**Exhibit 10.7****EMPLOYMENT AGREEMENT**     **THIS AGREEMENT**is amended as of December 1, 2007 by and between **GATEWAY BANK & TRUST CO.,**aNorth Carolina banking corporation (hereinafter referred to as the “Bank”) and **THEODORE L. SALTER**,an individual resident of Virginia (hereinafter referred to as the “Officer”).     For and in consideration of their mutual promises, covenants and conditions hereinafter setforth, and other good and valuable consideration, the receipt and sufficiency of which hereby isacknowledged, the parties agree as follows:     1. **Employment**. The Bank agrees to employ the Officer and the Officer agrees to acceptemployment upon the terms and conditions stated herein as the Chief Financial Officer of the Bank.The Officer shall render such administrative and management services to the Bank as are customarilyperformed by persons situated in a similar executive capacity. The Officer shall promote thebusiness of the Bank and perform such other duties as shall, from time to time, be reasonablyassigned by the Chief Executive Officer of the Bank. Upon the request of the Chief ExecutiveOfficer, the Officer shall disclose all business activities or commercial pursuits in which Officeris engaged, other than Bank duties.     2. **Compensation**. The Bank shall pay the Officer during the term of this Agreement, ascompensation for all services rendered by the Officer to the Bank, a base salary at the rate of$215,000 per annum, payable in cash not less frequently than monthly. The rate of such salaryshall be reviewed by the Compensation Committee of the Board of Directors of the Bank (the“Committee”) not less often than annually and the Committee may increase, but shall not decrease,such rate during the term of this Agreement. Such rate of salary, or increased rate of salary, asthe case may be, may be further increased from time to time in such amounts as the Committee, inits discretion, may decide. In determining salary increases, the Committee shall compensate theOfficer for increases in the cost of living and may also provide for performance or meritincreases. Participation in the Bank’s incentive compensation, deferred compensation,discretionary bonus, profit-sharing, retirement and other employee benefit plans and participationin any fringe benefits shall not reduce the salary payable to the Officer under this Paragraph. Inthe event of a Change in Control (as defined in Paragraph 10), the Officer’s rate of salary shallbe increased not less than five percent annually during the term of this Agreement. Any paymentsmade under this Agreement shall be subject to such deductions as are required by law or regulationor as may be agreed to by the Bank and the Officer.     3. **Discretionary Bonuses**. During the term of this Agreement, the Officer shall beentitled to such discretionary bonuses as may be authorized, declared and paid by the Committee tothe Bank’s key management employees. No other compensation provided for in this Agreement shall bedeemed a substitute for the Officer’s right to such discretionary bonuses when and as declared bythe Committee.     4. **Participation in Retirement and Employee Benefit Plans; Fringe Benefits****.**     (a) The Bank shall provide family medical coverage and disability insurance for the Officerand the Officer shall also be entitled to participate in any plan relating to deferredcompensation, stock options, stock purchases, pension, thrift, profit sharing, group lifeinsurance, education, or other retirement or employee benefits that the Bank has adopted, or may,from time to time adopt, for the benefit of its executive employees or for employees generally,subject to the eligibility rules of such plans.     (b) The Officer shall also be entitled to participate in any other fringe benefits which arenow or may be or become applicable to the Bank’s executive employees, including the payment ofreasonable
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expenses for attending annual and periodic meetings of trade associations, and any otherbenefits whichare commensurate with the duties and responsibilities to be performed by the Officer underthis Agreement. Additionally, the Officer shall be entitled to such vacation and sick leave asshall be established under uniform employee policies promulgated by the Bank. The Bank shallreimburse the Officer for all out-of-pocket reasonable and necessary business expenses which theOfficer may incur in connection with the Officer’s services on behalf of the Bank.     (c) The Bank shall pay the dues of the Officer for membership in the Kingsmill Country Cluband one additional country club in the market area of the Bank at the Officer’s election and duesfor membership in civic clubs. The Bank shall also provide the Officer with the use of a latemodel automobile suitable to the status of the Officer of a type and for lease terms to be approvedby the Committee and with the use of a cellphone.     5. **Term**. The initial term of employment under this Agreement shall be for the periodcommencing upon April 17, 2006 and ending three calendar years from that date. On each anniversaryof the effective date of this Agreement, the term of this Agreement shall automatically be extendedfor an additional one-year period beyond the then effective expiration date unless written noticefrom the Bank or the Officer is received 90 days prior to an anniversary date advising the otherthat this Agreement shall not be further extended; provided that the Committee shall review theOfficer’s performance annually and make a specific determination pursuant to such review to renewthis Agreement prior to the 90 days’ notice.     6. **Loyalty; Noncompetition; Confidentiality****.**     (a) The Officer shall devote his full efforts and entire business time to the performance ofthe Officer’s duties and responsibilities under this Agreement.     (b) During the term of this Agreement, or any renewals thereof, and for a period of one yearafter termination, the Officer agrees he will not, within the “Restricted Area,” directly orindirectly, engage in any business that competes with the Bank or any of its subsidiaries withoutthe prior written consent of the Bank; provided, however, that the provisions of this Paragraphshall not apply in the event the Officer’s employment is unilaterally terminated by the Bank forCause, (as such term is defined in Paragraph 8(c) hereof) or in the event the Officer terminateshis employment with the Bank after the occurrence of a “Termination Event” (as such term is definedin Paragraph 10(b) hereof) following a “Change of Control” (as such term is defined in Paragraph10(d) hereof). The Restricted Area covers the following divisible list of territories: Camden,Chowan, Currituck, Dare, Pasquotank, and Perquimans Counties, North Carolina and Chesapeake andVirginia Beach, Virginia, and within 15 miles of any Bank office operated during the term of thisAgreement. The one-year restricted period, however, does not include any period of violation orperiod of time required for litigation to enforce the Officer’s agreement not to compete againstthe Bank. Notwithstanding the foregoing, the Officer shall be free, without such consent, topurchase or hold as an investment or otherwise, up to five percent of the outstanding stock orother security of any corporation which has its securities publicly traded on any recognizedsecurities exchange or in any over-the counter market.     (c) The Officer agrees he will hold in confidence all knowledge or information of aconfidential nature with respect to the business of the Bank or any subsidiary received by theOfficer during the term of this Agreement and will not disclose or make use of such informationwithout the prior written consent of the Bank. The Officer agrees that he will be liable to theBank for any damages caused by unauthorized disclosure of such information. Upon termination ofhis employment, the Officer agrees to return all records or copies thereof of the Bank or anysubsidiary in his possession or under his control which relate to the activities of the Bank or anysubsidiary.
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     (d) The Officer acknowledges that it would not be possible to ascertain the amount of monetarydamages in the event of a breach by the Officer under the provisions of this Paragraph 6. TheOfficer agrees that, in the event of a breach of this Paragraph 6, injunctive relief enforcing theterms ofthis Paragraph 6 is an appropriate remedy. If the scope of any restriction contained in thisParagraph 6 is determined to be too broad by any court of competent jurisdiction, then suchrestriction shall be enforced to the maximum extent permitted by law and the Officer consents thatthe scope of this restriction may be modified judicially.     7. **Standards**. The Officer shall perform his duties and responsibilities under thisAgreement in accordance with such reasonable standards expected of employees with comparablepositions in comparable organizations and as may be established from time to time by the Bank. TheBank will provide the Officer with the working facilities and staff customary for similarexecutives and necessary for the Officer to perform his duties.     8. **Termination and Termination Pay****.**(a) The Officer’s employment under thisAgreement shall be terminated upon the death of the Officer during the term of this Agreement, inwhich event, the Officer’s estate shall be entitled to receive the compensation due the Officerthrough the last day of the calendar month in which the Officer’s death shall have occurred and fora period of one month thereafter.     (b) The Officer’s employment under this Agreement may be terminated at any time by the Officerupon 60 days’ written notice to the Bank. Upon such termination, the Officer shall be entitled toreceive compensation through the effective date of such termination.     (c) The Bank may terminate the Officer’s employment at any time, but any termination by theBank, other than termination for Cause, shall not prejudice the Officer’s right to compensation orother benefits under this Agreement. The Bank shall provide written notice specifying the groundsfor termination for Cause. The Officer shall have no right to receive compensation or otherbenefits for any period after termination for Cause. Termination for Cause shall includetermination because of the Officer’s personal dishonesty or moral turpitude, willful misconduct,breach of fiduciary duty involving personal profit, intentional failure to perform stated duties,willful violation of any law, rule, or regulation (other than traffic violations or similaroffenses) or final cease-and-desist order, or material breach of any provision of this Agreement.Notwithstanding such termination, the obligations under Paragraph 6(c) shall survive anytermination of employment.     (d) Subject to the Bank’s obligations and the Officer’s rights under (i) Title I of theAmericans with Disabilities Act, §504 of the Rehabilitation Act, and the Family and Medical LeaveAct, and to (ii) the vacation leave, disability leave, sick leave and any other leave policies ofthe Bank, the Officer’s employment under this Agreement automatically shall be terminated in theevent the Officer becomes disabled during the term of this Agreement and it is determined by theBank that the Officer is unable to perform the essential functions of the Officer’s job under thisAgreement for ninety (90) business days or more during any 12-month period. Upon any suchtermination, the Officer shall be entitled to receive any compensation the Officer shall haveearned prior to the date of termination but which remains unpaid, and shall be entitled to anypayments provided under any disability income plan of the Bank which is applicable to the Officer.     In the event of any disagreement between the Officer and the Bank as to whether the Officer isphysically or mentally incapacitated such as will result in the termination of the Officer’semployment pursuant to this Paragraph 8(d), the question of such incapacity shall be submitted toan impartial physician licensed to practice medicine in North Carolina for determination and whowill be selected by mutual agreement of the Officer and the Bank, or failing such agreement, by two(2) physicians (one (1) of whom shall be selected by the Bank and the other by the Officer), andsuch determination of the question of such incapacity by such physician or physicians shall befinal and binding on the Officer and
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the Bank. The Bank shall pay the reasonable fees and expensesof such physician or physicians in making any determination required under this Paragraph 8(d).     9. **Additional Regulatory Requirements****.**Notwithstanding anything contained in thisAgreement to the contrary, it is understood and agreed that the Bank (or any of its successors ininterest) shall not be required to make any payment or take any action under this Agreement if:     (a) such payment or action is prohibited by any governmental agency having jurisdiction overthe Bank (hereinafter referred to as “Regulatory Authority”) because the Bank is declared by suchRegulatory Authority to be insolvent, in default or operating in an unsafe or unsound manner; or,     (b) in the reasonable opinion of counsel to the Bank, such payment or action (i) would beprohibited by or would violate any provision of state or federal law applicable to the Bank,including, without limitation, the Federal Deposit Insurance Act as now in effect or hereafteramended, (ii) would be prohibited by or would violate any applicable rules, regulations, orders orstatements of policy, whether now existing or hereafter promulgated, of any Regulatory Authority,or (iii) otherwise would be prohibited by any Regulatory Authority.     10. **Change in Control****.**(a) In the event of a termination of the Officer’s employmentin connection with, or within twenty-four (24) months after, a “Change in Control” (as defined inSubparagraph (d) below) of the Bank other than for Cause (as defined in Paragraph 8), the Officershall be entitled to receive the amount set forth in Subparagraph (c) below. Said sum shall bepayable as provided in Subparagraph (e) below.     (b) In addition to any rights the Officer might have to terminate this Agreement contained inParagraph 8, the Officer shall have the right to terminate this Agreement upon the occurrence ofany of the following events (the “Termination Events”) within twenty-four months following a Changein Control of the Bank:     (i) Officer is assigned any duties and/or responsibilities that, in Officer’s reasonabledetermination, are inconsistent with or constitute a demotion or reduction in the Officer’sposition, duties, responsibilities or status as such existed at the time of the Change inControl or with his reporting responsibilities or titles with the Bank in effect at such time,regardless of Officer’s resulting position; or     (ii) Officer’s annual base salary rate is reduced below the annual amount in effect as ofthe effective date of a Change in Control or as the same shall have been increased from time totime following such effective date; or     (iii) Officer’s life insurance, medical or hospitalization insurance, disabilityinsurance, stock options plans, stock purchase plans, deferred compensation plans, managementretention plans, retirement plans or similar plans or benefits being provided by the Bank tothe Officer as of the effective date of the Change in Control are reduced in their level, scopeor coverage, or any such insurance, plans or benefits are eliminated, unless such reduction orelimination applies proportionately to all salaried employees of the Bank who participated insuch benefits prior to such Change in Control; or     (iv) Officer is transferred to a location which is more than 15 miles from his currentprincipal work location without the Officer’s express written consent.A Termination Event shall be deemed to have occurred on the date such action or event isimplemented or takes effect.     (c) In the event that the Officer’s employment is terminated pursuant to this Paragraph 10,the Bank will be obligated to pay or cause to be paid to Officer an amount equal to 2.99 times theOfficer’s “base amount” as defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, asamended (the “Code”).
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     (d) For the purpose of this Agreement, the term “Change in Control” shall mean:     (i) Any person, or more than one person acting as a group, accumulates ownership of thecommon stock of Gateway Financial Holdings, Inc. (“Gateway Financial”) constituting more than50% of the total fair market value or total voting power of Gateway Financial’s common stock,     (ii) Any person, or more than one person acting as a group, acquires within a 12-monthperiod ownership of Gateway Financial’s common stock possessing 30% or more of the total votingpower of Gateway Financial’s common stock;     (iii) A majority of Gateway Financial’s Board of Directors is replaced during any 12-monthperiod by directors whose appointment or election is not endorsed in advance by a majority ofGateway Financial’s Board of Directors before the date of appointment or election, or     (iv) Within a 12-month period, any person, or more than one person acting as a group,acquires assets from Gateway Financial having a total gross fair market value equal to orexceeding 40% of the total gross fair market value of all of the assets of Gateway Financialimmediately before the acquisition or acquisitions. For this purpose, “gross fair marketvalue” means the value of Gateway Financial’s assets, or the value of the assets being disposedof, determined without regard to any liabilities associated with the assetsPersons will be considered to be acting as a group if they are owners of a corporation that entersinto a merger, consolidation, purchase, or acquisition of stock, or a similar transaction,involving Gateway Financial. Notwithstanding the other provisions of this Paragraph 10, atransaction or event shall not be considered a Change in Control if, prior to the consummation oroccurrence of such transaction or event, the Employee and Bank agree in writing that the same shallnot be treated as a Change in Control for purposes of this Agreement.     (e) Such amounts payable pursuant to this Paragraph 10 shall be paid, at the option of theOfficer, either in one lump sum or in thirty-six (36) equal monthly payments following terminationof Officer’s employment.     (f) Following a Termination Event which gives rise to Officer’s rights hereunder, the Officershall have twelve (12) months from the date of occurrence of the Termination Event to terminatethis Agreement pursuant to this Paragraph 10. Any such termination shall be deemed to haveoccurred only upon delivery to the Bank (or to any successor corporation) of written notice oftermination which describes the Change in Control and the Termination Event. If Officer does notso terminate this Agreement within such twelve-month period, he shall thereafter have no furtherrights hereunder with respect to that Termination Event, but shall retain rights, if any, hereunderwith respect to any other Termination Event as to which such period has not expired.     (g) In the event any dispute shall arise between the Officer and the Bank as to the terms orinterpretation of this Agreement, including this Paragraph 10, whether instituted by formal legalproceedings or otherwise, including any action taken by the Officer to enforce the terms of thisParagraph 10 or in defending against any action taken by the Bank, the Bank shall reimburse theOfficer for all costs and expenses, proceedings or actions, in the event the Officer prevails inany such action.     11. **Successors and Assigns****.**(a) This Agreement shall inure to the benefit of and bebinding upon any corporate or other successor of the Bank which shall acquire, directly orindirectly, by conversion, merger, purchase or otherwise, all or substantially all of the assets ofthe Bank.     (b) Since the Bank is contracting for the unique and personal skills of the Officer, theOfficer shall be precluded from assigning or delegating his rights or duties hereunder withoutfirst obtaining the written consent of the Bank.     12. **Modification; Wavier; Amendments**. This Agreement represents, constitutes, andincorporates the entire, exclusive, and complete understanding of the parties hereto and replacesall previous
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agreements. This Agreement replaces the “probationary period” employment letterbetween the Officer and the Bank dated as of his employment, which established the non-competitioncovenant in consideration of Officer’s employment by the Bank. The Officer, by execution of thisAgreement, acknowledges that by acceptance of the terms of this Agreement, the Officer agrees notto dispute, and waives any argument as to, the adequacy of the consideration for thenon-competition and other covenantsin this Agreement. No provision of this Agreement may be modified, waived or dischargedunless such waiver, modification or discharge is agreed to in writing, signed by the Officer and onbehalf of the Bank by such officer as may be specifically designated by the Board of Directors. Nowaiver by either party hereto, at any time, of any breach by the other party hereto of, orcompliance with, any condition or provision of this Agreement to be performed by such other partyshall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at anyprior or subsequent time. No amendment or addition to this Agreement shall be binding unless inwriting and signed by both parties, except as herein otherwise provided.     13. **Applicable Law**. This Agreement shall be governed in all respects whether as tovalidity, construction, capacity, performance or otherwise, by the laws of North Carolina, exceptto the extent that federal law shall be deemed to apply.     14. **Severability**. The provisions of this Agreement shall be deemed severable and theinvalidity or unenforceability of any provision shall not affect the validity or enforceability ofthe other provisions hereof.     **IN WITNESS WHEREOF**, the parties have amended this Agreement as of the day and year firsthereinabove written.      **GATEWAY BANK & TRUST CO.**