EXHIBIT 10.3


                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT (this "Agreement") is made
and entered into as of November 17, 2008,  by and among the Citizens  South Bank
(the "Bank"), a federally  chartered savings bank and a wholly-owned  subsidiary
of the Citizens  South Banking  Corporation  (the  "Company"),  and Ira McDonald
Flowe, Jr. (the "Executive").

     WHEREAS,  the Executive is currently employed as a Senior Vice President of
the Bank, pursuant to an employment agreement between the Bank and the Executive
originally entered into as of June 1, 2007 (the "Original Agreement");

     WHEREAS,  the Bank desires to assure  itself of the  continued  services of
Executive  and in  consideration  for such  continued  services  is  willing  to
establish  minimum  severance  benefits  for the  Executive  in the  event  of a
termination of employment;

     WHEREAS,  the Bank desires to amend and restate the  Original  Agreement in
order to make changes to comply with  Section 409A of the Internal  Revenue Code
of 1986, as amended (the "Code"), as well as certain other changes;

     WHEREAS,  the Bank  desires  to  ensure  that the  Bank is  assured  of the
continued   availability  of  the  Executive's  services  as  provided  in  this
Agreement;

     WHEREAS,  the  Executive  is  willing  to serve  the Bank on the  terms and
conditions hereinafter set forth; and

     NOW THEREFORE,  in  consideration  of these premises,  the mutual covenants
contained  herein,  and other good and  valuable  consideration  the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows.

                                    ARTICLE 1
                                   EMPLOYMENT

     The  Bank  hereby  employs  the  Executive  as  Senior  Vice  President  in
accordance  with the terms and  conditions of this  Agreement and for the period
stated in Article 3. The Executive hereby accepts  employment in accordance with
the terms and conditions of this Agreement,  effective on the date first written
above  (the  "Effective  Date")  and for the  period  stated in  Article  3. The
Executive  also agrees to serve as an officer or director of any  subsidiary  or
affiliate  of the Bank,  if elected.  For purposes of this  Agreement,  the term
"affiliate"  means any entity that directly,  or indirectly  through one or more
intermediaries, controls, is controlled by, or is under common control with, the
Bank.

                                    ARTICLE 2
                                     DUTIES

     As Senior Vice President of the Bank,  the Executive  shall serve under the
direction of the Bank's President and Chief Executive  Officer ("CEO"),  and the
Bank's Board of Directors (the "Board"). The Executive shall report directly to

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the Executive Vice President,  Commercial Banking Group, or such other executive
officer  as  directed  by the  President  and  CEO.  He  shall  serve  the  Bank
faithfully,  diligently,  competently,  and to the best of his  ability,  and he
shall exclusively devote his full time, energy, and attention to the business of
the Bank and to the  promotion of the Bank's  interests  throughout  the term of
this  Agreement.  Without  the written  consent of the  President  and CEO,  the
Executive shall not render services to or for any person, firm, corporation,  or
other entity or  organization  in exchange for  compensation,  regardless of the
form in which such  compensation  is paid and  regardless  of whether it is paid
directly or indirectly to the Executive. Nothing in this Article 2 shall prevent
the Executive from managing his personal investments and affairs,  provided that
doing so does not  interfere  with the  proper  performance  of his  duties  and
responsibilities with the Bank.

                                    ARTICLE 3
                               TERM OF EMPLOYMENT

     The  term of this  Agreement  shall  commence  as of the date  first  above
written and shall expire on June 1, 2010.

                                    ARTICLE 4
                         COMPENSATION AND OTHER BENEFITS

     4.1 BASE SALARY.  In  consideration  of the Executive's  performance of his
obligations under this Agreement,  the Bank shall pay or cause to be paid to the
Executive a salary at the annual rate of not less than $140,000, payable in such
installments  as employees in general are paid.  The  Executive's  salary may be
increased but may not be reduced without his written consent.  It is anticipated
that the Executive's  salary will be increased  annually in conjunction with his
annual performance  review. The Executive's salary, as the same may be increased
from time to time, is referred to in this Agreement as the "Base Salary."

     4.2  BENEFIT  PLANS  AND  PERQUISITES.  The  Executive  shall  be  entitled
throughout  the term of this  Agreement to participate in any and all officer or
employee compensation,  bonus, incentive,  and benefit plans in effect from time
to time and  available  to  employees  and officers in general (on such terms as
such plans are made  available to employees and  officers),  including,  without
limitation, plans providing pension, medical, dental, disability, and group life
benefits,  including  the Bank's  401(k) Plan,  and to receive any and all other
fringe  benefits  provided  from  time to  time,  provided  that  the  Executive
satisfies the eligibility requirements for any such plans or benefits.

     4.3 VACATION.  The Executive  shall be entitled to paid annual vacation and
sick leave in accordance with the policies  established from time to time by the
Bank.  The Executive  shall not be entitled to any additional  compensation  for
failure to use  allotted  vacation or sick  leave,  nor shall the  Executive  be
entitled to  accumulate  unused sick leave or vacation days from one year to the
next, unless permitted under the policies of the Bank then in effect.

     4.4 INDEMNIFICATION.

     (a) The Bank shall  indemnify  Executive  to the fullest  extent  permitted
against all expenses and  liabilities  reasonably  incurred by him in connection
with or arising out of any action, suit or proceeding in which he may be


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involved by reason of his having been an officer of the Bank  (whether or not he
continues  to  be  an  officer  at  the  time  of  incurring  such  expenses  or
liabilities)  such expenses and  liabilities to include,  but not be limited to,
judgments,   court  costs  and  attorneys'  fees  and  the  cost  of  reasonable
settlements (such settlements must be approved by the Board),  provided that the
Bank  shall not be  required  to  indemnify  or  reimburse  Executive  for legal
expenses  or  liabilities  incurred  in  connection  with  an  action,  suit  or
proceeding  arising from any illegal or  fraudulent  act committed by Executive.
Any such  indemnification  shall be made  consistent with Section 545.121 of the
Office  of Thrift  Supervision  ("OTS")  Regulations  and  Section  18(k) of the
Federal Deposit Insurance Act, 12 U.S.C. ss. 1828(k), and the regulations issued
thereunder in 12 C.F.R. Part 359.

     (b) No indemnification shall be made unless the Bank gives the OTS at least
60 days' notice of its intention to make such indemnification. Such notice shall
state the facts on which the action arose, the terms of any settlement,  and any
disposition  of the  action  by a court.  Such  notice,  a copy  thereof,  and a
certified copy of the resolution  containing the required  determination  by the
Board, and shall be sent to the regional director of the OTS, who shall promptly
acknowledge  receipt thereof.  The notice period shall run from the date of such
receipt.  No such  indemnification  shall be made if the OTS advises the Bank in
writing within such notice period, of its objection thereto.

                                    ARTICLE 5
                            TERMINATION OF EMPLOYMENT

     5.1 TERMINATION BY THE EMPLOYER.

     (a)  Death  or  Disability.  The  Executive's  employment  shall  terminate
automatically  and without  further  obligation  on the date of the  Executive's
death (other than the payment of Base Salary through the date of death).

     The Bank may terminate  this  Agreement if the  Executive is disabled.  For
purposes of this  Agreement,  the Executive  shall be deemed to be "disabled" if
the Executive:  (i) is unable to engage in any substantial  gainful  activity by
reason of any medically  determinable  physical or mental impairment that can be
expected to result in death, or last for a continuous period of not less than 12
months;  (ii)  by  reason  of any  medically  determinable  physical  or  mental
impairment  that can be  expected to result in death,  or last for a  continuous
period of not less than 12 months, the Executive is receiving income replacement
benefits for a period of not less than three months under an accident and health
plan  covering  employees  of the Bank;  or (iii) is  determined  to be  totally
disabled by the Social Security Administration.  The Executive shall be entitled
to receive  benefits under any short or long-term  disability plan maintained by
the Bank.

     (b) Termination  Without Cause. With written notice to the Executive thirty
(30) days in advance, the Bank may terminate the Executive's  employment for any
reason and without Cause. If requested by the Bank in the aforementioned notice,
upon receipt of the notice  Executive shall refrain from performing  services at
the offices of the Bank,  and/or  refrain from acting or holding  himself out to
the  public  as acting  on  behalf  of the Bank  (and any  affiliates  thereof).
Notwithstanding  the  foregoing,  if  Executive  is  requested  to refrain  from
providing any further services as outlined in the preceding  sentence,  he shall
nevertheless be entitled to receive his Base Salary and all benefits  previously
provided him for the duration of the thirty day notice period.


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     (c)  Termination  With Cause.  Effective  on the date on which  termination
notice is given to the Executive and without the  requirement  of advance notice
to the Executive,  the Bank may terminate the Executive's employment with Cause.
For  purposes  of  this  Agreement,   "Cause"  means  the  Executive's  personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving
personal  profit,  material  breach  of the  Bank's  Code  of  Ethics,  material
violation of the  Sarbanes-Oxley  requirements  for officers of public companies
that  in the  reasonable  opinion  of the CEO or the  Board  will  likely  cause
substantial  financial harm or substantial injury to the reputation of the Bank,
willfully  engaging in actions that in the reasonable  opinion of the CEO or the
Board will likely cause substantial  financial harm or substantial injury to the
business  reputation of the Bank,  intentional failure to perform stated duties,
willful  violation of any law,  rule or regulation  (other than routine  traffic
violations or similar  offenses) or final  cease-and-desist  order,  or material
breach of any provision of the contract.

     5.2  TERMINATION  BY  THE  EXECUTIVE.   The  Executive  may  terminate  his
employment with written notice to the Bank thirty (30) days in advance,  whether
with or without Good Reason. If the Executive  terminates with Good Reason,  the
termination  will take effect at the  conclusion of the 30-day period unless the
event or  circumstance  constituting  Good Reason is cured by the Bank or unless
the notice of termination for Good Reason is revoked by the Executive within the
30-day  period.  For  purposes  of  this  Agreement,  "Good  Reason"  means  the
occurrence of any of the following events:

     (a) REDUCED BASE SALARY OR BENEFITS:  a material  reduction in the benefits
and  perquisites,  including  a  reduction  in Base  Salary,  being  provided to
Executive  relative to those being provided as of the Effective Date (except for
any  reduction  that is part of a reduction in pay or benefits that is generally
applicable to officers or employees),

     (b) REDUCED  RESPONSIBILITIES  OR STATUS:  assignment  to the  Executive of
duties that are materially  inconsistent with the Executive's position as Senior
Vice President,

     (c) MATERIAL  BREACH:  a material breach of this Agreement by the Bank that
is not corrected within thirty (30) days following notice from Executive, and

     (d)  RELOCATION  OF THE  EXECUTIVE:  requiring  the Executive to change his
principal work location, to any location that is more than fifty (50) miles from
the location on the date of this Agreement.

     5.3 NOTICE. Any purported termination by the Bank or by the Executive shall
be communicated  by written notice of termination to the other.  The notice must
state the specific  termination  provision of this Agreement relied upon. Except
for termination for Cause,  which becomes effective upon receipt by Executive of
the notice,  a termination  of employment  shall become  effective 30 days after
receipt of the notice.  If  termination  is for Cause or with Good  Reason,  the
notice must state in reasonable detail the facts and  circumstances  forming the
basis for termination.


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                                    ARTICLE 6
                   COMPENSATION AND BENEFITS AFTER TERMINATION

     6.1  CAUSE.  If  the  Executive's  employment  terminates  for  Cause,  the
Executive  shall  receive the Base Salary to which he was  entitled  through the
date on which  termination  becomes effective and any other benefits that may be
available  to him under the Bank's  benefit  plans and policies in effect on the
date of termination.  Executive shall not be entitled to any further payments or
benefits.

     6.2  TERMINATION  BY THE  EXECUTIVE  OTHER  THAN  FOR GOOD  REASON.  If the
Executive terminates  employment other than for Good Reason, the Executive shall
receive the Base Salary to which he is entitled, and any other benefits that may
be available to him under the Bank's  benefit  plans and  policies,  through the
date on which his termination becomes effective.

     6.3 CONTINUED BASE SALARY IN THE CASE OF TERMINATION BECAUSE OF DISABILITY.
If the Executive's  employment  terminates because of disability,  the Executive
shall receive the benefits  provided under any disability  program  sponsored by
the Bank.  To the  extent  that such  benefits  are less than  Executive's  Base
Salary,  the Bank  shall pay the  Executive  an amount  equal to the  difference
between such disability plan benefits and the amount of Executive's  Base Salary
for the remaining term of this Agreement.  Any payments required hereunder shall
commence  within  thirty  (30)  days  from the  Executive's  termination  due to
disability and be payable in semi-monthly installments.

     6.4  TERMINATION BY THE BANK WITHOUT CAUSE AND TERMINATION BY EXECUTIVE FOR
GOOD REASON OTHER THAN FOLLOWING A CHANGE IN CONTROL. If the Bank terminates the
Executive's  employment without Cause or if the Executive terminates  employment
for Good Reason, the Executive shall (i) continue to receive his Base Salary and
other employee benefits through the date of the termination, (ii) receive a lump
sum cash  payment  from the Bank equal to  one-half of the Base Salary in effect
immediately  prior to the notice of termination,  which payment shall be made by
the Bank no later than the date of termination, or in the event the Executive is
a   Specified   Employee   (within   the   meaning   of   Treasury   Regulations
ss.1.409A-1(i)),  and to the  extent  necessary  to avoid  penalties  under Code
Section  409A,  payment  shall be made to the  Executive on the first day of the
seventh month following the date of  termination,  and (iii) continue to receive
life  insurance  and  non-taxable  medical  and dental  coverage,  substantially
identical to the coverage  maintained by the Bank for the Executive  immediately
prior to his  termination  (except to the  extent  such  coverage  is changed in
application  to all employees or officers),  which coverage shall continue for a
period of six (6) months following the date of termination.

     The Bank and the Executive  acknowledge and agree that the compensation and
benefits  under  this  Section  6.4 shall not apply if the Bank  terminates  the
Executive's  employment without Cause or if the Executive terminates  employment
for Good  Reason,  in either case as of or  following  a Change in  Control,  as
provided in Section 7.


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     6.5 SEPARATION  FROM SERVICE.  For purposes of Section 6.4,  termination by
the Bank without Cause and the  Executive's  termination  of employment for Good
Reason as used herein shall be construed to require a "Separation  from Service"
as  defined  in Code  Section  409A  and the  Treasury  Regulations  promulgated
thereunder,  provided,  however,  that  the Bank  and the  Executive  reasonably
anticipate  that the level of bona fide  services the  Executive  would  perform
after termination would permanently decrease to a level that is less than 50% of
the average level of bona fide services  performed (whether as an employee or an
independent contractor) over the immediately preceding 36-month period.

                                    ARTICLE 7
                           CHANGE IN CONTROL BENEFITS

     7.1 CHANGE IN CONTROL TERMINATION BENEFITS.

     (a) TERMINATION OF EXECUTIVE OR THE EXECUTIVE'S  VOLUNTARY RESIGNATION FROM
THE  BANK'S  EMPLOY  FOR ANY REASON  AFTER A CHANGE IN  CONTROL.  If a Change in
Control  occurs  during  the  term of this  Agreement,  the  Executive  shall be
entitled  to the  lump sum  cash  payment  specified  in  paragraph  (b) and the
benefits  provided in (c) below if the Executive's  employment is  involuntarily
terminated  by the Bank without Cause at any time after the Change in Control or
if the Executive  voluntarily resigns from employment for any reason at any time
after the Change in Control.

     (b) LUMP SUM CASH  PAYMENT.  the Bank shall make or cause to be made a lump
sum cash  payment to the  Executive in an amount equal to the greater of (i) the
Base Salary in effect  immediately  prior to the Change in Control,  or (ii) the
Base Salary in effect  immediately  prior to the termination of employment.  The
payment  required  under  this  paragraph  (b) is payable no later than five (5)
business days after the Executive's employment  terminates,  or in the event the
Executive is a Specified  Employee  (within the meaning of Treasury  Regulations
ss.1.409A-1(i)),  and to the  extent  necessary  to avoid  penalties  under Code
Section  409A,  payment  shall be made to the  Executive on the first day of the
seventh month after the Executive's employment terminates.

     (c)  INSURANCE  COVERAGE.  Executive  shall be entitled to  continued  life
insurance and non-taxable medical and dental coverage,  substantially  identical
to the  coverage  maintained  by the  Bank  (or  its  successor)  for  Executive
immediately  prior to his  termination  (except to the extent  such  coverage is
changed in  application  to all employees or  officers),  which  coverage  shall
continue  for a period of twelve (12) months  following  the  effective  date of
termination.

     (d) SEPARATION  FROM SERVICE.  For purposes of Section 7.1, the Executive's
termination  of  employment  following a Change in Control shall be construed to
require a  "Separation  from  Service" as defined in Code  Section  409A and the
Treasury Regulations  promulgated thereunder,  provided,  however, that the Bank
and the Executive reasonably anticipate that the level of bona fide services the
Executive would perform after termination would permanently  decrease to a level
that is less  than 50% of the  average  level of bona  fide  services  performed
(whether as an  employee  or an  independent  contractor)  over the  immediately
preceding 36-month period.



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     7.2  DEFINITION  OF CHANGE IN  CONTROL.  For  purposes  of this  Agreement,
"Change in Control" means any one of the following events occurs:

     (a)  CHANGE  IN  OWNERSHIP  OF THE  COMPANY  OR THE  BANK.  A change in the
ownership  of  the  Company  or  the  Bank  (collectively,  as  applicable,  the
"Employers")  shall  occur on the date  that any one  person,  or more  than one
person   acting  as  a  group  (as  defined  in  Treasury   Regulation   Section
1.409A-3(i)(5)(v)(B)),  acquires  ownership  of  stock  of the  Employers  that,
together  with  stock  held by such  person or group,  constitutes  more than 50
percent of the total fair market value or total voting power of the stock of the
Employers. However, if any one person or more than one person acting as a group,
is  considered  to own more than 50 percent of the total  fair  market  value or
total voting power of the stock of the Employers,  the acquisition of additional
stock by the same person or persons is not  considered  to cause a change in the
ownership of the Employers (or to cause a change in the effective control of the
Employers  (within  the  meaning of  paragraph  (b)  below).  An increase in the
percentage of stock owned by any one person,  or persons acting as a group, as a
result of a transaction in which the corporation  acquires its stock in exchange
for  property  will be treated as an  acquisition  of stock for purposes of this
section.  This paragraph (a) applies only when there is a transfer of stock of a
corporation  (or  issuance  of  stock  of  a  corporation)  and  stock  in  such
corporation remains outstanding after the transaction

     (b) CHANGE IN THE EFFECTIVE CONTROL OF THE COMPANY OR THE BANK. A change in
the effective  control of the Employers  shall occur on the date that either (i)
any one  person,  or more  than one  person  acting as a group  (as  defined  in
Treasury  Regulation  Section  1.409A-3(i)(5)(v)(B)),  acquires (or has acquired
during the 12-month period ending on the date of the most recent  acquisition by
such person or persons)  ownership  of stock of the  corporation  possessing  30
percent or more of the total voting power of the stock of such  corporation;  or
(ii) a majority of members of the  corporation's  board of directors is replaced
during any 12-month  period by directors  whose  appointment  or election is not
endorsed by a majority of the members of the  corporation's  board of  directors
prior to the date of the appointment or election,  provided that for purposes of
this paragraph (b)(ii),  the term corporation refers solely to a corporation for
which no other corporation is a majority shareholder. In the absence of an event
described  in  paragraph  (i) or (ii),  a change in the  effective  control of a
corporation will not have occurred.  If any one person,  or more than one person
acting as a group,  is considered to effectively  control a corporation  (within
the meaning of this paragraph (b)), the acquisition of additional control of the
corporation by the same person or persons is not considered to cause a change in
the effective  control of the corporation (or to cause a change in the ownership
of the  corporation  within the meaning of paragraph  (a)).  Persons will not be
considered to be acting as a group solely  because they purchase or own stock of
the  same  corporation  at the same  time,  or as a  result  of the same  public
offering.

     (c) CHANGE IN THE  OWNERSHIP OF A  SUBSTANTIAL  PORTION OF THE COMPANY'S OR
BANK'S  ASSETS.  A change  in the  ownership  of a  substantial  portion  of the
Employer's  assets shall occur on the date that any one person, or more than one
person   acting  as  a  group  (as  defined  in  Treasury   Regulation   Section
1.409A-3(i)(5)(vii)(C)),  acquires (or has acquired  during the 12-month  period
ending on the date of the most  recent  acquisition  by such  person or persons)
assets from the  corporation  that have a total gross fair market value equal to
or more than 40% of the total  gross fair  market  value of all of the assets of
the corporation immediately prior to such acquisition or acquisitions.  For this
purpose,  gross  fair  market  value  means  the  value  of  the  assets  of the
corporation,  or the value of the assets being disposed of,  determined  without
regard to any  liabilities  associated  with such assets.  There is no Change in
Control  under this  paragraph (c) when there is a transfer to an entity that is
controlled by the shareholders of the transferring corporation immediately after
the transfer.


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     Each  of the  subparagraphs  (a)  through  (c) of  this  Section  shall  be
construed and interpreted  consistent with the requirements of Code Section 409A
and any Treasury Regulations or other guidance issued thereunder.

     7.3 NO MULTIPLE SEVERANCE PAYMENTS. If the Executive receives payment under
Section 7.1 he shall not be entitled to any additional  severance benefits under
Section 6.4 of this Agreement.

                                    ARTICLE 8
                          POST TERMINATION OBLIGATIONS

     8.1  NON-COMPETITION AND  NON-SOLICITATION.  The Executive hereby covenants
and agrees that,  for a period of six months  following any  termination  of his
employment,  other  than a  termination  of  employment  following  a Change  in
Control,  he shall not, without the written consent of the Bank, either directly
or indirectly:

     (i) solicit,  offer  employment  to, or take any other action  intended (or
that a reasonable person acting in like circumstances  would expect) to have the
effect of causing any  officer or employee of the Bank or any of its  affiliates
to terminate his or her  employment and accept  employment or become  affiliated
with, or provide  services for  compensation in any capacity  whatsoever to, any
business  whatsoever  that  competes with the business of the Bank or any of its
affiliates or has  headquarters  or offices  within 50 miles of the locations in
which  the  Bank or its  affiliates  has  business  operations  or has  filed an
application for regulatory approval to establish an office;

     (ii)  become  an  officer,  employee,  consultant,   director,  independent
contractor, agent, sole proprietor, joint venturer, greater than 5% equity-owner
or stockholder,  partner or trustee of or provide  services for  compensation in
any capacity  whatsoever  to, any savings  bank,  savings and loan  association,
savings and loan holding  company,  credit union,  bank or bank holding company,
insurance company or agency,  any mortgage or loan broker or any other financial
services  entity or business  whatsoever  that competes with the business of the
Bank or any of its affiliates or has  headquarters or offices within 50 miles of
Cornelius,  North Carolina;  provided,  however,  that this restriction shall no
apply if the Executive's employment is terminated,  either by Executive, with or
without Good Reason, or by the Bank, following a Change in Control; or

     (iii) solicit,  provide any information,  advice or  recommendation or take
any  other  action  intended  (or  that  a  reasonable  person  acting  in  like
circumstances  would  expect) to have the effect of causing any  customer of the
Bank  or  its  affiliates  to  terminate  an  existing  business  or  commercial
relationship with the Bank or its affiliates.


<PAGE>

     8.2 FURTHER  ASSISTANCE.  Executive shall, upon reasonable notice,  furnish
such  information  - and  assistance to the Bank and/or its  affiliates,  as may
reasonably be required by the Bank and/or its affiliates, in connection with any
litigation  in which it or any of its  subsidiaries  or  affiliates  is,  or may
become,  a party;  provided,  however,  that Executive  shall not be required to
provide  information or assistance  with respect to any  litigation  between the
Executive and the Bank, or any of its affiliates.

     8.3 EQUITABLE  REMEDIES.  All payments and benefits to the Executive  under
this Agreement shall be subject to the Executive's compliance with this Section.
The parties hereto, recognizing that irreparable injury will result to the Bank,
its  business  and  property  in the  event of the  Executive's  breach  of this
Section, agree that, in the event of any such breach by the Executive,  the Bank
will be entitled, in addition to any other remedies and damages available, to an
injunction  to restrain the  violation  hereof by the  Executive and all persons
acting for or with the Executive.  The Executive  represents and admits that the
Executive's  experience and  capabilities are such that the Executive can obtain
employment  in a business  engaged in other lines  and/or of a different  nature
than the Bank, and that the  enforcement  of a remedy by way of injunction  will
not prevent the  Executive  from earning a  livelihood.  Nothing  herein will be
construed as  prohibiting  the Bank from  pursuing  any other  remedies for such
breach  or  threatened  breach,  including  the  recovery  of  damages  from the
Executive.

                                    ARTICLE 9
                                  MISCELLANEOUS

     9.1 SUCCESSORS AND ASSIGNS.

     (a) THIS  AGREEMENT  IS BINDING ON THE BANK'S  SUCCESSORS.  This  Agreement
shall be binding  upon the Bank and any  successor  to the Bank,  including  any
persons  acquiring  directly  or  indirectly  all  or  substantially  all of the
business   or  assets   of  the  Bank  by   purchase,   merger,   consolidation,
reorganization,  or otherwise.  Any such successor shall thereafter be deemed to
be "the Bank" for purposes of this Agreement.  But this Agreement and the Bank's
obligations under this Agreement are not otherwise assignable,  transferable, or
delegable by the Bank.  By agreement in form and substance  satisfactory  to the
Executive,  the Bank shall require any successor to all or substantially  all of
the business or assets of the Bank expressly to assume and agree to perform this
Agreement  in the same  manner and to the same extent the Bank would be required
to perform if no such succession had occurred.

     (b) THIS  AGREEMENT IS  ENFORCEABLE  BY THE EXECUTIVE  AND HIS HEIRS.  This
Agreement  will inure to the benefit of and be  enforceable  by the  Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, and legatees.

     (c) THIS  AGREEMENT  IS  PERSONAL  IN NATURE  AND IS NOT  ASSIGNABLE.  This
Agreement is personal in nature.  Without  written consent of the other parties,
no party shall assign,  transfer,  or delegate  this  Agreement or any rights or
obligations under this Agreement,  except as expressly provided herein.  Without
limiting the generality or effect of the  foregoing,  the  Executive's  right to
receive payments hereunder is not assignable or transferable, whether by pledge,
creation  of a security  interest,  or  otherwise,  except for a transfer by the
Executive's  will or by the laws of descent and  distribution.  If the Executive
attempts an  assignment  or transfer  that is contrary to this  Section 9.1, the
Bank shall have no liability to pay any amount to the assignee or transferee.


<PAGE>

     9.2  GOVERNING  LAW,  JURISDICTION  AND  FORUM.  This  Agreement  shall  be
construed  under  and  governed  by the  internal  laws of the  State  of  North
Carolina,  without  giving  effect to any  conflict  of laws  provision  or rule
(whether of the State of North  Carolina or any other  jurisdiction)  that would
cause the  application of the laws of any  jurisdiction  other than the State of
North Carolina. By entering into this Agreement, the Executive acknowledges that
he is subject to the  jurisdiction  of both the federal and state  courts in the
State of North  Carolina.  Any  actions  or  proceedings  instituted  under this
Agreement  shall be brought and tried solely in courts located in Gaston County,
North Carolina or in the federal court having  jurisdiction  in Gastonia,  North
Carolina.  The Executive expressly waives his rights to have any such actions or
proceedings brought or tried elsewhere.

     9.3 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of the
parties  concerning the employment of the Executive by the Bank, and any oral or
written  statements,  representations,  agreements,  or  understandings  made or
entered into prior to or contemporaneously with the execution of this Agreement,
are  hereby  rescinded,  revoked,  and  rendered  null and void by the  parties.
Benefits  payable under this  Agreement  shall not be reduced by other  benefits
paid to the Executive by the Bank.

     9.4 NOTICES.  Any notice under this Agreement  shall be deemed to have been
effectively made or given if in writing and personally  delivered,  delivered by
mail properly  addressed in a sealed  envelope,  postage prepaid by certified or
registered mail, delivered by a reputable overnight delivery service, or sent by
facsimile.  Unless  otherwise  changed  by  notice,  notice  shall  be  properly
addressed to the  Executive if addressed to the address of the  Executive on the
books and records of the Bank at the time of the  delivery of such  notice,  and
properly  addressed  to the Bank if  addressed to the Bank at 519 South New Hope
Road, Gastonia, North Carolina 28054-4040, Attention: Corporate Secretary.

     9.5  SEVERABILITY.  In the case of conflict  between any  provision of this
Agreement and any statute,  regulation,  or judicial precedent, the latter shall
prevail,  but the affected  provisions of this Agreement  shall be curtailed and
limited solely to the extent  necessary to bring them within the requirements of
law.  If any  provision  of this  Agreement  is held  by a  court  of  competent
jurisdiction  to  be  indefinite,   invalid,  void  or  voidable,  or  otherwise
unenforceable,  the balance of this  Agreement  shall continue in full force and
effect unless such  construction  would clearly be contrary to the intentions of
the parties or would result in an injustice.

     9.6 CAPTIONS AND  COUNTERPARTS.  The captions in this  Agreement are solely
for convenience.  The captions in no way define, limit, or describe the scope or
intent of this Agreement This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which  together shall
constitute one and the same instrument.

     9.7 NO DUTY TO  MITIGATE.  the  Bank  hereby  acknowledges  that it will be
difficult  and could be  impossible  (a) for the  Executive  to find  reasonably
comparable  employment after his employment  terminates,  and (b) to measure the
amount  of  damages  the  Executive  may  suffer  as a  result  of  termination.
Additionally,  the Bank acknowledges that its general severance pay plans do not
provide for mitigation,  offset,  or reduction of any severance payment received
thereunder.  Accordingly,  the Bank  further  acknowledges  that the  payment of
severance and termination benefits under this Agreement is reasonable and shall


<PAGE>

     be liquidated damages.  The Executive shall not be required to mitigate the
amount  of  any  payment  provided  for  in  this  Agreement  by  seeking  other
employment.  Moreover,  the amount of any payment provided for in this Agreement
shall not be reduced by any  compensation  earned or  benefits  provided  as the
result of  employment  of the  Executive or as a result of the  Executive  being
self-employed after termination of his employment.

     9.8 AMENDMENT  AND WAIVER.  This  Agreement  may not be amended,  released,
discharged,  abandoned,  changed,  or  modified  in  any  manner,  except  by an
instrument in writing signed by each of the parties  hereto.  The failure of any
party  hereto to enforce  at any tune any of the  provisions  of this  Agreement
shall in no way be  construed to be a waiver of any such  provision,  nor in any
way to affect the validity of this Agreement or any part thereof or the right of
any party thereafter to enforce each and every such provision.  No waiver or any
breach of this Agreement shall be held to be a waiver of any other or subsequent
breach.

                                   ARTICLE 10
                               REQUIRED PROVISIONS

     10.1 BANK'S RIGHT TO TERMINATE THE EXECUTIVE'S EMPLOYMENT. The Bank's Board
of Directors  may  terminate the  Executive's  employment  at any time,  but any
termination by the Board of Directors,  other than termination for Cause,  shall
not prejudice the Executive's right to compensation or other benefits under this
Agreement.  The Executive  shall not have the right to receive  compensation  or
other benefits for any period after termination for Cause.

     10.2 SUSPENSION OF BANK'S OBLIGATIONS IF THE EXECUTIVE IS SUSPENDED. If the
Executive is suspended from office or temporarily  prohibited from participating
in the Bank's  affairs  by a notice  served  under  section  8(e)(3)  (12 U.S.C.
1818(e)(3)) or 8(g) (12 U.S.C.  1818(g)) of the Federal  Deposit  Insurance Act,
Citizen  South'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 may in its discretion (1) pay the Executive all
or part of the compensation withheld while the Bank's obligations were suspended
and  (2)  reinstate  in  whole  or in  part  any of the  obligations  that  were
suspended.

     10.3 TERMINATION OF BANK'S OBLIGATIONS IF THE EXECUTIVE IS REMOVED.  If the
Executive is removed or permanently  prohibited from participating in the Bank's
affairs by an order  issued under  section 8(e) (12 U.S.C.  1818(e)) or 8(g) (12
U.S.C.  1818(g)) of the Federal  Deposit  Insurance Act, all  obligations of the
Bank under this Agreement shall terminate as of the effective date of the order,
but vested rights of the parties shall not be affected.

     10.4  TERMINATION  IF BANK IS IN  DEFAULT.  If the  Bank is in  default  as
defined in section 3(x) (12 U.S.C.  1813(x)(1)) of the Federal Deposit Insurance
Act, all  obligations of the Bank under this Agreement shall terminate as of the
date of default,  but this  paragraph 10.4 shall not affect any vested rights of
the parties.


<PAGE>

     10.5 TERMINATION  ASSOCIATED WITH REGULATORY ACTION. All obligations of the
Bank under this Agreement shall terminate,  except to the extent determined that
continuation  of the contract is necessary  for the  continued  operation of the
institution, (1) by the Director of the OTS or the Director's designee, when the
Federal  Deposit  Insurance  Corporation  enters  into an  agreement  to provide
assistance to or on behalf of the Bank under the authority  contained in section
13(c) of the Federal Deposit  Insurance Act (12 U.S.C.  1823(c)),  or (2) by the
Director or the Director' designee when the OTS approves a supervisory merger to
resolve  problems  related  to the  operations  of the  Bank or when the Bank is
determined by the OTS or by the Federal Deposit  Insurance  Corporation to be in
an unsafe or  unsound  condition.  Vested  rights  of the  parties  shall not be
affected, however.

     10.6  PAYMENTS  ARE  SUBJECT  TO  COMPLIANCE  WITH 12 U.S.C.  1828(k).  Any
payments made to the Executive  under this Agreement or otherwise are subject to
and conditioned  upon their compliance with section 18(k) of the Federal Deposit
Insurance Act (12 U.S.C. 1828(k)) and any regulations promulgated thereunder.







<PAGE>

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

WITNESS:                                   CITIZENS SOUTH BANK

/s/ Paul L. Teem, Jr.                      /s/ Kim S. Price
----------------------------------         -------------------------------------
Paul L. Teem, Jr.                          Kim S. Price
                                           President and Chief Executive Officer


WITNESS:                                   EXECUTIVE

/s/ Paul L. Teem, Jr.                      /s/ Ira McDonald Flowe, Jr.
----------------------------------         -------------------------------------
Paul L. Teem, Jr.                          Ira McDonald Flowe, Jr.