**Exhibit10.13**

 

**TIDELANDS BANK**

**SALARY CONTINUATION AGREEMENT**

 

This **SALARYCONTINUATION AGREEMENT** (this “Agreement”) is entered into as of this1day of May, 2008, by and between Tidelands Bank, a SouthCarolina-chartered bank (the “Bank”), and James M. Bedsole, its Senior VicePresident and Chief Risk Officer (the “Executive”).

 

**WHEREAS**, the Executive has contributedsubstantially to the Bank’s success and the Bank desires that the Executivecontinue in its employ,

 

**WHEREAS**, to encourage the Executive to remain anemployee, the Bank is willing to provide to the Executive salary continuationbenefits payable from the Bank’s general assets,

 

**WHEREAS**, none of the conditions or eventsincluded in the definition of the term “golden parachute payment” that is set forthin section 18(k)(4)(A)(ii) of the Federal Deposit Insurance Act [12 U.S.C.1828(k)(4)(A)(ii)] and in Federal Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Bank, iscontemplated insofar as the Bank is concerned, and

 

**WHEREAS**, the parties hereto intend that thisAgreement shall be considered an unfunded arrangement maintained primarily toprovide supplemental retirement benefits for the Executive, and to beconsidered a non-qualified benefit plan for purposes of the Employee RetirementIncome Security Act of 1974, as amended (“ERISA”).  The Executive is fully advised of the Bank’sfinancial status.

 

**NOWTHEREFORE**, inconsideration of these premises and other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the Executive and theBank hereby agree as follows.

 

**ARTICLE 1**

**DEFINITIONS**

 

**1.1**          “**Accrual Balance**” means the liability that should be accruedby the Bank under generally accepted accounting principles (“GAAP”) for theBank’s obligation to the Executive under this Agreement, applying AccountingPrinciples Board Opinion No. 12, as amended by Statement of FinancialAccounting Standards No. 106.  TheAccrual Balance shall be calculated such that when it is credited with interesteach month the Accrual Balance at Normal Retirement Age equals the presentvalue of the normal retirement benefits. The discount rate means the rate used by the Plan Administrator fordetermining the Accrual Balance.  In itssole discretion the Plan Administrator may adjust the discount rate to maintainthe rate within reasonable standards according to GAAP.

 

**1.2**          “**Beneficiary**” means each designated person, or the estate ofthe deceased Executive, entitled to benefits, if any, upon the death of theExecutive, as provided in Article 4.

 

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**1.3**          “**Beneficiary Designation Form**” means the form establishedfrom time to time by the Plan Administrator that the Executive completes,signs, and returns to the Plan Administrator to designate one or moreBeneficiaries.

 

**1.4**          “**Change in Control**” shall mean a change in control as definedin Internal Revenue Code section 409A and rules, regulations, and guidance ofgeneral application thereunder issued by the Department of the Treasury, including—

 

(a)           *Change in ownership*:a change in ownership of Tidelands Bancshares, Inc., a South Carolinacorporation of which the Bank is a wholly owned subsidiary, occurs on the dateany one person or group accumulates ownership of Tidelands Bancshares, Inc.stock constituting more than 50% of the total fair market value or total votingpower of Tidelands Bancshares, Inc. stock, or

 

(b)           *Change in effectivecontrol*: (x) any one person or more than one person acting as agroup acquires within a 12-month period ownership of Tidelands Bancshares, Inc.stock possessing 30% or more of the total voting power of Tidelands Bancshares, Inc.,or (y) a majority of Tidelands Bancshares, Inc.’s board of directorsis replaced during any 12-month period by directors whose appointment orelection is not endorsed in advance by a majority of Tidelands Bancshares, Inc.’sboard of directors, or

 

(c)           *Change in ownership of asubstantial portion of assets*: a change in ownership of asubstantial portion of Tidelands Bancshares, Inc.’s assets occurs if in a12-month period any one person or more than one person acting as a groupacquires from Tidelands Bancshares, Inc. assets having a total gross fairmarket value equal to or exceeding 40% of the total gross fair market value ofall of Tidelands Bancshares, Inc.’s assets immediately before theacquisition or acquisitions.  For thispurpose, gross fair market value means the value of Tidelands Bancshares, Inc.’sassets, or the value of the assets being disposed of, determined without regardto any liabilities associated with the assets.

 

**1.5**          “**Code**” means the Internal Revenue Code of 1986, as amended,and rules, regulations, and guidance of general application issued thereunderby the Department of the Treasury.

 

**1.6**          “**Disability**”  means, becauseof a medically determinable physical or mental impairment that can be expectedto result in death or that can be expected to last for a continuous period ofat least 12 months, (x) the Executive is unable to engage in anysubstantial gainful activity, or (y) the Executive is receiving incomereplacement benefits for a period of at least three months under an accidentand health plan of the employer.  Medicaldetermination of disability may be made either by the Social SecurityAdministration or by the provider of an accident or health plan coveringemployees of the Bank.  Upon request ofthe Plan Administrator, the Executive must submit proof to the PlanAdministrator of the Social Security Administration’s or provider’sdetermination.

 

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**1.7**          “**Early Termination**” means Separation from Service beforeNormal Retirement Age for reasons other than death, Disability, or Terminationwith Cause, but Early Termination excludes a Separation from Service governedby section 2.4.

 

**1.8**          “**Effective Date**” means                                        ,2008.

 

**1.9**          “**Intentional**,” for purposes of this Agreement, no act orfailure to act on the Executive’s part shall be deemed to have been intentionalif it was due primarily to an error in judgment or negligence.  An act or failure to act on the Executive’spart shall be considered intentional if it is not in good faith and if it iswithout a reasonable belief that the action or failure to act is in the Bank’sbest interests.

 

**1.10**        “**Normal Retirement Age**” means the Executive’s 65th birthday.

 

**1.11**        “**Plan Administrator**” or “**Administrator**”means the plan administrator described in Article 8.

 

**1.12**        “**Plan Year**” means a twelve-month period commencing on January 1and ending on December 31 of each year. The initial Plan Year shall commence on the effective date of thisAgreement.

 

**1.13**        “**Separation from Service**” means the Executive’s service as anexecutive and independent contractor to the Bank and any member of a controlledgroup, as defined in Code section 414, terminates for any reason, other thanbecause of a leave of absence approved by the Bank or the Executive’sdeath.  For purposes of this Agreement,if there is a dispute about the employment status of the Executive or the dateof the Executive’s Separation from Service, the Bank shall have the sole andabsolute right to decide the dispute unless a Change in Control shall haveoccurred.

 

**1.14**        “**Termination with Cause**” and “**Cause**”shall have the same meaning specified in any effective severance or employmentagreement existing on the date hereof or hereafter entered into between theExecutive and the Bank or between the Executive and Tidelands Bancshares, Inc.  If the Executive is not a party to aseverance or employment agreement containing a definition of termination withcause, Termination with Cause means the Executive’s employment is terminatedfor any of the following reasons —

 

(a)           the Executive’s gross negligence orgross neglect of duties or intentional and material failure to perform statedduties after written notice thereof, or

 

(b)           disloyalty or dishonesty by theExecutive in the performance of the Executive’s duties, or a breach of theExecutive’s fiduciary duties, in any case whether in the Executive’s capacityas a director or officer, or

 

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(c)           intentional wrongful damage by theExecutive to the business or property of the Bank or its affiliates, includingwithout limitation the reputation of the Bank, which in the judgement of theBank causes material harm to the Bank or affiliates, or

 

(d)           a willful violation by the Executiveof any applicable law or significant policy of the Bank or an affiliate that,in the Bank’s judgement, results in an adverse effect on the Bank or theaffiliate, regardless of whether the violation leads to criminal prosecution orconviction.  For purposes of thisAgreement applicable laws include any statute, rule, regulatory order,statement of policy, or final cease-and-desist order of any governmental agencyor body having regulatory authority over the Bank, or

 

(e)           an intentional act of fraud,embezzlement, or theft by the Executive in the course of employment.  For purposes of this Agreement no act orfailure to act on the part of the Executive shall be deemed to have beenintentional if it was due primarily to an error in judgment or negligence.  An act or failure to act on the Executive’spart shall be considered intentional if it is not in good faith and if it iswithout a reasonable belief that the action or failure to act is in the bestinterests of the Bank, or

 

(f)            the occurrence of any event thatresults in the Executive being excluded from coverage, or having coveragelimited for the Executive as compared to other executives of the  Bank, under the Bank’s blanket bond or otherfidelity or insurance policy covering its directors, officers, or employees, or

 

(g)           the Executive is removed from officeor permanently prohibited from participating in the Bank’s affairs by an orderissued under section 8(e)(4) or section 8(g)(1) of the FederalDeposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or

 

(h)           conviction of the Executive for orplea of no contest to a felony or conviction of or plea of no contest to amisdemeanor involving moral turpitude, or the actual incarceration of theExecutive for seven consecutive days or more.

 

**ARTICLE 2**

**LIFETIME BENEFITS**

 

**2.1**          **Normal Retirement Benefit**. Unless Separation from Service occurs before Normal Retirement Age, whenthe Executive attains Normal Retirement Age the Bank shall pay to the Executivethe benefit described in this section 2.1 instead of any other benefit underthis Agreement.  If the Executive’sSeparation from Service thereafter is a Termination with Cause or if thisAgreement terminates under Article 5, no further benefits shall be paid tothe Executive.

 

2.1.1        *Amount of benefit*.  The annual benefit under this section 2.1 is$81,938.

 

2.1.2        *Payment of benefit*.  Beginning with the month immediately afterthe month in which the Executive attains Normal Retirement Age, the Bank shallpay the annual 

 

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benefit to the Executivein equal monthly installments on the first day of each month.  The annual benefit shall be paid to theExecutive for ten years.

 

**2.2**          **Early Termination Benefit**. If Early Termination occurs before Normal Retirement Age but on or afterthe date the Executive attains age 55, the Bank shall pay to the Executive thebenefit described in this section 2.2 instead of any other benefit under thisAgreement.  If Early Termination occursbefore the Executive attains age 55, no benefit shall be payable under thisAgreement.  Additionally, no benefitsshall be payable if the Executive’s Separation from Service is a Terminationwith Cause or if this Agreement terminates under Article 5.  Neither the Bank nor the Executive shall beentitled to elect in the 24-month period after a Change in Control between thebenefit under this section 2.2 versus the benefit under section 2.4.  If the Executive’s Separation from Servicewithin 24 months after a Change in Control is an involuntary terminationwithout Cause or a Voluntary Termination with Good Reason, no benefit shall bepayable under this section 2.2 and the Executive shall instead be entitled tothe benefit under section 2.4 or, if the Executive first attained NormalRetirement Age, section 2.1.

 

2.2.1        *Amount of benefit*.  The annual benefit under this section 2.2 iscalculated as the amount that fully amortizes the Accrual Balance existing atthe end of the month immediately before the month in which Separation fromService occurs, amortizing that Accrual Balance over ten years and taking intoaccount interest at the discount rate or rates established by the PlanAdministrator.

 

2.2.2        *Payment of benefit*.  Beginning with the later of (x) theseventh month after the month in which the Executive’s Separation from Serviceoccurs, or (y) the month immediately after the month in which theExecutive attains Normal Retirement Age, the Bank shall pay the benefit underthis section 2.2 to the Executive in equal monthly installments on the firstday of each month.  The annual benefitshall be paid to the Executive for ten years.

 

**2.3**          **Disability Benefit**. For Separation from Service because of Disability before NormalRetirement Age the Bank shall pay to the Executive the benefit described inthis section 2.3 instead of any other benefit under this Agreement.

 

2.3.1        *Amount of benefit*.  The annual benefit under this section 2.3 iscalculated as the amount that fully amortizes the Accrual Balance existing atthe end of the month immediately before the month in which Separation fromService occurs, amortizing that Accrual Balance over ten years and taking intoaccount interest at the discount rate or rates established by the PlanAdministrator.

 

2.3.2        *Payment of benefit*.  Beginning with the later of (x) theseventh month after the month in which the Executive’s Separation from Serviceoccurs, or (y) the month immediately after the month in which theExecutive attains Normal Retirement Age, the Bank shall pay the benefit underthis section 2.3 to the Executive in equal monthly 

 

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installments on the firstday of each month.  The annual benefitshall be paid to the Executive for ten years.

 

**2.4**          **Change-in-Control Benefit**. If the Executive’s Separation from Service is an involuntary terminationwithout Cause or a Voluntary Termination with Good Reason, in either casewithin 24 months after a Change in Control, the Bank shall pay to the Executivethe benefit described in this section 2.4 instead of any other benefit underthis Agreement.  However, no benefitsshall be payable if the Executive’s Separation from Service is a Terminationwith Cause or if this Agreement terminates under Article 5.  Neither the Bank nor the Executive shall beentitled to elect in the 24-month period after a Change in Control between thebenefit under this section 2.4 versus the Early Termination benefit undersection 2.2.  If the Executive’s Separationfrom Service within 24 months after a Change in Control is an involuntarytermination without Cause or a Voluntary Termination with Good Reason, nobenefit shall be payable under section 2.2 and the Executive shall instead beentitled to the benefit under this section 2.4. But if the Executive shall have attained Normal Retirement Age whenSeparation from Service within 24 months after a Change in Control occurs,whether Separation from Service is voluntary or involuntary for any reasonother than Termination with Cause, the Executive shall be entitled solely tothe benefit provided by section 2.1, not this section 2.4.

 

2.4.1        *Amount of benefit*.  The benefit under this section 2.4 is theAccrual Balance maintained by the Bank when Separation from Service occurs.

 

2.4.2        *Payment of benefit*.  The Bank shall pay the Change-in-Controlbenefit under this section 2.4 to the Executive in a single lump sum on thefirst day of the seventh month after the month in which Separation from Serviceoccurs.

 

2.4.3        *Preservation ofChange-in-Control benefit if the Executive is preemptively terminated withoutCause*.  If before theExecutive attains Normal Retirement Age the Executive is involuntarilyterminated without Cause after a Change in Control is announced but before theChange in Control occurs, the Executive shall be entitled to the benefit underthis section 2.4 instead of any other benefit under this Agreement, includingthe benefit under section 2.2.  The Bankshall pay the Change-in-Control benefit to the Executive in a single lump sumon the later of (x) the first day of the seventh month after the month inwhich the Executive’s Separation from Service occurs or (y) the day of theChange in Control.  A Change in Controlshall be considered to have been announced on the date a press release isissued by the Bank or by Tidelands Bancshares, Inc. concerning the Changein Control, on the date a Form 8-K Current Report is filed by TidelandsBancshares, Inc. with the Securities and Exchange Commission to report theChange in Control event, on the date an annual or quarterly report or proxystatement is filed by Tidelands Bancshares, Inc. with the Securities andExchange Commission disclosing the Change in Control event, or on the dateinformation concerning the Change in Control is publicly disseminated by theBank or by Tidelands Bancshares, Inc. in any other manner, whicheveroccurs first.

 

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**2.5**          **Lump-sum Payment of Normal Retirement Benefit, Early Termination Benefit,or Disability Benefit Being Paid to the Executive when a Change in ControlOccurs**.  If when a Change inControl occurs the Executive is receiving the benefit under section 2.1, theBank shall pay the remaining salary continuation benefits to the Executive in asingle lump sum on the date of the Change in Control.  If when a Change in Control occurs theExecutive is receiving or is entitled at Normal Retirement Age to receive thebenefit under sections 2.2 or 2.3, the Bank shall pay the remaining salarycontinuation benefits to the Executive in a single lump sum on the later of (x) thedate of the Change in Control or (y) the first day of the seventh monthafter the month in which the Executive’s Separation from Service occurs.  The lump-sum payment due to the Executive asa result of a Change in Control shall be an amount equal to the Accrual Balanceamount corresponding to the particular benefit when the Change in Controloccurs.

 

**2.6**          **Annual Benefit Statement**. Within 120 days after the end of each Plan Year the Plan Administratorshall provide or cause to be provided to the Executive an annual benefitstatement showing benefits payable or potentially payable to the Executiveunder this Agreement.  Each annual benefitstatement shall supersede the previous year’s annual benefit statement.  If there is a contradiction between thisAgreement and the annual benefit statement concerning the amount of aparticular benefit payable or potentially payable to the Executive under sections2.2, 2.3, or 2.4 hereof, the amount of the benefit determined under theAgreement shall control.

 

**2.7**          **Savings Clause Relating to Compliance with Code Section 409A**.  Despite any contrary provision of thisAgreement, if when the Executive’s employment terminates the Executive is a specifiedemployee, as defined in Code section 409A, and if any payments under Article 2of this Agreement will result in additional tax or interest to the Executivebecause of section 409A, the Executive shall not be entitled to the paymentsunder Article 2 until the earliest of (x) the date that is at leastsix months after termination of the Executive’s employment for reasons otherthan the Executive’s death, (y) the date of the Executive’s death, or (z) anyearlier date that does not result in additional tax or interest to theExecutive under section 409A.  If anyprovision of this Agreement would subject the Executive to additional tax orinterest under section 409A, the Bank shall reform the provision.  However, the Bank shall maintain to themaximum extent practicable the original intent of the applicable provisionwithout subjecting the Executive to additional tax or interest, and the Bankshall not be required to incur any additional compensation expense as a resultof the reformed provision.

 

**2.8**          **One Benefit Only**. Despite anything to the contrary in this Agreement, the Executive andBeneficiary are entitled to one benefit only under this Agreement, which shallbe determined by the first event to occur that is dealt with by thisAgreement.  Except as provided in section2.5 or Article 3, subsequent occurrence of events dealt with by thisAgreement shall not entitle the Executive or Beneficiary to other or additionalbenefits under this Agreement.

 

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**ARTICLE 3**

**DEATH BENEFITS**

 

**3.1**          **Death Before Separation from Service**.  Except as provided in section 5.2, if theExecutive dies before Separation from Service, at the Executive’s death theExecutive’s Beneficiary shall be entitled to an amount in cash equal to theAccrual Balance existing at the Executive’s death, unless the Change-in-Controlbenefit shall have been paid to the Executive under section 2.4 or unless aChange-in-Control payout shall have occurred under section 2.5.  No benefit shall be paid if the Change-in-Controlbenefit shall have been paid to the Executive under section 2.4 or if aChange-in-Control payout shall have occurred under section 2.5.  If a benefit is payable to the Executive’sBeneficiary, the benefit shall be paid in a single lump sum 90 days after theExecutive’s death.  However, no benefitsunder this Agreement shall be paid or payable to the Executive or the Executive’sBeneficiary if this Agreement is terminated under Article 5.

 

**3.2**          **Death after Separation from Service**.  If the Executive dies after Separation fromService, if Separation from Service was not a Termination with Cause, and if atdeath the Executive was receiving the benefit under section 2.1 or wasreceiving or was entitled at Normal Retirement Age to receive the benefit undersections 2.2 or 2.3, at the Executive’s death the Executive’s Beneficiary shallbe entitled to an amount in cash equal to the Accrual Balance remaining at theExecutive’s death, unless the Change-in-Control benefit shall have been paid tothe Executive under section 2.4 or unless a Change-in-Control payout shall haveoccurred under section 2.5.  No benefitshall be paid if the Change-in-Control benefit shall have been paid to theExecutive under section 2.4 or if a Change-in-Control payout shall haveoccurred under section 2.5.  If a benefitis payable to the Executive’s Beneficiary, the benefit shall be paid in asingle lump sum 90 days after the Executive’s death.  However, no benefits under this Agreementshall be paid or payable to the Executive or the Executive’s Beneficiary ifthis Agreement is terminated under Article 5.

 

**ARTICLE 4**

**BENEFICIARIES**

 

**4.1**          **Beneficiary Designations**. The Executive shall have the right to designate at any time aBeneficiary to receive any benefits payable under this Agreement at theExecutive’s death.  The Beneficiarydesignated under this Agreement may be the same as or different from thebeneficiary designation under any other benefit plan of the Bank in which theExecutive participates.

 

**4.2**          **Beneficiary Designation: Change**.  The Executive shall designate a Beneficiaryby completing and signing the Beneficiary Designation Form and deliveringit to the Plan Administrator or its designated agent.  The Executive’s Beneficiary designation shallbe deemed automatically revoked if the Beneficiary predeceases the Executive orif the Executive names a spouse as Beneficiary and the marriage is subsequentlydissolved.  The Executive shall have theright to change a Beneficiary by completing, signing, and otherwise complyingwith the terms of

 

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the BeneficiaryDesignation Form and the Plan Administrator’s rules and procedures,as in effect from time to time.  Upon theacceptance by the Plan Administrator of a new Beneficiary Designation Form, allBeneficiary designations previously filed shall be cancelled.  The Plan Administrator shall be entitled torely on the last Beneficiary Designation Form filed by the Executive andaccepted by the Plan Administrator before the Executive’s death.

 

**4.3**          **Acknowledgment**.  Nodesignation or change in designation of a Beneficiary shall be effective untilreceived, accepted, and acknowledged in writing by the Plan Administrator orits designated agent.

 

**4.4**          **No Beneficiary Designation**. If the Executive dies without a valid beneficiary designation or if alldesignated Beneficiaries predecease the Executive, the Executive’s spouse shallbe the designated Beneficiary.  If theExecutive has no surviving spouse, the benefits shall be paid to the Executive’sestate.

 

**4.5**          **Facility of Payment**. If a benefit is payable to a minor, to a person declared incapacitated,or to a person incapable of handling the disposition of his or her property,the Bank may pay the benefit to the guardian, legal representative, or personhaving the care or custody of the minor, incapacitated person, or incapableperson.  The Bank may require proof ofincapacity, minority, or guardianship as it may deem appropriate beforedistribution of the benefit. Distribution shall completely discharge the Bank from all liability forthe benefit.

 

**ARTICLE 5**

**GENERAL LIMITATIONS**

 

**5.1**          **Termination with Cause**. Despite any contrary provision of this Agreement, the Bank shall not payany benefit under this Agreement and this Agreement shall terminate ifSeparation from Service is a Termination with Cause.

 

**5.2**          **Suicide or Misstatement**. The Bank shall not pay any benefit under this Agreement if the Executivecommits suicide within two years after the date of this Agreement or if theExecutive makes any material misstatement of fact on any application or resumeprovided to the Bank or on any application for benefits provided by the Bank.

 

**5.3**          **Removal**.  If theExecutive is removed from office or permanently prohibited from participatingin the Bank’s affairs by an order issued under section 8(e)(4) or (g)(1) ofthe Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), allobligations of the Bank under this Agreement shall terminate as of theeffective date of the order.

 

**5.4**          **Default**.  Despite anycontrary provision of this Agreement, if the Bank is in “default” or “in dangerof default,” as those terms are defined in section 3(x) of the FederalDeposit Insurance Act, 12 U.S.C. 1813(x), all obligations under this Agreementshall terminate.

 

**5.5**          **FDIC Open-Bank Assistance**. All obligations under this Agreement shall terminate, except to theextent determined that continuation of the contract is necessary for the

 

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continued operation ofthe Bank, when the Federal Deposit Insurance Corporation enters into anagreement to provide assistance to or on behalf of the Bank under the authoritycontained in Federal Deposit Insurance Act section 13(c).  12 U.S.C. 1823(c).  Rights of the parties that have already vestedshall not be affected by such action, however.

 

**ARTICLE 6**

**CLAIMS AND REVIEW PROCEDURES**

 

**6.1**                               **Claims Procedure**. A person or beneficiary (“claimant”) who has not received benefits underthis Agreement that he or she believes should be paid shall make a claim forsuch benefits as follows —

 

6.1.1                        *Initiation — written claim*. The claimant initiates a claim by submitting to the Administrator awritten claim for the benefits.  If theclaim relates to the contents of a notice received by the claimant, the claimmust be made within 60 days after the notice was received by the claimant.  All other claims must be made within 180 daysafter the date of the event that caused the claim to arise.  The claim must state with particularity thedetermination desired by the claimant.

 

6.1.2                        *Timing of Bank response*. The Bank shall respond to the claimant within 90 days after receivingthe claim.  If the Bank determines thatspecial circumstances require additional time for processing the claim, theBank may extend the response period by an additional 90 days by notifying theclaimant in writing before the end of the initial 90-day period that anadditional period is required.  Thenotice of extension must state the special circumstances and the date by whichthe Bank expects to render its decision.

 

6.1.3                        *Notice of decision*. If the Bank denies part or all of the claim, the Bank shall notify theclaimant in writing of the denial.  TheBank shall write the notification in a manner calculated to be understood bythe claimant.  The notification shall setforth —

 

6.1.3.1                                                             the specific reasons for the denial,

 

6.1.3.2                                                             a reference to the specific provisions ofthe Agreement on which the denial is based,

 

6.1.3.3                                                             a description of any additionalinformation or material necessary for the claimant to perfect the claim and anexplanation of why it is needed,

 

6.1.3.4                                                             an explanation of the Agreement’s reviewprocedures and the time limits applicable to such procedures, and

 

6.1.3.5                                                             a statement of the claimant’s right tobring a civil action under ERISA section 502(a) following an adversebenefit determination on review.

 

**6.2**                               **Review Procedure**. If the Bank denies part or all of the claim, the claimant shall have theopportunity for a full and fair review by the Bank of the denial, as follows —

 

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6.2.1        *Initiation — written request*. To initiate the review, the claimant, within 60 days after receiving theBank’s notice of denial, must file with the Bank a written request for review.

 

6.2.2        *Additional submissions — information access*. The claimant shall then have the opportunity to submit written comments,documents, records, and other information relating to the claim.  The Bank shall also provide the claimant,upon request and free of charge, reasonable access to and copies of alldocuments, records, and other information relevant (as defined in applicableERISA regulations) to the claimant’s claim for benefits.

 

6.2.3        *Considerations on review*. In considering the review, the Bank shall take into account allmaterials and information the claimant submits relating to the claim, withoutregard to whether the information was submitted or considered in the initialbenefit determination.

 

6.2.4        *Timing of Bank response*. The Bank shall respond in writing to the claimant within 60 days afterreceiving the request for review.  If theBank determines that special circumstances require additional time forprocessing the claim, the Bank may extend the response period by an additional60 days by notifying the claimant in writing before the end of the initial 60-dayperiod that an additional period is required. The notice of extension must state the special circumstances and thedate by which the Bank expects to render its decision.

 

6.2.5        *Notice of decision*.  The Bankshall notify the claimant in writing of its decision on review.  The Bank shall write the notification in amanner calculated to be understood by the claimant.  The notification shall set forth —

 

6.2.5.1                     the specific reason for the denial,

6.2.5.2                     a reference to the specific provisions of the Agreementon which the denial is based,

6.2.5.3                     a statement that the claimant is entitled to receive,upon request and free of charge, reasonable access to and copies of alldocuments, records, and other information relevant (as defined in applicableERISA regulations) to the claimant’s claim for benefits, and

6.2.5.4                     a statement of the claimant’s right to bring a civilaction under ERISA section 502(a).

 

**ARTICLE 7**

**MISCELLANEOUS**

 

**7.1**          **Amendments and Termination**.  Subject tosection 7.14, this Agreement may be amended solely by a written agreementsigned by the Bank and by the Executive, and except for termination occurringunder Article 5 this Agreement may be terminated solely by a writtenagreement signed by the Bank and by the Executive.

 

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**7.2**          **Binding Effect**.  This Agreement shall bind theExecutive, the Bank, and their beneficiaries, survivors, executors, successors,administrators, and transferees.

 

**7.3**          **No Guarantee of Employment**.  ThisAgreement is not an employment policy or contract.  It does not give the Executive the right toremain an employee of the Bank nor does it interfere with the Bank’s right todischarge the Executive.  It also doesnot require the Executive to remain an employee or interfere with the Executive’sright to terminate employment at any time.

 

**7.4**          **Non-Transferability**.  Benefitsunder this Agreement may not be sold, transferred, assigned, pledged, attached,or encumbered.

 

**7.5**          **Successors; Binding Agreement**.  By anassumption agreement in form and substance satisfactory to the Executive, theBank shall require any successor (whether direct or indirect, by purchase,merger, consolidation, or otherwise) to all or substantially all of thebusiness or assets of the Bank to expressly assume and agree to perform thisAgreement in the same manner and to the same extent that the Bank would berequired to perform this Agreement had no succession occurred.

 

**7.6**          **Tax Withholding**.  The Bank shall withhold anytaxes that are required to be withheld from the benefits provided under thisAgreement.

 

**7.7**          **Applicable Law**.  This Agreement and all rightshereunder shall be governed by the laws of the State of South Carolina, exceptto the extent preempted by the laws of the United States of America.

 

**7.8**          **Unfunded Arrangement**.  The Executiveand Beneficiary are general unsecured creditors of the Bank for the payment ofbenefits.  The benefits represent themere promise by the Bank to pay benefits. Rights to benefits are not subject to anticipation, alienation, sale,transfer, assignment, pledge, encumbrance, attachment, or garnishment bycreditors.  Any insurance on theExecutive’s life is a general asset of the Bank to which the Executive andBeneficiary have no preferred or secured claim.

 

**7.9**          **Entire Agreement**.  This Agreement constitutes theentire agreement between the Bank and the Executive concerning the subjectmatter.  No rights are granted to theExecutive under this Agreement other than those specifically set forth.

 

**7.10        Severability**.  If anyprovision of this Agreement is held invalid, such invalidity shall not affectany other provision of this Agreement not held invalid, and each such otherprovision shall continue in full force and effect to the full extent consistentwith law.  If any provision of thisAgreement is held invalid in part, such invalidity shall not affect theremainder of the provision not held invalid, and the remainder of suchprovision together with all other provisions of this Agreement shall continuein full force and effect to the full extent consistent with law.

 

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**7.11**        **Headings**.  Caption headings and subheadings herein areincluded solely for convenience of reference and shall not affect the meaningor interpretation of any provision of this Agreement.

 

**7.12**        **Notices**.  All notices, requests, demands and othercommunications hereunder shall be in writing and shall be deemed to have beenduly given if delivered by hand or mailed, certified or registered mail, returnreceipt requested, with postage prepaid, to the following addresses or to suchother address as either party may designate by like notice.  If to the Bank, notice shall be given to theboard of directors, Tidelands Bank, 875 Lowcountry Boulevard, Mount Pleasant,South Carolina 29464, or to such other or additional person or persons as theBank shall have designated to the Executive in writing.  If to the Executive, notice shall be given tothe Executive at the Executive’s address appearing on the Bank’s records, or tosuch other or additional person or persons as the Executive shall havedesignated to the Bank in writing.

 

**7.13**        **Payment of Legal Fees**.  The Bank isaware that after a Change in Control management of the Bank could cause orattempt to cause the Bank to refuse to comply with its obligations under thisAgreement, or could institute or cause or attempt to cause the Bank toinstitute litigation seeking to have this Agreement declared unenforceable, orcould take or attempt to take other action to deny Executive the benefitsintended under this Agreement.  In thesecircumstances the purpose of this Agreement would be frustrated.  The Bank desires that the Executive not berequired to incur the expenses associated with the enforcement of rights underthis Agreement, whether by litigation or other legal action, because the costand expense thereof would substantially detract from the benefits intended tobe granted to the Executive hereunder. The Bank desires that the Executive not be forced to negotiatesettlement of rights under this Agreement under threat of incurringexpenses.  Accordingly, if after a Changein Control occurs it appears to the Executive that (x) the Bank has failedto comply with any of its obligations under this Agreement, or (y) theBank or any other person has taken any action to declare this Agreement void orunenforceable, or instituted any litigation or other legal action designed todeny, diminish, or to recover from the Executive the benefits intended to beprovided to the Executive hereunder, the Bank irrevocably authorizes theExecutive from time to time to retain counsel of the Executive’s choice, at theBank’s expense as provided in this section 7.13, to represent the Executive inthe initiation or defense of any litigation or other legal action, whether byor against the Bank or any director, officer, stockholder, or other personaffiliated with the Bank, in any jurisdiction. Despite any existing or previous attorney-client relationship betweenthe Bank and any counsel chosen by the Executive under this section 7.13, theBank irrevocably consents to the Executive entering into an attorney-clientrelationship with that counsel, and the Bank and the Executive agree that aconfidential relationship shall exist between the Executive and that counsel.  The fees and expenses of counsel selectedfrom time to time by the Executive as provided in this section shall be paid orreimbursed to the Executive by the Bank on a regular, periodic basis uponpresentation by the Executive of a statement or statements prepared by counselin accordance with counsel’s customary practices, up to a maximum aggregateamount of $100,000, whether suit be brought or not, and whether or not incurredin trial, bankruptcy, or appellate proceedings. The Bank’s obligation to pay the Executive’s legal fees provided by thissection 7.13 operates separately from and in addition to any legal fee

 

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reimbursement obligationthe Bank may have with the Executive under any separate employment, severance,or other agreement between the Executive and the Bank.  Despite any contrary provision within thisAgreement however, the Bank shall not be required to pay or reimburse theExecutive’s legal expenses if doing so would violate section 18(k) of theFederal Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of theFederal Deposit Insurance Corporation [12 CFR 359.3].

 

**7.14**        **Termination or Modification of Agreement Because of Changes in Law, Rules orRegulations**.  The Bank is entering into this Agreement onthe assumption that certain existing tax laws, rules, and regulations willcontinue in effect in their current form. If that assumption materially changes and the change has a materialdetrimental effect on this Agreement, then the Bank reserves the right toterminate or modify this Agreement accordingly, subject to the written consentof the Executive, which shall not be unreasonably withheld.  This section 7.14 shall become null and voideffective immediately upon a Change in Control.

 

**ARTICLE 8**

**ADMINISTRATION OF AGREEMENT**

 

**8.1**          **Plan Administrator Duties**.  ThisAgreement shall be administered by a Plan Administrator consisting of the Bank’sboard of directors or such committee or person(s) as the board shallappoint.  The Executive may not be amember of the Plan Administrator.  ThePlan Administrator shall have the discretion and authority to (x) make,amend, interpret, and enforce all appropriate rules and regulations forthe administration of this Agreement and (y) decide or resolve any and allquestions that may arise, including interpretations of this Agreement.

 

**8.2**          **Agents**.  In the administration of this Agreement, thePlan Administrator may employ agents and delegate to them such administrativeduties as it sees fit (including acting through a duly appointedrepresentative) and may from time to time consult with counsel, who may becounsel to the Bank.

 

**8.3**          **Binding Effect of Decisions**.  The decisionor action of the Plan Administrator concerning any question arising out of theadministration, interpretation, and application of the Agreement and the rules andregulations promulgated hereunder shall be final and conclusive and bindingupon all persons having any interest in the Agreement.  No Executive or Beneficiary shall be deemedto have any right, vested or nonvested, regarding the continued use of anypreviously adopted assumptions, including but not limited to the discount rateand calculation method described in section 1.1.

 

**8.4**          **Indemnity of Plan Administrator**.  The Bank shallindemnify and hold harmless the members of the Plan Administrator against anyand all claims, losses, damages, expenses, or liabilities arising from anyaction or failure to act with respect to this Agreement, except in the case ofwillful misconduct by the Plan Administrator or any of its members.

 

**8.5**          **Bank Information**.  To enable the PlanAdministrator to perform its functions, the Bank shall supply full and timelyinformation to the Plan Administrator on all matters relating to the date andcircumstances of the retirement, Disability, death, or Separation from

 

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Service of the Executiveand such other pertinent information as the Plan Administrator may reasonablyrequire.

 

**ARTICLE 9**

**COMPETITION AFTER SEPARATION FROM SERVICE**

 

**9.1**          **Covenant Not to Solicit Employees**.  The Executiveagrees not to solicit the services of any officer or employee of the Bank for12 months after the Executive’s Separation from Service.

 

**9.2**          **Covenant Not to Compete**.  (a) Without advance written consent of the Bank, the Executive covenants and agreesnot to compete directly or indirectly with the Bank for 12 months afterSeparation from Service, plus any period during which the Executive is inviolation of this covenant not to compete and any period during which the Bankseeks by litigation to enforce this covenant not to compete.  For purposes of this section —

 

(1)           the term “compete” means

 

(a)           providing financial products or services on behalf ofany financial institution for any person residing in the territory,

 

(b)           assisting (other than through the performance ofministerial or clerical duties) any financial institution in providingfinancial products or services to any person residing in the territory, or

 

(c)           inducing or attempting to induce any person who was acustomer of the Bank at the date of the Executive’s Separation from Service toseek financial products or services from another financial institution.

 

(2)           the phrase “compete directly or indirectly” means —

 

(a)           acting as a consultant, officer, director, independentcontractor, incorporator, organizer, or employee of any financial institutionin competition with the Bank in the territory, or

 

(b)           ownership of more than 5% of the voting shares of anyfinancial institution in competition with the Bank in the territory, or

 

(c)           communicating to such financial institution the namesor addresses or any financial information concerning any person who was acustomer of the Bank at the Executive’s Separation from Service.

 

(3)           the term “customer” means any person to whom the Bankis providing financial products or services on the date of the Executive’sSeparation from Service.

 

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(4)           the term “financial institution” means any bank,savings association, or bank or savings association holding company, or anyother institution, including a financial institution in organization, thebusiness of which is or will be engaging in activities that are financial innature or incidental to such financial activities as described in section 4(k) ofthe Bank Holding Company Act of 1956, other than the Bank or its affiliatedcorporations.

 

(5)           “financial product or service” means any product orservice that a financial institution or a financial holding company could offerby engaging in any activity that is financial in nature or incidental to such afinancial activity under section 4(k) of the Bank Holding Company Act of1956 and that is offered by the Bank or an affiliate on the date of the Executive’sSeparation from Service, including but not limited to banking activities andactivities that are closely related to and a proper incident to banking.

 

(6)           the term “person” means any individual or individuals,corporation, partnership, fiduciary or association.

 

(7)           the term “territory” means all of Charleston,Dorchester, and Berkeley Counties in South Carolina and the area within a50-mile radius of any full-service banking office of the Bank on the date ofthe Executive’s Separation from Service.

 

(b)           If any provision of this section or any word, phrase,clause, sentence or other portion thereof (including without limitation thegeographical and temporal restrictions contained therein) is held to beunenforceable or invalid for any reason, the unenforceable or invalid provisionor portion shall be modified or deleted so that the provision, as modified, islegal and enforceable to the fullest extent permitted under applicable law.

 

**9.3**          **Remedies**.  Because of the unique character of theservices to be rendered by the Executive hereunder, the Executive understandsthat the Bank would not have an adequate remedy at law for the material breachor threatened breach by the Executive of any one or more of the Executive’scovenants set forth in this Article 9. Accordingly, the Executive agrees that the Bank’s remedies for amaterial breach or threatened breach of this Article 9 include but are notlimited to (x) forfeiture of any money representing accrued salary,contingent payments, or other fringe benefits due and payable to the Executive,(y) forfeiture of any unpaid benefits under Article 2 of thisAgreement, and (z) a suit in equity by the Bank to enjoin the Executivefrom the breach or threatened breach of such covenants.  The Executive hereby waives the claim ordefense that an adequate remedy at law is available to the Bank and theExecutive agrees not to urge in any such action the claim or defense that anadequate remedy at law exists.  Nothingherein shall be construed to prohibit the Bank from pursuing any other remediesfor the breach or threatened breach.

 

**9.4**          **Article 9 Survives Termination But Is Void After a Change inControl**.  The rights and obligations set forth in this Article 9shall survive termination of this Agreement. However, Article 9 shall be null and void if a Change in Controloccurs before Separation from Service.

 

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**INWITNESS WHEREOF**,the Executive and a duly authorized officer of the Bank have executed thisSalary Continuation Agreement as of the date first written above.

 
| **EXECUTIVE**:       |   | **BANK**:      |
|----------------------|--------|----------------|
|                 |   | Tidelands Bank |
|                 |   |           |
| /s/ James M. Bedsole |   | By:            | /s/ Robert E.  Coffee, Jr. |
| James M. Bedsole     |   |           | Robert E. Coffee Jr. |
|                 |   | Its:           | President and CEO |
|                 |   |           |
|                 |   | And By:        | /s/ Alan W. Jackson |
|                 |   |           |
|                 |   | Its:           | Chief Financial Officer |
|                      |        |                |  |  |  |

 

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