COOPERATIVE BANKSHARES INC
EXHIBIT 10.11 - EXECUTIVE INDEXED RETIREMENT AGR
<DOCUMENT>
<TYPE>EX-10.11
<SEQUENCE>7
<FILENAME>ex1011fm10k2001-1083.txt
<DESCRIPTION>EXHIBIT 10.11 - EXECUTIVE INDEXED RETIREMENT AGR
<TEXT>
                          COOPERATIVE BANK FOR SAVINGS
                     EXECUTIVE INDEXED RETIREMENT AGREEMENT


     THIS  AGREEMENT  is adopted this 17th day of January  2002,  by and between
COOPERATIVE BANK FOR SAVINGS, a State/Stock  Savings Bank located in Wilmington,
North Carolina (the "Company"), and FREDERICK WILLETTS III (the "Executive").

                                  INTRODUCTION

     To  attract,  retain  and  reward  quality  Executives  and  to  provide  a
potentially higher level of retirement income, the Company is willing to provide
the Executive with this Executive Indexed Retirement Agreement. The Company will
pay the benefits from its general assets.

                                    AGREEMENT

     The Executive and the Company agree as follows:

                                    Article 1
                                   Definitions

     Whenever used in this Agreement, the following words and phrases shall have
the meanings specified:

     1.1  "Adjustment  Rate"  shall  mean  the  figure  equal to one  minus  the
Company's highest marginal tax rate for the current calendar year.

     1.2 "Change in Control" means a change in the control of the Company or its
holding company,  Cooperative Bankshares, Inc. (the "Holding Company"). The term
control  shall  refer to the  ownership,  holding  or power to vote more than 25
percent of the Company's or the Holding  Company's  voting stock, the control of
the election of a majority of the Company's or the Holding Company's  directors,
or the exercise of a controlling  influence  over the  management or policies of
the  Company or the Holding  Company by any person or persons  acting as a group
within the meaning of Section 13(d) of the  Securities  Exchange Act of 1934, as
amended.  The term "person means an individual  other than the  Executive,  or a
corporation,  partnership,  trust, association,  joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.

     1.3 "Disability"  means, if the Executive is covered by a Company-sponsored
disability policy,  total disability as defined in such policy without regard to
any waiting period. If the Executive is not covered by such a policy, Disability
means the  Executive  suffering a sickness,  accident or injury,  which,  in the
judgment  of a  physician  who is  satisfactory  to the  Company,  prevents  the
Executive from performing substantially all of the Executive's normal duties for
the Company.  As a condition to receiving any Disability  benefits,  the Company
may require the Executive to submit to such physical or mental  evaluations  and
tests as the Company's Board of Directors deems appropriate and reasonable.

                                      -1-
<PAGE>

     1.4 "Normal Retirement Age" means the Executive's 65th birthday.

     1.5 "Normal  Retirement Date" means the later of the Normal  Retirement Age
or Termination of Employment.

     1.6 "Plan Year" means each  calendar  year from January 1 through  December
31. In the year of  implementation,  it shall commence with the adoption date of
this Agreement and end on December 31, 2001.

     1.7 Simulated  Investments"  mean investments  specified by the Company for
use in measuring the Retirement  Benefit.  Subject to Article 2, the Company can
change the Simulated  Investments only with the Executive's  written  agreement.
The Simulated Investments shall be of equal initial amounts.

     1.8 Simulated  Investment Earnings" means the after-tax rate of return on a
Simulated  Investment.  If the Simulated  Investment is a life insurance policy,
the  Simulated  Investment  Earnings  shall track cash  surrender  value and not
include receipt of the policy's death benefit.

     1.9  "Termination of Employment"  means the Executive ceases to be employed
by the Company for any reason, voluntarily or involuntarily, other than death.

     1.10  "Voluntary  Early  Termination"  means that the  Executive,  prior to
Normal  Retirement  Age, has terminated  employment with the Company for reasons
other than Termination for Cause,  Disability,  Change of Control or Involuntary
Early Termination.

     1.11 "Involuntary  Early  Termination"  means that the Executive,  prior to
Normal  Retirement  Age, has been notified in writing,  that employment with the
Company is  terminated  for  reasons  other than an  approved  leave of absence,
Termination for Cause, Disability, Change of Control or Voluntary Termination.

                                    ARTICLE 2
                               RETIREMENT ACCOUNT

     2.1  Simulated  Investments.  The Company  shall  establish  two  Simulated
Investments in the amount of $2,148,000 as of October 1, 2001 as follows:

           2.1.1 Simulated  Investment Number One shall track the cash surrender
     value of one or more  specified  life  insurance  policy(s) as described in
     Appendix A.

            2.1.2  Simulated  Investment  Number Two shall  track the value of a
     simulated  investment  account  comprised of both principal and accumulated
     net after-tax interest earnings. Pre-tax interest earnings shall equal 4.44
     percent  for the first Plan Year and  adjusted  by the  Company's  Board of
     Directors at their sole and absolute  discretion for subsequent Plan Years.
     Simulated  Investment  Number  Two  assumes  the  income tax rate to be the
     Company's  highest  marginal tax rate for the current  calendar  year,  and
     assumes

                                      -2-
<PAGE>

     that  interest  (net of tax) shall be  compounded on an annual basis at the
     end of each Plan Year.

     2.2 Retirement Account. The Company shall establish a Retirement Account on
its  books  for  the  Executive.  The  Retirement  Account  balance  during  the
pre-termination  period is  determined  by  subtracting  the value of  Simulated
Investment  Number  Two from the value of  Simulated  Investment  Number One and
dividing  the  difference  by  the  Adjustment  Rate.  The  Retirement   Account
subsequent  to  Termination  of Employment is reduced by payments of the Primary
Normal  Retirement  Benefit under Section 3.1.1. The Retirement  Account balance
shall never be less than zero.

     2.3  Statement of Accounts.  The Company  shall  provide to the  Executive,
within 60 days after each Plan Year, a statement  setting  forth the  Retirement
Account balance.

     2.4  Accounting   Device  Only.   The  Retirement   Account  and  Simulated
Investments  are  solely  devices  for  measuring  amounts to be paid under this
Agreement.  They are not a trust fund of any kind.  The  Executive  is a general
unsecured  creditor of the Company for the  payment of  benefits.  The  benefits
represent the mere Company promise to pay such benefits.  The Executive's rights
are not subject in any manner to anticipation, alienation, transfer, assignment,
pledge, encumbrance, attachment or garnishment by the Executive's creditors.

                                    ARTICLE 3
                                NORMAL RETIREMENT

     3.1 Normal  Retirement  Benefit.  Subject  to the  general  limitations  of
Article 8, upon  reaching  the  Normal  Retirement  Date while in the  full-time
employment of the Company,  the Executive  shall be entitled to both the primary
and secondary benefits described in Sections 3.1.1 and 3.1.2.

            3.1.1  Primary  Normal   Retirement   Benefit.   Commencing  on  the
     Executive's  Normal Retirement Date, the Company shall pay a Primary Normal
     Retirement  Benefit  to the  Executive  which is  equal to the  Executive's
     Retirement Account balance as of the Plan Year ending immediately preceding
     the  Executive's  Normal  Retirement  Date. The Primary  Normal  Retirement
     Benefit  shall  be paid  over 24 years in 288  equal  monthly  installments
     (without  adjustment  for  interest  earnings  during the payment  period),
     commencing  with  the  month  following  the  Executive's   Termination  of
     Employment.

           3.2 Secondary Normal Retirement Benefit. Within 60 days following the
     end of the Plan Year following the  Executive's  Termination of Employment,
     and  continuing  until  the  Executive's  death,  the  Company  shall pay a
     Secondary Normal Retirement Benefit to the Executive.  The Secondary Normal
     Retirement  Benefit  shall be paid  annually  in an  amount  calculated  as
     follows:

                                      -3-
<PAGE>

     After-tax earnings for the Plan Year on Simulated Investment Number One
                                    minus the
     After-tax earnings for the Plan Year on Simulated Investment Number Two
                                 divided by the
                                Adjustment Rate.

     Earnings on Simulated  Investment  Number One will be equal to the increase
     in the cash surrender  value of the life insurance  policy(s)  described in
     Appendix A increased by any loans or withdrawals from the policy during the
     Plan Year and reduced by any  premium  payments  during the Plan Year.  For
     purposes of  calculating  the  after-tax  earnings on Simulated  Investment
     Number  One,  the  income tax rate is  assumed  to be 0% and  earnings  are
     compounded  on an  annual  basis  at the end of each  Plan  Year.  Interest
     earnings on Simulated Investment Number Two shall be determined pursuant to
     the method set forth in Section 2.1 hereof.

                                    ARTICLE 4
                         EARLY TERMINATION OF EMPLOYMENT

     Voluntary  Early  Termination.  Upon a  Voluntary  Early  Termination,  the
Executive will receive no benefit from the Company under this Agreement.

     Involuntary Early Termination. Upon an Involuntary Early Termination (other
than as a result of  Disability  or following a Change in Control),  the Company
shall pay to the Executive a benefit equal to the Retirement  Account balance as
of  the  last  day  of the  Plan  Year  immediately  preceding  the  Executive's
Termination of Employment. The Company shall pay the benefit to the Executive in
a lump sum within 60 days following Termination of Employment.

                                    ARTICLE 5
                        CHANGE OF CONTROL AND DISABILITY

     Upon the Executive's Termination of Employment following Disability or upon
a Change of  Control  followed  within  twelve  (12)  months by the  Executive's
Termination  of Employment  for reasons  other than death,  Disability or Normal
Retirement,  the Company  shall pay to the  Executive  the Primary and Secondary
benefits described in Sections 3.1.1 and 3.1.2.

     Internal  Revenue  Service  Section  280G  Gross  Up.  To  the  extent  not
prohibited by law, if, as a result of a Change of Control, the Executive becomes
entitled to  acceleration  of benefits  under this  Agreement or under any other
benefit,  compensation  or  incentive  plan  or  arrangement  with  the  Company
(collectively,  the "Total Benefits"),  and if any part of the Total Benefits is
subject to the Excise Tax under  Section  280G and Section  4999 of the Internal
Revenue Code (the "Excise  Tax"),  the Company  shall pay to the  Executive  the
following  additional  amounts,  consisting of (a) a payment equal to the Excise
Tax payable by the  Executive on the Total  Benefits  under  Section 4999 of the
Internal Revenue Code (the "Excise Tax Payment"), and (b) a payment equal to the
amount necessary to provide the Excise Tax Payment,  net of all income,

                                      -4-
<PAGE>

payroll and excise taxes. Payment of the additional amounts described in clauses
(a) and (b) shall be made in addition to the Total Benefits.

                                    ARTICLE 6
                                 DEATH BENEFITS

     Upon the  Executive's  death prior to  termination of this  Agreement,  the
Company  shall  pay  to the  Executive's  beneficiary  a  benefit  equal  to the
Retirement  Account  balance  as of the last day of the  Plan  Year  immediately
preceding  the  Executive's  death.  The  Company  shall pay the  benefit to the
Executive's  beneficiary in a lump sum within 60 days following the  Executive's
death.

                                    ARTICLE 7
                                  BENEFICIARIES

     7.1 Beneficiary  Designations.  The Executive shall designate a beneficiary
by filing a written  designation  with the Company.  The Executive may revoke or
modify  the  designation  at any  time by  filing  a new  designation.  However,
designations  will only be effective if signed by the  Executive and received by
the  Company  during  the  Executive's  lifetime.  The  Executive's  beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive or if the Executive names a spouse as beneficiary and the marriage
is  subsequently  dissolved.  If the Executive dies without a valid  beneficiary
designation, all payments shall be made to the Executive's estate.

     7.2  Facility of Payment.  If a benefit is payable to a minor,  to a person
declared  incompetent,  or to a person  incapable of handling the disposition of
his or her  property,  the Company may pay such benefit to the  guardian,  legal
representative  or person having the care or custody of such minor,  incompetent
person or  incapable  person.  The Company may  require  proof of  incompetence,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit.  Such  distribution  shall  completely  discharge  the Company from all
liability with respect to such benefit.

                                    ARTICLE 8
                               GENERAL LIMITATIONS

     8.1 Termination for Cause.  Notwithstanding any provision of this Agreement
to the contrary,  the Company shall not pay any benefit under this  Agreement if
the Company terminates the Executive's Employment for:

          (a) Gross negligence or gross neglect of duties;

          (b) Commission of a felony or of a gross  misdemeanor  involving moral
turpitude; or

          (c) Fraud,  disloyalty,  dishonesty or willful violation of any law or
significant Company policy resulting in an adverse effect on the Company.

                                      -5-
<PAGE>

     8.2 Suicide or  Misstatement.  The Company  shall not pay any benefit under
this  Agreement if the Executive  commits  suicide  within three years after the
date of this Agreement. In addition, the Company shall not pay any benefit under
this Agreement if the Executive has made any material misstatement of fact on an
employment  application or resume provided to the Company, or on any application
for any benefits provided by the Company to the Executive.

                                    ARTICLE 9
                          CLAIMS AND REVIEW PROCEDURES

     9.1 Claims  Procedure.  The Company  shall  notify any person or entity who
makes a claim against this Agreement (the "Claimant") in writing, within 90 days
of Claimant's  written  application  for benefits,  of his or her eligibility or
ineligibility for benefits under this Agreement.  If the Company determines that
the Claimant is not eligible for benefits or full benefits, the notice shall set
forth (1) the specific reasons for such denial,  (2) a specific reference to the
provisions of this Agreement on which the denial is based,  (3) a description of
any additional information or material necessary for the Claimant to perfect his
or her claim, and a description of why it is needed,  (4) an explanation of this
Agreement's claims review procedure and other appropriate  information as to the
steps to be taken if the  Claimant  wishes to have the claim  reviewed and (5) a
time within which review must be requested. If the Company determines that there
are special  circumstances  requiring  additional  time to make a decision,  the
Company shall notify the Claimant of the special  circumstances  and the date by
which a decision is  expected  to be made,  and may extend the time for up to an
additional 90 days.

     9.2 Review  Procedure.  If the Claimant is determined by the Company not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different  benefits,  the Claimant  shall have the  opportunity to
have such claim reviewed by the Company by filing a petition for review with the
Company  within 60 days after receipt of the notice issued by the Company.  Said
petition shall state the specific  reasons which the Claimant  believes  entitle
him or her to benefits or to greater or different benefits. Within 60 days after
receipt by the Company of the  petition,  the Company  shall afford the Claimant
(and  counsel,  if any) an  opportunity  to present  his or her  position to the
Company in writing, and the Claimant (or counsel) shall have the right to review
the pertinent  documents.  The Company shall notify the Claimant of its decision
in writing  within  the 60-day  period,  stating  specifically  the basis of its
decision,  written in a manner to be understood by the Claimant and the specific
provisions of the Agreement on which the decision is based.  If,  because of the
need for a hearing,  the 60-day  period is not  sufficient,  the decision may be
deferred for up to another 60 days at the election of the Company, but notice of
this deferral shall be given to the Claimant.

                                   ARTICLE 10
                           AMENDMENTS AND TERMINATION

     This  Agreement  may be amended or terminated  only by a written  agreement
signed by the Company and the Executive.


                                      -6-
<PAGE>
                                   Article 11
                                  Miscellaneous

     11.1  Binding  Effect.  This  Agreement  shall bind the  Executive  and the
Company  and  their  beneficiaries,  survivors,  executors,  administrators  and
transferees.

     11.2 No Guarantee of Employment. This Agreement is not an employment policy
or contract.  It does not give the  Executive the right to remain an employee of
the Company,  nor does it interfere  with the  Company's  right to discharge the
Executive.  It also does not require  the  Executive  to remain an employee  nor
interfere with the Executive's right to terminate employment at any time.

     11.3  Applicable  Law.  The  Agreement  and all rights  hereunder  shall be
governed  by the laws of the  State  of  North  Carolina  except  to the  extent
preempted by the laws of the United States of America.

     11.4  Reorganization.  The Company shall not merge or  consolidate  into or
with another company, or reorganize,  or sell substantially all of its assets to
another  company,  firm or person unless such succeeding or continuing  company,
firm or person agrees to assume and discharge the obligations of the Company.

     11.5  Non-Transferability.  Benefits under this  Agreement  cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.

     11.6 Tax  Withholding.  The  Company  shall  withhold  any  taxes  that are
required to be withheld from the benefits provided under this Agreement.

     11.7 Unfunded Arrangement. The Executive is a general unsecured creditor of
the  Company  for the payment of benefits  under this  Agreement.  The  benefits
represent  the mere promise by the Company to pay such  benefits.  The rights to
benefits  are not  subject  in any  manner to  anticipation,  alienation,  sale,
transfer,  assignment,   pledge,  encumbrance,   attachment  or  garnishment  by
creditors.  Any  insurance  on the  Executive's  life or any other asset held in
connection  with this  Agreement is a general  asset of the Company to which the
Executive has no preferred or secured claim.

     11.8 Entire  Agreement.  This Agreement  constitutes  the entire  agreement
between the Company and the Executive as to the subject matter hereof. No rights
are  granted  to the  Executive  by virtue of this  Agreement  other  than those
specifically set forth herein.

     11.9 Administration.  The Company shall have the powers which are necessary
to administer this Agreement, including but not limited to:

          (a) Interpreting the provisions of this Agreement;

          (b)  Establishing  and  revising  the  method  of  accounting  for the
Agreement;

                                      -7-
<PAGE>

          (c) Maintaining a record of benefit payments; and

          (d)  Establishing   rules  and  prescribing  any  forms  necessary  or
desirable to administer the Agreement.

     11.10 Actions of the Company. All determinations,  interpretations,  rules,
and decisions of the Company  shall be  conclusive  and binding upon all persons
having or claiming to have any interest or right under this Agreement.

     11.11 Named  Fiduciary.  The Company shall be the named  fiduciary and plan
administrator  under this Agreement.  The named fiduciary may delegate to others
certain  aspects of the  management and operation  responsibilities  of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals.

     IN WITNESS  WHEREOF,  the Executive and a duly  authorized  Company officer
have signed this Agreement.


EXECUTIVE:                              COMPANY:
                                        COOPERATIVE BANK FOR SAVINGS


 /s/ FREDERICK WILLETTS, III            BY:  /s/ JAMES D. HUNDLEY
------------------------------------        ------------------------------------
FREDERICK WILLETTS III                  NAME:  JAMES D. HUNDLEY
                                              ----------------------------------
                                        TITLE:  CHAIR, PERSONNEL COMMITTEE
                                               ---------------------------------


                                      -8-
<PAGE>
                                   APPENDIX A


                              SIMULATED POLICY DATA

                          COOPERATIVE BANK FOR SAVINGS
                     EXECUTIVE INDEXED RETIREMENT AGREEMENT

                             FREDERICK WILLETTS III


         INSURANCE CARRIER:               JEFFERSON-PILOT LIFE INSURANCE COMPANY
         POLICY TYPE:                     UNIVERSAL LIFE, NO LOAD
         PRODUCT NAME:                    ESPVI
         INSURED'S SEX AND AGE:           MALE, AGE 52
         CLASSIFICATION:                  STANDARD, NON-TOBACCO USE
         INITIAL FACE AMOUNT:             $4,565,918
         SINGLE PREMIUM AMOUNT:           $1,948,000
         ISSUE DATE:                      OCTOBER 1, 2001
         DEATH BENEFIT OPTION             LEVEL


                                      -9-
<PAGE>
                          COOPERATIVE BANK FOR SAVINGS
                             SPLIT DOLLAR AGREEMENT


     THIS  AGREEMENT is adopted this 17th day of January,  2002,  by and between
COOPERATIVE BANK FOR SAVINGS, a State/Stock  Savings Bank located in Wilmington,
North Carolina (the "Company"),  and FREDERICK  WILLETTS III (the  "Executive").
This Agreement  shall append the Split Dollar  Endorsement  entered into on even
date  herewith or as  subsequently  amended,  by and between the  aforementioned
parties.


                                  INTRODUCTION

     To  encourage  the  Executive  to remain an  employee of the  Company,  the
Company is willing to divide the death  proceeds of a life  insurance  policy on
the  Executive's  life.  The Company will pay life  insurance  premiums from its
general assets.

                                    AGREEMENT

     The Company and the Executive agree as follows:

                                    ARTICLE I
                               GENERAL DEFINITIONS

     The following terms shall have the meanings specified:

     1.1 "Insurers" means  Jefferson-Pilot Life Insurance Company and West Coast
Life Insurance Company.

     1.2 "Policies" means insurance  policy nos.  JP5195504 and ZUA386793 issued
by the respective Insurers.

     1.3 "Insured" means the Executive.

     1.4 "Net Death Proceeds" means the total death proceeds of the Policy minus
the cash surrender value.

     1.5 "Normal Retirement Age" means the Executive's 65th birthday.

     1.6 "Voluntary Early Termination" means that the Executive, prior to Normal
 etirement  Age, has  terminated  employment  with the Company for reasons other
than  Termination  for  Cause,  Disability,  Change of  Control  or  Involuntary
Termination   (Termination  for  Cause,   Disability,   Change  of  Control  and
Involuntary  Termination  are  defined  in  the  COOPERATIVE  BANK  FOR  SAVINGS
EXECUTIVE INDEXED RETIREMENT AGREEMENT of even date herewith).

                                       -1-
<PAGE>
                                    ARTICLE 2
                           POLICY OWNERSHIP/INTERESTS

     2.1  Company  Ownership.  The  Company  is the sole owner of the Policy and
shall have the right to exercise all incidents of ownership  except as otherwise
said  herein.  The  Company  shall  be the  beneficiary  of the  death  proceeds
remaining after the Executive's  interest has been paid according to Section 2.2
below.

     2.2 Executive's  Interest.  The Executive shall have the right to designate
the  beneficiary  of an amount equal to 100 percent of the Net Death Proceeds of
the  Policy.  The  Executive  shall  also  have the  right to elect  and  change
settlement  options  that  may  be  permitted.   However,  the  Executive,   the
Executive's  transferee or the Executive's  beneficiary  shall have no rights or
interests  in the  Policy  with  respect to that  portion of the death  proceeds
designated in this section 2.2 upon the Executive's Voluntary Early Termination.

     2.3 Option to Purchase.  The Company shall not sell,  surrender or transfer
ownership of the Policy while this  Agreement is in effect  without first giving
the Executive or the  Executive's  transferee  the option to purchase the Policy
for a period of 60 days from  written  notice of such  intention.  The  purchase
price shall be an amount equal to the cash surrender  value of the Policy.  This
provision shall not impair the right of the Company to terminate this Agreement.

     2.4  Comparable  Coverage.  Upon  adoption and subject to the terms of this
Agreement, the Company shall maintain the Policy in full force and effect and in
no  event  shall  the  Company  amend,  terminate,  or  otherwise  abrogate  the
Executive's interest in the Policy,  unless the Company replaces the Policy with
a  comparable  insurance  policy  to  cover  the  benefit  provided  under  this
Agreement,  amends the Split Dollar Agreement and executes a new Endorsement for
said comparable  insurance policy.  The Executive agrees to provide the required
medical information to the Insurers for the implementation of this Agreement and
agrees to  participate  with the  Company  if the  Company  desires  to obtain a
comparable  insurance  policy with another  carrier,  whether  prior to or after
Normal  Retirement Age. The Policy or any comparable  policy shall be subject to
the claims of the Company's creditors.

                                    ARTICLE 3
                                    PREMIUMS

     3.1 Premium Payment. The Company shall pay any premiums due on the Policy.

     3.2 Imputed Income.  The Company shall impute income to the Executive in an
amount equal to the current term rate for the  Executive's age multiplied by the
aggregate  death benefit payable to the  Executive's  beneficiary.  The "current
term rate" is the minimum  amount  required to be imputed under Revenue  Rulings
64-328 and 66-110, or any subsequent applicable authority.


                                       -2-
<PAGE>

                                    ARTICLE 4
                                   ASSIGNMENT

     The  Executive  may assign  without  consideration  all of the  Executive's
interests in the Policy and in this Agreement to any person, entity or trust. In
the event the Executive transfers all of the Executive's interest in the Policy,
then all of the Executive's interest in the Policy and in the Agreement shall be
vested  in the  Executive's  transferee,  who  shall be  substituted  as a party
hereunder and the Executive  shall have no further  interest in the Policy or in
this Agreement.

                                    ARTICLE 5
                                    INSURERS

     The Insurers  shall be bound only by the terms of the Policy.  Any payments
the Insurers make or actions either of the Insurers takes in accordance with the
Policy shall fully discharge such Insurer or Insurers from all claims, suits and
demands of all  entities or persons.  The  Insurers  shall not be bound by or be
deemed to have notice of the provisions of this Agreement.

                                    ARTICLE 6
                                CLAIMS PROCEDURE

     6.1 Claims  Procedure.  The Company  shall notify any person or entity that
makes a claim under this Agreement (the  "Claimant") in writing,  within 90 days
of Claimant's  written  application  for benefits,  of his or her eligibility or
ineligibility for benefits under this Agreement.  If the Company determines that
the Claimant is not eligible for benefits or full benefits, the notice shall set
forth (1) the specific reasons for such denial,  (2) a specific reference to the
provisions of this Agreement on which the denial is based,  (3) a description of
any additional information or material necessary for the Claimant to perfect his
or her claim, and a description of why it is needed,  (4) an explanation of this
Agreement's claims review procedure and other appropriate  information as to the
steps to be taken if the Claimant wishes to have the claim  reviewed,  and (5) a
time within which a review must be  requested.  If the Company  determines  that
there are special  circumstances  requiring  additional time to make a decision,
the Company shall notify the Claimant of the special  circumstances and the date
by which a decision is expected to be made, and may extend the time for up to an
additional 90 days.

     6.2 Review  Procedure.  If the Claimant is determined by the Company not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different  benefits,  the Claimant  shall have the  opportunity to
have such claim reviewed by the Company by filing a petition for review with the
Company  within 60 days after receipt of the notice issued by the Company.  Said
petition shall state the specific  reasons,  which the Claimant believes entitle
him or her to benefits or to greater or different benefits. Within 60 days after
receipt by the Company of the  petition,  the Company  shall afford the Claimant
(and  counsel,  if any) an  opportunity  to present  his or her  position to the
Company in writing, and the Claimant (or counsel) shall have the right to review
the pertinent  documents.  The Company shall notify the Claimant of its decision
in writing within the sixty-day  period,  stating  specifically the basis of its
decision,  written in a manner to be understood by the Claimant and the specific
provisions of this Agreement on which the decision is based.  If, because of the
need for a hearing,  the 60-day  period is not  sufficient,  the decision may be
deferred for up to another  60-day

                                      -3-
<PAGE>

period at the  election of the  Company,  but notice of this  deferral  shall be
given to the Claimant.

                                    ARTICLE 7
                           AMENDMENTS AND TERMINATION

     This  Agreement  may be amended or terminated  only by a written  agreement
signed  by  the  Company  and  the  Executive.   However,  this  Agreement  will
automatically terminate upon the Executive's Voluntary Early Termination.

                                    ARTICLE 8
                                  MISCELLANEOUS

     8.1 Binding Effect. This Agreement shall bind the Executive and the Company
and their beneficiaries,  survivors, executors,  administrators and transferees,
and any Policy beneficiary.

     8.2 No Guarantee of Employment.  This Agreement is not an employment policy
or contract.  It does not give the  Executive the right to remain an employee of
the Company,  nor does it interfere  with the  Company's  right to discharge the
Executive.  It also does not require  the  Executive  to remain an employee  nor
interfere with the Executive's right to terminate employment at any time.

     8.3  Applicable  Law.  The  Agreement  and all  rights  hereunder  shall be
governed by and construed  according to the laws of the State of North Carolina,
except to the extent preempted by the laws of the United States of America.

     8.4 Reorganization. The Company shall not merge or consolidate into or with
another  company,  or  reorganize,  or sell  substantially  all of its assets to
another  company,  firm or person unless such succeeding or continuing  company,
firm or person agrees to assume and discharge the obligations of the Company.

     8.5 Notice. Any notice, consent or demand required or permitted to be given
under the  provisions  of this Split  Dollar  Agreement  by one party to another
shall be in writing, shall be signed by the party giving or making the same, and
may be given either by delivering the same to such other party personally, or by
mailing the same, by United States  certified  mail,  postage  prepaid,  to such
party, addressed to his or her last known address as shown on the records of the
Company.  The date of such  mailing  shall  be  deemed  the date of such  mailed
notice, consent or demand.

     8.6 Entire  Agreement.  This  Agreement  constitutes  the entire  agreement
between the Company and the Executive as to the subject matter hereof. No rights
are  granted  to the  Executive  by virtue of this  Agreement  other  than those
specifically set forth herein.

     8.7  Administration.  The Company  shall have powers which are necessary to
administer this Agreement, including but not limited to:

                                      -4-
<PAGE>

          (a) Interpreting the provisions of the Agreement;

          (b)  Establishing  and  revising  the  method  of  accounting  for the
Agreement;

          (c) Maintaining a record of benefit payments; and

          (d)  Establishing   rules  and  prescribing  any  forms  necessary  or
desirable to administer the Agreement.

     8.8 Named  Fiduciary.  The Company  shall be the named  fiduciary  and plan
administrator  under this Agreement.  The named fiduciary may delegate to others
certain  aspects of the  management and operation  responsibilities  of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals.

     IN WITNESS  WHEREOF,  the parties have executed this  Agreement the day and
year first above written.


EXECUTIVE:                              COMPANY:

                                        COOPERATIVE BANK FOR SAVINGS


/s/ Frederick Willetts, III             BY /s/ James D. Hundley
--------------------------------           -------------------------------------
FREDERICK WILLETTS III
                                        TITLE Chair, Personnel Committee
                                              ----------------------------------

                                      -5-
<PAGE>
                       SPLIT DOLLAR POLICY ENDORSEMENT TO
               COOPERATIVE BANK FOR SAVINGS SPLIT DOLLAR AGREEMENT

Policy No. JP5195505                            Insured:  Frederick Willetts III

Supplementing and amending the application for insurance to Jefferson-Pilot Life
Insurance Company  ("Insurer") on September 26, 2001, the applicant requests and
directs that:

                                  BENEFICIARIES
                                  -------------

     1.  COOPERATIVE  BANK FOR SAVINGS,  a  State/Stock  Savings Bank located in
Wilmington,  North  Carolina (the  "Company"),  shall be the  beneficiary of the
death proceeds remaining after the Insured's interest has been paid according to
paragraph (2) below.

     2. The Insured or the Insured's  transferee shall designate the beneficiary
of an amount  equal to 100  percent  of the Net  Death  Proceeds  of the  Policy
(defined as the total  death  proceeds  of the Policy  minus the cash  surrender
value), subject to the provisions of paragraph (5) below.

                                    OWNERSHIP
                                    ---------

     3. The Owner of the policy shall be the  Company.  The Owner shall have all
ownership  rights in the  Policy  except as may be  specifically  granted to the
Insured or the Insured's transferee in paragraph (4) of this endorsement.

     4. The Insured or the Insured's  transferee shall have the rights to assign
his or her rights and  interests  in the Policy with  respect to that portion of
the death  proceeds  designated  in paragraph  (2) of this  endorsement,  and to
exercise all settlement options with respect to such death proceeds.

     5.  Notwithstanding  the provisions of paragraph (4) above,  the Insured or
the  Insured's  transferee  shall have no rights or interests in the Policy with
respect to that portion of the death  proceeds  designated  in paragraph  (2) of
this endorsement upon the Insured's  Voluntary Early  Termination (as defined in
the COOPERATIVE BANK FOR SAVINGS SPLIT DOLLAR AGREEMENT between Cooperative Bank
for Savings and Frederick Willetts III of even date herewith).

               MODIFICATION OF ASSIGNMENT PROVISIONS OF THE POLICY
               ---------------------------------------------------

Upon the death of the Insured,  the interest of any  collateral  assignee of the
Owner of the Policy  designated  in (3) above shall be limited to the portion of
the proceeds described in paragraph (1) above.


                                      -6-
<PAGE>

                                OWNERS AUTHORITY
                                ----------------

The  Insurer is hereby  authorized  to  recognize  the  Owner's  claim to rights
hereunder  without  investigating  the reason for any action taken by the Owner,
including its statement of the amount of premiums it has paid on the Policy. The
signature of the Owner shall be sufficient  for the exercise of any rights under
this  Endorsement and the receipt of the Owner for any sums received by it shall
be a full discharge and release  therefore to the Insurer.  The Insurer may rely
on a sworn  statement in form  satisfactory  to it  furnished by the Owner,  its
successors or assigns,  as to their interest,  and any payments made pursuant to
such statement  shall discharge the Insurer  accordingly.  The owner accepts and
agrees to this split dollar endorsement.

Any transferee's rights shall be subject to this Endorsement.

The undersigned is signing in a representative capacity and warrants that he or
she has the authority to bind the entity on whose behalf this document is being
executed.

Signed at Wilmington, North Carolina, this 17th day of January, 2002.

COOPERATIVE BANK FOR SAVINGS

By       /s/ James D. Hundley
      --------------------------------------
Title    Chair, Personnel Committee
      --------------------------------------


                     ACCEPTANCE AND BENEFICIARY DESIGNATION
                     --------------------------------------

The Insured  accepts and agrees to the foregoing  and,  subject to the rights of
the Owner as stated above,  designates  the following as  beneficiary(s)  of the
portion of the proceeds described in paragraph (2) above:

Primary Beneficiary:____________________________________________________________
         Relationship:__________________________________________________________
Contingent Beneficiary (if the Primary is deceased):____________________________
         Relationship:__________________________________________________________


Signed  at   ____________________,   North   Carolina,   this   ______   day  of
______________, 2001.

THE INSURED:


/s/ Frederick Willetts, III
--------------------------------
Frederick Willetts III

                                      -7-
<PAGE>

                       SPLIT DOLLAR POLICY ENDORSEMENT TO
               COOPERATIVE BANK FOR SAVINGS SPLIT DOLLAR AGREEMENT

Policy No. ZUA386793                            Insured:  Frederick Willetts III

Supplementing  and amending  the  application  for  insurance to West Coast Life
Insurance Company  ("Insurer") on September 26, 2001, the applicant requests and
directs that:

                                  BENEFICIARIES
                                  -------------

     1.  COOPERATIVE  BANK FOR SAVINGS,  a  State/Stock  Savings Bank located in
Wilmington,  North  Carolina (the  "Company"),  shall be the  beneficiary of the
death proceeds remaining after the Insured's interest has been paid according to
paragraph (2) below.

     2. The Insured or the Insured's  transferee shall designate the beneficiary
of an amount  equal to 100  percent  of the Net  Death  Proceeds  of the  Policy
(defined as the total  death  proceeds  of the Policy  minus the cash  surrender
value), subject to the provisions of paragraph (5) below.

                                    OWNERSHIP
                                    ---------

     3. The Owner of the policy shall be the  Company.  The Owner shall have all
ownership  rights in the  Policy  except as may be  specifically  granted to the
Insured or the Insured's transferee in paragraph (4) of this endorsement.

     4. The Insured or the Insured's  transferee shall have the rights to assign
his or her rights and  interests  in the Policy with  respect to that portion of
the death  proceeds  designated  in paragraph  (2) of this  endorsement,  and to
exercise all settlement options with respect to such death proceeds.

     5.  Notwithstanding  the provisions of paragraph (4) above,  the Insured or
the  Insured's  transferee  shall have no rights or interests in the Policy with
respect to that portion of the death  proceeds  designated  in paragraph  (2) of
this endorsement upon the Insured's  Voluntary Early  Termination (as defined in
the COOPERATIVE BANK FOR SAVINGS SPLIT DOLLAR AGREEMENT between Cooperative Bank
for Savings and Frederick Willetts III of even date herewith).

               MODIFICATION OF ASSIGNMENT PROVISIONS OF THE POLICY
               ---------------------------------------------------

Upon the death of the Insured,  the interest of any  collateral  assignee of the
Owner of the Policy  designated  in (3) above shall be limited to the portion of
the proceeds described in paragraph (1) above.


                                      -8-
<PAGE>
                                OWNERS AUTHORITY
                                ----------------

The  Insurer is hereby  authorized  to  recognize  the  Owner's  claim to rights
hereunder  without  investigating  the reason for any action taken by the Owner,
including its statement of the amount of premiums it has paid on the Policy. The
signature of the Owner shall be sufficient  for the exercise of any rights under
this  Endorsement and the receipt of the Owner for any sums received by it shall
be a full discharge and release  therefore to the Insurer.  The Insurer may rely
on a sworn  statement in form  satisfactory  to it  furnished by the Owner,  its
successors or assigns,  as to their interest,  and any payments made pursuant to
such statement  shall discharge the Insurer  accordingly.  The owner accepts and
agrees to this split dollar endorsement.

Any transferee's rights shall be subject to this Endorsement.

The undersigned is signing in a representative  capacity and warrants that he or
she has the  authority to bind the entity on whose behalf this document is being
executed.

Signed at Wilmington, North Carolina, this 17th day of January, 2002.

COOPERATIVE BANK FOR SAVINGS

By       /s/ James D. Hundley
         -----------------------------------
Title    Chair, Personnel Committee
         -----------------------------------


                     ACCEPTANCE AND BENEFICIARY DESIGNATION
                     --------------------------------------

The Insured accepts and agrees to the foregoing and, subject to the rights of
the Owner as stated above, designates the following as beneficiary(s) of the
portion of the proceeds described in paragraph (2) above:

Primary Beneficiary:____________________________________________________________
         Relationship:__________________________________________________________
Contingent Beneficiary (if the Primary is deceased):____________________________
         Relationship:__________________________________________________________


Signed at Wilmington, North Carolina, this 17th day of January, 2002.

THE INSURED:


/s/ Frederick Willetts III
---------------------------------
Frederick Willetts III



                                      -9-
<PAGE>
                          COOPERATIVE BANK FOR SAVINGS
                     EXECUTIVE INDEXED RETIREMENT AGREEMENT


     THIS  AGREEMENT  is adopted this 17th day of January  2002,  by and between
COOPERATIVE BANK FOR SAVINGS, a State/Stock  Savings Bank located in Wilmington,
North Carolina (the "Company"), and O. C. BURRELL (the "Executive").

                                  INTRODUCTION

     To  attract,  retain  and  reward  quality  Executives  and  to  provide  a
potentially higher level of retirement income, the Company is willing to provide
the Executive with this Executive Indexed Retirement Agreement. The Company will
pay the benefits from its general assets.

                                    AGREEMENT

     The Executive and the Company agree as follows:

                                    ARTICLE 1
                                   DEFINITIONS

     Whenever used in this Agreement, the following words and phrases shall have
the meanings specified:

     1.1  "Adjustment  Rate"  shall  mean  the  figure  equal to one  minus  the
Company's highest marginal tax rate for the current calendar year.

     1.2 "Change in Control" means a change in the control of the Company or its
holding company,  Cooperative Bankshares, Inc. (the "Holding Company"). The term
control  shall  refer to the  ownership,  holding  or power to vote more than 25
percent of the Company's or the Holding  Company's  voting stock, the control of
the election of a majority of the Company's or the Holding Company's  directors,
or the exercise of a controlling  influence  over the  management or policies of
the  Company or the Holding  Company by any person or persons  acting as a group
within the meaning of Section 13(d) of the  Securities  Exchange Act of 1934, as
amended.  The term "person means an individual  other than the  Executive,  or a
corporation,  partnership,  trust, association,  joint venture, pool, syndicate,
sole proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.

     1.3 "Disability"  means, if the Executive is covered by a Company-sponsored
disability policy,  total disability as defined in such policy without regard to
any waiting period. If the Executive is not covered by such a policy, Disability
means the  Executive  suffering a sickness,  accident or injury,  which,  in the
judgment  of a  physician  who is  satisfactory  to the  Company,  prevents  the
Executive from performing substantially all of the Executive's normal duties for
the Company.  As a condition to receiving any Disability  benefits,  the Company
may require the Executive to submit to such physical or mental  evaluations  and
tests as the Company's Board of Directors deems appropriate and reasonable.

                                      -1-
<PAGE>

     1.4 "Normal Retirement Age" means the Executive's 65th birthday.

     1.5 "Normal  Retirement Date" means the later of the Normal  Retirement Age
or Termination of Employment.

     1.6 "Plan Year" means each  calendar  year from January 1 through  December
31. In the year of  implementation,  it shall commence with the adoption date of
this Agreement and end on December 31, 2001.

     1.7 Simulated  Investments"  mean investments  specified by the Company for
use in measuring the Retirement  Benefit.  Subject to Article 2, the Company can
change the Simulated  Investments only with the Executive's  written  agreement.
The Simulated Investments shall be of equal initial amounts.

     1.8 Simulated  Investment Earnings" means the after-tax rate of return on a
Simulated  Investment.  If the Simulated  Investment is a life insurance policy,
the  Simulated  Investment  Earnings  shall track cash  surrender  value and not
include receipt of the policy's death benefit.

     1.9  "Termination of Employment"  means the Executive ceases to be employed
by the Company for any reason, voluntarily or involuntarily, other than death.

     1.10  "Voluntary  Early  Termination"  means that the  Executive,  prior to
Normal  Retirement  Age, has terminated  employment with the Company for reasons
other than Termination for Cause,  Disability,  Change of Control or Involuntary
Early Termination.

     1.11 "Involuntary  Early  Termination"  means that the Executive,  prior to
Normal  Retirement  Age, has been notified in writing,  that employment with the
Company is  terminated  for  reasons  other than an  approved  leave of absence,
Termination for Cause, Disability, Change of Control or Voluntary Termination.

                                    ARTICLE 2
                               RETIREMENT ACCOUNT

     2.1  Simulated  Investments.  The Company  shall  establish  two  Simulated
Investments in the amount of $2,148,000 as of October 1, 2001 as follows:

           2.1.1 Simulated  Investment Number One shall track the cash surrender
     value of one or more  specified  life  insurance  policy(s) as described in
     Appendix A.

            2.1.2  Simulated  Investment  Number Two shall  track the value of a
     simulated  investment  account  comprised of both principal and accumulated
     net after-tax interest earnings. Pre-tax interest earnings shall equal 4.44
     percent  for the first Plan Year and  adjusted  by the  Company's  Board of
     Directors at their sole and absolute  discretion for subsequent Plan Years.
     Simulated  Investment  Number  Two  assumes  the  income tax rate to be the
     Company's  highest  marginal tax rate for the current  calendar  year,  and
     assumes


                                      -2-
<PAGE>

     that  interest  (net of tax) shall be  compounded on an annual basis at the
     end of each Plan Year.

     2.2 Retirement Account. The Company shall establish a Retirement Account on
its  books  for  the  Executive.  The  Retirement  Account  balance  during  the
pre-termination  period is  determined  by  subtracting  the value of  Simulated
Investment  Number  Two from the value of  Simulated  Investment  Number One and
dividing  the  difference  by  the  Adjustment  Rate.  The  Retirement   Account
subsequent  to  Termination  of Employment is reduced by payments of the Primary
Normal  Retirement  Benefit under Section 3.1.1. The Retirement  Account balance
shall never be less than zero.

     2.3  Statement of Accounts.  The Company  shall  provide to the  Executive,
within 60 days after each Plan Year, a statement  setting  forth the  Retirement
Account balance.

     2.4  Accounting   Device  Only.   The  Retirement   Account  and  Simulated
Investments  are  solely  devices  for  measuring  amounts to be paid under this
Agreement.  They are not a trust fund of any kind.  The  Executive  is a general
unsecured  creditor of the Company for the  payment of  benefits.  The  benefits
represent the mere Company promise to pay such benefits.  The Executive's rights
are not subject in any manner to anticipation, alienation, transfer, assignment,
pledge, encumbrance, attachment or garnishment by the Executive's creditors.

                                    ARTICLE 3
                                NORMAL RETIREMENT

     3.1 Normal  Retirement  Benefit.  Subject  to the  general  limitations  of
Article 8, upon  reaching  the  Normal  Retirement  Date while in the  full-time
employment of the Company,  the Executive  shall be entitled to both the primary
and secondary benefits described in Sections 3.1.1 and 3.1.2.

            3.1.1  Primary  Normal   Retirement   Benefit.   Commencing  on  the
     Executive's  Normal Retirement Date, the Company shall pay a Primary Normal
     Retirement  Benefit  to the  Executive  which is  equal to the  Executive's
     Retirement Account balance as of the Plan Year ending immediately preceding
     the  Executive's  Normal  Retirement  Date. The Primary  Normal  Retirement
     Benefit  shall  be paid  over 24 years in 288  equal  monthly  installments
     (without  adjustment  for  interest  earnings  during the payment  period),
     commencing  with  the  month  following  the  Executive's   Termination  of
     Employment.

           3.2 Secondary Normal Retirement Benefit. Within 60 days following the
     end of the Plan Year following the  Executive's  Termination of Employment,
     and  continuing  until  the  Executive's  death,  the  Company  shall pay a
     Secondary Normal Retirement Benefit to the Executive.  The Secondary Normal
     Retirement  Benefit  shall be paid  annually  in an  amount  calculated  as
     follows:

                                      -3-
<PAGE>

     After-tax earnings for the Plan Year on Simulated Investment Number One
                                    minus the
     After-tax earnings for the Plan Year on Simulated Investment Number Two
                                 divided by the
                                Adjustment Rate.

     Earnings on Simulated  Investment  Number One will be equal to the increase
     in the cash surrender  value of the life insurance  policy(s)  described in
     Appendix A increased by any loans or withdrawals from the policy during the
     Plan Year and reduced by any  premium  payments  during the Plan Year.  For
     purposes of  calculating  the  after-tax  earnings on Simulated  Investment
     Number  One,  the  income tax rate is  assumed  to be 0% and  earnings  are
     compounded  on an  annual  basis  at the end of each  Plan  Year.  Interest
     earnings on Simulated Investment Number Two shall be determined pursuant to
     the method set forth in Section 2.1 hereof.

                                    ARTICLE 4
                         EARLY TERMINATION OF EMPLOYMENT

     Voluntary  Early  Termination.  Upon a  Voluntary  Early  Termination,  the
Executive will receive no benefit from the Company under this Agreement.

     Involuntary Early Termination. Upon an Involuntary Early Termination (other
than as a result of  Disability  or following a Change in Control),  the Company
shall pay to the Executive a benefit equal to the Retirement  Account balance as
of  the  last  day  of the  Plan  Year  immediately  preceding  the  Executive's
Termination of Employment. The Company shall pay the benefit to the Executive in
a lump sum within 60 days following Termination of Employment.

                                    ARTICLE 5
                        CHANGE OF CONTROL AND DISABILITY

     Upon the Executive's Termination of Employment following Disability or upon
a Change of  Control  followed  within  twelve  (12)  months by the  Executive's
Termination  of Employment  for reasons  other than death,  Disability or Normal
Retirement,  the Company  shall pay to the  Executive  the Primary and Secondary
benefits described in Sections 3.1.1 and 3.1.2.

     Internal  Revenue  Service  Section  280G  Gross  Up.  To  the  extent  not
prohibited by law, if, as a result of a Change of Control, the Executive becomes
entitled to  acceleration  of benefits  under this  Agreement or under any other
benefit,  compensation  or  incentive  plan  or  arrangement  with  the  Company
(collectively,  the "Total Benefits"),  and if any part of the Total Benefits is
subject to the Excise Tax under  Section  280G and Section  4999 of the Internal
Revenue Code (the "Excise  Tax"),  the Company  shall pay to the  Executive  the
following  additional  amounts,  consisting of (a) a payment equal to the Excise
Tax payable by the  Executive on the Total  Benefits  under  Section 4999 of the
Internal Revenue Code (the "Excise Tax Payment"), and (b) a payment equal to the
amount necessary to provide the Excise Tax Payment,  net of all income,

                                      -4-
<PAGE>

payroll and excise taxes. Payment of the additional amounts described in clauses
(a) and (b) shall be made in addition to the Total Benefits.

                                    ARTICLE 6
                                 DEATH BENEFITS

     Upon the  Executive's  death prior to  termination of this  Agreement,  the
Company  shall  pay  to the  Executive's  beneficiary  a  benefit  equal  to the
Retirement  Account  balance  as of the last day of the  Plan  Year  immediately
preceding  the  Executive's  death.  The  Company  shall pay the  benefit to the
Executive's  beneficiary in a lump sum within 60 days following the  Executive's
death.

                                    ARTICLE 7
                                  BENEFICIARIES

     7.1 Beneficiary  Designations.  The Executive shall designate a beneficiary
by filing a written  designation  with the Company.  The Executive may revoke or
modify  the  designation  at any  time by  filing  a new  designation.  However,
designations  will only be effective if signed by the  Executive and received by
the  Company  during  the  Executive's  lifetime.  The  Executive's  beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive or if the Executive names a spouse as beneficiary and the marriage
is  subsequently  dissolved.  If the Executive dies without a valid  beneficiary
designation, all payments shall be made to the Executive's estate.

     7.2  Facility of Payment.  If a benefit is payable to a minor,  to a person
declared  incompetent,  or to a person  incapable of handling the disposition of
his or her  property,  the Company may pay such benefit to the  guardian,  legal
representative  or person having the care or custody of such minor,  incompetent
person or  incapable  person.  The Company may  require  proof of  incompetence,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit.  Such  distribution  shall  completely  discharge  the Company from all
liability with respect to such benefit.

                                    ARTICLE 8
                               GENERAL LIMITATIONS

     8.1 Termination for Cause.  Notwithstanding any provision of this Agreement
to the contrary,  the Company shall not pay any benefit under this  Agreement if
the Company terminates the Executive's Employment for:

          (a) Gross negligence or gross neglect of duties;

          (b) Commission of a felony or of a gross  misdemeanor  involving moral
turpitude; or

          (c) Fraud,  disloyalty,  dishonesty or willful violation of any law or
significant Company policy resulting in an adverse effect on the Company.

                                      -5-
<PAGE>

     8.2 Suicide or  Misstatement.  The Company  shall not pay any benefit under
this  Agreement if the Executive  commits  suicide  within three years after the
date of this Agreement. In addition, the Company shall not pay any benefit under
this Agreement if the Executive has made any material misstatement of fact on an
employment  application or resume provided to the Company, or on any application
for any benefits provided by the Company to the Executive.

                                    ARTICLE 9
                          CLAIMS AND REVIEW PROCEDURES

     9.1 Claims  Procedure.  The Company  shall  notify any person or entity who
makes a claim against this Agreement (the "Claimant") in writing, within 90 days
of Claimant's  written  application  for benefits,  of his or her eligibility or
ineligibility for benefits under this Agreement.  If the Company determines that
the Claimant is not eligible for benefits or full benefits, the notice shall set
forth (1) the specific reasons for such denial,  (2) a specific reference to the
provisions of this Agreement on which the denial is based,  (3) a description of
any additional information or material necessary for the Claimant to perfect his
or her claim, and a description of why it is needed,  (4) an explanation of this
Agreement's claims review procedure and other appropriate  information as to the
steps to be taken if the  Claimant  wishes to have the claim  reviewed and (5) a
time within which review must be requested. If the Company determines that there
are special  circumstances  requiring  additional  time to make a decision,  the
Company shall notify the Claimant of the special  circumstances  and the date by
which a decision is  expected  to be made,  and may extend the time for up to an
additional 90 days.

     9.2 Review  Procedure.  If the Claimant is determined by the Company not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different  benefits,  the Claimant  shall have the  opportunity to
have such claim reviewed by the Company by filing a petition for review with the
Company  within 60 days after receipt of the notice issued by the Company.  Said
petition shall state the specific  reasons which the Claimant  believes  entitle
him or her to benefits or to greater or different benefits. Within 60 days after
receipt by the Company of the  petition,  the Company  shall afford the Claimant
(and  counsel,  if any) an  opportunity  to present  his or her  position to the
Company in writing, and the Claimant (or counsel) shall have the right to review
the pertinent  documents.  The Company shall notify the Claimant of its decision
in writing  within  the 60-day  period,  stating  specifically  the basis of its
decision,  written in a manner to be understood by the Claimant and the specific
provisions of the Agreement on which the decision is based.  If,  because of the
need for a hearing,  the 60-day  period is not  sufficient,  the decision may be
deferred for up to another 60 days at the election of the Company, but notice of
this deferral shall be given to the Claimant.

                                   ARTICLE 10
                           AMENDMENTS AND TERMINATION

     This  Agreement  may be amended or terminated  only by a written  agreement
signed by the Company and the Executive.

                                      -6-
<PAGE>
                                   ARTICLE 11
                                  MISCELLANEOUS

     11.1  Binding  Effect.  This  Agreement  shall bind the  Executive  and the
Company  and  their  beneficiaries,  survivors,  executors,  administrators  and
transferees.

     11.2 No Guarantee of Employment. This Agreement is not an employment policy
or contract.  It does not give the  Executive the right to remain an employee of
the Company,  nor does it interfere  with the  Company's  right to discharge the
Executive.  It also does not require  the  Executive  to remain an employee  nor
interfere with the Executive's right to terminate employment at any time.

     11.3  Applicable  Law.  The  Agreement  and all rights  hereunder  shall be
governed  by the laws of the  State  of  North  Carolina  except  to the  extent
preempted by the laws of the United States of America.

     11.4  Reorganization.  The Company shall not merge or  consolidate  into or
with another company, or reorganize,  or sell substantially all of its assets to
another  company,  firm or person unless such succeeding or continuing  company,
firm or person agrees to assume and discharge the obligations of the Company.

     11.5  Non-Transferability.  Benefits under this  Agreement  cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.

     11.6 Tax  Withholding.  The  Company  shall  withhold  any  taxes  that are
required to be withheld from the benefits provided under this Agreement.

     11.7 Unfunded Arrangement. The Executive is a general unsecured creditor of
the  Company  for the payment of benefits  under this  Agreement.  The  benefits
represent  the mere promise by the Company to pay such  benefits.  The rights to
benefits  are not  subject  in any  manner to  anticipation,  alienation,  sale,
transfer,  assignment,   pledge,  encumbrance,   attachment  or  garnishment  by
creditors.  Any  insurance  on the  Executive's  life or any other asset held in
connection  with this  Agreement is a general  asset of the Company to which the
Executive has no preferred or secured claim.

     11.8 Entire  Agreement.  This Agreement  constitutes  the entire  agreement
between the Company and the Executive as to the subject matter hereof. No rights
are  granted  to the  Executive  by virtue of this  Agreement  other  than those
specifically set forth herein.

     11.9 Administration.  The Company shall have the powers which are necessary
to administer this Agreement, including but not limited to:

          (a) Interpreting the provisions of this Agreement;

          (b)  Establishing  and  revising  the  method  of  accounting  for the
Agreement;

                                      -7-
<PAGE>

          (c) Maintaining a record of benefit payments; and

          (d)  Establishing   rules  and  prescribing  any  forms  necessary  or
desirable to administer the Agreement.

         11.10 Actions of the Company. All determinations, interpretations,
rules, and decisions of the Company shall be conclusive and binding upon all
persons having or claiming to have any interest or right under this Agreement.

         11.11 Named Fiduciary. The Company shall be the named fiduciary and
plan administrator under this Agreement. The named fiduciary may delegate to
others certain aspects of the management and operation responsibilities of the
plan including the employment of advisors and the delegation of ministerial
duties to qualified individuals.

         IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.


EXECUTIVE:                           COMPANY:
                                     COOPERATIVE BANK FOR SAVINGS


  /S/ O. C. "BUDDY" BURRELL, JR.     BY:   /S/ FREDERICK WILLETTS, III
--------------------------------           -------------------------------------
O. C. BURRELL                        NAME:  FREDERICK WILLETTS, III
                                            ------------------------------------
                                     TITLE:  PRESIDENT
                                            ------------------------------------


                                      -8-
<PAGE>
                                   APPENDIX A


                              SIMULATED POLICY DATA

                          COOPERATIVE BANK FOR SAVINGS
                     EXECUTIVE INDEXED RETIREMENT AGREEMENT

                                  O. C. BURRELL


         INSURANCE CARRIER:                    WEST COAST LIFE INSURANCE COMPANY
         POLICY TYPE:                          UNIVERSAL LIFE, NO LOAD
         PRODUCT NAME:                         ESPVI
         INSURED'S SEX AND AGE:                MALE, AGE 53
         CLASSIFICATION:                       STANDARD, NON-TOBACCO USE
         INITIAL FACE AMOUNT:                  $2,905,000
         SINGLE PREMIUM AMOUNT:                $1,275,000
         ISSUE DATE:                           OCTOBER 1, 2001
         DEATH BENEFIT OPTION                  LEVEL


                                      -9-
<PAGE>
                          COOPERATIVE BANK FOR SAVINGS
                             SPLIT DOLLAR AGREEMENT


     THIS  AGREEMENT is adopted this 17th day of January,  2002,  by and between
COOPERATIVE BANK FOR SAVINGS, a State/Stock  Savings Bank located in Wilmington,
North  Carolina  (the  "Company"),  and O. C.  BURRELL (the  "Executive").  This
Agreement  shall append the Split Dollar  Endorsement  entered into on even date
herewith or as subsequently amended, by and between the aforementioned parties.


                                  INTRODUCTION

     To  encourage  the  Executive  to remain an  employee of the  Company,  the
Company is willing to divide the death  proceeds of a life  insurance  policy on
the  Executive's  life.  The Company will pay life  insurance  premiums from its
general assets.

                                    AGREEMENT

     The Company and the Executive agree as follows:

                                    ARTICLE I
                               GENERAL DEFINITIONS

     The following terms shall have the meanings specified:

     1.1 "Insurer" means West Coast Life Insurance Company.

     1.2 "Policy" means insurance policy no. ZUA386792 issued by the Insurer.

     1.3 "Insured" means the Executive.

     1.4 "Net Death Proceeds" means the total death proceeds of the Policy minus
the cash surrender value.

     1.5 "Normal Retirement Age" means the Executive's 65th birthday.

     1.6 "Voluntary Early Termination" means that the Executive, prior to Normal
Retirement  Age, has  terminated  employment  with the Company for reasons other
than  Termination  for  Cause,  Disability,  Change of  Control  or  Involuntary
Termination   (Termination  for  Cause,   Disability,   Change  of  Control  and
Involuntary  Termination  are  defined  in  the  COOPERATIVE  BANK  FOR  SAVINGS
EXECUTIVE INDEXED RETIREMENT AGREEMENT of even date herewith).



                                      -1-
<PAGE>
                                    ARTICLE 2
                           POLICY OWNERSHIP/INTERESTS


     2.1  Company  Ownership.  The  Company  is the sole owner of the Policy and
shall have the right to exercise all incidents of ownership  except as otherwise
said  herein.  The  Company  shall  be the  beneficiary  of the  death  proceeds
remaining after the Executive's  interest has been paid according to Section 2.2
below.

     2.2 Executive's  Interest.  The Executive shall have the right to designate
the  beneficiary  of an amount equal to 100 percent of the Net Death Proceeds of
the  Policy.  The  Executive  shall  also  have the  right to elect  and  change
settlement  options  that  may  be  permitted.   However,  the  Executive,   the
Executive's  transferee or the Executive's  beneficiary  shall have no rights or
interests  in the  Policy  with  respect to that  portion of the death  proceeds
designated in this section 2.2 upon the Executive's Voluntary Early Termination.

     2.3 Option to Purchase.  The Company shall not sell,  surrender or transfer
ownership of the Policy while this  Agreement is in effect  without first giving
the Executive or the  Executive's  transferee  the option to purchase the Policy
for a period of 60 days from  written  notice of such  intention.  The  purchase
price shall be an amount equal to the cash surrender  value of the Policy.  This
provision shall not impair the right of the Company to terminate this Agreement.

     2.4  Comparable  Coverage.  Upon  adoption and subject to the terms of this
Agreement, the Company shall maintain the Policy in full force and effect and in
no  event  shall  the  Company  amend,  terminate,  or  otherwise  abrogate  the
Executive's interest in the Policy,  unless the Company replaces the Policy with
a  comparable  insurance  policy  to  cover  the  benefit  provided  under  this
Agreement,  amends the Split Dollar Agreement and executes a new Endorsement for
said comparable  insurance policy.  The Executive agrees to provide the required
medical  information to the Insurer for the implementation of this Agreement and
agrees to  participate  with the  Company  if the  Company  desires  to obtain a
comparable  insurance  policy with another  carrier,  whether  prior to or after
Normal  Retirement Age. The Policy or any comparable  policy shall be subject to
the claims of the Company's creditors.

                                    ARTICLE 3
                                    PREMIUMS

     3.1 Premium Payment. The Company shall pay any premiums due on the Policy.

     3.2 Imputed Income.  The Company shall impute income to the Executive in an
amount equal to the current term rate for the  Executive's age multiplied by the
aggregate  death benefit payable to the  Executive's  beneficiary.  The "current
term rate" is the minimum  amount  required to be imputed under Revenue  Rulings
64-328 and 66-110, or any subsequent applicable authority.


                                      -2-
<PAGE>
                                    ARTICLE 4
                                   ASSIGNMENT

     The  Executive  may assign  without  consideration  all of the  Executive's
interests in the Policy and in this Agreement to any person, entity or trust. In
the event the Executive transfers all of the Executive's interest in the Policy,
then all of the Executive's interest in the Policy and in the Agreement shall be
vested  in the  Executive's  transferee,  who  shall be  substituted  as a party
hereunder and the Executive  shall have no further  interest in the Policy or in
this Agreement.

                                    ARTICLE 5
                                     INSURER

     The Insurer  shall be bound only by the terms of the Policy.  Any  payments
the Insurer  makes or actions the Insurer  takes in  accordance  with the Policy
shall fully  discharge  such Insurer  from all claims,  suits and demands of all
entities  or  persons.  The  Insurer  shall not be bound by or be deemed to have
notice of the provisions of this Agreement.

                                    ARTICLE 6
                                CLAIMS PROCEDURE

     6.1 Claims  Procedure.  The Company  shall notify any person or entity that
makes a claim under this Agreement (the  "Claimant") in writing,  within 90 days
of Claimant's  written  application  for benefits,  of his or her eligibility or
ineligibility for benefits under this Agreement.  If the Company determines that
the Claimant is not eligible for benefits or full benefits, the notice shall set
forth (1) the specific reasons for such denial,  (2) a specific reference to the
provisions of this Agreement on which the denial is based,  (3) a description of
any additional information or material necessary for the Claimant to perfect his
or her claim, and a description of why it is needed,  (4) an explanation of this
Agreement's claims review procedure and other appropriate  information as to the
steps to be taken if the Claimant wishes to have the claim  reviewed,  and (5) a
time within which a review must be  requested.  If the Company  determines  that
there are special  circumstances  requiring  additional time to make a decision,
the Company shall notify the Claimant of the special  circumstances and the date
by which a decision is expected to be made, and may extend the time for up to an
additional 90 days.

     6.2 Review  Procedure.  If the Claimant is determined by the Company not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different  benefits,  the Claimant  shall have the  opportunity to
have such claim reviewed by the Company by filing a petition for review with the
Company  within 60 days after receipt of the notice issued by the Company.  Said
petition shall state the specific  reasons,  which the Claimant believes entitle
him or her to benefits or to greater or different benefits. Within 60 days after
receipt by the Company of the  petition,  the Company  shall afford the Claimant
(and  counsel,  if any) an  opportunity  to present  his or her  position to the
Company in writing, and the Claimant (or counsel) shall have the right to review
the pertinent  documents.  The Company shall notify the Claimant of its decision
in writing within the sixty-day  period,  stating  specifically the basis of its
decision,  written in a manner to be understood by the Claimant and the specific
provisions of this Agreement on which the decision is based.  If, because of the
need for a hearing,  the 60-day

                                      -3-
<PAGE>

period is not sufficient,  the decision may be deferred for up to another 60-day
period at the  election of the  Company,  but notice of this  deferral  shall be
given to the Claimant.

                                    ARTICLE 7
                           AMENDMENTS AND TERMINATION

     This  Agreement  may be amended or terminated  only by a written  agreement
signed  by  the  Company  and  the  Executive.   However,  this  Agreement  will
automatically terminate upon the Executive's Voluntary Early Termination.

                                    ARTICLE 8
                                  MISCELLANEOUS

     8.1 Binding Effect. This Agreement shall bind the Executive and the Company
and their beneficiaries,  survivors, executors,  administrators and transferees,
and any Policy beneficiary.

     8.2 No Guarantee of Employment.  This Agreement is not an employment policy
or contract.  It does not give the  Executive the right to remain an employee of
the Company,  nor does it interfere  with the  Company's  right to discharge the
Executive.  It also does not require  the  Executive  to remain an employee  nor
interfere with the Executive's right to terminate employment at any time.

     8.3  Applicable  Law.  The  Agreement  and all  rights  hereunder  shall be
governed by and construed  according to the laws of the State of North Carolina,
except to the extent preempted by the laws of the United States of America.

     8.4 Reorganization. The Company shall not merge or consolidate into or with
another  company,  or  reorganize,  or sell  substantially  all of its assets to
another  company,  firm or person unless such succeeding or continuing  company,
firm or person agrees to assume and discharge the obligations of the Company.

     8.5 Notice. Any notice, consent or demand required or permitted to be given
under the  provisions  of this Split  Dollar  Agreement  by one party to another
shall be in writing, shall be signed by the party giving or making the same, and
may be given either by delivering the same to such other party personally, or by
mailing the same, by United States  certified  mail,  postage  prepaid,  to such
party, addressed to his or her last known address as shown on the records of the
Company.  The date of such  mailing  shall  be  deemed  the date of such  mailed
notice, consent or demand.

     8.6 Entire  Agreement.  This  Agreement  constitutes  the entire  agreement
between the Company and the Executive as to the subject matter hereof. No rights
are  granted  to the  Executive  by virtue of this  Agreement  other  than those
specifically set forth herein.

     8.7  Administration.  The Company  shall have powers which are necessary to
administer this Agreement, including but not limited to:

                                      -4-
<PAGE>

          (a) Interpreting the provisions of the Agreement;

          (b)  Establishing  and  revising  the  method  of  accounting  for the
Agreement;

          (c) Maintaining a record of benefit payments; and

          (d)  Establishing   rules  and  prescribing  any  forms  necessary  or
desirable to administer the Agreement.

     8.8 Named  Fiduciary.  The Company  shall be the named  fiduciary  and plan
administrator  under this Agreement.  The named fiduciary may delegate to others
certain  aspects of the  management and operation  responsibilities  of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals.

     IN WITNESS  WHEREOF,  the parties have executed this  Agreement the day and
year first above written.


EXECUTIVE:                            COMPANY:

                                      COOPERATIVE BANK FOR SAVINGS


  /s/ O. C. BURRELL                   By  /s/ Frederick Willetts, III
------------------------------------      --------------------------------------
O. C. BURRELL                         NAME:  /s/ FREDERICK WILLETTS, III
                                             -----------------------------------
                                      Title  President
                                             -----------------------------------


                                      -5-
<PAGE>


                       SPLIT DOLLAR POLICY ENDORSEMENT TO
               COOPERATIVE BANK FOR SAVINGS SPLIT DOLLAR AGREEMENT

Policy No. ZUA386792                                     Insured:  O. C. Burrell

Supplementing  and amending  the  application  for  insurance to West Coast Life
Insurance Company  ("Insurer") on September 28, 2001, the applicant requests and
directs that:

                                  BENEFICIARIES
                                  -------------

     1.  COOPERATIVE  BANK FOR SAVINGS,  a  State/Stock  Savings Bank located in
Wilmington,  North  Carolina (the  "Company"),  shall be the  beneficiary of the
death proceeds remaining after the Insured's interest has been paid according to
paragraph (2) below.

     2. The Insured or the Insured's  transferee shall designate the beneficiary
of an amount  equal to 100  percent  of the Net  Death  Proceeds  of the  Policy
(defined as the total  death  proceeds  of the Policy  minus the cash  surrender
value), subject to the provisions of paragraph (5) below.

                                    OWNERSHIP
                                    ---------

     3. The Owner of the policy shall be the  Company.  The Owner shall have all
ownership  rights in the  Policy  except as may be  specifically  granted to the
Insured or the Insured's transferee in paragraph (4) of this endorsement.

     4. The Insured or the Insured's  transferee shall have the rights to assign
his or her rights and  interests  in the Policy with  respect to that portion of
the death  proceeds  designated  in paragraph  (2) of this  endorsement,  and to
exercise all settlement options with respect to such death proceeds.

     5.  Notwithstanding  the provisions of paragraph (4) above,  the Insured or
the  Insured's  transferee  shall have no rights or interests in the Policy with
respect to that portion of the death  proceeds  designated  in paragraph  (2) of
this endorsement upon the Insured's  Voluntary Early  Termination (as defined in
the COOPERATIVE BANK FOR SAVINGS SPLIT DOLLAR AGREEMENT between Cooperative Bank
for Savings and O. C. Burrell of even date herewith).

               MODIFICATION OF ASSIGNMENT PROVISIONS OF THE POLICY
               ---------------------------------------------------

Upon the death of the Insured,  the interest of any  collateral  assignee of the
Owner of the Policy  designated  in (3) above shall be limited to the portion of
the proceeds described in paragraph (1) above.

                                      -6-
<PAGE>

                                OWNERS AUTHORITY
                                ----------------

The Insurer is hereby authorized to recognize the Owner's claim to rights
hereunder without investigating the reason for any action taken by the Owner,
including its statement of the amount of premiums it has paid on the Policy. The
signature of the Owner shall be sufficient for the exercise of any rights under
this Endorsement and the receipt of the Owner for any sums received by it shall
be a full discharge and release therefore to the Insurer. The Insurer may rely
on a sworn statement in form satisfactory to it furnished by the Owner, its
successors or assigns, as to their interest, and any payments made pursuant to
such statement shall discharge the Insurer accordingly. The owner accepts and
agrees to this split dollar endorsement.

Any transferee's rights shall be subject to this Endorsement.

The undersigned is signing in a representative  capacity and warrants that he or
she has the  authority to bind the entity on whose behalf this document is being
executed.

Signed at Wilmington, North Carolina, this 17th day of January, 2002.

COOPERATIVE BANK FOR SAVINGS

By       /s/ Frederick Willetts, III
         --------------------------------------------
Title    President
         --------------------------------------------


                     ACCEPTANCE AND BENEFICIARY DESIGNATION
                     --------------------------------------


The Insured  accepts and agrees to the foregoing  and,  subject to the rights of
the Owner as stated above,  designates  the following as  beneficiary(s)  of the
portion of the proceeds described in paragraph (2) above:

Primary Beneficiary:____________________________________________________________
         Relationship:__________________________________________________________
Contingent Beneficiary (if the Primary is deceased):____________________________
         Relationship:__________________________________________________________


Signed at Wilmington, North Carolina, this 17th day of January, 2002.

THE INSURED:


 /s/ O.C. Burrell
-------------------------
O. C. Burrell


                                      -7-

</TEXT>
</DOCUMENT>
