Exhibit 10

                             Underwriting Agreement




                               1,400,000 Shares*

                        SOUTHCOAST FINANCIAL CORPORATION

                                  Common Stock


                             UNDERWRITING AGREEMENT



                                                                Atlanta, Georgia
                                                                October 26, 2005



Morgan Keegan & Company, Inc.
One Buckhead Plaza
3060 Peachtree Road, N.W. Suite 930
Atlanta, Georgia 33716

Ladies and Gentlemen:

         Southcoast  Financial  Corporation,  a South Carolina  corporation (the
"Company"),  proposes,  subject to the terms and conditions  stated  herein,  to
issue  and sell to  Morgan  Keegan  &  Company,  Inc.  (the  "Underwriter"),  an
aggregate of 1,400,000  shares of its Common Stock,  no par value per share (the
"Common  Stock").  The  aggregate  of  1,400,000  shares of  Common  Stock to be
purchased  from the  Company  are called the "Firm  Shares."  In  addition,  the
Company  has agreed to sell to the  Underwriter,  upon the terms and  conditions
stated  herein,  up to  an  additional  210,000  shares  of  Common  Stock  (the
"Additional  Shares") to cover  over-allotments by the Underwriter,  if any. The
Firm  Shares and the  Additional  Shares are  collectively  referred  to in this
Underwriting Agreement as the "Shares."

         The  Company  wishes to confirm as follows  its  agreement  with you in
connection with the purchase of the Shares from the Company.

1. Registration Statement and Prospectus. The Company has (i) prepared and filed
with the Securities and Exchange  Commission  (the  "Commission")  in accordance
with the provisions of the Securities Act of 1933, as amended, and the rules and
regulations  of the  Commission  thereunder  (collectively,  the "1933 Act"),  a
registration  statement on Form S-l (Commission File No.  333-128247) as amended

*Plus an  additional  210,000  shares  subject to  Underwriter's  over-allotment
option.


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<PAGE>

by  Amendment  No.1 on October  13,  2005,  including  the  related  preliminary
prospectus or prospectuses.  Such registration statement, including the exhibits
thereto  and  schedules  thereto at the time it became  effective  is called the
"Registration   Statement."  Promptly  after  execution  and  delivery  of  this
Underwriting  Agreement,  the  Company  will  prepare and file a  prospectus  in
accordance  with the  provisions  of Rule 430A ("Rule 430A") and Rule 424 ("Rule
424") of the 1933 Act, as such  prospectus is further  amended and  supplemented
(the "Prospectus"). If the Company files another registration statement with the
Commission to register a portion of the Shares pursuant to Rule 462(b) under the
1933 Act  (the  "Rule  462  Registration  Statement"),  then  any  reference  to
"Registration  Statement"  herein  shall be deemed to include  the  registration
statement on Commission Form S-1 (Commission  File No.  333-128247) and the Rule
462 Registration  Statement,  as each such registration statement may be amended
pursuant  to the 1933 Act.  The  prospectus  subject to  completion  in the form
included in the  Registration  Statement  at the time of  effectiveness  of such
Registration   Statement  with  the   Commission,   together  with  the  related
preliminary  prospectus,  as these may be amended or  supplemented  from time to
time until the final  Prospectus  dated of even date  herewith is referred to in
this Underwriting  Agreement as the "Preliminary  Prospectus." All references in
this  Underwriting  Agreement  to  the  Registration  Statement,  the  Rule  462
Registration  Statement,  a  Preliminary  Prospectus or the  Prospectus,  or any
amendments  or  supplements  to any of the  foregoing,  shall  include  any copy
thereof filed with the  Commission  pursuant to its Electronic  Data  Gathering,
Analysis and Retrieval System ("EDGAR") and Commission Regulation S-T.

         2. Agreements to Sell and Purchase.  The Company hereby agrees to issue
and  sell the Firm  Shares  to the  Underwriter  and,  upon the  basis of and in
reliance on the Company's  representations,  warranties  and  agreements  herein
contained,  and subject to all the terms and  conditions  set forth herein,  the
Underwriter  agrees to purchase  from the Company at a purchase  price of $20.21
per Share (the  "Purchase  Price per Share") the number of Firm Shares set forth
herein.

         The Company hereby also agrees to sell to the Underwriter and, upon the
basis  of and in  reliance  on the  Company's  representations,  warranties  and
agreements  of the  Company  herein  contained  and subject to all the terms and
conditions set forth herein,  the  Underwriter  shall have the right for 30 days
from the date of the  Prospectus  to  purchase  from the  Company  up to 210,000
Additional  Shares at the Purchase Price per Share. The Additional Shares may be
purchased  solely for the purpose of covering  over-allotments,  if any, made in
connection  with the  offering  of the  Firm  Shares.  The  option  to  purchase
Additional  Shares may be exercised at any time within 30 days after the date of
the Prospectus, but no more than once.

         3. Terms of Public  Offering.  The Company has been advised by you that
you  propose  to  make a  public  offering  of the  Shares  as  soon  after  the
Registration  Statement and this Underwriting Agreement have become effective as
in your  judgment is advisable  and initially to offer the Shares upon the terms
set forth in the Prospectus.

         Not later than  12:00 P.M.  Eastern  time on the  second  business  day
following  the date the Shares are released by the  Underwriter  for sale to the


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<PAGE>

public,  the  Company  shall  deliver  or cause to be  delivered  copies  of the
Prospectus  in such  quantities  and at such  places  as the  Underwriter  shall
request.

         4.  Delivery  of the  Shares  and  Payment  Therefor.  Delivery  to the
Underwriter of the Firm Shares and payment therefor shall be made at the offices
of Morgan Keegan & Company,  One Buckhead Plaza, 3060 Peachtree Road, N.W. Suite
930, Atlanta,  Georgia at 10:00 AM., Atlanta, Georgia time, on October 31, 2005,
or such other place,  time and date not later than 10:00 AM.,  Atlanta,  Georgia
time,  on October 31, 2005,  as Morgan  Keegan shall  designate by notice to the
Company (the time and date of such closing are called the "Closing  Date").  The
place of  closing  for the Firm  Shares  and the  Closing  Date may be varied by
agreement between Morgan Keegan and the Company. The Company hereby acknowledges
that circumstances  under which Morgan Keegan may provide notice to postpone the
Closing  Date  as  originally   scheduled  include,   without  limitation,   any
determination  by the  Company  or Morgan  Keegan to  recirculate  to the public
copies of an amended or  supplemented  Prospectus or a delay as  contemplated by
the provisions of Section 11 hereof.

         Delivery to the  Underwriter of any  Additional  Shares and payment for
any Additional  Shares to be purchased by the  Underwriter  shall be made at the
offices of Morgan Keegan & Company,  One Buckhead  Plaza,  3060 Peachtree  Road,
N.W. Suite 930, Atlanta,  Georgia, at 10:00 AM., Atlanta,  Georgia time, on such
date or dates (each, an "Additional Closing Date") (which may be the same as the
Closing Date, but shall in no event be earlier than the Closing Date nor earlier
than  three nor later  than ten  business  days  after the  giving of the notice
hereinafter  referred to) as shall be specified in a written notice, from Morgan
Keegan to the Company of the  Underwriter's  determination to purchase a number,
specified in such notice, of Additional Shares.  Such notice may be given at any
time within 30 days after the date of the  Prospectus and must set forth (i) the
aggregate number of Additional  Shares as to which the Underwriter is exercising
the option and (ii) the names and  denominations  in which the  certificates for
which the Additional  Shares are to be registered.  The place of closing for the
Additional  Shares and the  Additional  Closing  Date may be varied by agreement
between Morgan Keegan and the Company.

         Certificates  for the Firm Shares and for any  Additional  Shares to be
purchased  hereunder shall be registered in such names and in such denominations
as you shall request prior to 1:00 P.M.,  Atlanta,  Georgia time, not later than
the second  full  business  day  preceding  the Closing  Date or the  Additional
Closing Date, as the case may be. Such  certificates  shall be made available to
you in Atlanta,  Georgia or such other location  designated by Morgan Keegan for
inspection and packaging not later than 9:30 AM., Atlanta,  Georgia time, on the
business day  immediately  preceding the Closing Date or the Additional  Closing
Date, as the case may be. The  certificates  evidencing  the Firm Shares and any
Additional  Shares to be  purchased  hereunder  shall be delivered to you by the
Company on the Closing Date or the Additional  Closing Date, as the case may be,
against  payment by the  Underwriter  of the  purchase  price  therefor  by wire
transfer of immediately  available funds to an account  specified by the Company
in writing not later than the close of business on the business day  immediately
preceding the Closing Date or the  Additional  Closing Date, as the case may be.
Payment for the Shares sold by the Company  hereunder  shall be delivered by the
Underwriter to the Company on the Closing Date and each Additional Closing Date.

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<PAGE>

         5. Covenants and Agreements of the Company.

         The Company covenants and agrees with the Underwriter as follows:

         (a)  The  Registration   Statement  has  been  declared   effective  by
Commission  order dated October 26, 2005.  The Company will use its best efforts
to cause the  Registration  Statement to be maintained  as  effective,  and will
advise you  promptly  and, if  requested  by you,  will  confirm  such advice in
writing (i) if and when the  Registration  Statement is no longer  effective and
the  time  and  date  of any  filing  of  any  post-effective  amendment  to the
Registration  Statement or any supplement to any  Preliminary  Prospectus or the
Prospectus  and the time  and date  that  any  post-effective  amendment  to the
Registration  Statement becomes effective,  (ii) if Rule 430A under the 1933 Act
is employed,  when the  Prospectus has been timely filed pursuant to Rule 424(b)
under the 1933 Act, (iii) of the receipt of any comments of the  Commission,  or
any request by the Commission for amendments or supplements to the  Registration
Statement,  any  Preliminary  Prospectus  or the  Prospectus  or for  additional
information, (iv) of the issuance by the Commission of any stop order suspending
the  effectiveness  of  the  Registration  Statement  or of  the  suspension  of
qualification  of the Shares for  offering  or sale in any  jurisdiction  or the
initiation of any proceeding for such purposes and (v) within the period of time
referred to in Section  5(e)  below,  of any change in the  Company's  condition
(financial or other), business,  prospects,  properties, net worth or results of
operations,  or of any event that comes to the  attention  of the  Company  that
makes  any  statement  made  in  the  Registration  Statement,  the  Preliminary
Prospectus or the  Prospectus  (as then amended or  supplemented)  untrue in any
material respect or that requires the making of any additions thereto or changes
therein in order to make the statements  therein (in the case of the Preliminary
Prospectus,  in light of the  circumstances  under  which  they  were  made) not
misleading in any material  respect,  or of the necessity to amend or supplement
the Prospectus (as then amended or  supplemented) to comply with the 1933 Act or
any other Law (as defined in Section 6(k) below).  If at any time the Commission
shall issue any stop order  suspending  the  effectiveness  of the  Registration
Statement,  the  Company  will  make  every  reasonable  effort  to  obtain  the
withdrawal or lifting of such order at the earliest  possible  time. The Company
will  provide the  Underwriter  with copies of the form of  Prospectus,  in such
number as the Underwriter may reasonably  request,  and file with the Commission
such  Prospectus in accordance with Rule 424(b) of the 1933 Act before the close
of business on the first business day immediately following the date hereof.

         (b) The  Company  will  furnish  to you,  without  charge,  two  signed
duplicate  originals of the Registration  Statement as originally filed with the
Commission and of each amendment thereto, including financial statements and all
exhibits thereto,  and will also furnish to you, without charge,  such number of
conformed copies of the  Registration  Statement as originally filed and of each
amendment thereto as you may reasonably request.

         (c) The Company  will not file any Rule 462  Registration  Statement or
any amendment to the Registration  Statement or make any amendment or supplement
to the Prospectus  unless (i) you shall have previously been advised thereof and
been  given a  reasonable  opportunity  to  review  such  filing,  amendment  or


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<PAGE>

supplement and (ii) you have not reasonably  objected to such filing,  amendment
or  supplement  after  being so  advised  and  having  been  given a  reasonable
opportunity to review such filing, amendment or supplement.

         (d) Prior to the execution and delivery of this Underwriting Agreement,
the  Company has  delivered  or will  deliver to you,  without  charge,  in such
quantities as you have requested or may hereafter reasonably request,  copies of
each form of the  Preliminary  Prospectus.  Consistent  with the  provisions  of
Section 5(e) hereof,  the Company  consents to the use, in  accordance  with the
provisions  of the  1933 Act and  with  the  securities  or Blue Sky laws of the
jurisdictions in which the Shares are offered by the Underwriter and by dealers,
prior to the date of the Prospectus, of each Preliminary Prospectus so furnished
by the Company.

         (e) As soon  after the  execution  and  delivery  of this  Underwriting
Agreement as is practicable  and thereafter from time to time for such period as
in the  reasonable  opinion of  counsel  for the  Underwriter  a  prospectus  is
required  by the  1933  Act to be  delivered  in  connection  with  sales by the
Underwriter or a dealer (the "Prospectus  Delivery  Period"),  and for so long a
period as you may request for the  distribution of the Shares,  the Company will
deliver to the  Underwriter and each dealer,  without charge,  as many copies of
the  Prospectus  (and of any  amendment  or  supplement  thereto)  as  they  may
reasonably  request.  The Company  consents to the use of the Prospectus (and of
any amendment or supplement  thereto) in accordance  with the  provisions of the
1933 Act and with the securities or Blue Sky laws of the  jurisdictions in which
the Shares are offered by the  Underwriter and by all dealers to whom Shares may
be sold,  both in  connection  with the  offering and sale of the Shares and for
such period of time  thereafter as the Prospectus is required by the 1933 Act to
be delivered in connection  with sales by any  Underwriter or dealer.  If at any
time prior to the later of (i) the completion of the  distribution of the Shares
pursuant to the offering contemplated by the Registration  Statement or (ii) the
expiration of prospectus delivery  requirements with respect to the Shares under
Section 4(3) of the 1933 Act and Rule 174 thereunder, any event shall occur that
in the judgment of the Company or in the opinion of counsel for the  Underwriter
is required to be set forth in the Prospectus (as then amended or  supplemented)
or should be set forth therein in order to make the statements  therein,  in the
light of the circumstances under which they were made, not misleading,  or if it
is necessary to supplement  or amend the  Prospectus to comply with the 1933 Act
or any other law, the Company will  forthwith  prepare and,  subject to Sections
5(a) and 5(c) hereof, file with the Commission and use its best efforts to cause
to become  effective  as  promptly  as possible  an  appropriate  supplement  or
amendment  thereto,  and will  furnish to the  Underwriter,  without  charge,  a
reasonable number of copies thereof.

         (f) The Company will cooperate with you and counsel for the Underwriter
in connection with the  registration or qualification of the Shares for offering
and sale by the Underwriter and by dealers under the securities or Blue Sky laws
of such  jurisdictions  as you may  reasonably  designate  and  will  file  such
consents to service of process or other documents as may be reasonably necessary
in order to effect and maintain such  registration or qualification  for so long
as required to complete  the  distribution  of the Shares;  provided  that in no
event  shall  the  Company  be  obligated  to  qualify  to do  business  in  any
jurisdiction  where it is not now so  qualified or to take any action that would
subject it to general service of process in suits,  other than those arising out


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<PAGE>

of the  offering or sale of the Shares,  as  contemplated  by this  Underwriting
Agreement  and  the  Prospectus,  in any  jurisdiction  where  it is not  now so
subject.  In the event that the  qualification of the Shares in any jurisdiction
is suspended,  the Company shall so advise you promptly in writing.  The Company
will use its best  efforts to qualify or register  its Common  Stock for sale in
non-issuer transactions under (or obtain exemptions from the application of) the
Blue Sky laws of each state where necessary to permit market making transactions
and secondary  trading and will comply with such Blue Sky laws and will continue
such qualifications,  registrations and exemptions in effect for a period of not
less than one year after the date hereof.

         (g) The Company will make generally available to its security holders a
consolidated  earnings  statement  (in form  complying  with the  provisions  of
Commission Rule 158), which need not be audited,  covering a twelve-month period
commencing after the effective date of the  Registration  Statement and the Rule
462  Registration  Statement,  if any,  and  ending  not  later  than 15  months
thereafter,  as  soon  as  practicable  after  the  end of  such  period,  which
consolidated  earnings  statement shall satisfy the provisions of Section 11 (a)
of the 1933 Act.

         (h) During  the  Prospectus  Delivery  Period and for not less than one
year after the date  hereof,  the Company  will file and  furnish all  documents
required to be filed or furnished with the  Commission  pursuant to Sections 13,
14 and 15 of the  Securities  Exchange Act of 1934,  as amended  (the  "Exchange
Act") and Commission  regulations and rules ("Commission  Regulations"),  in the
manner and within the time periods  required by the Exchange Act and  Commission
requirements of Nasdaq National Market  ("Nasdaq") and the National  Association
of Securities  Dealers,  Inc. (the "NASD") or any national  securities  exchange
where any Company securities are listed.

         (i) During  the period  beginning  on the date  hereof and ending  five
years  from the date  hereof,  the  Company  will  furnish to you (i) as soon as
available,  a copy of each proxy statement,  quarterly or annual report or other
report of the Company mailed to shareholders  or filed with the Commission,  the
NASD or Nasdaq or any  national  securities  exchange and (ii) from time to time
such other information concerning the Company as you may reasonably request.

         (j)  If  this  Underwriting  Agreement  shall  terminate  or  shall  be
terminated after execution  pursuant to any provision hereof (except pursuant to
a termination  under Section 11 hereof,  other than clauses (ii), (iv) or (vii))
or if this Underwriting Agreement shall be terminated by the Underwriter because
of any  inability,  failure or refusal on the part of the  Company to perform in
all material respects any agreement herein or to comply in all material respects
with  any of the  terms or  provisions  hereof  or to  fulfill  in all  material
respects  any of the  conditions  of this  Underwriting  Agreement,  the Company
agrees  to  reimburse  you  for all  out-of-pocket  expenses  (including  travel
expenses and the fees and expenses of counsel for the Underwriter, but excluding
wages  and  salaries  paid by you)  reasonably  incurred  by you III  connection
herewith.

         (k) The Company will apply the net proceeds from the sale of the Shares
to be sold by it  hereunder in  accordance  in all  material  respects  with the
statements under the caption "Use of Proceeds" in the Prospectus.

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<PAGE>

         (l) If Rule  430A  under the 1933 Act is  employed,  the  Company  will
timely file the Prospectus pursuant to Rule 424(b) under the 1933 Act.

         (m) For a period  of 90 days  after  the date of the  Prospectus  first
filed  pursuant to Rule 424(b) under the 1933 Act,  without  your prior  written
consent, the Company will not and will cause each of its subsidiaries to not (i)
directly or indirectly,  issue,  announce the intention to sell,  sell, offer or
contract to sell or otherwise  dispose of or transfer any shares of Common Stock
or securities  convertible  into or  exchangeable  or exercisable  for shares of
Common  Stock  (collectively,  "Company  Securities")  or any rights to purchase
Company Securities,  or file any registration  statement under the 1933 Act with
respect to any of the foregoing,  or (ii) enter into any swap, forward contract,
or other agreement that transfers,  in whole or in part, directly or indirectly,
the economic  consequences or risks of ownership of Company  Securities  whether
any such swap or  transaction  is to be settled by delivery  of Common  Stock or
other securities,  in cash or otherwise,  except to the Underwriter  pursuant to
this  Underwriting  Agreement and except for (x) sales of shares of Common Stock
to employees  under the Company's  Employee Stock Purchase Plan (as described in
the  Prospectus)  (y) grants of options  pursuant  to the  Company's  1999 Stock
Option Plan (as  described in the  Prospectus)  and (z) except for  issuances of
shares of Common Stock upon the exercise of options  outstanding  as of the date
hereof under the Company's 1999 Stock Option Plan.

         (n) Prior to the Closing Date or the  Additional  Closing  Date, as the
case may be, the Company will furnish to you, as promptly as possible, copies of
any unaudited interim  consolidated  financial statements of the Company and its
subsidiaries  for any period  subsequent to the periods covered by the financial
statements appearing in the Prospectus.

         (o) The Company  will comply with all  provisions  of the  undertakings
contained in the Registration Statement.

         (p) The Company will not at any time, directly or indirectly,  take any
action designed, or which might reasonably be expected to cause or result in, or
which will constitute,  stabilization or manipulation of the price of the shares
of Common Stock to facilitate the sale or resale of any of the Shares.

         (q) The Company filed with Nasdaq a notice of sale of additional shares
on  September  12,  2005,  and will timely file with  Nasdaq all  documents  and
notices  required by Nasdaq of companies that have or will issue securities that
are traded on Nasdaq.

         (r) The Company shall engage and maintain,  at its expense,  a transfer
agent and, if necessary under the jurisdiction of its incorporation or the rules
of any  national  securities  exchange  on which the Common  Stock is listed,  a
registrar  (which,  if  permitted by  applicable  laws and rules may be the same
entity as the transfer agent) for the Common Stock.

         (s) The Company  will have an annual  audit  prepared by an  accounting
firm that is registered and in good standing with the Public Company  Accounting
Oversight  Board  ("PCAOB") and is  "independent"  of the Company under the 1933
Act, the Exchange Act and the PCAOB's rules.

                                       7
<PAGE>

         6. Representations and Warranties of the Company.

         The  Company   hereby   represents,   warrants  and  covenants  to  the
Underwriter  on the date hereof,  and shall be deemed to represent,  warrant and
covenant to the Underwriter on the Closing Date and the Additional Closing Date,
as the case may be, and the Underwriter is relying upon, the following:

         (a) The Company  satisfies all of the  requirements of the 1933 Act for
use of Form S-l and for the  offering  of  Shares  contemplated  hereby.  On the
original effective date of the Registration  Statement, on the effective date of
the most recent  post-effective  amendment  thereto,  if any,  the  Registration
Statement  complied in all material  respects with the  requirements of the 1933
Act and all Commission Regulations, and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated  therein or
necessary  to make the  statements  therein  not  misleading.  Each  Preliminary
Prospectus  and  Prospectus  included as part of the  Registration  Statement as
originally  filed or as part of any  amendment or supplement  thereto,  or filed
pursuant  to Rule 424 under the 1933 Act,  complied or will comply when so filed
in all material  respects  with the  provisions  of the 1933 Act and  Commission
Regulations,  provided that this  representation  and warranty does not apply to
statements in or omissions  from such  Preliminary  Prospectus or Prospectus (or
any  amendment or  supplement  thereto)  made in reliance upon and in conformity
with information relating to the Underwriter furnished to the Company in writing
by or on  behalf of the  Underwriter  expressly  for use  therein,  which  shall
include  only the  information  contained in  "Underwriting  -  Commissions  and
Expenses", "Stabilization" and "- Passive Market Making" sections.

         (b) None of the Commission or any securities or Blue Sky authorities of
any state or other  jurisdiction  has issued any order  preventing or suspending
the  use  of the  Registration  Statement,  any  Preliminary  Prospectus  or the
Prospectus and no proceeding for that purpose has been  instituted or threatened
by the  Commission  or the  securities or Blue Sky  authorities  of any state or
other jurisdiction.

         (c) The Company has prepared each of the  Registration  Statement,  any
Rule 462 Registration  Statement and any post-effective  amendment thereto,  the
Preliminary  Prospectus  and the  Prospectus  and all  amendments or supplements
thereto.  The  Registration  Statement  (including  any  Rule  462  Registration
Statement), in the form in which it became effective and also in such form as it
may be in when any post-effective amendment thereto shall become effective, each
Preliminary  Prospectus  and the  Prospectus,  and any  supplement  or amendment
thereto  when  filed  with the  Commission  under  Rule 424  under the 1933 Act,
complied and will comply as to form in all material respects with the provisions
of the 1933 Act and all applicable  Commission  Regulations  and will not at any
such times  contain an untrue  statement  of a material  fact or omit to state a
material fact required to be stated  therein or necessary to make the statements
therein not misleading,  except that this  representation  and warranty does not
apply to  statements  in or  omissions  from the  Registration  Statement or the
Prospectus (or any amendment or supplement thereto) made in reliance upon and in
conformity with information relating to the Underwriter furnished to the Company
in writing by or on behalf of the  Underwriter  through  you  expressly  for use
therein.

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<PAGE>

         (d)  Each  Preliminary  Prospectus  and the  Prospectus,  if  filed  by
electronic  transmission  pursuant  to  EDGAR  (except  as may be  permitted  by
Regulation  S- T under  the 1933  Act),  was  identical  (other  than any  EDGAR
formatting)  to the  copy  thereof  delivered  to  the  Underwriter  for  use in
connection with the offer and sale of the Shares.

         (e) All of the  Company's  filings or reports  filed under the 1933 Act
and the Exchange Act, when they were filed (or, if any amendment with respect to
any such document was filed,  when such  amendment was filed),  conformed in all
material  respects with the requirements of the 1933 Act or the Exchange Act (as
applicable)  and all  applicable  Commission  Regulations,  and  any  additional
reports or filings,  when so filed,  will,  when they are filed,  conform in all
material  respects with the requirements of the 1933 Act or the Exchange Act (as
applicable) and all applicable Commission Regulations; no such additional filing
or report  when it was filed  (or,  if an  amendment  with  respect  to any such
document  was  filed,  when  such  amendment  was  filed),  contained  an untrue
statement of a material  fact or omitted to state a material fact required to be
stated  therein  or  necessary  in  order  to make the  statements  therein  not
misleading;  and no such further Incorporated  Document,  when it is filed, will
contain an untrue  statement of a material fact or will omit to state a material
fact required to be stated  therein or necessary in order to make the statements
therein not misleading.

         (f) The  capitalization  of the  Company is and will be as set forth in
the Prospectus as of the date set forth therein.  All the outstanding  shares of
Common  Stock of the  Company  have  been,  and as of the  Closing  Date and the
Additional  Closing  Date,  as the case may be,  will be,  duly  authorized  and
validly  issued,  fully paid and  nonassessable  and free of any  preemptive  or
similar  rights.  The  Shares to be issued  and sold to the  Underwriter  by the
Company  hereunder have been duly  authorized  and, when issued and delivered to
the  Underwriter  against full  payment  therefor in  accordance  with the terms
hereof  will be validly  issued,  fully paid and  nonassessable  and free of any
preemptive or similar rights.  The capital stock of the Company  conforms to the
description  thereof included in the  Registration  Statement and the Prospectus
(or any amendment or supplement  thereto).  The delivery of certificates for the
Shares being sold by the Company against payment therefor  pursuant to the terms
of this Underwriting Agreement will pass valid title to the Shares being sold by
the  Company,  free and clear of any Lien (as defined in Section  6(i) below) or
defect in title,  to the  Underwriter,  which is purchasing  such Shares in good
faith and without notice of any Lien or defect in title.  The  certificates  for
the Shares being sold by the Company are in valid and sufficient form.

         (g) The  Company  is a bank  holding  company  under  the Bank  Holding
Company Act of 1956,  as amended (the "BHC Act") and is duly  registered as such
with the  Board  of  Governors  of the  Federal  Reserve  System  (the  "Federal
Reserve").  The Company is also subject to  regulation  and  supervision  by the
South Carolina State Board of Financial  Institutions  (the "State Board").  The
Company is duly organized and validly existing as a corporation in good standing
under the laws of the State of South  Carolina  with  full  corporate  power and
authority to own,  lease and operate its  properties and to conduct its business
as presently  conducted and as described in the  Registration  Statement and the
Prospectus (and any amendment or supplement thereto), and is duly registered and
qualified to conduct its business and is in good  standing in each  jurisdiction
or place  where the nature of its  properties  or the  conduct  of its  business


                                       9
<PAGE>

requires  such  registration  or  qualification,  except where the failure to so
register or qualify has not had and will not have a material  adverse  effect on
the condition (financial or otherwise),  business,  management,  properties, net
worth,  results of operations  or prospects of the Company and its  subsidiaries
taken as a whole (a  "Material  Adverse  Effect").  The  subsidiaries  listed on
Schedule 1 to this Agreement are the Company's only subsidiaries.

         (h) Each of the Company's  subsidiaries is an entity duly organized and
validly  existing  and  in  good  standing  under  the  laws  of  its  state  of
organization  with full entity power and authority to own, lease and operate its
properties  and to conduct its business as presently  conducted and as described
in  the  Registration  Statement  and  the  Prospectus  (and  any  amendment  or
supplement  thereto),  and is duly  registered  and  qualified  to  conduct  its
business and is in good standing in each  jurisdiction or place where the nature
of its properties or the conduct of its business  requires such  registration or
qualification,  except  where the  failure to so register or qualify has not had
and will not have a Material Adverse Effect. The subsidiaries listed on Schedule
1 to this Agreement are the Company's only subsidiaries.

         (i) The issued shares of capital stock or other ownership  interests of
each of the Company's subsidiaries have been duly authorized and validly issued,
are fully  paid and  nonassessable  and are owned by the  Company,  directly  or
indirectly,  free and  clear of any  security  interests,  mortgage,  pledge  or
negative  pledge,  hypothecation,  lien,  encumbrances,  or adverse  equities or
claims ("Liens").  The Company does not have any subsidiaries and does not own a
material interest in or control, directly or indirectly,  any other corporation,
partnership,  joint venture, association,  trust or other business organization,
except as set forth in the Registration Statement and Schedule 1 hereto. As used
in this Underwriting  Agreement,  "subsidiaries" shall have the meaning provided
in Commission  Rule 405 under the 1933 Act, and includes all direct and indirect
subsidiaries of the Company.

         (j) There are no legal or  governmental  proceedings  before or brought
by, any governmental,  regulatory,  administrative or self-regulatory authority,
arbitral  body or  court  ("Governmental  Authority")  pending  or,  to the best
knowledge of the Company, threatened, against the Company or its subsidiaries or
to which the Company or its subsidiaries or any of their properties are subject,
that  are  required  to be  described  in  the  Registration  Statement  or  the
Prospectus (or any amendment or supplement thereto),  but that are not described
as required therein.  Except as described in the Prospectus,  there is no claim,
action, suit, proceeding,  inquiry (formal or informal),  or investigation by or
before any  Governmental  Authority  pending  or, to the best  knowledge  of the
Company, threatened, against or involving the Company or its subsidiaries or any
of their  properties,  which might  individually or in the aggregate  prevent or
adversely affect the transactions  contemplated by this Underwriting  Agreement,
or result in a Material Adverse Effect, nor to the Company's knowledge, is there
any  basis  for  any  such  claim,   action,   suit,   inquiry,   proceeding  or
investigation.  There are no  agreements,  contracts,  commitments,  indentures,
leases, or other documents or instruments (collectively,  "Agreements") that are
required to be described in the Registration Statement or the Prospectus (or any
amendment  or  supplement  thereto) or to be filed as an exhibit to or otherwise
included in the  Registration  Statement that are not described in or filed with
the  Registration  Statement and the  Prospectus as required by the 1933 Act and
the  Commission  Regulations.  All Agreements to which the Company or any of its
subsidiaries is a party have been duly authorized, executed and delivered by the


                                       10
<PAGE>

Company or the applicable subsidiary, constitute valid and binding agreements of
the Company or the applicable subsidiary and are enforceable against the Company
or the applicable  subsidiary in accordance  with the terms  thereof,  except as
enforceability  thereof  may be limited by (i) the  application  of  bankruptcy,
receivership,  conservatorship,  reorganization,  insolvency  and  similar  Laws
affecting  creditors'  rights  generally  and (ii)  equitable  principles  being
applied at the  discretion of a court before which any proceeding may be brought
(the "Bankruptcy and Equity Exception").  Neither the Company nor the applicable
subsidiary  has  received  notice or been made aware that any other  party is in
breach of or default to the Company under any Agreement.

         (k) Neither the Company nor any of its subsidiaries is (i) in violation
of (A)  its  articles  of  incorporation  or  bylaws,  or  other  organizational
documents  ("Organizational  Documents"),  (B) any  law,  ordinance,  rules  and
regulations of, agreements with, and commitments to, orders, rulings, directives
and decrees of, any Governmental Authority (collectively, "Laws"), applicable to
the  Company or any of its  subsidiaries,  the  violation  of which would have a
Material  Adverse  Effect;  or (ii) in  default in any  material  respect in the
performance of any obligation, agreement or condition contained in (A) any bond,
debenture,  lease,  note or any other evidence of  indebtedness or obligation or
(B) any Agreement  (each of (A) and (B), an "Existing  Instrument") to which the
Company  or any  of  its  subsidiaries  is a  party  or by  which  any of  their
properties  may be  subject  or bound,  which  default  has had or would  have a
Material Adverse Effect;  and no state of facts exists that constitutes an event
of default  on the part of the  Company  or any of its  subsidiaries,  or to the
Company's  knowledge,  an event of default by any other  party  thereto,  or any
event,  nonoccurrence,  act or  omission  that,  with notice or lapse of time or
both, would constitute an event of default under its  Organizational  Documents,
any applicable Laws or any Existing Instruments.

         (l) The Company's execution and delivery of this Underwriting Agreement
and the  performance by the Company of its obligations  under this  Underwriting
Agreement  have  been  duly and  validly  authorized  by the  Company,  and this
Underwriting Agreement has been duly executed and delivered by the Company. This
Underwriting  Agreement constitutes a valid and legally binding agreement of the
Company, enforceable against the Company in accordance with its terms, except to
the extent enforceability may be limited by the Bankruptcy and Equity Exceptions
and to  limitations on the rights to indemnity and  contribution  hereunder that
exist by virtue of public policy under federal and state securities laws.

         (m) None of the offer,  issuance and sale of the Shares by the Company,
the execution,  delivery or performance  of this  Underwriting  Agreement by the
Company nor the  consummation  by the Company of the  transactions  contemplated
hereby (i) requires any consent,  approval,  authorization  or other order of or
registration or filing with, any Governmental  Authority  (except such as may be
required for the  registration  of the Shares under the 1933 Act, the listing of
the Shares for trading on Nasdaq and compliance  with the securities or Blue Sky
laws of various  jurisdictions,  all of which have been or will be,  effected in
accordance  with  this  Underwriting  Agreement),  (ii)  conflicts  with or will
conflict with or constitutes or will constitute a breach of, or a default under,
applicable  Laws,  the  Company's   Organizational  Documents  or  any  Existing
Instrument  to which the  Company  or any of its  subsidiaries  is a party or by
which any of its  properties  may be subject or bound,  (iii)  violates  any Law
applicable to the Company or any of its subsidiaries or any of their properties,


                                       11
<PAGE>

or (iv) results in a breach of, default or Debt Repayment  Triggering  Event (as
defined below) under,  or results in the creation or imposition of any Lien upon
any property or assets of the Company or any of its subsidiaries pursuant to, or
requires the consent of any other party to, any Existing Instrument,  except for
such conflicts,  breaches,  defaults or Liens, that will not, individually or in
the aggregate, result in a Material Adverse Effect. A "Debt Repayment Triggering
Event" means any event or condition that gives,  or with the giving of notice or
the lapse of time or both would give, the holder of any note,  debenture,  lease
or other evidence of  indebtedness  or obligation,  whether secured or unsecured
(or any indenture  Trustee or other person  acting on such holder's  behalf) the
right to accelerate any payment or maturity of such  indebtedness or obligation,
to require the Company or any of its subsidiaries to repurchase, redeem or repay
all or a portion of such  indebtedness  or  obligation  or increase the interest
charges or fees on any such indebtedness or obligation.

         (n) Except as  described in the  Prospectus,  and except for options to
purchase  capital stock issued  pursuant to the Company's 1999 Stock Option Plan
(the "1999 Stock Option Plan") and/or the Company's Employee Stock Purchase Plan
(the "ESPP"),  neither the Company nor any of its  subsidiaries is a party to or
bound by, and at the Closing Date and the  Additional  Closing Date, as the case
may be, will not be a party to or bound by, any outstanding options,  restricted
stock grants,  restricted stock,  stock  appreciation  rights or other rights to
purchase or acquire,  or any warrants to  subscribe  for, or any  securities  or
obligations   convertible  into  or  exchangeable   for,  or  any  contracts  or
commitments to issue or sell, any shares of Common Stock or any such warrants or
convertible  securities or  obligations.  No holder of securities of the Company
has rights to the  registration  of any securities of the Company as a result of
or  in  connection  with  the  filing  of  the  Registration  Statement  or  the
consummation  of  the  transactions  contemplated  hereby  that  have  not  been
satisfied or heretofore waived in writing.

         (o) Elliott Davis, LLC, which is the independent public accounting firm
that is registered with the PCAOB and that has certified the Company's financial
statements  (including the related notes thereto, and the supporting  schedules,
if any) filed as part of the  Registration  Statement and the Prospectus (or any
amendment or supplement thereto),  are independent registered public accountants
as required by the 1933 Act, the Exchange Act,  Commission  Regulations  and the
PCAOB.

         (p) The consolidated  and parent-only  financial  statements,  together
with  related  schedules,  exhibits  and  notes,  included  in the  Registration
Statement and the Prospectus (and any amendment or supplement thereto),  present
fairly  the  consolidated  and  parent-only  financial  condition,   results  of
operations,  cash  flows  and  shareholders'  equity  of  the  Company  and  its
subsidiaries  on a consolidated  basis and of the Company on a parent only basis
at the respective dates or for the respective  periods to which they apply; such
statements  and  related  schedules,  exhibits  and notes have been  prepared in
accordance  with United States  generally  accepted  accounting  principles  and
Commission  Regulations  consistently  applied  throughout the periods involved,
except as may be expressly  disclosed  therein.  The financial  and  statistical
information and data set forth in the  Registration  Statement and Prospectus is
accurately  presented and is consistent  with such financial  statements and the
books and records of the Company.  No other  financial  statements,  exhibits or
schedules are required to be included in the Registration Statement.

                                       12
<PAGE>

         (q) The Company has a duly constituted  audit committee of its Board of
Directors  (the  "Audit  Committee"),  composed  entirely  of  members  who  are
"independent"  in accordance  with  applicable  Law,  including  Federal Deposit
Insurance Act ("FDIA"), Section 36 and applicable regulations thereunder and all
NASD and Nasdaq rules and regulations  (collectively,  "NASD Rules"). Such Audit
Committee has operated consistent in all material respects with the requirements
of the  Securities  Act,  the  Exchange  Act,  the BHC Act,  the FDIA and  other
applicable  state and federal  banking Laws,  and the NASD Rules.  The Company's
independent  accountants  have  reviewed  each  Interim  Financial  Statement in
accordance with the applicable  requirements of the Securities Act, the Exchange
Act,  the BHC  Act,  state  and  federal  banking  and  other  Laws,  the  Audit
Committee's charter, the Commission Regulations and the NASD Rules.

         (r) All the Company's  reports to the Federal Reserve,  including those
on  Federal   Reserve  Forms  FRY-6,   FRY-9  (and  their   respective   various
subdesignations)  and the various schedules and subreports  thereunder,  for the
last full five years and any interim periods (the "FRB Reports"), conform in all
material  respects to the Federal Reserve's  requirements for such reports,  and
all of the Subsidiaries' call reports ("Call Reports")  submitted to its primary
federal and state  regulators  conform in all  material  respects to the Federal
Financial  Institutions  Examination  Council's ("FFIEC")  requirements for Call
Reports,  and all such FRB Reports and Call  Reports  conform to the  applicable
requirements  of Section 37 of the FDIA and applicable  regulations  thereunder,
and are accurate and complete in all material respects and fairly present in all
material respects the reporting entity's  financial  condition,  earnings,  cash
flows (to the extent a  statement  of cash  flows is  included  pursuant  to the
requirements of such forms) and shareholders' equity as of the dates and for the
periods  shown  consistent  with  the  Financial  Statements  as of and  for the
corresponding dates and periods.

         (s)  Except  as  disclosed  in  the  Registration   Statement  and  the
Prospectus  (or  any  amendment  or  supplement  thereto),   subsequent  to  the
respective  dates as of which  such  information  is  given or  included  in the
Registration  Statement  or the  Prospectus  (or  any  amendment  or  supplement
thereto),  (i) neither the Company nor any of its  subsidiaries has incurred any
material liabilities or obligations,  indirect, direct or contingent, matured or
unmatured, or entered into any transaction that is not in the ordinary course of
business, (ii) neither the Company nor any of its subsidiaries has sustained any
material loss or interference  with its business or properties from fire, flood,
windstorm,  accident or other  calamity,  whether or not  covered by  insurance,
(iii) neither the Company nor any of its  subsidiaries  has paid or declared any
dividends  or other  distributions  with  respect to its  capital  stock and the
Company is not in default  under the terms of any class of capital  stock of the
Company or any outstanding debt obligations,  (iv) there has not been any change
in the  authorized or  outstanding  capital stock of the Company or any material
change in the  indebtedness  or obligations  of the Company or its  subsidiaries
(other than in the ordinary  course of business)  and (v) there has not been any
material adverse change, or any development  involving or that may reasonably be
expected to result in a Material Adverse Effect.

         (t) All offers and sales of the Company's  capital stock and other debt
or other  securities  prior to the date hereof were made in compliance  with the


                                       13
<PAGE>

registration requirements or were the subject of an available exemption from the
registration  under the 1933 Act and all  other  applicable  state  and  federal
securities or blue sky Laws, or any actions under the 1933 Act, the Exchange Act
or any state or  federa11aws  or  regulations  in respect of any such  offers or
sales are effectively barred by waivers or statutes of limitation.

         (u) The  Company's  Common Stock  (including  the Shares) is registered
pursuant  to  Section  12(g) of the  Exchange  Act and is listed  on the  Nasdaq
National  Market  under the symbol  "SOCB",  and the Company has taken no action
designed  to,  or  reasonably  likely to have the  effect  of,  terminating  the
registration of the Common Stock under the Exchange Act or the deli sting of, or
suspension or termination  from trading in, the Common Stock on Nasdaq,  nor has
the Company  received  any  notification  that the  Commission  or the Nasdaq is
contemplating terminating or suspending such registration, listing, or trading.

         (v) The Company has not distributed  and will not  distribute,  and has
not  authorized  the  Underwriter  to  distribute,   any  offering  material  in
connection  with the offering and sale of the Shares other than the  Preliminary
Prospectus,  the Prospectus or other offering material,  if any, as permitted by
the 1933 Act.

         (w) Other than activity  expressly  permitted  pursuant to Regulation M
under the Exchange Act, the Company has not taken and will not take, directly or
indirectly,  any action that  constituted,  or any action  designed  to, or that
might reasonably be expected to cause or result in or constitute, under the 1933
Act or otherwise,  stabilization or manipulation of the price of any security of
the  Company  to  facilitate  the sale or resale of the  Shares or for any other
purpose.  Except for grants of  securities  under the 1999 Stock Option Plan and
securities sold to employees under the ESPP,  which were duly registered or were
issued in transactions  exempt from registration under the 1933 Act, the Company
and its  subsidiaries  have not offered or sold any shares of Common Stock since
at least  April 6, 2005,  or any other  securities  other  than Trust  Preferred
Securities issued by Southcoast Capital Trust III on August 5, 2005.

         (x) The Company and each of its subsidiaries have filed all tax returns
required to be filed (other than certain state or local tax returns, as to which
the failure to file, individually or in the aggregate, would not have a Material
Adverse Effect), which returns are complete and correct, and neither the Company
nor any  subsidiary  is in default in the payment of any taxes that were payable
pursuant to said  returns or any  assessments  with respect  thereto.  Except as
disclosed  in the  Prospectus,  all  deficiencies  asserted  as a result  of any
federal,  state,  local or foreign tax audits have been paid or finally  settled
and no issue has been raised in any such audit that, by  application of the same
or similar  principles,  reasonably  could be  expected  to result in a proposed
deficiency  for any  other  period  not so  audited.  There  are no  outstanding
agreements or waivers extending the statutory period of limitation applicable to
any federal,  state,  local or foreign tax return for any period. On the Closing
Date and the Additional Closing Date, as the case may be, all stock transfer and
other  taxes that are  required  to be paid in  connection  with the sale of the
Shares to be sold by the Company to the Underwriter will have been fully paid by
the Company and all laws imposing such taxes will have been complied with by the
Company.

                                       14
<PAGE>

         (y) Except as set forth in the  Prospectus,  there are no  transactions
with  "affiliates" (as defined in Commission Rule 405 under the 1933 Act) or any
officer,  director  or  security  holder  of  the  Company  (whether  or  not an
affiliate) that are required by the 1933 Act or the Exchange Act to be disclosed
in  the  Registration  Statement.   Additionally,  no  relationship,  direct  or
indirect, exists between the Company or any of its subsidiaries on the one hand,
and the directors, officers, shareholders, customers or suppliers of the Company
or any  subsidiary  on the other  hand,  that is required by the 1933 Act or the
Exchange  Act to be disclosed in the  Registration  Statement or the  Prospectus
that is not so disclosed.

         (z)  The  Company  is not an  "investment  company"  or an  "affiliated
person" of, or "promoter" or "principal  underwriter" for, an investment company
within the  meaning  of the  Investment  Company  Act of 1940,  as amended  (the
"ICA").  The  Company is not  required,  and upon the  issuance  and sale of the
Shares as herein  contemplated  and the  application of the net proceeds of such
offering  and sale as  described  in the  Prospectus  will not be  required,  to
register as an "investment  company" nor will it be an entity "controlled" by an
"investment  company",  as such  terms  are  defined  in the ICA and  Commission
Regulations.

         (aa)  Neither  the  issuance,  sale and  delivery of the Shares nor the
application  of  the  proceeds  thereof  by  the  Company  as  described  in the
Registration   Statement  and  the  Prospectus   will  violate  Federal  Reserve
Regulations T, U or X.

         (bb)  Nothing has come to the  attention of the Company that has caused
the Company to believe that the statistical and market-related  data included in
the  Registration  Statement  and  Prospectus  is not based on or  derived  from
sources that are reliable and accurate in all material respects.

         (cc)  Except as  otherwise  disclosed  in the  Prospectus,  each of the
Company and its  subsidiaries  has good and valid title to all  property  (real,
personal and mixed)  described in the  Prospectus as being owned by it, free and
clear of all Liens except  those Liens that are not  materially  burdensome  and
that have not had and will not result in a Material Adverse Effect. All property
(real, personal and mixed) held under leases by the Company and its subsidiaries
is held under valid, subsisting and enforceable leases with only such exceptions
as in the  aggregate  are not  materially  burdensome  and have not and will not
result in a Material Adverse Effect.

         (dd)  Except as  otherwise  disclosed  in the  Prospectus,  each of the
Company and its  subsidiaries  has all permits,  licenses,  franchises,  orders,
approvals,  consents and  authorizations  of Governmental  Authorities  (each, a
"Permit") as are necessary to own its  properties and to conduct its business in
the manner described in the Prospectus, subject to such qualifications as may be
set forth in the Prospectus,  except where the failure to have obtained any such
Permit  has not had and will not have a  Material  Adverse  Effect.  Each of the
Company and its  subsidiaries  has  operated  and is  operating  its business in
material compliance with and not in material violation of all of its obligations
with respect to each such Permit and no event has occurred that allows, or after
notice or lapse of time or both  would  allow,  the  suspension,  revocation  or
termination of the Company and its subsidiaries  under any such Permit or result
in any other  material  impairment of the rights of any such Permit,  subject in
each case to such qualification as may be set forth expressly in the Prospectus;
and except as disclosed in the Prospectus,  such Permits contain no restrictions


                                       15
<PAGE>

that have been or will be  materially  burdensome  to the  Company or any of its
subsidiaries.

         (ee)  Except as  otherwise  disclosed  in the  Prospectus,  each of the
Company and its subsidiaries  conduct their respective business in compliance in
all material  respects  with all Laws  applicable  to them,  including,  without
limitation,  (i) all regulations and orders of, or agreements  with, the Federal
Reserve, the State Board and the Federal Deposit Insurance Corporation ("FDIC"),
and (ii) state and federal  Laws  governing  the offer and  extension of credit,
including,  without  limitation,  consumer  credit and usury laws,  the Truth in
Lending  Act,  the Equal  Credit  Opportunity  Act,  the Fair  Housing  Act, the
Community  Reinvestment Act, the Home Mortgage  Disclosure Act, the Bank Secrecy
Act and the USA PATRIOT Act; (iii) all applicable  Laws,  regulations and orders
related to the offer and sale of investments,  insurance, real estate and advice
related  thereto,  and (iv) none of the Company or any of its  subsidiaries  has
received any communication from any Governmental  Authority asserting that it is
not in compliance with any Law.

         (ff) None of the Company nor any of its  subsidiaries  is a party to or
subject to any order,  decree,  memorandum or understanding or similar agreement
with, or a commitment  letter,  supervisory letter or similar submission to, any
Governmental Authority charged with the supervision or regulation of the Company
or any of its subsidiaries or their respective activities, except as has not had
and will not have,  individually or in the aggregate, a Material Adverse Effect,
and  neither the Company  nor any of its  subsidiaries  has been  advised by any
Governmental Authority that such Governmental Authority is contemplating issuing
or requesting (or is considering the  appropriateness  of issuing or requesting)
any such order,  decree,  agreement,  memorandum  or  understanding,  commitment
letter,  supervisory  letter  or  similar  submission,   except  as  would  not,
individually or in the aggregate, have a Material Adverse Effect.

         (gg) The  Company  and its  subsidiaries  maintain a system of internal
accounting  controls  sufficient  to  provide  reasonable  assurances  that  (i)
transactions  are executed in accordance with  management's  general or specific
authorizations,   (ii)   transactions   are  recorded  as  necessary  to  permit
preparation  of financial  statements  in  conformity  with  generally  accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted  only in accordance  with  management's  general or specific
authorizations,  (iv) the recorded  accountability  for assets is compared  with
existing  assets at reasonable  intervals and  appropriate  action is taken with
respect to any differences,  and (v) the internal  accounting controls otherwise
comply with all  applicable  federal  and state  banking,  securities  and other
applicable  Laws,   including  the  Federal  Deposit   Insurance  Act  and  FDIC
regulations thereunder, the Foreign Corrupt Practices Act and the Sarbanes-Oxley
Act of 2002 and applicable Commission Regulations thereunder.

         (hh)  Neither  the  Company  nor any of its  subsidiaries,  nor, to the
Company's  knowledge,  any  employee  or  agent  of  the  Company  or any of its
subsidiaries, has, directly or indirectly, (i) made any unlawful contribution to
any candidate for political office, or failed to disclose fully any contribution
in  violation of law or (ii) made any payment to any  federal,  state,  local or
foreign  governmental  official,  or other person charged with similar public or


                                       16
<PAGE>

quasi-public  duties,  other than payments  required or permitted by the laws of
the  United  States  or  any   jurisdiction   thereof  or   applicable   foreign
jurisdictions.

         (ii) The Company and its  subsidiaries  are (i) in compliance  with any
and all  applicable  federal,  state,  local and  foreign  Laws  relating to the
protection  of human health and safety,  the  environment  or hazardous or toxic
substances or wastes,  pollutants or contaminants  ("Environmental  Laws"), (ii)
have received all Permits required of them under applicable  Environmental  Laws
to conduct their respective  businesses,  (iii) are in compliance with all terms
and conditions of any such Permit, and (iv) the Company reasonably has concluded
that it has no  liabilities  under such  Environmental  Laws  except  where such
noncompliance  with  Environmental  Laws such costs or potential  costs,  or the
failure to receive or to comply with the terms and  conditions  of any  required
Permits  have not had and will not have,  individually  or in the  aggregate,  a
Material  Adverse Effect.  Neither the Company nor any of its  subsidiaries  has
been  named  as  a  "potentially  responsible  party"  under  the  Comprehensive
Environmental  Response  Compensation  and  Liability  Act of 1980,  as amended.
Neither the Company nor any of its  subsidiaries  owns,  leases or occupies  any
property  that appears on any list of hazardous or superfund  sites  compiled by
any Governmental Authority.

         (jj) Each of the Company and its subsidiaries  owns and has full right,
title and  interest in and to, or has valid  licenses  to use,  each trade name,
trademark,  service mark, patent,  copyright,  approval,  trade secret and other
similar rights  (collectively  "Intellectual  Property") under which the Company
and its subsidiaries  conduct all or any material part of its business,  and the
Company has not created or suffered any Lien on, or granted any right or license
with respect to, any such Intellectual Property, except where the failure to own
or obtain a license or right to use any such  Intellectual  Property has not and
will not have a Material  Adverse Effect.  There is no claim pending against the
Company or its subsidiaries  with respect to any  Intellectual  Property and the
Company and its subsidiaries  have not received notice or otherwise become aware
that any  Intellectual  Property  that it uses or has used in the conduct of its
business infringes upon or conflicts with the rights of any third party. Neither
the  Company  nor any of its  subsidiaries  has become  aware that any  material
Intellectual  Property  that it uses or has used in the conduct of its  business
infringes upon or conflicts with the rights of any third party.

         (kk) The Company has procured and delivered Lock-Up Agreements,  in the
form  of  Exhibit  A  attached  hereto,  from  each of the  Company's  executive
officers,  directors  and  principal  shareholders  listed on Exhibit B attached
hereto.

         (ll) No  officer,  director  or nominee  for  director or 5% or greater
shareholder  known to the Company based upon a review of public  information  on
file with the Commission  (excluding Babson Capital Management,  LLC and Goldman
Sachs  Assets  Management,  L.P.)  of  the  Company  has a  direct  or  indirect
affiliation or association with any member of the NASD.

         (mm) The Company and each of its  subsidiaries  maintain  insurance  on
their  respective  properties and businesses,  including  business  interruption
insurance  with insurers of  recognized  financial  responsibility  against such
losses  and  risks and in such  amounts  as are  prudent  and  customary  in the
businesses in which it is engaged,  including  hurricane,  flood and other storm
damages and business interruption insurance;  and none of the Company nor any of
its  subsidiaries  has reason to  believe  that it will not be able to renew its


                                       17
<PAGE>

existing  insurance  coverage  as and when such  coverage  expires  or to obtain
similar  coverage  from  similar  insurers as may be  necessary  to continue its
business at a comparable cost.

         (nn) The Company and its subsidiaries  and any "employee  benefit plan"
(as defined  under the  Employee  Retirement  Income  Security  Act of 1974,  as
amended,   and  the   regulations  and  published   interpretations   thereunder
(collectively,   "ERISA"))   established  or  maintained  by  the  Company,  its
subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all  material  respects  with ERISA and all other  applicable  state and federal
laws. "ERISA Affiliate" means, with respect to the Company or a subsidiary,  any
member of any group or organization  described in Sections  4l4(b),  (c), (m) or
(0) of the Internal  Revenue Code of 1986,  as amended (the "Code") of which the
Company or such  subsidiary is a member.  No "reportable  event",  as defined in
ERISA,  has  occurred or is  reasonably  expected  to occur with  respect to any
employee benefit plan established or maintained by the Company, its subsidiaries
or any of their  ERISA  Affiliates.  No employee  benefit  plan  established  or
maintained by the Company, its subsidiaries or any of their ERISA Affiliates, if
such employee benefit plan were  terminated,  would have any "amount of unfunded
benefit   liabilities"  (as  defined  in  ERISA).   Neither  the  Company,   its
subsidiaries  nor any of their  ERISA  Affiliates  has  incurred  or  reasonably
expects  to incur any  liability  under (i) Title IV of ERISA  with  respect  to
termination of, or withdrawal  from, any employee  benefit plan or (ii) Sections
412, 4971, 4975 or 4980B of the Code. Each employee  benefit plan established or
maintained by the Company,  its  subsidiaries  or any of their ERISA  Affiliates
that  is  intended  to be  qualified  under  Section  401(a)  of the  Code is so
qualified  and nothing has  occurred,  whether by action or failure to act, that
would cause the loss of such qualification.

         (oo) No  forward-looking  statement (within the meaning of Section 27 A
of  the  1933  Act  and  Section  2IE  of  the  Exchange  Act)  included  in the
Registration  Statement or the Prospectus has been made or reaffirmed  without a
reasonable basis or has been disclosed other than in good faith.

         (pp) The Company and its subsidiaries  have complied and will comply in
all  material  respects  with  wage and hour  determinations  issued by the U.S.
Department  of Labor under the Service  Contract  Act of 1965 and the Fair Labor
Standards  Act in paying its  employees'  salaries,  fringe  benefits  and other
compensation  for the  performance  of work or other duties in  connection  with
contracts  with the U.S.  government,  and have  complied and will comply in all
material  respects with the requirements of the Americans with  Disabilities Act
of 1990,  the Family and Medical Leave Act of 1993, the Civil Rights Act of 1964
(Title  VII),  the  National  Labor  Relations  Act,  the Vietnam Era  Veteran's
Readjustment  Act, the Age  Discrimination  in Employment Act, as amended by the
Older Workers' Benefit Protection Act, and federal,  state and local labor laws,
each as amended  except  where the failure to comply with any such  requirements
has not,  and will not,  have a Material  Adverse  Effect.  No labor  dispute or
disturbance  with employees of the Company or any  subsidiary  exists or, to the
knowledge  of the Company,  is imminent,  contemplated  or  threatened,  and the
Company  is not aware of any  existing  or  imminent  labor  disturbance  by the
employees  of  any of its or  any  subsidiary's  principal  suppliers,  vendors,
customers or  contractors  which,  in either case, may reasonably be expected to
result in a Material Adverse Effect.

                                       18
<PAGE>

         (qq) The Company and its directors and officers (in their capacities as
such) are in compliance with the applicable provisions of the Sarbanes-Oxley Act
of 2002, the Commission Regulations thereunder, and the corporate governance and
other rules and  requirements of the NASD and Nasdaq and will comply timely with
any such provisions that will become effective in the future,  and have made all
required  affirmations and filings to each Governmental  Authority in connection
therewith.

         7. Expenses.  Whether or not the transactions  contemplated  hereby are
consummated or this  Underwriting  Agreement becomes effective or is terminated,
the  Company  agrees  to payor  cause to be paid the  following:  (i) the  fees,
disbursements   and  expenses  of  the  Company's  counsel  and  accountants  in
connection with the  registration of the Shares under the 1933 Act and all other
expenses  in  connection  with  the  preparation,  printing  and  filing  of the
Registration Statement and the Prospectus and amendments and supplements thereto
and  the  mailing  and  delivering  of  copies  thereof  and of any  Preliminary
Prospectus  to the  Underwriter  and  dealers;  (ii) the  printing  and delivery
(including postage,  air freight charges and charges for counting and packaging)
of such copies of the Registration Statement,  the Prospectus,  each Preliminary
Prospectus,  the  Blue  Sky  memoranda,  this  Underwriting  Agreement,  and all
amendments or supplements to any of them as may be reasonably  requested for use
in connection  with the offering and sale of the Shares;  (iii)  consistent with
the   provisions  of  Section  5(f),   all  expenses  in  connection   with  the
qualification of the Shares for offering and sale under state securities laws or
Blue Sky laws, but not including  attorneys' fees and out-of-pocket  expenses of
the counsel for the  Underwriter in connection  therewith;  (iv) the filing fees
incident  to securing  any  required  review by the NASD of the  fairness of the
terms of the sale of the  Shares;  (v) the fees  and  expenses  associated  with
including  the Shares for  trading on  Nasdaq;  (vi) the cost of  preparing  and
delivering  certificates  for the  Shares;  (vii) the costs and  charges  of any
transfer agent or registrar or book-entry depository; (viii) the cost of the tax
stamps,  if any, in  connection  with the issuance and delivery of the Shares to
the Underwriter;  (ix) all other fees, costs and expenses referred to in Item 13
of the Registration Statement; and (x) the transportation, lodging, graphics and
other expenses incidental to the Company's  preparation for and participation in
the "roadshow" for the offering  contemplated hereby. Except as provided in this
Section 7 and in Section 8 hereof,  the Underwriter  shall pay its own expenses,
including the fees and disbursements of their counsel. In addition, in the event
that the proposed  offering is  terminated  for the reasons set forth in Section
5(j) hereof,  the Company  agrees to reimburse  the  Underwriter  as provided in
Section 5(j).

         8. Indemnification and Contribution. Subject to the limitations in this
paragraph  below,  the  Company  agrees  to  indemnify  and  hold  harmless  the
Underwriter,  the directors,  officers, employees and agents of the Underwriter,
and each person,  if any, who  controls  the  Underwriter  within the meaning of
Section 15 of the 1933 Act or Section 20 of the  Exchange  Act from and  against
any and  all  losses,  claims,  damages,  liabilities  and  expenses,  including
reasonable   costs  of   investigation   and   attorneys'   fees  and   expenses
(collectively,  "Damages") arising out of or based upon (i) any untrue statement
or alleged  untrue  statement of a material  fact  contained in any  Preliminary
Prospectus  or in  the  Registration  Statement  or  the  Prospectus  or in  any
amendment or supplement  thereto,  or any omission or alleged  omission to state
therein a material fact  required to be stated  therein or necessary to make the
statements therein (in the case of the Prospectus, in light of the circumstances
under which they were made) not  misleading,  except to the extent that any such


                                       19
<PAGE>

Damages  arise  out of or are based  upon an untrue  statement  or  omission  or
alleged  untrue  statement  or  omission  that has been made  therein or omitted
therefrom in reliance upon and in conformity with the  information  furnished in
writing to the Company by or on behalf of the Underwriter,  expressly for use in
connection  therewith or (ii) any inaccuracy in or breach of the representations
and warranties of the Company  contained herein or any failure of the Company to
perform its obligations  hereunder or under law;  provided,  however,  that with
respect to any untrue statement or omission made in any Preliminary  Prospectus,
the  indemnity  agreement  contained  in this  paragraph  shall not inure to the
benefit of the  Underwriter  (or to the  benefit of any person  controlling  the
Underwriter or to any officer,  director,  employee or agent of the Underwriter)
from whom the person  asserting any such Damages  purchased the Shares concerned
if both (A) a copy of the  Prospectus was not sent or given to such person at or
prior to the written  confirmation  of the sale of such Shares to such person as
required  by the  1933  Act and (B) the  untrue  statement  or  omission  in the
Preliminary  Prospectus was corrected in the  Prospectus.  This  indemnification
shall be in addition to any liability that the Company may otherwise have.

         In addition to its other  obligations under this Section 8, the Company
agrees that,  as an interim  measure  during the pendency of any claim,  action,
investigation,  inquiry  or other  proceeding  arising  out of or based upon any
statement or omission,  or any inaccuracy in the  representations and warranties
of the Company herein or failure to perform its  obligations  hereunder,  all as
set forth in this Section 8, the Company will  reimburse  the  Underwriter  on a
monthly basis for all reasonable legal or other out-of-pocket  expenses incurred
in  connection  with   investigating  or  defending  any  such  claim,   action,
investigation,  inquiry  or  other  proceeding  (to  the  extent  documented  by
reasonably  itemized  invoices  therefor),  notwithstanding  the  absence  of  a
judicial  determination as to the propriety and enforceability of the obligation
of  the  Company  to  reimburse  the  Underwriter  for  such  expenses  and  the
possibility  that such  payments  might later be held to have been improper by a
court  of  competent   jurisdiction.   To  the  extent  that  any  such  interim
reimbursement  payment is so held to have been improper,  the Underwriter  shall
promptly return it to the Company. Any such interim reimbursement  payments that
are not made to the  Underwriter  within 30 days of a request for  reimbursement
shall bear interest  compounded  daily at a rate  determined on the basis of the
base lending rate  announced  from time to time by The Wall Street  Journal from
the date of such request.

         If any action or claim shall be brought  against the Underwriter or any
person  controlling  the Underwriter in respect of which indemnity may be sought
against the Company,  the Underwriter or such controlling  person shall promptly
notify the Company in writing and the Company shall assume the defense  thereof,
including the employment of counsel reasonably  acceptable to the Underwriter or
such  controlling  person and the payment of all reasonable fees of and expenses
incurred by such counsel.  The Underwriter or any such controlling  person shall
have the right to employ separate  counsel in any such action and participate in
the defense  thereof,  but the fees and expenses of such counsel shall be at the
expense of the Underwriter or such  controlling  person,  unless (i) the Company
has agreed in writing to pay such fees and expenses, (ii) the Company has failed
to  assume  the  defense  and  employ  counsel  reasonably   acceptable  to  the


                                       20
<PAGE>

Underwriter  or such  controlling  person or (iii) the named parties to any such
action  (including any impleaded  parties)  include both the Underwriter or such
controlling  person and the Company,  and the  Underwriter  or such  controlling
person shall have been  advised by its counsel  that one or more legal  defenses
may be available to the Underwriter that may not be available to the Company, or
that  representation  of such  indemnified  party  and the  Company  by the same
counsel  would be  inappropriate  under  applicable  standards  of  professional
conduct  (whether  or not  such  representation  by the  same  counsel  has been
proposed) due to actual or potential  differing interests between them (in which
case the  Company  shall not have the right to assume the defense of such action
on behalf of the Underwriter or such  controlling  person (but the Company shall
not be  liable  for the fees and  expenses  of more  than  one  counsel  for the
Underwriter and such controlling persons)).  The Company shall not be liable for
any settlement of any such action effected without its written  consent,  but if
settled  with such  written  consent,  or if there be a final  judgment  for the
plaintiff in any such action,  the Company agrees to indemnify and hold harmless
the  Underwriter  and any such  controlling  person  from and  against any loss,
claim,  damage,  liability or expense by reason of such  settlement or judgment,
but in the case of a judgment only to the extent  stated in the first  paragraph
of this Section 8.

         The Underwriter agrees to indemnify and hold harmless the Company,  its
directors,  its officers who sign the Registration  Statement and any person who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the Exchange Act, to the same extent as the foregoing  indemnity  from the
Company to the  Underwriter,  but only with respect to information  furnished in
writing by or on behalf of the Underwriter expressly for use in the Registration
Statement,  the Prospectus or any  Preliminary  Prospectus,  or any amendment or
supplement  thereto,   which  information  only  includes  the  "Underwriting  -
Commissions  and  Expenses",  "-  Stabilization"  and "- Passive  Market Making"
sections.  If any  action or claim  shall be  brought or  asserted  against  the
Company,  any of its  directors,  any of its  officers  or any such  controlling
person based on the  Registration  Statement,  the Prospectus or any Preliminary
Prospectus,  or any  amendment or  supplement  thereto,  and in respect of which
indemnity may be sought against the Underwriter pursuant to this paragraph,  the
Underwriter  shall  have the  rights  and  duties  given to the  Company  by the
immediately  preceding  paragraph (except that if the Company shall have assumed
the  defense  thereof  the  Underwriter  shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof,  but the
fees and expenses of such counsel shall be at the  Underwriter' s expense),  and
the Company, its directors,  any such officers and any such controlling persons,
shall have the rights and duties  given to the  Underwriter  by the  immediately
preceding paragraph.

         In any event,  the Company will not,  without the prior written consent
of the Underwriter, settle or compromise or consent to the entry of any judgment
in any proceeding or threatened claim,  action, suit or proceeding in respect of
which  the   indemnification  may  be  sought  hereunder  (whether  or  not  the
Underwriter  or any person who  controls the  Underwriter  within the meaning of
Section 15 of the 1933 Act or Section 20 of the  Exchange Act is a party to such
claim, action, suit or proceeding) unless such settlement, compromise or consent
includes  an  unconditional  release  of the  Underwriter  and such  controlling
persons  from  all  liability  arising  out  of  such  claim,  action,  suit  or
proceeding.

         If the indemnification provided for in this Section 8 is unavailable or
insufficient for any reason whatsoever to an indemnified party in respect of any
Damages referred to herein,  then an indemnifying party, in lieu of indemnifying
such indemnified  party,  shall contribute to the amount paid or payable by such
indemnified  party as a result  of such  Damages  (i) in such  proportion  as is


                                       21
<PAGE>

appropriate to reflect the relative  benefits received by the Company on the one
hand, and the  Underwriter on the other hand,  from the offering and sale of the
Shares or (ii) if the  allocation  provided by clause (i) above is not permitted
by applicable  law, in such proportion as is appropriate to reflect not only the
relative  benefits  referred  to in clause (i) above but also the  relative  and
several fault of the Company on the one hand,  and the  Underwriter on the other
hand,  in  connection  with the  statements  or omissions  that resulted in such
Damages as well as any other relevant equitable considerations. The relative and
several benefits received by the Company on the one hand, and the Underwriter on
the other hand,  shall be deemed to be in the same  proportion  as the total net
proceeds from the offering (before deducting  expenses)  received by the Company
bear  to the  total  underwriting  discounts  and  commissions  received  by the
Underwriter,  in each case as set  forth in the  table on the cover  page of the
Prospectus;  provided  that,  in the  event  that  the  Underwriter  shall  have
purchased any Additional  Shares  hereunder,  any  determination of the relative
benefits  received by the Company or the  Underwriter  from the  offering of the
Shares shall include the net proceeds (before  deducting  expenses)  received by
the Company  and the  underwriting  discounts  and  commissions  received by the
Underwriter,  from the sale of such Additional  Shares, in each case computed on
the basis of the  respective  amounts set forth in the notes to the table on the
cover page of the Prospectus. The relative fault of the Company on the one hand,
and the  Underwriter  on the other hand,  shall be  determined  by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the  omission or alleged  omission to state a material  fact  relates to
information  supplied by the Company on the one hand, or by the  Underwriter  on
the  other  hand  and  the  parties'  relative  intent,  knowledge,   access  to
information and opportunity to correct or prevent such statement or omission.

         The  Company  and the  Underwriter  agree that it would not be just and
equitable if  contribution  pursuant to this Section 8 was  determined  by a pro
rata  allocation  or by any other method of  allocation  that does not take into
account the equitable  considerations  referred to in the immediately  preceding
paragraph. The amount paid or payable by an indemnified party as a result of the
Damages  referred to in the immediately  preceding  paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other expenses
reasonably  incurred by such indemnified party in connection with  investigating
or defending any such action or claim.  Notwithstanding  the  provisions of this
Section 8, the  Underwriter  shall not be required to  contribute  any amount in
excess of the amount of the underwriting commissions received by the underwriter
in connection with the Shares  underwritten by it and distributed to the public.
No person guilty of fraudulent  misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.

         Notwithstanding the second paragraph of this Section 8, any Damages for
which an indemnified party is entitled to  indemnification or contribution under
this Section 8 shall be paid by the indemnifying  party to the indemnified party
as Damages are incurred after receipt of reasonably  itemized invoices therefor.
The  indemnity,  contribution  and  reimbursement  agreements  contained in this
Section 8 and the  representations  and  warranties  of the Company set forth in
this Underwriting Agreement shall remain operative and in full force and effect,


                                       22
<PAGE>

regardless of (i) any  investigation  made by or on behalf of the Underwriter or
any person controlling the Underwriter,  the Company,  its directors or officers
or any person controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder and (iii) any termination of this Underwriting  Agreement.  A
successor to the Underwriter or any person  controlling the  Underwriter,  or to
the Company,  its directors or officers or any person  controlling  the Company,
shall  be  entitled  to  the  benefits  of  the  indemnity,   contribution   and
reimbursement agreements contained in this Section 8.

         It is agreed that any  controversy  arising out of the operation of the
interim  reimbursement  arrangements  set forth in the second  paragraph of this
Section 8, including the amounts of any requested reimbursement payments and the
method of determining  such amounts,  shall be settled by arbitration  conducted
pursuant to the Code of Arbitration  Procedure of the NASD. Any such arbitration
must be  commenced  by service of a written  demand for  arbitration  or written
notice of intention to arbitrate,  therein electing the arbitration tribunal. In
the event the party demanding  arbitration  does not make such designation of an
arbitration tribunal in such demand or notice, then the party responding to said
demand or notice is authorized to do so. Such an arbitration would be limited to
the operation of the interim  reimbursement  provisions  contained in the second
and fourth  paragraphs  of this  Section 8, and would not resolve  the  ultimate
propriety or  enforceability  of the  obligation  to reimburse  expenses that is
created by the provisions of the second paragraph of this Section 8.

9. Conditions of Underwriter's  Obligations.  The obligations of the Underwriter
to purchase the Firm Shares hereunder are subject to the following conditions:

         (a) The  Registration  Statement shall have become  effective not later
than 12:00 noon,  New York City time, on the date hereof,  or at such later date
and time as shall be consented to in writing by the Underwriter, and all filings
required  by Rules 424,  430A and 462 under the 1933 Act shall have been  timely
made.

         (b) You shall be reasonably  satisfied that since the respective  dates
as of which  information is given in the Registration  Statement and Prospectus,
(i) there shall not have been any change in the capital  stock of the Company or
any material  change in the  indebtedness  (other than in the ordinary course of
business)  of the  Company,  (ii)  except  as set forth or  contemplated  by the
Registration Statement or the Prospectus,  no material oral or written agreement
or other  transaction shall have been entered into by the Company that is not in
the ordinary  course of business or that could  reasonably be expected to result
in a material reduction in the future earnings of the Company,  (iii) no loss or
damage  (whether or not insured) to the property of the Company  shall have been
sustained  that had or could  reasonably be expected to have a Material  Adverse
Effect, (iv) no legal or governmental  action, suit or proceeding  affecting the
Company or any of its properties that is material to the Company or that affects
or could reasonably be expected to affect the transactions  contemplated by this
Underwriting  Agreement  shall have been  instituted or threatened and (v) there
shall  not  have  been  any  material  change  in the  condition  (financial  or
otherwise),  business,  management,  results of  operations  or prospects of the
Company or its  subsidiaries  that makes it  impractical  or inadvisable in your
judgment  to  proceed  with the public  offering  or  purchase  of the Shares as
contemplated hereby.

                                       23
<PAGE>

         (c) You shall have  received  on the Closing  Date (and the  Additional
Closing Date, if any) an opinion of Haynsworth Sinkler Boyd, P A, counsel to the
Company, substantially to the effect that:

         (i) The Company is a bank holding  company duly registered as such with
the Federal  Reserve,  subject to regulation and supervision of the State Board,
and is a corporation  validly  existing in good  standing  under the laws of the
State of South Carolina, with full corporate power and authority and all federal
state and local Permits  necessary to own,  lease and operate its properties and
to conduct its  business as  described  in the  Registration  Statement  and the
Prospectus  (and any  amendment  or  supplement  thereto)  and to enter into and
perform its obligations under the Underwriting Agreement, and is duly registered
or otherwise  qualified to conduct its business as a foreign  corporation and is
in good  standing  in  each  jurisdiction  or  place  where  the  nature  of its
properties  or the  conduct  of  its  business  requires  such  registration  or
qualification,  except  where the failure to have such Permits or so register or
qualify  does not and will not have a Material  Adverse  Effect.  In the case of
local Permits, counsel may rely upon an officer's certificate of the Company and
shall  state  in the  opinion  that  nothing  to the  contrary  has  come to the
attention of such counsel.

         (ii) Each of the Company's  subsidiaries is an entity validly  existing
in good standing under the laws of the  jurisdiction of its  organization,  with
full  corporate  power and  authority  and all federal,  state and local Permits
necessary to own,  lease and operate its  properties and to conduct its business
as described in the Registration Statement and the Prospectus (and any amendment
or supplement thereto), and is duly registered or otherwise qualified to conduct
its  business  as a  foreign  corporation  and  is  in  good  standing  in  each
jurisdiction  or place where the nature of its  properties or the conduct of its
business requires such  registration or qualification,  except where the failure
to have such Permits or so register or qualify does not have a Material  Adverse
Effect.  In the case of  local  Permits,  counsel  may  rely  upon an  officer's
certificate  of the Company and shall state in the opinion  that  nothing to the
contrary  has come to the  attention  of such  counsel.  All of the  outstanding
shares of capital  stock (or other equity  securities)  of each of the Company's
subsidiaries  have been duly authorized and validly  issued,  and are fully paid
and nonassessable,  and are owned by the Company directly, or indirectly through
one of the other  subsidiaries,  free and clear of any Lien and,  to the best of
its knowledge, none of the outstanding shares of capital stock of any subsidiary
was  issued  in  violation  of  the   preemptive   or  similar   rights  of  any
securityholder of such subsidiary.

         (iii)  The  capitalization  of the  Company  conforms  in all  material
respects  to the  description  thereof  contained  in the  Prospectus  under the
caption  "Capitalization" and the Shares conform in all material respects to the
description of the Common Stock included in the Prospectus.  Except as disclosed
in the  Prospectus,  the  Company is not a party to or bound by any  outstanding
options, warrants or similar rights to subscribe for, or contractual obligations
to issue, sell,  exchange,  transfer or acquire, any of its capital stock or any
securities convertible into or exchangeable for any of such capital stock.

         (iv) All shares of capital  stock of the Company  outstanding  prior to
the issuance of the Shares to be issued and sold by the Company hereunder,  have
been duly authorized and validly issued,  are fully paid and  nonassessable  and
are free of any  preemptive  or similar  rights that entitle or will entitle any


                                       24
<PAGE>

person to acquire any Shares upon the issuance  thereof by the  Company,  and no
such rights will exist as of the Closing Date.

         (v) To such counsel's  knowledge after reasonable  inquiry,  all offers
and sales of the Company's  capital stock and other securities prior to the date
hereof have been made in compliance with the  registration  requirements or were
made pursuant to available  exemptions from registration  under the 1933 Act and
all  other  applicable  state  and  federal  securities  or  blue  sky  laws  or
regulations.

         (vi) To such counsel's knowledge after reasonable inquiry,  none of the
Company nor any of its  subsidiaries  is in violation of or default under,  it's
Organizational Documents or any Law, and is not in default in the performance of
any obligation,  agreement or condition  contained in any Existing Instrument or
any other  Agreement  or  obligation  of the Company  which are  material to the
Company  and  included  as exhibits  to the  Registration  Statement,  where the
default has caused or, with notice, the lapse of time or both, would result in a
default,  an event of  default  or Debt  Repayment  Triggering  Event  under any
Existing  Instrument,  Agreement or  obligation  disclosed  in the  Registration
Statement or the Prospectus, including the Exhibits.

         (vii) None of the offer,  sale,  issuance  or delivery of the Shares by
the  Company,  the  execution,  delivery or  performance  by the Company of this
Underwriting Agreement,  compliance by the Company with all provisions hereof or
consummation  by  the  Company  of  the  transactions  contemplated  hereby  (A)
conflicts or will conflict with or constitutes  or will  constitute a breach of,
or a default  under,  the  Company's  Organizational  Documents  or any material
Existing  Instrument  to which  the  Company  is a party or by which  any of its
properties  is bound which are  material to the Company and included as exhibits
to the  Registration  Statement or (B) creates or will result in the creation or
imposition  of any Lien  upon any  property  or  assets  of the  Company  or (C)
violates  or  will  result  in any  violation  of  any  existing  Law  (assuming
compliance  with all applicable  state  securities  and Blue Sky laws),  that is
known to such counsel and is applicable to the Company or any of its properties.
No holder of  securities  of the Company has rights to the  registration  of any
securities of the Company as a result of or in connection with the filing of the
Registration  Statement or the  consummation  of the  transactions  contemplated
hereby that have not been satisfied or waived in writing.

         (viii) Except as described in the Registration Statement or Prospectus,
there is no action,  claim,  suit,  inquiry,  proceeding or  investigation by or
before any Governmental  Authority  pending,  based upon a review of federal and
South  Carolina  court  records  in the  counties  where  the  Company  conducts
business, or, to the knowledge of such counsel, threatened, against or involving
the Company or its subsidiaries,  or the properties of the Company or any of its
subsidiaries:  (A) which  might  individually  or in the  aggregate  prevent  or
adversely affect the transactions contemplated by this Underwriting Agreement or
might  result in a  Material  Adverse  Effect,  nor,  to the  knowledge  of such
counsel,  is  there  any  basis  for any  such  action,  claim,  suit,  inquiry,
proceeding  or  investigation;  or (B) that are  required to be described in the
Registration Statement or Prospectus (or any amendment or supplement thereto) or
in any Company  filing or report filed or furnished  under the Exchange Act that
are not described as required therein.

                                       25
<PAGE>

         (ix) Such  counsel  has  reviewed  all  Existing  Instruments  or other
documents or instruments specifically included,  described or referred to in the
Registration  Statement and the  Prospectus,  and such Existing  Instruments  or
other  documents  or  instruments  are fairly  summarized  or  disclosed  in all
material respects therein,  and filed as exhibits thereto as required,  and such
counsel does not know of any Agreements, Existing Instruments or other documents
or instruments  required to be so summarized or disclosed or filed that have not
been so summarized, disclosed or filed.

         (x)  No  consent,  approval,   authorization  or  other  order  of,  or
registration or filing with, any Governmental  Authority is required on the part
of the Company  (except such as have been obtained under the 1933 Act or such as
may be required  under state  securities  or Blue Sky laws  governing the offer,
sale,  distribution  and issuance of the Shares) for the valid issuance and sale
of the Shares.

         (xi) The form of  certificate  used to evidence  the Common Stock is in
due and  proper  form and  complies  with  all  applicable  requirements  of the
Company's  Organizational  Documents and the South Carolina Business Corporation
Act of 1988.

         (xii) The  description of the Company's  stock option,  stock bonus and
other stock plans or  arrangements  and the options or other rights  granted and
exercised  thereunder included in the Prospectus  accurately and fairly presents
the information  required to be shown with respect to such plans,  arrangements,
options and rights;  all shares and interests offered  thereunder have been duly
registered  under the 1933 Act or were exempt from  registration  under the 1933
Act and all other applicable, securities or Blue Sky laws, and such Registration
Statements have been declared effective and remain effective;  and no stop order
suspending the effectiveness of the Registration Statement has been issued under
the 1933 Act and no  proceedings  for such purpose have been  instituted  or are
pending or are  contemplated or threatened by the Commission.  The Company's two
Employee Stock Purchase Plans are qualified under Section 423 of the Code.

         (xiii) The Company has all requisite  corporate  power and authority to
enter into this Underwriting Agreement and to offer, issue, sell and deliver the
Shares to be sold by it as provided herein. This Underwriting Agreement has been
duly authorized, executed and delivered by, and is a valid and binding agreement
of the Company,  enforceable  against the Company in accordance  with its terms,
subject  to the  Bankruptcy  and Equity  Exception,  to an  exception  as to the
enforceability  of any  waiver  of  trial  by  jury  and to the  limitations  on
indemnity and  contribution  that exist by virtue of public policy under federal
or state securities laws.

         (xiv)  The  Shares  to be  issued  and sold to the  Underwriter  by the
Company  hereunder have been duly  authorized  and, when issued and delivered to
the Underwriter  against  payment  therefor in accordance with the terms hereof,
(A) such Shares will be validly issued, fully paid and nonassessable and free of
any  preemptive  or similar  rights that  entitle or will  entitle any person to
acquire  any Shares  upon the  issuance  thereof by the Company and (B) good and


                                       26
<PAGE>

valid title to such Shares, free and clear of any Lien or defect in title of any
nature will pass to the Underwriter.

         (xv) The  Registration  Statement  has been  declared  effective by the
Commission  under the 1933 Act. To the best  knowledge of such counsel,  no stop
order suspending the effectiveness of the Registration Statement has been issued
under the 1933 Act and no proceedings  for such purpose have been  instituted or
are pending or are  contemplated or threatened by the  Commission.  Any required
filing of the Prospectus and any supplement  thereto  pursuant to Rule 424 under
the 1933 Act has been made in the manner and within the time period  required by
such Rule 424.

         (xvi) The Registration  Statement,  including any Rule 462 Registration
Statement, the Prospectus,  and each amendment or supplement to the Registration
Statement and the Prospectus,  as of their respective  effective,  filing (other
than the financial  statements and supporting  schedules included or in exhibits
to or excluded from the Registration  Statement,  as to which no opinion need be
given) comply as to form in all material  respects with the  requirements of the
1933 Act and Commission Regulations and the exhibits thereto are complete and in
compliance with the requirements of the 1933 Act and Commission Regulations.

         (xvii)  The  descriptions  included  in  the  Prospectus  of  statutes,
regulations  or legal or  governmental  proceedings,  insofar as they purport to
summarize  certain of the  provisions  thereof,  are  accurate  in all  material
respects and fairly present the information required to be presented by the 1933
Act and Commission Regulations.

         (xviii) The Company is not, and after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof,  as described in
the Prospectus,  will not be, an "investment  company" or an "affiliated person"
of, or "promoter" or "principal investor" for, an "investment  company," as such
terms  are  defined  in the ICA and  Commission  Regulations.

         (xix)  Notice of  issuance  of the  Shares has been duly  executed  and
delivered to Nasdaq, and all the Shares are tradeable.

         (xx) The  statements  (i) in the  Prospectus  under the captions  "Risk
Factors-Ricks  Relating to Our  Industry,"  "Risk Factors - Risk Relating to Our
Common Stock" risks 3 and 4,  "Description of Capital Stock,"  "Dividend Policy"
"Management's  Discussion  and Analysis  and Results of  Operations--Liquidity,"
"Business-Legal  Proceedings," "Certain Relationships and Related Transactions,"
"Underwriting",  "Supervision  and  Regulation" and (ii) in Item 13, Item 14 and
Item 15 of the  Registration  Statement,  insofar as such statements  constitute
matters  of  law,  summaries  of  legal  matters,   the  Company's  articles  of
incorporation  or bylaw  provisions,  documents or legal  proceedings,  or legal
conclusions,  have  been  reviewed  by  such  counsel  and  fairly  present  and
summarize, in all material respects, the matters referred to therein.

         (xxi) To such counsel's  knowledge,  neither the Company nor any of its
subsidiaries  is a  party  to  or  subject  to  any  order,  decree,  agreement,
memorandum of understanding or similar arrangement with, or a commitment letter,
supervisory letter or similar submission to, any Governmental  Authority charged


                                       27
<PAGE>

with the supervision or regulation of the Company or its subsidiaries or engaged
in  the  insurance  of  deposits,  and  neither  the  Company  nor  any  of  its
subsidiaries  has been  advised  by any such  Governmental  Authority  that such
Governmental Authority is contemplating issuing or requesting (or is considering
the appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding,  commitment  letter,  supervisory letter or similar
submission.

         (xxii) The Company's depository  institution  subsidiary is a member in
good standing of the Federal Deposit Insurance system.

         (xxiii) With respect to the Sarbanes-Oxley Act of2002:

         (A) The  Company  has  adopted a Code of Ethics and Code of Conduct for
senior financial officers meeting the requirements of Commission Rule 406 and an
audit committee charter meeting the requirements of Rule 4350( d) (1 )(C) of the
Nasdaq Marketplace Rules;

         (B) The Company's Board of Directors has determined  affirmatively that
a majority of its members and all of the members of its compensation, nominating
and audit committees are independent under applicable Nasdaq  Marketplace Rules,
and based  solely  on a review  of  written  representations  furnished  by such
directors,  to our  knowledge,  no  independent  director of the Company has any
relationship  prohibited  under Rule  4200(a)(15)(A)  through  (G) of the Nasdaq
Marketplace Rules and no audit committee member has any relationship  prohibited
under Rule 4350(d)(2)(a)(1) of the Nasdaq Marketplace Rules;

         (C)  The  Board  of  Directors  has  adopted  a  policy  regarding  the
nominations  process  pursuant to Rule 4350(b)( 4)(B) of the Nasdaq  Marketplace
Rules that  provides for the  nomination  of directors in  accordance  with such
rules; and

         (D)  The  certifications  pursuant  to  Section  302  and  906  of  the
Sarbanes-Oxley  Act of 2002  contained in the Company's  periodic  reports filed
with the  Commission  since August 14, 2002  complied as to form in all material
respects  with  the  requirements  of the  Sarbanes-Oxley  Act of  2002  and the
Commission regulations  promulgated  thereunder;  and that the Company has filed
the required Corporate  Governance  Certification Form with Nasdaq.  Counsel for
the  Company is not aware of any  pending or  threatened  actions by Nasdaq that
would affect the listing, trading or quotation of Company shares on Nasdaq.

         (xxiv)  All  shares  issued  to  officers,  directors,   employees  and
consultants  since the  listing  of the  Company's  Common  Stock on the  Nasdaq
National  Market,  other than pursuant to "public  offerings" as defined by NASD
Rule  IM-4350,  were issued in a transaction  that either had prior  shareholder
approval or did not require shareholder approval under NASD Rule 4350(i).

         (xxv) Neither the Company nor any of its subsidiaries has nor have they
permitted any person acting on its or their behalf to,  directly or  indirectly,
sell, offer for sale or solicit offers to buy or otherwise  negotiate in respect


                                       28
<PAGE>

of any security  (as defined in the 1933 Act) that would or could be  integrated
with the sale of the Shares.

         In rendering  such  opinion,  counsel may rely, to the extent they deem
such reliance proper, as to matters of fact upon certificates of officers of the
Company and of  government  officials,  provided  that counsel shall state their
belief that they and you are justified in relying  thereon,  and that nothing to
the  contrary  has  come  to  such  counsel's  attention.  Copies  of  all  such
certificates  shall be furnished to you and your counsel on the Closing Date and
the  Additional  Closing  Date, as the case may be. Such counsel may also assume
that,  to the extent that their  opinion would be based on the laws of the State
of Georgia,  the laws of the State of Georgia are the same as the State of South
Carolina.

         In addition to the opinion set forth above,  such  counsel  shall state
that  during  the  course  of  its  participation  in  the  preparation  of  the
Registration  Statement and the Prospectus and the amendments  thereto,  nothing
has come to the attention of such counsel that has caused it to believe or given
it reason to believe that the  Registration  Statement or the  Prospectus or any
amendment  thereto (except for the financial  statements and other financial and
accounting  information  contained  therein or omitted  therefrom as to which no
opinion need be expressed),  at the date thereof,  contained an untrue statement
of a material  fact or omitted to state a material  fact  required  to be stated
therein or necessary to make the  statements  therein not misleading or that the
Registration  Statement or the Prospectus as of the date of the opinion  (except
as aforesaid), includes an untrue statement of a material fact or omits to state
a  material  fact  necessary  to make the  statements  therein,  in light of the
circumstances under which they were made, not misleading.

         (d) You shall have received on the Closing Date or  Additional  Closing
Date,  as the case may be, an opinion of Alston & Bird LLP,  as counsel  for the
Underwriter,  dated the Closing Date or Additional Closing Date, as the case may
be,  with  respect to the  issuance  and sale of the  Shares,  the  Registration
Statement  and other  related  matters as you may  reasonably  request,  and the
Company and its counsel shall have  furnished to your counsel such  documents as
they may  reasonably  request for the purpose of enabling them to pass upon such
matters.

         (e) You shall have received letters addressed to you and dated the date
hereof the Closing Date and the  Additional  Closing  Date,  as the case may be,
from (i) the firm of Elliott Davis,  LLC, the Company's  independent  registered
public  accounting  firm and (ii) the Chief  Financial  Officer of the  Company,
substantially in the forms heretofore approved by you.

         (f) (i) No stop order suspending the  effectiveness of the Registration
Statement  shall have been issued by the Commission and no proceedings  for that
purpose  shall  be  pending  or,  to the  knowledge  of the  Company,  shall  be
threatened or  contemplated by the Commission at or prior to the Closing Date or
Additional  Closing  Date,  as the case may be;  (ii) no  order  suspending  the
effectiveness of the Registration Statement or the qualification or registration
of the Shares under the securities or Blue Sky laws of any jurisdiction shall be
in  effect  and no  proceeding  for such  purpose  shall be  pending  or, to the
knowledge of the Company,  threatened or  contemplated by the authorities of any
jurisdiction;  (iii) any request for  additional  information on the part of the


                                       29
<PAGE>

staff of the Commission or any such authorities shall have been complied with to
the satisfaction of the staff of the Commission or such authorities;  (iv) after
the date hereof, no amendment or supplement to the Registration Statement or the
Prospectus  shall have been filed unless a copy  thereof was first  submitted to
you  and  you  did  not  object  thereto  in  good  faith;  and  (v)  all of the
representations  and  warranties of the Company  contained in this  Underwriting
Agreement  shall be true and correct in all material  respects  (except for such
representations and warranties qualified by materiality,  which  representations
and warranties  shall be true and correct in all respects) on and as of the date
hereof and on and as of the Closing Date or Additional Closing Date, as the case
may be, as if made on and as of the Closing Date or Additional  Closing Date, as
the case may be, and you shall have  received a  certificate,  dated the Closing
Date and signed by the chief executive  officer and the chief financial  officer
of the Company (or such other  officers as are  acceptable to you) to the effect
set forth in this Section 9(g) and in Sections 9(b) and 9(i) hereof.

         (g) The  Company  shall not have failed in any  material  respect at or
prior to the Closing Date or the Additional Closing Date, as the case may be, to
have  performed or complied  with any of its  agreements  herein  contained  and
required to be  performed  or complied  with by it  hereunder at or prior to the
Closing Date or Additional Closing Date, as the case may be.

         (h) The Company shall have  furnished or caused to have been  furnished
to you such further  certificates  and  documents  as you shall have  reasonably
requested.

         (i) You shall have received the written Lock-Up Agreements  executed by
each of the persons named on Exhibit B hereto,  whereby such persons have agreed
not to directly or indirectly  (i) sell,  offer or contract to sell or otherwise
dispose of or transfer any Company  Common Stock,  whether now owned or acquired
after  the  date of the  Prospectus  or with  respect  to  which  the  power  of
disposition  is  acquired  after  the  date  of  the  Prospectus,  or  file  any
registration  statement under the 1933 Act with respect to the foregoing or (ii)
enter into any swap or other agreement or any other agreement that transfers, in
whole or in part, directly or indirectly, the economic consequences of ownership
of Company  Securities  whether any such swap or transaction is to be settled by
delivery of Company Securities, in cash or otherwise;  other than as provided in
such written  commitment before the expiration of 90 days from the Closing Date,
without the prior written consent of Morgan Keegan & Company.

         All such opinions, certificates, letters and other documents will be in
compliance with the provisions  hereof only if they are reasonably  satisfactory
in form and substance to you and your counsel.

         The  obligation  of  the  Underwriter  to  purchase  Additional  Shares
hereunder are subject to the  satisfaction  on and as of the Additional  Closing
Date of the  conditions  set  forth  in this  Section  9,  except  that,  if the
Additional  Closing  Date is other  than the  Closing  Date,  the  certificates,
opinions  and  letters  referred  to in this  Section 9 shall be dated as of the
Additional  Closing Date and the opinions  called for by paragraphs  (c) and (d)
shall be revised to reflect the sale of Additional Shares.

                                       30
<PAGE>

         If any of the  conditions  hereinabove  provided  for in this Section 9
shall  not  have  been  satisfied  when  and as  required  by this  Underwriting
Agreement, this Underwriting Agreement may be terminated by you by notifying the
Company  of such  termination  in  writing  or by  telegram  at or prior to such
Closing Date, but you shall be entitled to waive any of such conditions.

         10.  Effective Date of Agreement.  This  Underwriting  Agreement  shall
become  effective upon the later of (a) the execution and delivery hereof by the
parties  hereto and (b)  release of  notification  of the  effectiveness  of the
Registration Statement by the Commission; provided, however, that the provisions
of Sections 7 and 8 shall at all times be effective.

         11.  Termination of Agreement.  This  Underwriting  Agreement  shall be
subject to termination  in your absolute  discretion,  without  liability on the
part of the Underwriter to the Company by notice to the Company, if prior to the
Closing Date or the Additional  Closing Date (if different from the Closing Date
and then  only as to the  Additional  Shares),  as the case may be, in your sole
judgment, (i) trading in the Company's Common Stock shall have been suspended by
the  Commission or Nasdaq,  (ii) trading in securities  generally on the Nasdaq,
the New York Stock  Exchange,  the American  Stock  Exchange,  the Chicago Board
Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade,
shall have been  suspended or materially  limited,  or minimum or maximum prices
shall have been generally  established on such exchange,  or additional material
governmental  restrictions,  not in  force  on the  date  of  this  Underwriting
Agreement,  shall have been imposed upon trading in securities  generally by any
such exchange or market or by order of the Commission or any other  Governmental
Authority,  (iii) trading of any securities  issued by the Company or any of its
subsidiaries shall have been suspended;  (iv) a general moratorium on commercial
banking   activities  shall  have  been  declared  by  federal   authorities  or
authorities  in the  States  of  Georgia,  New York or South  Carolina;  (v) any
downgrading shall have occurred in the rating accorded the Company's  securities
or the  deposits  of  any  Company  subsidiary  by  any  "nationally  recognized
statistical rating  organization," as that term is defined by the Commission for
purposes of Rule 436(g)(2) under the 1933 Act; (vi) any such organization  shall
have publicly announced that it has under surveillance or review,  with possible
negative  implications,  its rating of any of the Company's or its subsidiaries'
deposits,  debt, preferred stock or trust preferred  securities;  or (vii) there
shall have occurred any outbreak or escalation of hostilities, any terrorist act
or other international or domestic disaster, calamity, crisis or other change in
political,  financial or economic  conditions or other material event the effect
of which on the financial markets of the United States is such as to make it, in
your judgment,  impracticable  or inadvisable to market the Shares or to enforce
contracts  for the sale of the  Shares.  Notice  of such  cancellation  shall be
promptly  given  to the  Company  and its  counsel  by  telegraph,  telecopy  or
telephone and shall be subsequently confirmed by letter.

         12. Information Furnished by the Underwriter.  The Company acknowledges
that "Underwriting - Commissions and Expenses", "- Stabilization" and "- Passive
Market Making" under the caption  "Underwriting" in any Preliminary  Prospectus,
constitute  the only  information  furnished by or on behalf of the  Underwriter
through  you or on your  behalf as such  information  is referred to in Sections
6(a) and 8 hereof.

                                       31
<PAGE>

         13.  Miscellaneous.  Except as otherwise  provided in Sections 5 and 12
hereof,  notice given  pursuant to any of the  provisions  of this  Underwriting
Agreement shall be in writing and shall be delivered:

                  (i)      To the Company

                           Southcoast Financial Corporation
                           530 Johnnie Dodds Boulevard
                           Mt. Pleasant, South Carolina 29464
                           Attention: L. Wayne Pearson
                           Fax: (843) 884-2886

                           with a copy to

                           Haynsworth Sinkler Boyd, P.A.
                           1201 Main Street, Suite 2200
                           Columbia, South Carolina 29201
                           Attention: George S. King, Jr.
                           Fax: (803) 765-1243

                  (ii)     To the Underwriter

                           Morgan Keegan & Company, Inc.
                           Morgan Keegan Tower,
                           50 North Front Street, 10th Floor
                           Memphis, Tennessee 38103
                           Attention: Susan Brown
                           Fax: (901) 579-4388

                           with a copy to

                           Alston & Bird LLP
                           1201 West Peachtree Street
                           Atlanta, Georgia 30309
                           Attention: Ralph F. MacDonald, III
                           Fax: (404) 881-7777

         This Underwriting Agreement has been and is made solely for the benefit
of the  Underwriter,  the Company and their respective  directors,  officers and
controlling  persons, and shall be binding upon and inure to the benefit of such
persons  and  their   respective   successors,   assigns  and   personal   legal
representatives.  Nothing in this Underwriting Agreement is intended to or shall
be construed to grant any other  person any legal or equitable  right,  claim or
remedy  under or in respect of this  Underwriting  Agreement  or any  provisions
hereof.  No purchaser of Shares from any Underwriter shall be a successor of the
Underwriter solely by virtue of such purchase.

                                       32
<PAGE>

         14. Miscellaneous. This Underwriting Agreement shall be governed by and
construed in accordance with the laws of the State of Georgia without  reference
to choice of law principles thereunder.

         This  Underwriting   Agreement  may  be  signed  in  various  identical
counterparts,  each of which  shall be an  original,  and all of which  together
shall  constitute one and the same  instrument and a signature sent by facsimile
shall have the same force and effect as a manually signed original signature.

         This Underwriting  Agreement shall be effective when, but only when, at
least one counterpart  hereof shall have been executed and delivered by courier,
facsimile,  United States mail or overnight  delivery  service on behalf of each
party hereto to the other party hereto.

         The Company and the Underwriter each hereby irrevocably waive any right
they may have to a trial by jury in respect  to any claim  based upon or arising
out of this Underwriting Agreement or the transactions contemplated hereby.

         As used herein,  the singular  shall include the plural and vice versa,
and a reference to any gender shall include all genders. The terms "include" and
"including"  and  similar  terms  shall  mean  without  limitation  by reason of
enumeration or otherwise.



                                       33
<PAGE>


         Please  confirm that the foregoing  correctly  sets forth the agreement
between the Company and the Underwriter.

                                Very truly yours,

                                SOUTHCOAST FINANCIAL CORPORATION


                                ------------------------------------------------
                                President and Chief Executive Officer



CONFIRMED AND ACCEPTED as of the date first above written:

MORGAN KEEGAN & COMPANY, INC.



By:
   --------------------------------------------------
         Authorized Signatory



                                       34
<PAGE>


                                    EXHIBIT A
                            Form of Lock-Up Agreement



_______ ____ ,2005



SOUTHCOAST FINANCIAL CORPORATION
530 Johnnie Dodds Boulevard
Mt. Pleasant, South Carolina 29464


MORGAN KEEGAN & COMPANY, INC.
One Buckhead Plaza
3060 Peachtree Road, N.W. Suite 930
Atlanta, GA 33716

         Re:      Southcoast Financial Corporation (the "Company") - Restriction
                  on Stock Sales

Dear Sirs:

         This letter is delivered to you pursuant to the Underwriting  Agreement
(the "Underwriting Agreement") to be entered into by the Company, as issuer, and
Morgan Keegan & Company, Inc. (the "Underwriter"). Upon the terms and subject to
the conditions of the Underwriting Agreement,  the Underwriter intends to effect
a public  offering (the  "Offering") of Common Stock, no par value per share, of
the Company (the "Shares"), as described in and contemplated by the registration
statement of the Company on Form S-l,  File No.  333-______  (the  "Registration
Statement"),  as filed with the Securities and Exchange  Commission on ________,
2005.  Capitalized  terms used but not defined  herein  shall have the  meanings
provided in the Underwriting Agreement.

         The undersigned  recognizes that it is in the best financial  interests
of the undersigned, as an officer or director, or as an owner of stock, options,
warrants or other securities of the Company (the "Company Securities"), that the
Company completes the proposed Offering.

         The undersigned  further recognizes that the Company Securities held by
the   undersigned   are,  or  may  be,  subject  to  certain   restrictions   on
transferability,  including  those imposed by United States  federal  securities
laws.  Notwithstanding  these restrictions,  the undersigned has agreed to enter
into this letter  agreement to further assure the  Underwriter  that the Company
Securities of the undersigned,  now held or hereafter  acquired,  will not enter
the  public  market  at a  time  that  might  impair  or  adversely  affect  the
underwriting effort.

         Therefore,   as  an  inducement  to,  and  in  consideration   of,  the
Underwriter's  agreement to purchase and to make the Offering of the Shares, and
other good and valuable  consideration  the receipt and  sufficiency of which is


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acknowledged, the undersigned, intending to be legally bound, hereby agrees that
the  undersigned  will not,  for the period  commencing  on the date  hereof and
ending  90 days  after  the date of the  Company's  Prospectus  relating  to the
Offering (the  "Lock-Up  Period"),  without the prior written  consent of Morgan
Keegan &  Company,  Inc.,  (i)  offer,  sell,  contract  to sell,  announce  the
intention  to sell,  pledge,  grant or sell any option or contract to  purchase,
purchase any option or contract to sell,  grant any option,  right or warrant to
purchase  or  otherwise   transfer  or  dispose  of,   directly  or  indirectly,
(collectively,  a  "Disposition")  any  Company  Securities,  or any  securities
convertible  into or exercisable or exchangeable  for, or any rights to purchase
or otherwise acquire, any Company Securities held by the undersigned or acquired
by  the  undersigned  after  the  date  hereof,  or  that  may be  deemed  to be
beneficially  owned by the  undersigned  (collectively,  the "Lock-Up  Shares"),
pursuant to the Rules and  Regulations  promulgated  under the Securities Act of
1933, as amended (the "1933 Act"),  and the Securities  Exchange Act of 1934, as
amended (the "Exchange  Act") or any  Commission  Regulations or (ii) enter into
any swap or other  agreement  that  transfers,  in whole or in part,  any of the
economic   consequences   of  ownership  of  the  Lock-Up  Shares  held  by  the
undersigned,  whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Company Securities or such other securities,  in
cash or otherwise.  In addition,  the undersigned agrees that, without the prior
written  consent  of Morgan  Keegan &  Company,  Inc.,  it will not,  during the
Lock-Up  Period,  exercise or seek to exercise or  effectuate  in any manner any
rights of any nature that the  undersigned  has or may have hereafter to require
the Company to register under the Act the undersigned's  sale, transfer or other
disposition of any of the Lock-Up Shares or other securities of the Company held
by the undersigned,  or to otherwise participate as a selling  securityholder in
any manner in any registration effected by the Company under the Act, including,
without limitation, under the Registration Statement. The foregoing restrictions
are expressly  agreed to preclude the undersigned  from engaging in any hedging,
collar (whether or not for any consideration), swap or other transaction that is
designed to or reasonably expected to lead or result in a Disposition of Lock-Up
Shares during the Lock-Up Period,  even if such Lock-Up Shares would be disposed
of by  someone  other  than  such  holder.  Such  prohibited  hedging  or  other
transactions include any short sale or any purchase,  sale or grant of any right
(including  any put or call  option or reversal or  cancellation  thereof)  with
respect to any  Lock-Up  Shares or with  respect to any  security  (other than a
broad-based  market  basket or index) that  includes,  relates to or derives any
significant part of its value from Lock-Up Shares.

         Notwithstanding  the agreement not to make any  Disposition  during the
Lock-Up Period, you have agreed that the foregoing  restrictions shall not apply
to:

         (1)      the  Company   Securities  being  offered  in  the  Prospectus
                  included in the Registration Statement;

         (2)      any grant or  exercise of options  pursuant  to the  Company's
                  1999 Stock Option Plan and the purchase of shares  pursuant to
                  the Company's ESPP;

         (3)      transfers of Company Securities as bona fide charitable gifts;
                  and

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         (4)      transfers of Company  Securities for estate planning purposes,
                  including to a family limited  partnership or to a trust,  for
                  the  direct or  indirect  benefit  of the  undersigned  or the
                  undersigned's immediate family.

For  purposes  of this  letter  agreement,  "immediate  family"  shall  mean any
relationship  by blood,  marriage or adoption,  not more than first  cousin.  It
shall be a condition to any transfer  permitted by (3) and (4) of this paragraph
that (a) each transferee  execute a letter  agreement in the form of this letter
agreement and (b) any such transfer shall not involve a disposition for value.

         It is understood  that, if the  Underwriting  Agreement (other than the
provisions  thereof that survive  termination)  shall terminate or be terminated
prior  to  payment  for  and  delivery  of the  Shares,  you  will  release  the
undersigned from the obligations under this letter agreement.

         In furtherance of the foregoing, the Company and its transfer agent and
registrar  are hereby  authorized  to decline  to make any  transfer  of Lock-Up
Shares if such transfer  would  constitute a violation or breach of this letter.
This letter  agreement  shall be binding on the  undersigned  and the respective
successors,  heirs, legatees,  personal and legal representatives and assigns of
the  undersigned.  Capitalized  terms  used  but not  defined  herein  have  the
respective meanings assigned to such terms in the Underwriting Agreement.

                                        Very truly yours,



                                        Signature of Securityholder





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