Exhibit 10.2

 

GUARANTEE AGREEMENT

 

TIDELANDS BANCSHARES, INC.

 

Dated as of June 20, 2008

 

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TABLE OF CONTENTS

 

 

 

 

 

Page

ARTICLE I DEFINITIONS AND INTERPRETATION

 

1

 

 

 

SECTION 1.1

 

Definitions and Interpretation

 

1

 

 

 

 

 

ARTICLE II POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

 

4

 

 

 

SECTION 2.1

 

Powers and Duties of the Guarantee Trustee

 

4

SECTION 2.2

 

Certain Rights of the Guarantee Trustee

 

5

SECTION 2.3

 

Not Responsible for Recitals or Issuance of Guarantee

 

7

SECTION 2.4

 

Events of Default; Waiver

 

7

SECTION 2.5

 

Events of Default; Notice

 

8

 

 

 

 

 

ARTICLE III THE GUARANTEE TRUSTEE

 

8

 

 

 

SECTION 3.1

 

The Guarantee Trustee; Eligibility

 

8

SECTION 3.2

 

Appointment, Removal and Resignation of the Guarantee Trustee

 

9

 

 

 

 

 

ARTICLE IV GUARANTEE

 

9

 

 

 

SECTION 4.1

 

Guarantee

 

9

SECTION 4.2

 

Waiver of Notice and Demand

 

10

SECTION 4.3

 

Obligations Not Affected

 

10

SECTION 4.4

 

Rights of Holders

 

11

SECTION 4.5

 

Guarantee of Payment

 

11

SECTION 4.6

 

Subrogation

 

11

SECTION 4.7

 

Independent Obligations

 

12

SECTION 4.8

 

Enforcement

 

12

 

 

 

 

 

ARTICLE V LIMITATION OF TRANSACTIONS; SUBORDINATION

 

12

 

 

 

SECTION 5.1

 

Limitation of Transactions

 

12

SECTION 5.2

 

Ranking

 

13

 

 

 

 

 

ARTICLE VI TERMINATION

 

13

 

 

 

SECTION 6.1

 

Termination

 

13

 

 

 

 

 

ARTICLE VII INDEMNIFICATION

 

13

 

 

 

SECTION 7.1

 

Exculpation

 

13

SECTION 7.2

 

Indemnification

 

14

SECTION 7.3

 

Compensation; Reimbursement of Expenses

 

15

 

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ARTICLE VIII MISCELLANEOUS

 

15

 

 

 

 

 

SECTION 8.1

 

Successors and Assigns

 

15

SECTION 8.2

 

Amendments

 

16

SECTION 8.3

 

Notices

 

16

SECTION 8.4

 

Benefit

 

16

SECTION 8.5

 

Governing Law

 

16

SECTION 8.6

 

Counterparts

 

17

 

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GUARANTEE AGREEMENT

 

This GUARANTEE AGREEMENT (the “Guarantee”), dated as of June 20, 2008, is
executed and delivered by Tidelands Bancshares, Inc., a bank holding company
incorporated in South Carolina (the “Guarantor”), and Wilmington Trust Company,
a Delaware banking corporation, as trustee (the “Guarantee Trustee”), for the
benefit of the Holders (as defined herein) from time to time of the Capital
Securities (as defined herein) of Tidelands Statutory Trust II, a Delaware
statutory trust (the “Issuer”).

 

WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
“Declaration”), dated as of June 20, 2008, among the trustees named therein of
the Issuer, Tidelands Bancshares, Inc., as sponsor, and the Holders from time to
time of undivided beneficial interests in the assets of the Issuer, the Issuer
is issuing on the date hereof securities, having an aggregate liquidation amount
of $6,000,000, designated in the Declaration as MMCapSSM (the “Capital
Securities”); and

 

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

 

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

 

ARTICLE I

 

DEFINITIONS AND INTERPRETATION

 

SECTION 1.1         DEFINITIONS AND INTERPRETATION.

 

In this Guarantee, unless the context otherwise requires:

 

(A)           CAPITALIZED TERMS USED IN THIS GUARANTEE BUT NOT DEFINED IN THE
PREAMBLE ABOVE HAVE THE RESPECTIVE MEANINGS ASSIGNED TO THEM IN THIS
SECTION 1.1;

 

(B)           A TERM DEFINED ANYWHERE IN THIS GUARANTEE HAS THE SAME MEANING
THROUGHOUT;

 

(C)           ALL REFERENCES TO “THE GUARANTEE” OR “THIS GUARANTEE” ARE TO THIS
GUARANTEE AS MODIFIED, SUPPLEMENTED OR AMENDED FROM TIME TO TIME;

 

(D)           ALL REFERENCES IN THIS GUARANTEE TO ARTICLES AND SECTIONS ARE TO
ARTICLES AND SECTIONS OF THIS GUARANTEE, UNLESS OTHERWISE SPECIFIED;

 

(E)           TERMS DEFINED IN THE DECLARATION AS OF THE DATE OF EXECUTION OF
THIS GUARANTEE HAVE THE SAME MEANINGS WHEN USED IN THIS GUARANTEE, UNLESS
OTHERWISE DEFINED IN THIS GUARANTEE OR UNLESS THE CONTEXT OTHERWISE REQUIRES;
AND

 

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(F)            A REFERENCE TO THE SINGULAR INCLUDES THE PLURAL AND VICE VERSA.

 

“Beneficiaries” means any Person to whom the Issuer is or hereafter becomes
indebted or liable.

 

“Common Securities” has the meaning specified in the Declaration.

 

“Corporate Trust Office”  means the office of the Guarantee Trustee at which at
any particular time its corporate trust business shall be principally
administered, which at all times shall be located within the United States and
at the time of the execution of this Guarantee shall be Rodney Square North,
1100 North Market Street, Wilmington, DE 19890-0001.

 

“Covered Person” means any Holder of Capital Securities.

 

“Debenture Issuer” means Tidelands Bancshares, Inc. or any successor entity
resulting from any consolidation, amalgamation, merger or other business
combination, in its capacity as issuer of the Debentures.

 

“Debentures” means the junior subordinated debentures of the Debenture Issuer
that are designated in the Indenture as the “Fixed/Floating Rate Junior
Subordinated Debt Securities due 2038” and held by the Institutional Trustee (as
defined in the Declaration) of the Issuer.

 

“Event of Default” has the meaning set forth in Section 2.4.

 

“Guarantee Payments” means the following payments or distributions, without
duplication, with respect to the Capital Securities, to the extent not paid or
made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the
Declaration) which are required to be paid on such Capital Securities to the
extent the Issuer has funds available in the Property Account (as defined in the
Declaration) therefor at such time, (ii) the price payable upon the redemption
of any Capital Securities to the extent the Issuer has funds available in the
Property Account therefor at such time, with respect to any Capital Securities
that are (1) called for redemption by the Issuer or (2) mandatorily redeemed by
the Issuer, in each case, in accordance with the terms of such Capital
Securities, and (iii) upon a voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Issuer (other than in connection with the
distribution of Debentures to the Holders of the Capital Securities in exchange
therefor as provided in the Declaration), the lesser of (a) the aggregate of the
liquidation amount of the Capital Securities and all accrued and unpaid
Distributions on the Capital Securities to the date of payment, to the extent
the Issuer has funds available in the Property Account therefor at such time,
and (b) the amount of assets of the Issuer remaining available for distribution
to Holders in liquidation of the Issuer after satisfaction of liabilities to
creditors of the Issuer as required by applicable law (in either case, the
“Liquidation Distribution”).

 

“Guarantee Trustee” means Wilmington Trust Company, until a Successor Guarantee
Trustee has been appointed and has accepted such appointment pursuant to the
terms of this Guarantee and thereafter means each such Successor Guarantee
Trustee.

 

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“Holder” means any Person in whose name any Capital Securities are registered on
the books and records of the Issuer; provided, however, that, in determining
whether the holders of the requisite percentage of Capital Securities have given
any request, notice, consent or waiver hereunder, “Holder” shall not include the
Guarantor or any Affiliate of the Guarantor.

 

“Indemnified Person” means the Guarantee Trustee (including in its individual
capacity), any Affiliate of the Guarantee Trustee, or any officers, directors,
shareholders, members, partners, employees, representatives, nominees,
custodians or agents of the Guarantee Trustee.

 

“Indenture” means the Indenture, dated as of June 20, 2008, between the
Debenture Issuer and Wilmington Trust Company, not in its individual capacity
but solely as trustee, and any indenture supplemental thereto pursuant to which
the Debentures are to be issued to the Institutional Trustee of the Issuer.

 

“Liquidation Distribution” has the meaning set forth in the definition of
“Guarantee Payments” herein.

 

“Majority in liquidation amount of the Capital Securities” means Holder(s) of
outstanding Capital Securities, voting together as a class, but separately from
the holders of Common Securities, of more than 50% of the aggregate liquidation
amount (including the amount that would be paid upon the redemption, liquidation
or otherwise on the date upon which the voting percentages are determined, plus
unpaid Distributions accrued thereon to such date) of all Capital Securities
then outstanding.

 

“Obligations” means any costs, expenses or liabilities (but not including
liabilities related to taxes) of the Issuer, other than obligations of the
Issuer to pay to holders of any Trust Securities the amounts due such holders
pursuant to the terms of the Trust Securities.

 

“Officer’s Certificate” means, with respect to any Person, a certificate signed
by one Authorized Officer of such Person.  Any Officer’s Certificate delivered
with respect to compliance with a condition or covenant provided for in this
Guarantee shall include:

 

(a)           a statement that such officer signing the Officer’s Certificate
has read the covenant or condition and the definitions relating thereto;

 

(b)           a brief statement of the nature and scope of the examination or
investigation undertaken by such officer in rendering the Officer’s Certificate;

 

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

 

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

 

“Person” means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust,

 

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unincorporated association, or government or any agency or political subdivision
thereof, or any other entity of whatever nature.

 

“Responsible Officer” means, with respect to the Guarantee Trustee, any officer
within the Corporate Trust Office of the Guarantee Trustee with direct
responsibility for the administration of any matters relating to this Guarantee,
including any vice president, any assistant vice president, any secretary, any
assistant secretary, the treasurer, any assistant treasurer, any trust officer
or other officer of the Corporate Trust Office of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer’s knowledge of and familiarity with the particular subject.

 

“Successor Guarantee Trustee” means a successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 3.1.

 

“Trust Securities” means the Common Securities and the Capital Securities.

 

ARTICLE II

 

POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

 

SECTION 2.1         POWERS AND DUTIES OF THE GUARANTEE TRUSTEE.

 

(A)           THIS GUARANTEE SHALL BE HELD BY THE GUARANTEE TRUSTEE FOR THE
BENEFIT OF THE HOLDERS OF THE CAPITAL SECURITIES, AND THE GUARANTEE TRUSTEE
SHALL NOT TRANSFER THIS GUARANTEE TO ANY PERSON EXCEPT A HOLDER OF CAPITAL
SECURITIES EXERCISING HIS OR HER RIGHTS PURSUANT TO SECTION 4.4(B) OR TO A
SUCCESSOR GUARANTEE TRUSTEE ON ACCEPTANCE BY SUCH SUCCESSOR GUARANTEE TRUSTEE OF
ITS APPOINTMENT TO ACT AS SUCCESSOR GUARANTEE TRUSTEE.  THE RIGHT, TITLE AND
INTEREST OF THE GUARANTEE TRUSTEE SHALL AUTOMATICALLY VEST IN ANY SUCCESSOR
GUARANTEE TRUSTEE, AND SUCH VESTING AND CESSATION OF TITLE SHALL BE EFFECTIVE
WHETHER OR NOT CONVEYANCING DOCUMENTS HAVE BEEN EXECUTED AND DELIVERED PURSUANT
TO THE APPOINTMENT OF SUCH SUCCESSOR GUARANTEE TRUSTEE.

 

(B)           IF AN EVENT OF DEFAULT ACTUALLY KNOWN TO A RESPONSIBLE OFFICER OF
THE GUARANTEE TRUSTEE HAS OCCURRED AND IS CONTINUING, THE GUARANTEE TRUSTEE
SHALL ENFORCE THIS GUARANTEE FOR THE BENEFIT OF THE HOLDERS OF THE CAPITAL
SECURITIES.

 

(C)           THE GUARANTEE TRUSTEE, BEFORE THE OCCURRENCE OF ANY EVENT OF
DEFAULT AND AFTER THE CURING OR WAIVING OF ALL EVENTS OF DEFAULT THAT MAY HAVE
OCCURRED, SHALL UNDERTAKE TO PERFORM ONLY SUCH DUTIES AS ARE SPECIFICALLY SET
FORTH IN THIS GUARANTEE, AND NO IMPLIED COVENANTS SHALL BE READ INTO THIS
GUARANTEE AGAINST THE GUARANTEE TRUSTEE.  IN CASE AN EVENT OF DEFAULT HAS
OCCURRED (THAT HAS NOT BEEN CURED OR WAIVED PURSUANT TO SECTION 2.4(B)) AND IS
ACTUALLY KNOWN TO A RESPONSIBLE OFFICER OF THE GUARANTEE TRUSTEE, THE GUARANTEE
TRUSTEE SHALL EXERCISE SUCH OF THE RIGHTS AND POWERS VESTED IN IT BY THIS
GUARANTEE, AND USE THE SAME DEGREE OF CARE AND SKILL IN ITS EXERCISE THEREOF, AS
A PRUDENT PERSON WOULD EXERCISE OR USE UNDER THE CIRCUMSTANCES IN THE CONDUCT OF
HIS OR HER OWN AFFAIRS.

 

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(D)           NO PROVISION OF THIS GUARANTEE SHALL BE CONSTRUED TO RELIEVE THE
GUARANTEE TRUSTEE FROM LIABILITY FOR ITS OWN NEGLIGENT ACTION, ITS OWN NEGLIGENT
FAILURE TO ACT, OR ITS OWN WILLFUL MISCONDUCT OR BAD FAITH, EXCEPT THAT:

 

(I)            PRIOR TO THE OCCURRENCE OF ANY EVENT OF DEFAULT AND AFTER THE
CURING OR WAIVING OF ALL EVENTS OF DEFAULT THAT MAY HAVE OCCURRED:

 

(A)          THE DUTIES AND OBLIGATIONS OF THE GUARANTEE TRUSTEE SHALL BE
DETERMINED SOLELY BY THE EXPRESS PROVISIONS OF THIS GUARANTEE, AND THE GUARANTEE
TRUSTEE SHALL NOT BE LIABLE EXCEPT FOR THE PERFORMANCE OF SUCH DUTIES AND
OBLIGATIONS AS ARE SPECIFICALLY SET FORTH IN THIS GUARANTEE, AND NO IMPLIED
COVENANTS OR OBLIGATIONS SHALL BE READ INTO THIS GUARANTEE AGAINST THE GUARANTEE
TRUSTEE; AND

 

(B)           IN THE ABSENCE OF BAD FAITH ON THE PART OF THE GUARANTEE TRUSTEE,
THE GUARANTEE TRUSTEE MAY CONCLUSIVELY RELY, AS TO THE TRUTH OF THE STATEMENTS
AND THE CORRECTNESS OF THE OPINIONS EXPRESSED THEREIN, UPON ANY CERTIFICATES OR
OPINIONS FURNISHED TO THE GUARANTEE TRUSTEE AND CONFORMING TO THE REQUIREMENTS
OF THIS GUARANTEE; BUT IN THE CASE OF ANY SUCH CERTIFICATES OR OPINIONS
FURNISHED TO THE GUARANTEE TRUSTEE, THE GUARANTEE TRUSTEE SHALL BE UNDER A DUTY
TO EXAMINE THE SAME TO DETERMINE WHETHER OR NOT ON THEIR FACE THEY CONFORM TO
THE REQUIREMENTS OF THIS GUARANTEE;

 

(II)           THE GUARANTEE TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF
JUDGMENT MADE IN GOOD FAITH BY A RESPONSIBLE OFFICER OF THE GUARANTEE TRUSTEE,
UNLESS IT SHALL BE PROVED THAT SUCH RESPONSIBLE OFFICER OF THE GUARANTEE TRUSTEE
OR THE GUARANTEE TRUSTEE WAS NEGLIGENT IN ASCERTAINING THE PERTINENT FACTS UPON
WHICH SUCH JUDGMENT WAS MADE;

 

(III)          THE GUARANTEE TRUSTEE SHALL NOT BE LIABLE WITH RESPECT TO ANY
ACTION TAKEN OR OMITTED TO BE TAKEN BY IT IN GOOD FAITH IN ACCORDANCE WITH THE
WRITTEN DIRECTION OF THE HOLDERS OF A MAJORITY IN LIQUIDATION AMOUNT OF THE
CAPITAL SECURITIES RELATING TO THE TIME, METHOD AND PLACE OF CONDUCTING ANY
PROCEEDING FOR ANY REMEDY AVAILABLE TO THE GUARANTEE TRUSTEE, OR EXERCISING ANY
TRUST OR POWER CONFERRED UPON THE GUARANTEE TRUSTEE UNDER THIS GUARANTEE; AND

 

(IV)          NO PROVISION OF THIS GUARANTEE SHALL REQUIRE THE GUARANTEE TRUSTEE
TO EXPEND OR RISK ITS OWN FUNDS OR OTHERWISE INCUR PERSONAL FINANCIAL LIABILITY
IN THE PERFORMANCE OF ANY OF ITS DUTIES OR IN THE EXERCISE OF ANY OF ITS RIGHTS
OR POWERS, IF THE GUARANTEE TRUSTEE SHALL HAVE REASONABLE GROUNDS FOR BELIEVING
THAT THE REPAYMENT OF SUCH FUNDS IS NOT REASONABLY ASSURED TO IT UNDER THE TERMS
OF THIS GUARANTEE, OR SECURITY AND INDEMNITY, REASONABLY SATISFACTORY TO THE
GUARANTEE TRUSTEE, AGAINST SUCH RISK OR LIABILITY IS NOT REASONABLY ASSURED TO
IT.

 

SECTION 2.2 CERTAIN RIGHTS OF THE GUARANTEE TRUSTEE.

 

(A)           SUBJECT TO THE PROVISIONS OF SECTION 2.1:

 

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(I)            THE GUARANTEE TRUSTEE MAY CONCLUSIVELY RELY, AND SHALL BE FULLY
PROTECTED IN ACTING OR REFRAINING FROM ACTING UPON, ANY RESOLUTION, CERTIFICATE,
STATEMENT, INSTRUMENT, OPINION, REPORT, NOTICE, REQUEST, DIRECTION, CONSENT,
ORDER, BOND, DEBENTURE, NOTE, OTHER EVIDENCE OF INDEBTEDNESS OR OTHER PAPER OR
DOCUMENT BELIEVED BY IT TO BE GENUINE AND TO HAVE BEEN SIGNED, SENT OR PRESENTED
BY THE PROPER PARTY OR PARTIES.

 

(II)           ANY DIRECTION OR ACT OF THE GUARANTOR CONTEMPLATED BY THIS
GUARANTEE SHALL BE SUFFICIENTLY EVIDENCED BY AN OFFICER’S CERTIFICATE.

 

(III)          WHENEVER, IN THE ADMINISTRATION OF THIS GUARANTEE, THE GUARANTEE
TRUSTEE SHALL DEEM IT DESIRABLE THAT A MATTER BE PROVED OR ESTABLISHED BEFORE
TAKING, SUFFERING OR OMITTING ANY ACTION HEREUNDER, THE GUARANTEE TRUSTEE
(UNLESS OTHER EVIDENCE IS HEREIN SPECIFICALLY PRESCRIBED) MAY, IN THE ABSENCE OF
BAD FAITH ON ITS PART, REQUEST AND CONCLUSIVELY RELY UPON AN OFFICER’S
CERTIFICATE OF THE GUARANTOR WHICH, UPON RECEIPT OF SUCH REQUEST, SHALL BE
PROMPTLY DELIVERED BY THE GUARANTOR.

 

(IV)          THE GUARANTEE TRUSTEE SHALL HAVE NO DUTY TO SEE TO ANY RECORDING,
FILING OR REGISTRATION OF ANY INSTRUMENT OR OTHER WRITING (OR ANY RERECORDING,
REFILING OR REREGISTRATION THEREOF).

 

(V)           THE GUARANTEE TRUSTEE MAY CONSULT WITH COUNSEL OF ITS SELECTION,
AND THE ADVICE OR OPINION OF SUCH COUNSEL WITH RESPECT TO LEGAL MATTERS SHALL BE
FULL AND COMPLETE AUTHORIZATION AND PROTECTION IN RESPECT OF ANY ACTION TAKEN,
SUFFERED OR OMITTED BY IT HEREUNDER IN GOOD FAITH AND IN ACCORDANCE WITH SUCH
ADVICE OR OPINION.  SUCH COUNSEL MAY BE COUNSEL TO THE GUARANTOR OR ANY OF ITS
AFFILIATES AND MAY INCLUDE ANY OF ITS EMPLOYEES.  THE GUARANTEE TRUSTEE SHALL
HAVE THE RIGHT AT ANY TIME TO SEEK INSTRUCTIONS CONCERNING THE ADMINISTRATION OF
THIS GUARANTEE FROM ANY COURT OF COMPETENT JURISDICTION.

 

(VI)          THE GUARANTEE TRUSTEE SHALL BE UNDER NO OBLIGATION TO EXERCISE ANY
OF THE RIGHTS OR POWERS VESTED IN IT BY THIS GUARANTEE AT THE REQUEST OR
DIRECTION OF ANY HOLDER, UNLESS SUCH HOLDER SHALL HAVE PROVIDED TO THE GUARANTEE
TRUSTEE SUCH SECURITY AND INDEMNITY, REASONABLY SATISFACTORY TO THE GUARANTEE
TRUSTEE, AGAINST THE COSTS, EXPENSES (INCLUDING ATTORNEYS’ FEES AND EXPENSES AND
THE EXPENSES OF THE GUARANTEE TRUSTEE’S AGENTS, NOMINEES OR CUSTODIANS) AND
LIABILITIES THAT MIGHT BE INCURRED BY IT IN COMPLYING WITH SUCH REQUEST OR
DIRECTION, INCLUDING SUCH REASONABLE ADVANCES AS MAY BE REQUESTED BY THE
GUARANTEE TRUSTEE; PROVIDED, HOWEVER, THAT NOTHING CONTAINED IN THIS
SECTION 2.2(A)(VI) SHALL BE TAKEN TO RELIEVE THE GUARANTEE TRUSTEE, UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT, OF ITS OBLIGATION TO EXERCISE THE RIGHTS AND
POWERS VESTED IN IT BY THIS GUARANTEE.

 

(VII)         THE GUARANTEE TRUSTEE SHALL NOT BE BOUND TO MAKE ANY INVESTIGATION
INTO THE FACTS OR MATTERS STATED IN ANY RESOLUTION, CERTIFICATE, STATEMENT,
INSTRUMENT, OPINION, REPORT, NOTICE, REQUEST, DIRECTION, CONSENT, ORDER, BOND,
DEBENTURE, NOTE, OTHER EVIDENCE OF INDEBTEDNESS OR OTHER PAPER OR DOCUMENT, BUT
THE GUARANTEE TRUSTEE, IN ITS DISCRETION, MAY MAKE SUCH FURTHER INQUIRY OR
INVESTIGATION INTO SUCH FACTS OR MATTERS AS IT MAY SEE FIT.

 

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(VIII)        THE GUARANTEE TRUSTEE MAY EXECUTE ANY OF THE TRUSTS OR POWERS
HEREUNDER OR PERFORM ANY DUTIES HEREUNDER EITHER DIRECTLY OR BY OR THROUGH
AGENTS, NOMINEES, CUSTODIANS OR ATTORNEYS, AND THE GUARANTEE TRUSTEE SHALL NOT
BE RESPONSIBLE FOR ANY MISCONDUCT OR NEGLIGENCE ON THE PART OF ANY AGENT OR
ATTORNEY APPOINTED WITH DUE CARE BY IT HEREUNDER.

 

(IX)           ANY ACTION TAKEN BY THE GUARANTEE TRUSTEE OR ITS AGENTS HEREUNDER
SHALL BIND THE HOLDERS OF THE CAPITAL SECURITIES, AND THE SIGNATURE OF THE
GUARANTEE TRUSTEE OR ITS AGENTS ALONE SHALL BE SUFFICIENT AND EFFECTIVE TO
PERFORM ANY SUCH ACTION.  NO THIRD PARTY SHALL BE REQUIRED TO INQUIRE AS TO THE
AUTHORITY OF THE GUARANTEE TRUSTEE TO SO ACT OR AS TO ITS COMPLIANCE WITH ANY OF
THE TERMS AND PROVISIONS OF THIS GUARANTEE, BOTH OF WHICH SHALL BE CONCLUSIVELY
EVIDENCED BY THE GUARANTEE TRUSTEE’S OR ITS AGENT’S TAKING SUCH ACTION.

 

(X)            WHENEVER IN THE ADMINISTRATION OF THIS GUARANTEE THE GUARANTEE
TRUSTEE SHALL DEEM IT DESIRABLE TO RECEIVE INSTRUCTIONS WITH RESPECT TO
ENFORCING ANY REMEDY OR RIGHT OR TAKING ANY OTHER ACTION HEREUNDER, THE
GUARANTEE TRUSTEE (A) MAY REQUEST INSTRUCTIONS FROM THE HOLDERS OF A MAJORITY IN
LIQUIDATION AMOUNT OF THE CAPITAL SECURITIES, (B) MAY REFRAIN FROM ENFORCING
SUCH REMEDY OR RIGHT OR TAKING SUCH OTHER ACTION UNTIL SUCH INSTRUCTIONS ARE
RECEIVED AND (C) SHALL BE PROTECTED IN CONCLUSIVELY RELYING ON OR ACTING IN
ACCORDANCE WITH SUCH INSTRUCTIONS.

 

(XI)           THE GUARANTEE TRUSTEE SHALL NOT BE LIABLE FOR ANY ACTION TAKEN,
SUFFERED, OR OMITTED TO BE TAKEN BY IT IN GOOD FAITH AND REASONABLY BELIEVED BY
IT TO BE AUTHORIZED OR WITHIN THE DISCRETION OR RIGHTS OR POWERS CONFERRED UPON
IT BY THIS GUARANTEE.

 

(B)           NO PROVISION OF THIS GUARANTEE SHALL BE DEEMED TO IMPOSE ANY DUTY
OR OBLIGATION ON THE GUARANTEE TRUSTEE TO PERFORM ANY ACT OR ACTS OR EXERCISE
ANY RIGHT, POWER, DUTY OR OBLIGATION CONFERRED OR IMPOSED ON IT, IN ANY
JURISDICTION IN WHICH IT SHALL BE ILLEGAL OR IN WHICH THE GUARANTEE TRUSTEE
SHALL BE UNQUALIFIED OR INCOMPETENT IN ACCORDANCE WITH APPLICABLE LAW TO PERFORM
ANY SUCH ACT OR ACTS OR TO EXERCISE ANY SUCH RIGHT, POWER, DUTY OR OBLIGATION. 
NO PERMISSIVE POWER OR AUTHORITY AVAILABLE TO THE GUARANTEE TRUSTEE SHALL BE
CONSTRUED TO BE A DUTY.

 

SECTION 2.3         NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF GUARANTEE.

 

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

 

SECTION 2.4         EVENTS OF DEFAULT; WAIVER.

 

(A)           AN “EVENT OF DEFAULT” UNDER THIS GUARANTEE WILL OCCUR UPON THE
FAILURE OF THE GUARANTOR TO PERFORM ANY OF ITS PAYMENT OR OTHER OBLIGATIONS
HEREUNDER.

 

(B)           THE HOLDERS OF A MAJORITY IN LIQUIDATION AMOUNT OF THE CAPITAL
SECURITIES MAY, VOTING OR CONSENTING AS A CLASS, ON BEHALF OF THE HOLDERS OF ALL
OF THE CAPITAL SECURITIES,

 

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WAIVE ANY PAST EVENT OF DEFAULT AND ITS CONSEQUENCES.  UPON SUCH WAIVER, ANY
SUCH EVENT OF DEFAULT SHALL CEASE TO EXIST, AND SHALL BE DEEMED TO HAVE BEEN
CURED, FOR EVERY PURPOSE OF THIS GUARANTEE, BUT NO SUCH WAIVER SHALL EXTEND TO
ANY SUBSEQUENT OR OTHER DEFAULT OR EVENT OF DEFAULT OR IMPAIR ANY RIGHT
CONSEQUENT THEREON.

 

SECTION 2.5         EVENTS OF DEFAULT; NOTICE.

 

(A)           THE GUARANTEE TRUSTEE SHALL, WITHIN 90 DAYS AFTER THE OCCURRENCE
OF AN EVENT OF DEFAULT, TRANSMIT BY MAIL, FIRST CLASS POSTAGE PREPAID, TO THE
HOLDERS OF THE CAPITAL SECURITIES, NOTICES OF ALL EVENTS OF DEFAULT ACTUALLY
KNOWN TO A RESPONSIBLE OFFICER OF THE GUARANTEE TRUSTEE, UNLESS SUCH DEFAULTS
HAVE BEEN CURED BEFORE THE GIVING OF SUCH NOTICE, PROVIDED, HOWEVER, THAT THE
GUARANTEE TRUSTEE SHALL BE PROTECTED IN WITHHOLDING SUCH NOTICE IF AND SO LONG
AS A RESPONSIBLE OFFICER OF THE GUARANTEE TRUSTEE IN GOOD FAITH DETERMINES THAT
THE WITHHOLDING OF SUCH NOTICE IS IN THE INTERESTS OF THE HOLDERS OF THE CAPITAL
SECURITIES.

 

(B)           THE GUARANTEE TRUSTEE SHALL NOT BE CHARGED WITH KNOWLEDGE OF ANY
EVENT OF DEFAULT UNLESS THE GUARANTEE TRUSTEE SHALL HAVE RECEIVED WRITTEN NOTICE
THEREOF FROM THE GUARANTOR OR A HOLDER OF THE CAPITAL SECURITIES, OR A
RESPONSIBLE OFFICER OF THE GUARANTEE TRUSTEE CHARGED WITH THE ADMINISTRATION OF
THIS GUARANTEE SHALL HAVE ACTUAL KNOWLEDGE THEREOF.

 

ARTICLE III

 

THE GUARANTEE TRUSTEE

 

SECTION 3.1         THE GUARANTEE TRUSTEE; ELIGIBILITY.

 

(A)                                  THERE SHALL AT ALL TIMES BE A GUARANTEE
TRUSTEE WHICH SHALL:

 

(I)            NOT BE AN AFFILIATE OF THE GUARANTOR; AND

 

(II)           BE A CORPORATION OR NATIONAL ASSOCIATION ORGANIZED AND DOING
BUSINESS UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE THEREOF OR
OF THE DISTRICT OF COLUMBIA, OR PERSON AUTHORIZED UNDER SUCH LAWS TO EXERCISE
CORPORATE TRUST POWERS, HAVING A COMBINED CAPITAL AND SURPLUS OF AT LEAST 50
MILLION U.S. DOLLARS ($50,000,000), AND SUBJECT TO SUPERVISION OR EXAMINATION BY
FEDERAL, STATE OR DISTRICT OF COLUMBIA AUTHORITY.  IF SUCH CORPORATION OR
NATIONAL ASSOCIATION PUBLISHES REPORTS OF CONDITION AT LEAST ANNUALLY, PURSUANT
TO LAW OR TO THE REQUIREMENTS OF THE SUPERVISING OR EXAMINING AUTHORITY REFERRED
TO ABOVE, THEN, FOR THE PURPOSES OF THIS SECTION 3.1(A)(II), THE COMBINED
CAPITAL AND SURPLUS OF SUCH CORPORATION OR NATIONAL ASSOCIATION SHALL BE DEEMED
TO BE ITS COMBINED CAPITAL AND SURPLUS AS SET FORTH IN ITS MOST RECENT REPORT OF
CONDITION SO PUBLISHED.

 

(B)           IF AT ANY TIME THE GUARANTEE TRUSTEE SHALL CEASE TO BE ELIGIBLE TO
SO ACT UNDER SECTION 3.1(A), THE GUARANTEE TRUSTEE SHALL IMMEDIATELY RESIGN IN
THE MANNER AND WITH THE EFFECT SET FORTH IN SECTION 3.2(C).

 

(C)           IF THE GUARANTEE TRUSTEE HAS OR SHALL ACQUIRE ANY “CONFLICTING
INTEREST” WITHIN THE MEANING OF SECTION 310(B) OF THE TRUST INDENTURE ACT, THE
GUARANTEE TRUSTEE SHALL

 

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EITHER ELIMINATE SUCH INTEREST OR RESIGN TO THE EXTENT AND IN THE MANNER
PROVIDED BY, AND SUBJECT TO, THIS GUARANTEE.

 

SECTION 3.2         APPOINTMENT, REMOVAL AND RESIGNATION OF THE GUARANTEE
TRUSTEE.

 

(A)           SUBJECT TO SECTION 3.2(B), THE GUARANTEE TRUSTEE MAY BE APPOINTED
OR REMOVED WITHOUT CAUSE AT ANY TIME BY THE GUARANTOR EXCEPT DURING AN EVENT OF
DEFAULT.

 

(B)           THE GUARANTEE TRUSTEE SHALL NOT BE REMOVED IN ACCORDANCE WITH
SECTION 3.2(A) UNTIL A SUCCESSOR GUARANTEE TRUSTEE HAS BEEN APPOINTED AND HAS
ACCEPTED SUCH APPOINTMENT BY WRITTEN INSTRUMENT EXECUTED BY SUCH SUCCESSOR
GUARANTEE TRUSTEE AND DELIVERED TO THE GUARANTOR.

 

(C)           THE GUARANTEE TRUSTEE APPOINTED TO OFFICE SHALL HOLD OFFICE UNTIL
A SUCCESSOR GUARANTEE TRUSTEE SHALL HAVE BEEN APPOINTED OR UNTIL ITS REMOVAL OR
RESIGNATION.  THE GUARANTEE TRUSTEE MAY RESIGN FROM OFFICE (WITHOUT NEED FOR
PRIOR OR SUBSEQUENT ACCOUNTING) BY AN INSTRUMENT IN WRITING EXECUTED BY THE
GUARANTEE TRUSTEE AND DELIVERED TO THE GUARANTOR, WHICH RESIGNATION SHALL NOT
TAKE EFFECT UNTIL A SUCCESSOR GUARANTEE TRUSTEE HAS BEEN APPOINTED AND HAS
ACCEPTED SUCH APPOINTMENT BY AN INSTRUMENT IN WRITING EXECUTED BY SUCH SUCCESSOR
GUARANTEE TRUSTEE AND DELIVERED TO THE GUARANTOR AND THE RESIGNING GUARANTEE
TRUSTEE.

 

(D)           IF NO SUCCESSOR GUARANTEE TRUSTEE SHALL HAVE BEEN APPOINTED AND
ACCEPTED APPOINTMENT AS PROVIDED IN THIS SECTION 3.2 WITHIN 60 DAYS AFTER
DELIVERY OF AN INSTRUMENT OF REMOVAL OR RESIGNATION, THE GUARANTEE TRUSTEE
RESIGNING OR BEING REMOVED MAY PETITION ANY COURT OF COMPETENT JURISDICTION FOR
APPOINTMENT OF A SUCCESSOR GUARANTEE TRUSTEE.  SUCH COURT MAY THEREUPON, AFTER
PRESCRIBING SUCH NOTICE, IF ANY, AS IT MAY DEEM PROPER, APPOINT A SUCCESSOR
GUARANTEE TRUSTEE.

 

(E)           NO GUARANTEE TRUSTEE SHALL BE LIABLE FOR THE ACTS OR OMISSIONS TO
ACT OF ANY SUCCESSOR GUARANTEE TRUSTEE.

 

(F)            UPON TERMINATION OF THIS GUARANTEE OR REMOVAL OR RESIGNATION OF
THE GUARANTEE TRUSTEE PURSUANT TO THIS SECTION 3.2, THE GUARANTOR SHALL PAY TO
THE GUARANTEE TRUSTEE ALL AMOUNTS OWING TO THE GUARANTEE TRUSTEE UNDER SECTIONS
7.2 AND 7.3 ACCRUED TO THE DATE OF SUCH TERMINATION, REMOVAL OR RESIGNATION.

 

ARTICLE IV

 

GUARANTEE

 

SECTION 4.1         GUARANTEE.

 

(A)           THE GUARANTOR IRREVOCABLY AND UNCONDITIONALLY AGREES TO PAY IN
FULL TO THE HOLDERS THE GUARANTEE PAYMENTS (WITHOUT DUPLICATION OF AMOUNTS
THERETOFORE PAID BY THE ISSUER), AS AND WHEN DUE, REGARDLESS OF ANY DEFENSE
(EXCEPT DEFENSE OF PAYMENT BY THE ISSUER), RIGHT OF SET-OFF OR COUNTERCLAIM THAT
THE ISSUER MAY HAVE OR ASSERT.  THE GUARANTOR’S OBLIGATION TO MAKE A GUARANTEE
PAYMENT MAY BE SATISFIED BY DIRECT PAYMENT OF THE REQUIRED AMOUNTS BY THE
GUARANTOR TO THE HOLDERS OR BY CAUSING THE ISSUER TO PAY SUCH AMOUNTS TO THE
HOLDERS.

 

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(B)           THE GUARANTOR HEREBY ALSO AGREES TO ASSUME ANY AND ALL OBLIGATIONS
OF THE ISSUER AND IN THE EVENT ANY SUCH OBLIGATION IS NOT SO ASSUMED, SUBJECT TO
THE TERMS AND CONDITIONS HEREOF, THE GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY GUARANTEES TO EACH BENEFICIARY THE FULL PAYMENT, WHEN AND AS
DUE, OF ANY AND ALL OBLIGATIONS TO SUCH BENEFICIARIES.  THIS GUARANTEE IS
INTENDED TO BE FOR THE BENEFICIARIES WHO HAVE RECEIVED NOTICE HEREOF.

 

SECTION 4.2         WAIVER OF NOTICE AND DEMAND.

 

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

 

SECTION 4.3         OBLIGATIONS NOT AFFECTED.

 

The obligations, covenants, agreements and duties of the Guarantor under this
Guarantee shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:

 

(A)           THE RELEASE OR WAIVER, BY OPERATION OF LAW OR OTHERWISE, OF THE
PERFORMANCE OR OBSERVANCE BY THE ISSUER OF ANY EXPRESS OR IMPLIED AGREEMENT,
COVENANT, TERM OR CONDITION RELATING TO THE CAPITAL SECURITIES TO BE PERFORMED
OR OBSERVED BY THE ISSUER;

 

(B)           THE EXTENSION OF TIME FOR THE PAYMENT BY THE ISSUER OF ALL OR ANY
PORTION OF THE DISTRIBUTIONS, THE PRICE PAYABLE UPON THE REDEMPTION OF THE
CAPITAL SECURITIES, THE LIQUIDATION DISTRIBUTION OR ANY OTHER SUMS PAYABLE UNDER
THE TERMS OF THE CAPITAL SECURITIES OR THE EXTENSION OF TIME FOR THE PERFORMANCE
OF ANY OTHER OBLIGATION UNDER, ARISING OUT OF, OR IN CONNECTION WITH, THE
CAPITAL SECURITIES (OTHER THAN AN EXTENSION OF TIME FOR THE PAYMENT OF THE
DISTRIBUTIONS, THE PRICE PAYABLE UPON THE REDEMPTION OF THE CAPITAL SECURITIES,
THE LIQUIDATION DISTRIBUTION OR OTHER SUMS PAYABLE THAT RESULTS FROM THE
EXTENSION OF ANY INTEREST PAYMENT PERIOD ON THE DEBENTURES);

 

(C)           ANY FAILURE, OMISSION, DELAY OR LACK OF DILIGENCE ON THE PART OF
THE HOLDERS TO ENFORCE, ASSERT OR EXERCISE ANY RIGHT, PRIVILEGE, POWER OR REMEDY
CONFERRED ON THE HOLDERS PURSUANT TO THE TERMS OF THE CAPITAL SECURITIES, OR ANY
ACTION ON THE PART OF THE ISSUER GRANTING INDULGENCE OR EXTENSION OF ANY KIND;

 

(D)           THE VOLUNTARY OR INVOLUNTARY LIQUIDATION, DISSOLUTION, SALE OF ANY
COLLATERAL, RECEIVERSHIP, INSOLVENCY, BANKRUPTCY, ASSIGNMENT FOR THE BENEFIT OF
CREDITORS, REORGANIZATION, ARRANGEMENT, COMPOSITION OR READJUSTMENT OF DEBT OF,
OR OTHER SIMILAR PROCEEDINGS AFFECTING, THE ISSUER OR ANY OF THE ASSETS OF THE
ISSUER;

 

(E)           ANY INVALIDITY OF, OR DEFECT OR DEFICIENCY IN, THE CAPITAL
SECURITIES;

 

(F)            THE SETTLEMENT OR COMPROMISE OF ANY OBLIGATION GUARANTEED HEREBY
OR HEREBY INCURRED; OR

 

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(G)           ANY OTHER CIRCUMSTANCE WHATSOEVER THAT MIGHT OTHERWISE CONSTITUTE
A LEGAL OR EQUITABLE DISCHARGE OR DEFENSE OF A GUARANTOR, IT BEING THE INTENT OF
THIS SECTION 4.3 THAT THE OBLIGATIONS OF THE GUARANTOR HEREUNDER SHALL BE
ABSOLUTE AND UNCONDITIONAL UNDER ANY AND ALL CIRCUMSTANCES.

 

There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.

 

SECTION 4.4         RIGHTS OF HOLDERS.

 

(A)           THE HOLDERS OF A MAJORITY IN LIQUIDATION AMOUNT OF THE CAPITAL
SECURITIES HAVE THE RIGHT TO DIRECT THE TIME, METHOD AND PLACE OF CONDUCTING ANY
PROCEEDING FOR ANY REMEDY AVAILABLE TO THE GUARANTEE TRUSTEE IN RESPECT OF THIS
GUARANTEE OR TO DIRECT THE EXERCISE OF ANY TRUST OR POWER CONFERRED UPON THE
GUARANTEE TRUSTEE UNDER THIS GUARANTEE; PROVIDED, HOWEVER, THAT (SUBJECT TO
SECTIONS 2.1 AND 2.2) THE GUARANTEE TRUSTEE SHALL HAVE THE RIGHT TO DECLINE TO
FOLLOW ANY SUCH DIRECTION IF THE GUARANTEE TRUSTEE SHALL DETERMINE THAT THE
ACTIONS SO DIRECTED WOULD BE UNJUSTLY PREJUDICIAL TO THE HOLDERS NOT TAKING PART
IN SUCH DIRECTION OR IF THE GUARANTEE TRUSTEE BEING ADVISED BY LEGAL COUNSEL
DETERMINES THAT THE ACTION OR PROCEEDING SO DIRECTED MAY NOT LAWFULLY BE TAKEN
OR IF THE GUARANTEE TRUSTEE IN GOOD FAITH BY ITS BOARD OF DIRECTORS OR TRUSTEES,
EXECUTIVE COMMITTEE OR A TRUST COMMITTEE OF DIRECTORS OR TRUSTEES AND/OR
RESPONSIBLE OFFICERS SHALL DETERMINE THAT THE ACTION OR PROCEEDING SO DIRECTED
WOULD INVOLVE THE GUARANTEE TRUSTEE IN PERSONAL LIABILITY.

 

(B)           ANY HOLDER OF CAPITAL SECURITIES MAY INSTITUTE A LEGAL PROCEEDING
DIRECTLY AGAINST THE GUARANTOR TO ENFORCE THE GUARANTEE TRUSTEE’S RIGHTS UNDER
THIS GUARANTEE, WITHOUT FIRST INSTITUTING A LEGAL PROCEEDING AGAINST THE ISSUER,
THE GUARANTEE TRUSTEE OR ANY OTHER PERSON.  THE GUARANTOR WAIVES ANY RIGHT OR
REMEDY TO REQUIRE THAT ANY SUCH ACTION BE BROUGHT FIRST AGAINST THE ISSUER, THE
GUARANTEE TRUSTEE OR ANY OTHER PERSON BEFORE SO PROCEEDING DIRECTLY AGAINST THE
GUARANTOR.

 

SECTION 4.5         GUARANTEE OF PAYMENT.

 

This Guarantee creates a guarantee of payment and not of collection.

 

SECTION 4.6         SUBROGATION.

 

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

 

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SECTION 4.7         INDEPENDENT OBLIGATIONS.

 

The Guarantor acknowledges that its obligations hereunder are independent of the
obligations of the Issuer with respect to the Capital Securities and that the
Guarantor shall be liable as principal and as debtor hereunder to make Guarantee
Payments pursuant to the terms of this Guarantee notwithstanding the occurrence
of any event referred to in subsections (a) through (g), inclusive, of
Section 4.3 hereof.

 

SECTION 4.8         ENFORCEMENT.

 

A Beneficiary may enforce the Obligations of the Guarantor contained in
Section 4.1(b) directly against the Guarantor, and the Guarantor waives any
right or remedy to require that any action be brought against the Issuer or any
other person or entity before proceeding against the Guarantor.

 

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

 

ARTICLE V

 

LIMITATION OF TRANSACTIONS; SUBORDINATION

 

SECTION 5.1         LIMITATION OF TRANSACTIONS.

 

So long as any Capital Securities remain outstanding, if (a) there shall have
occurred and be continuing an Event of Default or (b) Debenture Issuer shall
have selected an Extension Period as provided in the Indenture and such period,
or any extension thereof, shall have commenced and be continuing, then the
Guarantor may not (x) declare or pay any dividends or distributions on, or
redeem, purchase, acquire, or make a liquidation payment with respect to, any of
the Guarantor’s capital stock, (y) make any payment of principal of or interest
or premium, if any, on or repay, repurchase or redeem any debt securities of the
Guarantor that rank in all respects pari passu with or junior in interest to the
Debentures or (z) make any payment under any guarantees of the Guarantor that
rank in all respects pari passu with or junior in interest to this Guarantee
(other than (i) repurchases, redemptions or other acquisitions of shares of
capital stock of the Guarantor (A) in connection with any employment contract,
benefit plan or other similar arrangement with or for the benefit of one or more
employees, officers, directors, or consultants, (B) in connection with a
dividend reinvestment or stockholder stock purchase plan or (C) in connection
with the issuance of capital stock of the Guarantor (or securities convertible
into or exercisable for such capital stock), as consideration in an acquisition
transaction entered into prior to the occurrence of the Event of Default or the

 

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applicable Extension Period, (ii) as a result of any exchange or conversion of
any class or series of the Guarantor’s capital stock (or any capital stock of a
subsidiary of the Guarantor) for any class or series of the Guarantor’s capital
stock or of any class or series of the Guarantor’s indebtedness for any class or
series of the Guarantor’s capital stock, (iii) the purchase of fractional
interests in shares of the Guarantor’s capital stock pursuant to the conversion
or exchange provisions of such capital stock or the security being converted or
exchanged, (iv) any declaration of a dividend in connection with any
stockholder’s rights plan, or the issuance of rights, stock or other property
under any stockholder’s rights plan, or the redemption or repurchase of rights
pursuant thereto, or (v) any dividend in the form of stock, warrants, options or
other rights where the dividend stock or the stock issuable upon exercise of
such warrants, options or other rights is the same stock as that on which the
dividend is being paid or ranks pari passu with or junior in interest to such
stock).

 

SECTION 5.2         RANKING.

 

This Guarantee will constitute an unsecured obligation of the Guarantor and will
rank subordinate and junior in right of payment to all present and future Senior
Indebtedness (as defined in the Indenture) of the Guarantor.  By their
acceptance thereof, each Holder of Capital Securities agrees to the foregoing
provisions of this Guarantee and the other terms set forth herein.

 

ARTICLE VI

 

TERMINATION

 

SECTION 6.1         TERMINATION.

 

This Guarantee shall terminate as to the Capital Securities (i) upon full
payment of the price payable upon redemption of all Capital Securities then
outstanding, (ii) upon the distribution of all of the Debentures to the Holders
of all of the Capital Securities or (iii) upon full payment of the amounts
payable in accordance with the Declaration upon dissolution of the Issuer.  This
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder of Capital Securities must restore payment of any
sums paid under the Capital Securities or under this Guarantee.

 

ARTICLE VII

 

INDEMNIFICATION

 

SECTION 7.1         EXCULPATION.

 

(A)           NO INDEMNIFIED PERSON SHALL BE LIABLE, RESPONSIBLE OR ACCOUNTABLE
IN DAMAGES OR OTHERWISE TO THE GUARANTOR OR ANY COVERED PERSON FOR ANY LOSS,
DAMAGE OR CLAIM INCURRED BY REASON OF ANY ACT OR OMISSION OF SUCH INDEMNIFIED
PERSON IN GOOD FAITH IN ACCORDANCE WITH THIS GUARANTEE AND IN A MANNER THAT SUCH
INDEMNIFIED PERSON REASONABLY BELIEVED TO BE WITHIN THE SCOPE OF THE AUTHORITY
CONFERRED ON SUCH INDEMNIFIED PERSON BY THIS GUARANTEE OR BY LAW, EXCEPT THAT AN
INDEMNIFIED PERSON SHALL BE LIABLE FOR ANY SUCH LOSS, DAMAGE OR CLAIM

 

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INCURRED BY REASON OF SUCH INDEMNIFIED PERSON’S NEGLIGENCE, WILLFUL MISCONDUCT
OR BAD FAITH WITH RESPECT TO SUCH ACTS OR OMISSIONS.

 

(B)           AN INDEMNIFIED PERSON SHALL BE FULLY PROTECTED IN RELYING IN GOOD
FAITH UPON THE RECORDS OF THE ISSUER OR THE GUARANTOR AND UPON SUCH INFORMATION,
OPINIONS, REPORTS OR STATEMENTS PRESENTED TO THE ISSUER OR THE GUARANTOR BY ANY
PERSON AS TO MATTERS THE INDEMNIFIED PERSON REASONABLY BELIEVES ARE WITHIN SUCH
OTHER PERSON’S PROFESSIONAL OR EXPERT COMPETENCE AND WHO, IF SELECTED BY SUCH
INDEMNIFIED PERSON, HAS BEEN SELECTED WITH REASONABLE CARE BY SUCH INDEMNIFIED
PERSON, INCLUDING INFORMATION, OPINIONS, REPORTS OR STATEMENTS AS TO THE VALUE
AND AMOUNT OF THE ASSETS, LIABILITIES, PROFITS, LOSSES, OR ANY OTHER FACTS
PERTINENT TO THE EXISTENCE AND AMOUNT OF ASSETS FROM WHICH DISTRIBUTIONS TO
HOLDERS OF CAPITAL SECURITIES MIGHT PROPERLY BE PAID.

 

SECTION 7.2         INDEMNIFICATION.

 

(A)           THE GUARANTOR AGREES TO INDEMNIFY EACH INDEMNIFIED PERSON FOR, AND
TO HOLD EACH INDEMNIFIED PERSON HARMLESS AGAINST, ANY AND ALL LOSS, LIABILITY,
DAMAGE, CLAIM OR EXPENSE INCURRED WITHOUT NEGLIGENCE, WILLFUL MISCONDUCT OR BAD
FAITH ON THE PART OF THE INDEMNIFIED PERSON, ARISING OUT OF OR IN CONNECTION
WITH THE ACCEPTANCE OR ADMINISTRATION OF THE TRUST OR TRUSTS HEREUNDER,
INCLUDING BUT NOT LIMITED TO THE COSTS AND EXPENSES (INCLUDING REASONABLE LEGAL
FEES AND EXPENSES) OF THE INDEMNIFIED PERSON DEFENDING ITSELF AGAINST, OR
INVESTIGATING, ANY CLAIM OR LIABILITY IN CONNECTION WITH THE EXERCISE OR
PERFORMANCE OF ANY OF THE INDEMNIFIED PERSON’S POWERS OR DUTIES HEREUNDER.  THE
OBLIGATION TO INDEMNIFY AS SET FORTH IN THIS SECTION 7.2 SHALL SURVIVE THE
RESIGNATION OR REMOVAL OF THE GUARANTEE TRUSTEE AND THE TERMINATION OF THIS
GUARANTEE.

 

(B)           PROMPTLY AFTER RECEIPT BY AN INDEMNIFIED PERSON UNDER THIS
SECTION 7.2 OF NOTICE OF THE COMMENCEMENT OF ANY ACTION, SUCH INDEMNIFIED PERSON
WILL, IF A CLAIM IN RESPECT THEREOF IS TO BE MADE AGAINST THE GUARANTOR UNDER
THIS SECTION 7.2, NOTIFY THE GUARANTOR IN WRITING OF THE COMMENCEMENT THEREOF;
BUT THE FAILURE SO TO NOTIFY THE GUARANTOR (I) WILL NOT RELIEVE THE GUARANTOR
FROM LIABILITY UNDER PARAGRAPH (A) ABOVE UNLESS AND TO THE EXTENT THAT THE
GUARANTOR DID NOT OTHERWISE LEARN OF SUCH ACTION AND SUCH FAILURE RESULTS IN THE
FORFEITURE BY THE GUARANTOR OF SUBSTANTIAL RIGHTS AND DEFENSES AND (II) WILL
NOT, IN ANY EVENT, RELIEVE THE GUARANTOR FROM ANY OBLIGATIONS TO ANY INDEMNIFIED
PERSON OTHER THAN THE INDEMNIFICATION OBLIGATION PROVIDED IN PARAGRAPH
(A) ABOVE.  THE GUARANTOR SHALL BE ENTITLED TO APPOINT COUNSEL OF THE
GUARANTOR’S CHOICE AT THE GUARANTOR’S EXPENSE TO REPRESENT THE INDEMNIFIED
PERSON IN ANY ACTION FOR WHICH INDEMNIFICATION IS SOUGHT (IN WHICH CASE THE
GUARANTOR SHALL NOT THEREAFTER BE RESPONSIBLE FOR THE FEES AND EXPENSES OF ANY
SEPARATE COUNSEL RETAINED BY THE INDEMNIFIED PERSON OR PERSONS EXCEPT AS SET
FORTH BELOW); PROVIDED, HOWEVER, THAT SUCH COUNSEL SHALL BE SATISFACTORY TO THE
INDEMNIFIED PERSON.  NOTWITHSTANDING THE GUARANTOR’S ELECTION TO APPOINT COUNSEL
TO REPRESENT THE INDEMNIFIED PERSON IN ANY ACTION, THE INDEMNIFIED PERSON SHALL
HAVE THE RIGHT TO EMPLOY SEPARATE COUNSEL (INCLUDING LOCAL COUNSEL), AND THE
GUARANTOR SHALL BEAR THE REASONABLE FEES, COSTS AND EXPENSES OF SUCH SEPARATE
COUNSEL, IF (I) THE USE OF COUNSEL CHOSEN BY THE GUARANTOR TO REPRESENT THE
INDEMNIFIED PERSON WOULD PRESENT SUCH COUNSEL WITH A CONFLICT OF INTEREST,
(II) THE ACTUAL OR POTENTIAL DEFENDANTS IN, OR TARGETS OF, ANY SUCH ACTION
INCLUDE BOTH THE INDEMNIFIED PERSON AND THE GUARANTOR AND THE INDEMNIFIED PERSON
SHALL HAVE REASONABLY CONCLUDED THAT THERE MAY BE LEGAL DEFENSES AVAILABLE TO IT
AND/OR OTHER INDEMNIFIED PERSONS

 

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WHICH ARE DIFFERENT FROM OR ADDITIONAL TO THOSE AVAILABLE TO THE GUARANTOR,
(III) THE GUARANTOR SHALL NOT HAVE EMPLOYED COUNSEL SATISFACTORY TO THE
INDEMNIFIED PERSON TO REPRESENT THE INDEMNIFIED PERSON WITHIN A REASONABLE TIME
AFTER NOTICE OF THE INSTITUTION OF SUCH ACTION OR (IV) THE GUARANTOR SHALL
AUTHORIZE THE INDEMNIFIED PERSON TO EMPLOY SEPARATE COUNSEL AT THE EXPENSE OF
THE GUARANTOR.  THE GUARANTOR WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF THE
INDEMNIFIED PERSONS, SETTLE OR COMPROMISE OR CONSENT TO THE ENTRY OF ANY
JUDGMENT WITH RESPECT TO ANY PENDING OR THREATENED CLAIM, ACTION, SUIT OR
PROCEEDING IN RESPECT OF WHICH INDEMNIFICATION OR CONTRIBUTION MAY BE SOUGHT
HEREUNDER (WHETHER OR NOT THE INDEMNIFIED PERSONS ARE ACTUAL OR POTENTIAL
PARTIES TO SUCH CLAIM OR ACTION) UNLESS SUCH SETTLEMENT, COMPROMISE OR CONSENT
INCLUDES AN UNCONDITIONAL RELEASE OF EACH INDEMNIFIED PERSON FROM ALL LIABILITY
ARISING OUT OF SUCH CLAIM, ACTION, SUIT OR PROCEEDING.

 

SECTION 7.3         COMPENSATION; REIMBURSEMENT OF EXPENSES.

 

The Guarantor agrees:

 

(A)           TO PAY TO THE GUARANTEE TRUSTEE FROM TIME TO TIME SUCH
COMPENSATION FOR ALL SERVICES RENDERED BY IT HEREUNDER AS THE PARTIES SHALL
AGREE TO FROM TIME TO TIME (WHICH COMPENSATION SHALL NOT BE LIMITED BY ANY
PROVISION OF LAW IN REGARD TO THE COMPENSATION OF A TRUSTEE OF AN EXPRESS
TRUST); AND

 

(B)           EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, TO REIMBURSE THE
GUARANTEE TRUSTEE UPON REQUEST FOR ALL REASONABLE EXPENSES, DISBURSEMENTS AND
ADVANCES INCURRED OR MADE BY IT IN ACCORDANCE WITH ANY PROVISION OF THIS
GUARANTEE (INCLUDING THE REASONABLE COMPENSATION AND THE EXPENSES AND
DISBURSEMENTS OF ITS AGENTS AND COUNSEL), EXCEPT ANY SUCH EXPENSE, DISBURSEMENT
OR ADVANCE AS MAY BE ATTRIBUTABLE TO THE NEGLIGENCE, WILLFUL MISCONDUCT OR BAD
FAITH OF THE GUARANTEE TRUSTEE.

 

The provisions of this Section 7.3 shall survive the resignation or removal of
the Guarantee Trustee and the termination of this Guarantee.

 

ARTICLE VIII

 

MISCELLANEOUS

 

SECTION 8.1         SUCCESSORS AND ASSIGNS.

 

All guarantees and agreements contained in this Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor
and shall inure to the benefit of the Holders of the Capital Securities then
outstanding.  Except in connection with any merger or consolidation of the
Guarantor with or into another entity or any sale, transfer or lease of the
Guarantor’s assets to another entity, in each case to the extent permitted under
the Indenture, the Guarantor may not assign its rights or delegate its
obligations under this Guarantee without the prior approval of the Holders of a
Majority in liquidation amount of the Capital Securities.

 

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SECTION 8.2         AMENDMENTS.

 

Except with respect to any changes that do not adversely affect the powers,
preferences, rights or interests of Holders of the Capital Securities in any
material respect (in which case no approval of Holders will be required), this
Guarantee may be amended only with the prior approval of the Holders of a
Majority in liquidation amount of the Capital Securities.  The provisions of the
Declaration with respect to amendments thereof shall apply equally with respect
to amendments of the Guarantee.

 

SECTION 8.3         NOTICES.

 

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

 

(A)           IF GIVEN TO THE GUARANTEE TRUSTEE, AT THE GUARANTEE TRUSTEE’S
MAILING ADDRESS SET FORTH BELOW (OR SUCH OTHER ADDRESS AS THE GUARANTEE TRUSTEE
MAY GIVE NOTICE OF TO THE HOLDERS OF THE CAPITAL SECURITIES): WILMINGTON TRUST
COMPANY, RODNEY SQUARE NORTH, 1100 NORTH MARKET STREET, WILMINGTON, DELAWARE
19890-0001, ATTENTION: CORPORATE CAPITAL MARKETS, TELECOPY: 302-636-4140,
TELEPHONE:  302-651-1000;

 

(B)           IF GIVEN TO THE GUARANTOR, AT THE GUARANTOR’S MAILING ADDRESS SET
FORTH BELOW (OR SUCH OTHER ADDRESS AS THE GUARANTOR MAY GIVE NOTICE OF TO THE
HOLDERS OF THE CAPITAL SECURITIES AND TO THE GUARANTEE TRUSTEE): TIDELANDS
BANCSHARES, INC., 875 LOWCOUNTRY BLVD., MOUNT PLEASANT, SOUTH CAROLINA 29464,
ATTENTION: CHIEF FINANCIAL OFFICER, ATTENTION: CHIEF FINANCIAL OFFICER,
TELECOPY: (843) 388-8081, TELEPHONE: (843) 388-8433; OR

 

(C)           IF GIVEN TO ANY HOLDER OF THE CAPITAL SECURITIES, AT THE ADDRESS
SET FORTH ON THE BOOKS AND RECORDS OF THE ISSUER.

 

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

 

SECTION 8.4         BENEFIT.

 

This Guarantee is solely for the benefit of the Holders of the Capital
Securities and, subject to Section 2.1(a), is not separately transferable from
the Capital Securities.

 

SECTION 8.5         GOVERNING LAW.

 

THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES OF SAID
STATE OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

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SECTION 8.6         COUNTERPARTS.

 

This Guarantee may contain more than one counterpart of the signature page and
this Guarantee may be executed by the affixing of the signature of the Guarantor
and the Guarantee Trustee to any of such counterpart signature pages.  All of
such counterpart signature pages shall be read as though one, and they shall
have the same force and effect as though all of the signers had signed a single
signature page.

 

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

 

 

TIDELANDS BANCSHARES, INC.,

 

as Guarantor

 

 

 

By::

/s/ Robert E. Coffee, Jr.

 

  Name: Robert E. Coffee, Jr.

 

  Title: Chief Executive Officer

 

 

 

 

 

WILMINGTON TRUST COMPANY,

 

as Guarantee Trustee

 

 

 

By:

/s/ W. Thomas Morris, II

 

  Name: W. Thomas Morris, II

 

  Title: Assistant Vice President

 

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