Document:

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                                  EXHIBIT 10.7

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                                                                    Exhibit 10.7

                               CITIZENS SOUTH BANK
                     MERGER/ACQUISITION PROTECTION AGREEMENT
                           FOR MICHAEL ROBERT MAGUIRE

       This AGREEMENT is made effective as of July 15, 2002, by and between
Citizens South Bank, a stock savings bank (the "Bank"), and Michael Robert
Maguire (the "Executive"). Any reference to "Company" herein shall mean Citizens
South Banking Corporation, or any successor thereto.

       WHEREAS, the Bank recognizes the substantial contribution the Executive
has made to the Bank and wishes to protect his position for the period provided
in this Agreement;

       WHEREAS, the Executive has been elected to, and has agreed to serve in
the position of Senior Vice President and Chief Credit Officer for the Bank, a
position of substantial responsibility; and

       WHEREAS, pursuant to a letter dated April 22, 1999 (the "April 1999
Letter") the Bank agreed that the Executive was entitled to an annual base
salary of $82,008 and various other perquisites during the 24-month period
commencing on April 22, 1999, and agreed to provide the Executive with a
Merger/Acquisition Protection Agreement providing certain benefits in the event
of a change in control of the Bank or the Company.

       NOW, THEREFORE, in consideration of the contribution of the Executive,
and upon the other terms and conditions hereinafter provided, the parties hereto
agree as follows:

1.     TERM OF AGREEMENT

       The term of this Agreement shall be deemed to have commenced as of the
date first above written and shall continue for a period of twelve (12) full
calendar months thereafter. Commencing on the first anniversary date of this
Agreement and continuing at each anniversary date thereafter, the Board of
Directors of the Bank (the "Board") may extend the Agreement for an additional
year. Within 30 days prior to such anniversary date, the Board will conduct a
performance evaluation of the Executive for purposes of determining whether to
extend the Agreement, and the results thereof shall be included in the minutes
of the Board's meeting. If the Executive is also a director then he or she shall
abstain from any and all voting with respect to the extension of the term of
such Executive's Agreement. This agreement does not create a right to the
continuation of employment.

2.     PAYMENTS TO EXECUTIVE UPON TERMINATION FOLLOWING A CHANGE IN CONTROL OR
OTHER CONTROL TRANSACTION

       (a) Upon the voluntary or involuntary termination of the Executive's
employment other than for Termination for Cause within 12 months after;

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              (i)  a Change in Control, or

              (ii) a merger of the Bank with another bank or savings association
       (other than an interim bank or association and other than in connection
       with the mutual-to-stock conversion of the Company's mutual holding
       company) with the Bank as the surviving entity, or acquisition by the
       Company of another bank or savings association that is held as a
       subsidiary of the Company and is not merged into the Bank, and either (A)
       a reduction in the base salary of the Executive, (B) a substantial
       diminution in the duties or responsibilities of the Executive, or (C) the
       relocation of the Executive's principal place of employment by more than
       50 miles from Gastonia, North Carolina,

the Bank or its successor shall be obligated to pay the Executive, or in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay, a sum equal to one and a half (1.5) times
the Executive's annual compensation, including base salary at the highest rate
of pay existing at the time of termination and aggregate bonuses paid during the
last 12 months prior to termination. At the election of the Executive, or his
estate, as the case may be, which election may be made annually by January 31 of
each year and is irrevocable for the year in which made (and once payments
commence), such payment may be made in a lump sum or paid in equal semimonthly
installments during the eighteen (18) months following the Executive's
termination. In the event that no election is made, payment to the Executive
will be made on a semimonthly basis during the remaining term of this Agreement.

       (b) Upon the occurrence of a Change in Control of the Bank followed at
any time during the term of this Agreement by the Executive's voluntary or
involuntary termination of the Executive's employment other than for Termination
for Cause, the Bank shall cause to be continued life, medical and dental
coverage substantially identical to the coverage maintained by the Bank for the
Executive prior to his severance. Such coverage and payments shall cease upon
expiration of eighteen (18) months.

       (c) Upon the occurrence of a Change in Control, the Executive will have
such rights as specified in any other employee benefit plan with respect to
options and such other rights as may have been granted to the Executive under
such plans.

       (d) A "Change in Control" of the Bank or the Company shall mean a change
in control of a nature that: (i) would be required to be reported in response to
Item 1(a) of the current report on Form 8K, as in effect on the date hereof,
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"); or (ii) results in a Change in Control of the Bank or the
Company within the meaning of the Home Owners' Loan Act, as amended, and
applicable rules and regulations promulgated thereunder (collectively, the
"HOLA") as in effect at the time of the Change in Control; or (iii) without
limitation such a Change in Control shall be deemed to have occurred at such
time as (a) any "person" (as the term is used in Sections 13(d) and 14(d) of the
Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3

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under the Exchange Act), directly or indirectly, of securities of the Company
representing 25 % or more of the combined voting power of Company's outstanding
securities, except for any securities purchased by the Bank's employee stock
ownership plan or trust; or (b) individuals who constitute the Board on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date hereof whose election was approved by a vote of at least three-quarters of
the directors comprising the Incumbent Board, or whose nomination for election
by the Company's stockholders was approved by the same Nominating Committee
serving under an Incumbent Board, shall be, for purposes of this clause (b),
considered as though he were a member of the Incumbent Board; or (c) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Bank or the Company or similar transaction in which the Bank or
Company is not the surviving institution occurs; or (d) a proxy statement
soliciting proxies from stockholders of the Company, by someone other than the
current management of the Company, seeking stockholder approval of a plan of
reorganization, merger or consolidation of the Company or similar transaction
with one or more corporations as a result of which the outstanding shares of the
class of securities then subject to the plan are to be exchanged for or
converted into cash or property or securities not issued by the Company; or (e)
a tender offer is made for 25% or more of the voting securities of the Company
and the shareholders owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender offer and such tendered shares have been accepted
by the tender offeror. The mutual-to-stock conversion of the Company's mutual
holding company shall not be a Change in Control.

       (e) The Executive shall not have the right to receive termination
benefits pursuant to Section 3 hereof upon Termination for Cause. The term
"Termination for Cause" shall mean termination because of the Executive's
intentional failure to perform stated duties, personal dishonesty, incompetence,
willful misconduct, any breach of fiduciary duty involving personal profit,
willful violation of any law, rule, regulation (other than traffic violations or
similar offenses) or final cease and desist order, or any material breach of any
material provision of this Agreement. In determining incompetence, the acts or
omissions shall be measured against standards generally prevailing in the
savings institution industry. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to him a copy of a resolution duly adopted by the
affirmative vote of not less than three-fourths of the members of the Board at a
meeting of the Board called and held for that purpose (after reasonable notice
to the Executive and an opportunity for him, together with counsel, to be heard
before the Board), finding that in the good faith opinion of the Board, the
Executive was guilty of conduct justifying Termination for Cause and specifying
the particulars thereof in detail. The Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause.

3.     REDUCTION IN THE CASE OF EXCESS PARACHUTE PAYMENT

       Notwithstanding any other provision of this agreement, in no event shall
the

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aggregate payments or benefits made or afforded to the Executive hereunder (the
"Termination Benefits") constitute an "excess parachute payment" under Section
280G of the Code or any successor thereto, and in order to avoid such a result,
Termination Benefits will be reduced, if necessary, to an amount (the
"Non-Triggering Amount"), the value of which is one dollar ($1.00) less than an
amount equal to three (3) times the Executive's "base amount," as determined in
accordance with said Section 280G.

4.     NOTICE OF TERMINATION

       (a) Any purported termination by the Bank or by the Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated.

       (b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the case of a Termination for Cause, shall be immediate).
In no event shall the Date of Termination exceed 30 days from the date Notice of
Termination is given.

5.     COVENANT NOT TO COMPETE

       The Executive agrees that for a period of twelve months following the
first payment of any benefit under Section 2(a) of the Agreement, he shall not,
directly or indirectly, engage (as principal, partner, director, officer, agent,
employee, or owner, with or without compensation) in any line of business that
the Company or the Bank is involved (including, but not limited to, the
providing of wholesale banking services, consumer financial services, retail
banking, trust and investment management services, secured and unsecured loan
and financing services, real estate financing services, asset and investment
management and fiduciary services, cash management services, and consumer and
commercial credit card services), in Gaston County, North Carolina.

       The Executive shall not entice or solicit, directly or indirectly, any
other executives or key management personnel of the Company (or any subsidiary)
to work with him or any entity with which the Executive has affiliated, for a
period of twelve months after the payment of severance benefits under the
Agreement. The Executive shall also not entice or solicit, directly or
indirectly, any client or customer of the Company (or any subsidiary) for any
competitor or in any competitive activity for a period of twelve months after
the payment of severance benefits under the Agreement.

       The foregoing restriction shall not be construed to prohibit the
Executive from owning less than five percent (5%) of any class of securities of
any corporation located in Gaston County, North Carolina, which is engaged in
any of the foregoing businesses having a class of securities registered pursuant
to the Securities Exchange Act of 1934, provided that such ownership

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represents a passive investment and that neither the Executive nor any group of
persons including the Executive in any way, either directly or indirectly,
manages or exercises control of any such corporation, guarantees any of its
financial obligations, otherwise takes part in its business, other than
exercising his rights as a shareholder, or seeks to do any of the foregoing.

6.     ENFORCEMENT OF OBLIGATIONS

       The Executive acknowledges that the restrictions contained in Section 5
are reasonable and necessary to protect the legitimate interests of the Company,
that the Company would not have entered into this Agreement in the absence of
such restrictions, and that any violation of any provision of this Section will
result in irreparable injury to the Company. The Executive further represents
and acknowledges that (i) he has been advised by the Company to consult his own
legal counsel with respect to this Agreement; and (ii) that he has, prior to
execution of this Agreement, reviewed thoroughly this Agreement with his
counsel. The Executive agrees that the Company shall be entitled to preliminary
and permanent injunctive relief, without the necessity of proving actual
damages, as well as to an equitable accounting of all earnings, profits and
other benefits arising from any violations of Section 5, which rights shall be
cumulative and in addition to any other rights or remedies to which the Company
may be entitled. In the event that any of the provisions of Section 5 should
ever be adjudicated to exceed the time, geographic, product or service, or other
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, product or service, or other limitations permitted by applicable
law. The Executive irrevocably and unconditionally (i) agrees that any suit,
action or other legal proceeding arising out of this Agreement in which any
party is seeking in whole or in part any form of equitable relief, including
without limitation, any action commenced by the Company for preliminary and
permanent injunctive relief and other equitable relief, may be brought in any
court of competent jurisdiction in Gaston County, North Carolina; (ii) consents
to the non-exclusive jurisdiction of any court in any such suit, action or
proceeding; and (iii) waives any objection which the Executive may have to the
laying of venue of any such suit, action or proceeding in any such court.

7.     SOURCE OF PAYMENTS

       It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the Bank. The
Company, however, guarantees payment and provision of all amounts and benefits
due hereunder to Executive and, if such amounts and benefits due from the Bank
are not timely paid or provided by the Bank, such amounts and benefits shall be
paid or provided by the Company.

8.     EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS

       This Agreement contains the entire understanding between the parties
hereto and supersedes any prior agreement between the Bank and the Executive,
including the April 1999

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Letter, except that this Agreement shall not affect or operate to reduce any
benefit or compensation inuring to the Executive of a kind elsewhere provided.
No provision of this Agreement shall be interpreted to mean that the Executive
is subject to receiving fewer benefits than those available to him without
reference to this Agreement.

9.     NO ATTACHMENT

       (a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.

       (b) This Agreement shall be binding upon, and inure to the benefit of,
the Executive and the Bank and their respective successors and assigns.

10.    MODIFICATION AND WAIVER

       (a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.

       (b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.

11.    REQUIRED PROVISIONS

       (a) The Bank may terminate the Executive's employment at any time. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 2(c) hereinabove.

       (b) If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 USC (S)1818(e)(3)) or 8(g) (12 USC (S)1818(g))
of the Federal Deposit Insurance Act, as amended by the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, the Bank's obligations under this
contract shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay the Executive all or part of the compensation
withheld while their contract obligations were suspended and (ii) reinstate (in
whole or in part) any of the obligations which were suspended.

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       (c) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 USC (S)1818(e)) or 8(g) (12 USC (S) 1818(g)) of the Federal
Deposit Insurance Act, as amended by the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, all obligations of the Bank under this contract
shall terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

       (d) If the Bank is in default as defined in Section 3(x) (12
USCss.1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, all
obligations of the Bank under this contract shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the
contracting parties.

       (e) All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the Bank, (i) by the Federal Deposit Insurance
Corporation ("FDIC"), at the time the FDIC enters into an agreement to provide
assistance to or on behalf of the Bank under the authority contained in Section
13(c) (12 USC ss.1823(c)) of the Federal Deposit Insurance Act, as amended by
the Financial Institutions Reform, Recovery and Enforcement Act of 1989; or (ii)
when the Bank is determined by the FDIC to be in an unsafe or unsound condition.
Any rights of the parties that have already vested, however, shall not be
affected by such action.

       (f) Any payments made to Executive pursuant to this Agreement or
otherwise are subject to and conditioned upon their compliance with 12 USC
Section 1828(k) and any regulations promulgated thereunder.

12.    SEVERABILITY

       If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

13.    HEADINGS FOR REFERENCE ONLY

       The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

14.    GOVERNING LAW

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       The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by the laws of the State of North Carolina, unless
preempted by Federal law as now or hereafter in effect.

       Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within fifty
(50) miles from the location of the Bank, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that
subject to Section 3(c) hereof, the Executive shall be entitled to seek specific
performance of his right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.

15.    PAYMENT OF LEGAL FEES

       All reasonable legal fees paid or incurred by the Executive pursuant to
any dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by the Bank if the Executive is successful on the merits
pursuant to a legal judgment, arbitration or settlement.

16.    SUCCESSOR TO THE BANK

       The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.

17.    SIGNATURES

       IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed by
its duly authorized officer, and the Executive has signed this Agreement, on the
day and date first above written.

ATTEST:                                        CITIZENS SOUTH BANK

__________________________________             By:___________________________
Paul L. Teem, Jr., Secretary                      Kim S. Price, President

WITNESS:                                       EXECUTIVE

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_________________________              __________________________
                                       Michael Robert Maguire

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                                  EXHIBIT 10.8

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                                                                    Exhibit 10.8

                               GASTON FEDERAL BANK
                              EMPLOYMENT AGREEMENT

     This Agreement is made effective as of January 1, 2002 by and between
Gaston Federal Bank (the "Bank"), a federally-chartered stock savings bank, with
its principal executive office at 245 West Main Avenue, P.O. Box 2249, Gastonia,
North Carolina 28053-2249 and Ronald E. Bostian (the "Executive"). Any reference
to "Company" herein shall mean Gaston Federal Bancorp, Inc., the stock holding
company parent of the Bank or any successor thereto.

     WHEREAS, the Bank wishes to assure itself of the continued services of
Executive for the period provided in this Agreement; and

     WHEREAS, Executive is willing to continue to serve in the employ of the
Bank on a full-time basis for said period.

     NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and upon the other terms and conditions hereinafter provided, the parties hereby
agree as follows:

1.   POSITION AND RESPONSIBILITIES

     During the period of his employment hereunder, Executive agrees to serve as
Executive Vice President of the Bank (the "Executive Position"). At the Merger
Effective Date the Executive shall be appointed to the Board of Directors of the
Company and the Bank, and During said period, Executive also agrees to continue
to serve, if elected, as a director of any subsidiary or affiliate of the Bank.
Failure to reelect Executive to the Executive Position without the consent of
the Executive during the term of this Agreement shall constitute a breach of
this Agreement.

2.   TERMS AND DUTIES

     (a)  The period of Executive's employment under this Agreement shall begin
as of the date first above written and shall continue for a period of
twenty-four (24) full calendar months thereafter. Within thirty days prior to
the first anniversary date of this Agreement, the Board of Directors of the Bank
("Board") will conduct a performance evaluation and review of the Executive,
provided, however, that based on this review, the Board shall be permitted to
terminate Executive's employment only in accordance with the terms of this
Agreement.

     (b)  During the period of his employment hereunder, except for periods of
absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, Executive shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the Bank; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
Executive may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, business companies or business

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organizations, which, in such Board's judgment, will not present any
conflict of interest with the Bank, or materially affect the
performance of Executive's duties pursuant to this Agreement (it being
understood that membership in social, religious, charitable or similar
organizations does not require Board approval pursuant to this Section 2(b)).

3.   COMPENSATION AND REIMBURSEMENT

     (a)  The compensation specified under this Agreement shall constitute the
salary and benefits paid for the duties described in Section 2(b). The Bank
shall pay Executive as compensation a salary of $150,000 per year ("Base
Salary"). Such Base Salary shall be payable semi-monthly. In addition to the
Base Salary provided in this Section 3(a), the Bank shall provide Executive at
no cost to Executive with all such other benefits as are provided uniformly to
permanent full-time employees of the Bank.

     (b)  In addition to the Base Salary provided for by paragraph (a) of this
Section 3, the Bank shall pay any dues associated with the Executives
involvement with civic clubs and his membership dues in the Country Club of
Salisbury and shall provide an automobile allowance (not to exceed $750 per
month) for the Executive, and, pay or reimburse Executive for all reasonable
travel and other reasonable expenses incurred by Executive performing his
obligations under this Agreement and may provide such additional compensation in
such form and such amounts as the Board may from time to time determine.

4.   PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION

     The provisions of this Section shall in all respects be subject to the
terms and conditions stated in Sections 7 and 14.

     (a)  The provisions of this Section shall apply upon the occurrence of an
Event of Termination (as herein defined) during the Executive's term of
employment under this Agreement. As used in this Agreement, an "Event of
Termination" shall mean and include any one or more of the following:

     (i)  the termination by the Bank or the Company of Executive's full-time
employment hereunder for any reason other than (A) Disability, as defined in
Section 5 below, or (B) Termination for Cause as defined in Section 6 hereof; or

     (ii) Executive's resignation from the Bank's employ, upon any

          (A) failure to elect or reelect or to appoint or reappoint Executive
          to the Executive Position,

          (B) a relocation of Executive's principal place of employment by more
          than 50 miles from its location at the effective date of this
          Agreement,

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          (C) liquidation or dissolution of the Bank or Company, other than
          liquidations or dissolutions that are caused by reorganizations that
          do not affect the status of Executive (including any mutual to stock
          conversion of Gaston Federal Holdings, MHC); or

          (D) breach of this Agreement by the Bank, if not corrected within
          thirty (30) days after notification of such breach is provided to the
          Bank by the Executive.

     (b)  Upon the occurrence of an Event of Termination, on the Date of
Termination, as defined in Section 7, the Bank shall pay Executive, or, in the
event of his subsequent death, his beneficiary or beneficiaries, or his estate,
as the case may be, as severance pay or liquidated damages, or both, a lump sum
cash payment equal to the pro-rated Base Salary for the remaining term of the
Agreement; provided however, that if the Bank is not in compliance with its
minimum capital requirements or if such payments would cause the Bank's capital
to be reduced below its minimum capital requirements, such payments shall be
deferred until such time as the Bank is in capital compliance. Such payments
shall not be reduced in the event the Executive obtains other employment
following termination of employment.

     (c)  Upon the occurrence of an Event of Termination, the Bank will cause to
be continued life, medical, and dental coverage substantially identical to the
coverage maintained by the Bank for Executive prior to his termination for the
remaining term of the Agreement. Such coverage shall cease upon the expiration
of the remaining term of this Agreement.

     (d)  Notwithstanding the preceding paragraphs of this Section 4, in the
event that:

          (i)  the aggregate payments or benefits to be made or afforded to
               Executive under said paragraphs (the "Termination Benefits")
               would be deemed to include an "excess parachute payment" under
               Section 280G of the Code or any successor thereto, and

          (ii) if such Termination Benefits were reduced to an amount (the
               "Non-Triggering Amount"), the value of which is one dollar
               ($1.00) less than an amount equal to the total amount of payments
               permissible under Section 280G of the Code or any successor
               thereto.

          then the Termination Benefits to be paid to Executive shall be so
          reduced so as to be a Non-Triggering Amount.

5.   TERMINATION UPON DISABILITY

     In the event Executive is unable to perform his duties under this Agreement
on a full-time basis for a period of six (6) consecutive months by reason of
illness or other physical or mental disability, the Employer may terminate this
Agreement, provided that the Employer shall continue to be obligated to pay the
Executive his Base Salary for the remaining term of the Agreement,

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provided that any amounts actually paid to Executive pursuant to any disability
insurance or other similar such program which the Employer has provided or may
provide on behalf of its employees or pursuant to any workman's compensation or
Social Security disability program shall reduce the compensation to be paid to
the Executive pursuant to this paragraph.

6.   TERMINATION FOR CAUSE

     The term "Termination for Cause" shall mean termination because of the
Executive's personal dishonesty, incompetence, willful misconduct, any breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of this Agreement. In determining incompetence, the acts
or omissions shall be measured against standards generally prevailing in the
savings institutions industry. For purposes of this paragraph, no act or failure
to act on the part of Executive shall be considered "willful" unless done, or
omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's action or omission was in the best interest of the
Bank. Notwithstanding the foregoing, Executive shall not be deemed to have been
Terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board at a meeting of the Board called and
held for that purpose (after reasonable notice to Executive and an opportunity
for him, together with counsel, to be heard before the Board), finding that in
the good faith opinion of the Board, Executive was guilty of conduct justifying
Termination for Cause and specifying the particulars thereof in detail. The
Executive shall not have the right to receive compensation or other benefits for
any period after Termination for Cause. Any stock options granted to Executive
under any stock option plan of the Bank, the Company or any subsidiary or
affiliate thereof, shall become null and void effective upon Executive's receipt
of Notice of Termination for Cause pursuant to Section 7 hereof, and shall not
be exercisable by Executive at any time subsequent to such Termination for
Cause.

7.   NOTICE

     (a)  Any purported termination by the Bank or by Executive shall be
communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated.

     (b)  "Date of Termination" shall mean (A) if Executive's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for Cause, the Date of Termination shall be immediate
upon receipt of the notice, and (C) if his employment is terminated for any
other reason, the date specified in the Notice of Termination (which shall not
be less than thirty (30) days from the date such Notice of Termination is
given).

                                       4

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     (c)  Within thirty (30) days after any Notice of Termination is given, the
party receiving such Notice of Termination may notify the other party in writing
that a dispute exists concerning the termination. In the event that Executive is
terminated for cause and such Termination for Cause is found to have been
wrongful or such dispute (notification of which is made in accordance with this
Sub-section 7(c)) is otherwise decided in Executive's favor, the Executive shall
be entitled to receive all compensation and benefits which accrued for up to a
period of nine months after termination employment. If such dispute is not
resolved within such nine-month period, the Bank shall not be obligated, upon
final resolution of such dispute, to pay Executive compensation and other
payments accruing more than nine months from the Date of the Termination
specified in the Notice of Termination. Amounts paid under this Section are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.

8.   POST-TERMINATION OBLIGATIONS

     (a)  All payments and benefits to Executive under this Agreement shall be
subject to Executive's compliance with paragraph (b) of this Section 8 during
the term of this Agreement and for one (1) full year after the expiration or
termination hereof.

     (b)  Executive shall, upon reasonable notice, furnish such information and
assistance to the Bank as may reasonably be required by the Bank in connection
with any litigation in which it or any of its subsidiaries or affiliates is, or
may become, a party.

9.   NON-COMPETITION

     (a)  Upon any termination of Executive's employment hereunder as a result
of which the Association is paying Executive benefits under Section 4 of this
Agreement, Executive agrees not to compete with the Bank and/or the Company for
a period of one (1) year following such termination in any city, town or county
in which the Bank and/or the Company has an office or has filed an application
for regulatory approval to establish an office, determined as of the effective
date of such termination, except as agreed to pursuant to a resolution duly
adopted by the Board. Executive agrees that during such period and within said
cities, towns and counties, Executive shall not work for or advise, consult or
otherwise serve with, directly or indirectly, any entity whose business
materially competes with the depository, lending or other business activities of
the Bank and/or the Company. The parties hereto, recognizing that irreparable
injury will result to the Bank and/or the Company, its business and property in
the event of Executive's breach of this Subsection 9(a) agree that in the event
of any such breach by Executive, the Bank and/or the Company will be entitled,
in addition to any other remedies and damages available, to an injunction to
restrain the violation hereof by Executive, Executive's partners, agents,
servants, employers, employees and all persons acting for or with Executive.
Executive represents and admits that Executive's experience and capabilities are
such that Executive can obtain employment in a business engaged in other lines
and/or of a different nature than the Bank and/or the Company, and that the
enforcement of a remedy by way of injunction will not prevent Executive from
earning a livelihood. Nothing herein will be construed as prohibiting the Bank
and/or the Company from pursuing any other remedies available to the Bank and/or
the Company for such breach or threatened breach, including the recovery of

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damages from Executive. This paragraph (a) shall not apply if an termination of
Executive's employment occurs in connection with a change in control of the
Bank, within the meaning of the Home Owners' Loan Act and the Rules and
Regulations promulgated by the Office of Thrift Supervision (or its predecessor
agency) thereunder.

     (b)  Executive recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the Bank and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the Bank. Executive will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the Bank or affiliates thereof to any person,
firm, corporation, or other entity for any reason or purpose whatsoever (except
for such disclosure as may be required to be provided to the Office of Thrift
Supervision (the "OTS"), the Federal Deposit Insurance Corporation (the "FDIC"),
or other federal or state banking agency with jurisdiction over the Bank or
Executive). Notwithstanding the foregoing, Executive may disclose any knowledge
of banking, financial and/or economic principles, concepts or ideas which are
not solely and exclusively derived from the business plans and activities of the
Bank, and Executive may disclose any information regarding the Bank or the
Company which is otherwise publicly available. In the event of a breach or
threatened breach by the Executive of the Provisions of this Section 9, the Bank
will be entitled to an injunction restraining Executive from disclosing, in
whole or in part, the knowledge of the past, present, planned or considered
business activities of the Bank or affiliates thereof, or from rendering any
services to any person, firm, corporation, other entity to whom such knowledge,
in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein will be construed as prohibiting the Bank from pursuing any other
remedies available to the Bank for such breach or threatened breach, including
the recovery of damages from Executive.

10.  SOURCE OF PAYMENTS

     All payments provided in this Agreement shall be timely paid by direct
electronic deposit or in cash or check from the general funds of the Bank. The
Company, however, guarantees payment and provision of all amounts and benefits
due hereunder to Executive and, if such amounts and benefits due from the Bank
are not timely paid or provided by the Bank, such amounts and benefits shall be
paid or provided by the Company.

11.  EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the Bank or any
predecessor of the Bank and Executive, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to the Executive
of a kind elsewhere provided. No provision of this Agreement shall be
interpreted to mean that Executive is subject to receiving fewer benefits than
those available to him without reference to this Agreement.

12.  NO ATTACHMENT

                                       6

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     (a)  Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.

     (b)  This Agreement shall be binding upon, and inure to the benefit of,
Executive and the Bank and their respective successors and assigns.

13.  MODIFICATION AND WAIVER

     (a)  This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.

     (b)  No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel. No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.

14.  REQUIRED PROVISIONS

     (a)  The Bank's Board of Directors may terminate the Executive's employment
at any time, but any termination by the Bank's Board of Directors, other than
Termination for Cause, shall not prejudice Executive's right to compensation or
other benefits under this Agreement. Executive shall not have the right to
receive compensation or other benefits for any period after Termination for
Cause as defined in Section 7 herein above.

     (b)  If the Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank's affairs by a notice
served under Section 8(e)(3) (12 U.S.C. (S)(S) 1818(e)(3)) or 8(g) (12 U.S.C.
(S) 1818(g)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, the Bank's
obligations under this contract shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the Bank may in its discretion (i) pay the Executive all or part of
the compensation withheld while their contract obligations were suspended and
(ii) reinstate (in whole or in part) any of the obligations which were
suspended.

     (c)  If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e) (12 U.S.C. (S)(S) 1818(e)) or 8(g) (12 U.S.C. (S) 1818(g)) of the
Federal Deposit Insurance Act, as amended by the Financial Institutions Reform,
Recovery and Enforcement Act of 1989, all obligations of the Bank under this
contract shall terminate as of the effective date of the order, but vested
rights of the contracting parties shall not be affected.

                                       7

<PAGE>

     (d)  If the Bank is in default as defined in Section 3(x) (12 U.S.C. (S)
1813(x)(1)) of the Federal Deposit Insurance Act, as amended by the Financial
Institutions Reform, Recovery and Enforcement Act of 1989, all obligations of
the Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.

     (e)  All obligations of the Bank under this contract shall be terminated,
except to the extent determined that continuation of the contract is necessary
for the continued operation of the institution, (i) by the Director, at the time
FDIC or the Resolution Trust Corporation enters into an agreement to provide
assistance to or on behalf of the Bank; or (ii) by the OTS at the time the OTS
or its District Director approves a supervisory merger to resolve problems
related to the operations of the Bank or when the Bank is determined by the OTS
or FDIC to be in an unsafe or unsound condition. Any rights of the parties that
have already vested, however, shall not be affected by such action.

     (f)  Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon their compliance with 12 USC
Section 1828(k) and any regulations promulgated thereunder.

15.  SEVERABILITY

     If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

16.  HEADINGS FOR REFERENCE ONLY

     The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

17.  GOVERNING LAW

     This Agreement shall be governed by the laws of the State of North Carolina
but only to the extent not superseded by federal law. In the event that any
discrepancies arise between the contract and laws or regulations which are
effective with respect to the contract, the laws and regulations will prevail.

                                       8

<PAGE>

18.  ARBITRATION

     Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by the employee within
thirty (30) miles from the location of the Bank, in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of his right to be paid
until the Date of Termination during the pendency of any dispute or controversy
arising under or in connection with this Agreement.

19.  SUCCESSOR TO THE BANK

     The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank or the Company, expressly
and unconditionally to assume and agree to perform the Bank's obligations under
this Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.

                                       9

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