Document:

ex10-2_1320256.htm

     

    

    

    SHARE
PURCHASE AGREEMENT

     

    

    BY

     

    [__]

     

    AS
SELLER

     

    

    

    AND

     

    

    

    VERNIY
AKTIV

     

    AS
BUYER

     

    

    

    

    CONCERNING

     

    CASPIAN
INTERNATIONAL OIL CORPORATION

     

    

    DATED
[________], 2008

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SHARE
PURCHASE AGREEMENT

     

    THIS
SHARE PURCHASE AGREEMENT (this Agreement),
dated as of  [________], 2008 (the Effective
Date), is hereby entered into by and between [NAME], an individual
residing at [address] (the Seller)
and VERNIY AKTIV, a closed unit risk investment fund organized under the laws of
the Republic of Kazakhstan (in accordance with certificate of state registration
for share issuance No. 30/05, issued by the Market and Financial Entity
Regulation and Supervisory Agency of the Republic of Kazakhstan on June 13,
2007) with a legal address of 117/6 Dostyk Ave., Almaty, Kazakhstan 050059 (the
Buyer), as
represented by its portfolio manager, VERNIY CAPITAL JOINT STOCK COMPANY, a
joint stock company organized under the laws of the Republic of Kazakhstan (in
accordance with state registration certificate No. 81096-1910-АО, issued by
Department of Justice of Almaty on October 19, 2006 and license manage portfolio
investments No. 0403200678, issued by the Market and Financial Entity Regulation
and Supervisory Agency of the Republic of Kazakhstan on dated April 19, 2007),
with a legal address of 117/6 Dostyk Ave., Almaty, Kazakhstan 050059, with
respect to the sale of shares in CASPIAN INTERNATIONAL OIL CORPORATION, a
Delaware corporation with offices located at 1800 West Loop South, Suite 850,
Houston, Texas USA 77027 (the Company).  The
Seller and Buyer are each referred to herein individually as a Party to
this Agreement, and collectively as the Parties to
this Agreement.

    

    NOW,
THEREFORE, in consideration of the premises set out above and the provisions set
out below the Parties agree as follows:

    

    ARTICLE
I – DEFINITIONS

    

    Definitions

    

    1.1  As
used in this Agreement:

    

    Affiliate
shall mean, as to any Person, any other Person that, directly or indirectly,
controls, is controlled by or is under common control with such Person or is a
director or officer of such Person.  For purposes of this definition,
the term “control” (including the terms “controlling,” “controlled by” and
“under common control with”) of a Person means the possession, direct or
indirect, of the power to vote 5% or more of the Voting Stock of such entity or
to direct or cause the direction of the management and policies of such Person,
whether through ownership of Voting Stock, by contract or
otherwise.

    

    Agreement
shall mean this Share Purchase Agreement, dated as of [________],
2008.

    

    Bankruptcy
Code shall mean the United States Bankruptcy Code, Title 11 of the United
States Code, as amended.

    

    Business
Day shall mean a day of the year on which banks are not required or
authorized by law to close in New York City.

    

    Buyer
shall have the meaning set forth in the recitals to this Agreement.

    

    Closing
shall have the meaning set forth in Section 2.2(a).

    

    Company
shall have the meaning set forth in the recitals to this
Agreement.

    

    Confidential
Information shall mean, with respect to both Parties hereto, this
Agreement, and with respect to each Party hereto, all information delivered by
the other Party to such Party in connection with this Agreement, negotiations
with respect to this Agreement and the transactions contemplated by or otherwise
pursuant to this Agreement; provided,
however, that such term does not include

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    information
that (a) was publicly known or otherwise known to the re­ceiving Party
prior to the time of such disclosure, (b) was disclosed to the receiving Party
on a non-confidential basis prior to this Agreement; (c) subsequently
becomes pub­licly known through no act or omission by the receiving Party or
any Person acting on such Party’s behalf, or (d) otherwise becomes known to
the receiving Party other than through disclosure by the delivering Party or any
Person with a duty to keep such information confidential.  Damages
shall mean the amount of any actual liability, loss, cost expense, claim award,
or judgment incurred or suffered by any Party hereto, as limited by Section 5.2
hereof, arising out of or resulting from any breach of the representations,
warranties or covenants of this Agreement, provided,
however, that Buyers and Sellers shall not be entitled to compensation
under Section 5.2 for, and Damages
shall not include, loss of profits or other indirect or consequential damages
suffered by the Party claiming damages, or any special or punitive
damages.

    

    Encumbrance
shall mean any lien, mortgage, pledge, encumbrance, proxy, voting trust,
voting agreement, adverse claim, contractual restriction on transfer or any
other charge effecting the title to or rights of the holder of any
Shares.

    

    Escrow
Agent shall have the meaning set forth in Section 2.2(b).

    

    Escrowed
Documents shall have the meaning set forth in Section
2.2(b).

    

    Faris
Agreement shall have the meaning set forth in Section
2.2(a).

    

    Governmental
Authority shall mean any nation and any political subdivision of such
nation, and any government, department, court, commission, board, bureau,
ministry, agency, or other instrumentality of such a nation or political
subdivision, which exercises or is entitled to excise administrative, executive,
judicial legislative, police, regulatory or taxing authority.

    

    Law shall
mean any law, statute, rule, regulation, ordinance, order, decree, requirement,
judgment, or code of any Governmental Authority that had both been published by
any Governmental Authority or recognized commercial compiler of laws in effect
at the time of the activity in question.

     

    Material Adverse
Effect shall mean, with respect to any Person, a negative financial
impact on the business, assets or financial condition of such Person that, when
expressed in monetary terms is equal to or greater than US$50,000 (fifty
thousand United States dollars).

     

    Notice
shall have the meaning set forth in Section 6.1.

    

    Party
shall mean the Seller or Buyer, and Parties
shall mean the Buyer and the Seller collectively.

    

    Person
shall mean any individual, partnership, corporation (including a business
trust), joint stock company, trust, unincorporated association, joint venture,
limited liability company or other entity, or a government or any political
subdivision or agent thereof.

    

    Purchase
Price shall have the meaning set forth in Section 2.1.

    

    Releasees
shall have the meaning set forth in Section 5.1(a).

    

    Share
shall mean any one of, and Shares
shall mean collectively, the [number] ([number in words]) shares of the
Company’s stock held by the Seller, which represent 100% of the Seller’s equity
ownership in the Company.

    

    Securities
Act shall mean the United States Securities Act of 1933, as
amended.

    

    Securities
Exchange Act shall mean the United States Securities Exchange Act of
1934, as amended.

    
      
         

      

      
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    Seller
shall have the meaning set forth in the recitals to this Agreement.

    

    Tax shall
mean all taxes, including income tax, surtax, remittance tax, presumptive tax,
net worth tax, special contribution, production tax, transportation tax, value
added tax, withholding tax, gross proceeds or receipts tax, windfall profits
tax, profits tax, severance tax, personal property tax, real property tax, sales
tax, service tax, transfer tax, use tax, excise tax, premium tax, customs
duties, stamp tax, motor vehicle tax, entertainment tax, insurance tax, capital
stock tax, franchise tax, occupation tax, payroll tax, employment tax, social
security, unemployment tax, disability tax, alternative or add-on minimum tax,
estimated tax, labor participation, and any other assessments, duties, fees,
levies or other charges imposed by a Governmental Authority, together with any
interests, fine or penalty on such Tax.

    

    Voting
Stock shall mean capital stock issued by a corporation, or equivalent
interests in any other Person, the holders of which are ordinarily, in absence
of contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even if the right so to vote has
been suspended by the occurrence of such contingency.

    

    References;
Rules of Construction

    

    1.2  In
this Agreement:

     

    (a)  References
to any gender include a reference to all other genders;

    

    (b)  References
to the singular include the plural, and vice versa;

    

    (c)  Reference
to any Article or Section means an Article or Section of this
Agreement;

    

    (d)  Reference
to any Attachment or Schedule means an Attachment or Schedule to this Agreement,
all of which are incorporated into and made a part of this
Agreement;

    

    (e)  Unless
expressly provided to the contrary, “hereunder,” “hereof,” “herein,” and words
of similar import are references to this Agreement as a whole and not any
particular Section or other provision of this Agreement;

    

    (f)  “Include”
and “including” shall mean include or including without limiting the generality
of the description preceding such term; and

    

    (g)   in
the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including” and the words “to” and “until”
each means “to but excluding”.

     

    ARTICLE
II – PURCHASE AND SALE

    

    Purchase
and Sale

    

    2.1(a)  In
accordance with the terms and conditions set forth in this Agreement, Buyer
hereby agrees to buy, and the Seller hereby agrees to sell, the Shares of the
Company at a price of US$0.285 (zero United States dollars and twenty eight and
a half cents) per Share, for a total purchase price of US$[number] ([number in
words] United States dollars) (the Purchase
Price).  Upon sale, all Shares shall be fully paid and
non-assessable and free and clear of all Encumbrances.  [These Shares
are restricted and unregistered Shares.  Seller makes no legal
representation regarding the eligibility of such Shares for registration.] OR
[The certificate for these Shares is not legended, and the Seller is not an
affililiate of the Company, as “affiliate” is defined in SEC Rule
144.]

    
      
         

      

      
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    (b)  In
exchange for delivery of the Purchase Price by wire transfer of immediately
available funds to the Seller’s bank account, Seller must deliver to Buyer
[certificates for the Shares, duly endorsed for transfer or accompanied by an
instrument of transfer in such form as may be necessary or required by Law to
transfer to the Buyer ownership of the Shares][documentation necessary or
required by Law to transfer ownership of the Shares to an account designated by
the Buyer and consummate the sale of such Shares and perfection of their
ownership by the Buyer].

    

    Closing

    

    2.2(a)  The
Closing (the Closing)
shall occur simultaneous with the closing under the Share Purchase Agreement
dated this date between George Faris and the Buyer (the Faris
Agreement).

    

    (b)  Prior
to the Closing, Seller shall deliver to Robert Brantl, Esq., Seller’s counsel
and the Escrow Agent named in the Faris Agreement (the Escrow
Agent), the documents described in Section 2.1(b) hereof (the Escrowed
Documents).

    

    (c)  Prior
to the Closing, Buyer shall deposit the Purchase Price with the Escrow
Agent.

    

    (d)  The
parties hereby jointly direct the Escrow Agent that at the Closing he should pay
over the Purchase Price to the Seller by wire transfer (net of a $12.50 wire
transfer fee, and should deliver the Escrowed Documents to counsel for the
Buyer.

    

    (e)  In
the event that the Escrow Agent reasonably determines that there is no
substantial likelihood that a closing will occur under the Faris Agreement, the
Escrow Agent is hereby directed that he should return the Purchase Price to the
Buyer (at such address as Buyer’s counsel shall indicate) and should return the
Escrowed Documents to the seller.

    

    Allocation
of Taxes

    

    2.3  Each
of the Parties hereto shall be responsible for, and entitled to any refunds with
respect to, all Taxes arising from the transactions contemplated by this
Agreement that are measured by income, profit or capital gain and are incurred
by or imposed on them or are otherwise imposed on them by applicable
legislation.  The Seller shall be responsible for payment of all
transfer Taxes, if any, arising from the transfer of the Shares under the
Federal law of the United States of America or the laws of the State of New
York.

     

    ARTICLE
III – REPRESENTATIONS AND WARRANTIES

     

    General
Statements

    

    3.1(a)
Except as expressly set forth in this Agreement, each Party hereto is only
making the representations and warranties to the other Party hereto which are
expressly set forth in this Article III, and no others with respect to the
matters contained herein.

    

    (b)  Subject
only to any matter which is expressly stated in this Agreement, the Buyer and
Seller represent and warrant to the other and any of their respective successors
and assigns that all warranties made by the representing Party pursuant to this
Agreement are accurate in all respects and not misleading as of the date of this
Agreement, subject to any qualifications, limitations or exclusions contained
elsewhere in this Agreement.

    

    (c)  The
Seller acknowledges that the Buyer has entered into this Agreement in reliance
upon, among others, each representation and warranty contained in this Section
3.1 and Section 3.2.  The Buyer acknowledges that the Seller has
entered into this Agreement in reliance upon, among others, each representation
and warranty contained in this Section 3.1 and Section 3.3.

    
      
         

      

      
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    (d)  Where
any statements in the representations and warranties contained in this Article
III are qualified by the expression “so far as the Party is aware”, or “to the
best of the knowledge, information and belief of the Party”, or any similar
expression, the applicable Party shall be deemed to have full knowledge of
anything which such Party has or had actual knowledge.

    

    Representations
and Warranties of the Seller

    

    3.2  Seller
hereby represents and warrants to the Buyer as follows:

    

    (a)  Authorization of
Agreement.  Seller has full power and authority to enter into
and perform this Agreement.  This Agreement has been duly executed and
delivered by Seller and, assuming due execution and authorization by the Buyer,
constitutes a legal, valid, and binding obligation of Seller, enforceable
against Seller in accordance with its terms, except as the same may be limited
by applicable laws relating to bankruptcy, insolvency, reorganization,
moratorium or similar creditors' rights generally and by general principles of
equity.

    

    [(b)  Organization; Good Standing;
Authorization of Agreement.  The Seller is a {company} duly
organized, validly existing, and in good standing under the laws of {New York}
and is duly qualified and in good standing in all other jurisdictions in which
the conduct of its business or the ownership of its assets requires such
qualification.  The Seller has full corporate power and authority to
hold interests and carry on its business as it has been and is now being
conducted.  The execution and delivery of this Agreement and the
consummation of the transaction contemplated by this Agreement have been duly
authorized by all necessary company action of Seller.  This Agreement
has been duly executed and delivered by Seller and, assuming due execution and
authorization by the Buyer, constitutes a legal, valid, and binding obligation
of Seller, enforceable against Seller in accordance with its terms, except as
the same may be limited by applicable laws relating to bankruptcy, insolvency,
reorganization, moratorium or similar creditors' rights generally and by general
principles of equity.][for entity sellers – reletter later reps if
used]

    

    (b)  No
Conflicts.  Except as expressly set forth in this Agreement,
neither the execution and delivery of this Agreement nor the consummation by
Seller of the transactions contemplated hereby, will (A) violate any order,
judgment, or decree applicable to Seller; (B) conflict with or result in a
breach of any of the terms, conditions or provisions of any agreement to which
Seller is a party or by which Seller is bound; (C) result in the creation
of any lien, charge, or Encumbrance upon the assets or properties of Seller; (D)
give rise to any preferential purchase rights; or (E) cause Seller to
become “insolvent” for purposes of the Bankruptcy Code.

    

    (c)  Consents.  No
consent, approval, or authorization of, or designation, declaration, or filing
with, any Governmental Authority or other third Person is required on the part
of Seller in connection with Seller’s execution, delivery, and performance of
this Agreement.

    

    (d)  Legal
Proceedings.  To Seller’s best knowledge, information and
belief, there is no pending or threatened claim, action, lawsuit, arbitration,
proceeding, or investigation against Seller which might bring into question the
validity or propriety of this Agreement or the consummation of the transactions
contemplated by this Agreement or which has or may have a Material Adverse
Effect on Seller or may result in a Material Adverse Effect on Seller or
Seller’s ability to consummate the transactions contemplated
hereby.  Seller is not subject to any material judgment, order, writ,
injunction or decree that has not been satisfied or complied with.

    

    (e)  No Payments
Due.  Seller has not made or committed to make, in connection
with the transactions contemplated by this Agreement, any payments in the form
of (A) consulting or other fees in violation of any statue, regulation or policy
applicable to the Seller; (B) commissions; or (C) brokers’ or finders’
fees, other than those for which the Seller is solely
responsible.

    
      
         

      

      
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    (f)  Ownership of
Shares.  The Shares represent 100% of Seller’s shares and
equity interests of any sort whatsoever (including options, warrants,
convertible debt and other instruments of any type) in the Company, and Seller
is the legal and beneficial owner of the Shares, and the Shares are now and
shall on the Closing Date be free and clear of any Encumbrances.

    

    (g)  No
Solicitation.  To the best of Seller’s knowledge, information
and belief, neither the Buyer nor any of the Buyer’s Affiliates has engaged in
any solicitation or open offer of purchase or communicated any such offer or
solicitation to any third Person in connection with the transactions
contemplated in this Agreement. 

    

    (h)  Acknowledgement.  Seller
understands, acknowledges and agrees that, following the consummation of the
transactions contemplated by this Agreement, the Company may, in the future,
decide to engage in a reorganization, recapitalization, merger, tender offer,
“going private” transaction or other action which affects the structure of the
Company generally.

    

    Representations
and Warranties of the Buyer

    

    3.3  Buyer
represents and warrants to the Seller
as follows:

    

    (a)  Organization; Good Standing;
Authorization of Agreement.  The Buyer is a closed unit risk
investment fund duly organized, validly existing, and in good standing under the
laws of the Republic of Kazakhstan and is duly qualified and in good standing in
all other jurisdictions in which the conduct of its business or the ownership of
its assets requires such qualification.  The Buyer is owned solely by
Timur Bergaliyev, an individual residing at 10B Abay St., Apt. 9, Almaty,
Kazakhstan.  The Buyer has full corporate power and authority to hold
interests and carry on its business as it has been and is now being
conducted.  The execution and delivery of this Agreement and the
consummation of the transaction contemplated by this Agreement have been duly
authorized by all necessary company action of the Buyer.  This
Agreement has been duly executed and delivered by the Buyer and, assuming due
execution and authorization by the Seller, constitutes a legal, valid, and
binding obligation of the Buyer, enforceable against the Buyer in accordance
with its terms, except as the same may be limited by applicable laws relating to
bankruptcy, insolvency, reorganization, moratorium or similar creditors' rights
generally and by general principles of equity.

    

    (b)  No
Conflicts.  Except as expressly set forth in this Agreement,
neither the execution and delivery of this Agreement nor the consummation by
Buyer of the transactions contemplated hereby, will (A) violate any order,
judgment, or decree applicable to Buyer; (B) violate the organizational
documents of the Buyer; (C) conflict with or result in a breach of any of the
terms, conditions or provisions of any agreement to which Buyer is a party or by
which Buyer is bound; (D) result in the creation of any lien, charge, or
Encumbrance upon the assets or properties of Buyer; (E) give rise to any
preferential purchase rights; or (F) cause Buyer to become “insolvent” for
purposes of the Bankruptcy Code.

    

    (c)  Consents.  No
consent, approval, or authorization of, or designation, declaration, or filing
with, any Governmental Authority or other third Person is required on the part
of Buyer in connection with Buyer’s execution, delivery, and performance of this
Agreement.

    

    (d)  Legal
Proceedings.  To Buyer’s best knowledge, information and
belief, there is no pending or threatened claim, action, lawsuit, arbitration,
proceeding, or investigation against Buyer which might bring into question the
validity or propriety of this Agreement or the consummation of the transactions
contemplated by this Agreement or which has or may have a Material Adverse
Effect on Buyer or may result in a Material Adverse Effect on Buyer or Buyer’s
ability to consummate the transactions contemplated hereby.  Buyer is
not subject to any material judgment, order, writ, injunction or decree that has
not been satisfied or complied with.

    
      
         

      

      
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    (e)  No Payments
Due.  Buyer has not made or committed to make, in connection
with the transactions contemplated by this Agreement, any payments in the form
of (A) consulting or other fees in violation of any statue, regulation or policy
applicable to the Buyer; (B) commissions; or (C) brokers’ or finders’ fees,
other than those for which the Buyer is solely responsible.

    

    (f)  Financing
Capability.  Buyer now has sufficient funds and credit
facilities and, at Closing, will have sufficient funds available to pay the
Purchase Price.  Such funds are not reserved for any other use or
purpose, are not otherwise restricted or encumbered in a manner that would
interfere with the consummation of the transactions contemplated by this
Agreement, by any agreement or other instrument to which Buyer is a party or by
which it may be bound, or subject to any lien, attachment, or other judicial
process, whether final or interim.

    

    (g)  Status.  Buyer
is not a “U.S. Person” within the definition set forth in Rule 902(k)
promulgated under the Securities Act, is an “Accredited Investor” within the
definition set forth in Rule 501(a) of the Securities Act, and the Shares
purchased pursuant to this Agreement are being acquired for investment only and
not with a view to any public distribution thereof.  Buyer further
represents that at no time has it been presented with or solicited by or through
any public promotion or other form of advertising in connection with this
transaction.

    

    (h)  Resale
Representations.  Buyer will not sell or otherwise transfer the
Shares unless either (i) they first shall have been registered under the
Securities Act or (ii) the Company first shall have been furnished with an
opinion of legal counsel, reasonably satisfactory to the Company, to the effect
that such sale or transfer is exempt from the registration requirements of the
Securities Act; provided,
however, that, notwithstanding the foregoing, no registration or opinion
of counsel shall be required for a transfer made in accordance with Rule 144
under the Securities Act.

    

    Effect
of Closing; Duration of Representations and Warranties

    

    3.4  The
representations and warranties made by the Parties and all other provisions of
this Agreement, and any other documents to be executed by the Parties pursuant
to or in connection with this Agreement insofar as the same shall not have been
performed at the Closing shall not be extinguished or affected by such Closing,
or by any other event or matter whatsoever (including, without limitation, any
satisfaction and/or waiver of the conditions precedent set out in this
Agreement).  The representations, warranties, and acknowledgements in
favor of either Party hereto contained in this Article III shall be valid at the
Effective Date and at Closing and shall survive for a period of 1 (one) year
after the Closing Date.

    

    ARTICLE
IV – COVENANTS OF THE PARTIES

    

    Covenants

    

    4.1  The
Parties shall not issue any press release or make any public statement in
connection with this Agreement except as required by applicable law or any stock exchange or other self-regulatory organization
requirement; provided, however, that any Party may make disclosures to any of its
Affiliates as such Party in its sole discretion deems appropriate if such
Affiliate agrees to be bound by the confidentiality provisions set forth in
Section 6.6 of this Agreement; and further provided, that the Parties hereto may discuss the transactions
contemplated by this Agreement with the Company.

     

    ARTICLE
V – INDEMNIFICATION AND LIMITATION ON LIABILITY

    

    Indemnification
and Covenant Not to Sue

    

    5.1(a)  With
the exception of any claims made with respect to this Agreement or the
transactions contemplated herein, the Seller hereby on behalf of himself and any
of his Affiliates releases and discharges the Buyer, the Company, any Affiliates
of the Company, and any of their respective

    
      
         

      

      
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    directors,
officers, parents, subsidiaries, agents, attorneys, and their respective
successors and assigns (collectively, the Releasees),
from all actions, suits, debts, dues, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions, claims
and demands whatsoever, in law, admiralty or equity, against the Releasees,
which the Seller ever had, now have or hereafter can, shall or may have, for,
upon or by reason of any matter, cause or thing whatsoever from the beginning of
the world to the day of the date of this Agreement and thereafter.

    

    (b)  With
the exception of any claims made with respect to this Agreement or the
transactions contemplated herein, the Seller hereby on behalf of himself and any
of his Affiliates covenants to the Releasees, never to, and never to cause any
affiliate of the Seller to, bring, commence, maintain, make, assert, assist,
request, or prosecute, directly or indirectly, against any Releasee, any claim
(including claims for indemnity and/or contribution in any form), demand,
action, suit, request, proceeding, or cause of action, in law or equity, for
damages or other relief arising out of or in connection with the Seller’s
relationship with the Company generally; provided, however, that notwithstanding
any of the foregoing, nothing in this Agreement shall (i) preclude the
Seller from complying with a request or demand for assistance or cooperation
from any regulatory body or (ii) constitute a waiver of any defense
available to the Seller in response to any claim against it by a person or
entity not a party to this Agreement.

    

    Limitation
on Liability

    

    5.2  Neither
Party shall have the right to seek damages under or in connection with this
Agreement, except to the extent the aggregate amount of Damages incurred by a
Party exceeds US$50,000 (fifty thousand United States dollars), after which all
such amounts exceeding such amount shall be subject to a claim or action for
damages under or in connection with this Agreement and to a maximum amount equal
to the value of this Agreement.

    

    ARTICLE
VI – MISCELLANEOUS

    

    Notice

    

    6.1  Any
notice, demand, request, consent, approval, declaration, delivery or other
communication (Notice)
hereunder to be made pursuant to the provisions of this Agreement shall be
sufficiently given or made if in writing and either delivered in person, by
telecopy or by overnight courier (signature required only for Notices sent
within the United States), addressed as follows:

    

    if to
Seller, at:

    [name]

    [address]

    

    with a
copy to:

    Robert
Brantl, Esq.

    52
Mulligan Lane

    Irvington,
NY 10533

    

    if to
Buyer, at:

    Verniy
Aktiv

    c/o
Eisenberg & Sima LLP

    102 Park
Ridge Lane

    White
Plains, NY 10603

    

    With a
copy (no signature required) to:

    Timur
Bergaliyev

    10B Abay
St., Apt. 9

    Almaty,
Kazakhstan

    
      
         

      

      
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    If to the
Escrow Agent, to Robert Brantl as above.

    

    or to
such other address as may be substituted by Notice given as herein provided,
with the condition that any substitute address for the primary notice must be an
address within the United States.  The giving of any Notice required
hereunder may be waived in writing by the Party entitled to receive such
Notice.  Every notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder shall be deemed to have
been duly given or served on the date on which personally delivered or faxed
(unless faxed on a day which is not a Business Day or after normal business
hours of the recipient, in which case delivery shall be deemed to have been
given the next Business Day) and the next Business Day after deposit with an
overnight courier service.

    

    Expenses

     

    6.2  Except
as otherwise set forth in this Agreement, each Party shall bear 100% of the
reasonable fees and expenses actually incurred by such Party in connection with
the authorization, preparation, or execution of this Agreement, and all
Attachments and Schedules to this Agreement including any other agreements
required to be entered into as conditions precedent to this agreement, and all
other matters related to the Closing, including, without limitation, all fees
and expenses of such Party’s legal counsel, accountants, and financial advisers
employed by such Party, whether or not the transactions contemplated by this
Agreement shall be consummated.

     

    Governing
Law; Submission to Jurisdiction; Waiver of Jury Trial

    

    6.3(a)  This
Agreement shall be construed in accordance with, and this Agreement and
all matters arising out of or relating in any way whatsoever (whether in
contract, tort or otherwise) to this Agreement shall be governed by, the law of
the State of New York.

    

    (b)  The
Parties hereto hereby irrevocably submit to the exclusive jurisdiction of any
New York State or Federal court sitting in the Borough of Manhattan in The City
of New York in any action or proceeding arising out of or relating to this
Agreement, and the Parties hereby irrevocably agree that all claims in respect
of such action or proceeding may be heard and determined in such New York State
or Federal court.  The Parties hereby irrevocably waive, to the
fullest extent that they may legally do so, the defense of an inconvenient forum
to the maintenance of such action or proceeding.  The Parties also
waive any right that they may have under the Hague Convention to the service of
papers overseas and any translation of papers, and Buyer designates its
attorneys Eisenberg & Sima LLP, as its agent for process of service for
service of any court pleadings relating to any proceeding or claims between the
Parties.

    

    (c)  EACH PARTY HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY PROCEEDING DIRECTLY
OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
THEORY).  Each Party hereby (i) certifies that no
representative, agent or attorney of the other has represented, expressly or
otherwise, that the other would not, in the event of a proceeding, seek to
enforce the foregoing waiver and (ii) acknowledges that it has been induced to
enter into this Agreement by, among other things, the mutual waivers and
certifications in this paragraph.

    

    Successors
and Assigns

    

    6.4  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the Parties hereto and their respective successors and assigns, except that no
Party may assign or otherwise

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    transfer
any of its rights under this Agreement without the prior written consent of the
other Parties hereto.

    

    No
Third Party Beneficiaries

    

    6.5  Nothing
in this Agreement shall entitle any Person other than Sellers and the Buyers to
any claim, cause of action, remedy, or right of any kind.

    

    Confidentiality

    

    6.6  Each
Party shall maintain the confidentiality of the other Party’s Confidential
Information in accordance with procedures adopted by such Party in good faith to
protect confidential information of third parties delivered to such Party; provided, however, that each Party may
deliver or disclose Confidential Information to (a) such Party’s
representatives who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 6.6, (b) any
Governmental Authority having jurisdiction over such Party to the extent
required by Law, or (c) any other Person to which such delivery or
disclosure may be necessary or appropriate (i) to effect compliance with
any Law applicable to such Party, (ii) in response to any subpoena or other
legal process, or (iii) in connection with any litigation to which such
Party is a party; provided, however, that, in the cases of
clauses (c) or (d), such Party shall provide the other Party with prompt written
notice thereof so that such Party may seek (with the cooperation and reasonable
efforts of the other Party) a protective order, confidential treatment or other
appropriate remedy.  In any such event, such Party shall furnish only
that portion of the information which is legally required and shall exercise
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded such information to the extent reasonably requested by the other
Party.

    

    Amendments;
Waivers

    

    6.7  No
amendment, modification or discharge of this Agreement, and no waiver hereunder,
shall be valid or binding unless set forth in writing and duly executed by each
of the Parties.  Neither the waiver by any of the Parties of a breach
of or a default under any of the provisions of this Agreement, nor the failure
by any of the Parties, on one or more occasions, to enforce or timely enforce
any of the provisions of this Agreement or to exercise any right or privilege
hereunder, shall be construed as a waiver of any other breach or default of a
similar nature, or as a waiver of any of such provisions, rights or privileges
hereunder.  The rights and remedies herein provided are cumulative and
none is exclusive of any other, or of any rights or remedies that any Party may
otherwise have at law or in equity.  The rights and remedies of any
Party based upon, arising out of or otherwise in respect of any breach of any
covenant or agreement or failure to fulfil any condition, shall in no way be
limited by the fact that the act, omission, occurrence or other state of facts
upon which any claim of any such breach is based may also be the subject matter
of any other covenant or agreement as to which there is no breach.

     

    Severability

    

    6.8  Any
provision of this Agreement which is invalid, illegal or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability, without affecting in any way
the remaining provisions hereof in such jurisdiction or rendering that or any
other provision of this Agreement invalid, illegal or unenforceable in any other
jurisdiction.

     

    Headings

    

    6.9  The
various headings of this Agreement are inserted for convenience only and shall
not affect the meaning or interpretation of this Agreement or any provisions
hereof.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    Entire
Agreement

    

    6.10  This
Agreement and the documents to be executed under this Agreement constitute the
entire agreement between the Parties pertaining to the subject matter hereof,
and supersede all prior agreements, understandings, negotiations, and
discussions, whether oral or written, of the Parties pertaining to the subject
matter of this Agreement.

    

    Counterparts

    

    6.11  This
Agreement may be executed in several counterparts, each of which shall be deemed
an original and all of which shall together constitute one and the same
instrument.  Delivery of an executed counterpart of a signature page
to this Agreement by facsimile shall be effective as delivery of a manually
executed counterpart of this Agreement.

     

    Further
Assurances

    

    6.12  Each
Party will, and will use all reasonable efforts to, take or cause to be taken
all actions, and do or cause to be done all other things, necessary, proper or
advisable in order to give full effect to this Agreement.  Each Party
shall negotiate, execute and deliver all reasonably required documents and do
all other acts which may be reasonably requested by any other Party hereto to
implement and carry out the terms and conditions of this
Agreement.  Each Party shall use its commercially reasonable efforts
not to take any action or fail to take any action which would reasonably be
expected to frustrate the intent and purposes of this Agreement.

    

    Construction

     

    6.13  The
language used in this Agreement will be deemed the language chosen by the
Parties to express their mutual intent, and no rules of strict construction will
be applied against either Party.

     

    (Signature
page follows)

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

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

    

    

      

      
        
          
            	
                    [NAME], as
      Seller

                     

                  
	
                    By

                  	 
      
	 
      	
                    [name]

                  

          

        

      

      

      

      
        
          
            	
                    VERNIY AKTIV, as
      Buyer

                     

                  	 
      
	 
      	
                    VERNIY
      CAPITAL JOINT STOCK COMPANY, as Portfolio Manager

                  
	 
      	 
      	 
      
	
                    By

                  	 
      	 
      
	 
      	
                    Name:
      Almat Tulemissov

                    Title:
      Deputy Chairman

                  	 
      

          

        

      

      

    

    
      
         

      

      
        12EXHIBIT 10.1

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

     This  AMENDED  AND  RESTATED   EMPLOYMENT   AGREEMENT   (this   "Employment
Agreement")  is made and  entered  into as of  November  17,  2008 by and  among
Citizens South Banking Corporation, a Delaware corporation, Citizens South Bank,
a federally chartered savings bank and wholly owned subsidiary of Citizens South
Banking  Corporation  (the  "Company"),  and Kim S. Price,  President  and Chief
Executive  Officer (the  "EXECUTIVE").  Citizens South Banking  Corporation  and
Citizens  South Bank are  hereinafter  sometimes  collectively  or  individually
referred to as "CITIZENS SOUTH."

     WHEREAS,  the  Executive is currently  employed as the  President and Chief
Executive Officer of Citizens South pursuant to an employment  agreement between
Citizens South and the Executive originally entered into as of May 17, 2004 (the
"Original Agreement");

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

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

     WHEREAS, none of the conditions or events included in the definition of the
term "golden parachute payment" that is set forth in Section  18(k)(4)(A)(ii) of
the Federal Deposit Insurance Act [12 U.S.C.  1828(k)(4)(A)(ii)]  and in Federal
Deposit  Insurance  Corporation Rule  359.1(f)(1)(ii)  [12 CFR  359.1(f)(1)(ii)]
exists or, to the best knowledge of Citizens South,  is contemplated  insofar as
Citizens South or any affiliates are concerned;

     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

     1.1 EMPLOYMENT.  Citizens South Banking Corporation and Citizens South Bank
hereby employ the Executive to serve as President  and Chief  Executive  Officer
according to the terms and conditions of this Employment Agreement, effective on
the date first written above (the "Effective Date") and for the period stated in
Article 3. The Executive  hereby accepts  employment  according to the terms and
conditions of this Employment  Agreement 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 Citizens  South,  if elected.  For purposes of this  Employment
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 Citizens South Bank.

<PAGE>

     1.2 SERVICE ON THE BOARD OF DIRECTORS.

     (a) BOARD OF DIRECTORS OF CITIZENS SOUTH BANKING CORPORATION. The Executive
is  currently  serving as a director  of  Citizens  South  Banking  Corporation.
Citizens South Banking  Corporation shall nominate the Executive for election as
a director at such times as necessary so that the Executive  will, if elected by
stockholders, remain a director of Citizens South Banking Corporation throughout
the term of this Employment Agreement. The Executive hereby consents to serve as
a director of Citizens  South  Banking  Corporation,  and the  Executive  hereby
consents to being named as a director of Citizens  South Banking  Corporation in
documents  filed by Citizens South Banking  Corporation  with the Securities and
Exchange  Commission.  The  Executive  shall be  deemed  to have  resigned  as a
director of Citizens  South  Banking  Corporation  effective  immediately  after
termination of the  Executive's  employment  under Article 5 of this  Employment
Agreement,  regardless  of  whether  the  Executive  submits a  formal,  written
resignation as director.

     (b) BOARD OF DIRECTORS OF CITIZENS  SOUTH BANK.  The Executive is currently
serving as a director of Citizens South Bank. The board of directors of Citizens
South  Banking  Corporation  and the board of directors  of Citizens  South Bank
shall  undertake  every  lawful  effort to ensure that the  Executive  continues
throughout  the term of his  employment to be elected or reelected as a director
of Citizens  South Bank.  The  Executive  shall be deemed to have  resigned as a
director of Citizens South Bank effective  immediately  after termination of the
Executive's employment under Article 5 of this Employment Agreement,  regardless
of whether the Executive submits a formal, written resignation as director.

                                    ARTICLE 2
                                     DUTIES

     As  President  and  Chief  Executive  Officer  of  Citizens  South  Banking
Corporation,  the Executive  shall serve under the  direction of Citizens  South
Banking  Corporation's  board of directors and in accordance with Citizens South
Banking  Corporation's  Articles of  Incorporation  and  Bylaws,  as each may be
amended or restated from time to time. As President and Chief Executive  Officer
of Citizens  South Bank,  the  Executive  shall  serve  under the  direction  of
Citizens  South Bank's board of directors and in accordance  with Citizens South
Bank's Charter and Bylaws, as each may be amended or restated from time to time.
The Executive  shall report  directly to the board of directors.  He shall serve
Citizens  South  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  Citizens  South  and to the  promotion  of  Citizens  South's
interests throughout the term of this Employment Agreement.  Without the written
consent  of  Citizens  South  Banking  Corporation's  board  of  directors,  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 as President and Chief Executive Officer.

<PAGE>

                                    ARTICLE 3
                               TERM OF EMPLOYMENT

     The  initial  term of this  Employment  Agreement  shall be for a period of
three years,  commencing on the Effective Date. On the first  anniversary of the
Effective Date of this Employment Agreement and on each anniversary  thereafter,
this  Employment  Agreement shall be extended  automatically  for one additional
year unless Citizens  South's board of directors  determines that the term shall
not be extended.

     If the  board of  directors  determines  not to extend  the term,  it shall
notify the Executive in writing at least ten days before the  anniversary  date.
If the board decides not to extend the term of this Employment  Agreement,  this
Employment  Agreement shall nevertheless remain in force until its term expires.
The board's  decision not to extend the term of this Employment  Agreement shall
not - by itself - give the Executive any rights under this Employment  Agreement
to claim an adverse change in his position,  compensation,  or  circumstances or
otherwise  to claim  entitlement  to  severance or  termination  benefits  under
Articles 6 or 7 of this Employment  Agreement.  References herein to the term of
this  Employment  Agreement  shall refer to the initial term, as the same may be
extended.  Unless sooner terminated,  the Executive's employment shall terminate
when he attains age 65.

     For one full year after expiration of the term of this Employment Agreement
or  termination  of the  Executive's  employment,  the  Executive  shall furnish
information  and  assistance to Citizens  South as may reasonably be required by
Citizens South in any litigation in which Citizens South or any of subsidiary or
affiliate is or may become a party, upon reasonable notice to the Executive.

                                    ARTICLE 4
                         COMPENSATION AND OTHER BENEFITS

     4.1 BASE SALARY.  In  consideration  of the Executive's  performance of his
obligations under this Employment Agreement,  Citizens South Banking Corporation
shall pay or cause to be paid to the  Executive  a salary at the annual  rate of
not less than $259,375,  payable in semi-monthly  installments.  The Executive's
salary  shall be reviewed  annually by the  Compensation  Committee  of Citizens
South's board of directors or by such other board committee as has  jurisdiction
over  executive  compensation.  The  Executive's  salary may be increased at the
discretion of the committee  having  jurisdiction  over executive  compensation.
However, the Executive's salary shall not be reduced. The Executive's salary, as
the same may be increased  from time to time, is referred to in this  Employment
Agreement as the "BASE SALARY." Nothing in this Employment Agreement is intended
to govern or  restrict  the kind or amount of  compensation  the  Executive  may
receive in his capacity as a director of Citizens South.

<PAGE>

     4.2  BENEFIT  PLANS  AND  PERQUISITES.  The  Executive  shall  be  entitled
throughout the term of this  Employment  Agreement to participate in any and all
officer or employee compensation,  bonus, incentive, and benefit plans in effect
from  time to  time,  including  without  limitation  plans  providing  pension,
medical, dental, disability, and group life benefits, including Citizens South'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. Without limiting the generality of the foregoing:

     (a)  PARTICIPATION  IN STOCK  PLANS.  The  Executive  shall be  eligible to
participate  in  Citizens  South's  stock  option  plans and  other  stock-based
compensation,  incentive,  bonus, or purchase plans existing on the date of this
Employment Agreement or adopted during the term of this Employment Agreement.

     (b) CLUB DUES. During the term of this Employment Agreement, Citizens South
shall pay or cause to be paid the Executive's membership assessments and dues in
civic clubs and such expenses  shall be paid  promptly by Citizens  South and in
any event no later than March 15 of the year  immediately  following the year in
which the expenses were incurred.

     (c) REIMBURSEMENT OF BUSINESS EXPENSES.  The Executive shall be entitled to
reimbursement  of all reasonable  business  expenses  incurred in performing his
obligations  under this Employment  Agreement,  including but not limited to all
reasonable  business travel and entertainment  expenses incurred while acting at
the request of or in the service of Citizens South and  reasonable  expenses for
attendance at annual and other periodic meetings of trade  associations and such
reimbursement shall be paid promptly by Citizens South and in any event no later
than March 15 of the year  immediately  following the year in which the expenses
were incurred.

     (d) USE OF  AUTOMOBILE.  The Executive  shall have the use of an automobile
titled in Citizens  South's  name for use by the  Executive  in carrying out his
duties for Citizens South, the insurance and maintenance expenses of which shall
be paid by Citizens  South.  As additional  compensation,  the Executive may use
such automobile for personal  purposes,  provided that the Executive  renders an
accounting of his business and personal use to Citizens South in accordance with
regulations under the Code.

     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
Citizens  South.   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 from one year to the next
unless authorized by Citizens South's board of directors to do so. Vacation days
not used in a given year may not be carried over from one  calendar  year to the
next.

<PAGE>

     4.4 INDEMNIFICATION AND INSURANCE.

     (a) INDEMNIFICATION. Citizens South Banking Corporation shall indemnify the
Executive  or  cause  the  Executive  to be  indemnified  with  respect  to  his
activities as a director,  officer, employee, or agent of Citizens South Banking
Corporation  or Citizens  South Bank or as a person who is serving or has served
at the request of Citizens South Banking Corporation (a  "REPRESENTATIVE")  as a
director,  officer,  employee,  agent, or trustee of an affiliated  corporation,
joint venture trust or other enterprise,  domestic or foreign, in which Citizens
South Banking  Corporation has a direct or indirect  ownership  interest against
expenses (including without limitation  attorneys' fees,  judgments,  fines, and
amounts paid in settlement) actually and reasonably incurred by him ("EXPENSES")
in connection  with any claim  against the Executive  that is the subject of any
threatened,  pending,  or completed  action,  suit, or other type of proceeding,
whether civil, criminal, administrative, investigative, or otherwise and whether
formal or informal  (a  "PROCEEDING"),  to which the  Executive  was,  is, or is
threatened  to be made a party by reason of the  Executive  being or having been
such a director, officer, employee, agent, or representative.

     The  indemnification  provided  herein  shall not be exclusive of any other
indemnification  or right to which  the  Executive  may be  entitled  and  shall
continue  after the  Executive  has ceased to occupy a position  as an  officer,
director, employee, agent or representative with respect to Proceedings relating
to or arising out of the  Executive's  acts or  omissions  during his service in
such  position.  The benefits  provided to the Executive  under this  Employment
Agreement for the Executive's  service as a  representative  shall be payable if
and only if and only to the extent that  reimbursement  to the  Executive by the
affiliated  entity  with which the  Executive  has  served as a  representative,
whether  pursuant to agreement,  applicable law,  articles of  incorporation  or
association,  by-laws or regulations of the entity,  or insurance  maintained by
such affiliated entity, is insufficient to compensate the Executive for Expenses
actually  incurred and otherwise payable by Citizens South under this Employment
Agreement.  Any payments in fact made to or on behalf of the Executive  directly
or indirectly  by the  affiliated  entity with which the  Executive  served as a
representative shall reduce the obligation of Citizens South hereunder.

     (b) EXCLUSIONS.  Anything herein to the contrary notwithstanding,  however,
nothing in this section 4.4 requires indemnification,  reimbursement, or payment
by Citizens South Banking  Corporation or Citizens South Bank, and the Executive
shall  not be  entitled  to demand  indemnification,  reimbursement  or  payment
hereunder:

          (1) if and to the extent  indemnification,  reimbursement,  or payment
     constitutes a "prohibited  indemnification  payment"  within the meaning of
     Federal   Deposit   Insurance   Corporation   Rule   359.1(l)(1)   [12  CFR
     359.1(l)(1)], or

<PAGE>

          (2) for any claim or any part thereof as to which the Executive  shall
     have been  determined by a court of competent  jurisdiction,  from which no
     appeal is or can be taken, by clear and convincing evidence,  to have acted
     with   deliberate   intent  to  cause  injury  to  Citizens  South  Banking
     Corporation or Citizens South Bank or with reckless  disregard for the best
     interests of Citizens South Banking Corporation, or

          (3) for any claim or any part thereof  arising  under Section 16(b) of
     the  Securities  Exchange Act of 1934 as a result of which the Executive is
     required to pay any penalty, fine, settlement, or judgment, or

          (4) for any obligation of the Executive  based upon or attributable to
     the Executive  gaining in fact any personal gain,  profit,  or advantage to
     which he was not entitled, or

          (5) any proceeding  initiated by the Executive  without the consent or
     authorization of Citizens South Banking  Corporation's  board of directors,
     but this  exclusion  shall not apply with respect to any claims  brought by
     the Executive (a) to enforce his rights under this Employment Agreement, or
     (b) in any Proceeding  initiated by another person or entity whether or not
     such claims were  brought by the  Executive  against a person or entity who
     was otherwise a party to such proceeding.

     (c) INSURANCE.  Citizens South Banking  Corporation shall maintain or cause
to be maintained  liability insurance covering the Executive throughout the term
of this Employment Agreement.

                                    ARTICLE 5
                            TERMINATION OF EMPLOYMENT

     5.1 TERMINATION BY THE EMPLOYER.

     (a)  DEATH  OR  DISABILITY.  The  Executive's  employment  shall  terminate
automatically  on the date of the  Executive's  death.  If the Executive dies in
active service to Citizens South, his estate,  legal  representatives,  or named
beneficiaries (as directed by Executive in writing) shall for one year after the
date of the  Executive's  death be paid the Base Salary at the rate in effect at
the time  Executive's  death which shall  commence  within 30 days following the
date of the  Executive's  death,  and Citizens  South shall  continue to provide
non-taxable  medical and dental  benefits  normally  provided for an executive's
family for one year after the Executive's death.

     By delivery of written notice 30 days in advance to the Executive, Citizens
South may terminate the Executive's employment if the Executive is disabled. For
purposes  of this  Employment  Agreement,  the  Executive  shall be deemed to be
"DISABLED" if: (i) the Executive 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

<PAGE>

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 Citizens
South;  or (iii)  Executive is determined  to be totally  disabled by the Social
Security  Administration.  If the  Executive is terminated by either of Citizens
South Banking  Corporation  or Citizens  South Bank because of  disability,  his
employment with the other shall also terminate at the same time.

     (b) TERMINATION WITHOUT CAUSE. With written notice to the Executive 60 days
in advance,  Citizens  South may terminate the  Executive's  employment  without
Cause. If the Executive is terminated  without Cause by either of Citizens South
Banking Corporation or Citizens South Bank, he shall be deemed also to have been
terminated without Cause by the other.

     (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,  Citizens South may terminate the Executive's  employment with
Cause.  If the  Executive is  terminated  for Cause by either of Citizens  South
Banking Corporation or Citizens South Bank, he shall be deemed also to have been
terminated  for Cause by the other.  The  Executive  shall not be deemed to have
been terminated for Cause under this Employment Agreement unless and until there
is  delivered  to him a copy of a  resolution  duly  adopted at a meeting of the
board of directors called and held for such purpose,  which resolution shall (1)
contain findings that, in the good faith opinion of the board, the Executive has
committed an act constituting  Cause,  and (2) specify the particulars  thereof.
The  resolution  shall be deemed to have been duly  adopted if and only if it is
adopted by the  affirmative  vote of at least 75% of the  directors  of Citizens
South  Banking  Corporation  then in office or 75% of the  directors of Citizens
South Bank then in office, in either case excluding the Executive,  at a meeting
duly called and held for that  purpose.  Notice of the meeting and the  proposed
termination  for Cause shall be given to the  Executive a  reasonable  amount of
time before the board's meeting. The Executive and his counsel (if the Executive
chooses to have counsel present) shall have a reasonable opportunity to be heard
by the board at the meeting.  Nothing in this  Employment  Agreement  limits the
Executive's or his beneficiaries'  right to contest the validity or propriety of
the board's determination of Cause.

     (d) DEFINITION OF CAUSE. For purposes of this Employment Agreement, "CAUSE"
means termination because of the Executive's personal dishonesty,  incompetence,
willful misconduct, breach of fiduciary duty involving personal profit, material
breach  of  Citizens  South's  Code  of  Ethics,   material   violation  of  the
Sarbanes-Oxley  requirements  for  officers  of  public  companies  that  in the
reasonable  opinion  of the  directors  of  Citizens  South  will  likely  cause
substantial  financial harm or substantial  injury to the reputation of Citizens
South,  willfully  engaging  in actions  that in the  reasonable  opinion of the
directors of Citizens  South will likely  cause  substantial  financial  harm or
substantial  injury to the business  reputation of Citizens  South,  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.

<PAGE>

     5.2  TERMINATION  BY  THE  EXECUTIVE.   The  Executive  may  terminate  his
employment with written notice to Citizens South Banking  Corporation 60 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 60-day
period  unless the event or  circumstance  constituting  Good Reason is cured by
Citizens South or unless the notice of termination for Good Reason is revoked by
the Executive  within the 60-day period.  For purposes of this Agreement,  "GOOD
REASON" means any of the following events occur -

     (a) Reduced Base Salary:  involuntary  reduction  of the  Executive's  Base
Salary,

     (b)  Participation  in Benefit  Plans  Reduced or  Terminated:  involuntary
reduction of the Executive's  bonus,  incentive,  and other  compensation  award
opportunities  under  Citizens  South  Banking  Corporation's  benefit plans and
Citizens  South Bank's  benefit  plans,  unless in the case of either  company a
company-wide   reduction   of   all   officers'   award   opportunities   occurs
simultaneously,  or involuntary termination of the Executive's  participation in
any officer or employee  benefit  plan  maintained  by  Citizens  South  Banking
Corporation or by Citizens South Bank, unless the plan is terminated  because of
changes in law or loss of tax  deductibility  to Citizens  South with respect to
contributions  to the plan,  or  unless  the plan is  terminated  as a matter of
Citizens South Banking  Corporation policy or Citizens South Bank policy applied
equally to all participants in the plan,

     (c) Reduced Responsibilities or Status:

          (1)  assignment  to  the  Executive  of  duties  that  are  materially
     inconsistent  with the  Executive's  position  as  Citizens  South  Banking
     Corporation's  principal executive officer or that represent a reduction of
     his authority,

          (2) failure to appoint or reappoint  the  Executive  as President  and
     Chief Executive Officer of Citizens South Banking Corporation,

          (3) failure to nominate the Executive as a director of Citizens  South
     Banking Corporation, or

          (4) failure to elect or reelect the  Executive or cause the  Executive
     to be elected or reelected to the board of directors of Citizens South Bank
     in accordance with Section 1.2(b) of this Employment Agreement, without the
     Executive's written consent,

     (d) Failure to Obtain Assumption Agreement: failure to obtain an assumption
of Citizens South's obligations under this Employment Agreement by any successor
to Citizens South Banking Corporation, regardless of whether such entity becomes
a  successor  to Citizens  South  Banking  Corporation  as a result of a merger,
consolidation, sale of assets, or other form of reorganization,

<PAGE>

     (e) Material  Breach:  a material  breach of this  Employment  Agreement by
Citizens South that is not corrected within a reasonable time, or

     (f)  Relocation  of the  Executive:  relocation  of Citizens  South Banking
Corporation's  principal executive offices, or requiring the Executive to change
his principal work location, to any location that is more than 15 miles from the
location of Citizens South Banking Corporation's  principal executive offices on
the date of this Employment Agreement.

     5.3 NOTICE. Any purported termination by Citizens South 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  Employment  Agreement
relied  upon.  The notice  must also state the date on which  termination  shall
become  effective,  which  shall  be a date  not  earlier  than  the date of the
termination  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 of the Executive's employment.

                                    ARTICLE 6
                   COMPENSATION AND BENEFITS AFTER TERMINATION

     6.1  CAUSE.  If  the  Executive's  employment  terminates  for  Cause,  the
Executive shall receive the salary to which he was entitled  through the date on
which termination  became effective and any other benefits that may be available
to him under Citizens  South's  benefit plans and policies in effect on the date
of  termination.  All unvested stock options held by the Executive  shall become
null and void effective  immediately  upon the Executive's  receipt of notice of
termination for Cause.

     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  salary  to  which he is  entitled  through  the date on which  his
termination  becomes  effective and any other  benefits that may be available to
him under Citizens South's benefit plans and policies.

     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
Citizens South. To the extent that such benefits are less than  Executive's Base
Salary, Citizens South shall pay the Executive an amount equal to the difference
between such  disability  plan benefits and the amount of the  Executive's  Base
Salary for the  remaining  term of this  Employment  Agreement  or for one year,
whichever is longer. Accordingly, 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 WITHOUT CAUSE AND TERMINATION FOR GOOD REASON.

<PAGE>

     (a)  CONTINUED   SALARY.  If  Citizens  South  terminates  the  Executive's
employment  without Cause or if the  Executive  terminates  employment  for Good
Reason,  the  Executive  shall  continue  to  receive  the Base  Salary  for the
unexpired  term of this  Employment  Agreement,  but he shall not be entitled to
continued  participation in Citizens South's or a subsidiary's 401(k) retirement
plan or any stock-based plans. Payments of Base Salary under this Section 6.4(a)
shall not be reduced or offset by any other  compensation the Executive receives
through other  employment  after  termination  of his  employment  with Citizens
South.  The  provisions  of this  Section  6.4 are  subject to Article 9 of this
Employment  Agreement.  Payments  of Base Salary  shall be made in  semi-monthly
installments  and  shall  commence  within  30 days  following  the  Executive's
termination  of  employment  pursuant to this Section 6.4.  Notwithstanding  the
foregoing,  in the event the  Executive  is a  Specified  Employee  (within  the
meaning of Treasury Regulations  ss.1.409A-1(i)),  then, to the extent necessary
to avoid  penalties  under Code Section 409A, any payments to which Executive is
entitled for the first six months  following  termination of employment shall be
held and shall be paid to the  Executive  on the first day of the seventh  month
following termination of the Executive's employment.  The withheld payments plus
interest at six percent (6%) shall be paid to the  Executive on the first day of
the seventh month following the Executive's  termination of employment  pursuant
to this Section 6.4.

     Citizens   South  and  the  Executive   acknowledge   and  agree  that  the
compensation  and  benefits  under  this  Section  6.4 shall not be  payable  if
compensation  and benefits are payable or shall have been previously paid to the
Executive  under Article 7 of this Agreement.  That is, the parties  acknowledge
and agree that the Executive  shall not be entitled to duplicative  compensation
and  benefit  payments  under  this  Section  6.4  and  under  Article  7 if the
Executive's   employment  is  terminated  without  Cause  or  if  the  Executive
terminates employment with Good Reason.

     (b)  CASH-OUT  OF  VALUE OF  UNVESTED  STOCK  OPTIONS.  If  Citizens  South
terminates  the  Executive's  employment  without  Cause  or  if  the  Executive
terminates employment with Good Reason before full vesting of stock options then
held by him, the Executive  shall be entitled to receive from Citizens  South an
amount  in cash  equal to the  value of the  unvested  stock  options  as of the
effective date of termination. Amounts payable under this paragraph (b) shall be
paid in a single lump sum at the same time the first payment is made pursuant to
Section 6.4(a) above.

     (c) CASH-OUT OF THE EXECUTIVE'S 401(K) RETIREMENT PLAN ACCOUNT. If Citizens
South  terminates the Executive's  employment  without Cause or if the Executive
terminates  employment  with Good  Reason  before  full  vesting of the  amounts
credited to his account as a result of matching or  discretionary  contributions
by Citizens  South under Citizens  South's  401(k) Plan, the Executive  shall be
entitled to receive from Citizens  South an amount in cash equal to the value of
any unvested  contributions  payable at the same time the first  payment is made
pursuant to Section 6.4(a) above.

     (d) SEPARATION  FROM SERVICE.  For purposes of Section 6.4,  termination of
the  Executive's  employment  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 Citizens South 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.

<PAGE>

     6.5  POST-TERMINATION   LIFE  AND  MEDICAL  COVERAGE.  If  the  Executive's
employment  terminates  involuntarily but without Cause, or voluntarily but with
Good Reason, or because of disability, until expiration of the remaining term of
this  Employment  Agreement  Citizens  South  shall  continue,  or  cause  to be
continued at Citizens  South's expense,  life insurance and non-taxable  medical
and dental  coverage  substantially  identical  to the  coverage  maintained  by
Citizens  South  Bank  for the  Executive  prior to his  termination;  provided,
however,  that such benefits  shall not be provided if they would  constitute an
unsafe or unsound  banking  practice  relating  to  executive  compensation  and
employment contracts according to 12 CFR 563.39 and 12 CFR 563.161, as in effect
currently or as in effect hereafter.

     6.6  SUPPLEMENTAL  RETIREMENT  PLAN.  Citizens South and the Executive have
entered into a Salary Continuation Agreement dated as of January 1, 2004 (as may
be  amended  from  time to  time).  Unless  the  Salary  Continuation  Agreement
explicitly  provides  otherwise,  whether  benefits are properly  payable to the
Executive under the Salary Continuation  Agreement shall be determined solely by
reference to that agreement.

                                    ARTICLE 7
                           CHANGE IN CONTROL BENEFITS

     7.1 CHANGE IN CONTROL BENEFITS.

     (a) CHANGE IN CONTROL  BENEFITS.  If a Change in Control  occurs during the
term of this Employment Agreement, Citizens South shall make or cause to be made
a lump-sum  payment to the  Executive  in an amount in cash equal to three times
the  Executive's  annual  compensation  within  thirty (30) days  following  the
effective date of the Change in Control.  For this purpose,  annual compensation
means (1) the Executive's  Base Salary at the time of the Change in Control plus
(2) the average of the cash bonuses and cash incentive  compensation  earned for
the three calendar years  immediately  preceding the year in which the Change in
Control occurs,  regardless of when the bonus or incentive  compensation is paid
and regardless of whether all or part of the bonus or incentive  compensation is
subject to elective deferral.  For this purpose bonus and incentive compensation
includes  cash  bonus  and cash  incentive  compensation  only and  specifically
excludes the value of  stock-based  compensation,  including  stock  options and
restricted  stock.  The amount payable to the Executive  hereunder  shall not be
reduced to account for the time value of money or discounted to present value.

     (b) BENEFIT PLANS:  In addition to life insurance and  non-taxable  medical
and dental  coverage  under  Section 6.5 of this  Employment  Agreement  and any
benefits to which the  Executive may be entitled  under the Salary  Continuation
Agreement referred to in Section 6.6 of this Employment  Agreement,  if a Change
in Control occurs,  Citizens South shall (1) cause the Executive to become fully
vested  in any  non-qualified  plans,  programs,  or  arrangements  in which the
Executive participated if the plan, program, or arrangement does not address the
effect of a Change in Control,  and (2) pay the Executive a lump sum cash amount
equal to the amount of the matching and profit sharing  contributions that would
have been contributed to the Executive's 401(k) plan account, if any, that would
have been made had the Executive's  employment not terminated  before the end of
the plan year,  with such payment to be made within  thirty (30) days  following
the effective date of a Change in Control.

<PAGE>

     7.2 DEFINITION OF CHANGE IN CONTROL

     For purposes of this Employment Agreement, "CHANGE IN CONTROL" means any
one of the following events occurs -

     (a) CHANGE IN THE  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  Employers  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

<PAGE>

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.

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 Employment Agreement.

     7.4 GROSS-UP FOR TAXES.

     (a)  Reimbursement  to Account for Excise Taxes. If the Executive  receives
the  lump  sum  payment  under  Section  7.1 of this  Employment  Agreement  and
acceleration  of benefits  under any other benefit,  compensation,  or incentive
plan or arrangement with Citizens South  (collectively,  the "TOTAL  BENEFITS"),
and if any part of the Total  Benefits  is  subject to the Excise Tax under Code
Section 280G and Code  Section  4999(the  "EXCISE  TAX"),  Citizens  South shall
reimburse the Executive the following  additional  amounts,  consisting of (1) a
payment equal to the Excise Tax payable by the Executive under Code Section 4999
on the Total  Benefits (the "EXCISE TAX PAYMENT") and (2) a payment equal to the
amount  necessary to provide the Excise Tax Payment net of all income,  payroll,
and excise taxes.  Together, the additional amounts described in clauses (1) and
(2) are  referred  to in this  Employment  Agreement  as the  "GROSS-UP  PAYMENT
AMOUNT." Payment of the Gross-Up Payment Amount shall be made within thirty (30)
days following the effective date of the Change in Control.

     CALCULATING THE EXCISE TAX. For purposes of determining  whether any of the
Total Benefits will be subject to the Excise Tax and for purposes of determining
the amount of the Excise Tax,

          (1)  Determination of "Parachute  Payments" Subject to the Excise Tax:
     any other payments or benefits  received or to be received by the Executive
     in connection  with a Change in Control or the  Executive's  termination of
     employment  (whether  under the terms of this  Employment  Agreement or any
     other  agreement or any other  benefit plan or  arrangement  with  Citizens
     South,  any person  whose  actions  result in a Change in  Control,  or any
     person  affiliated  with Citizens South or such person) shall be treated as
     "PARACHUTE PAYMENTS" within the meaning of Code Section 280G(b)(2), and all
     "EXCESS PARACHUTE  PAYMENTS" within the meaning of Code Section  280G(b)(1)
     shall be treated as subject to the Excise Tax, unless in the opinion of the
     certified public accounting firm that is

<PAGE>

     retained by Citizens South as of the date immediately  before the Change in
     Control  (the  "ACCOUNTING  FIRM")  such other  payments or benefits do not
     constitute  (in  whole  or in  part)  parachute  payments,  or such  excess
     parachute payments represent (in whole or in part) reasonable  compensation
     for  services   actually  rendered  within  the  meaning  of  Code  Section
     280G(b)(4)  in excess  (as  defined  in Code  Section  280G(b)(3)),  or are
     otherwise not subject to the Excise Tax,

          (2)  Calculation of Benefits  Subject to Excise Tax: the amount of the
     Total  Benefits that shall be treated as subject to the Excise Tax shall be
     equal to the lesser of (a) the total amount of the Total  Benefits  reduced
     by the amount of such Total  Benefits that in the opinion of the Accounting
     Firm are not  parachute  payments,  or (b) the  amount of excess  parachute
     payments  within the meaning of Code  Section  280G(b)(1)  (after  applying
     clause (1), above), and

          (3) Value of Noncash Benefits and Deferred Payments:  the value of any
     non-cash benefits or any deferred payment or benefit shall be determined by
     the  Accounting  Firm in  accordance  with the  principles of Code Sections
     280G(d)(3) and (4).

     ASSUMED  MARGINAL INCOME TAX RATE. For purposes of determining the Gross-Up
Payment Amount, the Executive shall be deemed to pay federal income taxes at the
highest  marginal rate of federal income taxation in the calendar years in which
the  Gross-Up  Payment  Amount is to be made and state and local income taxes at
the  highest  marginal  rate  of  taxation  in the  state  and  locality  of the
Executive's  residence  on the date of  termination  of  employment,  net of the
reduction in federal  income taxes that can be obtained  from  deduction of such
state and local taxes  (calculated  by assuming  that any  reduction  under Code
Section 68 in the  amount of  itemized  deductions  allowable  to the  Executive
applies  first to reduce the amount of such  state and local  income  taxes that
would otherwise be deductible by the Executive,  and applicable federal FICA and
Medicare withholding taxes).

     RETURN OF REDUCED  EXCISE TAX PAYMENT OR PAYMENT OF ADDITIONAL  EXCISE TAX.
If the Excise  Tax is later  determined  to be less than the  amount  taken into
account  hereunder when the  Executive's  employment  terminated,  the Executive
shall repay to Citizens  South - when the amount of the  reduction in Excise Tax
is finally determined - the portion of the Gross-Up Payment Amount  attributable
to the reduction (plus that portion of the Gross-Up Payment Amount  attributable
to the Excise Tax,  federal,  state and local income taxes and FICA and Medicare
withholding  taxes  imposed on the Gross-Up  Payment  Amount being repaid by the
Executive to the extent that the repayment results in a reduction in Excise Tax,
FICA and Medicare withholding taxes and/or a federal,  state or local income tax
deduction). The Executive shall repay Citizens South as soon as practicable, but
no later  than two and  one-half  months  after the end of the year in which the
reimbursement amount has been so determined.

<PAGE>

     If the Excise Tax is later determined to be more than the amount taken into
account hereunder when the Executive's  employment terminated (due, for example,
to a payment  whose  existence or amount cannot be determined at the time of the
Gross-Up Payment Amount),  Citizens South shall reimburse the Executive for that
excess (plus any interest,  penalties or additions  payable by the Executive for
the excess) within thirty (30) days of such determination.

     (b) Responsibilities of the Accounting Firm and Citizens South.

     DETERMINATIONS  SHALL  BE  MADE  BY THE  ACCOUNTING  FIRM.  Subject  to the
provisions of Section 7.4(a), all determinations  required to be made under this
Section  7.4(b) -  including  whether  and when a  Gross-Up  Payment  Amount  is
required,  the amount of the Gross-Up  Payment Amount and the  assumptions to be
used to arrive at the determination (collectively,  the "DETERMINATION") - shall
be  made  by the  Accounting  Firm,  which  shall  provide  detailed  supporting
calculations  both to Citizens  South and the Executive  within 15 business days
after receipt of notice from Citizens South or the Executive that there has been
a Gross-Up  Payment  Amount,  or such  earlier  time as is requested by Citizens
South.

     FEES AND EXPENSES OF THE ACCOUNTING  FIRM AND AGREEMENT WITH THE ACCOUNTING
FIRM.  All fees and  expenses of the  Accounting  Firm shall be borne  solely by
Citizens South.  Citizens South shall enter into any agreement  requested by the
Accounting Firm in connection with the performance of its services hereunder.

     ACCOUNTING FIRM'S OPINION. If the Accounting Firm determines that no Excise
Tax is payable by the Executive, the Accounting Firm shall furnish the Executive
with a written opinion to that effect,  and to the effect that failure to report
Excise Tax, if any, on the Executive's applicable federal income tax return will
not result in the imposition of a negligence or similar penalty.

     ACCOUNTING FIRM'S  DETERMINATION IS BINDING;  UNDERPAYMENT AND OVERPAYMENT.
The  Determination by the Accounting Firm shall be binding on Citizens South and
the Executive.  Because of the  uncertainty  in  determining  whether any of the
Total  Benefits  will  be  subject  to  the  Excise  Tax  at  the  time  of  the
Determination,  it is possible that a Gross-Up  Payment  Amount that should have
been made will not have been made by Citizens South ("UNDERPAYMENT"),  or that a
Gross-Up  Payment Amount will be made that should not have been made by Citizens
South  ("OVERPAYMENT").  If, after a Determination  by the Accounting  Firm, the
Executive is required to make a payment of additional Excise Tax, the Accounting
Firm shall  determine  the amount of the  Underpayment  that has  occurred.  The
Underpayment  (together  with  interest  at the rate  provided  in Code  Section
1274(d)(2)(B)  of the) shall be paid  promptly by  Citizens  South to or for the
benefit of the  Executive.  If the Gross-Up  Payment  Amount  exceeds the amount
necessary to reimburse  the  Executive  for his Excise Tax  according to Section
7.4(a),  the Accounting Firm shall determine the amount of the Overpayment  that
has been made. The  Overpayment  (together with interest at the rate provided in
Code Section  1274(d)(2)(B))  shall be paid  promptly by the Executive to or for
the benefit of Citizens  South.  Provided  that his expenses are  reimbursed  by
Citizens South,  the Executive  shall cooperate with any reasonable  requests by
Citizens  South in any contests or disputes  with the Internal  Revenue  Service
relating to the Excise Tax.

<PAGE>

      ACCOUNTING FIRM CONFLICT OF INTEREST. If the Accounting Firm is serving as
accountant or auditor for the individual, entity, or group effecting the Change
in Control, the Executive may appoint another nationally recognized public
accounting firm to make the Determinations required hereunder (in which case the
term "Accounting Firm" as used in this Employment Agreement shall be deemed to
refer to the accounting firm appointed by the Executive under this paragraph).

                                    ARTICLE 8
                                  MISCELLANEOUS

     8.1 SUCCESSORS AND ASSIGNS.

     (a) This Employment  Agreement Is Binding on Citizens  South's  Successors.
This  Employment   Agreement  shall  be  binding  upon  Citizens  South  Banking
Corporation and any successor to Citizens South Banking  Corporation,  including
any persons  acquiring  directly or indirectly all or  substantially  all of the
business or assets of Citizens South Banking  Corporation  by purchase,  merger,
consolidation, reorganization, or otherwise. Any such successor shall thereafter
be deemed to be  "Citizens  South  Banking  Corporation"  for  purposes  of this
Employment  Agreement.  But  this  Employment  Agreement  and  Citizens  South's
obligations  under  this  Employment  Agreement  are not  otherwise  assignable,
transferable, or delegable by Citizens South. By agreement in form and substance
satisfactory to the Executive,  Citizens South Banking Corporation shall require
any successor to all or substantially  all of the business or assets of Citizens
South  Banking  Corporation  expressly  to  assume  and  agree to  perform  this
Employment  Agreement in the same manner and to the same extent  Citizens  South
would be required to perform if no such succession had occurred.

     (b) This  Employment  Agreement Is  Enforceable  by the  Executive  and His
Heirs. This Employment 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 Employment  Agreement Is Personal in Nature and Is Not Assignable.
This Employment Agreement is personal in nature.  Without written consent of the
other  parties,  no party shall assign,  transfer,  or delegate this  Employment
Agreement or any rights or obligations under this Employment  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,  Citizens South shall have no liability to
pay any amount to the assignee or transferee.

<PAGE>

     8.2 GOVERNING LAW,  JURISDICTION AND FORUM. This Employment 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  Employment  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 Employment  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.

     8.3  ENTIRE  AGREEMENT.  This  Employment  Agreement  sets forth the entire
agreement of the parties  concerning the employment of the Executive by Citizens
South,  and any oral or  written  statements,  representations,  agreements,  or
understandings  made or  entered  into  prior to or  contemporaneously  with the
execution of this  Employment  Agreement,  are hereby  rescinded,  revoked,  and
rendered null and void by the parties. The Salary Continuation Agreement (as may
be amended from time to time) and the Split Dollar Agreement and Endorsement (as
may be  amended  from  time to time) and the  parties'  rights  and  obligations
thereunder shall remain in full force and effect according to the terms thereof,
as the  same may be  amended  and  restated  after  the date of this  Employment
Agreement. Benefits payable under this Employment Agreement shall not be reduced
by any benefits payable under the Salary  Continuation  Agreement,  and benefits
payable  under the  Salary  Continuation  Agreement  shall not be reduced by any
benefits payable under this Employment Agreement.

     Without  limiting  the  generality  of the  foregoing,  the parties  hereto
acknowledge and agree that this Employment  Agreement supersedes in its entirety
the 2004 employment agreements entered into by the Executive and Citizens South,
as amended or  supplemented.  The 2004  employment  agreement shall hereafter be
void and of no force or effect.

     8.4 NOTICES.  Any notice under this Employment 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 Citizens South Banking  Corporation at the
time of the delivery of such notice,  and properly  addressed to Citizens  South
Banking  Corporation if addressed to Citizens  South Banking  Corporation at 519
South New Hope Road, Gastonia, North Carolina 28054-4040,  Attention:  Corporate
Secretary.

     8.5  SEVERABILITY.  In the case of conflict  between any  provision of this
Employment  Agreement and any statute,  regulation,  or judicial precedent,  the
latter shall prevail,  but the affected provisions of this Employment  Agreement
shall be  curtailed  and limited  solely to the extent  necessary  to bring them
within the requirements of law. If any provision of this Employment Agreement is
held by a court of competent  jurisdiction  to be indefinite,  invalid,  void or
voidable, or otherwise  unenforceable,  the balance of this Employment 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.

<PAGE>

     8.6 CAPTIONS AND  COUNTERPARTS.  The captions in this Employment  Agreement
are solely for  convenience.  The captions in no way define,  limit, or describe
the scope or intent of this Employment Agreement.  This Employment 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.

     8.7 NO DUTY TO MITIGATE. Citizens South 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,  Citizens South  acknowledges that its general severance pay plans
do not provide for  mitigation,  offset,  or reduction of any severance  payment
received thereunder.  Accordingly,  Citizens South further acknowledges that the
payment of severance and termination benefits under this Employment Agreement is
reasonable and shall be liquidated damages.  The Executive shall not be required
to mitigate the amount of any payment provided for in this Employment  Agreement
by seeking other employment. Moreover, the amount of any payment provided for in
this  Employment  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.

     8.8 AMENDMENT  AND WAIVER.  This  Employment  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 time any of the provisions of this Employment
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  Employment  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 Employment Agreement shall be held to
be a waiver of any other or subsequent breach.

     8.9 PAYMENT OF LEGAL FEES.  Citizens  South is aware that after a Change in
Control  management  could cause or attempt to cause Citizens South to refuse to
comply with its obligations under this Employment Agreement,  or could institute
or cause or attempt to cause Citizens South to institute  litigation  seeking to
have this Employment Agreement declared unenforceable,  or could take or attempt
to take  other  action  to deny  Executive  the  benefits  intended  under  this
Employment  Agreement.  In these  circumstances,  the purpose of this Employment
Agreement would be frustrated. It is Citizens South's intention that

<PAGE>

the  Executive  not be  required  to  incur  the  expenses  associated  with the
enforcement of his rights under this Employment Agreement, whether by litigation
or other legal action,  because the cost and expense thereof would substantially
detract from the benefits intended to be granted to the Executive hereunder.  It
is Citizens  South's  intention  that the  Executive  not be forced to negotiate
settlement  of his  rights  under  this  Employment  Agreement  under  threat of
incurring expenses.  Accordingly, if after a Change in Control occurs it appears
to the  Executive  that (a) Citizens  South has failed to comply with any of its
obligations under this Employment Agreement,  or (b) Citizens South or any other
person  has taken any  action  to  declare  this  Employment  Agreement  void or
unenforceable,  or instituted any  litigation or other legal action  designed to
deny,  diminish,  or to recover from the Executive  the benefits  intended to be
provided to the Executive hereunder,  Citizens South irrevocably  authorizes the
Executive from time to time to retain counsel of his choice, at Citizens South's
expense  as  provided  in this  Section  8.9,  to  represent  the  Executive  in
connection  with the  initiation  or defense of any  litigation  or other  legal
action,  whether  by  or  against  Citizens  South  or  any  director,  officer,
stockholder,   or  other  person   affiliated   with  Citizens   South,  in  any
jurisdiction.   Notwithstanding   any   existing  or  previous   attorney-client
relationship  between  Citizens  South and any counsel  chosen by the  Executive
under this Section 8.9,  Citizens  South  irrevocably  consents to the Executive
entering into an  attorney-client  relationship with that counsel,  and Citizens
South and the  Executive  agree that a  confidential  relationship  shall  exist
between  the  Executive  and that  counsel.  The fees and  expenses  of  counsel
selected from time to time by the Executive as provided in this section shall be
paid or  reimbursed to the  Executive by Citizens  South on a regular,  periodic
basis within 30 days following the  presentation by the Executive of a statement
or  statements  prepared  by such  counsel  in  accordance  with such  counsel's
customary  practices,  up to a maximum  aggregate  amount of $500,000.  Citizens
South's  obligation to pay the  Executive's  legal fees provided by this Section
8.9  operates  separately  from and in addition  to any legal fee  reimbursement
obligation  Citizens  South Banking  Corporation or Citizens South Bank may have
with the Executive under any separate severance or other agreement.

                                    ARTICLE 9
                               REQUIRED PROVISIONS

     9.1  CITIZENS  SOUTH'S  RIGHT  TO  TERMINATE  THE  EXECUTIVE'S  EMPLOYMENT.
Citizens South'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 Employment Agreement. The Executive shall not have the right
to receive  compensation or other benefits for any period after  termination for
Cause.

     9.2  SUSPENSION  OF  CITIZENS'S  SOUTH  OBLIGATIONS  IF  THE  EXECUTIVE  IS
SUSPENDED.  If the Executive is suspended from office or temporarily  prohibited
from  participating  in Citizens  South 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,   Citizens  South's   obligations  under  this
Employment Agreement shall be suspended as of the date of service, unless stayed
by appropriate proceedings. If the charges in the notice are dismissed, Citizens
South  may  in  its  discretion  (1)  pay  the  Executive  all  or  part  of the
compensation  withheld while Citizens South's obligations were suspended and (2)
reinstate in whole or in part any of the obligations that were suspended.

<PAGE>

     9.3  TERMINATION  OF  CITIZENS  SOUTH'S  OBLIGATIONS  IF THE  EXECUTIVE  IS
REMOVED.   If  the  Executive  is  removed  or   permanently   prohibited   from
participating  in Citizens South 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 Citizens South under this Employment Agreement
shall terminate as of the effective date of the order,  but vested rights of the
parties shall not be affected.

     9.4  TERMINATION  IF CITIZENS  SOUTH BANK IS IN DEFAULT.  If Citizens South
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 Citizens South under this
Employment  Agreement  shall  terminate  as of the  date of  default,  but  this
paragraph (d) shall not affect any vested rights of the parties.

     9.5  TERMINATION  ASSOCIATED  WITH  REGULATORY  ACTION.  All obligations of
Citizens South under this Employment  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  ("FDIC")
enters into an agreement to provide assistance to or on behalf of Citizens South
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's
designee when the OTS approves a supervisory  merger to resolve problems related
to the  operations  of  Citizens  South  Bank or  when  Citizens  South  Bank is
determined  by the OTS or by the FDIC to be in an unsafe or  unsound  condition.
Vested rights of the parties shall not be affected, however.

     9.6 PAYMENTS ARE SUBJECT TO  COMPLIANCE  WITH 12 USC 1828(K).  Any payments
made to the Executive under this  Employment  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 Employment Agreement as
of the date first written above.

WITNESSES                               CITIZENS SOUTH BANKING CORPORATION

/s/ Paul L. Teem, Jr.                   By:   /s/ David W. Hoyle, Sr.
----------------------------                  ----------------------------------
Paul L. Teem, Jr.                             David W. Hoyle, Sr.

/s/ Gary F. Hoskins                     Its:  Chairman of the Board of Directors
----------------------------                  ----------------------------------
Gary F. Hoskins

WITNESSES                               CITIZENS SOUTH BANK

/s/ Paul L. Teem, Jr.                   By:  /s/ David W. Hoyle, Sr.
----------------------------                 -----------------------------------
Paul L. Teem, Jr.

/s/ Gary F. Hoskins                     Its: Chairman of the Board of Directors
----------------------------                 -----------------------------------
Gary F. Hoskins

WITNESSES                               EXECUTIVE

/s/ Paul L. Teem, Jr.                   /s/ Kim S. Price
----------------------------            ----------------------------------------
Paul L. Teem, Jr.                       Kim S. Price

County of Gaston)
                           ss:
State of North Carolina)

     Before me this 17th day of November,  2008,  personally  appeared the above
named  and Kim S.  Price,  who  acknowledged  that  they did sign the  foregoing
instrument and that the same was their free act and deed.

                                             /s/ Brendy Pogorzelski
                                             -----------------------------------
(Notary Seal)                                Notary Public

                                             My Commission Expires: May 30, 2009
                                                                    ------------

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