Michael C. Gerald
                         
 
FORM OF EMPLOYMENT AGREEMENT
 
      THIS AGREEMENT (the "Agreement"), made this 24th day of November 2003, by
and among COASTAL FINANCIAL CORPORATION, a Delaware corporation ("the Company"),
COASTAL FEDERAL BANK, a wholly owned subsidiary of the Company (the "Bank"), and
Michael C. Gerald (the "Executive").
 
                                   WITNESSETH
 
      WHEREAS, the Company and the Bank desire to retain the services of the
Executive as President and Chief Executive Officer of the Company and the Bank;
 
      WHEREAS, the Company and the Bank have previously entered into an
employment agreement with the Executive;
 
      WHEREAS, the Executive and the respective Boards of Directors of the Bank
and the Company desire to enter into an updated and revised agreement setting
forth the terms and conditions of the continuing employment of the Executive and
the related rights and obligations of each of the parties;
 
      NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed as follows:
 
      1. Employment. The Executive is employed as the President & Chief
Executive Officer of the Company and the Bank, reporting directly to their
respective Boards. The Executive shall have responsibility for the general
management and control of the business and affairs of the Company, the Bank, and
their respective subsidiaries, and shall perform all duties and shall have all
powers which are commonly incident to the offices of President and Chief
Executive Officer or which, consistent with those offices, are delegated to him
by the respective Boards.
 
      2. Location and Facilities. The Executive will be furnished with the
working facilities and staff customary for executive officers with the title and
duties set forth in Section 1 and as are necessary for him to perform his
duties. The location of such facilities and staff shall be at the principal
administrative offices of the Company and the Bank, or at such other site or
sites customary for such offices.
 
      3. Term.
 
            a.    The term of this Agreement shall be (i) the initial term,
                  consisting of the period commencing on the date of this
                  Agreement (the "Effective Date") and ending on the third
                  anniversary of the Effective Date, plus (ii) any and all
                  extensions of the initial term made pursuant to this Section
                  3.
 
            b.    Commencing on the Effective Date and on each day thereafter,
                  the term under this Agreement shall be renewed automatically
                  for an additional one
 
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                  (1) day period beyond the then effective expiration date
                  without action by any party, provided that neither the
                  Company, on the one hand, nor Executive, on the other, shall
                  have given at least sixty (60) days written notice of its or
                  his desire that the term not be renewed. In the case such
                  notice is given by one party to the other, the term of this
                  Agreement shall become fixed and shall end on the third
                  anniversary of the date of written notice.
 
      4. Base Salary.
 
            a.    The Bank agrees to pay the Executive during the term of this
                  Agreement a base salary at the rate of $248,000.00 per annum,
                  payable in accordance with the Bank's customary payroll
                  practices.
 
            b.    The Board of the Bank shall review annually the rate of the
                  Executive's base salary based upon factors they deem relevant,
                  and may maintain or increase his salary, provided that no such
                  action shall reduce the rate of salary below the rate in
                  effect on the Effective Date.
 
            c.    In the absence of action by the Board of the Bank, the
                  Executive shall continue to receive salary at the per annum
                  rate specified on the Effective Date or, if another rate has
                  been established under the provisions of this Section 4, the
                  rate last properly established by action of the Board of the
                  Bank under the provisions of this Section 4.
 
      5. Bonuses. The Executive shall be entitled to participate in any
discretionary bonus or other incentive compensation programs that the Board of
the Company or the Bank may establish from time to time for the benefit of the
officers or employees of the Company or the Bank.
 
      6. Benefit Plans. The Executive shall be entitled to participate in such
life insurance, medical, dental, pension, profit sharing, and retirement plans,
stock compensation plans and other programs and arrangements as may be approved
from time to time by the Company or the Bank for the benefit of their respective
employees.
 
      7. Vacation and Leave.
 
            a.    The Executive shall be entitled to vacations and other leave
                  in accordance with Bank policy for senior executives, or
                  otherwise as approved by the Board, but in any event, not less
                  than four (4) weeks vacation per calendar year.
 
            b.    In addition to paid vacations and other leave, the Executive
                  shall be entitled, without loss of pay, to absent himself
                  voluntarily from the performance of his employment for such
                  additional periods of time and for such valid and legitimate
                  reasons as the Board of the Company and the
 
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<PAGE>
                  Bank may in their discretion determine. Further, the Board of
                  the Company or the Bank may grant to the Executive 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.
 
      8. Expense Payments and Reimbursements. The Executive shall be reimbursed
for all reasonable out-of-pocket business expenses that he shall incur in
connection with his services under this Agreement upon substantiation of such
expenses in accordance with applicable policies of the Company or the Bank.
 
      9. Loyalty.
 
            a.    During the term of this Agreement the Executive: (i) shall
                  devote all his time, attention, skill, and efforts to the
                  faithful performance of his duties hereunder; provided,
                  however, that from time to time, the Executive may serve on
                  the boards of directors of, and hold any other offices or
                  positions in, companies or organizations which will not
                  present any conflicts of interest with the Company or the Bank
                  or any of their subsidiaries or affiliates, unfavorably affect
                  the performance of Executive's duties pursuant to this
                  Agreement, or violate any applicable statute or regulation and
                  (ii) shall not engage in any business or activity contrary to
                  the business affairs or interests of the Company or the Bank.
 
            b.    Nothing contained in this Agreement shall prevent or limit the
                  Executive's right to invest in the capital stock or other
                  securities of any business dissimilar from that of the Company
                  and the Bank, or, solely as a passive, minority investor, in
                  any business.
 
            c.    The Executive agrees to maintain the confidentiality of any
                  and all information concerning the operation or financial
                  status of the Company and the Bank; the names or addresses of
                  any of its borrowers, depositors and other customers; any
                  information concerning or obtained from such customers; and
                  any other information concerning the Company and the Bank to
                  which he may be exposed during the course of his employment.
                  The Executive further agrees that, unless required by law or
                  specifically permitted by the Board in writing, he will not
                  disclose to any person or entity, either during or subsequent
                  to his employment, any of the above-mentioned information
                  which is not generally known to the public, nor shall he
                  employ such information in any way other than for the benefit
                  of the Company and the Bank.
 
      10. Termination and Termination Pay. Subject to Section 11 of this
Agreement, the Executive's employment under this Agreement may be terminated in
the following circumstances:
 
 
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<PAGE>
 
            a.    Death. The Executive's employment under this Agreement shall
                  terminate upon his death during the term of this Agreement, in
                  which event the Executive's estate shall be entitled to
                  receive the compensation due to the Executive through the last
                  day of the calendar month in which his death occurred.
 
            b.    Retirement. This Agreement shall be terminated upon the
                  retirement of the Executive under the retirement benefit plan
                  or plans in which he participates pursuant to Section 6 of
                  this Agreement or otherwise. For all other purposes, the
                  Executive's termination of employment at retirement shall be
                  treated in the same manner as if he voluntarily terminated
                  employment pursuant to Section 10(f).
 
            c.    Disability.
 
                  i.    The Company, the Bank, or the Executive may terminate
                        the Executive's employment after having established the
                        Executive's Disability. For purposes of this Agreement,
                        "Disability" means a physical or mental infirmity that
                        impairs the Executive's ability to substantially perform
                        his duties under this Agreement and that results in the
                        Executive's becoming eligible for long-term disability
                        benefits under the Company's or the Bank's long-term
                        disability plan (or, if the Company or the Bank has no
                        such plan in effect, that impairs the Executive's
                        ability to substantially perform his duties under this
                        Agreement for a period of one hundred eighty (180)
                        consecutive days). The Boards of the Company and the
                        Bank shall determine whether or not the Executive is and
                        continues to be permanently disabled for purposes of
                        this Agreement in good faith, based upon competent
                        medical advice and other factors that they reasonably
                        believe to be relevant. As a condition to any benefits,
                        such Board may require the Executive to submit to such
                        physical or mental evaluations and tests as it deems
                        reasonably appropriate.
 
                  ii.   In the event of such Disability, the Executive's
                        obligation to perform services under this Agreement will
                        terminate. In the event of such termination, the
                        Executive shall continue to receive seventy-five (75)
                        percent of his monthly base salary (at the annual rate
                        in effect on his date of termination) through the
                        earlier of the date of the Executive's death, the date
                        he attains age 65 or the date which is three (3) years
                        after the Executive's termination date. Such payments
                        shall be reduced by the amount of any short- or
                        long-term disability benefits payable to the Executive
                        under any other disability program sponsored by the
                        Company or the Bank. In addition, during any period of
                        the Executive's Disability in which he is receiving
                        payments under this paragraph, the Executive and his
                        dependents shall, to the greatest extent possible,
 
 
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<PAGE>
 
                        continue to be covered under all benefit plans
                        (including, without limitation, retirement plans and
                        medical, dental and life insurance plans) of the Company
                        and the Bank in which Executive participated prior to
                        his Disability on the same terms as if Executive were
                        actively employed by the Company and the Bank.
 
            d.    Just Cause.
 
                  i.    The Board of the Company or the Bank may, by written
                        notice to the Executive in the form and manner specified
                        in this paragraph, immediately terminate his employment
                        with the Company or the Bank, respectively, at any time,
                        for Just Cause. The Executive shall have no right to
                        receive compensation or other benefits for any period
                        after termination for Just Cause except for vested
                        benefits. Termination for "Just Cause" shall mean
                        termination because of, in the good faith determination
                        of the Company's or the Bank's Board, the Executive's:
 
                        (1)   Personal dishonesty;
 
                        (2)   Incompetence;
 
                        (3)   Willful misconduct;
 
                        (4)   Breach of fiduciary duty involving personal
                              profit;
 
                        (5)   Intentional failure to perform duties under this
                              Agreement;
 
                        (6)   Willful violation of any law, rule or regulation
                              (other than traffic violations or similar
                              offenses) that reflects adversely on the
                              reputation of the Bank, any felony conviction, any
                              violation of law involving moral turpitude, or any
                              violation of a final cease-and-desist order; or
 
                        (7)   Material breach by the Executive of any provision
                              of this Agreement.
 
                  ii    Notwithstanding the foregoing, the Executive shall not
                        be deemed to have been terminated for Just Cause by the
                        Company or the Bank unless there shall have been
                        delivered to the Executive a copy of a resolution duly
                        adopted by the affirmative vote of not less than
                        three-fourths (3/4) of the entire membership of the
                        Board of the Company or the Bank at a meeting of such
                        Board called and held for the purpose (after reasonable
                        notice to the Executive and an opportunity for the
                        Executive to be heard before the Board with counsel),
                        finding that in the good faith opinion of such Board the
 
 
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<PAGE>
 
                        Executive was guilty of conduct described above and
                        specifying the particulars thereof.
 
            e.    Certain Regulatory Events.
 
                  i.    If the Executive 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. ss.ss. 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.
 
                  ii.   If the Bank is in default (as defined in Section 3(x)(1)
                        of FDIA), all obligations of the Bank under this
                        Agreement shall terminate as of the date of default, but
                        vested rights of the parties shall not be affected.
 
                  iii.  If a notice served under Sections 8(e)(3) or (g)(1) of
                        the FDIA (12 U.S.C. Sections 1818(e)(3) and (g)(1))
                        suspends and/or temporarily prohibits the Executive 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 shall, (x) pay the Executive all
                        or part of the compensation withheld while its contract
                        obligations were suspended, and (y) reinstate (in whole
                        or in part) any of its obligations which were suspended.
 
            f.    Voluntary Termination by Executive. In addition to his other
                  rights to terminate under this Agreement, the Executive may
                  voluntarily terminate employment with the Bank and the Company
                  during the term of this Agreement upon at least sixty (60)
                  days prior written notice to each Board, in which case the
                  Executive shall receive only his compensation, vested rights
                  and employee benefits up to the date of his termination.
 
            g.    Without Just Cause or With Good Reason.
 
                  i.    In addition to termination pursuant to Sections 10(a)
                        through 10(f), (x) the Board of the Company or the Bank,
                        respectively, may, by written notice to the Executive,
                        immediately terminate his employment with the Company or
                        the Bank, respectively, at any time for a reason other
                        than Just Cause (a termination "Without Just Cause") and
                        (y) the Executive may, by written notice to the Boards
                        of the Company and the Bank, immediately terminate this
                        Agreement at any time within ninety (90) days following
                        an event
 
 
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<PAGE>
 
                        constituting "Good Reason" as defined below (a
                        termination "With Good Reason").
 
                  ii.   Subject to Section 11 hereof, in the event of
                        termination under this Section 10(g), the Executive
                        shall be entitled to receive his base salary for the
                        remaining term of the Agreement, including any renewals
                        or extensions thereof (determined at the highest annual
                        rate of base salary in effect pursuant to Section 4 of
                        this Agreement for any of the twelve (12) months
                        immediately preceding the date of such termination),
                        plus annual cash bonuses for each year (prorated in the
                        event of partial years) remaining under such term
                        (determined by reference to the highest annual cash
                        bonus received by the Executive in any of the three (3)
                        calendar years preceding the termination. The sum due
                        under this Section 10(g) shall be paid in one lump sum
                        within ten (10) calendar days of such termination. Also,
                        in such event, the Executive shall, for the remaining
                        term of the Agreement, receive the benefits he would
                        have received during the remaining term of the Agreement
                        under any tax-qualified or non-tax-qualified retirement
                        programs in which the Executive participated prior to
                        his termination (with the amount of the benefits
                        determined by reference to the benefits received by the
                        Executive under such programs during the twelve (12)
                        months preceding his termination or, if applicable, the
                        accruals made on the Executive's behalf under such
                        programs) and continue to participate in any benefit
                        plans of the Company and the Bank that provide health
                        (including medical and dental), life or disability
                        insurance, or similar coverage upon terms no less
                        favorable than the most favorable terms provided to
                        senior executives of the Bank during such period. In the
                        event that the Company or the Bank is unable to provide
                        such coverage by reason of the Executive no longer being
                        an employee, the Company and the Bank shall provide the
                        Executive with comparable coverage on an individual
                        policy basis or, if individual coverage is not
                        available, provide a cash payment equivalent to the
                        value of such coverage.
 
                  iii.  "Good Reason" shall exist if, without Executive's
                        express written consent, the Company or the Bank
                        materially breach any of their respective obligations
                        under this Agreement. Without limitation, such a
                        material breach shall be deemed to occur upon any of the
                        following:
 
                        (1)   A material reduction in the Executive's
                              responsibilities or authority, or a requirement
                              that the Executive report to any person or group
                              other than the Boards of the Company and the Bank
                              (or any other effective reduction in reporting
 
 
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<PAGE>
 
                              responsibilities) in connection with his
                              employment with the Company or the Bank;
 
                        (2)   Assignment to the Executive of duties of a
                              non-executive nature or duties for which he is not
                              reasonably equipped by his skills and experience;
 
                        (3)   A reduction in salary or benefits contrary to the
                              terms of this Agreement, or, following a Change in
                              Control as defined in Section 11 of this
                              Agreement, any reduction in salary or material
                              reduction in benefits below the amounts to which
                              he was entitled prior to the Change in Control;
 
                        (4)   Termination of incentive and benefit plans,
                              programs or arrangements, or reduction of the
                              Executive's participation to such an extent as to
                              materially reduce their aggregate value below
                              their aggregate value as of the Effective Date; or
 
                        (5)   A requirement that the Executive relocate his
                              principal business office or his principal place
                              of residence outside of the area consisting of a
                              thirty five (35) mile radius from the current main
                              office and any branch of the Bank, or the
                              assignment to the Executive of duties that would
                              reasonably require such a relocation.
 
                  iv.   Notwithstanding the foregoing, a reduction or
                        elimination of the Executive's participation or benefits
                        under one or more benefit plans maintained by the
                        Company or the Bank as part of a good faith, overall
                        reduction or elimination of such plan or plans or
                        benefits thereunder applicable to all participants in a
                        manner that does not discriminate against the Executive
                        (except as such discrimination may be necessary to
                        comply with law) shall not constitute an event of Good
                        Reason or a material breach of this Agreement, provided
                        that benefits of the type or to the general extent as
                        those offered under such plans prior to such reduction
                        or elimination are not available to other officers of
                        the Company or the Bank or any company that controls
                        either of them under a plan or plans in or under which
                        the Executive is not entitled to participate.
 
                  v.    Notwithstanding anything in this Agreement to the
                        contrary, during the period beginning three (3) months
                        prior to the announcement by the Bank or the Company of
                        an event constituting a Change in Control (as defined in
                        Section 11(a)) and ending twelve (12) months following
                        the effective date of a
 
 
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<PAGE>
 
                        Change in Control, the Executive may voluntarily
                        terminate his employment under this Agreement for any
                        reason and such termination shall constitute termination
                        With Good Reason.
 
            h.    Continuing Covenant Not to Compete or Interfere with
                  Relationships. Regardless of anything herein to the contrary,
                  following a termination by the Company, the Bank or the
                  Executive pursuant to Section 10(g) and continuing until the
                  first anniversary of the effective date of such termination,
                  the Executive shall not serve as an officer, director or
                  employee of any bank holding company, bank, savings
                  association, savings and loan holding company, or mortgage
                  company which offers products or services competing with those
                  offered by the Company or the Bank from any office in any
                  city, town or county where Bank maintains an office as of the
                  date of the Executive's termination and shall not interfere
                  with the relationship of the Company or the Bank and any of
                  its employees, agents, or representatives.
 
      11. Termination in Connection with a Change in Control.
 
            a.    For purposes of this Agreement, a "Change in Control" shall be
                  deemed to occur on the earliest of
 
                  i.    The acquisition by any entity, person or group (other
                        than the acquisition by a tax-qualified retirement plan
                        sponsored by the Company or the Bank) of beneficial
                        ownership, as that term is defined in Rule 13d-3 under
                        the Securities Exchange Act of 1934, of more than 25% of
                        the outstanding capital stock of the Company or the Bank
                        entitled to vote for the election of directors ("Voting
                        Stock");
 
                  ii.   The commencement by any entity, person, or group (other
                        than the Company or the Bank, a subsidiary of the
                        Company or the Bank, or a tax-qualified retirement plan
                        sponsored by the Company or the Bank) of a tender offer
                        or an exchange offer for more than 25% of the
                        outstanding Voting Stock of the Company or the Bank;
 
                  iii.  The effective time of (x) a merger or consolidation of
                        the Company or the Bank with one or more other
                        corporations as a result of which the holders of the
                        outstanding Voting Stock of the Company or the Bank
                        immediately prior to such merger exercise voting control
                        over less than 51 % of the Voting Stock of the surviving
                        or resulting corporation, or (y) a transfer of
                        substantially all of the property of the Company or the
                        Bank other than to an entity of which the Company or the
                        Bank owns at least 51% of the Voting Stock; and
 
 
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<PAGE>
 
                  iv.   At such time that, during any period of two (2)
                        consecutive years, individuals who at the beginning of
                        such period constitute the Board of the Company or the
                        Bank (the "Continuing Directors") 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 Board was approved by a vote of at
                        least two-thirds (_) of the Continuing Directors then in
                        office shall be considered a Continuing Director.
 
            b.    If within the period beginning three (3) months prior to the
                  announcement by the Bank or the Company of an event
                  constituting a Change in Control and ending twelve (12) months
                  following the effective date of a Change in Control, (i) the
                  Company or the Bank shall terminate the Executive's employment
                  Without Just Cause, or (ii) the Executive shall voluntarily
                  terminate his employment With Good Reason, the Company or the
                  Bank shall, within ten (10) calendar days of the termination
                  of the Executive's employment, make a lump-sum cash payment to
                  him equal to three (3) times the sum of the Executive's (x)
                  current base salary (determined at the highest annual rate of
                  base salary in effect pursuant to Section 4 of this Agreement
                  for any of the twelve (12) months immediately preceding the
                  effective date of the Change in Control or, if higher, the
                  rate in effect on the Executive's termination date) and (y)
                  the highest cash bonus paid to the Executive or accrued on the
                  Executive's behalf with respect to any of the three (3) most
                  recently completed fiscal years of the Bank preceding the
                  effective date of the Change in Control. This cash payment
                  shall be made in lieu of any payment also required under
                  Section 10(g) of this Agreement because of a termination in
                  such period. The Executive's rights under Section 10(g) are
                  not otherwise affected by this Section 11. Also, in such
                  event, the Executive shall, for a thirty-six (36) month period
                  following his termination of employment, receive the benefits
                  he would have received over such period under any
                  tax-qualified or non-tax-qualified retirement programs in
                  which the Executive participated prior to his termination
                  (with the amount of the benefits determined by reference to
                  the benefits received by the Executive under such programs
                  during the twelve (12) months preceding the Change in Control
                  or, if applicable, the accruals made on the Executive's behalf
                  during such period) and continue to participate in any benefit
                  plans of the Company and the Bank that provide health
                  (including medical and dental), life or disability insurance,
                  or similar coverage upon terms no less favorable than the most
                  favorable terms provided to senior executives of the Bank
                  during such period. In the event that the Company or the Bank
                  is unable to provide such coverage by reason of the Executive
                  no longer being an employee, the Company and the Bank shall
                  provide the Executive with comparable coverage on an
                  individual policy or, if individual coverage is not available,
                  provide a cash payment equivalent to the value of such
                  coverage.
 
 
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      12. Indemnification and Liability Insurance.
 
            a.    Indemnification. The Company and the Bank agree to indemnify
                  the Executive (and his heirs, executors, and administrators),
                  and to advance expenses related thereto, to the fullest extent
                  permitted under applicable law and regulations against any and
                  all expenses and liabilities reasonably incurred by him in
                  connection with or arising out of any action, suit, or
                  proceeding in which he may be involved by reason of his having
                  been a director or Executive of the Company or the Bank or any
                  of their subsidiaries (whether or not he continues to be a
                  director or Executive at the time of incurring any such
                  expenses or liabilities) such expenses and liabilities to
                  include, but not be limited to, judgments, court costs, and
                  attorney's fees and the cost of reasonable settlements, such
                  settlements to be approved by the Board of the Company or the
                  Bank, if such action is brought against the Executive in his
                  capacity as an Executive or director of the Company or the
                  Bank or any of their subsidiaries. Indemnification for expense
                  shall not extend to matters for which the Executive has been
                  terminated for Just Cause. Nothing contained herein shall be
                  deemed to provide indemnification prohibited by applicable law
                  or regulation. Notwithstanding anything herein to the
                  contrary, the obligations of this Section 12 shall survive the
                  term of this Agreement by a period of six (6) years.
 
            b.    Insurance. During the period in which indemnification of the
                  Executive is required under this Section, the Company or the
                  Bank shall provide the Executive (and his heirs, executors,
                  and administrators) with coverage under a directors' and
                  Executives' liability policy at the expense of the Company or
                  the Bank, at least equivalent to such coverage provided to
                  directors and senior Executives of the Company or the Bank,
                  whichever is more favorable to the Executive.
 
          13.  Reimbursement of Executive's  Expenses to Enforce this Agreement.
     The Company or the Bank shall reimburse the Executive for all out-of-pocket
     expenses,  including,  without  limitation,   reasonable  attorney's  fees,
     incurred by the Executive in connection with successful  enforcement by the
     Executive of the  obligations  of the Company or the Bank to the  Executive
     under this  Agreement.  Successful  enforcement  shall mean the grant of an
     award of money or the  requirement  that the  Company or the Bank take some
     action  specified by this Agreement (i) as a result of court order; or (ii)
     otherwise by the Company or the Bank  following  an initial  failure of the
     Company or the Bank to pay such money or take such  action  promptly  after
     written  demand  therefor from the  Executive  stating the reason that such
     money or action  was due under  this  Agreement  at or prior to the time of
     such demand.
 
      14. Adjustment of Certain Payments and Benefits.
 
            a.    Tax Indemnification. Anything in this Agreement to the
                  contrary notwithstanding and except as set forth below, in the
                  event it shall be
 
 
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<PAGE>
 
                  determined that any payment, benefit or distribution made or
                  provided by the Company or the Bank to or for the benefit of
                  the Executive (whether made or provided pursuant to the terms
                  of this Agreement or otherwise) (each referred to herein as a
                  "Payment"), would be subject to the excise tax imposed by
                  Section 4999 of the Internal Revenue Code of 1986, as amended
                  (the "Code") or any interest or penalties are incurred by the
                  Executive with respect to such excise tax (the excise tax,
                  together with any such interest and penalties, are hereinafter
                  collectively referred to as the "Excise Tax"), the Executive
                  shall be entitled to receive an additional payment (a
                  "Gross-Up Payment") in an amount such that after payment by
                  the Executive of all taxes (including any interest or
                  penalties imposed with respect to such taxes), including,
                  without limitation, any income taxes (and any interest and
                  penalties imposed with respect thereto) and Excise Tax imposed
                  upon the Gross-Up Payment, the Executive retains an amount of
                  the Gross-Up Payment equal to the Excise Tax imposed upon the
                  Payments.
 
            b.    Determination of Gross-Up Payment. Subject to the provisions
                  of Section 14(c), all determinations required to be made under
                  this Section 14, including whether and when a Gross-Up Payment
                  is required and the amount of such Gross-Up Payments and the
                  assumptions to be utilized in arriving at such determination,
                  shall be made by a certified public accounting firm reasonably
                  acceptable to the Company as may be designated by the
                  Executive (the "Accounting Firm") which shall provide detailed
                  supporting calculations both to the Company, the Bank and the
                  Executive within fifteen (15) business days of the receipt of
                  notice from the Executive that there have been Payments, or
                  such earlier time as is requested by the Company and the Bank.
                  All fees and expenses of the Accounting Firm shall be borne
                  solely by the Company and the Bank. Any Gross-Up Payment, as
                  determined pursuant to this Section 14, shall be paid by the
                  Company to the Executive within five days of (i) the later of
                  the due date for the payments of any Excise Tax, and (ii) the
                  receipt of the Accounting Firm's determination. Any
                  determination by the Accounting Firm shall be binding upon the
                  Company and the Executive. As a result of the uncertainty in
                  the application of Section 4999 of the Code, at the time of
                  the initial determination by the Accounting Firm hereunder, it
                  is possible that Gross-Up Payments which will not have been
                  made by the Company and the Bank should have been made
                  ("Underpayment"), consistent with the calculations required to
                  be made hereunder. In the event that the Company and the Bank
                  exhaust their remedies pursuant to Section 14(c) and the
                  Executive thereafter is required to make a payment of any
                  Excise Tax, the Accounting Firm shall determine the amount of
                  the Underpayment that has occurred and any such Underpayment
                  shall be promptly paid by the Company to or for the benefit of
                  the Executive.
 
 
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<PAGE>
 
            c.    Treatment of Claims. The Executive shall notify the Company
                  and the Bank in writing of any claim by the Internal Revenue
                  Service that, if successful, would require the payment by the
                  Company and the Bank of the Gross-Up Payment. Such
                  notification shall be given as soon as practicable but no
                  later than ten (10) business days after the Executive is
                  informed in writing of such claim and shall apprise the
                  Company and the Bank of the nature of such claims and the date
                  on which such claim is requested to be paid. The Executive
                  shall not pay such claim prior to the expiration of the thirty
                  (30) day period following the date on which it gives such
                  notice to the Company and the Bank (or such shorter period
                  ending on the date that any payment of taxes with respect to
                  such claim is due). If the Company and the Bank notify the
                  Executive in writing prior to the expiration of such period
                  that it desires to contest such claim, the Executive shall:
 
                  i.    give the Company and the Bank any information reasonably
                        request by the Company and the Bank relating such claim,
 
                  ii.   take such action in connection with contesting such
                        claim as the Company and the Bank shall reasonably
                        request in writing from time to time, including, without
                        limitation, accepting legal representation with respect
                        to such claim by an attorney reasonably selected by the
                        Company and the Bank,
 
                  iii.  cooperate with the Company and the Bank in good faith in
                        order effectively to contest such claim, and
 
                  iv.   permit the Company and the Bank to participate in any
                        proceedings relating to such claim; provided, however,
                        that the Company and the Bank shall bear and pay
                        directly all costs and expenses (including additional
                        interest and penalties) incurred in connection with such
                        contest and indemnity and hold the Executive harmless,
                        on an after-tax basis, for any Excise Tax or income tax
                        (including interest and penalties with respect thereto)
                        imposed as a result of such representation and payment
                        of costs and expenses. Without limitation on the
                        foregoing provisions of this Section 14(c), the Company
                        and the Bank shall control all proceedings taken in
                        connection with such contest and, at their sole option,
                        may pursue or forgo any and all administrative appeals,
                        proceedings, hearings and conferences with the taxing
                        authority in respect of such claim and may, at their
                        sole option, either direct the Executive to pay the tax
                        claimed and sue for a refund or contest the claim in any
                        permissible manner, and the Executive agrees to
                        prosecute such contest to a determination before any
                        administrative tribunal, in a court of initial
                        jurisdiction and in one or more appellate courts, as the
                        Company and the Bank shall determine;
 
 
                                       13
<PAGE>
 
                        provided, however, that if the Company and the Bank
                        direct the Executive to pay such claim and sue for a
                        refund, the Company and the Bank shall advance the
                        amount of such payment to the Executive, on an
                        interest-free basis, from any Excise Tax or income tax
                        (including interest or penalties with respect thereto)
                        imposed with respect to such advance or with respect to
                        any imputed income with respect to such advance.
                        Furthermore, the Company's and the Bank's control of the
                        contest shall be limited to issues with respect to which
                        a Gross-Up Payment would be payable hereunder and the
                        Executive shall be entitled to settle or contest, as the
                        case may be, any other issues raised by the Internal
                        Revenue Service or any other taxing authority.
 
            d.    Adjustments to the Gross-Up Payment. If, after the receipt by
                  the Executive of an amount advanced by the Company pursuant to
                  Section 14(c), the Executive becomes entitled to receive any
                  refund with respect to such claim, the Executive shall
                  (subject to the Company's complying with the requirements of
                  Section 14(c)) promptly pay to the Company the amount of such
                  refund (together with any interest paid or credited thereon
                  after applicable taxes). If, after the receipt by the
                  Executive of an amount advanced by the Company pursuant to
                  Section 14(c), a determination is made that the Executive
                  shall not be entitled to any refund with respect to such claim
                  and such denial of refund occurs prior to the expiration of
                  thirty (30) days after such determination, then such advance
                  shall be forgiven and shall not be required to be repaid and
                  the amount of such advance shall offset, to the extent
                  thereof, the amount of the Gross-Up Payment.
 
          15.  Injunctive  Relief.  If there is a breach or threatened breach of
     Section  10(h)  of  his  Agreement  or  the  prohibitions  upon  disclosure
     contained  in Section 9(c) of this  Agreement,  the Company or the Bank and
     the  Executive  agree  that  there is no  adequate  remedy  at law for such
     breach,  and that  the  Company  and the Bank  each  shall be  entitled  to
     injunctive relief  restraining the Executive from such breach or threatened
     breach,  but such relief shall not be the  exclusive  remedy  hereunder for
     such breach. The parties hereto likewise agree that the Executive,  without
     limitation,   shall  be  entitled  to  injunctive  relief  to  enforce  the
     obligations of the Company and the Bank under Section 11 of this Agreement.
 
      16. Successors and Assigns.
 
            a.    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.
 
 
                                       14
<PAGE>
 
            b.    Since the Bank and the Company are contracting for the unique
                  and personal skills of the Executive, the Executive shall be
                  precluded from assigning or delegating his rights or duties
                  hereunder without first obtaining the written consent of the
                  Bank and the Company.
 
      17. No Mitigation. The Executive 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 Executive as a result of any subsequent
employment.
 
      18. Notices. All notices, requests, demands and other communications in
connection with this Agreement shall be made in writing and shall be deemed to
have been given when delivered by hand or 48 hours after mailing at any general
or branch United States Post Office, by registered or certified mail, postage
prepaid, addressed as follows, or to such other address as shall have been
designated in writing by the addressee:
 
                  a.    If to the Company or the Bank:
                        Copy to: Corporate Secretary
                                 Coastal Financial Corporation
                                 2619 Oak Street
                                 Myrtle Beach, S.C. 29577
 
                  b.    If to the Executive:
                                 Michael C. Gerald
                                 211 Lake Drive
                                 Myrtle Beach, S.C. 29572
 
      19. Joint and Several Liability; Payments by the Company and the Bank. To
the extent permitted by law, except as otherwise provided herein, the Company
and the Bank shall be jointly and severally liable for the payment of all
amounts due under this Agreement. The Company hereby agrees that it shall be
jointly and severally liable with the Bank for the payment of all amounts due
under this Agreement and shall guarantee the performance of the Bank's
obligations thereunder, provided that the Company shall not be required by this
Agreement to pay to the Executive a salary or any bonuses or any other cash
payments, except in the event that the Bank does not fulfill the obligations to
the Executive hereunder for such payments.
 
      20. No Plan Created by this Agreement. The Executive, the Company and the
Bank expressly declare and agree that this Agreement was negotiated among them
and that no provision or provisions of this Agreement are intended to, or shall
be deemed to, create any plan for purposes of the Employee Retirement Income
Security Act or any other law or regulation, and the Company, the Bank and the
Executive each expressly waives any right to assert the contrary. Any assertion
in any judicial or administrative filing, hearing, or process by or on behalf of
the Executive or the Company or the Bank that such a plan was so created by this
Agreement shall be deemed a material breach of this Agreement by the party
making such an assertion.
 
 
                                       15
<PAGE>
 
      21. 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.
 
      22. Applicable Law. Except to the extent preempted by Federal law, the
laws of the State of Delaware shall govern this Agreement in all respects,
whether as to its validity, construction, capacity, performance or otherwise.
 
      23. 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.
 
      24. Headings. Headings contained herein are for convenience of reference
only.
 
      25. Entire Agreement. This Agreement, together with any understandings or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement among the parties hereto with respect to the subject matter
hereof, other than written agreements with respect to specific plans, programs
or arrangements described in Sections 5 and 6. This Agreement supercedes and
replaces in its entirety the Agreement dated September 26,1990, as amended,
between the Company, the Bank and the Executive.
 
 
                                       16
<PAGE>
 
      IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
 
Attest:                                  COASTAL FINANCIAL CORPORATION
 
 
 /s/ Susan J. Cooke                         By:/s/ J.T. Clemmons
----------------------------                ------------------------------------
Susan J. Cooke                                  J.T. Clemmons
                                            Title: Chairman
 /s/  Rebecca Belcher
----------------------------
Rebecca Belcher
 
Attest:                                  COASTAL FEDERAL BANK
 
 
 /s/ Susan J. Cooke                         By: /s/ J.T. Clemmons
----------------------------                ------------------------------------
Susan J. Cooke                                  J.T. Clemmons
                                            Title: Chairman
/s/ Rebecca Belcher
----------------------------
Rebecca Belcher
 
Witness:
 
/s/ Susan J. Cooke                       /s/ Michael C. Gerald
----------------------------             ---------------------------------------
Susan J. Cooke                           EXECUTIVE: Michael C. Gerald
 
 
                                       17