Exhibit 10.2


 


GUARANTEE AGREEMENT


 


TIDELANDS BANCSHARES, INC.


 


Dated as of June 20,
2008


 

















 


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

  
							



 


i

















 


	
  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

  



 


ii

















 


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


 

















 


(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.


 


2

















 


“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,


 


3

















 


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.


 


4

















 


(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:


 


5

















 


(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.


 


6

















 


(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,


 


7

















 


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


 


8

















 


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.


 


9
















 


(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


 


10

















 


(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.


 


11

















 


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


 


12

















 


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


 


13

















 


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


 


14

















 


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.


 


15

















 


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.


 


16

















 


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.


 


17

















 


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

  
				



 


18