Exhibit
10.7


 


EMPLOYMENT AGREEMENT


 


This EMPLOYMENT
AGREEMENT (this “Agreement”)
is entered into as of this 1 day of May, 2008, by and among Tidelands
Bancshares, Inc., a South Carolina corporation (the “Corporation”),
Tidelands Bank, a South Carolina-chartered bank and wholly owned subsidiary of
Tidelands Bancshares, Inc. (the “Bank”), and
James M. Bedsole, Senior Vice President and Chief Risk Officer of the Bank (the
“Executive”).  The Corporation and the Bank are referred to
in 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 Executive
has made and is expected to continue to make major contributions to the
profitability, growth, and financial strength of the Employer and affiliates,


 


WHEREAS, the Employer and the Executive desire
to set forth in this Agreement the terms and conditions of the Executive’s
employment,


 


WHEREAS, the Executive and the Corporation are
parties to an Employment Agreement dated as of September 19, 2005, but the
Executive, the Corporation, and the Bank intend that this Agreement supersede
and replace the September 19, 2005 Employment Agreement in its entirety,
and


 


WHEREAS, none of the conditions or events
included in the definition of the term “golden parachute payment” that is set
forth 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) [12
CFR 359.1(f)(1)(ii)] exists or, to the best knowledge of the Employer, is
contemplated insofar as the Employer or any affiliates are concerned.


 


NOW
THEREFORE, in
consideration of these premises, the mutual covenants contained herein, and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows.


 


ARTICLE 1


EMPLOYMENT


 


1.1          Employment.  Effective
on the date and for the term specified in section 1.3, the Employer hereby
employs the Executive to serve as the Bank’s Senior Vice President and Chief
Risk Officer according to the terms and conditions of this Agreement.  The Executive hereby accepts employment
according to the terms and conditions of this Agreement.


 


1.2          Duties.  As the Bank’s
Senior Vice President and Chief Risk Officer, the Executive shall serve in
accordance with the Employer’s Articles of Incorporation and Bylaws, as each
may 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 full
working time, energy, and attention to the business of the Employer and to the
promotion of the Employer’s interests throughout the term of this Agreement.  Without the 


 

















 


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


 


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


 


ARTICLE 2


COMPENSATION AND BENEFITS


 


2.1          Base Salary.  In
consideration of the Executive’s performance of the obligations under this
Agreement, the Employer shall pay or cause to be paid to the Executive a salary
at the annual rate of not less than $144,300, payable in accordance with the
Employer’s pay practices.  The Executive’s
salary shall be reviewed annually by the Employer’s board of directors or by
the board committee having jurisdiction over executive compensation.  The Executive’s salary shall be increased no
less frequently than annually to account for cost of living increases.  The Executive’s salary also may be increased
beyond the amount necessary to account for cost of living increases at the
discretion of the committee having jurisdiction over executive
compensation.  However, the Executive’s
salary shall not be reduced.  The
Executive’s salary, as the same may be increased from time to time, is referred
to in this Agreement as the “Base Salary.”


 


2.2          Benefit Plans and Perquisites.  The Executive shall be entitled throughout
the term of this Agreement to participate in any and all officer or employee
compensation, 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 adopted
during the term of this Agreement and plans providing pension, retirement,
welfare, medical, dental, disability, and group life benefits, and to receive
any and all other fringe benefits provided from time to time, provided that the
Executive satisfies the


 


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eligibility requirements
for the plans or benefits.  Without
limiting the generality of the foregoing —


 


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


 


(b)           Reimbursement of business
expenses.  Upon submission of
appropriate documentation by the Executive, the Executive shall be entitled to reimbursement
for all reasonable business expenses incurred performing the Executive’s
obligations under this Agreement, including but not limited to all reasonable
business travel and entertainment expenses incurred while acting at the request
of or in the service of the Employer and reasonable expenses for attendance at
annual and other periodic meetings of trade associations.  To be reimbursable each expense must be of a
nature qualifying it as a proper deduction on the Employer’s income tax returns
as a business expense rather than deductible compensation to the
Executive.  The records and other
documentary evidence submitted by the Executive to the Employer with each
request for reimbursement shall be in the form required by applicable statutes
and regulations issued by appropriate taxing authorities for the substantiation
of expenditures as deductible business expenses of the Employer rather than
deductible compensation to the Executive.


 


(c)           Insurance premiums.  At no expense to the Executive, the Employer
shall pay the Executive’s individual yearly medical and dental insurance
premiums.


 


2.3          Vacation.  The
Executive shall be entitled to paid annual vacation and sick leave in
accordance with policies established from time to time by the Employer.


 


2.4          Taxes.  All
compensation of the Executive shall be subject to withholding and other
employment 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 terminate
automatically on the date of the Executive’s death.  If the Executive dies in active service to
the Employer, the Executive’s estate shall receive any sums due to the
Executive as Base Salary and reimbursement of expenses through the end of the
month in which death occurred, any bonus earned or accrued through the date of
death, including any unvested amounts awarded for previous years, and for
twelve months after the Executive’s death the Employer shall provide without
cost to the Executive’s family continuing health care coverage under COBRA
substantially identical to that provided for the Executive before death.


 


(b)           Disability.  By delivery of written notice 30 days in
advance to the Executive, the Employer may terminate the Executive’s employment
if the Executive is disabled.  For
purposes of this Agreement the Executive shall be considered “disabled” if an independent
physician


 


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selected by the Employer
and reasonably acceptable to the Executive or the Executive’s legal
representative determines that, because of illness or accident, the Executive
is unable to perform the Executive’s duties and will be unable to perform those
duties for 90 consecutive days.  The
Executive shall not be considered disabled, however, if the Executive returns
to work on a full-time basis within 30 days after the Employer gives notice of
termination due to disability.  If the
Executive 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 same
time.  During the period of incapacity
leading 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 in
effect and all perquisites and other benefits (other than bonus) until the
Executive becomes eligible for benefits under any disability plan or insurance
program maintained by the Employer, provided that the amount of the Employer’s payments
to the Executive under this section 3.1(b) shall be reduced by the sum of
the amounts, if any, payable to the Executive for the same period under any
disability benefit or pension plan covering the Executive.  Furthermore, the Executive shall receive any
bonus earned or accrued through the date of incapacity, including any unvested
amounts awarded for previous years.


 


3.2          Involuntary Termination with Cause.  The Employer may terminate the Executive’s
employment with Cause.  If the Executive’s
employment terminates with Cause, the Executive shall receive the Base Salary
through the date on which termination becomes effective and reimbursement of
expenses to which the Executive is entitled when termination becomes effective.  If the Executive is terminated with Cause by
either of the Corporation or the Bank, the Executive shall be deemed also to
have 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 or
failure to act on the part of the Executive shall be deemed to have been
intentional if it was due primarily to an error in judgment or negligence.  An act or failure to act on the Executive’s
part shall be considered intentional if it is not in good faith and if it is
without a reasonable belief that the action or failure to act is in the
Employer’s best interests, or


 


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


 


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


 


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


 


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


 


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(f)            a breach by the Executive of this
Agreement that, in the Employer’s sole judgment, is a material breach, which
breach is not corrected by the Executive within ten days after receiving
written notice of the breach, or


 


(g)           removal of the Executive from office
or permanent prohibition of the Executive from participating in the Bank’s
affairs by an order issued under section 8(e)(4) or (g)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. 1818(e)(4) or (g)(1), or


 


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


 


(i)            the occurrence of any event that
results in the Executive being excluded from coverage, or having coverage
limited for the Executive as compared to other executives of the Employer,
under the Employer’s blanket bond or other fidelity or insurance policy
covering its directors, officers, or employees.


 


3.3          Voluntary Termination by the Executive Without Good Reason.  If the Executive terminates employment without
Good Reason, the Executive shall receive the Base Salary and expense
reimbursement to which the Executive is entitled through the date on which
termination becomes effective.


 


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


 


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


 


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


 


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


 


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3)             a material diminution in the
authority, duties, or responsibilities of the supervisor to whom the Executive
is required to report, or


 


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


 


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


 


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


 


(b)           the Executive must give notice to the
Employer of the existence of one or more of the conditions described in
paragraph (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 voluntary
termination because of the existence of one or more of the conditions described
in paragraph (a) must occur within 24 months after the initial existence
of the condition.


 


ARTICLE 4


SEVERANCE COMPENSATION


 


4.1          Cash Severance after Termination Without Cause or Termination with Good
Reason.  (a)  Subject to
the possibility that cash severance after employment termination might be
delayed under section 4.1(b), if the Executive’s employment terminates
involuntarily but without Cause or if the Executive voluntarily terminates
employment with Good Reason, 30 days after employment termination the Employer
shall pay to the Executive in a single lump sum cash in an amount equal to (x) the
Executive’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 by
the Executive or accrued by the Employer on behalf of the Executive through the
date employment termination becomes effective (including any amounts awarded
but that have not vested when termination becomes effective).  The Employer and the Executive acknowledge
and agree that the compensation and benefits under this section 4.1 shall not
be payable if compensation and benefits are payable or shall have been paid to
the Executive under Article 5 of this Agreement.


 


(b)           If when employment termination occurs
the Executive is a specified employee within the meaning of section 409A of the
Internal Revenue Code of 1986, and if the cash severance payment under section
4.1(a) would be considered deferred compensation under section 409A, and
finally if an exemption from the six-month delay requirement of section
409A(a)(2)(B)(i) is not available, the Executive’s cash severance payment
under section 4.1(a) shall be paid to the Executive in a single lump sum
on the first day of the seventh month after the month in which the Executive’s
employment terminates.  References in
this Agreement to section 409A of the Internal Revenue Code of 1986 include
rules, regulations, and guidance of


 


6

















 


general application
issued by the Department of the Treasury under Internal Revenue Code section
409A.


 


4.2          Post-Termination Insurance Coverage.  (a) Subject to section 4.2(b), if the
Executive’s employment terminates involuntarily but without Cause, voluntarily
but with Good Reason, or because of disability, the Employer shall continue or
cause to be continued at the Employer’s expense and on behalf of the Executive
and the Executive’s dependents and beneficiaries medical, dental, and
hospitalization insurance coverage as in effect during and in accordance with
the same schedule prevailing in the 12 months preceding the date of the
Executive’s termination.  The insurance
benefits provided by this section 4.2(a) shall be reduced if the Executive
obtains disability, medical, dental, and hospitalization insurance benefits
through another employer, or eliminated entirely if the other employer’s
insurance benefits are equivalent or superior to the benefits provided under
this section 4.2(a).  If the insurance
benefits are reduced, they shall be reduced by an amount such that the
Executive’s aggregate insurance benefits for the period specified in this
section 4.2(a) are equivalent to the benefits to which the Executive would
have been entitled had the Executive not obtained disability, medical, dental,
and hospitalization insurance benefits through another employer.  The medical, dental, and hospitalization
insurance coverage shall continue until the first to occur of (w) the
Executive’s return to employment with the Employer or another employer
providing equivalent or superior insurance benefits, (x) the Executive’s
attainment of age 65, (y) the Executive’s death, or (z) the first
anniversary of the Executive’s termination. 
This section 4.2 shall not be interpreted to limit any benefits to which
the Executive or the Executive’s dependents or beneficiaries may be entitled
under any of the Employer’s employee benefit plans, agreements, programs, or
practices after the Executive’s employment termination, including without
limitation retiree medical and life insurance benefits.


 


(b)           If (x) under the terms of the
applicable policy or policies for the insurance benefits specified in section
4.2(a) it is not possible to continue the Executive’s coverage or (y) when
employment termination occurs the Executive is a specified employee within the
meaning of section 409A of the Internal Revenue Code of 1986, if any of the
continued insurance benefits specified in section 4.2(a) would be
considered deferred compensation under section 409A, and finally if an
exemption from the six-month delay requirement of section 409A(a)(2)(B)(i) is
not available for that particular insurance benefit, instead of continued
insurance coverage under section 4.2(a) the Employer shall pay to the
Executive in a single lump sum an amount in cash equal to the present value of
the Employer’s projected cost to maintain that particular insurance benefit had
the Executive’s employment not terminated, assuming continued coverage for the
lesser of 12 months or the number of months until the Executive attains age
65.  The lump-sum payment shall be made
30 days after employment termination or, if section 4.1(b) applies and a
six-month delay is required under Internal Revenue Code section 409A, on the
first day of the seventh month after the month in which the Executive’s
employment terminates.


 


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


 


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obligations and
discharging both parties, as well as the Employer’s officers, directors, and
employees for their actions for or on behalf of the Employer, from any other
claims or obligations arising out of the Executive’s employment by the
Employer, including the circumstances of the Executive’s employment
termination.  The non-compete and other
covenants contained in Article 7 of this Agreement are not contingent on
the Executive entering into a release under this section 4.3 and shall be
effective 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 this
Agreement and if within 24 months thereafter the Executive is involuntarily
terminated without Cause or the Executive terminates employment voluntarily but
with Good Reason, the Employer shall make or cause to be made a lump-sum
payment to the Executive in an amount in cash equal to the Executive’s annual
compensation.  For this purpose annual
compensation means (x) the Executive’s annual base salary on the date of
the Change in Control or on the date of the Executive’s employment termination
(whichever is greater) plus (y) any bonus or incentive compensation earned
for the calendar year ended immediately before the year in which the Change in
Control occurred or for the calendar year ended immediately before the year in
which employment termination occurred (whichever is greater), regardless of
when the bonus or incentive compensation earned for the preceding calendar year
is paid and regardless of whether all or part of the bonus or incentive
compensation is subject to elective deferral or vesting.  Annual compensation shall be calculated
without regard to any deferrals under qualified or nonqualified plans, but
annual compensation shall not include interest or other earnings credited to
the Executive under qualified or nonqualified plans and annual compensation
shall not include any compensation earned in the Executive’s capacity as a
director.  The amount payable to the
Executive hereunder shall not be reduced to account for the time value of money
or discounted to present value.  The
payment required under this section 5.1(a) is payable within five business
days after the Executive’s employment termination.  If the Executive receives payment under this
section 5.1(a) the Executive shall not be entitled to any cash severance
benefits under section 4.1 of this Agreement after employment termination.


 


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


 


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performance measures,
including but not limited to stock price or financial statement or other
financial 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 and
rules, regulations, and guidance of general application thereunder issued by
the Department of the Treasury, including —


 


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


 


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


 


(c)           Change in ownership of a
substantial portion of assets: a change in ownership of a
substantial portion of the Corporation’s assets occurs if in a 12-month period
any one person or more than one person acting as a group acquires from the
Corporation assets having a total gross fair market value equal to or exceeding
40% of the total gross fair market value of all of the Corporation’s assets
immediately before the acquisition or acquisitions.  For this purpose, gross fair market value
means the value of the Corporation’s assets, or the value of the assets being
disposed of, determined without regard to any liabilities associated with the
assets.


 


ARTICLE 6


CONFIDENTIALITY AND CREATIVE WORK


 


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


 


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


 


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


 


(c)           the whole or any portion or phase of
any 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 time
to time by the laws of the State of South Carolina.


 


However, confidential
information excludes information that — as of the date hereof or at any time
after the date hereof — is published or disseminated without obligation of
confidence or that becomes a part of the public domain (x) by or through
action of the Employer, or (y) otherwise than by or at the direction of
the Executive.  This section 6.1 does not
prohibit disclosure required by an order of a court having jurisdiction or a
subpoena from an appropriate governmental agency or disclosure made by the
Executive in the ordinary course of business and within the scope of the
Executive’s authority.


 


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


 


6.3          Creative Work.  The
Executive agrees that all creative work and work product, including but not
limited to all technology, business management tools, processes, software,
patents, trademarks, and copyrights developed by the Executive during the term
of this Agreement and in the course and scope of the Executive’s duties
hereunder, regardless of when or where such work or work product was produced,
constitutes work made for hire, all rights of which are owned by the
Employer.  The Executive hereby assigns
to the Employer all rights, title, and interest, whether by way of copyrights,
trade secret, trademark, patent, or otherwise, in all such work or work
product, 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 the
damages that will be suffered by the Employer if the Executive fails to observe
the obligations imposed by this Article 6. 
Accordingly, if the Employer institutes an action to enforce the
provisions hereof, the Executive hereby waives the claim or defense that an
adequate remedy at law is available to the Employer and the Executive agrees
not to urge in any such action the claim or defense that an adequate remedy at
law exists.


 


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


 


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ARTICLE 7


COMPETITION
AFTER EMPLOYMENT TERMINATION


 


7.1                               Covenant Not to Solicit Employees.  The Executive
agrees not to solicit the services of any officer or employee of the Employer
for 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 and
agrees not to compete directly or indirectly with the Employer for 12 months
after employment termination, plus any period during which the Executive is in
violation of this covenant not to compete and any period during which the
Employer 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 services
on behalf of any financial institution for any person residing in the
territory,


 


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


 


(c)                                  inducing or attempting to induce any
person who was a customer of the Employer at the date of the Executive’s
employment termination to seek financial products or services from another
financial institution.


 


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


 


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


 


(b)                                 ownership of more than 5% of the voting
shares of any financial institution in competition with the Employer in the
territory, or


 


(c)                                  communicating to such financial
institution the names or addresses or any financial information concerning any
person who was a customer of the Employer at the Executive’s employment
termination.


 


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


 


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(4)                                  the term “financial institution” means
any 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 financial
in nature or incidental to such financial activities as described in section 4(k) of
the Bank Holding Company Act of 1956, other than the Employer or its affiliated
corporations.


 


(5)                                  “financial product or service” means any
product or service that a financial institution or a financial holding company
could offer by engaging in any activity that is financial in nature or
incidental to such a financial activity under section 4(k) of the Bank
Holding Company Act of 1956 and that is offered by the Employer or an affiliate
on the date of the Executive’s employment termination, including but not
limited to banking activities and activities 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 a 50-mile radius of any full-service banking office of the Bank on the
date of the Executive’s employment termination.


 


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


 


7.3                               Remedies. 
Because of the unique character of the services to be rendered by the
Executive hereunder, the Executive understands that the Employer would not have
an adequate remedy at law for the material breach or threatened breach by the
Executive of any one or more of the Executive’s covenants set forth in this Article 7.  Accordingly, the Executive agrees that the
Employer’s remedies for a material breach or threatened breach of this Article 7
include but are not limited 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 severance benefits under
sections 4.1 and 4.2 of this Agreement, and (z) a suit in equity by the
Employer to enjoin the Executive from the breach or threatened breach of such
covenants.  The Executive hereby waives
the claim or defense that an adequate remedy at law is available to the
Employer and the Executive agrees not to urge in any such action the claim or
defense that an adequate remedy at law exists. 
Nothing herein shall be construed to prohibit the Employer from pursuing
any other remedies for the breach or threatened breach.


 


7.4                               Article 7 Survives
Termination But Is Void After a Change in Control. 
The rights and obligations set forth in this Article 7 shall
survive termination of this Agreement.


 


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


 


ARTICLE 8


MISCELLANEOUS


 


8.1                               Successors and Assigns.  (a) 
This Agreement is binding on the Employer’s
successors.  This Agreement
shall be binding upon the Employer and any successor, including any persons
acquiring directly or indirectly all or substantially all of the business or
assets of the Employer by purchase, merger, consolidation, reorganization, or
otherwise.  But this Agreement and the
Employer’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, the
Employer shall require any successor to all or substantially all of the
business or assets of the Employer to expressly assume and agree to perform
this Agreement in the same manner and to the same extent the Employer would be
required to perform had no succession occurred.


 


(b)                                 This Agreement is enforceable by
the Executive’s heirs.  This Agreement shall inure to
the 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 is
not 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 or
obligations under this Agreement except as expressly provided herein.  Without limiting the generality or effect of
the foregoing, the Executive’s right to receive payments hereunder is not
assignable 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 of
descent and distribution.  If the
Executive 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 or
transferee.


 


8.2                               Governing Law, Jurisdiction, and
Forum.  This Agreement shall be construed under and
governed by the internal laws of the State of South Carolina, without giving
effect to any conflict of laws provision or rule (whether of the State of
South Carolina or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of South Carolina.  By entering into this Agreement, the
Executive agrees to be subject to the jurisdiction of both the federal and
state courts in the State of South Carolina. 
Any actions or proceedings instituted under this Agreement shall be
brought and tried solely in courts located in Charleston County, South Carolina
or in the federal court having jurisdiction in Mount Pleasant, South
Carolina.  The Executive expressly waives
the 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 concerning
the Executive’s employment.  Any oral or
written statements, representations, agreements, or understandings made or
entered into prior to or contemporaneously with the


 


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execution of this
Agreement are hereby rescinded, revoked, and rendered null and void by the
parties.  Without limiting the generality
of the foregoing, the parties hereto acknowledge and agree that this Agreement
supersedes 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 been
amended 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 shall
be in writing and shall be deemed to have been duly given if delivered by hand
or mailed, certified or registered mail, return receipt requested, with postage
prepaid.  Unless otherwise changed by
notice, notice shall be properly addressed to the Executive if addressed to the
address of the Executive on the books and records of the Employer at the time
of the delivery of notice, and properly addressed to the Employer if addressed
to the Board of Directors, Tidelands Bancshares, Inc., 875 Lowcountry
Boulevard, Mount Pleasant, South Carolina 
29464.


 


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


 


8.6                               Captions and Counterparts. 
Captions in this Agreement are included solely for convenience and do
not define, limit, or describe the scope or intent of this Agreement.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.


 


8.7                               No Duty to Mitigate. 
The Employer hereby acknowledges that it will be difficult and could be
impossible (x) for the Executive to find reasonably comparable employment
after employment termination, and (y) to measure the amount of damages the
Executive may suffer as a result of termination.  Additionally, the Employer acknowledges that
its general severance pay plans do not provide for mitigation, offset, or reduction
of any severance payment received thereunder. 
The Employer further acknowledges that the payment of severance benefits
under this Agreement is reasonable and shall be liquidated damages.  The Executive shall not be required to
mitigate the amount of any payment provided by this Agreement by seeking other
employment.  Moreover, the amount of any
payment provided by this Agreement shall not be reduced by any compensation
earned or benefits provided as the result of employment of the Executive or as a
result 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 the
parties hereto.  The failure of any party
hereto to enforce at any time any of the provisions of this Agreement shall not
be construed to be a waiver of any such provision nor affect the


 


14

















 


validity of this Agreement
or any part thereof or the right of any party thereafter to enforce each and
every such provision.  No waiver of a
breach of this Agreement shall be held to be a waiver of any other or
subsequent breach.


 


8.9                               Payment of Legal Fees. 
The Employer is aware that after a Change in Control management could
cause or attempt to cause the Employer to refuse to comply with its obligations
under this Agreement, or could institute or cause or attempt to cause the
Employer to institute litigation seeking to have this Agreement declared
unenforceable, or could take or attempt to take other action to deny Executive
the benefits intended under this Agreement. 
In these circumstances the purpose of this Agreement would be frustrated.  The Employer desires that the Executive not
be required to incur the expenses associated with the enforcement of rights
under this Agreement, whether by litigation or other legal action, because the
cost and expense thereof would substantially detract from the benefits intended
to be granted to the Executive hereunder. 
The Employer desires that the Executive not be forced to negotiate
settlement of rights under this Agreement under threat of incurring
expenses.  Accordingly, if after a Change
in Control occurs it appears to the Executive that (x) the Employer has
failed to comply with any of its obligations under this Agreement, or (y) the
Employer or any other person has taken any action to declare this Agreement
void or unenforceable, or instituted any litigation or other legal action designed
to deny, diminish, or to recover from the Executive the benefits intended to be
provided to the Executive hereunder, the Employer irrevocably authorizes the
Executive from time to time to retain counsel of the Executive’s choice, at the
Employer’s expense as provided in this section 8.9, to represent the Executive
in the initiation or defense of any litigation or other legal action, whether
by or against the Employer or any director, officer, stockholder, or other
person affiliated with the Employer, in any jurisdiction.  Despite any existing or previous
attorney-client relationship between the Employer and any counsel chosen by the
Executive under this section 8.9, the Employer irrevocably consents to the
Executive entering into an attorney-client relationship with that counsel, and
the Employer and the Executive agree that a confidential relationship shall
exist between the Executive and that counsel. 
The fees and expenses of counsel selected from time to time by the
Executive as provided in this section shall be paid or reimbursed to the
Executive by the Employer on a regular, periodic basis upon presentation by the
Executive of a statement or statements prepared by counsel in accordance with
counsel’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 by
this section 8.9 operates separately from and in addition to any legal fee
reimbursement obligation the Employer may have with the Executive under any
separate severance or other agreement. 
Despite anything in this Agreement to the contrary, however, the
Employer shall not be required to pay or reimburse Executive’s legal expenses
if doing so would violate section 18(k) of the Federal Deposit Insurance
Act [12 U.S.C. 1828(k)] and Rule 359.3 of the Federal Deposit Insurance
Corporation [12 CFR 359.3].


 


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


 


15

















 


have the assistance of
counsel.  Both the Employer and the
Executive have participated in the negotiation and drafting of this Agreement
and they hereby agree that there shall not be strict interpretation against
either party in any review of this Agreement in which interpretation thereof is
an issue.


 


8.11                        Compliance with Internal Revenue
Code Section 409A.  The Employer and the Executive
intend that their exercise of authority or discretion under this Agreement
shall comply with section 409A of the Internal Revenue Code of 1986.  If when the Executive’s employment terminates
the Executive is a specified employee, as defined in section 409A of the
Internal Revenue Code of 1986, and if any payments under this Agreement,
including Articles 4 or 5, will result in additional tax or interest to the
Executive because of section 409A, then despite any provision of this Agreement
to the contrary the Executive shall not be entitled to the payments until the
earliest of (x) the date that is at least six months after termination of
the Executive’s employment for reasons other than the Executive’s death, (y) the
date of the Executive’s death, or (z) any earlier date that does not
result in additional tax or interest to the Executive under section 409A.  As promptly as possible after the end of the
period during which payments are delayed under this provision, the entire
amount of the delayed payments shall be paid to the Executive in a single lump
sum.  If any provision of this Agreement
does not satisfy the requirements of section 409A, such provision shall
nevertheless be applied in a manner consistent with those requirements.  If any provision of this Agreement would
subject the Executive to additional tax or interest under section 409A, the
Employer shall reform the provision. 
However, the Employer shall maintain to the maximum extent practicable
the original intent of the applicable provision without subjecting the
Executive to additional tax or interest, and the Employer shall not be required
to incur any additional compensation expense as a result of the reformed
provision.


 


IN
WITNESS WHEREOF,
the parties have executed this Employment Agreement as of the date first
written 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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