to the expiration of a term.

Building and Development: Lessor shall provide a turnkey building and site constructed according to the plans and specifications to be provided by the Lessee or developed by Lessor and Lessee with an architect chosen by Lessor and Lessee. The date of Occupancy shall be defined in the lease and shall be determined by Lessee.

Rent: The base rent for the project shall be based upon a twelve (12%) percent return on the actual project cost, as determined by the parties. The purchase price of the land is $575,000. The Lessor shall bid the project with bondable general contractors experienced in this type of construction. A pro forma budget is attached to this letter containing the estimated costs for each item involved in determining project cost. Those items marked with an asterisk shall not increase more than five (5%) in the final calculation of cost. The final cost shall be determined at the time of the bid award and the rent for the first five years shall be fixed at 12 % of the final cost. The building cost is dependant upon the plans provided by Lessee and can not be determined until the bid process is completed. The Sitework cost includes grading, drainage, utilities, paving, site lighting, and other items as specified on plans to be pr ovided by Lessee or developed by Lessor and Lessee. This cost can not be determined until the plans are received and the bid process is complete. Lessor estimates, based upon conversations with Lessee and local contractors, that the cost of the land and sitework should be as shown on the proforma. The final budget shall be subject to the approval of both Lessor and Lessee. The rent shall be increased five (5%) at the beginning of each five year period of the initial term and options.

Continuing Maintenance and Common Area Costs: The lease is intended to be a fully net lease with the Lessee either maintaining or reimbursing the Lessor for real estate taxes, property and casualty insurance, utilities, common area maintenance, and after a one year construction guarantee period, the HVAC and roof. All warrantees of work and materials such as manufacturers warrantees on equipment and materials shall be assigned to Lessee.

Due Diligence Period: The Lessee shall have ninety (90) days in which to obtain the necessary government approvals for a branch prior to the beginning of the pre-development term in the lease. The parties agree to use their best efforts to complete a formal lease document by July 31, 2001.

Earnest Money: If, after the due diligence period Lessee decides not to proceed with the project, Lessee shall reimburse Lessor for the actual out of pocket costs of development completed to that point plus the interest on the land at prime plus one (1%) percent.

This proposal is not legally binding on either party, but contingent upon the Lessee obtaining the required board and regulatory approvals and the execution of a mutually agreed to Lease Agreement. Each of the parties will be responsible for its own costs and attorneys fees associated with preparing and implementing this letter of intent and the Lease Agreement.

This will provide the basis for a formal lease document to be negotiated between the parties. If this is your understanding of the agreed terms and conditions, please ask a representative of the Lessee to indicate their acceptance by signing below and returning one original to our office.

Sincerely,

/s/ DICK DAVIS

Dick Davis
For Lessor

cc: Richard W. Carpenter

Accepted and Agreed this 10^th day of May, 2001

The Bank of Nashville
By: /s/ C. BLAKE PARKS
First Vice President

By: /s/ JOAN B. MARSHALL
Senior Vice President

Bank of Nashville
Jackson Downs

Pro Forma
Land				$575,000 fixed
PreDevelopment:
Legal				$2,500 *
Property Tax				$3,500 *
Survey				$4,000 *
Engineering				$10,000 *
Sub Total				$20,000
Construction:
Architecture				$12,000 *
Sitework				$185,000
General Conditions				$36,000 *
Landscaping				$35,000 *
Contingency				$30.000 *
Building		3,800	$65.00	$247,000
Sub Total				$545,000
Loan:
Legal and Closing				$7,500 *
Bond				$5.000
Interest				$65,258
Fees
Construction		0.25%		$3,125
Permanent		1.50%		$18,666
Lenders Inspection				4,500
Sub Total				$104,048
Total Project Cost				$1,244,048
Rent	12%			$149,200

*These items shall not increase more than 5% in the final cost and rent calculation. Lessee shall receive the benefit of any decrease.

EXHIBIT C

LANDLORD'S WORK

Landlord's Work consists of the construction to full completion of all buildings and improvements in substantial compliance with the Plans and Specifications. Landlord's Work will be performed by Landlord at its sole cost and expense. Landlord shall submit the Plans and Specifications for competitive bidding with at least three (3) reputable, licensed and bonded contractors. Landlord shall not charge any fee for supervision or general conditions. Landlord shall allow Tenant's representative to participate fully in the bidding and award process, and barring any fraud Landlord's Work will be awarded to the lowest bidder. Landlord and Tenant must approve in writing the Construction Contract which shall be a stipulated sum contract on standard AlA form. Prior to commencing any change in Landlord's Work as a result of a change order desired by Tenant, Landlord will prepare and deliver to Tenant, for Tenant's approval, a change orer setting forth the total c ost of such change, which will include, without limitation, associated architectural, engineering, and contractor's costs and fees, completion schedule changes, and other like items. Change orders shall be priced at the actual cost to Landlord, without surcharge, fee or general conditions to be paid to Landlord. If Tenant fails to approve such change order within five (5) business days after delivery by Landlord, Tenant shall be deemed to have withdrawn the proposed change and Landlord will not proceed to perform the change. Upon Landlord's receipt of Tenant's approval of the change, Landlord will diligently proceed with the change. The total cost of all change orders shall be paid by Tenant within thirty (30) days after Tenant's approval of a change order.

Landlord's Work shall include the completion of the Building on elevations above the 100 year flood plain, with appropriate engineer's certifications, and such radon preventative measures as are ordinary and reasonable for the conditions set forth in that certain Phase I assessment prepared by The Breland Group, LLC.

SCHEDULE C-l

PLANS AND SPECIFICATIONS

Plans and specifications dated January 23, 2002 prepared by Gould Turner Group, PC dated January 23, 2002, Job #21046, "Bank of Nashville, Hermitage Branch.

EXHIBIT D

COMMENCEMENT AGREEMENT

This Agreement is made and entered into as of the day of , 20 between ("Landlord") and ("Tenant"), and shall be attached to and made a part of that certain Lease between Landlord and Tenant dated , 20 (the "Lease") demising square feet at (the "Premises", as such term is further defined in the Lease).

Pursuant to the provisions of the Lease, Landlord and Tenant intending to be legally bound hereby, agree to the following:

1. The term of the Lease commenced on , and shall terminate on , unless sooner terminated or extended as provided in the Lease.

2. Fixed Minimum Rent shall commence on the day of .

IN WITNESS WHEREOF, the parties have duly executed this supplement to the Lease as of the day and year first above written

LANDLORD:

______________________________________________

By: ___________________________________________

Title: __________________________________________

TENANT:

THE BANK OF NASHVILLE
A TENNESSEE STATE MEMBER BANK

By: __________________________________________

Title: _________________________________________

EX-6

Exhibit 10.19

Executive Termination Agreement In The Event of Change of Control

This Executive Termination Agreement In the Event of Change of Control (this "Agreement") entered into this 1^st day of March, 2002, by and among COMMUNITY FINANCIAL GROUP, INC., a Tennessee corporation (the "Company"), THE BANK OF NASHVILLE, a banking corporation organized under the laws of the State of Tennessee (the "Bank"), and JULIAN C. CORNETT (the "Executive").

WITNESSETH:

WHEREAS, the Company is a one-bank holding company which owns one hundred percent (100%) of the outstanding stock of the Bank;

WHEREAS, the Company and the Bank desire to retain the services of the Executive on the terms and conditions set forth herein and, for purposes of effecting the same, the Boards of Directors of the Company and the Bank have approved this Agreement and authorized its execution and delivery to the Executive on behalf of the Company and the Bank;

WHEREAS, the Executive serves as Executive Vice President-Credit Administration of the Bank and, as such, is a key executive officer of the Bank whose continued dedication, availability, advice and counsel to the Bank is deemed important to the Bank, the Company, the Boards of Directors of the Bank and the Company and the present and future stockholders of the Company;

WHEREAS, the Company and the Bank wish to attract and retain well-qualified executives, and it is in the best interests of the Company, the Bank and the Executive, notwithstanding any change in control of the Company or the Bank, to secure and maintain the services of the Executive, whose experience and knowledge of affairs of the Company and the Bank, and whose reputation and contacts in the industry, are extremely valuable to the Company and the Bank;

WHEREAS, the Company and the Bank consider the establishment and maintenance of a sound and vital management team to be part of their overall corporate strategy and to be essential to protecting and enhancing the best interests of the Company, the Bank and its stockholders; and

WHEREAS, the Company and the Bank have terminated that certain Executive Employment Agreement, dated as of March 1, 2001 (the "Employment Agreement"), among the Company, the Bank and the Executive, and as consideration for his continued employment as Executive Vice President -Credit Administration, the Executive has agreed to enter into this Agreement.

NOW, THEREFORE, to assure the Company and the Bank of the Executive's continued dedication, the availability of the Executive's advice and counsel to the Boards of Directors of the Company and the Bank, the availability of the Executive's management skills to the Company and the Bank, and to induce the Executive to remain and continue in the employ of the Company and the Bank in the Executive's current capacities, and for other good and valuable consideration, the receipt and adequacy of which each party hereby acknowledges the Company, the Bank and the Executive hereby agree as follows:

1. CHANGE OF CONTROL AND EFFECTIVE DATE. As used in this Agreement, "Change of Control" shall mean any transaction or series of transactions resulting in the change of control of more than 50% of either the voting rights or equity interests in the Company or the Bank. As used in this Agreement, "Effective Date" shall mean the date upon which the Change of Control occurs.

2. TERMINATION IN CONNECTION WITH CHANGE OF CONTROL. If the Bank or the Company terminates the Executive for any reason, except for cause as specified in Section 5 hereof, either (a) within 12 months after the Effective Date or (b) within 90 days immediately prior to the Effective Date, the Company and the Bank shall pay the Executive an amount (the "Termination Payment") equal to twice the sum of (i) the Executive's annual base salary as of the date of such termination and (ii) the annual cost to the Company and the Bank of all pension, group insurance, hospitalization, deferred compensation, life insurance, incentive plans or other benefit plan (the "Benefit Plans") received by the Executive as of the date of such termination, provided, however, that any benefits received by the Executive under the Stock Option Agreements (as such term is defined in Section 6 below) shall not be included in the calculation of the value of the Benefit Plans. At the Ex ecutive's option, the Termination Payment will either be paid in full within 30 days of any such termination or in 24 equal monthly installments for the 24 months immediately subsequent to such termination.

3. EXECUTIVE OPTION. Within 90 days after the Effective Date, the Executive, in his sole and absolute discretion, may elect to terminate his employment with the Company and the Bank and receive the Termination Payment by delivering written notice to the Company and the Bank of the Executive's election to terminate his employment (the "Election Notice") prior to the expiration of such 90-day period. Within 14 days of receipt of the Election Notice, (a) the Company and the Bank shall pay the Executive the Termination Payment and (b) the Executive shall cease to be employed by the Company and the Bank. Failure by the Executive to provide the Election Notice to the Company and the Bank within such 90-day period shall be deemed a waiver of the Executive's rights under this Section 3. Notwithstanding anything to the contrary contained in this Agreement, the Executive shall have no right to make the election described in this Section 3 should the Executive have committed a ny of the acts entitling the Company or the Bank to terminate the Executive for cause as described in Section 5.

4. TERMINATION EVENTS. For a period of one year after the Effective Date, the Executive, in his sole and absolute discretion, may terminate his employment with the Company and the Bank and receive the Termination Payment upon the occurrence of any of the following events (each, a "Termination Event"); provided that, the Executive complies with the notice provisions set forth in this Section 4:

(a) A material reduction of the Executive's base salary as in effect on the Effective Date;

(b) The failure of the Company and the Bank collectively to provide the Executive with substantially the same fringe benefits (including paid vacations) that were provided to the Executive immediately prior to the Effective Date, or with a package of fringe benefits that, though one or more of such benefits may vary from those in effect immediately prior to the Effective Date, is substantially comparable in all material respects to such fringe benefits taken as a whole; or

(c ) The Executive being required to relocate from Nashville, Tennessee.

Within 30 days after any Termination Event, the Executive may elect to exercise his rights under this Section 4 by providing written notice of the same to the Company and the Bank, and within 14 days subsequent to the receipt of such notice by the Company and the Bank, the Company and the Bank shall (i) pay the Executive the Termination Payment and (ii) the Executive shall cease to be employed by the Company and the Bank. Failure by the Executive to provide notice to the Company and the Bank of the Executive's exercise of the rights under this Section 4 within 30 days of a Termination Event shall be deemed a waiver of the Executive's rights under this Section 4. Notwithstanding anything to the contrary contained in this Agreement, the Executive shall not have the right to make the election described in this Section 4 should the Executive have committed any of the acts entitling the Company or the Bank to terminate the Executive for cause as described in Section 5.

5. FOR CAUSE. For purposes of this Agreement, "for cause" shall be defined as the Executive's personal dishonesty, incompetence, willful misconduct, gross negligence, willful breach of fiduciary duty (including involving personal profit), failure to substantially perform expected duties, willful violation of any material law, rule or regulation (other than traffic violations), willful violation of any final cease-and-desist order issued by any regulatory agency having jurisdiction over the Company or the Bank, the imposition of any sanction upon the Executive by any such regulatory agency or any other action by the Executive that results in substantial harm to the general reputation of the Bank or the Company.

6. STOCK OPTION AGREEMENTS. Notwithstanding anything to the contrary contained herein, this Agreement shall not affect or alter the Executive's rights contained in those certain Non-Qualified Stock Option Agreements, dated as of July 16, 1996, April 29, 1997, April 21, 1998, April 13, 1999, February 8, 2000 and June 19, 2001, each as amended between the Executive and the Company or such other agreements (including any amendments thereto) entered into subsequent to the date hereof between the Executive and the Company pursuant to the Company's 1997 Nonstatutory Stock Option Plan (collectively, the "Stock Option Agreements").

7. EMPLOYEE AT WILL. Notwithstanding any provisions of this Agreement to the contrary, the parties hereto agree that the Executive is an employee at will, and the Executive shall perform the duties and obligations assigned to him in a manner and fashion acceptable to the Company and the Bank, in their sole and absolute discretion.

8. ENTIRE AGREEMENT. This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, whether written or oral, between the parties with respect to the subject matter hereof.

9. ASSIGNMENTS. This Agreement is personal to the Executive, who may not assign his obligations hereunder. The Company and the Bank may assign this Agreement upon written notice to the Executive.

10. ARBITRATION. Any dispute, controversy or claim arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators, in Nashville, Tennessee, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any accordance with the laws of the State of Tennessee. Unless otherwise provided in the rules of the American Arbitration Association, the arbitrators shall, in their award, allocate between the parties the cost of the arbitration, which shall include reasonable attorneys' fees and expenses of the parties, as well as the arbitrator's fees and expenses, in such proportions as they deem just and appropriate.

11. MODIFICATION. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties hereto.

12. GOVERNING LAW. The validity, interpretation and construction of this Agreement shall be governed by the laws of the State of Tennessee, exclusive of the conflict of laws rules thereof.

13 NOTICES. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:

Community Financial Group, Inc.
401 Church Street
Nashville, TN 37219
Attention: Chairman of Compensation Committee

with a copy to:
Miller & Martin LLP
1200 One Nashville Place
150 4th Avenue North
Nashville, TN 37219
Attention: Hugh C. Howser, Jr.

If to the Bank:

The Bank of Nashville
401 Church Street
Nashville, TN 37219
Attention: Chairman of Compensation Committee

with a copy to:
Miller & Martin LLP
1200 One Nashville Place
150 4th Avenue North
Nashville, TN 37219
Attention: Hugh C. Howser, Jr.

If to the Executive:

Julian C. Cornett
9311 Chesapeake Drive
Brentwood, TN 37027

or at such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

14. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which shall be deemed as original, but which together shall constitute the same document.

15. TERMINATION AND RELEASE. Notwithstanding anything to the contrary contained herein, each of the parties hereto irrevocably and forever releases the other parties from any obligations or liabilities under the Employment Agreement arising subsequent to the date hereof.

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

EXECUTIVE:

/s/  JULIAN C. CORNETT

COMMUNITY FINANCIAL GROUP, INC.

By: /s/ JULIAN B. BAKER
Name: Julian B. Baker
Title: Chairman, Compensation Committee

THE BANK OF NASHVILLE

By: /s/ MACK S. LINEBAUGH
Name: Mack S. Linebaugh
Title: Chairman

EX-7

Exhibit 10.20

Executive Termination Agreement In The Event of Change or Control

This Executive Termination Agreement In The Event of Change of Control (this "Agreement") entered into this 1^st day of March, 2002, by and among COMMUNITY FINANCIAL GROUP, INC., a Tennessee corporation (the "Company"), THE BANK OF NASHVILLE, a banking corporation organized under the laws of the State of Tennessee (the "Bank"), and CONNELL BLAKE PARKS (the "Executive").

WITNESSETH:

WHEREAS, the Company is a one-bank holding company which owns one hundred per cent (100%) of the outstanding stock of the Bank;

WHEREAS, the Company and the Bank desire to retain the services of the Executive on the terms and conditions set forth herein and, for purposes of effecting the same, the Boards of Directors of the Company and the Bank have approved this Agreement and authorized its execution and delivery to the Executive on behalf of the Company and the Bank;

WHEREAS, the Executive serves as Senior Vice President and Retail Sales Manager of the Bank and, as such, is a key executive officer of the Bank whose continued dedication, availability, advice and counsel to the Bank is deemed important to the Bank, the Company, the Boards of Directors of the Bank and the Company and the present and future stockholders of the Company;

WHEREAS, the Company and the Bank wish to attract and retain well-qualified executives, and it is in the best interests of the Company, the Bank and the Executive, notwithstanding any change in control of the Company or the Bank, to secure and maintain the services of the Executive, whose experience and knowledge of affairs of the Company and the Bank, and whose reputation and contacts in the industry, are extremely valuable to the Company and the Bank;

WHEREAS, the Company and the Bank consider the establishment and maintenance of a sound and vital management team to be part of their overall corporate strategy and to be essential to protecting and enhancing the best interests of the Company, the Bank and its stockholders; and

WHEREAS, the Executive is an at-will employee of the Company and the Bank, and as consideration for his continued employment by the Company and the Bank as Senior Vice President and Retail Sales Manager of the Bank, the Executive has agreed to enter into this Agreement.

NOW, THEREFORE, to assure the Company and the Bank of the Executive's continued dedication, the availability of the Executive's advice and counsel to the Boards of Directors of the Company and the Bank, the availability of the Executive's management skills to the Company and the Bank, and to induce the Executive to remain and continue in the employ of the Company and the Bank in Executive's current capacities, and for other good and valuable consideration, the receipt and adequacy of which each party hereby acknowledges the Company, the Bank and the Executive hereby agree as follows:

1. CHANGE OF CONTROL AND EFFECTIVE DATE: As used in this Agreement, "Change of Control" shall mean any transaction or series of transactions resulting in the change of control of more than 50% of either the voting rights or equity, interests in the Company or the Bank. As used in this Agreement, "Effective Date" shall mean the date upon which the Change of Control occurs.

2. TERMINATION IN CONNECTION WITH CHANGE OF CONTROL: If the Bank or the Company terminates the Executive for any reason, except for cause as specified in Section 3 hereof, either (a) within 12 months after the Effective Date or (b) within 90 days immediately prior to the Effective Date, the Company and the Bank shall pay the Executive an amount (the "Termination Payment") equal to the sum of (i) the Executive's annual base salary for the 12-month period immediately preceding such termination and (ii) the annual cost to the Company and the Bank of all pension, group insurance, hospitalization, deferred compensation, life insurance, incentive plans or other benefit plan (the "Benefit Plans") received by the Executive during the l2-month period immediately preceding such termination, provided, however, that any benefits received by the Executive under the Stock Option Agreements (as such term is defined in Section 4 below) shall not be included in the cal culation of the value of the Benefit Plans. At the Executive's option, the Termination Payment will either be paid in full within 30 days of any such termination or in 12 equal monthly installments for the 12 months immediately subsequent to such termination.

3. FOR CAUSE: For purposes of this Agreement, "for cause" shall be defined as the Executive's personal dishonesty, incompetence, willful misconduct, gross negligence, willful breach of fiduciary duty (including involving personal profit), failure to substantially perform expected duties, willful violation of any material law, rule or regulation (other than traffic violations), willful violation of any final cease-and-desist order issued by any regulatory agency having jurisdiction over the Company or the Bank, the imposition of any sanction upon the Executive by any such regulatory agency or any other action by the Executive that results in substantial harm to the general reputation of the Bank or the Company.

4. STOCK OPTION AGREEMENT: Notwithstanding anything to the contrary contained herein, this Agreement shall not affect or alter the Executive's rights contained in that certain Non-Qualified Stock Option Agreement, dated as of June 19, 2001, as amended, between the Executive and the Company or such other agreements (including amendments thereto) entered into subsequent to the date hereof between the Executive and the Company pursuant to the Company's 1997 Nonstatutory Stock Option Plan (collectively, the "Stock Option Agreements").

5. EMPLOYEE AT WILL: Notwithstanding any provisions of this Agreement to the contrary, the parties hereto agree that the Executive is an employee at will, and the Executive shall perform the duties and obligations assigned to him in a manner and fashion acceptable to the Company and the Bank, in their sole and absolute discretion.

6. ENTIRE AGREEMENT: This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, whether written or oral, between the parties with respect to the subject matter hereof.

7. ASSIGNMENTS: This Agreement is personal to the Executive, who may not assign his obligations hereunder. The Company or the Bank may assign this Agreement upon written notice to the Executive.

8. ARBITRATION: Any dispute, controversy or claim arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators, in Nashville, Tennessee, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any accordance with the laws of the State of Tennessee. Unless otherwise provided in the rules of the American Arbitration Association, the arbitrators shall, in their award, allocate between the parties the cost of the arbitration, which shall include reasonable attorneys' fees and expenses of the parties, as well as the arbitrator's fees and expenses, in such proportions as they deem just and appropriate.

9. MODIFICATION: No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the parties hereto.

10. GOVERNING LAW: The validity, interpretation and construction of this Agreement shall be, governed by the laws of the State of Tennessee, exclusive of the conflict of laws rules thereof.

11. NOTICES: For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:

Community Financial Group, Inc.
401 Church Street
Nashville, TN 37219
Attention: Chairman of Compensation Committee

with a copy to:
Miller & Martin LLP
1200 One Nashville Place
150 4th Avenue North
Nashville, TN 37219
Attention: Hugh C. Howser, Jr.

If to the Bank:
The Bank of Nashville
401 Church Street
Nashville, TN 37219
Attention: Chairman of Compensation Committee

with a copy to:
Miller & Martin LLP
1200 One Nashville Place
150 4th Avenue North
Nashville, TN 37219
Attention: Hugh C. Howser, Jr.

If to the Executive:
Connell Blake Parks
303 East Northfield Blvd.
Murfreesboro, TN 37130

or at such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

12. COUNTERPARTS: This Agreement may be executed in two or more counterparts, each of which shall be deemed as original, but which together shall constitute the same document.

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

EXECUTIVE:

/s/ CONNELL BLAKE PARKS
CONNELL BLAKE PARKS

COMMUNITY FINANCIAL GROUP, INC.

By: /s/ JULIAN B. BAKER
Name: Julian B. Baker
Title: Chairman - Compensation Committee

THE BANK OF NASHVILLE

By: /s/ MACK S. LINEBAUGH
Name: Mack S. Linebaugh
Title: Chairman

EX-8

Exhibit 10.21

Executive Employment Agreement.

This Executive Employment Agreement entered into this 1^st day of March 2002, by and among COMMUNITY FINANCIAL GROUP, INC., a Tennessee corporation (the "Company"), The BANK OF NASHVILLE, a banking corporation organized under the laws of the State of Tennessee (the "Bank"), and J. HUNTER ATKINS (the "Executive").

WITNESSETH:

WHEREAS, the Company is a one-bank holding company which owns one hundred per cent (100%) of the outstanding stock of the Bank?

WHEREAS, the Company and the Bank desire to retain the services of Executive on the terms and conditions set forth herein and, for purposes of effecting the same, the Boards of Directors of the Company and the Bank have approved this Employment Agreement and authorized its execution and delivery to the Executive on behalf of the Company and the Bank;

WHEREAS, the Executive serves as President and Chief Executive Officer of the Company and, as such, is a key executive officer of the Company whose continued dedication, availability, advice and counsel to the Company is deemed important to the Company, the Board of Directors of the Company, and the present and future stockholders of the Company;

WHEREAS, the Executive serves as President and Chief Executive Officer of the Bank and, as such, is a key executive officer of the Bank whose continued dedication, availability, advice and counsel to the Bank is deemed important to the Board of Directors of the Bank, the Bank and the Company;

WHEREAS, the Company and the Bank wish to attract and retain well-qualified executives, and it is in the best interests of the Company, the Bank and the Executive, notwithstanding any change in control of the Company or the Bank, to secure the services of the Executive, whose experience and knowledge of the affairs of the Company and the Bank, and whose reputation and contacts in the industry, are extremely valuable to the Company and the Bank; and

WHEREAS, the Company and the Bank consider the establishment and maintenance of a sound and vital management team to be part of their overall corporate strategy and to be essential to protecting and enhancing the best interests of the Bank, the Company, and its stockholders.

NOW, THEREFORE, to assure the Company and the Bank of the Executive's continued dedication, the availability of Executive's advice' and counsel to the Boards of Directors of the Company and the Bank, the availability of Executive's management skills to the Company and the Bank, and to induce the Executive to remain and continue in the employ of the Company and the Bank in Executive's current capacities, and for other good and valuable consideration, the receipt and adequacy of which each party hereby acknowledged, the Company, the Bank and the Executive hereby agree as follows:

1. EMPLOYMENT. The Company and the Bank agree to, and do hereby, employ Executive and Executive agrees to, and does hereby, accept such employment, all upon the terms and conditions hereafter set forth.

2. TERM: The initial term of employment under this Agreement shall be for a period of one (1) year, commencing on the date first above written and ending at the close of business one year from said date. This Agreement shall be automatically renewed for succeeding terms of one (1) year each, unless either party shall, at least thirty (30) days, but not more than one hundred eighty (180) days, prior to the expiration of any term, give written notice of his or its intention not to renew this Agreement.

3. EMPLOYMENT, DUTIES AUTHORITY AND RESPONSIBILITIES:

(a) During the term of employment of the Executive by the Company and the Bank, the Executive shall devote Executive's full business time and attention to the rendition of services as President and Chief Executive Officer of the Company and as President and Chief Executive Officer of the Bank, and to the furtherance of the best interests of the Company and the Bank, and shall exert Executive's best efforts in the rendition of such services. The Executive agrees that in the rendition of such services and in all aspects of such employment Executive will comply with the policies, standards and regulations of the Company and the Bank as from time to time established by their respective Boards of Directors. The expenditure by the Executive of reasonable amounts of time for charitable, professional and similar activities is encouraged and shall not be deemed a breach of this Agreement provided such activities do not materially interfere with the services to be rendered to the Comp any and the Bank hereunder. Further, Executive shall be allowed to pursue personal business ventures and such ventures shall not be deemed a breach of this Agreement as long as (i) such ventures do not violate Section 18 below, (ii) Executive's involvement in such ventures is only in the nature of a passive investor, and (iii) Executive's involvement in such ventures does not materially interfere with the services to be rendered to the Company and the Bank hereunder.

(b) As President and Chief Executive Officer of the Company, the Executive shall have the general powers and duties of supervision and management of the Company (the Company includes any and all subsidiaries, ventures and related business) which usually pertain to such offices and shall perform all such other duties as are properly required of Executive by the Board of Directors of the Company. In performing the services hereunder, the Executive shall be responsible to and shall report only to the Board of Directors of the Company.

(c) The Board of Directors of the Company hereby grants the Executive the necessary authority and responsibility for the day-to-day operations of the Company and the implementation of the policies set by the Board of Directors of the Company. All officers of the Company shall be supervised by, be responsible to, and shall report, directly or indirectly, to the Executive pursuant to such reporting structure as shall be established from time to time by the Executive. A material reduction or limitation in these duties and responsibilities by the Company shall constitute a breach of this Agreement by the Company. In the event of any breach of any provision of this Agreement by the Company which breach is not cured within ten (10) days after written notice of the breach to the Company by the Executive shall entitle the Executive to terminate his employment by the Company pursuant to this Agreement by not less than sixty (60) days written notice to the Board of Directors of the Co mpany and, at the option of Executive, to terminate his employment by the Bank pursuant to this Agreement by not less than sixty (60) days written notice to the Board of Directors of the Bank. Any such termination by the Executive of his employment by the Bank hereunder resulting from a breach of the terms of this Agreement shall be treated the same as a termination by the Bank without cause and governed by Section 9 below, unless such breach occurs in Contemplation of a Change of Control or within twelve (12) months after a Change of Control, and constitutes' Good Reason for the Executive to terminate Executive's employment, in which case it shall be governed by Section 15 below.

(d) As President and Chief Executive Officer of the Bank, the Executive shall have the general powers and duties of supervision and management of the Bank (the Bank includes any and all subsidiaries, ventures and related business) which usually pertain to such offices and shall perform all such other duties as are properly required of him by the Board of Directors. In performing the services hereunder, the Executive shall be responsible to and shall report only to the Board of Directors of the Bank.

(e) The Board of Directors of the Bank hereby grants the Executive the necessary authority and responsibility for the day-to-day operations of the Bank and the implementation of the policies set by the Board of Directors of the Bank. All officers of the Bank shall be supervised by, be responsible to, and shall report, directly or indirectly, to the Executive pursuant to such reporting structure as shall be established from time to time by the Executive. A material reduction or limitation in these duties and responsibilities by the Bank shall constitute a breach of this Agreement by the Bank. In the event of any breach of any provision of this Agreement by the Bank which breach is not cured within ten (10) days after written notice of the breach to the Bank by the Executive shall entitle the Executive to terminate his employment by the Bank pursuant to this Agreement by not less than sixty (60) days written notice to the Board of Directors of the Bank and, at the option of Ex ecutive, to terminate his employment by the Company pursuant to this Agreement by not less than sixty (60) days written notice to the Board of Directors of the Company. Any such termination by the Executive of his employment by the Bank hereunder resulting from a breach of the terms of this Agreement shall be treated as a termination by the Bank without cause and governed by Section 9 below, unless such breach occurs in Contemplation of a Change of Control or within twelve (12) months after a Change of Control, and constitutes Good Reason for the Executive to terminate Executive's employment, in which case it shall be governed by Section 15 below.

4. COMPENSATION: The Bank agrees to pay Executive, and Executive agrees to accept, as compensation for all services rendered by him to the Company, the Bank and their affiliates during the period of his employment under this Agreement, base compensation at the annual rate of not less than $206,000 which shall be payable in accordance with the normal payroll policies of the Bank and shall be subject to all appropriate withholding taxes.

5. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT Of BUSINESS EXPENSES AND MOVING EXPENSES:

(a) During the term of this Agreement, Executive shall be entitled to participate in all pension, group insurance, hospitalization, deferred compensation, Company paid life insurance, or incentive plans, and any other benefit plan of the Company or the Bank presently in effect or hereafter adopted by the Company or the Bank and generally available to all employees of either organization of senior executive status (the "Benefit Plans").

(b) During the term of this Agreement, to the extent that such expenditures meet the requirements of the Internal Revenue Code for deductibility by the Company or the Bank for federal income tax purposes and are substantiated by the Executive as required by the Internal Revenue Service and policies of the Company and the Bank, the Bank shall reimburse the Executive promptly for all expenditures (including travel, entertainment, parking, business meetings, and the monthly costs, including dues, of maintaining memberships at appropriate clubs, including, but not limited to, Nashville City Club) made in accordance with rules and policies established from time to time by the Board of Directors of the Bank in pursuance and furtherance of the Company's and the Bank's business and good will.

(c) During the term of this Agreement, in the event that the Company or the Bank relocates its principal executive offices to a location more than one hundred (100) miles from Nashville, Tennessee, or the Board of Directors of either the Company or the Bank requires the Executive to be based anywhere more than one hundred (100) miles from the Bank's principal executive offices, the Bank shall pay (or reimburse the Executive for) all reasonable moving expenses incurred by Executive relating to a change of Executive's principal residence in connection with such relocation, provided that the Executive furnishes the Bank with adequate records and documentary evidence for the substantiation of such reimbursement.

6. ILLNESS: In the event Executive is unable to perform Executive's duties under this Agreement on a full-time basis for a period of six (6) consecutive months by reason of illness or other physical or mental disability, and at or before the end of such period Executive does not return to work on a full-time basis, the Company and the Bank may jointly terminate Executive's employment pursuant to this Agreement without further or additional compensation being due the Executive from the Bank pursuant to this Agreement, except that the Executive shall be paid Executive's base compensation from the Bank at the rate in effect at the time of Executive's termination for a period of twelve (12) months from the date of the commencement of the Executive's inability to perform his duties, less any disability payments payable during such time under any disability plans maintained and paid for by the Bank, and Executive shall continue to participate in all Benefit Plans in effec t at the time of Executive's termination for a period of twelve (12) months from the date of the commencement of the Executive's inability to perform his duties.

7. DEATH: In the event of the Executive's death during the term of this Agreement, Executive's estate, legal representatives or named beneficiaries (as directed by the Executive in writing) shall be paid Executive's base compensation from the Bank at the rate in effect at the time of the Executive's death under this Agreement for the period of twelve (12) months from the date of the Executive's death, less any amounts payable to Executive's estate or beneficiaries under life insurance policies on the life of Executive maintained and paid for by Bank.

8. TERMINATION BY COMPANY: Notwithstanding the provisions of Section 2 above, the Board of Directors of the Company may, in its sole discretion, terminate the Executive's employment with the Company under this Agreement at any time in any lawful manner by not less than thirty (30) days written notice to the Executive, in which event the Executive shall be entitled to elect to have such termination likewise constitute a termination of Executive's employment by the Bank. If Executive so elects, then unless such termination is for Cause as defined in Section 10 of this Agreement or unless the Executive's employment is terminated in Contemplation of a Change of Control or within twelve (12) months after a Change of Control, Executive shall be entitled to the compensation provided for in Section 9 below.

9. TERMINATION BY BANK: Notwithstanding the provisions of Section 2 of this Agreement, the Board of Directors of the Bank may, in its sole discretion, terminate the Executive's employment with the Bank under this Agreement at any time in any lawful manner after one hundred eighty (180) days from the date of initial employment as determined in accordance with Section 2, and the anniversary date for each year thereafter, in the event this Agreement is automatically renewed, by not less than thirty (30) days written notice to the Executive (or, at the Bank's option, pay for such thirty days in lieu of notice) and in such event, unless the Bank terminates the Executive's employment with the Bank for Cause as defined in Section 10 of this Agreement or, unless the Executive's employment is terminated in Contemplation of a Change of Control or within twelve (12) months after a Change of Control, the Executive shall be paid, during the twelve (12) months following such term ination at such times as payment was theretofore made, the base compensation that the Executive would have been entitled to receive during such period of time had such termination not occurred, such payments to be in addition to any payment in lieu of notice. Furthermore, the Bank shall pay to the Executive in equal monthly payments an amount sufficient to fully fund any Benefit Plans of the Bank, with respect to the Executive, commencing at the beginning of the first month following termination of Executive's employment with the Bank pursuant to this paragraph, and ending twelve (12) months after such termination. In the event that a payment made with respect to any benefit plan or program would otherwise violate the terms of the plan or program, an equivalent amount shall be paid directly to Executive. Executive shall owe no duty to mitigate these payments, and shall not be required to obtain or attempt to obtain alternate employment during such twelve (12) month period. If Executive obtains other gainfu l employment during such twelve (12) month period, the compensation and benefits received by Executive during said period from such other employment shall not reduce the payments otherwise due to Executive pursuant to this section.

10. TERMINATION FOR CAUSE:

(a) Notwithstanding the provisions of this Agreement the Board of Directors of the Company may, in its sole discretion, terminate the Executive's employment with the Company for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder: (i) because of the Executive's personal dishonesty, incompetence, willful misconduct, gross negligence, willful breach of fiduciary duty (including involving personal profit), failure to substantially perform stated duties described In Section 3 of this Agreement, willful violation of any material law, rule, regulation (other than traffic violations or similar offenses), willful violation of any final cease-and-desist order issued by any regulatory agency having jurisdiction over the Company or the Bank, or material breach by the Executive of any provision of this Agreement or any related agreement entered into by the Executive; or (ii) if the Board of Directors of the Bank t erminates the employment of Executive with the Bank for Cause pursuant to subsection (c) of this Section 10. For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith or without reasonable belief that his action or omission was in the best interest of the Company; provided that any act or omission to act on the Executive's behalf in reliance upon an opinion of counsel to either the Company or the Bank shall not be deemed to be "willful." Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been a resolution approved by a majority of the non-officer members of the Board of Directors of the Company finding that, in the good faith opinion of such majority, the Executive was guilty of conduct which is deemed to be Cause within the meaning of this paragraph, after notice to the Executive and an opportunity for him, toge ther with his counsel, to be heard before such majority (with the Company Board retaining the right to deliberate without the Executive and his counsel present before and/or after such hearing).

(b) If the Company terminates the Executive's employment with the Company for Cause in accordance with Section 10(a) of this Agreement, the Company shall have no obligation to make any further payments to or provide benefits for the Executive, provided that the Executive shall be entitled to receive any accrued compensation or benefits, insured or otherwise, that he would otherwise have been eligible to receive under any Benefit Plans of the Company through the date of such termination.

(c) Notwithstanding the provisions of this Agreement, the Board of Directors of the Bank may, in its sole discretion, terminate the Executive's employment with the Bank for Cause. For the purposes of this Agreement, the Bank shall have "Cause" to terminate the Executive's employment hereunder: (i) because of the Executive's personal dishonesty, incompetence, willful misconduct, gross negligence, willful breach of fiduciary duty (including involving personal profit), failure to substantially perform stated duties described in Section 3 of this Agreement, willful violation of any material law, rule, regulation (other than traffic violations or similar offenses), willful violation of any final cease-and-desist order issued by any regulatory agency having jurisdiction over the Company or the Bank, the imposition of any sanction upon the Executive by any such regulatory agency, or material breach by the Executive of any provision of this Agreement or any related agreement enter ed into by the Executive; or (ii) if the Board of Directors of the Company terminates Executive's employment with the Company for Cause pursuant to subsection (a) of this Section 10. For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith or without reasonable belief that his action or omission was in the best interest of the Bank; provided that any act or omission to act on the Executive's behalf in reliance upon an opinion of counsel to either the Company or the Bank shall not be deemed to be "willful." Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been a resolution approved by a majority of the non-officer members of the Board of Directors of the Bank finding that, in the good faith opinion of such majority, the Executive was guilty of conduct which is deemed to be Cause within the meaning of this paragr aph, after notice to the Executive and an opportunity for him, together with his counsel to be heard before such majority (with the Bank Board retaining the right to deliberate without the Executive and his counsel present before and/or after such hearing).

(d) If the Bank terminates the Executive's employment with the Bank for Cause in accordance with Section 10(c) of this Agreement, the Bank shall have no obligation to make any further payments to or provide benefits for the Executive, provided that the Executive shall be entitled to receive any accrued compensation or benefits, insured or otherwise, which Executive would otherwise have been eligible to receive under any Benefit Plans of the Bank through the date of such termination.

11. TERMINATION BY THE EXECUTIVE: The Executive may terminate the Executive's employment with the Company or with the Bank hereunder at any time upon sixty (60) days written notice to the affected entity. If the Executive terminates the Executive's employment with either the Company or the Bank other than for breach of this Agreement as provided in Section 3, for Good Reason, in Contemplation of a Change of Control or within twelve (12) months after a Change of Control, Executive shall be deemed to have voluntarily terminated Executive's employment with both the Company and the Bank ("Voluntary Termination"), and thereupon the Company and the Bank shall have no obligation to make any further payments to or provide benefits for the Executive, provided that the Executive shall be entitled to receive any accrued compensation and benefits, insured or otherwise, that be would otherwise have been eligible to receive under any Benefit Plans of the Company or the Bank throu gh the date of such termination.

12. DEFINITION OF CHANGE OF CONTROL OF THE COMPANY: A "Change of Control" of the Company shall mean a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 ("Exchange Act") or such item thereof which may hereafter pertain to the same subject; provided that, and notwithstanding the foregoing, a Change of Control shall be deemed to have occurred if (i) any person (as that term is used in Sections 13 (d) and 14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing thirty-five percent (35%) or more of the combined voting power of the Company's then outstanding securities, or (ii) the Company shall cease to be a publicly owned corporation, as defined in the Exchange Act.

13. DEFINITION OF CHANGE OF CONTROL OF THE BANK: A "Change of Control" of the Bank shall mean any Change of Control of the Company, or any change or series of changes in circumstances which result in the Company ceasing to own, control, and vote an absolute majority of the voting securities of the Bank.

14. TERMINATION BY COMPANY OR BANK AFTER CHANGE IN CONTROL: If a Change of Control of the Company or a Change of Control of the Bank shall have occurred, this Agreement shall continue in full force and effect. If the Executive's employment is terminated by the Company or the Bank within twelve (12) months after a Change of Control of the Company, as defined in Section 12 above, or a Change of Control of the Bank, as defined in Section 13 above, or in Contemplation of a Change of Control of either, as defined below, Executive shall be entitled to be paid an amount equal to two and ninety-nine hundredths (2.99) times the sum of Executive's annual base cash compensation plus the annual value of Executive's participation in all Benefit Programs in effect at the time of such termination. At Executive's option, the sums payable pursuant to this Section will be paid in full in a lump sum and without discount within thirty (30) days of the termination of Executive's employm ent, or in equal monthly installments over twelve (12) months. Any termination of Executive's employment hereunder during any period of time when the Board of Directors of the Company has formed an intent to offer the Bank for sale or to promote an acquisition of or merger of the Company or the Bank, or when the Company has knowledge that any person(s), entity or concern has taken steps reasonably calculated to effect a Change of Control of the Company shall constitute a termination of Executive's employment "In Contemplation of a Change of Control". The period of Contemplation of Change of Control shall continue until the Board of Directors of the Company no longer intends to promote an acquisition of or merger of the Company or the Bank, or until in the opinion of the Company's Board of Directors, the person(s), concern or entity has abandoned or terminated its efforts to effect a Change of Control of the Company, as applicable. Any good faith determination by the Company's Board of Directors that Board no longer has such an intent, or that the person(s), concern or entity has abandoned or terminated its efforts to effect a Change of Control of the Company shall be conclusive and binding on the Executive. Such determination shall be promptly communicated to the Executive in writing by the Chairman of the Compensation Committee or Chairman or Vice Chairman of the Board of the Company. Notwithstanding the foregoing, any termination of the Executive by the Company or by the Bank within ninety (90) days prior to a Change of Control of the Company shall be conclusively presumed to have been in Contemplation of Change of Control.

15. TERMINATION BY EXECUTIVE FOR GOOD REASON: During the term of Executive's employment hereunder, the Executive may terminate his employment with both the Company and the Bank if the Executive has Good Reason, as defined below. Termination by the Executive of Executive' s employment with either entity shall be deemed termination with both. For purposes of this Agreement, "Good Reason" shall mean:

(i) The assignment of duties to the Executive by the Company or the Bank which (1) are significantly different from the Executive's duties immediately prior to the Change of Control, or (2) result in the Executive having significantly less authority and/or responsibility than Executive had as an executive officer of the Company or the Bank prior to the Change of Control, without the express written consent of Executive;

(ii) The removal of the Executive from or any failure to re-elect Executive to the positions set forth in Section 3 above, except in connection with a termination of his employment by the Company or the Bank for Cause or Executive's resignation other than for Good Reason.

(iii) A reduction of the Executive's base salary as in effect on the date of the Change of Control, unless the reduction in the Executive's salary is waived in writing by the Executive;

(iv) The failure of the Company and the Bank collectively to provide the Executive with substantially the same fringe benefits (including paid vacations) that were provided to Executive immediately prior to the Change of Control, or with a package of .fringe benefits that, though one or more of such benefits may vary from those in effect immediately prior to such Change of Control, is substantially comparable in all material respects to such fringe benefits taken as a whole; or

(v) Requiring the Executive to perform a significant part of Executive's duties in locations more than one hundred (100) miles from Nashville, Tennessee.

Further, and notwithstanding any other provision of this Agreement, the Executive may terminate his employment without Good Reason at any time within ninety (90) days after a Change of Control shall have occurred.

16. PAYMENTS ON TERMINATION: Upon termination of Executive's employment by the Company or the Bank, the Company and the Bank shall have the following payment obligations to Executive:

(a) If the Executive's employment is terminated due to illness of the Executive, the provisions of Section 6 shall apply.

(b) If the Executive's employment is terminated due to the death of the Executive, the provisions of Section 7 shall apply.

(c) If the Executive's employment is terminated by the Company other than for Cause, and not In Contemplation of a Change of Control of the Company or the Bank or within twelve months after a Change of Control of the Company or the Bank, the provisions of Section 8 shall apply, and therefore the payment provisions of Section 9 apply.

(d) If the Executive's employment is terminated by the Bank other than for Cause, and not In Contemplation of a Change of Control of the Company or the Bank or within twelve months after a Change of Control of the Company or the Bank, the provisions of Section 9 shall apply.

(e) If the Executive's employment is terminated by the Company for Cause, or by the Bank for Cause, the provisions of Section 10 shall apply.

(f) If the Executive's employment is terminated by the Executive as a result of a breach of the agreement by the Company or the Bank, the provisions of Section 3 apply, and therefore the payment provisions of Section 9 apply.

(g) In the event of a Voluntary Termination of Executive's employment as defined in Section 11, the provisions of Section 11 apply.

(h) If the Executive's employment is terminated by the Company or the Bank within twelve (12) months after a Change of Control of the Company, as defined in Section 12 above, or a Change of Control of the Bank, as defined in Section 13 above, or in Contemplation of a Change of Control of either, as defined in Section 14, the provisions of Section 14 shall apply.

(i) If the Executive's employment is terminated by the Executive for Good Reason, as defined in Section 15 above, the Executive's employment with the Company and with the Bank shall be deemed to have been terminated without Cause by the Company and by the Bank at the time of such termination by Executive for Good Reason. If such termination is during a period of Contemplation of Change of Control, or within twelve (12) months after a Change of Control, the provisions of Section 14 shall apply.

(j) Termination of Executive's employment by the Company or by the Bank or by the Executive shall be communicated by written Notice of Termination to the other parties hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision(s) in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provisions so indicated.

17. CONFIDENTIALLY: In the course of the Executive's employment, the Company and the Bank may disclose or make known to the Executive, and the Executive may be given access to or may become acquainted with, certain information, including but not limited to confidential information which relates to or is useful in the businesses of the Company and the Bank and which is not available from public records or other generally available sources (collectively, "Confidential Information"), and which the Company or the Bank consider proprietary and desire to maintain confidential. During the term of this Agreement and at all times thereafter, the Executive shall not in any manner, either directly or indirectly, divulge, disclose or communicate to any person or firm, except to legal counsel for the Company or the Bank or otherwise to or for the benefit of the Company or the Bank as directed by the Company or the Bank, and except to the Executive's legal counsel in connection w ith the resolution of any dispute between the Executive and the Company or the Bank under this Agreement, any of the Confidential Information which Executive may have acquired in the course of or as an incident to Executive's employment by the Company or the Bank, the parties agreeing that such Confidential Information affects the successful and effective conduct of the business and their goodwill of the Company and the Bank, and that any material breach of the terms of this Section 17 is a material breach of this Agreement.

18. COVENANT NOT TO COMPETE: During the term of this Agreement, Executive agrees that Executive will not directly or indirectly own, become interested in, or become involved in any manner whatsoever in any business which is similar or competitive with any aspect of the business of the Company or the Bank. Without limiting the foregoing, Executive agrees during the term of this Agreement not to engage in the banking or leasing businesses, whether as an owner, partner, director, officer, employee, consultant, stockholder, agent, salesman or in any other capacity for any person, partnership, firm, corporation or other entity without the express written consent of the Board of Directors of the Company. Further, if Executive terminates Executive's employment in a Voluntary Termination or for Good Reason, or if the Company or the Bank terminate Executive's employment in Contemplation of a Change of Control, or within twelve (12) months after a Change of Control, or for Ca use, for the period of twelve (12) months following the termination of Executive's employment with the Company or the Bank, Executive agrees that Executive will not directly or indirectly own, become interested in, or become involved in any manner whatsoever, including, without limitation, as an owner, partner, director, officer, employee, consultant, stockholder, agent, salesman or in any other capacity, with any credit union, savings and loan association, bank or bank holding company which has an office in Davidson County, Tennessee or in any county contiguous to Davidson County, Tennessee without the express written consent of the Board of Directors of the Company. The foregoing, however, shall not prohibit the Executive (i) from continuing to maintain any ownership interest currently held by Executive in any business which is similar or competitive with any aspect of the business of the Company or the Bank provided that the provisions of parts (ii) and (iii) of the last sentence of Section 3 (a) above ar e satisfied, or (ii) from obtaining an ownership interest in a business which is similar or competitive with any aspect of the business of the Company or the Bank provided that (A) the provisions of parts (ii) and (ill) of the last sentence of Section 3(a) above are satisfied, (B) the shares of such business are publicly traded on a national securities exchange, and (C) Executive does not own, directly or indirectly, more than five percent (5%) of the total outstanding shares of such business. Executive specifically acknowledges and agrees that the foregoing restriction on competition with the Company and the Bank will not prevent Executive from obtaining gainful employment following termination of Executive's employment with the Company and the Bank, and is a reasonable restriction upon Executive's ability to compete with the Company and the Bank, given the economic benefits afforded to Executive under this Agreement.

19. NO ENTICEMENT OF EMPLOYEES: Executive agrees that Executive will not, directly or indirectly, entice or induce, or attempt to entice or induce any employee of the Company or Bank to leave the employ of the Company or the Bank during the period covered by the NonCompetition provisions of Section 18 above.

20. NO SOLICITATION: Executive will not, directly or indirectly, solicit, entice or induce, or attempt to entice or induce any customer or user of the products or services of the Bank or the Company during the period covered by the Non-Competition provisions of Section 18 above.

21. REMEDIES: Executive acknowledges and agrees that the breach or threatened breach of any of the provisions of Sections 17, 18, 19 and 20 of this Agreement will cause irreparable harm to the Company and the Bank, and can-not be adequately compensated by the payment of damages. Accordingly, Executive covenants and agrees that the Company and the Bank, in addition to any other rights or remedies which they may have, will be entitled to such equitable and injunctive relief as may be available from any court of competent jurisdiction to restrain Executive from breaching or threatening to breach any of the provisions of this Sections 17, 18, 19 and 20, without posting bond or other surety. Such right to obtain injunctive relief may be exercised at the option of the Company or the Bank in addition to, concurrently with, prior to, after, or in lieu of the exercise of any other rights or remedies which the Company or the Bank may have as a result of any such breach or thr eatened breach. In addition to all other remedies, in the event of the breach or threatened breach of any of the provisions of Sections 17, 18, 19 or 20 of this Agreement, the Company and Bank shall be relieved of any obligation to continue payments to the Executive pursuant to the provisions of this agreement.

22. NOTICES: For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:
Community Financial Group, Inc.
401 Church Street
Nashville, TN 37219
Attention: Chairman of Compensation Committee

with a copy to:
Miller & Martin LLP
1200 One Nashville Place
150 4th Avenue North
Nashville, TN 37219
Attention: Hugh C. Howser, Jr.

If to the Bank:
The Bank of Nashville
401 Church Street
Nashville, TN 37219
Attention: Chairman of Compensation Committee

with a copy to:
Miller & Martin LLP
1200 One Nashville Place
150 4th Avenue North
Nashville, TN 37219
Attention: Hugh C. Howser, Jr.

If to the Executive:
J. Hunter Atkins
205 Wentworth Circle
Nashville, TN 37215

or at such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

23. MODIFICATION WAIVERS APPLICABLE LAW: No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by the Executive, and on behalf of the Company by such officer as may be specifically designated by the Board of Directors of the Company after approval of the modification by the Board of Directors, and on behalf of the Bank by such officer as may be specifically designated by the Board of Directors of the Bank after approval of the modification by the Board of Directors. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject m atter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee.

24. INVALIDITY, ENFORCEABILITY: The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

25. ASSIGNMENTS: This Agreement is personal to the Executive, who may not assign his obligations hereunder.

26. SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, the Bank, its successors and assigns, and upon the Executive, and his personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate.

27. HEADINGS: Descriptive headings contained in this Agreement are for convenience only and shall not control or affect the meaning or construction of any provision hereof.

28. ARBITRATION: Any dispute, controversy or claim arising under or in connection with this Agreement shall be settled exclusively by arbitration conducted before a panel of three arbitrators, in Nashville, Tennessee, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Unless otherwise provided in the rules of the American Arbitration Association, the arbitrators shall, in their award, allocate between the parties the costs of arbitration, which shall include reasonable attorneys' fees and expenses of the parties, as well as the arbitrator's fees and expenses, in such proportions as the arbitrators deem just.

29. ENTIRE AGREEMENT: This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and supersedes or amends all other agreements, negotiations, understandings and representations (if any) made by and between the parties hereto; provided, however, that nothing herein shall affect in any way agreements granting or evidencing the Executive's options to acquire shares of the Company.

30. REGULATORY AND OTHER PROCEEDINGS: The provisions of this Section 30 shall control as to continuing rights and obligations under this Agreement, notwithstanding any other provision of this Agreement, for as long as they are required to be included in employment contracts between an institution insured by the FDIC and its officers and as long as the Bank is such an insured institution;

(a) If the Executive is suspended and/or temporarily prohibited from participating in the conduct of the affairs of the Bank or the Company by a notice served under applicable Federal or State statutes or regulations, the Bank's obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank and the Company shall pay the Executive all of the compensation withheld while their obligations hereunder were suspended and reinstate their obligations which were suspended.

(b) If the Executive is removed and/or permanently prohibited from participating in the conduct of the affairs of the Bank or the Company by an order issued under applicable Federal or State statutes or regulations, all obligations of the Company and the Bank under this Agreement shall terminate as of the effective date of the order, provided that vested rights of the contracting parties shall not be affected.

(c) If the Company or the Bank become insolvent or taken over by regulatory entities, all obligations under this Agreement shall terminate as of the date of default, provided that this paragraph shall not affect any vested rights of the contracting parties.

(d) All obligations under this Agreement may be terminated, except to the extent determined that continuation thereof is necessary for the continued operation of the Company or the Bank, by the FDIC at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank or approves a supervisory merger to resolve problems related to operation of the Bank, provided that any rights of the parties that have already vested shall not be affected by such action.

31. SURVIVAL: This Agreement shall remain in effect notwithstanding the termination of Executive's employment hereunder, and in any case, the provisions of Sections 18, 19, and 20 shall survive any termination of this Agreement.

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

EXECUTIVE:

/s/ J. HUNTER ATKINS
J. HUNTER ATKINS

COMMUNITY FINANCIAL GROUP, INC.

By: /s/ JULIAN B. BAKER
Name: Julian B. Baker
Title: Compensation Chairman

THE BANK OF NASHVILLE

By: /s/ MACK S. LINEBAUGH, JR.
Name: Mack S. Linebaugh, Jr.
Title: Chairman

EX-9

Exhibit 10.22

Executive Employment Agreement

This Executive Employment Agreement entered into this 1st day of March 2002, by and among COMMUNITY FINANCIAL GROUP, INC., a Tennessee corporation (the "Company"), THE BANK OF NASHVILLE, a banking corporation organized under the laws of the State of Tennessee (the "Bank"), and ATTILIO F. GALLI (the "Executive").

WITNESSETH:

WHEREAS, the Company is a one-bank holding company which owns one hundred per cent (100%) of the outstanding stock of the Bank;

WHEREAS, the Company and the Bank desire to retain the services of Executive on the terms and conditions set forth herein and, for purposes of effecting the same, the Boards of Directors of the Company and the Bank have approved this Employment Agreement and authorized its execution and delivery to the Executive on behalf of the Company and the Bank;

WHEREAS, the Executive serves as Chief Financial Officer of the Company and, as such, is a key executive officer of the Company whose continued dedication, availability, advice and counsel to the Company is deemed important to the Company, the Board of Directors of the Company, and the present and future stockholders of the Company;

WHEREAS, the Executive serves as Chief Financial Officer of the Bank and, as such, is a key executive officer of the Bank whose continued dedication, availability, advice and counsel to the Bank is deemed important to the Board of Directors of the Bank, the Bank and the Company;

WHEREAS, the Company and the Bank wish to attract and retain well-qualified executives, and it is in the best interests of the Company, the Bank and the Executive, notwithstanding any change in control of the Company or the Bank to secure the services of the Executive, whose experience and knowledge of the affairs of the Company and the Bank, and whose reputation and contacts in the industry, are extremely valuable to the Company and the Bank; and

WHEREAS, the Company and the Bank consider the establishment and maintenance of a sound and vital management team to be part of their overall corporate strategy and to be essential to protecting and enhancing the best interests of the Bank, the Company, and its stockholders.

NOW, THEREFORE, to assure the Company and the Bank of the Executive's continued dedication, the availability of Executive's advice and counsel to the Boards of Directors of the Company and the Bank, the availability of Executive's management skills to the Company and the Bank, and to induce the Executive to remain and continue in the employ of the Company and the Bank in Executive's current capacities, and for other good and valuable consideration, the receipt and adequacy of which each party hereby acknowledged, the Company, the Bank and the Executive hereby agree as follows:

1. EMPLOYMENT. The Company and the Bank agree to, and do hereby, employ Executive and Executive agrees to, and does hereby, accept such employment, all upon the terms and conditions hereinafter set forth.

2. TERM: The initial term of employment under this Agreement shall be for a period of one (1) year, commencing on the date first above written and ending at the close of business one year from said date. This Agreement shall be automatically renewed for succeeding terms of one (1) year each, unless either party shall, at least thirty (30) days, but not more than one hundred eighty (180) days, prior to the expiration of any term, give written notice of his or its intention not to renew this Agreement.

3. EMPLOYMENT, DUES, AUTHORITY, AND RESPONSIBILITIES:

(a) During the term of employment of the Executive by the Company and the Bank, the Executive shall devote Executive's full business time and attention to the rendition of services as Chief Financial Officer of the Company and as Chief Financial Officer of the Bank, and to the furtherance of the best interests of the Company and the Bank and shall exert Executive's best efforts in the rendition of such services. The Executive agrees that in the rendition of such services and in all aspects of such employment Executive will comply with the policies, standards and regulations of the Company and the Bank as from time to time established by their respective Boards of Directors. The expenditure by the Executive of reasonable amounts of time for charitable, professional and similar activities is encouraged and shall not be deemed a breach of this Agreement provided such activities do not materially interfere with the services to be rendered to the Company and the Bank hereunder. Further, Executive shall be allowed to pursue personal business ventures and such ventures shall not be deemed a breach of this Agreement as long as (i) such ventures do not violate Section 18 below, (ii) Executive's involvement in such ventures is only in the nature of a passive investor, and (iii) Executive's involvement in such ventures does not materially interfere with the services to be rendered to the Company and the Bank hereunder.

(b) As Chief Financial Officer of the Company, the Executive shall have the general powers and duties of supervision and management of the Company (the Company includes any and all subsidiaries, ventures and related business) which usually pertain to such offices and shall perform all such other duties as are properly required of Executive by the Board of Directors of the Company. In performing the services hereunder, the Executive shall be responsible to and shall report only to the Board of Directors of the Company.

(c) The Board of Directors of the Company hereby grants the Executive the necessary authority and responsibility to manage the day-to-day operations of the Company consistent with the implementation of policies set by the President/Chief Executive Officer of the Company. All officers of the Company shall be supervised by, be responsible to, and shall report, directly or indirectly, to the Executive pursuant to such reporting structure as shall be established from time to time by the President/Chief Executive Officer. In the event of any breach of any provision of this Agreement by the Company which breach is not cured within ten (10) days after written notice of the breach to the Company by the Executive shall entitle the Executive to terminate his employment by the Company pursuant to this Agreement by not less than sixty (60) days written notice to the Board of Directors of the Company and, at the option of Executive, to terminate his employment by th e Bank pursuant to this Agreement by not less than sixty (60) days written notice to the Board of Directors of the Bank. Any such termination by the Executive of his employment by the Bank hereunder resulting from a breach of the terms of this Agreement shall be treated the same as a termination by the Bank without cause and governed by Section 9 below, unless such breach occurs in Contemplation of a Change of Control or within twelve (12) months after a Change of Control, and constitutes Good Reason for the Executive to terminate Executive's employment, in which case it shall be governed by Section 15 below.

(d) As Chief Financial Officer of the Bank, the Executive shall have the general powers and duties of supervision and management of the Bank (the Bank includes any and all subsidiaries, ventures and related business) which usually pertain to the office of Chief Financial Officer, including all day to day bank operations, supervision and implementation of all information and technology systems, regulatory compliance, both federal and state, and loan review. In performing the services hereunder, the Executive shall be responsible to and shall report to the Chief Executive Officer/President.

(e) The Board of Directors of the Bank hereby grants the Executive the necessary authority and responsibility to manage the day-to-day operations of the Bank consistent with the implementation of policies set by the President/Chief Executive Officer of the Bank. A material reduction or limitation in these duties and responsibilities by the Bank shall constitute a breach of this Agreement by the Bank. In the event of any breach of any provision of this Agreement by the Bank which breach is not cured within ten (10) days after written notice of the breach to the Bank by the Executive shall entitle the Executive to terminate his employment by the Bank pursuant to this Agreement by not less than sixty (60) days written notice to the Board of Directors of the Bank and, at the option of Executive, to terminate his employment by the Company pursuant to this Agreement by not less than sixty (60) days written notice to the Board of Directors of the Company. Any such termination by the Executive of his employment by the Bank hereunder resulting from a breach of the terms of this Agreement shall be treated as a termination by the Bank without cause and governed by Section 9 below, unless such breach occurs in Contemplation of a Change of Control or within twelve (12) months after a Change of Control, and constitutes Good Reason for the Executive to terminate Executive's employment, in which case it shall be governed by Section 15 below.

4. COMPENSATION: The Bank agrees to pay Executive, and Executive agrees to accept, as compensation for all services rendered by him to the Company, the Bank and their affiliates during the period of his employment under this Agreement, base compensation at the annual rate of not less than $128,750, which shall be payable in accordance with the normal payroll policies of the Bank and shall be subject to all appropriate withholding taxes.

5. PARTICIPATION IN BENEFIT PLANS, REIMBURSEMENT OF BUSINESS EXPENSES AND MOVING EXPENSES:

(a) During the term of this Agreement, Executive shall be entitled to participate in all pension, group insurance, hospitalization, deferred compensation, Company paid life insurance, or incentive plans, and any other benefit plan of the Company or the Bank presently in effect or hereafter adopted by the Company or the Bank and generally available to all employees of either organization of senior executive status (the "Benefit Plans").

(b) During the term of this Agreement, to the extent that such expenditures meet the requirements of the Internal Revenue Code for deductibility by the Company or the Bank for federal income tax purposes and are substantiated by the Executive as required by the Internal Revenue Service and policies of the Company and the Bank, the Bank shall reimburse the Executive promptly for all expenditures (including travel, entertainment, parking, business meetings, and the monthly costs, including dues, of maintaining memberships at appropriate clubs, including, but not limited to, Nashville City Club) made in accordance with rules and policies established from time to time by the Board of Directors of the Bank in pursuance and furtherance of the Company's and the Bank's business and good will.

(c) During the term of this Agreement, in the event that the Company or the Bank relocates its principal executive offices to a location more than one hundred (100) miles from Nashville, Tennessee, or the Board of Directors of either the Company or the Bank requires the Executive to be based anywhere more than one hundred (100) miles from the Bank's principal executive offices, the Bank shall pay (or reimburse the Executive for) all reasonable moving expenses incurred by Executive relating to a change of Executive's principal residence in connection with such relocation, provided that the Executive furnishes the Bank with adequate records and documentary evidence for the substantiation of such reimbursement.

6. ILLNESS: In the event Executive is unable to perform Executive's duties under this Agreement on a full-time basis for a period of six (6) consecutive months by reason of illness or other physical or mental disability, and at or before the end of such period Executive does not return to work on a full-time basis, the Company and the Bank may jointly terminate Executive's employment pursuant to this Agreement without further or additional compensation being due the Executive from the Bank pursuant to this Agreement, except that the Executive shall be paid Executive's base compensation from the Bank at the rate in effect at the time of Executive's termination for a period of twelve (12) months from the date of the commencement of the Executive's inability to perform his duties, less any disability payments payable during such time under any disability plans maintained and paid for by the Bank, and Executive shall continue to participate in all B enefit Plans in effect at the time of Executive's termination for a period of twelve (12) months from the date of the commencement of the Executive's inability to perform his duties.

7. DEATH: In the event of the Executive's death during the term of this Agreement, Executive's estate, legal representatives or named beneficiaries (as directed by the Executive in writing) shall be paid Executive's base compensation from the Bank at the rate in effect at the time of the Executive's death under this Agreement for the period of twelve (12) months from the date of the Executive's death, less any amounts payable to Executive's estate or beneficiaries under life insurance policies on the life of Executive maintained and paid for by Bank.

8. TERMINATION BY COMPANY: Notwithstanding the provisions of Section 2 above, the Board of Directors of the Company may, in its sole discretion, terminate the Executive's employment with the Company under this Agreement at any time in any lawful manner by not less than thirty (30) days written notice to the Executive, in which event the Executive shall be entitled to elect to have such termination likewise constitute a termination of Executive's employment by the Bank. If Executive so elects, then unless such termination is for Cause as defined in Section 10 of this Agreement or unless the Executive's" employment is terminated in Contemplation or a Change of Control or within twelve (12) months after a Change of Control, Executive shall be entitled to the compensation provided for in Section 9 below.

9. TERMINATION BY BANK: Notwithstanding the provisions of Section 2 of this Agreement, the Board of Directors of the Bank may, in its sole discretion, terminate the Executive's employment with the Bank under this Agreement at any time in any lawful manner after one hundred eighty (180) days from the date of initial employment as determined in accordance with Section 2, and the anniversary date for each year thereafter, in the event this Agreement is automatically renewed, by not less than thirty (30) days written notice to the Executive (or, at the Bank's option, pay for such thirty days in lieu of notice) and in such event, unless the Bank terminates the Executive's employment with the Bank for Cause as defined in Section 10 of this Agreement or, unless the Executive's employment is terminated in Contemplation of a Change of Control or within twelve (12) months after a Change of Control, the Executive shall be paid, during the twelve (12) month s following such termination at such times as payment was theretofore made, the base compensation that the Executive would have been entitled to receive during such period of time had such termination not occurred, such payments to be in addition to any payment in lieu of notice. Furthermore, the Bank shall pay to the Executive in equal monthly payments an amount sufficient to fully fund any Benefit Plans of the Bank, with respect to the Executive, commencing at the beginning of the first month following termination of Executive's employment with the Bank pursuant to this paragraph, and ending twelve (12) months after such termination. In the event that a payment made with respect to any benefit plan or program would otherwise violate the terms of the plan or program, an equivalent amount shall be paid directly to Executive. Executive shall owe no duty to mitigate these payments, and shall not be required to obtain or attempt to obtain alternate employment during such twelve (12) month period. If Executive o btains other gainful employment during such twelve (12) month period, the compensation and benefits received by Executive during said period from such other employment shall not reduce the payments otherwise due to Executive pursuant to this section.

10. TERMINATION FOR CAUSE:

(a) Notwithstanding the provisions of this Agreement, the Board of Directors of the Company may, in its sole discretion, terminate the Executive's employment with the Company for Cause. For the purposes of this Agreement, the Company shall have "Cause" to terminate the Executive's employment hereunder: (i) because of the Executive's personal dishonesty, incompetence, willful misconduct, gross negligence, willful breach of fiduciary duty (including involving personal profit), failure to substantially perform stated duties described In Section 3 of this Agreement, willful violation of any material law, rule, regulation (other than traffic violations or similar offenses), willful violation of any final cease-and-desist order issued by any regulatory agency having jurisdiction over the Company or the Bank, or material breach by the Executive of any provision of this Agreement or any related agreement entered into by the Executive; or (ii) if the Board of Di rectors of the Bank terminates the employment of Executive with the Bank for Cause pursuant to subsection (c) of this Section 10. For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith or without reasonable belief that his action or omission was in the best interest of the Company; provided that any act or omission to act on the Executive's behalf in reliance upon an opinion of counsel to either the Company or the Bank shall not be deemed to be "willful." Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been a resolution approved by a majority of the non-officer members of the Board of Directors of the Company finding that, in the good faith opinion of such majority, the Executive was guilty of conduct which is deemed to be Cause within the meaning of this paragraph, after notice to the Executive and an oppor tunity for him, together with his counsel, to be heard before such majority (with the Company Board retaining the right to deliberate without the Executive and his counsel present before and/or after such hearing).

(b) If the Company terminates the Executive's employment with the Company for Cause in accordance with Section 1O( a) of this Agreement, the Company shall have no obligation to make any further payments to or provide benefits for the Executive, provided that the Executive shall be entitled to receive any accrued compensation or benefits, insured or otherwise, that he would otherwise have been eligible to receive under any Benefit Plans of the Company through the date of such termination.

(c) Notwithstanding the provisions of this Agreement, the Board of Directors of the Bank may, in its sole discretion, terminate the Executive's employment with the Bank for Cause. For the purposes of this Agreement, the Bank shall have "Cause" to terminate the Executive's employment hereunder: (i) because of the Executive's personal dishonesty, incompetence, willful misconduct, gross negligence, willful breach of fiduciary duty (including involving personal profit), failure to substantially perform stated duties described in Section 3 of this Agreement, willful violation of any material law, rule, regulation (other than traffic violations or similar offenses), willful violation of any final cease-and-desist order issued by any regulatory agency having jurisdiction over the Company or the Bank, the imposition of any sanction upon the Executive by any such regulatory agency, or material breach by the Executive of any provision of this Agreement or any rel ated agreement entered into by the Executive; or (ii) if the Board of Directors of the Company terminates Executive's employment with the Company for Cause pursuant to subsection (a) of this Section 10. For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith or without reasonable belief that his action or omission was in the best interest of the Bank; provided that any act or omission to act on the Executive's behalf in reliance upon an opinion of counsel to either the Company or the Bank shall not be deemed to be "willful." Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been a resolution approved by a majority of the non-officer members of the Board of Directors of the Bank finding that, in the good faith opinion of such majority, the Executive was guilty of conduct which is deemed to be Cause within the me aning of this paragraph, after notice to the Executive and an opportunity for him, together with his counsel to be heard before such majority (with the Bank Board retaining the right to deliberate without the Executive and his counsel present before and/or after such hearing).

(d) If the Bank terminates the Executive's employment with the Bank for Cause in accordance with Section 10(c) of this Agreement, the Bank shall have no obligation to make any further payments to or provide benefits for the Executive, provided that the Executive shall be entitled to receive any accrued compensation or benefits, insured or otherwise, which Executive would otherwise have been eligible to receive under any Benefit Plans of the Bank through the date of such termination.

11. TERMINATION BY THE EXECUTIVE: The Executive may terminate the Executive's employment with the Company or with the Bank hereunder at any time upon sixty (60) days written notice to the affected entity. If the Executive terminates the Executive's employment with either the Company or the Bank other than for breach of this Agreement as provided in Section 3, for Good Reason, in Contemplation of a Change of Control or within twelve (12) months after a Change of Control, Executive shall be deemed to have voluntarily terminated Executive's employment with both the Company and the Bank ("Voluntary Termination"), and thereupon the Company and the Bank shall have no obligation to make any further payments to or provide benefits for the Executive, provided that the Executive shall be entitled to receive any accrued compensation and benefits, insured or otherwise, that he would otherwise have been eligible to receive under any Benefit Plans of the Comp any or the Bank through the date of such termination.

12. DEFINITION OF CHANGE OF CONTROL OF THE COMPANY: A "Change of Control" of the Company shall mean a change of control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 ("Exchange Act") or such item thereof which may hereafter pertain to the same subject; provided that, and notwithstanding the foregoing, a Change of Control shall be deemed to have occurred if (i) any person (as that term is used in Sections 13(d) and 14(d) (2) of the Exchange Act) is or becomes the beneficial owner, directly or-indirectly, of securities of the Company representing thirty- five percent (35%) or more of the combined voting power of the Company's then outstanding securities, or (ii) the Company shall cease to be a publicly owned corporation, as defined in the Exchange Act.

13. DEFINITION OF CHANGE OF CONTROL OF THE BANK: A "Change of Control" of the Bank shall mean any Change of Control of the Company, or any change or series of changes in circumstances which result in the Company ceasing to own, control, and vote an absolute majority of the voting securities of the Bank.

14. TERMINATION BY COMPANY OR BANK AFTER CHANGE IN CONTROL: If a Change of Control of the Company or a Change of Control of the Bank shall have occurred, this Agreement shall continue in full force and effect. If the Executive's employment is terminated by the Company or the Bank within twelve (12) months after a Change of Control of the Company, as defined in Section 12 above, or a Change of Control of the Bank, as defined in Section 13 above, or in Contemplation of a Change of Control of either, as defined below, Executive shall be entitled to be paid an amount equal to 2.00 x t of Executive's annual base cash compensation plus the annual value of Executive's participation in all Benefit Programs in effect at the time of such termination. At Executive's option, the sums payable pursuant to this Section will be paid in full in a lump sum and l without discount within thirty (30) days of the termination of Executive's employment, or in equal mon thly installments over twelve (12) months. Any termination of Executive's employment hereunder during any period of time when the Board of Directors of the Company has formed an intent to offer the Bank for sale or to promote an acquisition of or merger of the Company or the Bank, or when the Company has knowledge that any person(s), entity or concern has taken steps reasonably calculated to effect a Change of Control of the Company shall constitute a termination of Executive's employment "In Contemplation of a Change of Control". The period of Contemplation of Change of Control shall continue until the Board of Directors of the Company no longer intends to promote an acquisition of or merger of the Company. or the Bank, or until in the opinion of the Company's Board of Directors, the person(s), concern or entity has abandoned or terminated its efforts to effect a Change of Control of the Company, as applicable. Any good faith determination by the Company's Board of Directors that Board no longer has such an intent, or that the person(s), concern or entity has abandoned or terminated its efforts to effect a Change of Control of the Company shall be conclusive and binding on the Executive. Such determination shall be promptly communicated to the Executive in writing by the Chairman of the Compensation Committee or Chairman or Vice Chairman of the Board of the Company. Notwithstanding the foregoing, any termination of the Executive by the Company or by the Bank within ninety (90) days prior to a Change of Control of the Company shall be conclusively presumed to have been in Contemplation of Change of Control.

15. TERMINATION BY EXECUTIVE FOR GOOD REASON: During the term of Executive's employment hereunder, the Executive may terminate his employment with both the Company and the Bank if the Executive has Good Reason, as defined below. Termination by the Executive of Executive's employment with either entity shall be deemed termination with both. For purposes of this Agreement, "Good Reason" shall mean:

(i) The assignment of duties to the Executive by the Company or the Bank which (1) are significantly different from the Executive's duties immediately prior to the Change of Control, or (2) result in the Executive having significantly less authority and/or responsibility than Executive had as an executive officer of the Company or the Bank prior to the Change of Control, without the express written consent of Executive;

(ii) The removal of the Executive from or any failure to re-elect Executive to the positions set forth in Section 3 above, except in connection with a termination of his employment by the Company or the Bank for Cause or Executive's resignation other than for Good Reason.

(iii) A reduction of the Executive's base salary as in effect on the date of the Change of Control, unless the reduction in the Executive's salary is waived in writing by the Executive;

(iv) The failure of the Company and the Bank collectively to provide the Executive with substantially the same fringe benefits (including paid vacations) that were provided to Executive immediately prior to the Change of Control, or with a package of fringe benefits that, though one or more of such benefits may vary from those in effect immediately prior to such Change of Control, is substantially comparable in all material respects to such fringe benefits taken as a whole; or

(v) Requiring the Executive to perform a significant part of Executive's duties in locations more than one hundred (100) miles from Nashville, Tennessee.

Further, and notwithstanding any other provision of this Agreement, the Executive may terminate his employment without Good Reason at any time within ninety (90) days after a Change of Control shall have occurred.

16. PAYMENTS ON TERMINATION: Upon termination of Executive's employment by the Company or the Bank, the Company and the Bank shall have the following payment obligations to Executive:

(a) If the Executive's employment is terminated due to illness of the Executive, the provisions of Section 6 shall apply.

(b) If the Executive's employment is terminated due to the death of the Executive, the provisions of Section 7 shall apply.

(c) If the Executive's employment is terminated by the Company other than for Cause, and not In Contemplation of a Change of Control of the Company or the Bank or within twelve months after a Change of Control of the Company or the Bank, the provisions of Section 8 shall apply, and therefore the payment provisions of Section 9 apply.

(d) If the Executive's employment is terminated by the Bank other than for Cause, and not In Contemplation of a Change of Control of the Company or the Bank or within twelve months after a Change of Control of the Company or the Bank, the provisions of Section 9 shall apply.

(e) If the Executive's employment is terminated by the Company for Cause, or by the Bank for Cause, the provisions of Section 10 shall apply.

(f) If the Executive's employment is terminated by the Executive as a result of a breach of the agreement by the Company or the Bank, the provisions of Section 3 apply, and therefore the payment provisions of Section 9 apply.

(g) In the event of a Voluntary Termination of Executive's employment as defined in Section 11, the provisions of Section 11 apply.

(h) If the Executive's employment is terminated by the Company or the Bank within twelve (12) months after a Change of Control of the Company, as defined in Section 12 above, or a Change of Control of the Bank, as defined in Section 13 above, or in Contemplation of a Change of Control of either, as defined in Section 14, the provisions of Section 14 shall apply.

(i) If the Executive's employment is terminated by the Executive for Good Reason, as defined in Section 15 above, the Executive's employment with the Company and with the Bank shall be deemed to have been terminated without Cause by the Company and by the Bank at the time of such termination by Executive for Good Reason. If such termination is during a period of Contemplation of Change of Control, or within twelve (12) months after a Change of Control, the provisions of Section 14 shall apply.

j) Termination of Executive's employment by the Company or by the Bank or by the Executive shall be communicated by written Notice of Termination to the other parties hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision(s) in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated.

17. CONFIDENTIALITY: In the course of the Executive's employment, the Company and the Bank may disclose or make known to the Executive, and the Executive may be given access to or may become acquainted with, certain information, including but not limited to confidential information which relates to or is useful in the businesses of the Company and the Bank and which is not available from public records or other generally available sources (collectively, "Confidential Information"), and which the Company or the Bank consider proprietary and desire to maintain confidential. During the term of this Agreement and at all times thereafter, the Executive shall not in any manner, either directly or indirectly, divulge, disclose or communicate to any person or firm, except to legal counsel for the Company or the Bank or otherwise to or for the benefit of the Company or the Bank as directed by the Company or the Bank, and except to the Executive's legal c ounsel in connection with the resolution of any dispute between the Executive and the Company or the Bank under this Agreement, any of the Confidential Information which Executive may have acquired in the course of or as an incident to Executive's employment by the Company or the Bank, the parties agreeing that such Confidential Information affects the successful and effective conduct of the business and their goodwill of the Company and the Bank, and that any material breach of the terms of this Section 17 is a material breach of this Agreement.

18. COVENANT NOT TO COMPETE: During the term of this Agreement, Executive agrees that Executive will not directly or indirectly own, become interested in, or become involved in any manner whatsoever in any business which is similar or competitive with any aspect of the business of the Company or the Bank. Without limiting the foregoing, Executive agrees during the term of this Agreement not to engage in the banking or leasing businesses, whether as an owner, partner, director, officer, employee, consultant, stockholder, agent, salesman or in any other capacity for any person, partnership, firm, corporation or other entity without the express written consent of the Board of Directors of the Company. Further, if Executive terminates Executive's employment in a Voluntary Termination or for Good Reason, or if the Company or the Bank terminate Executive's employment in Contemplation of a Change of Control, or within twelve (12) months after a Change of Control, or for Cause, for the period of twelve (12) months following the termination of Executive's employment with the Company or the Bank, Executive agrees that Executive will not directly or indirectly own, become interested in, or become involved in any manner whatsoever, including, without limitation, as an owner, partner, director, officer, employee, consultant, stockholder, agent, salesman or in any other capacity, with any credit union, savings and loan association, bank or bank holding company which has an office in Davidson County, Tennessee or in any county contiguous to Davidson County, Tennessee without the express written consent of the Board of Directors of the Company. The foregoing, however, shall not prohibit the Executive (i) from continuing to maintain any ownership interest currently held by Executive in any business which is similar or competitive with any aspect of the business of the Company or the Bank provided that the provisions of arts (ii) and (iii) of the last sentence of Se ction 3(a) above are satisfied, or (ii) from obtaining an ownership interest in a business which is similar or competitive with any aspect of the business of the Company or the Bank provided that (A) the provisions of parts (ii) and (ill) of the last sentence of Section 3(a) above are satisfied, (B) the shares of such business are publicly traded on a national securities exchange, and (C) Executive does not own, directly or indirectly, more than five percent (5%) of the total outstanding shares of such business. Executive specifically acknowledges and agrees that the foregoing restriction on competition with the Company and the Bank will not prevent Executive from obtaining gainful employment following termination of Executive's employment with the Company and the Bank, and is a reasonable restriction upon Executive's ability to compete with the Company and the Bank, given the economic benefits afforded to Executive under this Agreement.

19. NO ENTICEMENT OF EMPLOYEES: Executive agrees that Executive will not, directly or indirectly, entice or induce, or attempt to entice or induce any employee of the Company or Bank to leave the employ of the Company or the Bank during the period covered by the Non-Competition provisions of Section 18 above.

20. NO SOLICITATION: Executive will not, directly or indirectly, solicit, entice or induce, or attempt to entice or induce any customer or user of the products or services of the Bank or the Company during the period covered by the Non-Competition provisions of Section 18 above.

21. REMEDIES: Executive acknowledges and agrees that the breach or threatened breach of any of the provisions of Sections 17, 18, 19 and 20 of this Agreement will cause irreparable harm to the Company and the Bank, and can-not be adequately compensated by the payment of damages. Accordingly, Executive covenants and agrees that the Company and the Bank, in addition to any other rights or remedies which they may have, will be entitled to such equitable and injunctive relief as may be available from any court of competent jurisdiction to restrain Executive from breaching or threatening to breach any of the provisions of this Sections 17, 18, 19 and 20, without posting bond or other surety. Such right to obtain injunctive relief may be exercised at the option of the Company or the Bank in addition to, concurrently with, prior to, after, or in lieu of the exercise of any other rights or remedies which the Company or the Bank may have as a result of a ny such breach or threatened breach. In addition to all other remedies, in the event of the breach or threatened breach of any of the provisions of Sections 17,18,19 or 20 of this Agreement, the Company and Bank shall be relieved of any obligation to continue payments to the Executive pursuant to the provisions of this agreement.

22. NOTICES: For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Company:
Community Financial Group, Inc.
401 Church Street
Nashville, TN 37219
Attention: Chairman of Compensation Committee

with a copy to:
Miller & Martin LLP
1200 One Nashville Place
150 4th Avenue North
Nashville, 1N 37219
Attention: Hugh C. Howser, Jr.

If to the Bank:
The Bank of Nashville
401 Church Street
Nashville,1N 37219
Attention: Chairman of Compensation Committee

with a copy to:
Miller & Martin LLP
1200 One Nashville Place
150 4th Avenue North
Nashville, TN 37219
Attention: Hugh C. Howser, Jr.

If to the Executive:
Attilio Galli
3506 Creekbriar Drive
Houston, TX 77068

or at such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt.

23. MODIFICATION: WAIVERS APPLICABLE LAW: No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by the Executive, and on behalf of the Company by such officer as may be specifically designated by the Board of Directors of the Company after approval of the modification by the Board of Directors, and on behalf of the Bank by such officer as may be specifically designated by the Board of Directors of the Bank after approval of the modification by the Board of Directors. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with re spect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Tennessee.

24. INVALIDITY ENFORCEABILITY: The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. Any provision in this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective only to the extent of such prohibition or unenforceability without invalidating or affecting the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

25. ASSIGNMENTS: This Agreement is personal to the Executive, who may not assign his obligations hereunder.

26. SUCCESSOR RIGHTS: This Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, the Bank, its successors and assigns, and upon the Executive, and his personal or legal representatives, executors, administrators, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his devisee, legatee or other designee or, if there is no such designee, to his estate.

27. HEADINGS: Descriptive headings contained in this Agreement are for convenience only and shall not control or affect the meaning or construction of any provision hereof.

28. ARBITRATION: Any dispute, controversy or claim arising under or in connection with this Agreement shall be settled exclusively by arbitration, conducted before a panel of three arbitrators, in Nashville, Tennessee, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction. Unless otherwise provided in the rules of the American Arbitration Association, the arbitrators shall, in their award, allocate between the parties the costs of arbitration, which shall include reasonable attorneys' fees and expenses of the parties, as well as the arbitrator's fees and expenses, in such proportions as the arbitrators deem just.

29. ENTIRE AGREEMENT: This Agreement represents the entire understanding and agreement between the parties hereto with respect to the subject matter hereof, and supersedes or amends all other agreements, negotiations, understandings and representations (if any) made by and between the parties hereto; provided, however, that nothing herein shall affect in any way agreements granting or evidencing the Executive's options to acquire shares of the Company.

30. REGULATORY AND OTHER PROCEEDINGS: The provisions of this Section 30 shall control as to continuing rights and obligations under this Agreement, notwithstanding any other provision of this Agreement, for as long as they are required to be included in employment contracts between an institution insured by the FDIC and its officers and as long as the Bank is such an insured institution.

(a) If the Executive is suspended and/or temporarily prohibited from participating in the conduct of the affairs of the Bank or the Company by a notice served under applicable Federal or State statutes or regulations, the Bank's obligations under this Agreement shall be suspended as of the date of service, unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Bank and the Company shall pay the Executive all of the compensation withheld while their obligations hereunder were suspended and reinstate their obligations which were suspended.

(b) If the Executive is removed and/or permanently prohibited from participating in the conduct of the affairs of the Bank or the Company by an order issued under applicable Federal or State statutes or regulations, all obligations of the Company and the Bank under this Agreement shall terminate as of the effective date of the order, provided that vested rights of the contracting parties shall not be affected.

(c) If the Company or the Bank become insolvent or taken over by regulatory entities, all obligations under this Agreement shall terminate as of the date of default, provided that this paragraph shall not affect any vested rights of the contracting parties.

(d) All obligations under this Agreement may be terminated, except to the extent determined that continuation thereof is necessary for the continued operation of the Company or the Bank, by the FDIC at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank or approves a supervisory merger to resolve problems related to operation of the Bank, provided that any rights of the parties that have already vested shall not be affected by such action.

31. SURVIVAL: This Agreement shall remain in effect notwithstanding the termination of Executive's employment hereunder, and in any case, the provisions of Sections 18, 19, and 20 shall survive any termination of this Agreement.

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

EXECUTIVE:
/s/ ATTILIO GALLI
ATTILIO GALLI

EXECUTIVE:
/s/ ATTILIO GALLI
Attilio Galli

COMMUNITY FINANCIAL GROUP, INC.
By: /s/ JULIAN B. BAKER
Name Julian B. Baker
Title: Chairman - Compensation Committee

THE BANK OF NASHVILLE
By: /s/ MACK S. LINEBAUGH
Name: Mack S. Linebaugh
Title: Chairman