**Exhibit 10.16**

 

**TIDELANDS BANCSHARES, INC.**

**2004STOCK INCENTIVE PLAN**

 

**AMENDMENT NO. 2**

**ADOPTED BY THE BOARD OF DIRECTORS**

**OCTOBER 20, 2008**

 

**First**, the Board****amendedthe definition of “Fair Market Value” found in Article I by deleting it inits entirety and replacing it with the following:

 

“Fair MarketValue” on any date shall mean:

 

(i)            ifthe Stock is readily tradable on an established securities market (as definedin Treasury Regulation § 1.897-1(m)), the closing sales price of the Stock onthe trading day immediately preceding such date on the securities exchangehaving the greatest volume of trading in the Stock during the 30-day periodpreceding the day the value is to be determined or, if such exchange was notopen for trading on such date, the next preceding date on which it was open;

 

(ii)           ifthe Stock is not traded on any securities exchange (as defined in TreasuryRegulation §1.897-1(m)), the average of the closing high bid and low askedprices of the Stock on the over-the-counter market on the day such value is tobe determined, or in the absence of closing bids on such day, the closing bidson the next preceding day on which there were bids; or

 

(iii)          ifthe Stock also is not traded on the over-the-counter market, the fair marketvalue as determined in good faith by the Board or the Committee by applicationof a reasonable valuation method consistently applied and taking intoconsideration all available information material to the value of the Company;factors to be considered may include, as applicable, the value of tangible andintangible assets of the Company, the present value of future cash-flows of theCompany, the market value of stock or equity interests in similar corporationswhich can be readily determined through objective means (such as throughtrading prices on an established securities market or an amount paid in an arm’slength private transaction), and other relevant factors such as controlpremiums or discounts for lack of marketability.  For purposes of the foregoing, a valuationprepared in accordance with any of the methods set forth in Treasury Regulation§ 1.409A-1(b)(5)(iv)(B)(2), consistently used, shall be rebuttably presumed toresult in a reasonable valuation.  Thisparagraph is intended to comply with the definition of “fair market value”contained in Treasury Regulation § 1.409A-1(b)(5)(iv) and should beinterpreted consistently therewith.

 

**Second**, the Board adopted, and made an integralpart of the Plan, Article X, Section 10.7 to read as follows:

 

10.7         Amendmentto Meet the Requirements of Code Section 409A.  It is intended that this Plan and any Optionsgranted under this Plan comply with or meet an exemption from Section 409Aof the Code, so that the income inclusion provisions of Code Section 409A(a)(1) donot apply to an Optionee.  Optioneeacknowledges that the Board shall have the sole discretion and authority toamend the Plan and any Stock Option Agreement hereunder including, but notlimited to, increasing the Exercise Price and/or changing the exercise period,payment periods, or restrictions of any Option in the event that the FairMarket Value of the Stock is subsequently determined to be greater than theExercise Price initially established at the time of grant, to the extentnecessary to cause the Plan or such Options to comply with the provisions ofCode Section 409A. Such amendment may be retroactive to the extentpermitted by Section 409A of the Code, and shall not require the consentof the Optionee.

 

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IN WITNESS WHEREOF, theCompany has caused this Amendment No. 2 to the Plan to be executed as of October 20,2008 in accordance with the authority provided by the Board of Directors.

 
|   |                        |                              |
|--------|-----------------------------|-----------------------------------|
|   | TIDELANDS BANCSHARES,  INC. |
|   |                        |                              |
|   |                        |                              |
|   | By:                         | /s/  Robert E. Coffee, Jr.   |
|   |                        | Name:  Robert E. Coffee, Jr. |
|   |                        | Title:  Chief Executive Officer   |

 

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