ex10_3.htm

1. Pledge. As collateral security for the payment and performance in full of the Obligations, Pledgor hereby pledges, hypothecates, assigns, transfers, sets over and delivers unto Lender, and hereby grants to Lender a first lien security interest in, the collateral described in Schedule A, together with the proceeds thereof and all cash, additional securities or other property at any time and from time to time receivable or otherwise distributable in respect of, in exchange for, or in substitution for any and all such pledged securities (all such pledged securities, the proceeds thereof, cash, dividends, additional securities and other property now or hereafter pledged hereunder are hereinafter collectively called the “Pledged Securities”);

TO HAVE AND TO HOLD the Pledged Securities, together with all rights, titles, interests, powers, privileges and preferences pertaining or incidental thereto, unto Lender, its successors and assigns; subject, however, to the terms, covenants and conditions hereinafter set forth. Pledgee agrees to hold the Pledged Securities to secure the payment of the Obligations and shall not encumber or otherwise dispose of such Pledged Securities except in accordance with the terms and provisions of this Agreement.

Upon delivery to Lender, the Pledged Securities shall be accompanied by executed stock powers in blank and by such other instruments or documents as Lender or its counsel may reasonably request. Each delivery of certificates for such Pledged Securities shall be accompanied by a schedule showing the number of shares and the numbers of the certificates theretofore and then pledged hereunder, which schedule shall be attached hereto as Schedule A and made a part hereof. Each schedule so delivered shall supersede any prior schedule so delivered.

2. Obligations Secured. This Agreement is made, and the security interest created hereby is granted to Lender, to secure full payment and performance of any and all indebtedness and other obligations of Pledgor to Lender, direct or contingent, however evidenced or denominated, arising under or related to that certain Twenty-Five Million Dollar ($25,000,000.00) Loan governed by the Loan Agreement, and all other indebtedness or obligations of Pledgor or Bank under or evidenced by the Note, the Loan Agreement and other Loan Documents, as each of them may be amended from time to time, in each case now existing or hereafter arising under the Loan Documents (all of the foregoing, collectively, the “Obligations”).

3. Representations and Warranties. Pledgor hereby represents and warrants to Lender (a) that Pledgor is the legal and equitable owner of the Pledged Securities, that Pledgor has the complete and unconditional authority to pledge the Pledged Securities being pledged by it, and holds the same free and clear of all liens, charges, encumbrances and security interests of every kind and nature; (b) that no consent or approval of any governmental body or regulatory authority, or of any other party, which was or is necessary to the validity of this pledge, has not been obtained; and (c) that the Pledged Securities represent eighty-five percent (85.00%) of the issued and outstanding Capital Stock of the Bank. Pledgor further represents and warrants that no part of the Obligations will be used to purchase or carry any “margin stock”, as defined in Regulation U of the Board of Governors of the Federal Reserve System, 12 CFR § 221.1 et seq.

(a) No Disposition, Etc. The Pledgor shall not sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, any of the Pledged Securities, nor will it create, incur or permit to exist any pledge, lien, mortgage, hypothecation, security interest, charge, option or any other encumbrance with respect to any of the Pledged Securities, or any interest therein, or any proceeds thereof, except for the lien and security interest provided for by this Agreement.

(b) Share Adjustments. All new, substitute, and additional shares, or other securities, issued by reason of any share dividend, reclassification, recapitalization, adjustment or other change declared or made in the capital structure of the Bank (subject to obtaining Lender’s prior written consent thereto as required by the Loan Documents), which are issued in respect of the Pledged Securities, shall be delivered to and held by Lender under the terms of this Agreement in the same manner as the Pledged Securities originally pledged hereunder.

(c) Warrants and Rights. In the event that subscription warrants or any other rights or options shall be issued in connection with any of the Pledged Securities (subject to obtaining Lender’s prior written consent thereto as required by the Loan Documents), such warrants, rights, and options shall be immediately assigned to Lender to be held under the terms of this Agreement in the same manner as the Pledged Securities originally pledged hereunder.

5. Registration in Nominee Name; Denominations. Lender shall have the right (in its sole and absolute discretion) to hold the certificates representing the Pledged Securities in its own name or in the name of the Pledgor, endorsed or assigned in blank or in favor of Lender. Upon request and delivery of certificates representing the Pledged Securities to the issuer of the Pledged Securities, Lender may have such Pledged Securities registered in the name of Lender or any nominee or nominees of Lender. Lender shall at all times have the right to exchange the certificates representing Pledged Securities for certificates of smaller or larger denominations for any purpose consistent with this Agreement.

6. Dividends. Notwithstanding anything in this Agreement to the contrary, so long as no Event of Default has occurred and is continuing, all cash dividends paid in respect of the Pledged Securities, if any (subject to obtaining Lender’s prior written consent thereto, if required by the Loan Documents), shall be the property of Pledgor. If any Event of Default occurs and is continuing, all such cash dividends shall thereafter be paid to Lender and applied in reduction of the Obligations, in such order of priority as Lender shall determine in its sole discretion.

(b) Upon the occurrence and during the continuance of an Event of Default hereunder or under any other Loan Documents, all rights of Pledgor to exercise or refrain from exercising the voting rights attributable to the Pledged Securities or any part thereof pursuant to subparagraph 7(a)(i) or otherwise shall cease, and Lender and its successors and assigns shall have the sole right to exercise or refrain from exercising such rights after obtaining all necessary regulatory approvals. In furtherance of the foregoing, Pledgor hereby makes, constitutes and appoints Lender and its officers as the proxies and attorneys-in-fact of and for Pledgor, with full power to exercise or to refrain from exercising any and all voting rights attributable to the Pledged Securities upon the occurrence and during the continuance of any such default or event of default. The foregoing appointment and power, being coupled with an interest, are irrevocable until the Obligations have been fully and irreversibly satisfied.

(a) Upon the occurrence of any Event of Default, Lender shall have all of the rights, powers, privileges, options and remedies of a secured party under the Uniform Commercial Code as in effect in the State of Tennessee, and without limiting the foregoing, Lender may (1) collect any and all amounts payable in respect of the Pledged Securities and exercise any and all rights, powers, privileges, options and remedies of the holder and owner thereof, and (2) sell, transfer or negotiate the Pledged Securities, or any part thereof, at public or private sale, for cash, upon credit or for future delivery as Lender shall deem appropriate, including without limitation, at Lender’s option, the purchase of all or any part of the Pledged Securities at any public sale by Lender. Upon consummation of any sale, Lender shall have the right to assign, transfer and deliver to the purchaser or purchasers thereof the Pledged Securities so sold. Each such purchaser at any such sale shall hold the property sold absolutely, free from any claim or right on the part of Pledgor, and Pledgor hereby waives (to the extent permitted by law) all rights of redemption, stay or appraisal that Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereinafter enacted. Pledgor hereby expressly waives notice to redeem and notice of the time, place and manner of such sale.

(b) Pledgor recognizes that, by reason of certain prohibitions contained in the Securities Act of 1933, as amended (the “Securities Act”), applicable state securities laws, and other applicable laws, rules and regulations (including without limitation the rules and regulations of any Bank Regulatory Authority), Lender may be compelled, with respect to any sale of all or any part of the Pledged Securities, to limit purchasers to those who agree, among other things, to acquire such Pledged Securities for their own account, for investment and not with a view to the distribution or resale thereof. Pledgor acknowledges that any such private sales may be at prices and on terms less favorable than those obtainable through a public sale without such restrictions (including, without limitation, a public offering made pursuant to a registration statement under the Securities Act), and, notwithstanding such circumstances, Pledgor agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner and that Lender shall have no obligation to engage in public sales and no obligation to delay the sale of any of the Pledged Securities for the period of time necessary to permit the issuer thereof to register such sale under the Securities Act or under applicable state securities laws, even if Pledgor would agree to do so.

(c) If Lender determines to exercise its right to sell any or all of the Pledged Securities, upon written request, Pledgor from time to time shall, and shall cause each issuer of the Pledged Securities to be sold hereunder to, furnish to Lender all such information as Lender may request in order to determine the number of shares and other instruments included in the Pledged Securities that may be sold by Lender as exempt transactions under the Securities Act and the rules of the Securities and Exchange Commission thereunder, as the same are from time to time in effect.

10. Reimbursement of Lender. Pledgor agrees to reimburse Lender, upon demand, for all expenses, including without limitation reasonable attorney’s fees, incurred by it in connection with the administration (other than Lender's general overhead expenses and subject to the terms of the Loan Agreement) and enforcement of this Agreement, and agrees to indemnify Lender and hold it harmless from and against any and all liability incurred by it hereunder or in connection herewith, unless such liability shall be due to willful misconduct or gross negligence on the part of Lender.

11. No Waiver. No failure on the part of Lender to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by Lender preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies are cumulative and are not exclusive of any other remedies provided by law.

12. Limitation of Liability. The powers conferred on Lender hereunder are solely to protect its interests in the Pledged Securities, and shall not impose any duty upon Lender to exercise any such powers. Except for the exercise of reasonable care in the custody and preservation and return of the certificates or other instruments representing Pledged Securities in its possession and the accounting for monies actually received by it hereunder, Lender shall have no duty as to any Pledged Securities. Without limiting the generality of the foregoing, Lender shall have no responsibility for (a) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Pledged Securities, regardless of whether Lender has or is deemed to have knowledge of such matters, (b) taking any necessary steps (other than steps in accordance with the standard of care set forth above to maintain possession of the certificates or other instruments representing Pledged Securities in its possession) to preserve rights against any parties with respect to the Pledged Securities, (c) taking any necessary steps to collect or realize upon any of the Obligations or any of the Pledged Securities, or (d) initiating any action to protect the Pledged Securities against the possibility of a decline in market value. Lender shall be deemed to have exercised reasonable care in the custody and preservation of the certificates or other instruments representing Pledged Securities in its possession if such items are accorded treatment substantially equal to that which Lender accords its own property consisting of negotiable securities.

13. Counterparts. This Agreement may be executed in multiple counterparts or copies, each of which shall be deemed an original hereof for all purposes. One or more counterparts or copies of this Agreement may be executed by one or more of the parties hereto, and some different counterparts or copies executed by one or more of the other parties. Each counterpart or copy hereof executed by any party hereto shall be binding upon the party executing same even though other parties may execute one or more different counterparts or copies, and all counterparts or copies hereof so executed shall constitute but one and the same agreement. Each party hereto, by execution of one or more counterparts or copies hereof, expressly authorizes and directs any other party hereto to detach the signature pages and any corresponding acknowledgment, attestation, witness or similar pages relating thereto from any such counterpart or copy hereof executed by the authorizing party and affix same to one or more other identical counterparts or copies hereof so that upon execution of multiple counterparts or copies hereof by all parties hereto, there shall be one or more counterparts or copies hereof to which is(are) attached signature pages containing signatures of all parties hereto and any corresponding acknowledgment, attestation, witness or similar pages relating thereto.

15. Further Assurances. Pledgor agrees to do such further acts and things, and to execute and deliver such additional conveyances, assignments, agreements and instruments (including but not limited to the execution and delivery and filing of UCC financing statements with respect to the security interests of this Agreement), as Lender at any time may request in connection with the administration and enforcement of this Agreement or relative to the Pledged Securities or any part thereof or in order to assure and confirm unto Lender its rights and remedies hereunder.

16. Severability. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement or the application of such provision to other persons or circumstances shall not be affected thereby and shall be enforceable to the greatest extent permitted by law.

17. Return of Pledged Securities. Upon the irrevocable payment in full of the Obligations and termination of any commitment of Lender to lend thereunder, at the request of Pledgor, Lender shall promptly return and deliver the Pledged Securities to Pledgor (unless otherwise required by law, in which case Lender shall return and deliver the Pledged Securities to the party legally entitled thereto).

(e) All references herein to the preamble, the recitals or sections, paragraphs, subparagraphs, schedules or exhibits are to the preamble, recitals, sections, paragraphs, subparagraphs, schedules and exhibits of or to this Agreement unless otherwise specified. The words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement.

(f) When used herein, (1) the singular shall include the plural, and vice versa, and the use of the masculine, feminine or neuter gender shall include all other genders, as appropriate, (2) ”include”, “includes” and “including” shall be deemed to be followed by “without limitation” regardless of whether such words or words of like import in fact follow same, and (3) unless the context clearly indicates otherwise, the disjunctive “or” shall include the conjunctive “and”.