UNDERWRITING AGREEMENT

 

                                                                      Exhibit 10

 

                             Underwriting Agreement

 

 

 

 

                               1,400,000 Shares*

 

                        SOUTHCOAST FINANCIAL CORPORATION

 

                                   Common Stock

 

 

                             UNDERWRITING AGREEMENT

 

 

 

                                                                Atlanta, Georgia

                                                                October 26, 2005

 

 

 

Morgan Keegan & Company, Inc.

One Buckhead Plaza

3060 Peachtree Road, N.W. Suite 930

Atlanta, Georgia 33716

 

Ladies and Gentlemen:

 

         Southcoast   Financial   Corporation,   a South Carolina   corporation (the

"Company"),   proposes,   subject to the terms and conditions   stated   herein,   to

issue   and sell to   Morgan   Keegan   &   Company,   Inc.   (the   "Underwriter"),   an

aggregate of 1,400,000   shares of its Common Stock,   no par value per share (the

"Common   Stock").   The   aggregate   of   1,400,000   shares of   Common   Stock to be

purchased   from the   Company   are called the "Firm   Shares."   In   addition,   the

Company   has agreed to sell to the   Underwriter,   upon the terms and   conditions

stated   herein,   up to   an   additional   210,000   shares   of   Common   Stock   (the

"Additional   Shares") to cover   over-allotments by the Underwriter,   if any. The

Firm   Shares and the   Additional   Shares are   collectively   referred   to in this

Underwriting Agreement as the "Shares."

 

         The   Company   wishes to confirm as follows   its   agreement   with you in

connection with the purchase of the Shares from the Company.

 

1. Registration Statement and Prospectus. The Company has (i) prepared and filed

with the Securities and Exchange   Commission   (the   "Commission")   in accordance

with the provisions of the Securities Act of 1933, as amended, and the rules and

regulations   of the   Commission   thereunder   (collectively,   the "1933 Act"),   a

registration   statement on Form S-l (Commission File No.   333-128247) as amended

 

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

option.

 

 

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by   Amendment   No.1 on October   13,   2005,   including   the   related   preliminary

prospectus or prospectuses.   Such registration statement, including the exhibits

thereto   and   schedules   thereto at the time it became   effective   is called the

"Registration    Statement."   Promptly   after   execution   and   delivery   of   this

Underwriting   Agreement,   the   Company   will   prepare and file a   prospectus   in

accordance   with the   provisions   of Rule 430A ("Rule 430A") and Rule 424 ("Rule

424") of the 1933 Act, as such   prospectus is further   amended and   supplemented

(the "Prospectus"). If the Company files another registration statement with the

Commission to register a portion of the Shares pursuant to Rule 462(b) under the

1933 Act   (the   "Rule   462   Registration   Statement"),   then   any   reference   to

"Registration   Statement"   herein   shall be deemed to include   the   registration

statement on Commission Form S-1 (Commission   File No.   333-128247) and the Rule

462 Registration   Statement,   as each such registration statement may be amended

pursuant   to the 1933 Act.   The   prospectus   subject to   completion   in the form

included in the   Registration   Statement   at the time of   effectiveness   of such

Registration    Statement   with   the    Commission,    together   with   the   related

preliminary   prospectus,   as these may be amended or   supplemented   from time to

time until the final   Prospectus   dated of even date   herewith is referred to in

this Underwriting   Agreement as the "Preliminary   Prospectus." All references in

this   Underwriting   Agreement   to   the   Registration   Statement,   the   Rule   462

Registration   Statement,   a   Preliminary   Prospectus or the   Prospectus,   or any

amendments   or   supplements   to any of the   foregoing,   shall   include   any copy

thereof filed with the   Commission   pursuant to its Electronic   Data   Gathering,

Analysis and Retrieval System ("EDGAR") and Commission Regulation S-T.

 

         2. Agreements to Sell and Purchase.   The Company hereby agrees to issue

and   sell the Firm   Shares   to the   Underwriter   and,   upon the   basis of and in

reliance on the Company's   representations,   warranties   and   agreements   herein

contained,   and subject to all the terms and   conditions   set forth herein,   the

Underwriter   agrees to purchase   from the Company at a purchase   price of $20.21

per Share (the   "Purchase   Price per Share") the number of Firm Shares set forth

herein.

 

         The Company hereby also agrees to sell to the Underwriter and, upon the

basis   of and in   reliance   on the   Company's   representations,   warranties   and

agreements   of the   Company   herein   contained   and subject to all the terms and

conditions set forth herein,   the   Underwriter   shall have the right for 30 days

from the date of the   Prospectus   to   purchase   from the   Company   up to 210,000

Additional   Shares at the Purchase Price per Share. The Additional Shares may be

purchased   solely for the purpose of covering   over-allotments,   if any, made in

connection   with the   offering   of the   Firm   Shares.   The   option   to   purchase

Additional   Shares may be exercised at any time within 30 days after the date of

the Prospectus, but no more than once.

 

         3. Terms of Public   Offering.   The Company has been advised by you that

you   propose   to   make a   public   offering   of the   Shares   as   soon   after   the

Registration   Statement and this Underwriting Agreement have become effective as

in your   judgment is advisable   and initially to offer the Shares upon the terms

set forth in the Prospectus.

 

         Not later than   12:00 P.M.   Eastern   time on the   second   business   day

following   the date the Shares are released by the   Underwriter   for sale to the

 

 

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public,   the   Company   shall   deliver   or cause to be   delivered   copies   of the

Prospectus   in such   quantities   and at such   places   as the   Underwriter   shall

request.

 

         4.   Delivery   of the   Shares   and   Payment   Therefor.   Delivery   to the

Underwriter of the Firm Shares and payment therefor shall be made at the offices

of Morgan Keegan & Company,   One Buckhead Plaza, 3060 Peachtree Road, N.W. Suite

930, Atlanta,   Georgia at 10:00 AM., Atlanta, Georgia time, on October 31, 2005,

or such other place,   time and date not later than 10:00 AM.,   Atlanta,   Georgia

time,   on October 31, 2005,   as Morgan   Keegan shall   designate by notice to the

Company (the time and date of such closing are called the "Closing   Date").   The

place of   closing   for the Firm   Shares   and the   Closing   Date may be varied by

agreement between Morgan Keegan and the Company. The Company hereby acknowledges

that circumstances   under which Morgan Keegan may provide notice to postpone the

Closing   Date   as   originally    scheduled   include,    without   limitation,    any

determination   by the   Company   or Morgan   Keegan to   recirculate   to the public

copies of an amended or   supplemented   Prospectus or a delay as   contemplated by

the provisions of Section 11 hereof.

 

         Delivery to the   Underwriter of any   Additional   Shares and payment for

any Additional   Shares to be purchased by the   Underwriter   shall be made at the

offices of Morgan Keegan & Company,   One Buckhead   Plaza,   3060 Peachtree   Road,

N.W. Suite 930, Atlanta,   Georgia, at 10:00 AM., Atlanta,   Georgia time, on such

date or dates (each, an "Additional Closing Date") (which may be the same as the

Closing Date, but shall in no event be earlier than the Closing Date nor earlier

than   three nor later   than ten   business   days   after the   giving of the notice

hereinafter   referred to) as shall be specified in a written notice, from Morgan

Keegan to the Company of the   Underwriter's   determination to purchase a number,

specified in such notice, of Additional Shares.   Such notice may be given at any

time within 30 days after the date of the   Prospectus and must set forth (i) the

aggregate number of Additional   Shares as to which the Underwriter is exercising

the option and (ii) the names and   denominations   in which the   certificates for

which the Additional   Shares are to be registered.   The place of closing for the

Additional   Shares and the   Additional   Closing   Date may be varied by agreement

between Morgan Keegan and the Company.

 

         Certificates   for the Firm Shares and for any   Additional   Shares to be

purchased   hereunder shall be registered in such names and in such denominations

as you shall request prior to 1:00 P.M.,   Atlanta,   Georgia time, not later than

the second   full   business   day   preceding   the Closing   Date or the   Additional

Closing Date, as the case may be. Such   certificates   shall be made available to

you in Atlanta,   Georgia or such other location   designated by Morgan Keegan for

inspection and packaging not later than 9:30 AM., Atlanta,   Georgia time, on the

business day   immediately   preceding the Closing Date or the Additional   Closing

Date, as the case may be. The   certificates   evidencing   the Firm Shares and any

Additional   Shares to be   purchased   hereunder   shall be delivered to you by the

Company on the Closing Date or the Additional   Closing Date, as the case may be,

against   payment by the   Underwriter   of the   purchase   price   therefor   by wire

transfer of immediately   available funds to an account   specified by the Company

in writing not later than the close of business on the business day   immediately

preceding the Closing Date or the   Additional   Closing Date, as the case may be.

Payment for the Shares sold by the Company   hereunder   shall be delivered by the

Underwriter to the Company on the Closing Date and each Additional Closing Date.

 

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         5. Covenants and Agreements of the Company.

 

         The Company covenants and agrees with the Underwriter as follows:

 

         (a)   The   Registration    Statement   has   been   declared    effective   by

Commission   order dated October 26, 2005.   The Company will use its best efforts

to cause the   Registration   Statement to be maintained   as   effective,   and will

advise you   promptly   and, if   requested   by you,   will   confirm   such advice in

writing (i) if and when the   Registration   Statement is no longer   effective and

the   time   and   date   of any   filing   of   any   post-effective   amendment   to the

Registration   Statement or any supplement to any   Preliminary   Prospectus or the

Prospectus   and the time   and date   that   any   post-effective   amendment   to the

Registration   Statement becomes effective,   (ii) if Rule 430A under the 1933 Act

is employed,   when the   Prospectus has been timely filed pursuant to Rule 424(b)

under the 1933 Act, (iii) of the receipt of any comments of the   Commission,   or

any request by the Commission for amendments or supplements to the   Registration

Statement,   any   Preliminary   Prospectus   or the   Prospectus   or for   additional

information, (iv) of the issuance by the Commission of any stop order suspending

the   effectiveness   of   the   Registration   Statement   or of   the   suspension   of

qualification   of the Shares for   offering   or sale in any   jurisdiction   or the

initiation of any proceeding for such purposes and (v) within the period of time

referred to in Section   5(e)   below,   of any change in the   Company's   condition

(financial or other), business,   prospects,   properties, net worth or results of

operations,   or of any event that comes to the   attention   of the   Company   that

makes   any   statement   made   in   the   Registration   Statement,   the   Preliminary

Prospectus or the   Prospectus   (as then amended or   supplemented)   untrue in any

material respect or that requires the making of any additions thereto or changes

therein in order to make the statements   therein (in the case of the Preliminary

Prospectus,   in light of the   circumstances   under   which   they   were   made) not

misleading in any material   respect,   or of the necessity to amend or supplement

the Prospectus (as then amended or   supplemented) to comply with the 1933 Act or

any other Law (as defined in Section 6(k) below).   If at any time the Commission

shall issue any stop order   suspending   the   effectiveness   of the   Registration

Statement,   the   Company   will   make   every   reasonable   effort   to   obtain   the

withdrawal or lifting of such order at the earliest   possible   time. The Company

will   provide the   Underwriter   with copies of the form of   Prospectus,   in such

number as the Underwriter may reasonably   request,   and file with the Commission

such   Prospectus in accordance with Rule 424(b) of the 1933 Act before the close

of business on the first business day immediately following the date hereof.

 

         (b) The   Company   will   furnish   to you,   without   charge,   two   signed

duplicate   originals of the Registration   Statement as originally filed with the

Commission and of each amendment thereto, including financial statements and all

exhibits thereto,   and will also furnish to you, without charge,   such number of

conformed copies of the   Registration   Statement as originally filed and of each

amendment thereto as you may reasonably request.

 

         (c) The Company   will not file any Rule 462   Registration   Statement or

any amendment to the Registration   Statement or make any amendment or supplement

to the Prospectus   unless (i) you shall have previously been advised thereof and

been   given a   reasonable   opportunity   to   review   such   filing,   amendment   or

 

 

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supplement and (ii) you have not reasonably   objected to such filing,   amendment

or   supplement   after   being so   advised   and   having   been   given a   reasonable

opportunity to review such filing, amendment or supplement.

 

         (d) Prior to the execution and delivery of this Underwriting Agreement,

the   Company has   delivered   or will   deliver to you,   without   charge,   in such

quantities as you have requested or may hereafter reasonably request,   copies of

each form of the   Preliminary   Prospectus.   Consistent   with the   provisions   of

Section 5(e) hereof,   the Company   consents to the use, in   accordance   with the

provisions   of the   1933 Act and   with   the   securities   or Blue Sky laws of the

jurisdictions in which the Shares are offered by the Underwriter and by dealers,

prior to the date of the Prospectus, of each Preliminary Prospectus so furnished

by the Company.

 

         (e) As soon   after the   execution   and   delivery   of this   Underwriting

Agreement as is practicable   and thereafter from time to time for such period as

in the   reasonable   opinion of   counsel   for the   Underwriter   a   prospectus   is

required   by the   1933   Act to be   delivered   in   connection   with   sales by the

Underwriter or a dealer (the "Prospectus   Delivery   Period"),   and for so long a

period as you may request for the   distribution of the Shares,   the Company will

deliver to the   Underwriter and each dealer,   without charge,   as many copies of

the   Prospectus   (and of any   amendment   or   supplement   thereto)   as   they   may

reasonably   request.   The Company   consents to the use of the Prospectus (and of

any amendment or supplement   thereto) in accordance   with the   provisions of the

1933 Act and with the securities or Blue Sky laws of the   jurisdictions in which

the Shares are offered by the   Underwriter and by all dealers to whom Shares may

be sold,   both in   connection   with the   offering and sale of the Shares and for

such period of time   thereafter as the Prospectus is required by the 1933 Act to

be delivered in connection   with sales by any   Underwriter or dealer.   If at any

time prior to the later of (i) the completion of the   distribution of the Shares

pursuant to the offering contemplated by the Registration   Statement or (ii) the

expiration of prospectus delivery   requirements with respect to the Shares under

Section 4(3) of the 1933 Act and Rule 174 thereunder, any event shall occur that

in the judgment of the Company or in the opinion of counsel for the   Underwriter

is required to be set forth in the Prospectus (as then amended or   supplemented)

or should be set forth therein in order to make the statements   therein,   in the

light of the circumstances under which they were made, not misleading,   or if it

is necessary to supplement   or amend the   Prospectus to comply with the 1933 Act

or any other law, the Company will   forthwith   prepare and,   subject to Sections

5(a) and 5(c) hereof, file with the Commission and use its best efforts to cause

to become   effective   as   promptly   as possible   an   appropriate   supplement   or

amendment   thereto,   and will   furnish to the   Underwriter,   without   charge,   a

reasonable number of copies thereof.

 

         (f) The Company will cooperate with you and counsel for the Underwriter

in connection with the   registration or qualification of the Shares for offering

and sale by the Underwriter and by dealers under the securities or Blue Sky laws

of such   jurisdictions   as you may   reasonably   designate   and   will   file   such

consents to service of process or other documents as may be reasonably necessary

in order to effect and maintain such   registration or qualification   for so long

as required to complete   the   distribution   of the Shares;   provided   that in no

event   shall   the   Company   be   obligated   to   qualify   to do   business   in   any

jurisdiction   where it is not now so   qualified or to take any action that would

subject it to general service of process in suits,   other than those arising out

 

 

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of the   offering or sale of the Shares,   as   contemplated   by this   Underwriting

Agreement   and   the   Prospectus,   in any   jurisdiction   where   it is not   now so

subject.   In the event that the   qualification of the Shares in any jurisdiction

is suspended,   the Company shall so advise you promptly in writing.   The Company

will use its best   efforts to qualify or register   its Common   Stock for sale in

non-issuer transactions under (or obtain exemptions from the application of) the

Blue Sky laws of each state where necessary to permit market making transactions

and secondary   trading and will comply with such Blue Sky laws and will continue

such qualifications,   registrations and exemptions in effect for a period of not

less than one year after the date hereof.

 

         (g) The Company will make generally available to its security holders a

consolidated   earnings   statement   (in form   complying   with the   provisions   of

Commission Rule 158), which need not be audited,   covering a twelve-month period

commencing after the effective date of the   Registration   Statement and the Rule

462   Registration   Statement,   if any,   and   ending   not   later   than 15   months

thereafter,   as   soon   as   practicable   after   the   end of   such   period,   which

consolidated   earnings   statement shall satisfy the provisions of Section 11 (a)

of the 1933 Act.

 

         (h) During   the   Prospectus   Delivery   Period and for not less than one

year after the date   hereof,   the Company   will file and   furnish all   documents

required to be filed or furnished with the   Commission   pursuant to Sections 13,

14 and 15 of the   Securities   Exchange Act of 1934,   as amended   (the   "Exchange

Act") and Commission   regulations and rules ("Commission   Regulations"),   in the

manner and within the time periods   required by the Exchange Act and   Commission

requirements of Nasdaq National Market   ("Nasdaq") and the National   Association

of Securities   Dealers,   Inc. (the "NASD") or any national   securities   exchange

where any Company securities are listed.

 

         (i) During   the period   beginning   on the date   hereof and ending   five

years   from the date   hereof,   the   Company   will   furnish to you (i) as soon as

available,   a copy of each proxy statement,   quarterly or annual report or other

report of the Company mailed to shareholders   or filed with the Commission,   the

NASD or Nasdaq or any   national   securities   exchange and (ii) from time to time

such other information concerning the Company as you may reasonably request.

 

         (j)   If   this   Underwriting   Agreement   shall   terminate   or   shall   be

terminated after execution   pursuant to any provision hereof (except pursuant to

a termination   under Section 11 hereof,   other than clauses (ii), (iv) or (vii))

or if this Underwriting Agreement shall be terminated by the Underwriter because

of any   inability,   failure or refusal on the part of the   Company to perform in

all material respects any agreement herein or to comply in all material respects

with   any of the   terms or   provisions   hereof   or to   fulfill   in all   material

respects   any of the   conditions   of this   Underwriting   Agreement,   the Company

agrees   to   reimburse   you   for all   out-of-pocket   expenses   (including   travel

expenses and the fees and expenses of counsel for the Underwriter, but excluding

wages   and   salaries   paid by you)   reasonably   incurred   by you III   connection

herewith.

 

         (k) The Company will apply the net proceeds from the sale of the Shares

to be sold by it   hereunder in   accordance   in all   material   respects   with the

statements under the caption "Use of Proceeds" in the Prospectus.

 

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         (l) If Rule   430A   under the 1933 Act is   employed,   the   Company   will

timely file the Prospectus pursuant to Rule 424(b) under the 1933 Act.

 

         (m) For a period   of 90 days   after   the date of the   Prospectus   first

filed   pursuant to Rule 424(b) under the 1933 Act,   without   your prior   written

consent, the Company will not and will cause each of its subsidiaries to not (i)

directly or indirectly,   issue,   announce the intention to sell,   sell, offer or

contract to sell or otherwise   dispose of or transfer any shares of Common Stock

or securities   convertible   into or   exchangeable   or exercisable   for shares of

Common   Stock   (collectively,   "Company   Securities")   or any rights to purchase

Company Securities,   or file any registration   statement under the 1933 Act with

respect to any of the foregoing,   or (ii) enter into any swap, forward contract,

or other agreement that transfers,   in whole or in part, directly or indirectly,

the economic   consequences or risks of ownership of Company   Securities   whether

any such swap or   transaction   is to be settled by delivery   of Common   Stock or

other securities,   in cash or otherwise,   except to the Underwriter   pursuant to

this   Underwriting   Agreement and except for (x) sales of shares of Common Stock

to employees   under the Company's   Employee Stock Purchase Plan (as described in

the   Prospectus)   (y) grants of options   pursuant   to the   Company's   1999 Stock

Option Plan (as   described in the   Prospectus)   and (z) except for   issuances of

shares of Common Stock upon the exercise of options   outstanding   as of the date

hereof under the Company's 1999 Stock Option Plan.

 

         (n) Prior to the Closing Date or the   Additional   Closing   Date, as the

case may be, the Company will furnish to you, as promptly as possible, copies of

any unaudited interim   consolidated   financial statements of the Company and its

subsidiaries   for any period   subsequent to the periods covered by the financial

statements appearing in the Prospectus.

 

         (o) The Company   will comply with all   provisions   of the   undertakings

contained in the Registration Statement.

 

         (p) The Company will not at any time, directly or indirectly,   take any

action designed, or which might reasonably be expected to cause or result in, or

which will constitute,   stabilization or manipulation of the price of the shares

of Common Stock to facilitate the sale or resale of any of the Shares.

 

         (q) The Company filed with Nasdaq a notice of sale of additional shares

on   September   12,   2005,   and will timely file with   Nasdaq all   documents   and

notices   required by Nasdaq of companies that have or will issue securities that

are traded on Nasdaq.

 

         (r) The Company shall engage and maintain,   at its expense,   a transfer

agent and, if necessary under the jurisdiction of its incorporation or the rules

of any   national   securities   exchange   on which the Common   Stock is listed,   a

registrar   (which,   if   permitted by   applicable   laws and rules may be the same

entity as the transfer agent) for the Common Stock.

 

         (s) The Company   will have an annual   audit   prepared by an   accounting

firm that is registered and in good standing with the Public Company   Accounting

Oversight   Board   ("PCAOB") and is   "independent"   of the Company under the 1933

Act, the Exchange Act and the PCAOB's rules.

 

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         6. Representations and Warranties of the Company.

 

         The   Company    hereby    represents,    warrants   and   covenants   to   the

Underwriter   on the date hereof,   and shall be deemed to represent,   warrant and

covenant to the Underwriter on the Closing Date and the Additional Closing Date,

as the case may be, and the Underwriter is relying upon, the following:

 

         (a) The Company   satisfies all of the   requirements of the 1933 Act for

use of Form S-l and for the   offering   of   Shares   contemplated   hereby.   On the

original effective date of the Registration   Statement, on the effective date of

the most recent   post-effective   amendment   thereto,   if any,   the   Registration

Statement   complied in all material   respects with the   requirements of the 1933

Act and all Commission Regulations, and did not contain an untrue statement of a

material fact or omit to state a material fact required to be stated   therein or

necessary   to make the   statements   therein   not   misleading.   Each   Preliminary

Prospectus   and   Prospectus   included as part of the   Registration   Statement as

originally   filed or as part of any   amendment or supplement   thereto,   or filed

pursuant   to Rule 424 under the 1933 Act,   complied or will comply when so filed

in all material   respects   with the   provisions   of the 1933 Act and   Commission

Regulations,   provided that this   representation   and warranty does not apply to

statements in or omissions   from such   Preliminary   Prospectus or Prospectus (or

any   amendment or   supplement   thereto)   made in reliance upon and in conformity

with information relating to the Underwriter furnished to the Company in writing

by or on   behalf of the   Underwriter   expressly   for use   therein,   which   shall

include   only the   information   contained in   "Underwriting   -   Commissions   and

Expenses", "Stabilization" and "- Passive Market Making" sections.

 

         (b) None of the Commission or any securities or Blue Sky authorities of

any state or other   jurisdiction   has issued any order   preventing or suspending

the   use   of the   Registration   Statement,   any   Preliminary   Prospectus   or the

Prospectus and no proceeding for that purpose has been   instituted or threatened

by the   Commission   or the   securities or Blue Sky   authorities   of any state or

other jurisdiction.

 

         (c) The Company has prepared each of the   Registration   Statement,   any

Rule 462 Registration   Statement and any post-effective   amendment thereto,   the

Preliminary   Prospectus   and the   Prospectus   and all   amendments or supplements

thereto.   The   Registration   Statement   (including   any   Rule   462   Registration

Statement), in the form in which it became effective and also in such form as it

may be in when any post-effective amendment thereto shall become effective, each

Preliminary   Prospectus   and the   Prospectus,   and any   supplement   or amendment

thereto   when   filed   with the   Commission   under   Rule 424   under the 1933 Act,

complied and will comply as to form in all material respects with the provisions

of the 1933 Act and all applicable   Commission   Regulations   and will not at any

such times   contain an untrue   statement   of a material   fact or omit to state a

material fact required to be stated   therein or necessary to make the statements

therein not misleading,   except that this   representation   and warranty does not

apply to   statements   in or   omissions   from the   Registration   Statement or the

Prospectus (or any amendment or supplement thereto) made in reliance upon and in

conformity with information relating to the Underwriter furnished to the Company

in writing by or on behalf of the   Underwriter   through   you   expressly   for use

therein.

 

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          (d)   Each   Preliminary   Prospectus   and the   Prospectus,   if   filed   by

electronic   transmission   pursuant   to   EDGAR   (except   as may be   permitted   by

Regulation   S- T under   the 1933   Act),   was   identical   (other   than any   EDGAR

formatting)   to the   copy   thereof   delivered   to   the   Underwriter   for   use in

connection with the offer and sale of the Shares.

 

         (e) All of the   Company's   filings or reports   filed under the 1933 Act

and the Exchange Act, when they were filed (or, if any amendment with respect to

any such document was filed,   when such   amendment was filed),   conformed in all

material   respects with the requirements of the 1933 Act or the Exchange Act (as

applicable)   and all   applicable   Commission   Regulations,   and   any   additional

reports or filings,   when so filed,   will,   when they are filed,   conform in all

material   respects with the requirements of the 1933 Act or the Exchange Act (as

applicable) and all applicable Commission Regulations; no such additional filing

or report   when it was filed   (or,   if an   amendment   with   respect   to any such

document   was   filed,   when   such   amendment   was   filed),   contained   an untrue

statement of a material   fact or omitted to state a material fact required to be

stated   therein   or   necessary   in   order   to make the   statements   therein   not

misleading;   and no such further Incorporated   Document,   when it is filed, will

contain an untrue   statement of a material fact or will omit to state a material

fact required to be stated   therein or necessary in order to make the statements

therein not misleading.

 

         (f) The   capitalization   of the   Company is and will be as set forth in

the Prospectus as of the date set forth therein.   All the outstanding   shares of

Common   Stock of the   Company   have   been,   and as of the   Closing   Date and the

Additional   Closing   Date,   as the case may be,   will be,   duly   authorized   and

validly   issued,   fully paid and   nonassessable   and free of any   preemptive   or

similar   rights.   The   Shares to be issued   and sold to the   Underwriter   by the

Company   hereunder have been duly   authorized   and, when issued and delivered to

the   Underwriter   against full   payment   therefor in   accordance   with the terms

hereof   will be validly   issued,   fully paid and   nonassessable   and free of any

preemptive or similar rights.   The capital stock of the Company   conforms to the

description   thereof included in the   Registration   Statement and the Prospectus

(or any amendment or supplement   thereto).   The delivery of certificates for the

Shares being sold by the Company against payment therefor   pursuant to the terms

of this Underwriting Agreement will pass valid title to the Shares being sold by

the   Company,   free and clear of any Lien (as defined in Section   6(i) below) or

defect in title,   to the   Underwriter,   which is purchasing   such Shares in good

faith and without notice of any Lien or defect in title.   The   certificates   for

the Shares being sold by the Company are in valid and sufficient form.

 

         (g) The   Company   is a bank   holding   company   under   the Bank   Holding

Company Act of 1956,   as amended (the "BHC Act") and is duly   registered as such

with the   Board   of   Governors   of the   Federal   Reserve   System   (the   "Federal

Reserve").   The Company is also subject to   regulation   and   supervision   by the

South Carolina State Board of Financial   Institutions   (the "State Board").   The

Company is duly organized and validly existing as a corporation in good standing

under the laws of the State of South   Carolina   with   full   corporate   power and

authority to own,   lease and operate its   properties and to conduct its business

as presently   conducted and as described in the   Registration   Statement and the

Prospectus (and any amendment or supplement thereto), and is duly registered and

qualified to conduct its business and is in good   standing in each   jurisdiction

or place   where the nature of its   properties   or the   conduct   of its   business

 

 

                                       9

<PAGE>

 

requires   such   registration   or   qualification,   except where the failure to so

register or qualify has not had and will not have a material   adverse   effect on

the condition (financial or otherwise),   business,   management,   properties, net

worth,   results of operations   or prospects of the Company and its   subsidiaries

taken as a whole (a   "Material   Adverse   Effect").   The   subsidiaries   listed on

Schedule 1 to this Agreement are the Company's only subsidiaries.

 

         (h) Each of the Company's   subsidiaries is an entity duly organized and

validly   existing   and   in   good   standing   under   the   laws   of   its   state   of

organization   with full entity power and authority to own, lease and operate its

properties   and to conduct its business as presently   conducted and as described

in   the   Registration   Statement   and   the   Prospectus   (and   any   amendment   or

supplement   thereto),   and is duly   registered   and   qualified   to   conduct   its

business and is in good standing in each   jurisdiction or place where the nature

of its properties or the conduct of its business   requires such   registration or

qualification,   except   where the   failure to so register or qualify has not had

and will not have a Material Adverse Effect. The subsidiaries listed on Schedule

1 to this Agreement are the Company's only subsidiaries.

 

         (i) The issued shares of capital stock or other ownership   interests of

each of the Company's subsidiaries have been duly authorized and validly issued,

are fully   paid and   nonassessable   and are owned by the   Company,   directly   or

indirectly,   free and   clear of any   security   interests,   mortgage,   pledge   or

negative   pledge,   hypothecation,   lien,   encumbrances,   or adverse   equities or

claims ("Liens").   The Company does not have any subsidiaries and does not own a

material interest in or control, directly or indirectly,   any other corporation,

partnership,   joint venture, association,   trust or other business organization,

except as set forth in the Registration Statement and Schedule 1 hereto. As used

in this Underwriting   Agreement,   "subsidiaries" shall have the meaning provided

in Commission   Rule 405 under the 1933 Act, and includes all direct and indirect

subsidiaries of the Company.

 

         (j) There are no legal or   governmental   proceedings   before or brought

by, any governmental,   regulatory,   administrative or self-regulatory authority,

arbitral   body or   court   ("Governmental   Authority")   pending   or,   to the best

knowledge of the Company, threatened, against the Company or its subsidiaries or

to which the Company or its subsidiaries or any of their properties are subject,

that   are   required   to be   described   in   the   Registration   Statement   or   the

Prospectus (or any amendment or supplement thereto),   but that are not described

as required therein.   Except as described in the Prospectus,   there is no claim,

action, suit, proceeding,   inquiry (formal or informal),   or investigation by or

before any   Governmental   Authority   pending   or, to the best   knowledge   of the

Company, threatened, against or involving the Company or its subsidiaries or any

of their   properties,   which might   individually or in the aggregate   prevent or

adversely affect the transactions   contemplated by this Underwriting   Agreement,

or result in a Material Adverse Effect, nor to the Company's knowledge, is there

any   basis   for   any   such   claim,    action,    suit,    inquiry,    proceeding   or

investigation.   There are no   agreements,   contracts,   commitments,   indentures,

leases, or other documents or instruments (collectively,   "Agreements") that are

required to be described in the Registration Statement or the Prospectus (or any

amendment   or   supplement   thereto) or to be filed as an exhibit to or otherwise

included in the   Registration   Statement that are not described in or filed with

the   Registration   Statement and the   Prospectus as required by the 1933 Act and

the   Commission   Regulations.   All Agreements to which the Company or any of its

subsidiaries is a party have been duly authorized, executed and delivered by the

 

 

                                       10

<PAGE>

 

Company or the applicable subsidiary, constitute valid and binding agreements of

the Company or the applicable subsidiary and are enforceable against the Company

or the applicable   subsidiary in accordance   with the terms   thereof,   except as

enforceability   thereof   may be limited by (i) the   application   of   bankruptcy,

receivership,   conservatorship,   reorganization,   insolvency   and   similar   Laws

affecting   creditors'   rights   generally   and (ii)   equitable   principles   being

applied at the   discretion of a court before which any proceeding may be brought

(the "Bankruptcy and Equity Exception").   Neither the Company nor the applicable

subsidiary   has   received   notice or been made aware that any other   party is in

breach of or default to the Company under any Agreement.

 

         (k) Neither the Company nor any of its subsidiaries is (i) in violation

of (A)   its   articles   of   incorporation   or   bylaws,   or   other   organizational

documents   ("Organizational   Documents"),   (B) any   law,   ordinance,   rules   and

regulations of, agreements with, and commitments to, orders, rulings, directives

and decrees of, any Governmental Authority (collectively, "Laws"), applicable to

the   Company or any of its   subsidiaries,   the   violation   of which would have a

Material   Adverse   Effect;   or (ii) in   default in any   material   respect in the

performance of any obligation, agreement or condition contained in (A) any bond,

debenture,   lease,   note or any other evidence of   indebtedness or obligation or

(B) any Agreement   (each of (A) and (B), an "Existing   Instrument") to which the

Company   or any   of   its   subsidiaries   is a   party   or by   which   any of   their

properties   may be   subject   or bound,   which   default   has had or would   have a

Material Adverse Effect;   and no state of facts exists that constitutes an event

of default   on the part of the   Company   or any of its   subsidiaries,   or to the

Company's   knowledge,   an event of default by any other   party   thereto,   or any

event,   nonoccurrence,   act or   omission   that,   with notice or lapse of time or

both, would constitute an event of default under its   Organizational   Documents,

any applicable Laws or any Existing Instruments.

 

         (l) The Company's execution and delivery of this Underwriting Agreement

and the   performance by the Company of its obligations   under this   Underwriting

Agreement   have   been   duly and   validly   authorized   by the   Company,   and this

Underwriting Agreement has been duly executed and delivered by the Company. This

Underwriting   Agreement constitutes a valid and legally binding agreement of the

Company, enforceable against the Company in accordance with its terms, except to

the extent enforceability may be limited by the Bankruptcy and Equity Exceptions

and to   limitations on the rights to indemnity and   contribution   hereunder that

exist by virtue of public policy under federal and state securities laws.

 

         (m) None of the offer,   issuance and sale of the Shares by the Company,

the execution,   delivery or performance   of this   Underwriting   Agreement by the

Company nor the   consummation   by the Company of the   transactions   contemplated

hereby (i) requires any consent,   approval,   authorization   or other order of or

registration or filing with, any Governmental   Authority   (except such as may be

required for the   registration   of the Shares under the 1933 Act, the listing of

the Shares for trading on Nasdaq and compliance   with the securities or Blue Sky

laws of various   jurisdictions,   all of which have been or will be,   effected in

accordance   with   this   Underwriting   Agreement),   (ii)   conflicts   with or will

conflict with or constitutes or will constitute a breach of, or a default under,

applicable   Laws,   the   Company's    Organizational   Documents   or   any   Existing

Instrument   to which the   Company   or any of its   subsidiaries   is a party or by

which any of its   properties   may be subject or bound,   (iii)   violates   any Law

applicable to the Company or any of its subsidiaries or any of their properties,

 

 

                                       11

<PAGE>

 

or (iv) results in a breach of, default or Debt Repayment   Triggering   Event (as

defined below) under,   or results in the creation or imposition of any Lien upon

any property or assets of the Company or any of its subsidiaries pursuant to, or

requires the consent of any other party to, any Existing Instrument,   except for

such conflicts,   breaches,   defaults or Liens, that will not, individually or in

the aggregate, result in a Material Adverse Effect. A "Debt Repayment Triggering

Event" means any event or condition that gives,   or with the giving of notice or

the lapse of time or both would give, the holder of any note,   debenture,   lease

or other evidence of   indebtedness   or obligation,   whether secured or unsecured

(or any indenture   Trustee or other person   acting on such holder's   behalf) the

right to accelerate any payment or maturity of such   indebtedness or obligation,

to require the Company or any of its subsidiaries to repurchase, redeem or repay

all or a portion of such   indebtedness   or   obligation   or increase the interest

charges or fees on any such indebtedness or obligation.

 

         (n) Except as   described in the   Prospectus,   and except for options to

purchase   capital stock issued   pursuant to the Company's 1999 Stock Option Plan

(the "1999 Stock Option Plan") and/or the Company's Employee Stock Purchase Plan

(the "ESPP"),   neither the Company nor any of its   subsidiaries is a party to or

bound by, and at the Closing Date and the   Additional   Closing Date, as the case

may be, will not be a party to or bound by, any outstanding options,   restricted

stock grants,   restricted stock,   stock   appreciation   rights or other rights to

purchase or acquire,   or any warrants to   subscribe   for, or any   securities   or

obligations    convertible   into   or   exchangeable    for,   or   any   contracts   or

commitments to issue or sell, any shares of Common Stock or any such warrants or

convertible   securities or   obligations.   No holder of securities of the Company

has rights to the   registration   of any securities of the Company as a result of

or   in   connection   with   the   filing   of   the   Registration   Statement   or   the

consummation   of   the   transactions   contemplated   hereby   that   have   not   been

satisfied or heretofore waived in writing.

 

         (o) Elliott Davis, LLC, which is the independent public accounting firm

that is registered with the PCAOB and that has certified the Company's financial

statements   (including the related notes thereto, and the supporting   schedules,

if any) filed as part of the   Registration   Statement and the Prospectus (or any

amendment or supplement thereto),   are independent registered public accountants

as required by the 1933 Act, the Exchange Act,   Commission   Regulations   and the

PCAOB.

 

         (p) The consolidated   and parent-only   financial   statements,   together

with   related   schedules,   exhibits   and   notes,   included   in the   Registration

Statement and the Prospectus (and any amendment or supplement thereto),   present

fairly   the   consolidated   and   parent-only   financial   condition,    results   of

operations,   cash   flows   and   shareholders'   equity   of   the   Company   and   its

subsidiaries   on a consolidated   basis and of the Company on a parent only basis

at the respective dates or for the respective   periods to which they apply; such

statements   and   related   schedules,   exhibits   and notes have been   prepared in

accordance   with United States   generally   accepted   accounting   principles   and

Commission   Regulations   consistently   applied   throughout the periods involved,

except as may be expressly   disclosed   therein.   The financial   and   statistical

information and data set forth in the   Registration   Statement and Prospectus is

accurately   presented and is consistent   with such financial   statements and the

books and records of the Company.   No other   financial   statements,   exhibits or

schedules are required to be included in the Registration Statement.

 

                                        12

<PAGE>

 

         (q) The Company has a duly constituted   audit committee of its Board of

Directors   (the   "Audit   Committee"),   composed   entirely   of   members   who   are

"independent"   in accordance   with   applicable   Law,   including   Federal Deposit

Insurance Act ("FDIA"), Section 36 and applicable regulations thereunder and all

NASD and Nasdaq rules and regulations   (collectively,   "NASD Rules"). Such Audit

Committee has operated consistent in all material respects with the requirements

of the   Securities   Act,   the   Exchange   Act,   the BHC Act,   the FDIA and   other

applicable   state and federal   banking Laws,   and the NASD Rules.   The Company's

independent   accountants   have   reviewed   each   Interim   Financial   Statement in

accordance with the applicable   requirements of the Securities Act, the Exchange

Act,   the BHC   Act,   state   and   federal   banking   and   other   Laws,   the   Audit

Committee's charter, the Commission Regulations and the NASD Rules.

 

         (r) All the Company's   reports to the Federal Reserve,   including those

on   Federal    Reserve   Forms   FRY-6,    FRY-9   (and   their    respective    various

subdesignations)   and the various schedules and subreports   thereunder,   for the

last full five years and any interim periods (the "FRB Reports"), conform in all

material   respects to the Federal Reserve's   requirements for such reports,   and

all of the Subsidiaries' call reports ("Call Reports")   submitted to its primary

federal and state   regulators   conform in all   material   respects to the Federal

Financial   Institutions   Examination   Council's ("FFIEC")   requirements for Call

Reports,   and all such FRB Reports and Call   Reports   conform to the   applicable

requirements   of Section 37 of the FDIA and applicable   regulations   thereunder,

and are accurate and complete in all material respects and fairly present in all

material respects the reporting entity's   financial   condition,   earnings,   cash

flows (to the extent a   statement   of cash   flows is   included   pursuant   to the

requirements of such forms) and shareholders' equity as of the dates and for the

periods   shown   consistent   with   the   Financial   Statements   as of and   for the

corresponding dates and periods.

 

         (s)   Except   as   disclosed   in   the   Registration    Statement   and   the

Prospectus   (or   any   amendment   or   supplement   thereto),    subsequent   to   the

respective   dates as of which   such   information   is   given or   included   in the

Registration   Statement   or the   Prospectus   (or   any   amendment   or   supplement

thereto),   (i) neither the Company nor any of its   subsidiaries has incurred any

material liabilities or obligations,   indirect, direct or contingent, matured or

unmatured, or entered into any transaction that is not in the ordinary course of

business, (ii) neither the Company nor any of its subsidiaries has sustained any

material loss or interference   with its business or properties from fire, flood,

windstorm,   accident or other   calamity,   whether or not   covered by   insurance,

(iii) neither the Company nor any of its   subsidiaries   has paid or declared any

dividends   or other   distributions   with   respect to its   capital   stock and the

Company is not in default   under the terms of any class of capital   stock of the

Company or any outstanding debt obligations,   (iv) there has not been any change

in the   authorized or   outstanding   capital stock of the Company or any material

change in the   indebtedness   or obligations   of the Company or its   subsidiaries

(other than in the ordinary   course of business)   and (v) there has not been any

material adverse change, or any development   involving or that may reasonably be

expected to result in a Material Adverse Effect.

 

         (t) All offers and sales of the Company's   capital stock and other debt

or other   securities   prior to the date hereof were made in compliance   with the

 

 

                                       13

<PAGE>

 

registration requirements or were the subject of an available exemption from the

registration   under the 1933 Act and all   other   applicable   state   and   federal

securities or blue sky Laws, or any actions under the 1933 Act, the Exchange Act

or any state or   federa11aws   or   regulations   in respect of any such   offers or

sales are effectively barred by waivers or statutes of limitation.

 

         (u) The   Company's   Common Stock   (including   the Shares) is registered

pursuant   to   Section   12(g) of the   Exchange   Act and is listed   on the   Nasdaq

National   Market   under the symbol   "SOCB",   and the Company has taken no action

designed   to,   or   reasonably   likely to have the   effect   of,   terminating   the

registration of the Common Stock under the Exchange Act or the deli sting of, or

suspension or termination   from trading in, the Common Stock on Nasdaq,   nor has

the Company   received   any   notification   that the   Commission   or the Nasdaq is

contemplating terminating or suspending such registration, listing, or trading.

 

         (v) The Company has not distributed   and will not   distribute,   and has

not   authorized   the   Underwriter   to   distribute,    any   offering   material   in

connection   with the offering and sale of the Shares other than the   Preliminary

Prospectus,   the Prospectus or other offering material,   if any, as permitted by

the 1933 Act.

 

         (w) Other than activity   expressly   permitted   pursuant to Regulation M

under the Exchange Act, the Company has not taken and will not take, directly or

indirectly,   any action that   constituted,   or any action   designed   to, or that

might reasonably be expected to cause or result in or constitute, under the 1933

Act or otherwise,   stabilization or manipulation of the price of any security of

the   Company   to   facilitate   the sale or resale of the   Shares or for any other

purpose.   Except for grants of   securities   under the 1999 Stock Option Plan and

securities sold to employees under the ESPP,   which were duly registered or were

issued in transactions   exempt from registration under the 1933 Act, the Company

and its   subsidiaries   have not offered or sold any shares of Common Stock since

at least   April 6, 2005,   or any other   securities   other   than Trust   Preferred

Securities issued by Southcoast Capital Trust III on August 5, 2005.

 

         (x) The Company and each of its subsidiaries have filed all tax returns

required to be filed (other than certain state or local tax returns, as to which

the failure to file, individually or in the aggregate, would not have a Material

Adverse Effect), which returns are complete and correct, and neither the Company

nor any   subsidiary   is in default in the payment of any taxes that were payable

pursuant to said   returns or any   assessments   with respect   thereto.   Except as

disclosed   in the   Prospectus,   all   deficiencies   asserted   as a result   of any

fede