**Exhibit10.7**

 

**EMPLOYMENT AGREEMENT**

 

This **EMPLOYMENTAGREEMENT** (this “**Agreement**”)is entered into as of this 1 day of May, 2008, by and among TidelandsBancshares, Inc., a South Carolina corporation (the “**Corporation**”),Tidelands Bank, a South Carolina-chartered bank and wholly owned subsidiary ofTidelands Bancshares, Inc. (the “**Bank**”), andJames M. Bedsole, Senior Vice President and Chief Risk Officer of the Bank (the“**Executive**”).  The Corporation and the Bank are referred toin this Agreement individually and together as the “**Employer**.”

 

**WHEREAS**, the Executive possesses unique skills,knowledge, and experience relating to the Employer’s business and the Executivehas made and is expected to continue to make major contributions to theprofitability, growth, and financial strength of the Employer and affiliates,

 

**WHEREAS**, the Employer and the Executive desireto set forth in this Agreement the terms and conditions of the Executive’semployment,

 

**WHEREAS**, the Executive and the Corporation areparties to an Employment Agreement dated as of September 19, 2005, but theExecutive, the Corporation, and the Bank intend that this Agreement supersedeand replace the September 19, 2005 Employment Agreement in its entirety,and

 

**WHEREAS**, none of the conditions or eventsincluded in the definition of the term “golden parachute payment” that is setforth in 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 Employer, iscontemplated insofar as the Employer or any affiliates are concerned.

 

**NOWTHEREFORE**, inconsideration of these premises, the mutual covenants contained herein, andother good and valuable consideration the receipt and sufficiency of which arehereby acknowledged, the parties hereto agree as follows.

 

**ARTICLE 1**

**EMPLOYMENT**

 

**1.1**          **Employment**.  Effectiveon the date and for the term specified in section 1.3, the Employer herebyemploys the Executive to serve as the Bank’s Senior Vice President and ChiefRisk Officer according to the terms and conditions of this Agreement.  The Executive hereby accepts employmentaccording to the terms and conditions of this Agreement.

 

**1.2**          **Duties**.  As the Bank’sSenior Vice President and Chief Risk Officer, the Executive shall serve inaccordance with the Employer’s Articles of Incorporation and Bylaws, as eachmay be amended or restated from time to time. The Executive shall serve the Employer faithfully, diligently,competently, and to the best of the Executive’s ability.  The Executive shall exclusively devote fullworking time, energy, and attention to the business of the Employer and to thepromotion of the Employer’s interests throughout the term of this Agreement.  Without the 

 

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written consent of theCorporation and the Bank, the Executive shall not render services to or for anyperson, firm, corporation, or other entity or organization in exchange forcompensation, regardless of the form in which the compensation is paid andregardless of whether it is paid directly or indirectly to the Executive.  Nothing in this section 1.2 shall prevent theExecutive from managing personal investments and affairs, provided that doingso does not interfere with the proper performance of the Executive’s duties andresponsibilities under this Agreement.

 

**1.3**          **Term of Employment**. The initial term of employment under this Agreement shall be athree-year period commencing on May 1, 2008.  At the end of each day the term of thisAgreement shall automatically extend for one additional day so that the entireterm remains a term of three years. However, at any time the Employer or the Executive may provide writtennotice to the other that the term of this Agreement shall be fixed to a finiteterm ending three years after the date of the notice, without extension.  If the Employer or the Executive giveswritten notice that the term shall be fixed at three years, this Agreementshall nevertheless remain in force until the end of the fixed term.  The Employer’s decision not to extend theterm of this Agreement shall not — by itself — give the Executive any rightsunder this Agreement to claim an adverse change in position, compensation, orcircumstances or otherwise to claim entitlement to severance or other benefitsunder Articles 4 or 5 of this Agreement. Unless sooner terminated, the Executive’s employment and the term ofthis Agreement shall terminate when the Executive attains age 65.

 

**ARTICLE 2**

**COMPENSATION AND BENEFITS**

 

**2.1**          **Base Salary**.  Inconsideration of the Executive’s performance of the obligations under thisAgreement, the Employer shall pay or cause to be paid to the Executive a salaryat the annual rate of not less than $144,300, payable in accordance with theEmployer’s pay practices.  The Executive’ssalary shall be reviewed annually by the Employer’s board of directors or bythe board committee having jurisdiction over executive compensation.  The Executive’s salary shall be increased noless frequently than annually to account for cost of living increases.  The Executive’s salary also may be increasedbeyond the amount necessary to account for cost of living increases at thediscretion of the committee having jurisdiction over executivecompensation.  However, the Executive’ssalary shall not be reduced.  TheExecutive’s salary, as the same may be increased from time to time, is referredto in this Agreement as the “**Base Salary**.”

 

**2.2**          **Benefit Plans and Perquisites**.  The Executive shall be entitled throughoutthe term of this Agreement to participate in any and all officer or employeecompensation, bonus, incentive, and benefit plans in effect from time to time,including without limitation any stock-based compensation, option, incentive,bonus, or purchase plans existing on the date of this Agreement or adoptedduring the term of this Agreement and plans providing pension, retirement,welfare, medical, dental, disability, and group life benefits, and to receiveany and all other fringe benefits provided from time to time, provided that theExecutive satisfies the

 

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eligibility requirementsfor the plans or benefits.  Withoutlimiting the generality of the foregoing —

 

(a)           *Automobile allowance*.  The Executive shall receive an automobileallowance consistent with past practices of the Employer, as the same maychange from time to time.

 

(b)           *Reimbursement of businessexpenses*.  Upon submission ofappropriate documentation by the Executive, the Executive shall be entitled to reimbursementfor all reasonable business expenses incurred performing the Executive’sobligations under this Agreement, including but not limited to all reasonablebusiness travel and entertainment expenses incurred while acting at the requestof or in the service of the Employer and reasonable expenses for attendance atannual and other periodic meetings of trade associations.  To be reimbursable each expense must be of anature qualifying it as a proper deduction on the Employer’s income tax returnsas a business expense rather than deductible compensation to theExecutive.  The records and otherdocumentary evidence submitted by the Executive to the Employer with eachrequest for reimbursement shall be in the form required by applicable statutesand regulations issued by appropriate taxing authorities for the substantiationof expenditures as deductible business expenses of the Employer rather thandeductible compensation to the Executive.

 

(c)           *Insurance premiums*.  At no expense to the Executive, the Employershall pay the Executive’s individual yearly medical and dental insurancepremiums.

 

**2.3**          **Vacation**.  TheExecutive shall be entitled to paid annual vacation and sick leave inaccordance with policies established from time to time by the Employer.

 

**2.4**          **Taxes**.  Allcompensation of the Executive shall be subject to withholding and otheremployment taxes imposed by federal, state, and local law.

 

**ARTICLE 3**

**EMPLOYMENT TERMINATION**

 

**3.1**          **Termination Because of Death or Disability**.  (a)  *Death*.  The Executive’s employment shall terminateautomatically on the date of the Executive’s death.  If the Executive dies in active service tothe Employer, the Executive’s estate shall receive any sums due to theExecutive as Base Salary and reimbursement of expenses through the end of themonth in which death occurred, any bonus earned or accrued through the date ofdeath, including any unvested amounts awarded for previous years, and fortwelve months after the Executive’s death the Employer shall provide withoutcost to the Executive’s family continuing health care coverage under COBRAsubstantially identical to that provided for the Executive before death.

 

(b)           *Disability*.  By delivery of written notice 30 days inadvance to the Executive, the Employer may terminate the Executive’s employmentif the Executive is disabled.  Forpurposes of this Agreement the Executive shall be considered “**disabled**” if an independentphysician

 

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selected by the Employerand reasonably acceptable to the Executive or the Executive’s legalrepresentative determines that, because of illness or accident, the Executiveis unable to perform the Executive’s duties and will be unable to perform thoseduties for 90 consecutive days.  TheExecutive shall not be considered disabled, however, if the Executive returnsto work on a full-time basis within 30 days after the Employer gives notice oftermination due to disability.  If theExecutive is terminated by either of the Corporation or the Bank because of disability,the Executive’s employment with the other shall also terminate at the sametime.  During the period of incapacityleading up to termination of the Executive’s employment under this provision,the Employer shall continue to pay the full Base Salary at the rate then ineffect and all perquisites and other benefits (other than bonus) until theExecutive becomes eligible for benefits under any disability plan or insuranceprogram maintained by the Employer, provided that the amount of the Employer’s paymentsto the Executive under this section 3.1(b) shall be reduced by the sum ofthe amounts, if any, payable to the Executive for the same period under anydisability benefit or pension plan covering the Executive.  Furthermore, the Executive shall receive anybonus earned or accrued through the date of incapacity, including any unvestedamounts awarded for previous years.

 

**3.2**          **Involuntary Termination with Cause**.  The Employer may terminate the Executive’semployment with Cause.  If the Executive’semployment terminates with Cause, the Executive shall receive the Base Salarythrough the date on which termination becomes effective and reimbursement ofexpenses to which the Executive is entitled when termination becomes effective.  If the Executive is terminated with Cause byeither of the Corporation or the Bank, the Executive shall be deemed also tohave been terminated with Cause by the other. For purposes of this Agreement “**Cause**”means any of the following —

 

(a)           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 theEmployer’s best interests, or

 

(b)           intentional violation of any law orsignificant policy of the Employer that, in the Employer’s sole judgment, hasan adverse effect on the Employer, or

 

(c)           the Executive’s gross negligence orgross neglect of duties in the performance of duties, or

 

(d)           intentional wrongful damage by the Executiveto the business or property of the Employer, including without limitation theEmployer’s reputation, which in the Employer’s sole judgment causes materialharm to the Employer, or

 

(e)           a breach by the Executive offiduciary duties or misconduct involving dishonesty, in either case whether inthe Executive’s capacity as an officer or as a director, or

 

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(f)            a breach by the Executive of thisAgreement that, in the Employer’s sole judgment, is a material breach, whichbreach is not corrected by the Executive within ten days after receivingwritten notice of the breach, or

 

(g)           removal of the Executive from officeor permanent prohibition of the Executive from participating in the Bank’saffairs by an order issued under section 8(e)(4) or (g)(1) of theFederal Deposit 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, or

 

(i)            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 Employer,under the Employer’s blanket bond or other fidelity or insurance policycovering its directors, officers, or employees.

 

**3.3**          **Voluntary Termination by the Executive Without Good Reason**.  If the Executive terminates employment withoutGood Reason, the Executive shall receive the Base Salary and expensereimbursement to which the Executive is entitled through the date on whichtermination becomes effective.

 

**3.4**          **Involuntary Termination Without Cause and Voluntary Termination with GoodReason**.  With written noticeto the Executive 90 days in advance, the Employer may terminate the Executive’semployment without Cause.  Terminationshall take effect at the end of the 90-day period.  With advance written notice to the Employeras provided in paragraph (b), the Executive may terminate employment with GoodReason.  If the Executive’s employmentterminates involuntarily without Cause or voluntarily but with Good Reason, theExecutive shall be entitled to the benefits specified in Article 4 of thisAgreement.  For purposes of thisAgreement a voluntary termination by the Executive will be considered avoluntary termination with Good Reason if the conditions stated in bothparagraphs (a) and (b) are satisfied —

 

(a)           a voluntary termination by theExecutive will be considered a voluntary termination with Good Reason if any ofthe following occur without the Executive’s advance written consent, and theterm Good Reason shall mean the occurrence of any of the following without theExecutive’s advance written consent —

 

1)             a material diminution of theExecutive’s Base Salary, or

 

2)             a material diminution of theExecutive’s authority, duties, or responsibilities, or

 

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3)             a material diminution in theauthority, duties, or responsibilities of the supervisor to whom the Executiveis required to report, or

 

4)             a material diminution in the budgetover which the Executive retains authority, or

 

5)             a material change in the geographiclocation at which the Executive must perform services for the Employer, or

 

6)             any other action or inaction thatconstitutes a material breach by the Employer of this Agreement.

 

(b)           the Executive must give notice to theEmployer of the existence of one or more of the conditions described inparagraph (a) within 90 days after the initial existence of the condition,and the Employer shall have 30 days thereafter to remedy the condition.  In addition, the Executive’s voluntarytermination because of the existence of one or more of the conditions describedin paragraph (a) must occur within 24 months after the initial existenceof the condition.

 

**ARTICLE 4**

**SEVERANCE COMPENSATION**

 

**4.1**          **Cash Severance after Termination Without Cause or Termination with GoodReason**.  (a)  Subject tothe possibility that cash severance after employment termination might bedelayed under section 4.1(b), if the Executive’s employment terminatesinvoluntarily but without Cause or if the Executive voluntarily terminatesemployment with Good Reason, 30 days after employment termination the Employershall pay to the Executive in a single lump sum cash in an amount equal to (x) theExecutive’s Base Salary on the date notice of employment termination is given,without discount for the time value of money, plus (y) any bonus earned bythe Executive or accrued by the Employer on behalf of the Executive through thedate employment termination becomes effective (including any amounts awardedbut that have not vested when termination becomes effective).  The Employer and the Executive acknowledgeand agree that the compensation and benefits under this section 4.1 shall notbe payable if compensation and benefits are payable or shall have been paid tothe Executive under Article 5 of this Agreement.

 

(b)           If when employment termination occursthe Executive is a specified employee within the meaning of section 409A of theInternal Revenue Code of 1986, and if the cash severance payment under section4.1(a) would be considered deferred compensation under section 409A, andfinally if an exemption from the six-month delay requirement of section409A(a)(2)(B)(i) is not available, the Executive’s cash severance paymentunder section 4.1(a) shall be paid to the Executive in a single lump sumon the first day of the seventh month after the month in which the Executive’semployment terminates.  References inthis Agreement to section 409A of the Internal Revenue Code of 1986 includerules, regulations, and guidance of

 

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general applicationissued by the Department of the Treasury under Internal Revenue Code section409A.

 

**4.2**          **Post-Termination Insurance Coverage**.  (a) Subject to section 4.2(b), if theExecutive’s employment terminates involuntarily but without Cause, voluntarilybut with Good Reason, or because of disability, the Employer shall continue orcause to be continued at the Employer’s expense and on behalf of the Executiveand the Executive’s dependents and beneficiaries medical, dental, andhospitalization insurance coverage as in effect during and in accordance withthe same schedule prevailing in the 12 months preceding the date of theExecutive’s termination.  The insurancebenefits provided by this section 4.2(a) shall be reduced if the Executiveobtains disability, medical, dental, and hospitalization insurance benefitsthrough another employer, or eliminated entirely if the other employer’sinsurance benefits are equivalent or superior to the benefits provided underthis section 4.2(a).  If the insurancebenefits are reduced, they shall be reduced by an amount such that theExecutive’s aggregate insurance benefits for the period specified in thissection 4.2(a) are equivalent to the benefits to which the Executive wouldhave been entitled had the Executive not obtained disability, medical, dental,and hospitalization insurance benefits through another employer.  The medical, dental, and hospitalizationinsurance coverage shall continue until the first to occur of (w) theExecutive’s return to employment with the Employer or another employerproviding equivalent or superior insurance benefits, (x) the Executive’sattainment of age 65, (y) the Executive’s death, or (z) the firstanniversary of the Executive’s termination. This section 4.2 shall not be interpreted to limit any benefits to whichthe Executive or the Executive’s dependents or beneficiaries may be entitledunder any of the Employer’s employee benefit plans, agreements, programs, orpractices after the Executive’s employment termination, including withoutlimitation retiree medical and life insurance benefits.

 

(b)           If (x) under the terms of theapplicable policy or policies for the insurance benefits specified in section4.2(a) it is not possible to continue the Executive’s coverage or (y) whenemployment termination occurs the Executive is a specified employee within themeaning of section 409A of the Internal Revenue Code of 1986, if any of thecontinued insurance benefits specified in section 4.2(a) would beconsidered deferred compensation under section 409A, and finally if anexemption from the six-month delay requirement of section 409A(a)(2)(B)(i) isnot available for that particular insurance benefit, instead of continuedinsurance coverage under section 4.2(a) the Employer shall pay to theExecutive in a single lump sum an amount in cash equal to the present value ofthe Employer’s projected cost to maintain that particular insurance benefit hadthe Executive’s employment not terminated, assuming continued coverage for thelesser of 12 months or the number of months until the Executive attains age65.  The lump-sum payment shall be made30 days after employment termination or, if section 4.1(b) applies and asix-month delay is required under Internal Revenue Code section 409A, on thefirst day of the seventh month after the month in which the Executive’semployment terminates.

 

**4.3**          **Release**.  TheExecutive shall be entitled to no compensation or other benefits under this Article 4unless the Executive enters into a release in form satisfactory to theExecutive and the Employer acknowledging the Employer’s and the Executive’sremaining

 

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obligations anddischarging both parties, as well as the Employer’s officers, directors, andemployees for their actions for or on behalf of the Employer, from any otherclaims or obligations arising out of the Executive’s employment by theEmployer, including the circumstances of the Executive’s employmenttermination.  The non-compete and othercovenants contained in Article 7 of this Agreement are not contingent onthe Executive entering into a release under this section 4.3 and shall beeffective regardless of whether the Executive enters into the release.

 

**ARTICLE 5**

**CHANGE IN CONTROL BENEFITS**

 

**5.1**          **Change in Control Benefits**. (a)  If a Change in Control occurs during the term of thisAgreement and if within 24 months thereafter the Executive is involuntarilyterminated without Cause or the Executive terminates employment voluntarily butwith Good Reason, the Employer shall make or cause to be made a lump-sumpayment to the Executive in an amount in cash equal to the Executive’s annualcompensation.  For this purpose annualcompensation means (x) the Executive’s annual base salary on the date ofthe Change in Control or on the date of the Executive’s employment termination(whichever is greater) plus (y) any bonus or incentive compensation earnedfor the calendar year ended immediately before the year in which the Change inControl occurred or for the calendar year ended immediately before the year inwhich employment termination occurred (whichever is greater), regardless ofwhen the bonus or incentive compensation earned for the preceding calendar yearis paid and regardless of whether all or part of the bonus or incentivecompensation is subject to elective deferral or vesting.  Annual compensation shall be calculatedwithout regard to any deferrals under qualified or nonqualified plans, butannual compensation shall not include interest or other earnings credited tothe Executive under qualified or nonqualified plans and annual compensationshall not include any compensation earned in the Executive’s capacity as adirector.  The amount payable to theExecutive hereunder shall not be reduced to account for the time value of moneyor discounted to present value.  Thepayment required under this section 5.1(a) is payable within five businessdays after the Executive’s employment termination.  If the Executive receives payment under thissection 5.1(a) the Executive shall not be entitled to any cash severancebenefits under section 4.1 of this Agreement after employment termination.

 

(b)           If a Change in Control occurs duringthe term of this Agreement and if within 24 months thereafter the Executive isinvoluntarily terminated without Cause or the Executive terminates employmentvoluntarily but with Good Reason, in addition to any benefits to which theExecutive may be entitled under section 4.2 the Employer shall cause theExecutive to become fully vested in awards under any stock option, stockincentive, or other non-qualified plans, programs, or arrangements in which theExecutive participated if (x) the plan, program, or arrangement does notaddress the effect of a change in control or termination after a change incontrol and (y) award vesting occurs automatically with the passage oftime or years of service.  Acceleratedvesting in or entitlement to awards shall not occur under this section 5.1(b) inthe case of any award for which vesting or entitlement is based on achievementof performance conditions, whether the conditions have to do with individualperformance or corporate

 

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performance measures,including but not limited to stock price or financial statement or otherfinancial measures.

 

**5.2**          **Change in Control Defined**. For purposes of this Agreement “**Change in Control**”means a change in control as defined in Internal Revenue Code section 409A andrules, regulations, and guidance of general application thereunder issued bythe Department of the Treasury, including —

 

(a)           *Change in ownership*:a change in ownership of the Corporation occurs on the date any one person orgroup accumulates ownership of Corporation stock constituting more than 50% ofthe total fair market value or total voting power of Corporation stock,

 

(b)           *Change in effectivecontrol*: (x) any one person or more than one person acting as agroup acquires within a 12-month period ownership of Corporation stockpossessing 30% or more of the total voting power of Corporation stock, or (y) amajority of the Corporation’s board of directors is replaced during any12-month period by directors whose appointment or election is not endorsed inadvance by a majority of the Corporation’s board of directors, or

 

(c)           *Change in ownership of asubstantial portion of assets*: a change in ownership of asubstantial portion of the Corporation’s assets occurs if in a 12-month periodany one person or more than one person acting as a group acquires from theCorporation assets having a total gross fair market value equal to or exceeding40% of the total gross fair market value of all of the Corporation’s assetsimmediately before the acquisition or acquisitions.  For this purpose, gross fair market valuemeans the value of the Corporation’s assets, or the value of the assets beingdisposed of, determined without regard to any liabilities associated with theassets.

 

**ARTICLE 6**

**CONFIDENTIALITY AND CREATIVE WORK**

 

**6.1**          **Non-disclosure**.  TheExecutive covenants and agrees not to reveal to any person, firm, orcorporation any confidential information of any nature concerning the Employeror its business, or anything connected therewith.  As used in this Article 6, the term “**confidential information**” means allof the Employer’s and affiliates’ confidential and proprietary information andtrade secrets in existence on the date hereof or existing at any time duringthe term of this Agreement, including but not limited to —

 

(a)           the whole or any portion or phase ofany business plans, financial information, purchasing data, supplier data,accounting data, or other financial information,

 

(b)           the whole or any portion or phase ofany research and development information, design procedures, algorithms orprocesses, or other technical information,

 

(c)           the whole or any portion or phase ofany marketing or sales information, sales records, customer lists, prices,sales projections, or other sales information, and

 

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(d)           trade secrets, as defined from timeto time by the laws of the State of South Carolina.

 

However, confidentialinformation excludes information that — as of the date hereof or at any timeafter the date hereof — is published or disseminated without obligation ofconfidence or that becomes a part of the public domain (x) by or throughaction of the Employer, or (y) otherwise than by or at the direction ofthe Executive.  This section 6.1 does notprohibit disclosure required by an order of a court having jurisdiction or asubpoena from an appropriate governmental agency or disclosure made by theExecutive in the ordinary course of business and within the scope of theExecutive’s authority.

 

**6.2**          **Return of Materials**. The Executive agrees to deliver or return to the Employer upontermination, upon expiration of this Agreement, or as soon thereafter aspossible, all written information and any other similar items furnished by theEmployer or prepared by the Executive in connection with the Executive’sservices hereunder.  The Executive willretain no copies thereof after termination of this Agreement or termination ofthe Executive’s employment.

 

**6.3**          **Creative Work**.  TheExecutive agrees that all creative work and work product, including but notlimited to all technology, business management tools, processes, software,patents, trademarks, and copyrights developed by the Executive during the termof this Agreement and in the course and scope of the Executive’s dutieshereunder, regardless of when or where such work or work product was produced,constitutes work made for hire, all rights of which are owned by theEmployer.  The Executive hereby assignsto the Employer all rights, title, and interest, whether by way of copyrights,trade secret, trademark, patent, or otherwise, in all such work or workproduct, regardless of whether the same is subject to protection by patent,trademark, or copyright laws.

 

**6.4**          **Injunctive Relief**. The Executive acknowledges that it is impossible to measure in money thedamages that will be suffered by the Employer if the Executive fails to observethe obligations imposed by this Article 6. Accordingly, if the Employer institutes an action to enforce theprovisions hereof, the Executive hereby waives the claim or defense that anadequate remedy at law is available to the Employer and the Executive agreesnot to urge in any such action the claim or defense that an adequate remedy atlaw exists.

 

**6.5**          **Affiliates’ Confidential Information is Covered; ConfidentialityObligation Survives Termination**. For purposes of this Agreement the term “**affiliate**”includes the Corporation, the Bank, and any entity that directly or indirectlythrough one or more intermediaries controls, is controlled by, or is undercommon control with the Corporation or the Bank.  The rights and obligations set forth in this Article 6shall survive termination of this Agreement.

 

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**ARTICLE 7**

**COMPETITIONAFTER EMPLOYMENT TERMINATION**

 

**7.1**                               **Covenant Not to Solicit Employees**.  The Executiveagrees not to solicit the services of any officer or employee of the Employerfor 12 months after the Executive’s employment termination.

 

**7.2**                               **Covenant Not to Compete**.  (a) Without advance written consent of the Employer, the Executive covenants andagrees not to compete directly or indirectly with the Employer for 12 monthsafter employment termination, plus any period during which the Executive is inviolation of this covenant not to compete and any period during which theEmployer seeks by litigation to enforce this covenant not to compete.  For purposes of this section —

 

(1)                                  the term “compete” means

 

(a)                                  providing financial products or serviceson behalf of any financial institution for any person residing in theterritory,

 

(b)                                 assisting (other than through theperformance of ministerial or clerical duties) any financial institution inproviding financial products or services to any person residing in theterritory, or

 

(c)                                  inducing or attempting to induce anyperson who was a customer of the Employer at the date of the Executive’semployment termination to seek financial products or services from anotherfinancial institution.

 

(2)                                  the phrase “compete directly orindirectly” means —

 

(a)                                  acting as a consultant, officer,director, independent contractor, incorporator, organizer, or employee of anyfinancial institution in competition with the Employer in the territory, or

 

(b)                                 ownership of more than 5% of the votingshares of any financial institution in competition with the Employer in theterritory, or

 

(c)                                  communicating to such financialinstitution the names or addresses or any financial information concerning anyperson who was a customer of the Employer at the Executive’s employmenttermination.

 

(3)                                  the term “customer” means any person towhom the Employer is providing financial products or services on the date ofthe Executive’s employment termination.

 

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

 

(5)                                  “financial product or service” means anyproduct or service that a financial institution or a financial holding companycould offer by engaging in any activity that is financial in nature orincidental to such a financial activity under section 4(k) of the BankHolding Company Act of 1956 and that is offered by the Employer or an affiliateon the date of the Executive’s employment termination, including but notlimited to banking activities and activities that are closely related to and aproper incident to banking.

 

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

 

(7)                                  the term “territory” means all ofCharleston, Dorchester, and Berkeley Counties in South Carolina and the areawithin a 50-mile radius of any full-service banking office of the Bank on thedate of the Executive’s employment termination.

 

(b)                                 If any provision of this section or anyword, phrase, clause, sentence or other portion thereof (including withoutlimitation the geographical and temporal restrictions contained therein) isheld to be unenforceable or invalid for any reason, the unenforceable orinvalid provision or portion shall be modified or deleted so that theprovision, as modified, is legal and enforceable to the fullest extentpermitted under applicable law.

 

**7.3**                               **Remedies**. Because of the unique character of the services to be rendered by theExecutive hereunder, the Executive understands that the Employer would not havean adequate remedy at law for the material breach or threatened breach by theExecutive of any one or more of the Executive’s covenants set forth in this Article 7.  Accordingly, the Executive agrees that theEmployer’s remedies for a material breach or threatened breach of this Article 7include but are not limited to (x) forfeiture of any money representingaccrued salary, contingent payments, or other fringe benefits due and payableto the Executive, (y) forfeiture of any unpaid severance benefits undersections 4.1 and 4.2 of this Agreement, and (z) a suit in equity by theEmployer to enjoin the Executive from the breach or threatened breach of suchcovenants.  The Executive hereby waivesthe claim or defense that an adequate remedy at law is available to theEmployer and the Executive agrees not to urge in any such action the claim ordefense that an adequate remedy at law exists. Nothing herein shall be construed to prohibit the Employer from pursuingany other remedies for the breach or threatened breach.

 

**7.4**                               **Article 7 SurvivesTermination But Is Void After a Change in Control**. The rights and obligations set forth in this Article 7 shallsurvive termination of this Agreement.

 

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However, Article 7shall be null and void if a Change in Control occurs before employmenttermination.

 

**ARTICLE 8**

**MISCELLANEOUS**

 

**8.1**                               **Successors and Assigns**.  (a) *This Agreement is binding on the Employer’ssuccessors*.  This Agreementshall be binding upon the Employer and any successor, including any personsacquiring directly or indirectly all or substantially all of the business orassets of the Employer by purchase, merger, consolidation, reorganization, orotherwise.  But this Agreement and theEmployer’s obligations under this Agreement are not otherwise assignable,transferable, or delegable by the Employer. By agreement in form and substance satisfactory to the Executive, theEmployer shall require any successor to all or substantially all of thebusiness or assets of the Employer to expressly assume and agree to performthis Agreement in the same manner and to the same extent the Employer would berequired to perform had no succession occurred.

 

(b)                                 *This Agreement is enforceable bythe Executive’s heirs*.  This Agreement shall inure tothe benefit of and be enforceable by the Executive’s personal or legal representatives,executors, administrators, successors, heirs, distributees, and legatees.

 

(c)                                  *This Agreement is personal and isnot assignable*.  This Agreement is personal in nature.  Without written consent of the other parties,no party shall assign, transfer, or delegate this Agreement or any rights orobligations under this Agreement except as expressly provided herein.  Without limiting the generality or effect ofthe foregoing, the Executive’s right to receive payments hereunder is notassignable or transferable, whether by pledge, creation of a security interest,or otherwise, except for a transfer by the Executive’s will or by the laws ofdescent and distribution.  If theExecutive attempts an assignment or transfer that is contrary to this section 8.1,the Employer shall have no liability to pay any amount to the assignee ortransferee.

 

**8.2**                               **Governing Law, Jurisdiction, andForum**.  This Agreement shall be construed under andgoverned by the internal laws of the State of South Carolina, without givingeffect to any conflict of laws provision or rule (whether of the State ofSouth Carolina or any other jurisdiction) that would cause the application ofthe laws of any jurisdiction other than the State of South Carolina.  By entering into this Agreement, theExecutive agrees to be subject to the jurisdiction of both the federal andstate courts in the State of South Carolina. Any actions or proceedings instituted under this Agreement shall bebrought and tried solely in courts located in Charleston County, South Carolinaor in the federal court having jurisdiction in Mount Pleasant, SouthCarolina.  The Executive expressly waivesthe right to have any such actions or proceedings brought or tried elsewhere.

 

**8.3**                               **Entire Agreement**. This Agreement sets forth the entire agreement of the parties concerningthe Executive’s employment.  Any oral orwritten statements, representations, agreements, or understandings made orentered into prior to or contemporaneously with the

 

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execution of thisAgreement are hereby rescinded, revoked, and rendered null and void by theparties.  Without limiting the generalityof the foregoing, the parties hereto acknowledge and agree that this Agreementsupersedes in its entirety the Employment Agreement dated as of September 19,2005, entered into by the Executive and the Employer, as the same may have beenamended or supplemented.  The September 19,2005 Employment Agreement shall hereafter be void and of no force or effect.

 

**8.4**                               **Notices**. All notices, requests, demands, and other communications hereunder shallbe in writing and shall be deemed to have been duly given if delivered by handor mailed, certified or registered mail, return receipt requested, with postageprepaid.  Unless otherwise changed bynotice, notice shall be properly addressed to the Executive if addressed to theaddress of the Executive on the books and records of the Employer at the timeof the delivery of notice, and properly addressed to the Employer if addressedto the Board of Directors, Tidelands Bancshares, Inc., 875 LowcountryBoulevard, Mount Pleasant, South Carolina 29464.

 

**8.5**                               **Severability**. In the case of conflict between a provision of this Agreement and anystatute, regulation, or judicial precedent, the latter shall prevail, but theaffected provisions of this Agreement shall be curtailed and limited solely tothe extent necessary to bring them within the requirements of law.  If any provision of this Agreement is held bya court of competent jurisdiction to be indefinite, invalid, void or voidable,or otherwise unenforceable, the remainder of this Agreement shall continue infull force and effect unless that would clearly be contrary to the intentionsof the parties or would result in an injustice.

 

**8.6**                               **Captions and Counterparts**. Captions in this Agreement are included solely for convenience and donot define, limit, or describe the scope or intent of this Agreement.  This Agreement may be executed in severalcounterparts, each of which shall be deemed to be an original but all of whichtogether shall constitute one and the same instrument.

 

**8.7**                               **No Duty to Mitigate**. The Employer hereby acknowledges that it will be difficult and could beimpossible (x) for the Executive to find reasonably comparable employmentafter employment termination, and (y) to measure the amount of damages theExecutive may suffer as a result of termination.  Additionally, the Employer acknowledges thatits general severance pay plans do not provide for mitigation, offset, or reductionof any severance payment received thereunder. The Employer further acknowledges that the payment of severance benefitsunder this Agreement is reasonable and shall be liquidated damages.  The Executive shall not be required tomitigate the amount of any payment provided by this Agreement by seeking otheremployment.  Moreover, the amount of anypayment provided by this Agreement shall not be reduced by any compensationearned or benefits provided as the result of employment of the Executive or as aresult of the Executive being self-employed after employment termination.

 

**8.8**                               **Amendment and Waiver**. This Agreement may not be amended, released, discharged, abandoned,changed, or modified except by an instrument in writing signed by each of theparties hereto.  The failure of any partyhereto to enforce at any time any of the provisions of this Agreement shall notbe construed to be a waiver of any such provision nor affect the

 

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validity of this Agreementor any part thereof or the right of any party thereafter to enforce each andevery such provision.  No waiver of abreach of this Agreement shall be held to be a waiver of any other orsubsequent breach.

 

**8.9**                               **Payment of Legal Fees**. The Employer is aware that after a Change in Control management couldcause or attempt to cause the Employer to refuse to comply with its obligationsunder this Agreement, or could institute or cause or attempt to cause theEmployer to institute litigation seeking to have this Agreement declaredunenforceable, or could take or attempt to take other action to deny Executivethe benefits intended under this Agreement. In these circumstances the purpose of this Agreement would be frustrated.  The Employer desires that the Executive notbe required to incur the expenses associated with the enforcement of rightsunder this Agreement, whether by litigation or other legal action, because thecost and expense thereof would substantially detract from the benefits intendedto be granted to the Executive hereunder. The Employer 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 Employer hasfailed to comply with any of its obligations under this Agreement, or (y) theEmployer or any other person has taken any action to declare this Agreementvoid or unenforceable, or instituted any litigation or other legal action designedto deny, diminish, or to recover from the Executive the benefits intended to beprovided to the Executive hereunder, the Employer irrevocably authorizes theExecutive from time to time to retain counsel of the Executive’s choice, at theEmployer’s expense as provided in this section 8.9, to represent the Executivein the initiation or defense of any litigation or other legal action, whetherby or against the Employer or any director, officer, stockholder, or otherperson affiliated with the Employer, in any jurisdiction.  Despite any existing or previousattorney-client relationship between the Employer and any counsel chosen by theExecutive under this section 8.9, the Employer irrevocably consents to theExecutive entering into an attorney-client relationship with that counsel, andthe Employer and the Executive agree that a confidential relationship shallexist between the Executive and that counsel. The fees and expenses of counsel selected from time to time by theExecutive as provided in this section shall be paid or reimbursed to theExecutive by the Employer on a regular, periodic basis upon presentation by theExecutive of a statement or statements prepared by counsel in accordance withcounsel’s customary practices, up to a maximum aggregate amount of $100,000,whether suit be brought or not, and whether or not incurred in trial,bankruptcy, or appellate proceedings. The Employer’s obligation to pay the Executive’s legal fees provided bythis section 8.9 operates separately from and in addition to any legal feereimbursement obligation the Employer may have with the Executive under anyseparate severance or other agreement. Despite anything in this Agreement to the contrary, however, theEmployer shall not be required to pay or reimburse Executive’s legal expensesif doing so would violate section 18(k) of the Federal Deposit InsuranceAct [12 U.S.C. 1828(k)] and Rule 359.3 of the Federal Deposit InsuranceCorporation [12 CFR 359.3].

 

**8.10**                        **Consultation with Counsel andInterpretation of this Agreement**.  The Executiveacknowledges and agrees that the Executive has had the assistance of counsel ofthe Executive’s choosing in the negotiation of this Agreement, or the Executivehas chosen not to

 

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have the assistance ofcounsel.  Both the Employer and theExecutive have participated in the negotiation and drafting of this Agreementand they hereby agree that there shall not be strict interpretation againsteither party in any review of this Agreement in which interpretation thereof isan issue.

 

**8.11**                        **Compliance with Internal RevenueCode Section 409A**.  The Employer and the Executiveintend that their exercise of authority or discretion under this Agreementshall comply with section 409A of the Internal Revenue Code of 1986.  If when the Executive’s employment terminatesthe Executive is a specified employee, as defined in section 409A of theInternal Revenue Code of 1986, and if any payments under this Agreement,including Articles 4 or 5, will result in additional tax or interest to theExecutive because of section 409A, then despite any provision of this Agreementto the contrary the Executive shall not be entitled to the payments until theearliest of (x) the date that is at least six months after termination ofthe Executive’s employment for reasons other than the Executive’s death, (y) thedate of the Executive’s death, or (z) any earlier date that does notresult in additional tax or interest to the Executive under section 409A.  As promptly as possible after the end of theperiod during which payments are delayed under this provision, the entireamount of the delayed payments shall be paid to the Executive in a single lumpsum.  If any provision of this Agreementdoes not satisfy the requirements of section 409A, such provision shallnevertheless be applied in a manner consistent with those requirements.  If any provision of this Agreement wouldsubject the Executive to additional tax or interest under section 409A, theEmployer shall reform the provision. However, the Employer shall maintain to the maximum extent practicablethe original intent of the applicable provision without subjecting theExecutive to additional tax or interest, and the Employer shall not be requiredto incur any additional compensation expense as a result of the reformedprovision.

 

**INWITNESS WHEREOF**,the parties have executed this Employment Agreement as of the date firstwritten above.

 
| **EXECUTIVE**        |   | **TIDELANDS BANK**             |
|----------------------|--------|--------------------------------|
|                 |   |                           |   |
|                 |   |                           |   |
| /s/ James M. Bedsole |   | By:                            | /s/ Robert E.  Coffee, Jr. |
|                 |   |                           | Robert E. Coffee Jr. |
|                 |   | Its:                           | President and CEO |
|                 |   |                           |   |
|                 |   | **TIDELANDS BANCSHARES, INC.** |
|                 |   |                           |   |
|                 |   |                           |   |
|                 |   | By:                            | /s/ Robert E.  Coffee, Jr. |
|                 |   |                           | Robert E. Coffee Jr. |
|                 |   | Its:                           | President and CEO |

 

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