Document:

EXHIBIT 10.1

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT

         THIS AMENDED AND RESTATED  EMPLOYMENT  AGREEMENT (the  "Agreement")  is
entered  into and is  effective  this  20th day of April,  2006 (the  "Effective
Date"),  by and between FIRST SOUTH BANCORP,  INC. (the "Company"),  FIRST SOUTH
BANK and THOMAS A. VANN (the "Employee").

         WHEREAS,  the Employee has heretofore  been employed by the Company and
the Bank as Chief  Executive  Officer and  President and is  experienced  in all
phases of the business of the Company and the Bank; and

         WHEREAS, the Board of Directors of each of the Company and the Bank and
the Employee have  determined that it is necessary and appropriate to enter into
this  Amended  and  Restated  Employment  Agreement  to  ensure  the  Employee's
continued  service on terms  consistent  with his role and his importance to the
success of the Company and the Bank;

         NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained  herein,  and other good and valuable  consideration,  the adequacy of
which is acknowledged by the parties hereto, it is AGREED as follows:

         1.       Defined Terms

         When used anywhere in this  Agreement,  the following  terms shall have
the meaning set forth herein.

         (a) "Bank Board" shall mean the Board of Directors of the Bank.

         (b) "Change in Control" shall mean any one of the following events: (i)
the  acquisition  by any person  (or  persons  acting as a group) of  ownership,
holding or power to vote more than 25% of the voting stock of the Company or the
Bank,  (ii) the  acquisition by any person (or persons acting as a group) of the
ability to control the  election of a majority  of the  Company's  or the Bank's
directors,  (iii) the acquisition of a controlling influence over the management
or  policies  of the  Company or of the Bank,  or (iv)  during any period of two
consecutive years, individuals (the "Continuing Directors") who at the beginning
of such period  constitute  the Board of Directors of the Company or of the Bank
(the  "Existing  Board") cease for any reason to constitute at least  two-thirds
thereof,  provided that any individual whose election or nomination for election
as a member of the Existing Board was approved by a vote of at least  two-thirds
of the  Continuing  Directors  then in office  shall be  considered a Continuing
Director. For purposes of this paragraph,  the terms "person" or "persons acting
as a group"  shall be  construed  within the  meaning  of  Section  13(d) of the
Securities  Exchange  Act  of  1934  and  shall  refer  to  an  individual  or a
corporation,  partnership,  trust, association,  joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.

         (c) "Code"  shall mean the Internal  Revenue  Code of 1986,  as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.

         (d) "Company Board" shall mean the Board of Directors of the Company.

<PAGE>

         (e) "Good Reason" shall mean any of the following events, which has not
been  consented  to in advance by the Employee in writing:  (i) the  requirement
that  the  Employee  move his  personal  residence,  or  perform  his  principal
executive functions,  more than 30 miles from his primary office as of the later
of the Effective Date and the most recent voluntary  relocation by the Employee;
(ii) a  material  reduction  in the  Employee's  base  compensation  under  this
Agreement as the same may be increased  from time to time;  (iii) the failure by
the Company or the Bank to continue to provide the  Employee  with  compensation
and benefits  provided  under this  Agreement as the same may be increased  from
time to time, or with benefits  substantially  similar to those  provided to him
under any of the employee  benefit  plans in which the Employee now or hereafter
becomes a  participant,  or the taking of any action by the  Company or the Bank
which would  directly or  indirectly  reduce any of such benefits or deprive the
Employee of any material  fringe  benefit  enjoyed by him under this  Agreement;
(iv) the  assignment to the Employee of duties and  responsibilities  materially
different from those  normally  associated  with his position;  (v) a failure to
reelect the Employee to the Company Board or the Bank Board, if the Employee has
served  on such  Board at any time  during  the  term of the  Agreement;  (vi) a
material diminution or reduction in the Employee's responsibilities or authority
(including  reporting  responsibilities)  in connection with his employment with
the Company or the Bank;  or (vii) a material  reduction in the  secretarial  or
other administrative support of the Employee.

         (f) "Just Cause"  shall mean,  in the good faith  determination  of the
Company Board and the Bank, the Employee's  personal  dishonesty,  incompetence,
willful  misconduct,   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.
No act, or failure to act, on the Employee's part shall be considered  "willful"
unless he has acted, or failed to act, with an absence of good faith and without
a reasonable  belief that his action or failure to act was in the best  interest
of the Company and the Bank.

         (g)  "Protected  Period"  shall mean the period that begins on the date
six months before a Change in Control and ends on the later of the second annual
anniversary of the effective date of a Change in Control or the expiration  date
of this Agreement (including any renewal terms).

         2. Employment.  The Employee is employed as the Chief Executive Officer
and  President  of the  Company and the Bank.  The  Employee  shall  render such
administrative  and  management  services  to the  Company  and the  Bank as are
currently  rendered and as are  customarily  performed by persons  situated in a
similar executive capacity. The Employee shall also promote, by entertainment or
otherwise,  as and to the extent  permitted  by law, the business of the Company
and the Bank. The Employee's  other duties shall be such as the Company Board or
the Bank Board may from time to time reasonably direct,  including normal duties
as an officer of the Company and Bank.

         3. Base  Compensation.  The Bank agrees to pay the Employee  during the
term of this  Agreement a salary at the rate of $[ ] per annum,  payable in cash
not less frequently than monthly.  The Board of the Bank shall review,  not less
often  than  annually,  the  rate  of the  Employee's  salary  and  in its  sole
discretion may decide to increase his salary.

         4.  Discretionary   Bonuses.  The  Employee  shall  participate  in  an
equitable  manner  with all other  senior  management  employees  of the Bank in
discretionary  bonuses  that the Bank  Board may award  from time to time to the
Bank's senior management  employees.  No other compensation provided for in this
Agreement  shall be deemed a substitute for the Employee's  right to participate
in such discretionary bonuses.

         5. Participation in Retirement, Medical and Other Plans.

         (a) During the term of this  Agreement,  the Employee shall be eligible
to  participate  in  the  following   benefit  plans:   group   hospitalization,
disability,  health, dental, sick leave, life insurance,  travel and/or accident
insurance, auto allowance/auto lease, retirement,  pension, and/or other present
or future qualified plans provided by the Bank.

<PAGE>

         (b) The  Employee  shall  be  eligible  to  participate  in any  fringe
benefits  which are or may  become  available  to the Bank's  senior  management
employees,  including,  by way of example,  but not limitation,  any stock-based
compensation or incentive  compensation  plans, and any other benefits which are
commensurate  with the  responsibilities  and  functions  to be performed by the
Employee  under  this  Agreement.  The  Employee  shall  be  reimbursed  for all
reasonable  out-of-pocket  business  expenses which he shall incur in connection
with his services under this Agreement upon  substantiation  of such expenses in
accordance with the policies of the Bank.

         (c) Upon the Employee's  termination of employment for any reason other
than Just Cause,  the Employee and his spouse shall  continue to  participate in
the Bank's group health insurance  program for the remainder of their respective
lives on the terms set forth herein.  The Bank shall,  subject to Sections 10(d)
and 12(b) of this Agreement,  fund the cost of such continuation coverage on the
same terms as the Bank  funded the cost of  coverage  for the  Employee  and his
spouse immediately prior to the Employee's  termination of employment (i.e., the
Employee  will pay the same dollar  amount  toward the premium  costs as he paid
immediately prior to his termination of employment), and the Bank shall fund the
balance of such costs. If, for any reason,  the Employee or his spouse cannot be
continued  under the  Bank's  group  health  insurance  program  for the  period
contemplated by this  subparagraph (c), the Bank shall reimburse the Employee or
his spouse for the cost of any substitute  coverage  obtained by the Employee or
his spouse that provides  substantially  similar  benefits.  Such  reimbursement
shall be in an amount  determined  by reference to the dollar amount paid by the
Employee immediately prior to his termination of employment,  with the remaining
amount paid by the Bank.

         6. Term.  The Company and the Bank hereby employ the Employee,  and the
Employee  hereby accepts such employment  under this  Agreement,  for the period
commencing  on the  Effective  Date and  ending  36 months  thereafter  (or such
earlier  date  as  is  determined  in  accordance   with  Sections  10  or  12).
Additionally,  on each  annual  anniversary  date  of the  Effective  Date,  the
Employee's term of employment shall be automatically  extended for an additional
one-year period beyond the then effective  expiration  date,  unless the Company
and the Bank or the Employee  gives notice not later than ninety (90) days prior
to the  anniversary  date of an  intention  that the  Agreement  not be extended
beyond its then current term.

         7. Loyalty; Noncompetition.

         (a)  During  the  period of his  employment  hereunder  and  except for
illnesses,  reasonable vacation periods,  and reasonable leaves of absence,  the
Employee shall devote all his full business time, attention,  skill, and efforts
to the faithful  performance of his duties hereunder;  provided,  however,  from
time to time, the Employee may serve on the boards of directors of, and hold any
other  offices or  positions  in,  companies  or  organizations,  which will not
present any  conflict of interest  with the Bank or any of its  subsidiaries  or
affiliates,  or unfavorably affect the performance of Employee's duties pursuant
to this  Agreement,  or will not violate any  applicable  statute or regulation.
"Full business time" is hereby defined as that amount of time usually devoted to
like companies by similarly situated executive officers.  During the term of his
employment  under this Agreement,  the Employee shall not engage in any business
or activity contrary to the business affairs or interests of the Bank.

         (b) Nothing  contained  in this  Section  shall be deemed to prevent or
limit the Employee's right to invest in the capital stock or other securities of
any  business  dissimilar  from that of the  Bank,  or,  solely as a passive  or
minority investor, in any business.

         8.  Standards.  The  Employee  shall  perform  his  duties  under  this
Agreement in accordance with such  reasonable  standards as the Company Board or
the Bank Board may establish from time to time.  The Bank will provide  Employee
with the working  facilities  and staff  customary  for similar  executives  and
necessary for him to perform his duties.

         9. Vacation and Sick Leave.

         (a) The  Employee  shall be entitled to annual  vacation and sick leave
benefits  in  accordance  with the  policies  that the Bank  Board  periodically
establishes for senior management employees.

         (b) The Employee shall not receive any additional compensation from the
Bank on  account  of his  failure  to take a  vacation  or sick  leave,  and the
Employee shall not accumulate unused vacation or sick leave from one fiscal year
to the next, except in either case to the extent authorized by the Bank Board.

<PAGE>

         (c) In addition to the aforesaid paid vacations,  the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Bank for such additional periods of time and for such
valid and  legitimate  reasons  as the  Company  Board and the Bank Board may in
their discretion  determine.  Further,  the Company Board and the Bank Board may
grant to the Employee a leave or leaves of absence, with or without pay, at such
time or times  and upon  such  terms  and  conditions  as such  Boards  in their
discretion may determine.

         10.  Termination and Termination Pay. Subject to Section 12 hereof, the
Employee's   employment   hereunder  may  be  terminated   under  the  following
circumstances:

         (a)  Death.  The  Employee's  employment  under  this  Agreement  shall
terminate upon his death during the term of this  Agreement,  in which event the
Employee's estate shall be entitled to receive the compensation due the Employee
through the last day of the calendar month in which his death occurred.

         (b)  Disability.  (i)  The  Company  and the  Bank  may  terminate  the
Employee's  employment after having established the Employee's  Disability.  For
purposes of this Agreement,  "Disability"  means a physical or mental  infirmity
which impairs the Employee's  ability to substantially  perform his duties under
this Agreement and which results in the Employee becoming eligible for long-term
disability benefits under the Bank's long-term  disability plan (or, if the Bank
has  no  such  plan  in  effect,   which  impairs  the  Employee's   ability  to
substantially  perform  his  duties  under  this  Agreement  for a period of 180
consecutive  days).  Subject to Section 5(c),  the Employee shall be entitled to
the  compensation  and benefits  provided for under this  Agreement  for (x) any
period during the term of this Agreement and prior to the  establishment  of the
Employee's  Disability  during  which the  Employee is unable to work due to the
physical or mental infirmity,  or (y) any period of Disability which is prior to
the  Employee's  termination  of  employment  pursuant  to this  Section  10(b);
provided that any benefits paid pursuant to the Bank's long term disability plan
will continue as provided in such plan.

                  (ii)  During  any  period  that  the  Employee  shall  receive
disability  benefits and to the extent that the Employee shall be physically and
mentally  able to do so,  he shall  furnish  such  information,  assistance  and
documents so as to assist in the continued  ongoing business of the Bank and, if
able,  shall  make  himself  available  to  the  Bank  to  undertake  reasonable
assignments  consistent  with his prior  position  and his  physical  and mental
health.  The Bank shall pay all reasonable  expenses incident to the performance
of any assignment given to the Employee during the disability period.

         (c) Just Cause.  The  Company  Board and the Bank Board may, by written
notice to the Employee,  terminate his  employment at any time,  for Just Cause.
The Employee shall have no right to receive  compensation  or other benefits for
any period after  termination  for Just Cause. No act, or failure to act, on the
Employee's part shall be considered  "willful" unless the Employee has acted, or
failed to act,  with an absence of good faith and  without a  reasonable  belief
that the action,  or failure to act,  was in the best  interest of the  Company.
Notwithstanding  the  foregoing,  the Employee  shall not be deemed to have been
terminated for Just Cause unless there shall have been delivered to the Employee
a copy of a resolution duly adopted by the  affirmative  vote of not less than a
majority of the  membership of the Company Board and the Bank Board at a meeting
called and held for that purpose (after reasonable notice to the Employee and an
opportunity for the Employee to be heard before the Boards), finding that in the
good  faith  opinion  of the Boards  the  Employee  was  guilty of  conduct  and
specifying the particulars thereof in detail.

         (d) Termination  Without Just Cause or for Good Reason. (i) The Company
Board and the Bank Board may, by written  notice to the Employee,  terminate his
employment at any time for a reason other than Just Cause,  or (ii) the Employee
may, by written notice to the Company and the Bank, terminate his employment for
Good Reason. Upon the occurrence of either event, the Employee shall be entitled
to receive the  following  compensation  and benefits  (unless such  termination
occurs during the Protected Period, in which event the benefits and compensation
provided for in Section 12 shall  apply):  (x) a payment  equal to the amount of
base salary (at the rate in effect on his  termination  date) the Employee would
have been paid through the  expiration  date of this  Agreement,  including  any
renewal  term (the  "Expiration  Date"),  plus  said  salary  for an  additional
12-month  period,  (y) the Bank  shall  cover the entire  cost of the  continued
participation  of the  Employee  and  his  spouse  in the  Bank's  group  health
insurance  program  under  Section  5(c) through the  Expiration  Date (with the
provisions of Section 5(c) remaining in effect  thereafter) and (2) continuation
of life,  disability and other benefits which the Employee  participated  at his
termination  date through the Expiration  Date. All cash amounts  payable to the
Employee under this subsection (d) shall be paid in one lump sum within ten days
of such termination.

<PAGE>

         (e) Voluntary  Termination  by Employee.  The Employee may  voluntarily
terminate  employment with the Bank during the term of this  Agreement,  upon at
least 90 days prior written  notice to the Company  Board of the Bank Board,  in
which case the Employee shall receive only his  compensation,  vested rights and
employee  benefits up to the date of his  termination  (unless such  termination
occurs  pursuant to Section  10(d)  hereof or within the  Protected  Period,  in
Section 12(a) hereof, in which event the benefits and compensation  provided for
in Sections 10(d) or 12, as applicable, shall apply).

         11. No  Mitigation.  The Employee shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Employee in any subsequent employment.

         12. Change in Control.

         (a)  Trigger  Events.  The  Employee  shall be  entitled to collect the
severance  benefits  set forth in Section  12(b) hereof in the event that either
(i) the Employee  voluntarily  terminates  employment  for any reason within the
180-day period  beginning on the date of a Change in Control,  (ii) the Employee
voluntarily  terminates  employment  within 90 days of an event that both occurs
during the Protected Period and constitutes Good Reason, or (iii) the Company or
Bank or their  successor(s)  in interest  terminate  the  Employee's  employment
without his written  consent and for any reason other than Just Cause during the
Protected Period.

         (b) Severance  Payments and Benefits.  Upon the occurrence of a trigger
event described in Section 12(a),  the Employee shall be entitled to receive the
following payments and benefits:

(i) A cash severance benefit equal to three times the Employer's  average annual
compensation  over the five most recently  completed taxable years preceding the
effective date of the Change in Control. For purposes of this Agreement, "annual
compensation" shall mean, with respect to any taxable year of the Employee,  the
amount  reported for the taxable year in Box 1 of the  Employee's  Form W-2. The
severance  benefit  shall be  payable  in one lump  sum  within  ten days of the
Employee's last day of employment.

(ii)  For the  first  36  months  of the  Employee's  (and  spouse's)  continued
participation  in the Bank's health  insurance  program under Section 5(c),  the
Bank  shall  cover the entire  cost of such  continued  participation  (with the
provisions of Section 5(c) remaining in effect thereafter).

(iii) For a period of 36 months following the Employee's  termination  date, the
Bank shall  continue the Employee's  coverage under the Bank's life,  disability
and other benefits that the Employee participated at his termination date.

         13. EXCISE TAXES.

         (a)  Covered  Benefits.  "Covered  Benefits"  shall mean any payment or
benefit paid or provided to the Employee by the Company or any  affiliate or any
successor  in interest to the Company  (whether  pursuant to this  Agreement  or
otherwise)  that will be (or in the opinion of Tax  Counsel  (as defined  below)
might reasonably be expected to be) subject to any excise tax (the "Excise Tax")
imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code").  In the event that at any time  during or after the Term of  Employment
the Employee  shall receive any Covered  Benefits,  the Company shall pay to the
Employee an additional amount (the "Gross-Up  Payment") such that the net amount
retained by the  Employee  from the  Gross-Up  Payment,  after  deduction of any
federal,  state  and local  income  taxes,  Excise  Tax,  and FICA and  Medicare
withholding taxes on the Gross-Up  Payment,  shall be equal to the Excise Tax on
the Covered Benefits.  For purposes of determining the amount of such Excise Tax
on the Covered Benefits,  the amount of the Covered Benefits that shall be taken
into  account in  calculating  the Excise Tax shall be equal to (i) the  Covered
Benefits,  less (ii) the amount of such Covered Benefits that, in the opinion of
tax counsel  selected by the Company and  reasonably  acceptable to the Employee
("Tax  Counsel"),  are not  parachute  payments  (within  the meaning of Section
280G(b)(1) of the Code).

         (b) Certain Assumptions.  For purposes of this Section 13, the Employee
shall be deemed to pay  federal  income  taxes at the highest  marginal  rate of
federal income  taxation in the calendar year in which the Excise Tax is payable
and state and local income taxes at the highest marginal rate of taxation in the
state and  locality of the  Employee's  residence on the  effective  date of the
Employee's termination, net of the reduction in federal income taxes which could
be obtained  from  deduction of such state and local taxes.  Except as otherwise
provided herein,  all  determinations  required to be made under this Section 13
shall be made by Tax  Counsel,  which  determinations  shall be  conclusive  and
binding on the Employee and Company, absent manifest error.

         (c) Tax  Indemnification.  The  Company  shall  indemnify  and hold the
Employee harmless from any and all losses, costs and expenses (including without
limitation,  reasonable attorney's fees, reasonable accountant's fees, interest,
fines and  penalties of any kind) which the  Employee  incurs as a result of any
administrative or judicial review of the Employee's liability under Section 4999
of the Code by the  Internal  Revenue  Service or any  comparable  state  agency
through and including a final  judicial  determination  or final  administrative
settlement of any dispute arising out of the Employee's liability for the Excise
Tax or otherwise  relating to the classification for purposes of Section 280G of
the Code of any of the  Covered  Benefits  or other  payment  or  benefit in the
nature of  compensation  made or provided to the  Employee by the  Company.  The
Employee  shall  promptly  notify the Company in writing  whenever  the Employee
receives  notice  of  the   commencement  of  any  judicial  or   administrative
proceeding, formal or informal, in which the federal tax treatment under Section
4999 of the Code of any amount paid or payable under this Agreement or otherwise
is being reviewed or is in dispute (including a notice of audit or other inquiry
concerning the reporting of the Employee's  liability  under Section 4999).  The
Company may assume control at its expense over all legal and accounting  matters
pertaining  to such  federal  or  state  tax  treatment  (except  to the  extent
necessary or appropriate  for the Employee to resolve any such  proceeding  with
respect to any matter  unrelated  to the Covered  Benefits  or other  payment or
benefit in the nature of  compensation  made or provided to the  Employee by the
Company) and the  Employee  shall  cooperate  fully with the Company in any such
proceeding.  The Employee  shall not enter into any  compromise or settlement or
otherwise  prejudice  any rights the  Company may have in  connection  therewith
without prior consent of the Company.  In the event that the Company  elects not
to assume control over such matters,  the Company shall  promptly  reimburse the
Employee for all expenses related thereto as and when incurred upon presentation
of appropriate documentation relating thereto.

         14. Indemnification and Insurance.

         (a) To the maximum extent  permitted  under  applicable law, during the
term of this  Agreement  and for a period of six years  thereafter,  the Company
shall  indemnify  the Employee  against and hold the Employee  harmless from any
costs,  liabilities,  losses and exposures to the fullest extent and on the most
favorable  terms and conditions that similar  indemnification  is offered to any
director or officer of the Company or any affiliate thereof.

         (b)  During  the term of this  Agreement  and for a period of six years
thereafter,  the Company  shall cause the Employee to be covered by and named as
an insured under any policy or contract of insurance  obtained by either Company
to  insure  directors  and  officers  against  personal  liability  for  acts or
omissions in connection with service as an officer or director of the Company or
any of its affiliates  service in other capacities at its request.  The coverage
provided to the Employee  pursuant to this Section 14 shall be of the same scope
and on the same terms and  conditions as the coverage (if any) provided to other
officers or directors of the Company.

         15. Reimbursement of Employee for Enforcement Proceedings. In the event
that any dispute  arises  between the  Employee  and the Bank as to the terms or
interpretation of this Agreement, whether instituted by formal legal proceedings
or otherwise, including any action that the Employee takes to defend against any
action taken by the Bank or the Company,  the Employee  shall be reimbursed  for
all costs and expenses,  including reasonable attorneys' fees, arising from such
dispute,  proceedings  or actions,  provided that the Employee  obtains either a
written  settlement  or a final  judgment by a court of  competent  jurisdiction
substantially in his favor. Such reimbursement  shall be paid within ten days of
Employee's  furnishing to the Bank written  evidence,  which may be in the form,
among other things,  of a cancelled  check or receipt,  of any costs or expenses
incurred by the Employee.

         16. Federal Income Tax  Withholding.  The Bank may withhold all federal
and state income or other taxes from any benefit payable under this Agreement as
shall be required pursuant to any law or government regulation or ruling.

         17. Successors and Assigns.

         (a) Company and the Bank. This Agreement shall not be assignable by the
Company Bank,  provided that this Agreement shall inure to the benefit of and be
binding upon any  corporate or other  successor of the Company or the Bank which
shall acquire,  directly or indirectly,  by merger,  consolidation,  purchase or
otherwise, all or substantially all of the assets or stock of the Company or the
Bank.

         (b) Employee.  Since the Company and the Bank are  contracting  for the
unique and personal skills of the Employee, the Employee shall be precluded from
assigning or delegating his rights or duties  hereunder  without first obtaining
the  written  consent  of the Bank;  provided,  however,  that  nothing  in this
paragraph  shall  preclude (i) the Employee from  designating  a beneficiary  to
receive any benefit  payable  hereunder  upon his death,  or (ii) the executors,
administrators,  or other legal  representatives  of the  Employee or his estate
from assigning any rights hereunder to the person or persons entitled thereunto.

         (c) Attachment. 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 exclusion,
attachment,  levy or similar  process or assignment by operation of law, and any
attempt, voluntary or involuntary, to effect any such action shall be null, void
and of no effect.

         18.  Amendments.  No amendments or additions to this Agreement shall be
binding  unless  made in  writing  and signed by all of the  parties,  except as
herein otherwise specifically provided.

         19.  Source of Payments.  Unless  otherwise  determined  by the Company
Board and except to the extent contemplated by Section 5(b), the Executive shall
not receive any separate  compensation or benefits from the Company for services
rendered under this Agreement;  provided,  however, that the Company agrees that
it shall be jointly  and  severally  liable with the Bank for the payment of all
amounts and the  provision of all benefits due the Employee  under any provision
of this Agreement.

         20.  Special  Limitations.  (1)  If  the  Employee  is  removed  and/or
permanently  prohibited from  participating in the conduct of the Bank's affairs
by an order  issued  under  Sections  8(e)(4) or 8(g)(1) of the Federal  Deposit
Insurance  Act ("  FDIA")  (12  U.S.C.  Sections  1818(e)(4)  and  (g)(1)),  all
obligations  of  the  Bank  under  this  Agreement  shall  terminate,  as of the
effective  date of the order,  but  vested  rights of the  parties  shall not be
affected.

         (2) If the Bank is in default (as defined in Section  3(x)(1) of FDIA),
all obligations  under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the parties.

         (3) If a notice served under Section  8(e)(3) or (g)(1) of the FDIA (12
U.S.C.  Section 1818(e)(3) or (g)(1)) suspends and/or temporarily  prohibits the
Employee from  participating  in the conduct of the Bank's  affairs,  the Bank's
obligations  under  this  Agreement  shall be  suspended  as of the date of such
service, unless stayed by appropriate proceedings.  If the charges in the notice
are  dismissed,  the Bank may in its discretion (i) pay the Employee all or part
of the compensation withheld while its contract obligations were suspended,  and
(ii)  reinstate  (in  whole  or in  part)  any of  its  obligations  which  were
suspended.

         (4) Any payments made to the Employee  pursuant to this  Agreement,  or
otherwise,  are subject to and conditioned  upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

         (5) Any payments made to the Employee under this Section 11 are subject
to and  conditioned  upon their  compliance  with  Section  409A of the Internal
Revenue Code of 1986, as amended, and any regulations  promulgated under Section
409A regarding any delay in such payments by the Company.

         21.  Applicable Law. Except to the extent preempted by federal law, the
laws of the State of North Carolina shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.

         22.  Severability.  The  provisions of this  Agreement  shall be deemed
severable and the  invalidity  or  unenforceability  of any provision  shall not
affect the validity or enforceability of the other provisions hereof.

         23. Entire Agreement.  This Agreement,  together with any understanding
or  modifications  thereof  as  agreed  to in  writing  by  the  parties,  shall
constitute the entire  agreement  between the parties hereto and shall supersede
any prior  agreement  between  the parties  including  the  separate  Employment
Agreements between the Employee, the Company and the Bank dated April 7, 1997.

<PAGE>

      IN WITNESS  WHEREOF,  the parties have executed this  Agreement on the day
and year first hereinabove written.

ATTEST:                           FIRST SOUTH BANCORP, INC.

/s/ William L. Wall               By:      /s/ Frederick N. Holscher
------------------------------             ------------------------------
Secretary                                  Chairman of the Board

ATTEST:                            FIRST SOUTH BANK

/s/ William L. Wall                By:      /s/ Frederick N. Holscher
------------------------------              ------------------------------
Secretary                                   Chairman of the Board

WITNESS:

/s/ Ruth K. Peoples                          /s/ Thomas A. Vann
------------------------------               ------------------------------
                                             Thomas A. VannEXHIBIT 10.12

                     CHANGE-IN-CONTROL PROTECTIVE AGREEMENT

         THIS AMENDED AND RESTATED AGREEMENT (the "Agreement") entered into this
20th day of April, 2006 (the "Effective  Date"), by and between FIRST SOUTH BANK
(the "Bank"),  FIRST SOUTH BANCORP,  INC. (the  "Company"),  and WILLIAM L. WALL
(the "Employee").

         WHEREAS,  the Employee has  heretofore  been employed by the Bank as an
executive officer; and

         WHEREAS,  the Board of Directors  of each of the Company,  the Bank and
the Employee have  determined that it is necessary and appropriate to enter into
this Amended and Restated  Agreement to ensure the Employee's  continued service
on terms  consistent  with his role and his  importance  to the  success  of the
Company and the Bank;

         NOW, THEREFORE, the undersigned parties AGREE as follows:

         1. Defined Terms

         When used anywhere in the Agreement, the following terms shall have the
meanings set forth herein.

         (a) "Change in Control" shall mean any one of the following events: (i)
the  acquisition  by any person  (or  persons  acting as a group) of  ownership,
holding or power to vote more than 25% of the voting stock of the Company or the
Bank,  (ii) the  acquisition by any person (or persons acting as a group) of the
ability to control the  election of a majority  of the  Company's  or the Bank's
directors,  (iii) the acquisition of a controlling influence over the management
or  policies  of the  Company or of the Bank,  or (iv)  during any period of two
consecutive years, individuals (the "Continuing Directors") who at the beginning
of such period  constitute  the Board of Directors of the Company or of the Bank
(the  "Existing  Board") cease for any reason to constitute at least  two-thirds
thereof,  provided that any individual whose election or nomination for election
as a member of the Existing Board was approved by a vote of at least  two-thirds
of the  Continuing  Directors  then in office  shall be  considered a Continuing
Director. For purposes of this paragraph,  the terms "person" or "persons acting
as a group"  shall be  construed  within the  meaning  of  Section  13(d) of the
Securities  Exchange  Act  of  1934  and  shall  refer  to  an  individual  or a
corporation,  partnership,  trust, association,  joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.

         (b) "Code"  shall mean the Internal  Revenue  Code of 1986,  as amended
from time to time, and as interpreted through applicable rulings and regulations
in effect from time to time.

         (c) "Good Reason" shall mean any of the  following  events,  which has
not been consented to in advance by the Employee in writing: (i) the requirement
that  the  Employee  move his  personal  residence,  or  perform  his  principal
executive  functions,  more than thirty (30) miles from his primary office as of
the date of the Change in Control;  (ii) a material  reduction in the Employee's
base  compensation  as in effect on the date of the  Change in Control or as the
same may be  increased  from time to time;  (iii) the failure by the Bank or the
Company to continue to provide  the  Employee  with  compensation  and  benefits
provided for on the date of the Change in Control,  as the same may be increased
from time to time, or with benefits  substantially  similar to those provided to
him  under  any of the  employee  benefit  plans in which  the  Employee  now or
hereafter becomes a participant,  or the taking of any action by the Bank or the
Company  which  would  directly  or  indirectly  reduce any of such  benefits or
deprive the Employee of any material  fringe benefit  enjoyed by him at the time
of the Change in  Control;  (iv) the  assignment  to the  Employee of duties and
responsibilities  materially  different from those normally  associated with his
position;  (v) a  failure  to elect or  reelect  the  Employee  to the  Board of
Directors of the Bank or the  Company,  if the Employee is serving on such Board
on the date of the Change in Control; (vi) a material diminution or reduction in
the   Employee's    responsibilities   or   authority    (including    reporting
responsibilities)  in  connection  with  his  employment  with  the  Bank or the
Company;   or  (vii)  a  material   reduction  in  the   secretarial   or  other
administrative support of the Employee.

         (d) "Just Cause"  shall mean,  in the good faith  determination  of the
Bank's Board of Directors,  the Employee's  personal  dishonesty,  incompetence,
willful  misconduct,   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.
The Employee shall have no right to receive  compensation  or other benefits for
any period after  termination  for Just Cause. No act, or failure to act, on the
Employee's part shall be considered  "willful" unless he has acted, or failed to
act,  with an absence of good faith and  without a  reasonable  belief  that his
action or failure to act was in the best  interest of the Bank and the  Company.
Notwithstanding  the  foregoing,  the Employee  shall not be deemed to have been
terminated for Just Cause unless there shall have been delivered to the Employee
a copy of a resolution duly adopted by the  affirmative  vote of not less than a
majority of the  membership of the Bank's Board at a meeting called and held for
that purpose (after reasonable notice to the Employee and an opportunity for the
Employee to be heard before the Board),  finding that in the good faith  opinion
of the Boards the Employee was guilty of conduct and specifying the  particulars
thereof in detail.

         (e)  "Protected  Period"  shall mean the period that begins on the date
that is six (6)  months  before a  Change  in  Control  and ends on later of the
second anniversary of the effective date of a Change in Control.

         2. Trigger Events

         The Employee  shall be entitled to the severance  benefits set forth in
Section 3 of this  Agreement  in the  event  that (i) the  Employee  voluntarily
terminates  employment for any reason within the 30-day period  beginning on the
effective date of a Change in Control, (ii) the Employee voluntarily  terminates
employment  within 90 days of an event that both  occurs  during  the  Protected
Period and  constitutes  Good Reason,  or (iii) the Bank, the Company,  or their
successor(s)  in interest  terminate the  Employee's  employment  for any reason
other than Just Cause during the Protected Period.

         3. Severance Benefit

         If the Employee becomes entitled to collect severance benefits pursuant
to Section 2 hereof,  the Bank shall pay the Employee a severance  benefit equal
to one (1) times the  Employee's  base annual  salary at the rate in effect when
the Protected  Period begins.  Said sum shall be paid in one lump sum within ten
(10) days of the later of the date of the Change in Control  and the  Employee's
last day of  employment  with the Bank or the  Company.  In  addition,  upon the
Employee's  termination of employment during the Protected Period for any reason
other than Just Cause, the Employee and his spouse shall continue to participate
in the  Bank's  group  health  insurance  program  for the  remainder  of  their
respective lives on the terms set forth herein.  The Bank shall fund the cost of
such  continuation  coverage  on the same  terms as the Bank  funded the cost of
coverage  for the Employee and his spouse  immediately  prior to the  Employee's
termination  of employment  (i.e.,  the Employee will pay the same dollar amount
toward the premium  costs as he paid  immediately  prior to his  termination  of
employment),  and the Bank shall fund the  balance  of such  costs.  If, for any
reason,  the Employee or his spouse  cannot be continued  under the Bank's group
health insurance program for the period  contemplated by this subparagraph,  the
Bank shall  reimburse the Employee or his spouse for the cost of any  substitute
coverage  obtained by the  Employee or his spouse  that  provides  substantially
similar  benefits.  Such  reimbursement  shall  be in an  amount  determined  by
reference  to the dollar  amount paid by the Employee  immediately  prior to his
termination of employment, with the remaining amount paid by the Bank.

         4. Excise Tax Indemnification

         (a) For purposes of this Agreement,  "Covered  Benefits" shall mean any
payment or benefit paid or provided to the Employee by the Company,  the Bank or
any  affiliate or any  successor in interest to the Company or the Bank (whether
pursuant to this Agreement or otherwise)  that will be (or in the opinion of Tax
Counsel (as defined  below) might  reasonably  be expected to be) subject to any
excise tax (the "Excise Tax") imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended (the  "Code").  In the event that at any time during or
after the Term of Employment  the Employee  shall receive any Covered  Benefits,
the Company  shall pay to the  Employee  an  additional  amount  (the  "Gross-Up
Payment")  such that the net amount  retained by the Employee  from the Gross-Up
Payment,  after deduction of any federal,  state and local income taxes,  Excise
Tax, and FICA and Medicare  withholding taxes on the Gross-Up Payment,  shall be
equal to the Excise Tax on the Covered Benefits. For purposes of determining the
amount of such  Excise Tax on the  Covered  Benefits,  the amount of the Covered
Benefits that shall be taken into account in calculating the Excise Tax shall be
equal to (i) the Covered Benefits, less (ii) the amount of such Covered Benefits
that,  in the  opinion of tax counsel  selected  by the  Company and  reasonably
acceptable to the Employee ("Tax Counsel"),  are not parachute  payments (within
the meaning of Section 280G(b)(1) of the Code).

         (b) For purposes of this Section 4, the Employee shall be deemed to pay
federal income taxes at the highest  marginal rate of federal income taxation in
the calendar  year in which the Excise Tax is payable and state and local income
taxes at the highest  marginal rate of taxation in the state and locality of the
Employee's residence on the effective date of the Employee's termination, net of
the reduction in federal  income taxes which could be obtained from deduction of
such  state  and  local  taxes.   Except  as  otherwise   provided  herein,  all
determinations  required  to be made under this  Section 13 shall be made by Tax
Counsel,  which  determinations  shall be conclusive and binding on the Employee
and Company, absent manifest error.

         (c) The Company shall indemnify and hold the Employee harmless from any
and all losses,  costs and expenses  (including without  limitation,  reasonable
attorney's fees, reasonable accountant's fees, interest,  fines and penalties of
any  kind)  which the  Employee  incurs  as a result  of any  administrative  or
judicial  review of the Employee's  liability  under Section 4999 of the Code by
the  Internal  Revenue  Service  or any  comparable  state  agency  through  and
including a final judicial  determination or final administrative  settlement of
any  dispute  arising  out of the  Employee's  liability  for the  Excise Tax or
otherwise  relating to the  classification  for  purposes of Section 280G of the
Code of any of the Covered Benefits or other payment or benefit in the nature of
compensation made or provided to the Employee by the Company. The Employee shall
promptly notify the Company in writing whenever the Employee  receives notice of
the  commencement  of any  judicial  or  administrative  proceeding,  formal  or
informal,  in which the federal tax treatment  under Section 4999 of the Code of
any amount paid or payable under this  Agreement or otherwise is being  reviewed
or is in dispute  (including a notice of audit or other inquiry  concerning  the
reporting of the  Employee's  liability  under  Section  4999).  The Company may
assume control at its expense over all legal and accounting  matters  pertaining
to such  federal  or state tax  treatment  (except to the  extent  necessary  or
appropriate  for the Employee to resolve any such proceeding with respect to any
matter  unrelated  to the Covered  Benefits  or other  payment or benefit in the
nature of compensation  made or provided to the Employee by the Company) and the
Employee  shall  cooperate  fully with the Company in any such  proceeding.  The
Employee  shall  not  enter  into any  compromise  or  settlement  or  otherwise
prejudice any rights the Company may have in connection  therewith without prior
consent  of the  Company.  In the event  that the  Company  elects not to assume
control over such matters, the Company shall promptly reimburse the Employee for
all  expenses  related  thereto  as  and  when  incurred  upon  presentation  of
appropriate documentation relating thereto.

         5. Term of the Agreement

         This Agreement shall remain in effect for the period  commencing on the
Effective  Date and ending on the  earlier  of (i) the date 12 months  after the
Effective  Date, and (ii) the date on which the Employee  terminates  employment
with the Bank;  provided that the  Employee's  rights  hereunder  shall continue
following  the  termination  of this  employment  with the Bank under any of the
circumstances  described  in  Section 2  hereof.  Additionally,  on each  annual
anniversary  date from the Effective  Date, the term of this Agreement  shall be
extended for an additional one-year period beyond the then effective  expiration
date  provided the Board of Directors of the Bank  determines  in a duly adopted
resolutions  that the performance of the Employee has met the  requirements  and
standards of the Board, and that this Agreement shall be extended.

         6. Termination or Suspension Under Federal Law

         (a) Any payments made to the Employee  pursuant to this  Agreement,  or
otherwise,  are subject to and conditioned  upon their compliance with 12 U.S.C.
Section 1828(k) and any regulations promulgated thereunder.

         (b) If the  Employee  is removed  and/or  permanently  prohibited  from
participating  in the  conduct of the Bank's  affairs by an order  issued  under
Sections  8(e)(4) or 8(g)(1) of the Federal  Deposit  Insurance Act ("FDIA") (12
U.S.C.  1818(e)(4) or (g)(1)),  all obligations of the Bank under this Agreement
shall terminate, as of the effective date of the order, but the vested rights of
the parties shall not be affected.
         (c) If the Bank is in default (as defined in Section  3(x)(1) of FDIA),
all obligations  under this Agreement shall terminate as of the date of default;
however, this Paragraph shall not affect the vested rights of the parties.

         (d) If a notice served under Section  8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the Employee
from participating in the conduct of the Bank's affairs,  the Bank's obligations
under this Agreement  shall be suspended as of the date of such service,  unless
stayed by appropriate  proceedings.  If the charges in the notice are dismissed,
the  Bank  may in its  discretion  (i)  pay  the  Employee  all or  part  of the
compensation  withheld while its contract  obligations were suspended,  and (ii)
reinstate (in whole or in part) any of its obligations which were suspended.

         7. Expense Reimbursement

         In the event that any dispute  arises between the Employee and the Bank
as to the terms or  interpretation  of this  Agreement,  whether  instituted  by
formal legal  proceedings  or otherwise,  including any action that the Employee
takes to enforce  the terms of this  Agreement  or to defend  against any action
taken by the Bank or the Company, the Employee shall be reimbursed for all costs
and expenses,  including reasonable  attorneys' fees, arising from such dispute,
proceedings or actions, provided that the Employee shall obtain a final judgment
in favor of the  Employee  in a court of  competent  jurisdiction  or in binding
arbitration  under  the  rules of the  American  Arbitration  Association.  Such
reimbursement shall be paid within ten (10) days of Employee's furnishing to the
Bank or the  Company  written  evidence,  which may be in the form,  among other
things,  of a cancelled check or receipt,  of any costs or expenses  incurred by
the Employee.

         8. Successors and Assigns; Source of Payments

         (a) This  Agreement  shall inure to the benefit of and be binding  upon
any  corporate or other  successor of the Bank or Company  which shall  acquire,
directly or indirectly, by merger, consolidation,  purchase or otherwise, all or
substantially all of the assets or stock of the Bank or Company.

         (b) Since the Bank is contracting for the unique and personal skills of
the Employee,  the Employee  shall be precluded from assigning or delegating his
rights or duties  hereunder  without first  obtaining the written consent of the
Bank.

         (c) The payments and benefits due the Employee under this Agreement, if
any, shall be paid or provided by the Bank; provided,  however, that the Company
agrees  that it shall be  jointly  and  severally  liable  with the Bank for the
payment of all amounts and the provision of all benefits due the Employee  under
any provision of this Agreement.

         9. Amendments

         No amendments or additions to this  Agreement  shall be binding  unless
made in writing  and signed by all of the  parties,  except as herein  otherwise
specifically provided.

         10. Applicable Law

         Except to the extent preempted by federal law, the laws of the State of
North Carolina  shall govern this  Agreement in all respects,  whether as to its
validity, construction, capacity, performance or otherwise.

         11. Severability

         The  provisions  of this  Agreement  shall be deemed  severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof.

         12. Entire Agreement

         This  Agreement,  together  with  any  understanding  or  modifications
thereof as agreed to in  writing by the  parties,  shall  constitute  the entire
agreement between the parties hereto.

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Agreement on the day and year first hereinabove written.

ATTEST:                                             FIRST SOUTH BANK

/s/ Kristie W. Hawkins                              By:   /s/ Thomas A. Vann
---------------------------                            -------------------------
Assistant Secretary                                       Its President

ATTEST:                                             FIRST SOUTH BANCORP, INC.

/s/ Kristie W. Hawkins                              By:   /s/ Thomas A. Vann_
---------------------------                            -------------------------
Assistant Secretary                                       Its President

WITNESS:

/s/ Kristie W. Hawkins                              /s/ William L. Wall
----------------------------                        ----------------------------
                                                    William L. Wall

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