Document:

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                                                                     Exhibit 4.6

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                           TRUST PREFERRED SECURITIES
                               GUARANTEE AGREEMENT

                              COASTAL BANCORP, INC.

                          DATED AS OF _______ __ , 2002

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                                TABLE OF CONTENTS

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                                                                                                PAGE
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                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1    DEFINITIONS AND INTERPRETATION......................................................1

                                   ARTICLE II
                               TRUST INDENTURE ACT

SECTION 2.1    TRUST INDENTURE ACT; APPLICATION....................................................5
SECTION 2.2    LISTS OF HOLDERS OF TRUST PREFERRED SECURITIES......................................5
SECTION 2.3    REPORTS BY THE TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE.........................6
SECTION 2.4    PERIODIC REPORTS TO TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE....................6
SECTION 2.5    EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT....................................6
SECTION 2.6    GUARANTEE EVENTS OF DEFAULT; WAIVER.................................................6
SECTION 2.7    GUARANTEE EVENT OF DEFAULT; NOTICE..................................................7
SECTION 2.8    CONFLICTING INTERESTS...............................................................7

                                   ARTICLE III
                          POWERS, DUTIES AND RIGHTS OF
                  TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE

SECTION 3.1    POWERS AND DUTIES OF THE TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE...............7
SECTION 3.2    CERTAIN RIGHTS OF TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE......................9
SECTION 3.3    NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF TRUST PREFERRED SECURITIES GUARANTEE...11

                                   ARTICLE IV
                  TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE

SECTION 4.1    TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE; ELIGIBILITY..........................11
SECTION 4.2    APPOINTMENT, REMOVAL AND RESIGNATION OF TRUST PREFERRED
                     SECURITIES GUARANTEE TRUSTEE.................................................12

                                    ARTICLE V
                                    GUARANTEE

SECTION 5.1    GUARANTEE..........................................................................13
SECTION 5.2    WAIVER OF NOTICE AND DEMAND........................................................13
SECTION 5.3    OBLIGATIONS NOT AFFECTED...........................................................13
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SECTION 5.4    RIGHTS OF HOLDERS..................................................................14
SECTION 5.5    GUARANTEE OF PAYMENT...............................................................15
SECTION 5.6    SUBROGATION........................................................................15
SECTION 5.7    INDEPENDENT OBLIGATIONS............................................................15

                                   ARTICLE VI
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.1    LIMITATION OF TRANSACTIONS.........................................................15
SECTION 6.2    RANKING............................................................................16

                                   ARTICLE VII
                                   TERMINATION

SECTION 7.1    TERMINATION........................................................................16

                                  ARTICLE VIII
                                 INDEMNIFICATION

SECTION 8.1    EXCULPATION........................................................................17
SECTION 8.2    INDEMNIFICATION....................................................................17

                                   ARTICLE IX
                                  MISCELLANEOUS

SECTION 9.1    SUCCESSORS AND ASSIGNS.............................................................17
SECTION 9.2    AMENDMENTS.........................................................................18
SECTION 9.3    NOTICES............................................................................18
SECTION 9.4    BENEFIT............................................................................19
SECTION 9.5    GOVERNING LAW......................................................................19
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                                       ii
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                 TRUST PREFERRED SECURITIES GUARANTEE AGREEMENT

          This Trust Preferred Securities Guarantee Agreement (the "Trust
Preferred Securities Guarantee"), dated as of _______ __, 2002, is executed and
delivered by Coastal Bancorp, Inc., a Texas corporation (the "Guarantor"), and
The Bank of New York, a New York banking corporation, as trustee, for the
benefit of the Holders (as defined herein) from time to time of the Trust
Preferred Securities (as defined herein) of Coastal Capital Trust I, a Delaware
statutory business trust (the"Issuer").

          WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of _______ _, 2002, among the trustees of the Issuer
named therein, the Guarantor, as sponsor, and the Holders from time to time of
undivided beneficial interests in the assets of the Issuer, the Issuer is
issuing on the date hereof, __________ trust preferred securities, having an
aggregate liquidation amount of $_________, such trust preferred securities
being designated the ____% Cumulative Trust Preferred Securities (collectively
the "Trust Preferred Securities"); and

          WHEREAS, as incentive for the Holders to purchase the Trust Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Trust Preferred Securities Guarantee, to pay to the
Holders the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein; and

          WHEREAS, the Guarantor is executing and delivering a guarantee
agreement (the "Common Securities Guarantee"), with substantially identical
terms to this Trust Preferred Securities Guarantee, for the benefit of the
holders of the Common Securities (as defined herein), except that if an Event of
Default (as defined in the Declaration) has occurred and is continuing, the
rights of holders of the Common Securities to receive Guarantee Payments under
the Common Securities Guarantee are subordinated, to the extent and in the
manner set forth in the Common Securities Guarantee, to the rights of holders of
Trust Preferred Securities to receive Guarantee Payments under this Trust
Preferred Securities Guarantee;

          NOW, THEREFORE, in consideration of the purchase by each Holder, which
purchase the Guarantor hereby acknowledges shall benefit the Guarantor, the
Guarantor executes and delivers this Trust Preferred Securities Guarantee for
the benefit of the Holders.

                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1    DEFINITIONS AND INTERPRETATION

               In this Trust Preferred Securities Guarantee, unless the context
otherwise requires:

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               (a)  capitalized terms used in this Trust Preferred Securities
                    Guarantee but not defined in the preamble above have the
                    respective meanings assigned to them in this Section 1.1;

               (b)  a term defined in the Declaration as at the date of
                    execution of this Trust Preferred Securities Guarantee have
                    the same meaning when used in this Trust Preferred
                    Securities Guarantee unless otherwise defined in this Trust
                    Preferred Securities Guarantee;

               (c)  a term defined anywhere in this Trust Preferred Securities
                    Guarantee has the same meaning throughout;

               (d)  all references to "the Trust Preferred Securities Guarantee"
                    or "this Trust Preferred Securities Guarantee" are to this
                    Trust Preferred Securities Guarantee as modified,
                    supplemented or amended from time to time;

               (e)  all references in this Trust Preferred Securities Guarantee
                    to Articles and Sections are to Articles and Sections of
                    this Trust Preferred Securities Guarantee, unless otherwise
                    specified;

               (f)  a term defined in the Trust Indenture Act has the same
                    meaning when used in this Trust Preferred Securities
                    Guarantee, unless otherwise defined in this Trust Preferred
                    Securities Guarantee or unless the context otherwise
                    requires; and

               (g)  a reference to the singular includes the plural and vice
                    versa.

               "AFFILIATE" has the same meaning as given to that term in Rule
405 under the Securities Act of 1933, as amended, or any successor rule
thereunder.

               "BUSINESS DAY" means any day other than a Saturday or a Sunday,
or a day on which banking institutions in the City of New York or Houston, Texas
are authorized or required by law or executive order to close.

               "COMMON SECURITIES" means the securities representing common
undivided beneficial interests in the assets of the Issuer.

               "CORPORATE TRUST OFFICE" means the office of the Trust Preferred
Securities Guarantee Trustee at which the corporate trust business of the Trust
Preferred Securities Guarantee Trustee shall, at any particular time, be
principally administered, which office at the date of execution of this Trust
Preferred Securities Guarantee is located at 5 Penn Plaza, 13th Floor, New York,
New York 10001.

               "COVERED PERSON" means any Holder or beneficial owner of Trust
Preferred Securities.

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               "DEBENTURES" means the series of subordinated deferrable interest
debentures of the Guarantor designated the ___% Junior Subordinated Deferrable
Interest Debentures due _________ _, 2032 held by the Property Trustee (as
defined in the Declaration) of the Issuer.

               "GUARANTEE EVENT OF DEFAULT" means a default by the Guarantor on
any of its payment or other obligations under this Trust Preferred Securities
Guarantee; provided, however, that except with respect to a default in payment
of any Guarantee Payment, the Guarantor shall have received notice of default
and shall not have cured such default within 60 days after receipt of such
notice.

               "GUARANTEE PAYMENTS" means the following payments or
distributions, without duplication, with respect to the Trust Preferred
Securities, to the extent not paid or made by the Issuer: (i) any accumulated
and unpaid Distributions (as defined in the Declaration) that are required to be
paid on such Trust Preferred Securities to the extent the Issuer has funds on
hand legally available therefor at such time; (ii) the redemption price,
including all accumulated and unpaid Distributions to the date of redemption
(the "Redemption Price") to the extent the Issuer has funds on hand legally
available therefor at such time, with respect to any Trust Preferred Securities
called for redemption by the Issuer; and (iii) upon a voluntary or involuntary
dissolution or winding up of the Issuer (other than in connection with the
distribution of Debentures to the Holders in exchange for Trust Preferred
Securities as provided in the Declaration), the lesser of (a) the aggregate of
the liquidation amount and all accumulated and unpaid Distributions on the Trust
Preferred Securities to the date of payment, to the extent the Issuer has funds
on hand legally available therefor, and (b) the amount of assets of the Issuer
remaining available for distribution to Holders in liquidation of the Issuer
after satisfaction of liabilities to creditors (in either case, the "Liquidation
Distribution"). If an Event of Default has occurred and is continuing, no
Guarantee Payments under the Common Securities Guarantee with respect to the
Common Securities or any guarantee payment under any Other Common Securities
Guarantees shall be made until the Holders shall be paid in full the Guarantee
Payments to which they are entitled under this Trust Preferred Securities
Guarantee.

               "HOLDER" shall mean any holder, as registered on the books and
records of the Issuer, of any Trust Preferred Securities; provided, however,
that, in determining whether the holders of the requisite percentage of Trust
Preferred Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor or any Affiliate of the
Guarantor.

               "INDEMNIFIED PERSON" means the Trust Preferred Securities
Guarantee Trustee, any Affiliate of the Trust Preferred Securities Guarantee
Trustee, or any officers, directors, shareholders, members, partners, employees,
representatives, nominees, custodians or agents of the Trust Preferred
Securities Guarantee Trustee.

               "INDENTURE" means the Indenture dated as of _______ _, 2002,
among the Guarantor (the "Debenture Issuer") and The Bank of New York, as
trustee (the "Indenture Trustee"), pursuant to which the Debentures are to be
issued to the Property Trustee of the Issuer.

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               "INDENTURE EVENT OF DEFAULT" shall mean any event specified in
Section 5.01 of the Indenture.

               "MAJORITY IN LIQUIDATION AMOUNT OF THE TRUST PREFERRED
SECURITIES" means, except as provided by the Declaration, the terms of the
Preferred Securities or by the Trust Indenture Act, a vote by Holder(s) of more
than 50% of the aggregate liquidation amount of all Trust Preferred Securities.
In determining whether the Holders of the requisite amount of Trust Preferred
Securities have voted, Trust Preferred Securities which are owned by the
Guarantor or any Affiliate of the Guarantor or any other obligor on the Trust
Preferred Securities shall be disregarded for the purpose of any such
determination.

               "OFFICERS' CERTIFICATE" means, with respect to the Guarantor, a
certificate signed by any two of the following: the Chairman, a Vice Chairman,
the Chief Executive Officer, the President, a Vice President, the Comptroller,
the Secretary or an Assistant Secretary of the Guarantor. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Trust Preferred Securities Guarantee (other than pursuant
to Section 314(d)(4) of the Trust Indenture Act) shall include:

               (a)  a statement that each officer signing the Officers'
          Certificate has read the covenant or condition and the definitions
          relating thereto;

               (b)  a statement that each such officer has made such examination
          or investigation as, in such officer's opinion, is necessary to enable
          such officer to express an informed opinion as to whether or not such
          covenant or condition has been complied with; and

               (c)  a statement as to whether, in the opinion of each such
          officer, such condition or covenant has been complied with.

               "OTHER COMMON SECURITIES GUARANTEES" shall have the same meaning
as "Other Guarantees" as defined in the Common Securities Guarantee.

               "OTHER DEBENTURES" means all junior subordinated debentures
issued by the Guarantor from time to time and sold to trusts to be established
by the Guarantor, in each case similar to the Issuer.

               "OTHER GUARANTEES" means all guarantees issued or to be issued by
the Guarantor with respect to trust preferred securities similar to the Trust
Preferred Securities issued by other trusts established or to be established by
the Guarantor, in each case similar to the Issuer.

               "PERSON" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

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               "RESPONSIBLE OFFICER" means, with respect to the Trust Preferred
Securities Guarantee Trustee, any officer within the Corporate Trust Office of
the Trust Preferred Securities Guarantee Trustee with direct responsibility for
the administration of this Trust Preferred Securities Guarantee and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of that officer's knowledge of and familiarity
with the particular subject.

               "SUCCESSOR TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE" means a
successor Trust Preferred Securities Guarantee Trustee possessing the
qualifications to act as Trust Preferred Securities Guarantee Trustee under
Section 4.1.

               "TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE" means The Bank of
New York, a New York banking corporation, until a Successor Trust Preferred
Securities Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Trust Preferred Securities Guarantee
and thereafter means each such Successor Trust Preferred Securities Guarantee
Trustee.

               "TRUST INDENTURE ACT" means the Trust Indenture Act of 1939, as
amended from time to time, or any successor legislation.

               "TRUST SECURITIES" means the Common Securities and the Trust
Preferred Securities, collectively.

                                   ARTICLE II
                               TRUST INDENTURE ACT

SECTION 2.1    TRUST INDENTURE ACT; APPLICATION

               (a)  This Trust Preferred Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this Trust
Preferred Securities Guarantee and shall, to the extent applicable, be governed
by such provisions; and

               (b)  if and to the extent that any provision of this Trust
Preferred Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.

SECTION 2.2    LISTS OF HOLDERS OF TRUST PREFERRED SECURITIES

               (a)  The Guarantor shall provide the Trust Preferred Securities
Guarantee Trustee (unless the Trust Preferred Securities Guarantee Trustee is
otherwise the registrar of the Trust Preferred Securities) with a list, in such
form as the Trust Preferred Securities Guarantee Trustee may reasonably require,
of the names and addresses of the Holders of the Trust Preferred Securities
("List of Holders") as of such date, (i) within 14 days after each record date
for payment of Distributions, as defined in the Declaration, and (ii) at any
other time within 30 days of receipt by the Guarantor of a written request for a
List of Holders as of a date no more than 14

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days before such List of Holders is given to the Trust Preferred Securities
Guarantee Trustee, provided, that the Guarantor shall not be obligated to
provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Trust Preferred Securities
Guarantee Trustee by the Guarantor. The Trust Preferred Securities Guarantee
Trustee shall preserve, in as current a form as is reasonably practicable, all
information contained in a List of Holders given to it, provided that it may
destroy any List of Holders previously given to it on receipt of a new List of
Holders.

               (b)  The Trust Preferred Securities Guarantee Trustee shall
comply with its obligations under Sections 311(a), 311(b) and Section 312(b) of
the Trust Indenture Act.

SECTION 2.3    REPORTS BY THE TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE

               Within 60 days after May 15 of each year, commencing May 15,
2002, the Trust Preferred Securities Guarantee Trustee shall provide to the
Holders such reports as are required by Section 313 of the Trust Indenture Act,
if any, in the form and in the manner provided by Section 313 of the Trust
Indenture Act. The Trust Preferred Securities Guarantee Trustee shall also
comply with the other requirements of Section 313 of the Trust Indenture Act.

SECTION 2.4    PERIODIC REPORTS TO TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE

               The Guarantor shall provide to the Trust Preferred Securities
Guarantee Trustee such documents, reports and information as required by Section
314 of the Trust Indenture Act (if any) and the compliance certificate required
by Section 314 of the Trust Indenture Act in the form, in the manner and at the
times required by Section 314 of the Trust Indenture Act, provided that such
compliance certificate shall be delivered on or before 120 days after the end of
each fiscal year of the Guarantor.

SECTION 2.5    EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT

               The Guarantor shall provide to the Trust Preferred Securities
Guarantee Trustee such evidence of compliance with any conditions precedent, if
any, provided for in this Trust Preferred Securities Guarantee that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to Section
314(c)(1) may be given in the form of an Officers' Certificate.

SECTION 2.6    GUARANTEE EVENTS OF DEFAULT; WAIVER

               The Holders of a Majority in liquidation amount of Trust
Preferred Securities may, by vote or by written consent, on behalf of all
Holders, waive any past Guarantee Event of Default and its consequences. Upon
such waiver, any such Guarantee Event of Default shall cease to exist, and any
Guarantee Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Trust Preferred Securities Guarantee, but no such
waiver shall extend to any subsequent or other default or Guarantee Event of
Default or impair any right consequent thereon.

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SECTION 2.7    GUARANTEE EVENT OF DEFAULT; NOTICE

               (a)  The Trust Preferred Securities Guarantee Trustee shall,
within 90 days after the occurrence of a Guarantee Event of Default, mail by
first class postage prepaid, to all Holders, notices of all Guarantee Events of
Default actually known to a Responsible Officer, unless such defaults have been
cured before the giving of such notice; provided, that, except in the case of a
Guarantee Event of Default in the timing or payment of any Guarantee Payment,
the Trust Preferred Securities Guarantee Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or a Responsible Officer of the
Trust Preferred Securities Guarantee Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders.

               (b)  The Trust Preferred Securities Guarantee Trustee shall not
be deemed to have knowledge of any Guarantee Event of Default unless the Trust
Preferred Securities Guarantee Trustee shall have received written notice from
the Guarantor, or a Responsible Officer charged with the administration of this
Trust Preferred Securities Guarantee shall have obtained actual knowledge, of
such Guarantee Event of Default.

SECTION 2.8    CONFLICTING INTERESTS

               The Declaration shall be deemed to be specifically described in
this Trust Preferred Securities Guarantee for the purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.

                                   ARTICLE III
                          POWERS, DUTIES AND RIGHTS OF
                  TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE

SECTION 3.1    POWERS AND DUTIES OF THE TRUST PREFERRED SECURITIES GUARANTEE
               TRUSTEE

               (a)  This Trust Preferred Securities Guarantee shall be held by
the Trust Preferred Securities Guarantee Trustee for the benefit of the Holders,
and the Trust Preferred Securities Guarantee Trustee shall not transfer this
Trust Preferred Securities Guarantee to any Person except a Holder exercising
his, her or its rights pursuant to Section 5.4(b) or to a Successor Trust
Preferred Securities Guarantee Trustee on acceptance by such Successor Trust
Preferred Securities Guarantee Trustee of its appointment to act as Successor
Trust Preferred Securities Guarantee Trustee. The right, title and interest of
the Trust Preferred Securities Guarantee Trustee shall automatically vest in any
Successor Trust Preferred Securities Guarantee Trustee, and such vesting and
succession of title shall be effective whether or not conveyancing documents
have been executed and delivered pursuant to the appointment of such Successor
Trust Preferred Securities Guarantee Trustee.

               (b)  If a Guarantee Event of Default actually known to a
Responsible Officer has occurred and is continuing, the Trust Preferred
Securities Guarantee Trustee shall enforce this Trust Preferred Securities
Guarantee for the benefit of the Holders.

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               (c)  The Trust Preferred Securities Guarantee Trustee, before the
occurrence of any Guarantee Event of Default and after the curing of all
Guarantee Events of Default that may have occurred, shall undertake to perform
only such duties as are specifically set forth in this Trust Preferred
Securities Guarantee, and no implied covenants shall be read into this Trust
Preferred Securities Guarantee against the Trust Preferred Securities Guarantee
Trustee. In case a Guarantee Event of Default has occurred (that has not been
cured or waived pursuant to Section 2.6) and is actually known to a Responsible
Officer, the Trust Preferred Securities Guarantee Trustee shall exercise such of
the rights and powers vested in it by this Trust Preferred Securities Guarantee,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.

               (d)  No provision of this Trust Preferred Securities Guarantee
shall be construed to relieve the Trust Preferred Securities Guarantee Trustee
from liability for its own negligent action, its own negligent failure to act,
or its own willful misconduct, except that:

                    (i)  prior to the occurrence of any Guarantee Event of
     Default and after the curing or waiving of all such Guarantee Events of
     Default that may have occurred:

                         (A) the duties and obligations of the Trust Preferred
                    Securities Guarantee Trustee shall be determined solely by
                    the express provisions of this Trust Preferred Securities
                    Guarantee, and the Trust Preferred Securities Guarantee
                    Trustee shall not be liable except for the performance of
                    such duties and obligations as are specifically set forth in
                    this Trust Preferred Securities Guarantee, and no implied
                    covenants or obligations shall be read into this Trust
                    Preferred Securities Guarantee against the Trust Preferred
                    Securities Guarantee Trustee; and

                         (B) in the absence of bad faith on the part of the
                    Trust Preferred Securities Guarantee Trustee, the Trust
                    Preferred Securities Guarantee Trustee may conclusively
                    rely, as to the truth of the statements and the correctness
                    of the opinions expressed therein, upon any certificates or
                    opinions furnished to the Trust Preferred Securities
                    Guarantee Trustee and conforming to the requirements of this
                    Trust Preferred Securities Guarantee; but in the case of any
                    such certificates or opinions that by any provision hereof
                    are specifically required to be furnished to the Trust
                    Preferred Securities Guarantee Trustee, the Trust Preferred
                    Securities Guarantee Trustee shall be under a duty to
                    examine the same to determine whether or not they conform to
                    the requirements of this Trust Preferred Securities
                    Guarantee (but need not confirm or investigate the accuracy
                    of mathematical calculations or other facts stated therein);

                    (ii) the Trust Preferred Securities Guarantee Trustee shall
     not be liable for any error of judgment made in good faith by a Responsible
     Officer, unless it shall be

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     proved that the Trust Preferred Securities Guarantee Trustee was negligent
     in ascertaining the pertinent facts upon which such judgment was made;

                    (iii) the Trust Preferred Securities Guarantee Trustee shall
     not be liable with respect to any action taken or omitted to be taken by it
     in good faith in accordance with the direction of the Holders of a Majority
     in liquidation amount of the Trust Preferred Securities relating to the
     time, method and place of conducting any proceeding for any remedy
     available to the Trust Preferred Securities Guarantee Trustee, or
     exercising any trust or power conferred upon the Trust Preferred Securities
     Guarantee Trustee under this Trust Preferred Securities Guarantee; and

                    (iv) no provision of this Trust Preferred Securities
     Guarantee shall require the Trust Preferred Securities Guarantee Trustee to
     expend or risk its own funds or otherwise incur personal financial
     liability in the performance of any of its duties or in the exercise of any
     of its rights or powers, if the Trust Preferred Securities Guarantee
     Trustee shall have reasonable grounds for believing that the repayment of
     such funds or liability is not reasonably assured to it under the terms of
     this Trust Preferred Securities Guarantee or indemnity, reasonably
     satisfactory to the Trust Preferred Securities Guarantee Trustee, against
     such risk or liability is not reasonably assured to it.

SECTION 3.2    CERTAIN RIGHTS OF TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE

               (a)  Subject to the provisions of Section 3.1:

                    (i)   The Trust Preferred Securities Guarantee Trustee may
     conclusively rely, and shall be fully protected in acting or refraining
     from acting, upon any resolution, certificate, statement, instrument,
     opinion, report, notice, request, direction, consent, order, bond,
     debenture, note, other evidence of indebtedness or other paper or document
     believed by it to be genuine and to have been signed, sent or presented by
     the proper party or parties.

                    (ii)  Any direction or act of the Guarantor contemplated by
     this Trust Preferred Securities Guarantee may be sufficiently evidenced by
     an Officers' Certificate.

                    (iii) Whenever, in the administration of this Trust
     Preferred Securities Guarantee, the Trust Preferred Securities Guarantee
     Trustee shall deem it desirable that a matter be proved or established
     before taking, suffering or omitting any action hereunder, the Trust
     Preferred Securities Guarantee Trustee (unless other evidence is herein
     specifically prescribed) may, in the absence of bad faith on its part,
     request and conclusively rely upon an Officers' Certificate which, upon
     receipt of such request, shall be promptly delivered by the Guarantor.

                    (iv)  The Trust Preferred Securities Guarantee Trustee shall
     have no duty to see to any recording, filing or registration of any
     instrument (or any rerecording, refilling or registration thereof).

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                    (v)   The Trust Preferred Securities Guarantee Trustee may
     consult with counsel of its selection, and the advice or opinion of such
     counsel with respect to legal matters shall be full and complete
     authorization and protection in respect of any action taken, suffered or
     omitted by it hereunder in good faith and in accordance with such advice or
     opinion. Such counsel may be counsel to the Guarantor or any of its
     Affiliates and may include any of its employees. The Trust Preferred
     Securities Guarantee Trustee shall have the right at any time to seek
     instructions concerning the administration of this Trust Preferred
     Securities Guarantee from any court of competent jurisdiction.

                    (vi)  The Trust Preferred Securities Guarantee Trustee shall
     be under no obligation to exercise any of the rights or powers vested in it
     by this Trust Preferred Securities Guarantee at the request or direction of
     any Holder, unless such Holder shall have provided to the Trust Preferred
     Securities Guarantee Trustee such security and indemnity, reasonably
     satisfactory to the Trust Preferred Securities Guarantee Trustee, against
     the costs, expenses (including attorneys' fees and expenses and the
     expenses of the Trust Preferred Securities Guarantee Trustee's agents,
     nominees or custodians) and liabilities that might be incurred by it in
     complying with such request or direction, including such reasonable
     advances as may be requested by the Trust Preferred Securities Guarantee
     Trustee; provided that, nothing contained in this Section 3.2(a)(vi) shall
     be taken to relieve the Trust Preferred Securities Guarantee Trustee, upon
     the occurrence of a Guarantee Event of Default, of its obligation to
     exercise the rights and powers vested in it by this Trust Preferred
     Securities Guarantee.

                    (vii) The Trust Preferred Securities Guarantee Trustee shall
     not be bound to make any investigation into the facts or matters stated in
     any resolution, certificate, statement, instrument, opinion, report,
     notice, request, direction, consent, order, bond, debenture, note, other
     evidence of indebtedness or other paper or document, but the Trust
     Preferred Securities Guarantee Trustee, in its discretion, may make such
     further inquiry or investigation into such facts or matters as it may see
     fit.

                    (viii) The Trust Preferred Securities Guarantee Trustee may
     execute any of the trusts or powers hereunder or perform any duties
     hereunder either directly or by or through agents, nominees, custodians or
     attorneys, and the Trust Preferred Securities Guarantee Trustee shall not
     be responsible for any misconduct or negligence on the part of any agent,
     custodian, nominee or attorney appointed with due care by it hereunder.

                    (ix)  Any action taken by the Trust Preferred Securities
     Guarantee Trustee or its agents hereunder shall bind the Holders, and the
     signature of the Trust Preferred Securities Guarantee Trustee or its agents
     alone shall be sufficient and effective to perform any such action. No
     third party shall be required to inquire as to the authority of the Trust
     Preferred Securities Guarantee Trustee to so act or as to its compliance
     with any of the terms and provisions of this Trust Preferred Securities
     Guarantee, both of which shall be conclusively evidenced by the Trust
     Preferred Securities Guarantee Trustee's or its agent's taking such action.

                                       10
<Page>

                    (x)   Whenever in the administration of this Trust Preferred
     Securities Guarantee the Trust Preferred Securities Guarantee Trustee shall
     deem it desirable to receive instructions with respect to enforcing any
     remedy or right or taking any other action hereunder, the Trust Preferred
     Securities Guarantee Trustee (i) may request instructions from the Holders
     of a Majority in liquidation amount of the Trust Preferred Securities, (ii)
     may refrain from enforcing such remedy or right or taking such other action
     until such instructions are received and (iii) shall be protected in
     conclusively relying on or acting in accordance with such instructions.

                    (xi)  The Trust Preferred Securities Guarantee Trustee shall
     not be liable for any action taken, suffered, or omitted to be taken by it
     in good faith, without negligence, and reasonably believed by it to be
     authorized or within the discretion or rights or powers conferred upon it
     by this Trust Preferred Securities Guarantee.

               (b)  No provision of this Trust Preferred Securities Guarantee
shall be deemed to impose any duty or obligation on the Trust Preferred
Securities Guarantee Trustee to perform any act or acts or exercise any right,
power, duty or obligation conferred or imposed on it in any jurisdiction in
which it shall be illegal, or in which the Trust Preferred Securities Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Trust Preferred
Securities Guarantee Trustee shall be construed to be a duty.

SECTION 3.3.   NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF TRUST PREFERRED
               SECURITIES GUARANTEE

               The recitals contained in this Trust Preferred Securities
Guarantee shall be taken as the statements of the Guarantor, and the Trust
Preferred Securities Guarantee Trustee does not assume any responsibility for
their correctness. The Trust Preferred Securities Guarantee Trustee makes no
representation as to the validity or sufficiency of this Trust Preferred
Securities Guarantee.

                                   ARTICLE IV
                  TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE

SECTION 4.1    TRUST PREFERRED SECURITIES GUARANTEE TRUSTEE; ELIGIBILITY

               (a)  There shall at all times be a Trust Preferred Securities
Guarantee Trustee which shall:

                    (i)   not be an Affiliate of the Guarantor; and

                    (ii)  be a corporation organized and doing business under
     the laws of the United States of America or any State or Territory thereof
     or of the District of Columbia, or a corporation or Person permitted by the
     Securities and Exchange Commission to act as an institutional trustee under
     the Trust Indenture Act, authorized

                                       11
<Page>

     under such laws to exercise corporate trust powers, having a combined
     capital and surplus of at least 50 million U.S. dollars ($50,000,000), and
     subject to supervision or examination by Federal, State, Territorial or
     District of Columbia authority. If such corporation publishes reports of
     condition at least annually, pursuant to law or to the requirements of the
     supervising or examining authority referred to above, then, for the
     purposes of this Section 4.1(a)(ii), the combined capital and surplus of
     such corporation shall be deemed to be its combined capital and surplus as
     set forth in its most recent report of condition so published.

               (b)  If at any time the Trust Preferred Securities Guarantee
Trustee shall cease to be eligible to so act under Section 4.1(a), the Trust
Preferred Securities Guarantee Trustee shall immediately resign in the manner
and with the effect set out in Section 4.2(c).

               (c)  If the Trust Preferred Securities Guarantee Trustee has or
shall acquire any "conflicting interest" within the meaning of Section 310(b) of
the Trust Indenture Act, the Trust Preferred Securities Guarantee Trustee and
Guarantor shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act.

SECTION 4.2    APPOINTMENT, REMOVAL AND RESIGNATION OF TRUST PREFERRED
               SECURITIES GUARANTEE TRUSTEE

               (a)  Subject to Section 4.2(b), the Trust Preferred Securities
Guarantee Trustee may be appointed or removed without cause at any time by the
Guarantor except during a Guarantee Event of Default.

               (b)  The Trust Preferred Securities Guarantee Trustee shall not
be removed in accordance with Section 4.2(a) until a Successor Trust Preferred
Securities Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Trust Preferred
Securities Guarantee Trustee and delivered to the Guarantor.

               (c)  The Trust Preferred Securities Guarantee Trustee shall hold
office until a Successor Trust Preferred Securities Guarantee Trustee shall have
been appointed or until its removal or resignation. The Trust Preferred
Securities Guarantee Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument in writing executed by the Trust
Preferred Securities Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Trust Preferred Securities
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Trust Preferred Securities
Guarantee Trustee and delivered to the Guarantor and the resigning Trust
Preferred Securities Guarantee Trustee.

               (d)  If no Successor Trust Preferred Securities Guarantee Trustee
shall have been appointed and accepted appointment as provided in this Section
4.2 within 60 days after delivery of an instrument of removal or resignation,
the Trust Preferred Securities Guarantee Trustee resigning or being removed may
petition any court of competent jurisdiction for appointment of a Successor
Trust Preferred Securities Guarantee Trustee. Such court may

                                       12
<Page>

thereupon, after prescribing such notice, if any, as it may deem proper, appoint
a Successor Trust Preferred Securities Guarantee Trustee.

               (e)  No Trust Preferred Securities Guarantee Trustee shall be
liable for the acts or omissions to act of any Successor Trust Preferred
Securities Guarantee Trustee.

               (f)  Upon termination of this Trust Preferred Securities
Guarantee or removal or resignation of the Trust Preferred Securities Guarantee
Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Trust
Preferred Securities Guarantee Trustee all amounts due to the Trust Preferred
Securities Guarantee Trustee for fees and reimbursement of expenses which have
accrued to the date of such termination, removal or resignation.

                                    ARTICLE V
                                    GUARANTEE

SECTION 5.1    GUARANTEE

               The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.

SECTION 5.2    WAIVER OF NOTICE AND DEMAND

               The Guarantor hereby waives notice of acceptance of this Trust
Preferred Securities Guarantee and of any liability to which it applies or may
apply, presentment, demand for payment, any right to require a proceeding first
against the Issuer or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.

SECTION 5.3    OBLIGATIONS NOT AFFECTED

               The obligations, covenants, agreements and duties of the
Guarantor under this Trust Preferred Securities Guarantee shall be absolute and
unconditional and shall remain in full force and effect until the entire
liquidation amount of all Trust Preferred Securities shall have been paid and
such obligations, covenants, agreements and duties shall in no way be affected
or impaired by reason of the happening from time to time of any event, including
without limitation the following, whether or not with notice to, or the consent
of, the Guarantor:

               (a)  the release or waiver, by operation of law or otherwise, of
the performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Trust Preferred Securities to be
performed or observed by the Issuer;

                                       13
<Page>

               (b)  the extension of time for the payment by the Issuer of all
or any portion of the Distributions, Redemption Price, Liquidation Distribution
(as defined in the Declaration) or any other sums payable under the terms of the
Trust Preferred Securities or the extension of time for the performance of any
other obligation under, arising out of, or in connection with, the Trust
Preferred Securities (other than an extension of time for payment of
Distributions, Redemption Price, Liquidation Distribution or other sum payable
that results from the extension of any interest payment period on the Debentures
permitted by the Indenture);

               (c)  any failure, omission, delay or lack of diligence on the
part of the Property Trustee or the Holders to enforce, assert or exercise any
right, privilege, power or remedy conferred on the Property Trustee or the
Holders pursuant to the terms of the Trust Preferred Securities, or any action
on the part of the Issuer granting indulgence or extension of any kind;

               (d)  the voluntary or involuntary liquidation, dissolution, sale
of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Issuer or any of the
assets of the Issuer;

               (e)  any invalidity of, or defect or deficiency in, the Trust
Preferred Securities;

               (f)  the settlement or compromise of any obligation guaranteed
hereby or hereby incurred;

               (g)  any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 5.3 that the obligations of the Guarantor with
respect to the Guarantee Payments shall be absolute and unconditional under any
and all circumstances.

               There shall be no obligation of the Holders to give notice to, or
obtain consent of, the Guarantor with respect to the happening of any of the
foregoing. No set-off, counterclaim, reduction or diminution of any obligation,
or any defense of any kind or nature that the Guarantor has or may have against
any Holder shall be available hereunder to the Guarantor against such Holder to
reduce the payments to it under this Trust Preferred Securities Guarantee.

SECTION 5.4    RIGHTS OF HOLDERS

               (a)  The Holders of a Majority in liquidation amount of the Trust
Preferred Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trust Preferred
Securities Guarantee Trustee in respect of this Trust Preferred Securities
Guarantee or exercising any trust or power conferred upon the Trust Preferred
Securities Guarantee Trustee under this Trust Preferred Securities Guarantee.

               (b)  If the Trust Preferred Securities Guarantee Trustee fails to
enforce such Trust Preferred Securities Guarantee, any Holder may institute a
legal proceeding directly against the Guarantor to enforce the Trust Preferred
Securities Guarantee Trustee's rights under this Trust Preferred Securities
Guarantee, without first instituting a legal proceeding against the

                                       14
<Page>

Issuer, the Trust Preferred Securities Guarantee Trustee or any other Person or
entity. Notwithstanding the foregoing, if the Guarantor has failed to make a
Guarantee Payment, a Holder may directly institute a proceeding against the
Guarantor for enforcement of the Trust Preferred Securities Guarantee for such
payment to the Holder of the principal of or interest on the Debentures on or
after the respective due dates specified in the Debentures, and the amount of
the payment will be based on the Holder's pro rata share of the amount due and
owing on all of the Trust Preferred Securities. The Guarantor waives any right
or remedy to require that any action be brought first against the Issuer or any
other Person or entity before proceeding directly against the Guarantor.

SECTION 5.5    GUARANTEE OF PAYMENT

               This Trust Preferred Securities Guarantee creates a guarantee of
payment and not of collection.

SECTION 5.6    SUBROGATION

               The Guarantor shall be subrogated to all (if any) rights of the
Holders against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Trust Preferred Securities Guarantee; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any right that it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Trust Preferred
Securities Guarantee, if, at the time of any such payment, any amounts are due
and unpaid under this Trust Preferred Securities Guarantee. If any amount shall
be paid to the Guarantor in violation of the preceding sentence, the Guarantor
agrees to hold such amount in trust for the Holders and to pay over such amount
to the Holders.

SECTION 5.7    INDEPENDENT OBLIGATIONS

               The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Trust Preferred
Securities, and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Trust
Preferred Securities Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.3 hereof.

                                   ARTICLE VI
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 6.1    LIMITATION OF TRANSACTIONS

               So long as any Trust Preferred Securities remain outstanding, if
there shall have occurred a Guarantee Event of Default or an Event of Default,
or an event that, with the giving of notice or the lapse of time, or both, would
be a Guarantee Event of Default or an Event of Default then, prior to the
payment of all accrued interest on outstanding Debentures , the Guarantor shall
not (i) declare or pay any dividends or distributions on, or redeem, purchase,

                                       15
<Page>

acquire, or make a liquidation payment with respect to, any of the Guarantor's
capital stock (which includes common and preferred stock), (ii) make any payment
of principal, interest or premium, if any, on or repay or repurchase or redeem
any debt securities of the Guarantor (including any Other Debentures) that rank
pari passu with or junior in right of payment to the Debentures or (iii) make
any guarantee payments with respect to any guarantee by the Guarantor of the
debt securities of any Subsidiary (including under Other Guarantees) if such
guarantee ranks equal or junior in right of payment to the Debentures (other
than (a) dividends or distributions in shares of, or options, warrants, rights
to subscribe for or purchase shares of, common stock of the Guarantor, (b) any
declaration of a dividend in connection with the implementation of a
stockholders' rights plan, or the issuance of stock under any such plan in the
future, or the redemption or repurchase of any such rights pursuant thereto, (c)
payments under the Trust Preferred Securities Guarantee, (d) the purchase of
fractional shares resulting from a reclassification of the Guarantor's capital
stock, (e) the purchase of fractional interests in shares of the Guarantor's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged and (f) purchases of common
stock related to the issuance of common stock or rights under any of the
Guarantor's benefit plans for its directors, officers or employees or any of the
Guarantor's dividend reinvestment plans).

SECTION 6.2    RANKING

               This Trust Preferred Securities Guarantee will constitute an
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to Senior and Subordinated Indebtedness (as defined in the
Indenture), to the same extent and in the same manner that the Debentures are
subordinated to Senior and Subordinated Indebtedness pursuant to the Indenture,
(ii) pari passu with the Debentures, the Other Debentures, the Common Securities
Guarantee, any Other Guarantee and any Other Common Securities Guarantee, (iii)
senior to the Guarantor's capital stock and (iv) effectively subordinated to the
liabilities and obligations of the Guarantor's subsidiaries. If an Event of
Default has occurred and is continuing, the rights of the holders of the Common
Securities to receive any payments shall be subordinated to the rights of the
Holders to receive Guarantee Payments hereunder.

                                   ARTICLE VII
                                   TERMINATION

SECTION 7.1    TERMINATION

               This Trust Preferred Securities Guarantee shall terminate (i)
upon full payment of the Redemption Price (as defined in the Declaration) of all
Trust Preferred Securities or (ii) upon liquidation of the Issuer and the full
payment of the amounts payable in accordance with the Declaration or the
distribution of the Debentures to the Holders and the holders of Common
Securities. Notwithstanding the foregoing, this Trust Preferred Securities
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder must restore payment of any sums paid under the
Trust Preferred Securities or under this Trust Preferred Securities Guarantee.

                                       16
<Page>

                                  ARTICLE VIII
                                 INDEMNIFICATION

SECTION 8.1    EXCULPATION

               (a)  No Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Guarantor or any Covered Person for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person in good faith in accordance with this Trust
Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Trust Preferred Securities Guarantee or by law,
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's negligence or willful
misconduct with respect to such acts or omissions.

               (b)  An Indemnified Person shall be fully protected in relying in
good faith upon the records of the Guarantor and upon such information,
opinions, reports or statements presented to the Guarantor by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders might properly be paid.

SECTION 8.2    INDEMNIFICATION

               The Guarantor agrees to indemnify each Indemnified Person for,
and to hold each Indemnified Person harmless against, any and all loss,
liability, damage, claim or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or administration
of the trust or trusts hereunder, including the costs and expenses (including
reasonable legal fees and expenses) of defending itself against, or
investigating, any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 8.2 shall survive the termination of this
Trust Preferred Securities Guarantee.

                                   ARTICLE IX
                                  MISCELLANEOUS

SECTION 9.1    SUCCESSORS AND ASSIGNS

               All guarantees and agreements contained in this Trust Preferred
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
then outstanding.

                                       17
<Page>

SECTION 9.2    AMENDMENTS

               Except with respect to any changes that do not adversely affect
the rights of Holders (in which case no consent of Holders will be required),
this Trust Preferred Securities Guarantee may only be amended with the prior
approval of the Holders of a Majority in liquidation amount of the Trust
Preferred Securities (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined). The provisions of
the Declaration with respect to consents to amendments thereof (whether at a
meeting or otherwise) shall apply to the giving of such approval.

               Prior to executing any amendment hereto, the Trust Preferred
Securities Guarantee Trustee shall be entitled to receive and rely upon an
Opinion of Counsel stating that the execution of such amendment is authorized or
permitted by this Trust Preferred Securities Guarantee Agreement.

SECTION 9.3    NOTICES

               All notices provided for in this Trust Preferred Securities
Guarantee shall be in writing, duly signed by the party giving such notice, and
shall be delivered, telecopied or mailed by first class mail, as follows:

               (a)  If given to the Issuer, in care of the Trustee at the
Issuer's mailing address set forth below (or such other address as the Issuer
may give notice of to the Holders and the Trust Preferred Securities Guarantee
Trustee):

                              Coastal Capital Trust I
                              c/o Coastal Bancorp, Inc.
                              5718 Westheimer, Suite 600
                              Houston, Texas 77057
                              Attention:  Administrative Trustee
                              Telecopy:   (713) 435-5106

               (b)  If given to the Trust Preferred Securities Guarantee
Trustee, at the Trust Preferred Securities Guarantee Trustee's mailing address
set forth below (or such other address as the Trust Preferred Securities
Guarantee Trustee may give notice of to the Holders, the Guarantor and the
Issuer):

                              The Bank of New York
                              5 Penn Plaza
                              13th Floor
                              New York, New York  10001
                              Attention:  Corporate Trust Trustee Administration
                              Telecopy:   (212) ____-______

                                       18
<Page>

               (c)  If given to the Guarantor, at the Guarantor's mailing
address set forth below (or such other address as the Guarantor may give notice
of to the Holders and the Trust Preferred Securities Guarantee Trustee):

                              Coastal Bancorp, Inc.
                              5718 Westheimer, Suite 600
                              Houston, Texas 77057
                              Attention:  Catherine N. Wylie
                                          Senior Executive Vice President and
                                          Chief Financial Officer
                              Telecopy:   (713) 435-5106

               (d)  If given to any Holder, at the address set forth on the
books and records of the Issuer.

               All such notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.

SECTION 9.4    BENEFIT

               This Trust Preferred Securities Guarantee is solely for the
benefit of the Holders and, subject to Section 3.1(a), is not separately
transferable from the Trust Preferred Securities.

SECTION 9.5    GOVERNING LAW

               THIS TRUST PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF.

                                       19
<Page>

               THIS TRUST PREFERRED SECURITIES GUARANTEE is executed as of the
day and year first above written.

                                    COASTAL BANCORP, INC., as Guarantor

                                    By:
                                        --------------------------------------
                                        Catherine N. Wylie
                                        Senior Executive Vice President and
                                        Chief Financial Officer

                                    THE BANK OF NEW YORK, as Trust Preferred
                                       Securities Guarantee Trustee

                                    By:
                                        --------------------------------------
                                        Name:
                                        Title:

                                       20<PAGE>

                                                                    EXHIBIT 10.7

                              EMPLOYMENT AGREEMENT

               AGREEMENT, dated as of March 8, 2002, by and between Vornado
Realty Trust, a Maryland real estate investment trust, with its principal
offices at 888 Seventh Avenue, New York, New York 10106 (the "Company") and
Michael D. Fascitelli ("Executive").

               WHEREAS, the Company and Executive entered into an Employment
Agreement, dated as of December 2, 1996 (the "1996 Agreement");

               WHEREAS, the Company and Executive wish to amend and restate the
1996 Agreement in its entirety;

               NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth below, the parties hereby amend and restate the 1996
Agreement in its entirety and agree as follows:

               1. EMPLOYMENT. The Company hereby agrees to continue Executive's
employment as the President of the Company, and Executive hereby accepts such
continued employment, on the terms and conditions hereinafter set forth.

               2. TERM. The period of employment of Executive by the Company
hereunder (the "Employment Period") shall commence on January 1, 2002 (the
"Commencement Date") and shall continue through December 31, 2006; PROVIDED
that, commencing on January 1, 2006, and on each January 1 thereafter, the
Employment Period shall automatically be extended for one (1) additional year
unless either party gives written notice not to extend this Agreement prior to
three (3) months before such extension would be effectuated. The Employment
Period may be sooner terminated by either party in accordance with Section 6 of
this Agreement.

               3. POSITION AND DUTIES. During the Employment Period, Executive
shall serve as President of the Company, and shall report solely and directly to
Mr. Steven Roth; PROVIDED that, if Mr. Steven Roth is no longer employed by the
Company for any reason, Executive shall report, in respect of his duties and
responsibilities at the Company, solely and directly to the board of trustees of
the Company (the "Board"). Subject to the supervisory powers of Mr. Steven Roth
only, Executive shall have those powers and duties normally associated with the
position of President and trustee and such other powers and duties as may be
prescribed by Mr. Roth and the Board only, PROVIDED that such other powers and
duties are consistent with Executive's position as President and trustee of the
Company. Executive shall devote substantially all of his working time, attention
and energies during normal business hours (other than absences due to illness or
vacation) to the performance of his duties for the Company. Notwithstanding the
above, Executive shall be permitted, to the extent such activities do not
substantially interfere with the performance by Executive of his duties and
responsibilities hereunder or violate Section 10(a), (b) or (c) of this
Agreement, to (i) manage Executive's personal, financial and legal affairs, and
(ii) serve on civic or charitable boards or committees (it being

<PAGE>

expressly understood and agreed that Executive's continuing to serve on any such
board and/or committees on which Executive is serving, or with which Executive
is otherwise associated, as of the Commencement Date (each of which has been
disclosed to the Company prior to the execution of this Agreement), shall be
deemed not to interfere with the performance by Executive of his duties and
responsibilities under this Agreement). Executive is currently serving as a
member of the Board and of the board of directors of certain affiliates of the
Company.

               4. PLACE OF PERFORMANCE. The principal place of employment of
Executive shall be at the Company's principal executive offices in New York, New
York.

               5. COMPENSATION AND RELATED MATTERS.

                  (a) BASE SALARY. During the Employment Period the Company
shall pay Executive a base salary at the rate of not less than $1,000,000 per
year ("Base Salary"). Executive's Base Salary shall be paid in approximately
equal installments in accordance with the Company's customary payroll practices.
If Executive's Base Salary is increased by the Company, such increased Base
Salary shall then constitute the Base Salary for all purposes of this Agreement.

                  (b) COMPANY SHARE OPTION. The Company has granted to Executive
a non-qualified share option (the "Company Share Option") to acquire 3,500,000
shares of the common shares of beneficial interest of the Company, par value
$.04 per share (the "Company Stock"), pursuant to the Company's 1993 Omnibus
Share Plan (the "Company Option Plan"). The Company Share Option is subject to
the terms set forth in the share option agreement attached to the 1996 Agreement
as Exhibit A (the "Company Share Option Agreement") and to the Company Option
Plan. The Company hereby represents and warrants to Executive that (a) the
Company Option Plan has and will have sufficient shares available to effect the
exercise of the Company Share Option and the Company Option Plan has been
approved by its shareholders, (b) the Company Share Option was granted by the
Board or by a compensation committee of the Board satisfying the conditions for
"non-employee directors" under Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended ("Rule16b-3"), (c) the Company Share Option was
properly authorized and approved by the Board and/or its compensation committee,
(d) the Company Stock underlying the Company Share Option has been registered on
Form S-8 and (e) the Company Stock underlying the Company Share Option has been
listed on the New York Stock Exchange. The Company hereby undertakes and agrees
(at no cost to Executive) to have an effective shelf-registration in place in
favor of Executive in respect of the Company Stock underlying the Company Share
Option (the "Company Registration Statement"). The Company Registration
Statement shall be subject to the terms set forth on Exhibit B to the 1996
Agreement.

                  (c) ALEXANDER'S STOCK OPTION. Alexander's, Inc.
("Alexander's") has granted to Executive a non-qualified stock option (the
"Alexander's Stock Option") to acquire 350,000 shares of the common stock of
Alexander's, par value $1.00 per share (the "Alexander's Stock"), pursuant to
the Alexander's, Inc. Omnibus Stock Plan (the "Alexander's Option Plan"). The
Alexander's Option is subject to the

                                       2
<PAGE>

terms set forth in the stock option agreement attached to the 1996 Agreement as
Exhibit C (the "Alexander's Stock Option Agreement") and to the Alexander's
Option Plan. The Company hereby represents and warrants to Executive that (a)
the Alexander's Stock Option Plan has sufficient shares available to effect the
exercise of the Alexander's Option and the Alexander's Stock Option Plan has
been approved by its shareholders, (b) the Alexander's Option was granted by the
board of directors of Alexander's or by a compensation committee of the board of
directors of Alexander's satisfying the conditions for non-employee directors
under Rule 16b-3, (c) the Alexander's Option was properly authorized and
approved by the board of directors of Alexander's and/or its compensation
committee, (d) the Alexander's Stock underlying the Alexander's Stock Option has
been registered on Form S-8, and (e) the Alexander's Stock underlying the
Alexander's Stock Option has been properly listed on the New York Stock
Exchange. The Company hereby undertakes and agrees (at no cost to Executive) to
use its best efforts to cause Alexander's to have an effective
shelf-registration in place in favor of Executive in respect of the Alexander's
Stock underlying the Alexander's Option (the "Alexander's Registration
Statement"). The Alexander's Registration Statement shall be subject to the
terms set forth on Exhibit B to the 1996 Agreement.

                  (d) 2002 UNITS AGREEMENT. The Company and Executive shall
execute on the date of this Agreement a deferred compensation arrangement in the
form of 626,566 convertible units (the "2002 Units") pursuant to an agreement in
the form attached hereto as EXHIBIT A (the "2002 Units Agreement").

                  (e) RABBI TRUST. In connection with the 2002 Units, the
Company shall, within 60 days from the date of this Agreement, contribute a
certificate for 626,566 shares of Company Stock into the irrevocable "rabbi"
trust established pursuant to the Trust Agreement, dated as of December 2, 1996,
between the Company and The Chase Manhattan Bank, a New York banking corporation
(the "Rabbi Trust"). The Company hereby undertakes and agrees to maintain at no
cost to Executive or the trustee under the Rabbi Trust agreement (attached as
Exhibit F to the 1996 Agreement) the Rabbi Trust in respect of the 919,540
shares of Company Stock held therein pursuant to the 1996 Agreement, as well as
the 626,566 shares of Company Stock to be contributed hereunder.

                  (f) CONDITION TO RECEIPT OF 2002 UNITS. Notwithstanding
anything in this Section 5 to the contrary, Executive shall have no right to the
amount payable pursuant to the 2002 Units Agreement in the event that, prior to
December 31, 2002, he voluntarily terminates employment hereunder (other than
for Good Reason); PROVIDED that, under no circumstances shall such amount be
forfeited upon Executive's death or a termination of employment due to
Executive's Disability.

                  (g) AUTOMOBILE. The Company will provide Executive with an
automobile and driver, which automobile shall be a Lincoln Town Car or similar
model.

                  (h) EXPENSES. The Company shall promptly reimburse Executive
for all reasonable business expenses upon the presentation of reasonably
itemized statements of such expenses in accordance with the Company's policies

                                       3
<PAGE>

and procedures now in force or as such policies and procedures may be modified
with respect to all senior executive officers of the Company.

                  (i) VACATION. Executive shall be entitled to the number of
weeks of vacation per year provided to the Company's chief executive officer,
but in no event less than four (4) weeks annually.

                  (j) SERVICES FURNISHED. During the Employment Period, the
Company shall furnish Executive with office space, stenographic and secretarial
assistance and such other facilities and services comparable to those provided
to the Company's chief executive officer.

                  (k) COMPANY LOAN. During the Employment Period, upon the
written request of Executive, the Company shall disburse to Executive one or
more loans in the aggregate amount of $20,000,000, less any loan amounts
outstanding pursuant to the 1996 Agreement. Each of such loans shall be on a
revolving principal basis subject to the following terms and conditions:

                     (i) the loan must be in an amount of at least $500,000;

                     (ii) the loan shall be full recourse to Executive;

                     (iii) the principal amount of the loan shall be due and
    payable upon the first to occur of (A) Executive's Date of Termination, (B)
    the fifth anniversary of the loan's date of disbursement or (C) the final
    payment to Executive under the 2002 Units Agreement, provided that under no
    circumstances shall the aggregate principal amount of all outstanding loans
    (including loans to Executive pursuant to the 1996 Agreement) exceed
    one-half (1/2) the sum of (x) the product of (1) the fair market value of
    one share of Company Stock and (2) the sum of the number of Convertible
    Units (as defined below) and 2002 Units and (y) the total "spread" on all of
    Executives outstanding stock options to purchase Company Stock (I.E. the
    positive difference between the aggregate fair market value of the Company
    Stock underlying all of the Executive's outstanding stock options to
    purchase Company Stock and the aggregate exercise price of such options),
    and in the event such aggregate principal amount of outstanding loans does
    exceed such sum, the excess shall be due and payable immediately;

                     (iv) the loan shall be subject to interest at the
    applicable Federal rate under Section 1274(d) of the Code on the date the
    loan is made;

                     (v) interest on the loan shall be payable quarterly as set
    forth in the agreement evidencing the loan (the intent of which will be to
    approximate the timing of the Company's regular quarterly dividend
    payments);

                     (vi) there shall be an agreement evidencing the loan and it
    shall contain such additional terms and conditions as are reasonably
    acceptable to the Executive in good faith; and

                                       4
<PAGE>

                     (vii) Executive shall not be required to pledge or
    otherwise hypothecate or encumber any of Executive's personal assets in
    connection with the loan.

For purposes of clause (iii) of this paragraph, "fair market value" on any given
date shall mean the average of the high and low trading prices of the Company
Stock on such date, as reported on the New York Stock Exchange composite tape
for such date.

                  (l) WELFARE, PENSION AND INCENTIVE BENEFIT PLANS. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, accidental death and dismemberment
and travel accident insurance plans and programs, other than any such benefits
provided solely to Mr. Steven Roth. The Company shall at all times provide to
Executive (and his spouse and dependents to the extent provided under the
applicable plans or programs) (subject to modifications affecting all senior
executive officers) the same type and levels of participation and benefits as
are being provided to Mr. Steven Roth (and his spouse and dependents to the
extent provided under the applicable plans or programs) on the Commencement
Date. In addition, during the Employment Period, Executive shall be eligible to
participate in all pension, retirement, savings and other employee benefit plans
and programs maintained from time to time by the Company for the benefit of its
senior executives, other than any such benefits provided solely to Mr. Steven
Roth or any annual incentive or long-term performance plans (other than those
specified or referred to in Section 5).

                  (m) OTHER BENEFITS. During the Employment Period, the Company
shall provide Executive with the benefits described below:

                     (i) a $3 million five-year renewable term life insurance
    policy;

                     (ii) a Company-provided medical examination on an annual
    basis at a medical clinic selected by Executive and reasonably satisfactory
    to the Company's chief executive officer;

                     (iii) tax preparation and financial planning assistance up
    to a maximum value of $15,000 per year; and

                     (iv) long-term disability insurance coverage with benefits
    at a rate of 60% of Base Salary through age sixty-five (65), less any
    disability benefits paid under any group long-term disability plan of the
    Company.

                  (n) OFFICES. Executive shall serve, without additional
compensation, as a director or trustee of the Company or any of its wholly-owned
subsidiaries and affiliates, and in one or more executive positions of any of
such subsidiaries and affiliates, PROVIDED that Executive is indemnified for
serving in any and

                                       5
<PAGE>

all such capacities on a basis no less favorable than is then provided to any
other director, trustee, or executive of such entity.

                  (o) ADJUSTMENTS TO THE 2002 UNITS. In the event of a spin-off
by the Company to its shareholders, Executive shall receive an appropriate
equitable adjustment to the 2002 Units pursuant to the terms of Section 7(j) of
the 2002 Units Agreement.

               6. TERMINATION. Executive's employment hereunder may be
terminated during the Employment Period under the following circumstances:

                  (a) DEATH. Executive's employment hereunder shall terminate
upon his death.

                  (b) DISABILITY. If, as a result of Executive's incapacity due
to physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination is given after
such six (6) month period, Executive shall not have returned to the substantial
performance of his duties on a full-time basis, the Company shall have the right
to terminate Executive's employment hereunder for "Disability", and such
termination in and of itself shall not be, nor shall it be deemed to be, a
breach of this Agreement.

                  (c) CAUSE. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's:

                     (i) conviction of, or plea of guilty or nolo contendere to,
    a felony;

                     (ii) willful and continued failure to use reasonable best
    efforts to substantially perform his duties hereunder (other than such
    failure resulting from Executive's incapacity due to physical or mental
    illness or subsequent to the issuance of a Notice of Termination by
    Executive for Good Reason) after demand for substantial performance is
    delivered by the Company in writing that specifically identifies the manner
    in which the Company believes Executive has not used reasonable best efforts
    to substantially perform his duties; or

                     (iii) willful misconduct (including, but not limited to, a
    willful breach of the provisions of Section 10) that is materially
    economically injurious to the Company or Alexander's or to any entity in
    control of, controlled by or under common control with the Company or
    Alexander's ("Affiliates").

For purposes of this Section 6(c), no act, or failure to act, by Executive shall
be considered "willful" unless committed in bad faith and without a reasonable
belief that the act or omission was in the best interests of the Company,
Alexander's or any

                                       6
<PAGE>

Affiliates thereof. Cause shall not exist under paragraph (ii) or (iii) above
unless and until the Company has delivered to Executive a copy of a resolution
duly adopted by a majority of the Board (excluding Executive for purposes of
determining such majority) at a meeting of the Board called and held for such
purpose (after reasonable (but in no event less than thirty (30) days) notice to
Executive and an opportunity for Executive, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of the Board,
Executive was guilty of the conduct set forth in paragraph (ii) or (iii) and
specifying the particulars thereof in detail. This Section 6(c) shall not
prevent Executive from challenging in any court of competent jurisdiction the
Board's determination that Cause exists or that Executive has failed to cure any
act (or failure to act) that purportedly formed the basis for the Board's
determination.

                  (d) GOOD REASON. Executive may terminate his employment for
"Good Reason" within one hundred and twenty (120) days after Executive has
actual knowledge of the occurrence, without the written consent of Executive, of
one of the following events that has not been cured within thirty (30) days
after written notice thereof has been given by Executive to the Company:

                     (i) the failure of Executive to be appointed to the
    position set forth in Section 3;

                     (ii) the assignment to Executive of duties materially and
    adversely inconsistent with Executive's status as President of the Company
    or a material and adverse alteration in the nature of Executive's duties
    and/or responsibilities, reporting obligations, titles or authority;

                     (iii) a reduction by the Company in Executive's Base Salary
    or a failure by the Company to pay any such amounts when due or any amounts
    due under the deferred compensation agreement attached as Exhibit D to the
    1996 Agreement (the "Deferred Compensation Agreement"), the convertible
    units agreement attached as Exhibit E to the 1996 Agreement (the
    "Convertible Units Agreement or the 2002 Units Agreement;

                     (iv) the relocation of the Company's principal executive
    offices or Executive's own office location to a location more than thirty
    (30) miles from New York City;

                     (v) any purported termination of Executive's employment for
    Cause which is not effected pursuant to the procedures of Section 6(c) (and
    for purposes of this Agreement, no such purported termination shall be
    effective);

                     (vi) the Company's material breach of the Company Share
    Option Agreement, the Convertible Units Agreement, the Deferred Compensation
    Agreement or the 2002 Units Agreement;

                     (vii) the Company's failure to provide the benefits set
    forth in Section 5(m)(i) or 5(m)(iv) or the failure of the Company to
    substantially provide any material employee benefits due to be provided to
    Executive (other

                                       7
<PAGE>

    than any such failure not inconsistent with any express provisions contained
    herein which failure affects all senior executive officers, not including
    for this purpose benefits provided solely to Mr. Steven Roth);

                     (viii) the Company's failure to provide in all material
    respects the indemnification set forth in Section 11 of this Agreement;

                     (ix) the material breach of the Alexander's Stock Option
    Agreement by Alexander's;

                     (x) the failure by the Company or by Alexander's to provide
    Executive, upon the spin-off or distribution of any property by the Company
    or Alexander's to their shareholders, with an appropriate equitable
    adjustment to the Company Share Option, the Alexander's Share Option, the
    convertible units granted pursuant to the Convertible Units Agreement (the
    "Convertible Units") or the 2002 Units pursuant to the terms of the Company
    Share Option Agreement, the Alexander's Stock Option Agreement, the
    Convertible Units Agreement or the 2002 Units Agreement, as applicable;

                     (xi) a Change in Control of the Company;

                     (xii) the failure of the Company (i) to list (or to
    maintain such listing) for trading on The New York Stock Exchange or (ii) to
    register (or to maintain pursuant to the terms set forth on Exhibit B of the
    1996 Agreement) the stock underlying the Company Share Option, the
    Alexander's Stock Option, the Convertible Units Agreement or the 2002 Units
    Agreement pursuant to an effective shelf registration statement on Form S-3
    in favor of Executive and the Rabbi Trust trustee;

                     (xiii) the Company's material failure to disburse the loan
    amount in accordance with Section 5(k); or

                     (xiv) the Company's failure to contribute the annual Rabbi
    Trust funding, to the extent such funding is required by the Rabbi Trust
    agreement.

Executive's right to terminate his employment hereunder for Good Reason shall
not be affected by his incapacity due to physical or mental illness. Executive's
continued employment during the one hundred and twenty (120) day period referred
to above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.

                  (e) WITHOUT CAUSE. The Company shall have the right to
terminate Executive's employment hereunder without Cause by providing Executive
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.

                                       8
<PAGE>

                  (f) WITHOUT GOOD REASON. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.

               For purposes of this Agreement, a "Change in Control" of the
Company means the occurrence of one of the following events:

                     (1) individuals who, on the Commencement Date, constitute
    the Board (the "Incumbent Trustees") cease for any reason to constitute at
    least a majority of the Board, PROVIDED that any person becoming a trustee
    subsequent to the Commencement Date whose election or nomination for
    election was approved by a vote of at least two-thirds of the Incumbent
    Trustees then on the Board (either by a specific vote or by approval of the
    proxy statement of the Company in which such person is named as a nominee
    for trustee, without objection to such nomination) shall be an Incumbent
    Trustee; PROVIDED, HOWEVER, that no individual initially elected or
    nominated as a trustee of the Company as a result of an actual or threatened
    election contest with respect to trustees or as a result of any other actual
    or threatened solicitation of proxies by or on behalf of any person other
    than the Board shall be an Incumbent Trustee;

                     (2) any "person" (as such term is defined in Section
    3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and as
    used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes,
    after the Commencement Date, a "beneficial owner" (as defined in Rule 13d-3
    under the Exchange Act), directly or indirectly, of securities of the
    Company representing 30% or more of the combined voting power of the
    Company's then outstanding securities eligible to vote for the election of
    the Board (the "Company Voting Securities"); PROVIDED, HOWEVER, that an
    event described in this paragraph (2) shall not be deemed to be a Change in
    Control if any of following becomes such a beneficial owner: (A) the Company
    or any majority-owned subsidiary (PROVIDED that this exclusion applies
    solely to the ownership levels of the Company or the majority-owned
    subsidiary), (B) any tax-qualified, broad-based employee benefit plan
    sponsored or maintained by the Company or any majority-owned subsidiary, (C)
    any underwriter temporarily holding securities pursuant to an offering of
    such securities, (D) any person pursuant to a Non-Qualifying Transaction (as
    defined in paragraph (3)), (E) Executive or any group of persons including
    Executive (or any entity controlled by Executive or any group of persons
    including Executive); or (F) (i) any of the partners (as of the Commencement
    Date) in Interstate Properties ("Interstate") including immediate family
    members and family trusts or family-only partnerships and any charitable
    foundations of such partners (the "Interstate Partners"), (ii) any entities
    the majority of the voting interests of which are beneficially owned by the
    Interstate Partners, or (iii) any "group" (as described in Rule 13d-5(b)(i)
    under the Exchange Act) including the Interstate Partners, PROVIDED that the
    Interstate Partners beneficially own a majority of the Company Voting
    Securities beneficially owned by such group (the persons in (i), (ii) and

                                       9
<PAGE>

    (iii) shall be individually and collectively referred to herein as,
    "Interstate Holders");

                     (3) the consummation of a merger, consolidation, share
    exchange or similar form of transaction involving the Company or any of its
    subsidiaries, or the sale of all or substantially all of the Company's
    assets (a "Business Transaction"), unless immediately following such
    Business Transaction (i) more than 50% of the total voting power of the
    entity resulting from such Business Transaction or the entity acquiring the
    Company's assets in such Business Transaction (the "Surviving Corporation")
    is beneficially owned, directly or indirectly, by the Interstate Holders or
    the Company's shareholders immediately prior to any such Business
    Transaction, and (ii) no person (other than the persons set forth in clauses
    (A), (B), (C), or (F) of paragraph (2) above or any tax-qualified,
    broad-based employee benefit plan of the Surviving Corporation or its
    affiliates) beneficially owns, directly or indirectly, 30% or more of the
    total voting power of the Surviving Corporation (a "Non-Qualifying
    Transaction"); or

                     (4) Board approval of a liquidation or dissolution of the
    Company, unless the voting common equity interests of an ongoing entity
    (other than a liquidating trust) are beneficially owned, directly or
    indirectly, by the Company's shareholders in substantially the same
    proportions as such shareholders owned the Company's outstanding voting
    common equity interests immediately prior to such liquidation and such
    ongoing entity assumes all existing obligations of the Company to Executive
    under this Agreement, the 2002 Units Agreement, the Company Share Option
    Agreement, the Company Registration Statement, the Alexander's Stock Option
    Agreement, the Deferred Compensation Agreement, the Convertible Units
    Agreement and the Rabbi Trust agreement.

               7. TERMINATION PROCEDURE.

                  (a) NOTICE OF TERMINATION. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.

                  (b) DATE OF TERMINATION. "Date of Termination" shall mean (i)
if Executive's employment is terminated by his death, the date of his death,
(ii) if Executive's employment is terminated pursuant to Section 6(b), thirty
(30) days after Notice of Termination (PROVIDED that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.

                                       10
<PAGE>

               8. COMPENSATION UPON TERMINATION OR DURING DISABILITY. In the
event Executive suffers or incurs a Disability as defined in Section 6(b) or his
employment terminates during the Employment Period, the Company shall provide
Executive with the payments and benefits set forth below. Executive acknowledges
and agrees that the payments set forth in this Section 8 constitute liquidated
damages for termination of his employment during the Employment Period.

                  (a) TERMINATION BY COMPANY WITHOUT CAUSE OR BY EXECUTIVE FOR
GOOD REASON. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason:

                     (i) the Company shall pay to Executive (A) his Base Salary
    and accrued vacation pay through the Date of Termination, as soon as
    practicable following the Date of Termination, and (B) continued Base Salary
    (as provided for in Section 5(a)) for a period of three (3) years following
    the Date of Termination; PROVIDED that during the second and third years
    following the Date of Termination the Company's obligation to pay continued
    Base Salary shall be offset by the economic value of any compensation
    actually received (or deferred) for services rendered by Executive to any
    other entity;

                     (ii) the Company shall pay any deferred compensation
    payable in accordance with the terms of the Deferred Compensation Agreement,
    the Convertible Units Agreement or the 2002 Units Agreement;

                     (iii) the Company shall maintain in full force and effect,
    for the continued benefit of Executive, his spouse and his dependents for a
    period of three (3) years following the Date of Termination the medical,
    hospitalization, dental, and life insurance programs (including without
    limitation the life insurance policy set forth in Section 5(m), but for no
    longer than the five-year term of such policy) in which Executive, his
    spouse and his dependents were participating immediately prior to the Date
    of Termination at the level in effect and upon substantially the same terms
    and conditions (including without limitation contributions required by
    Executive for such benefits) as existed immediately prior to the Date of
    Termination; PROVIDED that, if Executive, his spouse or his dependents
    cannot continue to participate in the Company programs providing such
    benefits, the Company shall arrange to provide Executive, his spouse and his
    dependents with the economic equivalent of such benefits which they
    otherwise would have been entitled to receive under such plans and programs
    ("Continued Benefits"), PROVIDED that such Continued Benefits shall
    terminate on the date or dates Executive receives equivalent coverage and
    benefits, without waiting period or pre-existing condition limitations,
    under the plans and programs of a subsequent employer (such coverage and
    benefits to be determined on a coverage-by-coverage or benefit-by-benefit,
    basis);

                     (iv) the Company shall reimburse Executive pursuant to
    Section 5(h) for reasonable expenses incurred, but not paid prior to such
    termination of employment; and

                                       11
<PAGE>

                     (v) Executive shall be entitled to any other rights,
    compensation and/or benefits as may be due to Executive in accordance with
    the terms and provisions of any agreements, plans or programs of the
    Company.

                  (b) CAUSE OR BY EXECUTIVE WITHOUT GOOD REASON. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):

                     (i) the Company shall pay Executive his Base Salary and, to
    the extent required by law or the Company's vacation policy, his accrued
    vacation pay through the Date of Termination, as soon as practicable
    following the Date of Termination;

                     (ii) the Company shall pay any deferred compensation
    payable in accordance with the terms of the Deferred Compensation Agreement,
    the Convertible Units Agreement or the 2002 Units Agreement;

                     (iii) the Company shall reimburse Executive pursuant to
    Section 5(h) for reasonable expenses incurred, but not paid prior to such
    termination of employment, unless such termination resulted from a
    misappropriation of Company funds; and

                     (iv) Executive shall be entitled to any other rights,
    compensation and/or benefits as may be due to Executive in accordance with
    the terms and provisions of any agreements, plans or programs of the
    Company.

                  (c) DISABILITY. During any period that Executive fails to
perform his duties hereunder as a result of incapacity due to physical or mental
illness ("Disability Period"), Executive shall continue to receive his full Base
Salary set forth in Section 5(a) until his employment is terminated pursuant to
Section 6(b). In the event Executive's employment is terminated for Disability
pursuant to Section 6(b):

                     (i) the Company shall pay to Executive (A) his Base Salary
    and accrued vacation pay through the Date of Termination, as soon as
    practicable following the Date of Termination, and (B) continued Base Salary
    (as provided for in Section 5(a)) and Continued Benefits for the longer of
    (i) six (6) months or (ii) the date on which Executive becomes entitled to
    long-term disability benefits under the applicable plan or program of the
    Company paying the benefits described in Section 5(m)(iv), up to a maximum
    of three (3) years of Base Salary continuation;

                     (ii) the Company shall pay any deferred compensation
    payable in accordance with the terms of the Deferred Compensation Agreement,
    the Convertible Units Agreement or the 2002 Units Agreement;

                     (iii) the Company shall reimburse Executive pursuant to
    Section 5(h) for reasonable expenses incurred, but not paid prior to such
    termination of employment; and

                                       12
<PAGE>

                     (iv) Executive shall be entitled to any other rights,
    compensation and/or benefits as may be due to Executive in accordance with
    the terms and provisions of any agreements, plans or programs of the
    Company.

                  (d) DEATH. If Executive's employment is terminated by his
death:

                     (i) the Company shall pay in a lump sum to Executive's
    beneficiary, legal representatives or estate, as the case may be,
    Executive's Base Salary through the Date of Termination and one (1) times
    Executive's annual rate of Base Salary, and shall provide Executive's spouse
    and dependents with Continued Benefits for one (1) year;

                     (ii) the Company shall pay any deferred compensation
    payable in accordance with the terms of the Deferred Compensation Agreement,
    the Convertible Units Agreement or the 2002 Units Agreement;

                     (iii) the Company shall reimburse Executive's beneficiary,
    legal representatives, or estate, as the case may be, pursuant to Section
    5(h) for reasonable expenses incurred, but not paid prior to such
    termination of employment; and

                     (iv) Executive's beneficiary, legal representatives or
    estate, as the case may be, shall be entitled to any other rights,
    compensation and benefits as may be due to any such persons or estate in
    accordance with the terms and provisions of any agreements, plans or
    programs of the Company.

                  (e) FAILURE TO EXTEND. A failure to extend the Agreement
pursuant to Section 2 by either party shall not be treated as a termination of
Executive's employment for purposes of this Agreement.

               9. MITIGATION. Executive shall not be required to mitigate
amounts payable under this Agreement by seeking other employment or otherwise,
and there shall be no offset against amounts due Executive under this Agreement
on account of subsequent employment except as specifically provided herein.
Additionally, amounts owed to Executive under this Agreement, the 2002 Units
Agreement, the Deferred Compensation Agreement or the Convertible Units
Agreement shall not be offset by any claims the Company may have against
Executive (other than an offset for any due and payable loan amounts under
Section 5(k) excluding the Deferred Compensation Agreement) and, except with
respect to such loan amounts, as set forth above, the Company's obligation to
make the payments provided for in this Agreement, the 2002 Units Agreement, the
Deferred Compensation Agreement or the Convertible Units Agreement, and
otherwise to perform its obligations hereunder, shall not be affected by any
other circumstances, including, without limitation, any counterclaim,
recoupment, defense or other right which the Company may have against Executive
or others.

               10. CONFIDENTIAL INFORMATION, OWNERSHIP OF DOCUMENTS;
NON-COMPETITION.

                                       13
<PAGE>

                  (a) CONFIDENTIAL INFORMATION. Executive shall hold in a
fiduciary capacity for the benefit of the Company all trade secrets and
confidential information, knowledge or data relating to the Company and its
businesses and investments, which shall have been obtained by Executive during
Executive's employment by the Company and which is not generally available
public knowledge (other than by acts by Executive in violation of this
Agreement). Except as may be required or appropriate in connection with his
carrying out his duties under this Agreement, Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
any legal process, or as is necessary in connection with any adversarial
proceeding against the Company (in which case Executive shall use his reasonable
best efforts in cooperating with the Company in obtaining a protective order
against disclosure by a court of competent jurisdiction), communicate or divulge
any such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company or on behalf of the Company in the
furtherance of its business or to perform duties hereunder.

                  (b) REMOVAL OF DOCUMENTS; RIGHTS TO PRODUCTS. All records,
files, drawings, documents, models, equipment, and the like relating to the
Company's business, which Executive has control over shall not be removed from
the Company's premises without its written consent, unless such removal is in
the furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.

                  (c) PROTECTION OF BUSINESS. During the Employment Period and
until the first anniversary of Executive's Date of Termination (but only in the
event Executive is terminated by the Company for Cause, Executive terminates
employment without Good Reason or Executive is terminated by the Company for
Disability), the Executive will not (i) engage, anywhere within the geographical
areas in which the Company, Alexander's or any of their Affiliates (the
"Designated Entities") are conducting their business operations or providing
services as of the Date of Termination, in any business which is being engaged
in by the Designated Entities as of the Date of Termination or pursue or attempt
to develop any project known to Executive and which the Designated Entities are
pursuing, developing or attempting to develop as of the Date of Termination,
unless such project has been inactive for over nine (9) months (a "Project"),
directly or indirectly, alone, in association with or as a shareholder,
principal, agent, partner, officer, director, employee or consultant of any
other organization, (ii) divert to any entity which is engaged in any business
conducted by the Designated Entities in the same geographic area as the
Designated Entities, any Project or any customer of any of the Designated
Entities, or (iii) solicit any officer, employee (other than secretarial staff)
or consultant of any of the Designated Entities to leave the employ of any of
the Designated Entities. Notwithstanding the preceding sentence, Executive shall
not be prohibited from owning less than one (1%) percent of any publicly traded

                                       14
<PAGE>

corporation, whether or not such corporation is in competition with the Company.
If, at any time, the provisions of this Section 10(c) shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 10(c) shall be considered divisible
and shall become and be immediately amended to only such area, duration and
scope of activity as shall be determined to be reasonable and enforceable by the
court or other body having jurisdiction over the matter; and Executive agrees
that this Section 10(c) as so amended shall be valid and binding as though any
invalid or unenforceable provision had not been included herein.

                  (d) INJUNCTIVE RELIEF. In the event of a breach or threatened
breach of this Section 10, Executive agrees that the Company shall be entitled
to injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.

                  (e) CONTINUING OPERATION. Except as specifically provided in
this Section 10, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 10.

               11. INDEMNIFICATION.

                  (a) GENERAL. The Company agrees that if Executive is made a
party or a threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that Executive is or was a trustee, director or officer of
the Company, Alexander's or any subsidiary of such entities or is or was serving
at the request of the Company, Alexander's or any subsidiary as a trustee,
director, officer, member, employee or agent of another corporation or a
partnership, joint venture, trust or other enterprise, including, without
limitation, service with respect to employee benefit plans, whether or not the
basis of such Proceeding is alleged action in an official capacity as a trustee,
director, officer, member, employee or agent while serving as a trustee,
director, officer, member, employee or agent, Executive shall be indemnified and
held harmless by the Company to the fullest extent authorized by Maryland law,
as the same exists or may hereafter be amended, against all Expenses incurred or
suffered by Executive in connection therewith, and such indemnification shall
continue as to Executive even if Executive has ceased to be an officer,
director, trustee or agent, or is no longer employed by the Company or
Alexander's and shall inure to the benefit of his heirs, executors and
administrators.

                  (b) EXPENSES. As used in this Agreement, the term "Expenses"
shall include, without limitation, damages, losses, judgments, liabilities,
fines, penalties, excise taxes, settlements, and costs, attorneys' fees,
accountants' fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.

                  (c) ENFORCEMENT. If a claim or request under this Agreement is
not paid by the Company or on its behalf, within thirty (30) days after a
written claim or

                                       15
<PAGE>

request has been received by the Company, Executive may at any time thereafter
bring suit against the Company to recover the unpaid amount of the claim or
request and if successful in whole or in part, Executive shall be entitled to be
paid also the expenses of prosecuting such suit. All obligations for
indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.

                  (d) PARTIAL INDEMNIFICATION. If Executive is entitled under
any provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.

                  (e) ADVANCES OF EXPENSES. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.

                  (f) NOTICE OF CLAIM. Executive shall give to the Company
notice of any claim made against him for which indemnification will or could be
sought under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.

                  (g) DEFENSE OF CLAIM. With respect to any Proceeding as to
which Executive notifies the Company of the commencement thereof:

                     (i) The Company will be entitled to participate therein at
    its own expense; and

                     (ii) Except as otherwise provided below, to the extent that
    it may wish, the Company will be entitled to assume the defense thereof,
    with counsel reasonably satisfactory to Executive, which in the Company's
    sole discretion may be regular counsel to the Company and may be counsel to
    other officers and directors of the Company, Alexander's or any subsidiary.
    Executive also shall have the right to employ his own counsel in such
    action, suit or proceeding if he reasonably concludes that failure to do so
    would involve a conflict of interest between the Company and Executive, and
    under such circumstances the fees and expenses of such counsel shall be at
    the expense of the Company.

                     (iii) The Company shall not be liable to indemnify
    Executive under this Agreement for any amounts paid in settlement of any
    action or claim effected without its written consent. The Company shall not
    settle any action or claim in any manner which would impose any penalty or
    limitation on

                                       16
<PAGE>

    Executive without Executive's written consent. Neither the Company nor
    Executive will unreasonably withhold or delay their consent to any proposed
    settlement.

                  (h) NON-EXCLUSIVITY. The right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the declaration of trust or certificate of incorporation or by-laws
of the Company, Alexander's or any subsidiary, agreement, vote of shareholders
or disinterested directors or trustees or otherwise.

               12. LEGAL FEES AND EXPENSES. The Company shall reimburse
Executive promptly following the Commencement Date for all legal fees and
expenses reasonably incurred by Executive in connection with Executive and the
Company entering into this Agreement and the 2002 Units Agreement, upon receipt
of reasonable written evidence of such fees and expenses. If any contest or
dispute shall arise between the Company or Alexander's and Executive regarding
any provision of this Agreement, the Rabbi Trust agreement, the Company
Registration Statement, the Alexander's Registration Statement, or the
Alexander's Stock Option Agreement, the Company shall reimburse Executive for
all legal fees and expenses reasonably incurred by Executive in connection with
such contest or dispute, but only if Executive is successful in respect of
substantially all of Executive's claims brought and pursued in connection with
such contest or dispute. Such reimbursement shall be made as soon as practicable
following the resolution of such contest or dispute (whether or not appealed) to
the extent the Company receives reasonable written evidence of such fees and
expenses.

               13. SUCCESSORS; BINDING AGREEMENT.

                  (a) COMPANY'S SUCCESSORS. No rights or obligations of the
Company under this Agreement may be assigned or transferred except that the
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.

                  (b) EXECUTIVE'S SUCCESSORS. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Executive's death, this
Agreement and all rights of Executive hereunder shall inure to the benefit of
and be enforceable by Executive's beneficiary or beneficiaries, personal or
legal representatives, or estate, to the extent any

                                       17
<PAGE>

such person succeeds to Executive's interests under this Agreement. Executive
shall be entitled to select and change a beneficiary or beneficiaries to receive
any benefit or compensation payable hereunder following Executive's death by
giving the Company written notice thereof. In the event of Executive's death or
a judicial determination of his incompetence, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary(ies),
estate or other legal representative(s). If Executive should die following his
Date of Termination while any amounts would still be payable to him hereunder if
he had continued to live, all such amounts unless otherwise provided herein
shall be paid in accordance with the terms of this Agreement to such person or
persons so appointed in writing by Executive, or otherwise to his legal
representatives or estate.

               14. NOTICE. For the purposes of this Agreement, notices, demands
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given when delivered either personally or
by United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:

                  If to Executive:
                  Michael D. Fascitelli
                  888 Seventh Avenue
                  New York, New York 10106

                  with a copy to:

                  Stephen W. Skonieczny
                  Dechert
                  30 Rockefeller Plaza
                  New York, NY 10112-2200

                  If to the Company:

                  Vornado Realty Trust
                  888 Seventh Avenue
                  New York, New York 10106
                  Attention:  Steven Roth

or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.

               15. MISCELLANEOUS. No provisions of this Agreement may be
amended, modified, or waived unless such amendment or modification is agreed to
in writing signed by Executive and by a duly authorized officer of the Company,
and such waiver is set forth in writing and signed by the party to be charged.
No waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No

                                       18
<PAGE>

agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement. The respective rights and obligations
of the parties hereunder of this Agreement shall survive Executive's termination
of employment and the termination of this Agreement to the extent necessary for
the intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York without regard to its conflicts of law
principles.

               16. VALIDITY. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement, which shall remain in full force and
effect.

               17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

               18. ENTIRE AGREEMENT. This Agreement amends and restates the 1996
Agreement in its entirety and along with the 2002 Units Agreement, the Company
Share Option Agreement, the Company Registration Statement, the Alexander's
Stock Option Agreement, the Deferred Compensation Agreement, the Convertible
Units Agreement and the Rabbi Trust agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto in respect of such
subject matter. Any other prior agreement of the parties hereto in respect of
the subject matter contained herein is hereby terminated and cancelled, other
than any outstanding stock option or restricted stock agreements or any
compensatory plan or program in which the Executive is a participant on the
Commencement Date.

               19. WITHHOLDING. All payments hereunder shall be subject to any
required withholding of Federal, state and local taxes pursuant to any
applicable law or regulation.

               20. NONCONTRAVENTION. The Company represents that the Company is
not prevented from entering into, or performing this Agreement by the terms of
any law, order, rule or regulation, its by-laws or declaration of trust, or any
agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.

               21. TRUSTEE. In the event any successor to the Company is a
corporation, all references herein to "trustee" or "Board of Trustees" shall
mean "director" or "Board of Directors", respectively.

               22. SECTION HEADINGS. The section headings in this Employment
Agreement are for convenience of reference only, and they form no part of this
Agreement and shall not affect its interpretation.

                                       19
<PAGE>

               23. ACKNOWLEDGMENT. The Company hereby agrees to perform its
obligations under the last sentence of Section 5(b) of the 2002 Units Agreement
and Section 23 of the Company Share Option Agreement, and shall use its best
efforts to cause Alexander's to perform its obligations under Section 21, of the
Alexander's Stock Option Agreement.

               24. REIT REPRESENTATIONS AND WARRANTY. The Company hereby
represents and warrants to Executive that, if Executive (1) does not (x)
Beneficially Own (as such term is defined in the Amended and Restated
Declaration of Trust of the Company (the "Declaration)), hereafter come to
Beneficially Own, Constructively Own (as such term is defined in the
Declaration) or hereafter come to Constructively Own Common Equity Stock (as
such term is defined in the Declaration) of the Company other than Company Stock
received by Executive pursuant to the terms of the Company Share Option
Agreement, the Convertible Units Agreement, the 2002 Units Agreement or share
options to purchase Company Stock granted to Executive by the Company prior to
the date hereof, as well as Company Stock owned by Executive as of the date
hereof or (y) Beneficially Own (as such term is defined in the Amended and
Restated Certificate of Incorporation of Alexander's, Inc. (the "Certificate"),
hereafter come to Beneficially Own, Constructively Own (as such term is defined
in the Certificate) or hereafter come to Constructively Own Alexander's Stock
other than Alexander's Stock received by Executive pursuant to the terms of the
Alexander's Stock Option Agreement or Beneficially Owned or Constructively Owned
as a result of Executive's receipt of Company Stock under the Company Share
Option Agreement, the Convertible Units Agreement or the 2002 Units Agreement,
(2) complies with the requirements for Existing Constructive Holder status set
forth in the Declaration at all times, if any, that Executive Constructively
Owns in excess of 9.9 percent of the Company's outstanding Common Equity Stock,
and (3) complies with the requirements for Existing Constructive Holder status
set forth in the Certificate at all times, if any, that Executive Constructively
Owns in excess of 9.9 percent of the Alexander's Stock, (a) any and all
issuances or transfers of shares of Company Stock to Executive under the Company
Share Option Agreement, the Convertible Units Agreement or the 2002 Units
Agreement shall not be voided pursuant to the Declaration and shall not result
in (i) the receipt by Executive of shares classified as or exchanged for Excess
Stock (as defined in the Declaration) or (ii) Executive not acquiring
shareholder rights at all times under such shares of the Company Stock to the
fullest extent provided for in the Declaration, the Amended and Restated By-Laws
of the Company and Maryland law, and (b) any and all issuances or transfers of
shares of Alexander's Stock to Executive under the Alexander's Stock Option
Agreement shall not be void under the Certificate and shall not result in (i)
the receipt by Executive of Excess Stock (as defined in the Certificate) or (ii)
Executive not acquiring stockholder rights under such shares of Alexander's
Stock to the fullest extent provided for in the Certificate, the Amended and
Restated By-Laws of Alexander's, Inc., and Delaware law. The representation and
warranty in clause (a) of the preceding sentence is subject to approval by the
Board of an increase in the Ownership Limit (as such term is defined in the
Declaration) with respect to Executive in an amount necessary to cover all of
the shares of Company Stock referred to in clause (1)(x) of the preceding
sentence. The Company will use its best efforts to have such Board approval
adopted as soon as practicable, but in no event later than April 30, 2002.

                                       20
<PAGE>

               25. REMEDY LIMITED TO MONEY DAMAGES. Executive shall not be
entitled to specific performance for a breach of the representation and warranty
contained in paragraph 24 hereof and shall not be entitled to any other remedy
except for an action for money damages.

                                       21
<PAGE>

                  IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.

                                 VORNADO REALTY TRUST

                                  By:      /s/ Steven Roth
                                           ---------------------------------
                                           Steven Roth
                                           Chief Executive Officer

                                           /s/ Michael D. Fascitelli
                                           ---------------------------------
                                           Michael D. Fascitelli

                                       22

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