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9

                       CITIZENS SOUTH BANKING CORPORATION

                    AMENDED AND RESTATED SEVERANCE AGREEMENT

     This AMENDED AND RESTATED  SEVERANCE  AGREEMENT (this  "Agreement") is made
and entered into as of November 17, 2008 by and between  Citizens  South Banking
Corporation,  a Delaware corporation (the "Corporation"),  and _________________
(the "Executive").

     WHEREAS,  the  Executive  entered  into  a  severance  agreement  with  the
Corporation on ____________ (the "Original Agreement");

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

     WHEREAS,  the  Corporation  desires  to assure  itself  of the  Executive's
services and desires to establish minimum  severance  benefits for the Executive
in the event of a change in control;

     WHEREAS,  the  Corporation  wishes  to  ensure  that the  Executive  is not
distracted  from  discharging  his duties if a change in control is  proposed or
occurs; and

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

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

1.   CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT

     (a) Termination of Executive Anytime After a Change in Control. If a Change
in  Control  occurs  during  the term of this  Agreement  and if  either  of the
following  occurs,  the  Executive  shall  be  entitled  to  severance  benefits
specified in Section 2 of this Agreement -

          (1)  Termination  by  the  Corporation  or a  Subsidiary  (as  defined
               herein):  if the  Executive's  employment with the Corporation or
               its  Subsidiary  is  involuntarily  terminated at anytime after a
               Change in Control,  except for a termination of employment  under
               Section 3 of this Agreement, or

          (2)  Voluntary Termination by the Executive: the Executive voluntarily

<PAGE>

               terminates his employment for any reason with the  Corporation or
               Subsidiary at anytime after a Change in Control.

     If the  Executive  is removed from office or if his  employment  terminates
after discussions with a third party regarding a Change in Control commence, and
if those  discussions  ultimately  conclude  with a Change in Control,  then for
purposes  of this  Agreement  the removal of the  Executive  or  termination  of
employment  shall be deemed to have  occurred  after the Change in Control.  For
purposes  of  this  Agreement,   "Subsidiary"  means  an  entity  in  which  the
Corporation  directly  or  indirectly  beneficially  owns  50%  or  more  of the
outstanding voting securities

     (b)  Definition  of Change in  Control.  For  purposes  of this  Agreement,
"Change in Control" means any of the following events occur -

         (1)   Merger:  the Corporation merges into or consolidates with another
               corporation,  or merges another corporation into the Corporation,
               and as a result less than 50% of the combined voting power of the
               resulting   corporation   immediately   after   the   merger   or
               consolidation  is held by  persons  who were the  holders  of the
               Corporation's voting securities  immediately before the merger or
               consolidation.  For purposes of this Agreement, the term "person"
               means   an   individual,    corporation,    partnership,   trust,
               association, joint venture, pool, syndicate, sole proprietorship,
               unincorporated organization or other entity, or

         (2)   Acquisition of Significant Share Ownership:  a report on Schedule
               13D,  Schedule  TO,  or  another  form or  schedule  (other  than
               Schedule 13G), is filed or is required to be filed under Sections
               13(d) or 14(d) of the  Securities  Exchange  Act of 1934,  if the
               schedule  discloses  that the filing person or persons  acting in
               concert has or have become the beneficial owner of 25% or more of
               a class of the  Corporation's  voting securities (but this clause
               (2) shall not apply to beneficial ownership of voting shares held
               by a Subsidiary in a fiduciary capacity), or

         (3)   Change in Board Composition: during any period of two consecutive
               years,  individuals  who  constitute the  Corporation's  board of
               directors at the  beginning of the two-year  period cease for any
               reason  to  constitute  at least a  majority  thereof;  provided,
               however,  that - for purposes of this clause (3) - each  director
               who is first  elected  by the board (or  first  nominated  by the
               board  for  election  by  stockholders)  by a  vote  of at  least
               two-thirds  (2/3)  of the  directors  who were  directors  at the
               beginning  of the period  shall be deemed to have been a director
               at the beginning of the two-year period, or

         (4)   Sale  of  Assets:   The  Corporation   sells  to  a  third  party
               substantially  all of the Corporation's  assets.  For purposes of
               this Agreement,  sale of substantially  all of the  Corporation's
               assets includes sale of Citizens South Bank alone.

<PAGE>

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

2.   SEVERANCE BENEFITS

     (a) Severance  Benefits.  The severance  benefits to which the Executive is
entitled under Section 1 are as follows -

         (1)   Lump Sum Payment:  The Corporation shall make or cause to be made
               a lump sum payment to the Executive in an amount in cash equal to
               1.5 times the Executive's  annual  compensation.  For purposes of
               this  Agreement,  annual  compensation  means (a) the Executive's
               annual  base  salary on the date of the  Change in Control or the
               Executive's  termination  of  employment,   whichever  amount  is
               greater, plus (b) any cash bonuses or cash incentive compensation
               earned for the calendar year immediately before the year in which
               the Change in Control occurred or immediately  before the year in
               which  termination of employment  occurred,  whichever  amount is
               greater,  regardless of when the bonus or incentive  compensation
               is or was paid.  The  Corporation  recognizes  that the bonus and
               incentive  compensation  earned by the Executive for a particular
               year's  service might be paid in the year after the calendar year
               in which the  bonus or  incentive  compensation  is  earned.  The
               amount payable to the Executive hereunder shall not be reduced to
               account  for the time  value of money or  discounted  to  present
               value. The payment required under this Section 2(a)(1) is payable
               no later  than 5  business  days  after the date the  Executive's
               employment  terminates,  or  in  the  event  the  Executive  is a
               Specified  Employee  (within the meaning of Treasury  Regulations
               ss.1.409A-1(i)),  and to the extent  necessary to avoid penalties
               under Code Section  409A,  payment shall be made to the Executive
               on the  first day of the  seventh  month  following  the date the
               Executive's employment terminates.

         (2)   Retirement   Benefit  Plans:  The  Corporation  shall  cause  the
               Executive   to  become  fully   vested  in  any   qualified   and
               non-qualified  plans,  programs  or  arrangements  in  which  the
               Executive  participated if the plan, program, or arrangement does
               not address the effect of a change in  control.  The  Corporation
               also shall  contribute or cause a Subsidiary to contribute to any
               account of the Executive under a 401(k) plan, retirement plan, or
               profit-sharing plan the matching and voluntary contributions,  if
               any, that would have been made had the Executive's employment not
               terminated  before  the end of the plan  year.  In the  event

<PAGE>

               the  Corporation  is  unable  to fully  vest the  Executive  in a
               qualified  plan that does not  address  the effect of a change in
               control due to operation of law, the Executive  will be paid in a
               single cash lump sum  distribution  the present value of the cash
               equivalent  of the amount of benefits  the  Executive  would have
               received if he were fully vested in such plan,  with such payment
               made at the same time the cash  severance is payable  pursuant to
               Section 2(a)(1) of this Agreement.

         (3)   Other Benefit Plans: The Corporation  shall cause to be continued
               life  insurance  and  non-taxable  medical  and  dental  coverage
               substantially   identical  to  the  coverage  maintained  by  the
               Corporation  for  the  Executive  prior  to his  severance.  Such
               coverage and payments  shall cease after 18 months,  or sooner if
               the Executive becomes employed elsewhere.

     (b) Mitigation Is Not Required. The Corporation hereby acknowledges that it
will be  difficult  and  could  be  impossible  (1) for  the  Executive  to find
reasonably  comparable  employment after his employment  terminates,  and (2) to
measure the amount of damages the Executive  suffers as a result of termination.
Additionally,  the Corporation acknowledges that its general severance pay plans
do not provide for  mitigation,  offset or  reduction of any  severance  payment
received thereunder.  Accordingly, the Corporation further acknowledges that the
payment  of  severance  benefits  by the  Corporation  under this  Agreement  is
reasonable  and will be  liquidated  damages,  and the  Executive  shall  not be
required to mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor will any profits, income, earnings or
other  benefits  from any  source  whatsoever  create  any  mitigation,  offset,
reduction  or any other  obligation  on the part of the  Executive  hereunder or
otherwise.

3.   TERMINATION FOR WHICH NO SEVERANCE BENEFITS ARE PAYABLE

     (a) No Severance  for  Termination  for Cause.  The Bank may  terminate the
Executive's  employment at any time.  Anything in this Agreement to the contrary
notwithstanding,  under no  circumstance  shall the  Executive  be  entitled  to
severance benefits if his employment terminates for Cause.

         (1)   "Cause"  Means  Commission  of  Any of the  Following  Acts:  For
               purposes of this  Agreement,  "Cause" means the  Executive  shall
               have committed any of the following acts -

               (a)  Fraud, Embezzlement,  Theft or Other Crime: an act of fraud,
                    embezzlement,  or theft in connection  with his duties or in
                    the  course  of his  employment  with the  Corporation  or a
                    Subsidiary,  or  commission  of a felony or  commission of a
                    misdemeanor involving moral turpitude, or

<PAGE>

               (b)  Damage  to  Property:  intentional  wrongful  damage  to the
                    business or property of the Corporation or  Subsidiary(ies),
                    which, in the Corporation's  sole judgment,  causes material
                    harm to the Corporation or Subsidiary(ies), or

               (c)  Negligence    and   Other   Actions:    gross    negligence,
                    insubordination,    disloyalty,   or   dishonesty   in   the
                    performance  of his duties as an officer of the  Corporation
                    or Subsidiary(ies), or

               (d)  Violation of Law or Policy: intentional violation of any law
                    or significant  policy of the Corporation or Subsidiary(ies)
                    committed in  connection  with the  Executive's  employment,
                    which, in the  Corporation's  sole judgment,  has an adverse
                    effect on the Corporation or Subsidiary(ies), or

               (e)  Disclosure of Trade Secrets: intentional wrongful disclosure
                    of  secret  processes  or  confidential  information  of the
                    Corporation  or a Subsidiary,  which,  in the  Corporation's
                    sole judgment,  causes  material harm to the  Corporation or
                    the Subsidiary, or

               (f)  Competing  with  the   Corporation:   intentional   wrongful
                    engagement in any competitive activity. For purposes of this
                    Agreement,   competitive   activity  means  the  Executive's
                    participation,  without  the  written  consent  of a  senior
                    executive  officer of the Corporation,  in the management of
                    any business  enterprise  if (1) the  enterprise  engages in
                    substantial and direct competition with the Corporation, (2)
                    the  enterprise's  revenues  derived  from  any  product  or
                    service  competitive  with any  product  or  service  of the
                    Corporation  or  Subsidiary(ies)  amounted to 10% or more of
                    the  enterprise's  revenues for its most recently  completed
                    fiscal year,  and (3) the  Corporation's  revenues  from the
                    product  or  service  amounted  to 10% of the  Corporation's
                    revenues  for its most  recently  completed  fiscal  year. A
                    competitive  activity  does not include  mere  ownership  of
                    securities  in an  enterprise  and the  exercise  of  rights
                    appurtenant   thereto,   provided  the   Executive's   share
                    ownership  does not give his  practical or legal  control of
                    the enterprise.  For this purpose, ownership of less than 5%
                    of the  enterprise's  outstanding  voting  securities  shall
                    conclusively be presumed to be insufficient for practical or
                    legal  control,   and  ownership  of  more  than  50%  shall
                    conclusively  be presumed to constitute  practical and legal
                    control.

                    If the Executive is now or hereafter  becomes  subject to an
                    agreement   not  to   compete   with  the   Corporation   or
                    Subsidiary(ies),  a breach by the  Executive  of that  other
                    non-competition  agreement  shall be  grounds  for denial of
                    severance  benefits  for  Cause  under  this  clause  (f) of
                    Section  3(a)(1).  However,  if the  Executive  engages in a
                    competitive  activity under circumstances  justifying denial
                    of severance  benefits for Cause under

<PAGE>

                    this clause (f), that shall not  necessarily  be grounds for
                    concluding  that the  Executive  has also breached the other
                    non-competition  agreement  to  which  he is or  may  become
                    subject. This clause (f) is not intended to and shall not be
                    construed  to  supersede  or  amend  any   provision  of  an
                    employment  or   non-competition   agreement  to  which  the
                    Executive is or may become subject. This clause (f) does not
                    grant to the  Executive  any right or privilege to engage in
                    other activities or enterprises, whether in competition with
                    the Corporation or otherwise, or

               (g)  Termination  for Cause under an  Employment  Agreement:  any
                    actions that have caused the Executive to be terminated  for
                    Cause under any  employment  agreement  existing on the date
                    hereof or hereafter  entered into between the  Executive and
                    the Corporation or a Subsidiary.

         (2)   Definition of "Intentional":  For purposes of this Agreement,  no
               act or  failure  to act on the  part of the  Executive  shall  be
               deemed to have been  intentional  if it was due  primarily  to an
               error in judgment or negligence.  An act or failure to act on the
               Executive's part shall be considered  intentional if it is not in
               good  faith and if it is  without a  reasonable  belief  that the
               action  or  failure  to  act  is in  the  best  interests  of the
               Corporation or a Subsidiary.

     (b)  The   Executive's   Right  to  Severance  Is  Subject  to   Regulatory
Considerations. Payments made to the Executive under 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.

     (c) No  Severance  under  this  Agreement  for  the  Executive's  Death  or
Disability. Anything in this Agreement to the contrary notwithstanding, under no
circumstance  shall the Executive be entitled to severance  benefits  under this
Agreement if -

         (1)   Death:  the  Executive  dies  while  actively   employed  by  the
               Corporation or a Subsidiary, or

         (2)   Disability: the Executive becomes totally disabled while actively
               employed by the Corporation or a Subsidiary. For purposes of this
               Agreement,  the term "totally  disabled"  means that,  because of
               injury or  sickness,  the  Executive  is unable  to  perform  his
               duties.

The benefits, if any, payable to the Executive or his beneficiary(ies) or estate
relating to his death or disability  shall be determined  solely by such benefit
plans or  arrangements  as

<PAGE>

the  Corporation or Subsidiary may have with the Executive  relating to death or
disability, not by this Agreement.

4.   TERM OF AGREEMENT

     The initial  term of this  Agreement  shall be for a period of three years,
commencing on November 1, 2008 (the "Effective  Date"). On the first anniversary
of the Effective Date of this  Agreement,  and on each  anniversary  thereafter,
this Agreement  shall be extended  automatically  for one additional year unless
the Corporation's board of directors gives notice to the Executive in writing at
least 90 days before the anniversary that the term of this Agreement will not be
extended.  If the board of directors determines not to extend the term, it shall
promptly notify the Executive.  References  herein to the term of this Agreement
mean the initial term and  extensions  of the initial  term.  Unless  terminated
earlier,  this Agreement shall  terminate when the Executive  reaches age 65. If
the board of directors  decides not to extend the term of this  Agreement,  this
Agreement shall nevertheless remain in force until its term expires. The board's
decision not to extend the term of this  Agreement  shall not - by itself - give
the Executive any rights under this  Agreement to claim an adverse change in his
position,  compensation or  circumstances  or otherwise to claim  entitlement to
severance benefits under this Agreement.

5.   THIS AGREEMENT IS NOT AN EMPLOYMENT CONTRACT

     The parties hereto  acknowledge  and agree that (a) this Agreement is not a
management or employment  agreement and (b) nothing in this Agreement shall give
the Executive any rights or impose any  obligations  to continued  employment by
the Corporation or any Subsidiary or successor of the Corporation,  nor shall it
give the  Corporation  any rights or impose any  obligations  for the  continued
performance of duties by the Executive for the  Corporation or any Subsidiary or
successor of the Corporation.

6.   WITHHOLDING OF TAXES

     The Corporation may withhold from any benefits payable under this Agreement
all Federal, state, local or other taxes as may be required by law, governmental
regulation or ruling.

7.   SUCCESSORS AND ASSIGNS

     (a)  This  Agreement  Is  Binding  on the  Corporation's  Successors.  This
Agreement  shall  be  binding  upon the  Corporation  and any  successor  to the
Corporation,  including  any persons  acquiring  directly or  indirectly  all or
substantially  all of the  business or assets of the  Corporation  by  purchase,
merger,  consolidation,  reorganization,  or otherwise. Any such successor shall
thereafter be deemed to be "Citizens South Banking  Corporation" for purposes of
this Agreement.  However, this Agreement and the Corporation's obligations under
this Agreement are not otherwise  assignable,  transferable  or delegable by the
Corporation.  By agreement in form and substance  satisfactory to the Executive,
the Corporation  shall require any successor to all or substantially  all of the

<PAGE>

business or assets of the  Corporation  expressly to assume and agree to perform
this Agreement in the same manner and to the same extent the  Corporation  would
be required to perform if no such succession had occurred.

     (b) This  Agreement Is  Enforceable  by the Executive  and His Heirs.  This
Agreement  will inure to the benefit of and be  enforceable  by the  Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributes and legatees.

     (c) This  Agreement  Is  Personal  in Nature  and Is Not  Assignable.  This
Agreement  is personal in nature.  Without  written  consent of the other party,
neither party shall assign,  transfer,  or delegate this Agreement or any rights
or obligations under this Agreement except as expressly provided in this Section
7. Without  limiting the generality or effect of the foregoing,  the Executive's
right to receive payments  hereunder is not assignable or transferable,  whether
by pledge, creation of a security interest, or otherwise,  except for a transfer
by Executive's will or by the laws of descent and distribution. If the Executive
attempts  an  assignment  or transfer  that is  contrary to this  Section 7, the
Corporation  shall  have no  liability  to pay any  amount  to the  assignee  or
transferee.

8.   NOTICES

     All notices,  requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if  delivered  by hand or
mailed,  certified or registered mail,  return receipt  requested,  with postage
prepaid  (a) to the  Corporation  at 519 South  New Hope  Road,  P.O.  Box 2249,
Gastonia,  North Carolina  28053-2249,  Attn:  Corporate  Secretary,  (b) to the
Executive at the address appearing on the Corporation's  records, or (c) to such
other address as the party may designate by like notice.

9.   CAPTIONS AND COUNTERPARTS

     The headings and subheadings used in this Agreement are included solely for
convenience  and shall not affect the  interpretation  of this  Agreement.  This
Agreement  may be executed in one or more  counterparts,  each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same agreement.

10.  AMENDMENTS AND WAIVERS

     No  provision  of this  Agreement  may be modified  or amended  except in a
writing  signed by the  Executive  and by the  Corporation.  No waiver by either
party of any breach by the other or waiver of  compliance  with any condition or
provision of this  Agreement  shall be deemed a waiver of similar  provisions or
conditions at the same time or at any other time.

11.  SEVERABILITY

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

<PAGE>

other  provisions  of  this  Agreement.  Any  provision  held to be  invalid  or
unenforceable shall be reformed to the extent (and only to the extent) necessary
to make it valid and enforceable.

12.  GOVERNING LAW

     The  validity,   interpretation,   construction  and  performance  of  this
Agreement  shall be governed by and construed in accordance with the substantive
laws of the State of North Carolina,  without giving effect to the principles of
conflict of laws of such State.

13.  ENTIRE AGREEMENT

     This Agreement constitutes the entire agreement between the Corporation and
the Executive concerning the subject matter hereof. No rights are granted to the
Executive under this Agreement other than those  specifically  set forth herein.
No  agreements  or  representations,  oral or  otherwise,  expressed  or implied
concerning  the subject  matter of this Agreement have been made by either party
that are not set forth expressly in this Agreement.

     Without  limiting  the  generality  of the  foregoing,  the parties  hereto
acknowledge  and agree that this Agreement  supersedes in its entirety any prior
Merger/Acquisition  Protection  Agreement  entered into by the Executive and the
Corporation  or by  the  Executive  and  Citizens  South  Bank,  as  amended  or
supplemented.  Any Merger/Acquisition Protection Agreement entered into prior to
this Agreement shall hereafter be void and of no force or effect.

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

                                    CITIZENS SOUTH BANKING CORPORATION

                                    By:
                                        ------------------------------

                                    Its:
                                        ------------------------------

                                    EXECUTIVE

                                    ----------------------------------EXHIBIT 10.5

                               FIRST AMENDMENT TO

                          SALARY CONTINUATION AGREEMENT

     First Amendment,  dated as of _________ __, 2008 (the "Amendment"),  to the
Salary  Continuation  Agreement,  dated as of January 1, 2004 (as  amended,  the
"Salary Continuation Agreement"),  by and among Citizens South Bank (the "Bank")
and _______________  (the "Executive").  Capitalized terms which are not defined
herein  shall  have the same  meaning  as set forth in the  Salary  Continuation
Agreement.

                              W I T N E S S E T H:

     WHEREAS,  the parties desire to amend the Salary Continuation  Agreement to
comply with the final  regulations  issued in April 2007 by the Internal Revenue
Service under Section 409A of the Internal Revenue Code of 1986, as amended (the
"Code"); and

     WHEREAS,  pursuant  to  Sections  7.1 and 7.14 of the  Salary  Continuation
Agreement,  the parties to the Salary Continuation Agreement desire to amend the
Salary Continuation Agreement;

     NOW,  THEREFORE,  in consideration of the premises,  the mutual  agreements
herein set forth and such other consideration the sufficiency of which is hereby
acknowledged, the Bank and the Executive hereby agree as follows:

     Section 1. Amendment to Section 1.4 of the Salary  Continuation  Agreement.
The  definition  of Change in Control in Section 1.4 of the Salary  Continuation
Agreement is hereby amended to read in its entirety as follows:

          "Change in Control means a change in the  ownership of Citizens  South
     Banking  Corporation (the "Company") or the Bank, a change in the effective
     control  of the  Company  or the Bank or a  change  in the  ownership  of a
     substantial  portion of the assets of the Company or the Bank, in each case
     as provided under Section 409A of the Code and the regulations thereunder."

     Section 2. Amendment to Section 1.5 of the Salary  Continuation  Agreement.
The definition of Disability in Section 1.5 of the Salary Continuation Agreement
is hereby amended to read in its entirety as follows:

          "Disability  means  the  Executive  (i) is  unable  to  engage  in any
     substantial  gainful  activity  by  reason  of any  medically  determinable
     physical or mental  impairment  which can be expected to result in death or
     can be expected to last for a continuous period of not less than 12 months,
     or (ii) is, by  reason of any  medically  determinable  physical  or mental
     impairment  which can be  expected to result in death or can be expected to
     last for a continuous  period of not less than 12 months,  receiving income
     replacement benefits

<PAGE>

     for a period of not less than three  months  under an  accident  and health
     Agreement covering employees of the Bank."

     Section 3. Amendment to Section 1.9 of the Salary  Continuation  Agreement.
The  definition  of  Good  Reason  in  Section  1.9 of the  Salary  Continuation
Agreement is hereby amended to read in its entirety as follows:

          "Good Reason means the occurrence of any of the following conditions:

          (i) any  material  breach of this  Agreement  by the  Bank,  including
     without limitation any of the following:  (A) a material  diminution in the
     Executive's base compensation, (B) a material diminution in the Executive's
     authority, duties or responsibilities,  or (C) a material diminution in the
     authority,  duties or responsibilities of the officer to whom the Executive
     is required to report, or

          (ii) any  material  change  in the  geographic  location  at which the
     Executive must perform his services under this Agreement;

     provided,  however,  that prior to any  termination  of employment for Good
     Reason,  the Executive must first provide written notice to the Bank within
     ninety (90) days of the initial existence of the condition,  describing the
     existence of such condition,  and the Bank shall  thereafter have the right
     to  remedy  the  condition  within  thirty  (30)  days of the date the Bank
     received the written  notice from the  Executive.  If the Bank remedies the
     condition  within  such thirty  (30) day cure  period,  then no Good Reason
     shall be deemed to exist with respect to such  condition.  If the Bank does
     not remedy the condition within such thirty (30) day cure period,  then the
     Executive may deliver a notice of  termination  for Good Reason at any time
     within sixty (60) days following the expiration of such cure period."

     Section 4. Amendment to Section 1.16 of the Salary Continuation  Agreement.
Section 1.16 of the Salary  Continuation  Agreement is hereby amended to read in
its entirety as follows:

          "Termination  of Employment,"  for purposes of this  Agreement,  shall
     mean a "Separation from Service" as such term is defined in Section 409A of
     the Code and the final regulations issued thereunder, provided that whether
     a Separation from Service has occurred shall be determined based on whether
     the  facts  and  circumstances  indicate  that the  Bank and the  Executive
     reasonably  anticipated that no further services would be performed after a
     certain date or that the level of bona fide  services the  Executive  would
     perform  after  such date  (whether  as an  employee  or as an  independent
     contractor) would permanently  decrease to less than fifty percent (50%) of
     the average level of bona fide services  performed  (whether as an employee
     or an independent  contractor)  over the immediately  preceding  thirty-six
     (36)  month  period  (or the full  period  of  services  to the Bank if the
     Executive has been providing services to the Bank less than thirty-six (36)
     months)."

<PAGE>

     Section 5.  Deletion of Section 2.6 of the Salary  Continuation  Agreement.
Section  2.6 of the  Salary  Continuation  Agreement  is hereby  deleted  in its
entirety.

     Section 6. New  Section  2.8 of the Salary  Continuation  Agreement.  A new
Section 2.8 of the Salary Continuation  Agreement is hereby added to read in its
entirety as follows:

     "2.8  Restriction on Commencement  of  Distributions.  Notwithstanding  any
     provision of this Agreement to the contrary, if the Executive is considered
     a  Specified   Employee   (within   the  meaning  of  Treasury   Regulation
     1.409A-1(i)), the provisions of this Section 2.8 shall govern the timing of
     all  distributions  under Sections 2.1, 2.2, 2.3 and 2.4 of this Agreement.
     In the event the  Executive  is a  Specified  Employee,  and to the  extent
     necessary to avoid  penalties  under Section 409A of the Code,  payments to
     the  Executive  shall not commerce  until the later of (i) the first day of
     the  month  following  the  lapse  of six  months  after  the  date  of the
     Termination of Employment, or (ii) the first day of the month following the
     Executive's  attainment of Normal  Retirement Age. Any  distribution  which
     would  otherwise  be paid to the  Executive  during  such  period  shall be
     accumulated and paid to the Executive in a lump sum on the first day of the
     month  following the lapse of six months after the date of the  Termination
     of  Employment.  All subsequent  distributions  shall be paid in the manner
     specified."

     Section 7. Amendment to Section 7.1 of the Salary  Continuation  Agreement.
Section 7.1 of the Salary  Continuation  Agreement is hereby  amended to read in
its entirety as follows:

     "7.1 Amendments and Termination.

          (a) Subject to Section 7.14 of this Agreement,  (a) this Agreement may
     be  amended  solely  by a written  agreement  signed by the Bank and by the
     Executive,  and (b) except for termination  occurring under Article 5, this
     Agreement may be  terminated  solely by a written  agreement  signed by the
     Bank and by the  Executive.  Except as  provided  in  Section  7.1(b),  the
     termination  of this Agreement  shall not cause a distribution  of benefits
     under this Agreement.

          (b) Notwithstanding anything to the contrary in Section 7.1(a), if the
     Bank irrevocably terminates this Agreement in the following circumstances:

               (i) Within thirty (30) days before a Change in Control,  provided
          that all  distributions  are made no later  than  twelve  (12)  months
          following such  irrevocable  termination of this Agreement and further
          provided that all of the arrangements sponsored by the Bank that would
          be  aggregated   with  this  Agreement   under   Treasury   Regulation
          ss.1.409A-1(c)(2)  are  terminated so the Executive and all Executives
          under the other  aggregated  arrangements  are required to receive all
          amounts of  compensation  deferred under the  terminated  arrangements
          within twelve (12) months of the date the Bank  irrevocably  takes all
          necessary action to terminate such arrangements;

<PAGE>

               (ii) With twelve (12) months of a  dissolution  of the Bank taxed
          under  Section 331 of the Code or with the  approval  of a  bankruptcy
          court pursuant to 11 U.S.C. ss.503(b)(1)(A), provided that the amounts
          deferred  under this Agreement are included in the  Executive's  gross
          income in the latest of (i) the calendar year in which this  Agreement
          terminates;  (ii) the  calendar  year in which the amount is no longer
          subject  to a  substantial  risk of  forfeiture;  or (iii)  the  first
          calendar   year  in  which  the   distribution   is   administratively
          practicable; or

               (iii)  Upon  the  Bank's   termination  of  this  and  all  other
          arrangements that would be aggregated with this Agreement  pursuant to
          Treasury  Regulation  ss.1.409A-1(c) if the Executive  participated in
          such  arrangements  ("Similar  Arrangements"),  provided  that (i) the
          termination and liquidation  does not occur proximate to a downturn in
          the  financial  health of the Bank,  (ii) no payments  are made within
          twelve (12) months of the termination of the  arrangements  other than
          payments that would be payable under the terms of the  arrangements if
          the termination had not occurred, (iii) all termination  distributions
          are  made  no  later  than  twenty-four  (24)  months  following  such
          termination, and (iv) the Bank does not adopt any new arrangement that
          would be a  Similar  Arrangement  for a  minimum  of three  (3)  years
          following the date the Bank takes all necessary  action to irrevocably
          terminate and liquidate the Agreement;

               the Bank may distribute the Accrual Balance, determined as of the
          date of the  termination of this Agreement  (without regard to vesting
          in the event of a  termination  pursuant to Section  7(b)(i)),  to the
          Executive in a lump sum subject to the above terms.

     Section 8. Amendment to Section 7.13 of the Salary Continuation  Agreement.
The second to last sentence in Section 7.13 of the Salary Continuation Agreement
is hereby amended to read in its entirety as follows:

          "The fees and  expenses of counsel  selected  from time to time by the
     Executive as provided in this section  shall be paid or  reimbursed  to the
     Executive by the Bank on a regular, periodic basis upon presentation within
     thirty (30) days following the  Executive's  presentation of a statement or
     statements  prepared  by such  counsel in  accordance  with such  counsel's
     customary practices, up to a maximum aggregate amount of $25,000."

     Section 9.  Effectiveness.  This Amendment shall be deemed  effective as of
the date first above written,  as if executed on such date.  Except as expressly
set forth herein,  this Amendment  shall not by implication or otherwise  alter,
modify,  amend or in any way affect any of the terms,  conditions,  obligations,
covenants or agreements contained in the Salary Continuation  Agreement,  all of
which are ratified and affirmed in all respects and shall continue in full force
and effect and shall be otherwise unaffected.

     Section 10.  Governing Law. This  Amendment and the rights and  obligations
hereunder  shall be governed by and construed in accordance with the laws of the
State of North Carolina.

<PAGE>

     Section 11.  Counterparts.  This Amendment may be executed in any number of
counterparts,  each of which shall for all purposes be deemed an  original,  and
all of which together shall constitute but one and the same instrument.

     Section  12.   Compliance  with  Section  409A.  This  Agreement  shall  be
interpreted and administered consistent with Section 409A of the Code.

     IN WITNESS  WHEREOF,  the Bank and the  Executive  have duly  executed this
Amendment as of the day and year first written above.

                                               CITIZENS SOUTH BANK

Attest:

                                           By:
---------------------------------------        ---------------------------------
Name:  Paul L. Teem, Jr.                       Name:  Kim S. Price
Title: Executive Vice President,               Title: President and Chief
         Chief Administrative Officer                   Executive Officer

                                               EXECUTIVE

Attest:

------------------------                       ---------------------------------
Name:  Paul L. Teem, Jr.                       -----------------------

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