-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ogwftu9h+FyQ4oJV6Z7z/z43kxr2OI1QnC+StL/PT0zUw9NTvgVuNUSJqAVuJJtG BP6Jon/GwGHqlBoD9v1/gA== 0000914317-06-000025.txt : 20060103 0000914317-06-000025.hdr.sgml : 20060102 20060103170011 ACCESSION NUMBER: 0000914317-06-000025 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20051227 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060103 DATE AS OF CHANGE: 20060103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL BANK CORP CENTRAL INDEX KEY: 0001071992 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 562101930 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-30062 FILM NUMBER: 06503213 BUSINESS ADDRESS: STREET 1: 4901 GLENWOOD AVENUE CITY: RALEIGH STATE: NC ZIP: 27612 BUSINESS PHONE: 9196456312 MAIL ADDRESS: STREET 1: PO BOX 18949 CITY: RALEIGH STATE: NC ZIP: 27619-8949 8-K 1 form8k-72907capital.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): December 27, 2005 CAPITAL BANK CORPORATION (Exact name of registrant as specified in its charter) North Carolina 000-30062 56-2101930 (State or other jurisdiction (Commission File No.) (I.R.S. Employer of incorporation) Identification Number) 4901 Glenwood Ave. Raleigh, North Carolina 27612 (Address of principal executive offices) (919) 645-6400 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [_] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into a Material Definitive Agreement. On December 27, 2005, Capital Bank Corporation, a North Carolina corporation (the "Company"), received a $30,000,000 loan (the "Loan") from First Tennessee Bank National Association ("First Tennessee"). The Loan is secured by a pledge of all of the Company's capital stock in Capital Bank, the Company's wholly-owned subsidiary, pursuant to a Commercial Pledge Agreement with First Tennessee (collectively, with the Loan, the "Loan Documents"). The Loan matures on January 31, 2006, at which time the principal and interest on all funds borrowed by the Company will become due and payable. The Company is permitted to prepay the Loan at any time without penalty. The interest rate on the Loan is First Tennessee's base commercial rate, which may change daily. The Loan's initial interest rate is 7.25% per annum. The Loan Documents provide for certain events of default with customary cure provisions, including failure to pay any principal or interest when due, failure to comply with covenants, any material representation or warranty made by the Company proving to be false in any material respect, certain insolvency or receivership events affecting the Company, defaults relating to certain other indebtedness, a change in ownership of the Company and the occurrence of a material adverse change in the Company's financial condition. The Company intends to use the borrowed funds from the Loan to finance a portion of the merger consideration for its merger with 1st State Bancorp, Inc. ("1st State"). The merger between the Company and 1st State is scheduled to close in early January 2006. In connection with the merger between the Company and 1st State, FTN Midwest Securities Corp. ("FTN"), an affiliate of FTN Financial Group, a division of First Tennessee, acted as the Company's financial advisor. FTN provided general financial advice in connection with the merger, including delivering a written opinion to the Company's board of directors that the exchange ratio and the aggregate merger consideration being paid by the Company was fair from a financial point of view to the Company. As the Company's financial advisor in connection with the merger with 1st State, FTN will receive customary fees for the services provided. The foregoing description of the Loan and the Loan Documents is qualified in its entirety by the documents attached to this report as Exhibits 10.1 and 10.2, respectively, each of which is incorporated herein by reference. Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. The disclosure included under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03. Item 9.01 Financial Statements and Exhibits. (d) Exhibits Exhibit No. Description of Exhibit - ----------- ---------------------- Exhibit 10.1 Promissory Note, dated December 27, 2005, between Capital Bank Corporation and First Tennessee Bank National Association. Exhibit 10.2 Commercial Pledge Agreement, dated December 27, 2005, between Capital Bank Corporation and First Tennessee Bank National Association. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CAPITAL BANK CORPORATION By: /s/ B. Grant Yarber ----------------------- B. Grant Yarber Chief Executive Officer Date: January 3, 2006 EXHIBIT INDEX Exhibit No. Description of Exhibit - ----------- ---------------------- Exhibit 10.1 Promissory Note, dated December 27, 2005, between Capital Bank Corporation and First Tennessee Bank National Association. Exhibit 10.2 Commercial Pledge Agreement, dated December 27, 2005, between Capital Bank Corporation and First Tennessee Bank National Association. EX-10.1 2 ex10-1.txt Exhibit 10.1
PROMISSORY NOTE - ---------------------------------------------------------------------------------------------------------- Principal Loan Date Maturity Loan No Call / Coll Account Officer Initials $30,000,000.00 12-27-2005 01-31-2006 04AD / STKU 53803 - ---------------------------------------------------------------------------------------------------------- References in the shaded area are for Lender's use only and do nut limit lbs applicability of this document to any particular loan or item Any item above containing "***" has been omitted due to text length limitations. - ---------------------------------------------------------------------------------------------------------- Borrower: Capital Bank Corporation (TIN: 56-2101930) Lender: First Tennessee Bank National Association 4901 Glen wood Avenue Financial Institutions Raleigh NC 27612 845 Crossover Lane, Suits 150 Memphis, TN 38117 (901) 435-7972 ========================================================================================================== Principal Amount: $30,000,000 00 Initial Rate: 7.250% Date of Note: December 27, 2005
PROMISE TO PAY. Capital Bank Corporation ("Borrower") promises to pay to First Tennessee Bank National Association ("Lender"), or order in lawful money of the United States of America, the principal amount of Thirty Million & 00/100 Dollars ($30,000,000.00) or so much as may be outstanding, together with Interest on the unpaid outstanding principal balance of each advance, Interest shad be calculated from the date of each advance until repayment of each advance PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on January 31, 2006. Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; and then to any unpaid collection costs. The annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is the Lender's base commercial rate (the "Index") The index is not necessarily the lowest rate charged by Lender on its loans and is set by Lender in its sole discretion. If the Index becomes unavailable during the term of this loan Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 7.250% per annum. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate equal to the Index, resulting in an initial rate of 7.250% per annum. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rate allowed by applicable law. PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes payment in full of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: First Tennessee Bank National Association Financial Institutions, 845 Crossover Lane, Suite 150, Memphis, TN 38117. INTEREST AFTER DEFAULT. Upon default, including failure to pay upon final maturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Note to 21.000% per annum. In no event will the effective total interest rate on this Note be greater than the rate permitted by applicable law. DEFAULT. Each of the following shall constitute an event of default ("Event of Default") under this Note: Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term obligation covenant or condition contained in any other agreement between Lender and Borrower. Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents False Statements. Any warranty representation or statement made or furnished to Lender by Borrower or on Borrower s behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help repossession or any other method, by any creditor of Borrower or by any governmental agency against any collatera 2 securing the loan. This includes a garnishment of any of Borrower's accounts including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding in an amount determined by Lender in its sole discretion as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any of the indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note. In the event of a death, Lender, at its option, may but shall not be required to, permit the guarantor's estate to assume unconditionally the obligations arising under the guaranty in a manner satisfactory to Lender and, in doing so cure any Event of Default. Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower s financial condition or Lender believes the prospect of payment or performance of this Note is impaired. Cure Provisions. If any default, other than a default in payment or failure to satisfy Lender s requirement in the Insufficient Market Value of Securities section is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured if Borrower, after receiving written notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days immediately initiates steps which Lender deems in Lender s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDERS RIGHTS. Upon default. Lender may declare the entire unpaid principal balance on this Note and ail accrued unpaid interest immediately due and then Borrower will pay that amount. Any payment not made when due hereunder (whether by acceleration or otherwise) shall bear interest after maturity at the maximum effective contract rate of interest which the Lender may lawfully charge. In the event of any renewal or extension of the loan indebtedness evidenced hereby, unless the parties otherwise agree to a lower rate, the Lender shall have the right to charge interest at the highest of the following rates: (i) the maximum rate permissible at the time the contract to make the loan was executed; or (ii) the maximum rate permissible at the time the loan was made; or (iii) the maximum rate permissible at the time of such renewal or extension; or (iv) the maximum 3 rate permitted by applicable federal law; it being intended that those statutes and laws, state or federal, from time to time in effect, which permit the charging of the higher rate of interest shall govern the maximum fate which may be charged hereunder. In the event that for any reason the foregoing provisions hereof shall not contain a valid enforceable designation of a rate of interest prior to maturity or method of determining the same, then the indebtedness hereby evidenced shall bear interest prior to maturity at the maximum effective rate which may be lawfully charged by the Lender under applicable law. Regardless of any provision herein, or in any other document executed in connection herewith the holder hereof shall never be entitled to receive, collect, or apply, as interest hereon, any amount in excess of the maximum contract rate which may be lawfully charged by the holder hereof under applicable law; and in the event the holder hereof ever receives, collect, or applies at interest any such excess, such amount which would be excessive interest shall be deemed a partial prepayment of principal and treated hereunder as such; and if the principal hereof is paid in full, any remaining excess shall forthwith be paid to the undersigned. In determining whether or not the interest paid or payable under any specific contingency, exceeds the maximum lawful contract rate, the undersigned and the holder hereof shall, to the maximum extent permitted by applicable law, (a) characterize any non-principal payment as a reasonable loan charge rather than as interest; (b) exclude voluntary prepayments and the effects thereof; and (c) amortize, prorate, allocate, and spread, in equal parts, the total amount of interest throughout the entire contemplated term hereof so that the interest accrued or to accrue throughout the entire term contemplated hereby shall at no time exceed the maximum lawful contract rate. ATTORNEYS FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys fees and Lender s legal expenses, whether or not there is a lawsuit, including attorneys' fees expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals if not prohibited by applicable law, Borrower also will pay any court costs in addition to all other sums provided by law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action proceeding or counterclaim brought by either Lender or Borrower against the other. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $25.00 if Borrower makes a payment on Borrower's loan and the check or preauthorized charge with which Borrower pays is later dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether checking, savings, or some other account). This includes all accounts Borrower may open in the future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, and, at Lender's option to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph. 4 FINANCIAL STATEMENTS. The undersigned agrees to furnish a current financial statement upon the request of Lender from time to time, and further agrees to execute and deliver all other instruments and take such other actions as Lender may from time to time reasonably request in order to carry out the provisions and intent hereof. LATE FEE. For any payment which is not made within 10 days of the due date for such payment the Borrower shall pay a late fee The late fee shall equal 5% of the unpaid portion of the past-due payment. EXCLUSION FROM INDEBTEDNESS. Excluded from indebtedness shall be any indebtedness governed by the Federal Truth in Lending Act. COLLATERAL. Borrower acknowledges this Note is secured by the following collateral described in the security instrument listed herein: securities or Investment property described in a Commercial Pledge Agreement dated December 27, 2005. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested either orally or in writing by Borrower or by an authorized person Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender. The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor's guarantee of this Note or any other loan with Lender; or (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized by Lender. USA PATRIOT ACT. Important information about procedures for opening a new account. To help the government fight the funding of terrorism and money laundering activities. Federal law requires all financial institutions to obtain verify and record information that identifies each business entity that opens an account. What this means to you: When you open an account, we will ask for Federal Tax Identification Number physical street address of your business, full legal name of your business and other information that will allow us to identify your company. We may also ask you to provide copies of certain documents that will aid in confirming this information. DOCUMENT FEE. Borrower acknowledges that any fees associated with the Promissory Note and any collateral documents are for the account of the Borrower and Borrower agrees to reimburse Lender for any such fees. A document fee in the amount of $400 00 may be due and 5 payable with the initial billing under the terms of the Promissory Note and will be in addition to any scheduled payment. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower and upon Borrowers heirs, personal representatives successors and assigns and shall inure to the benefit of Lender and its successors and assigns. GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them Borrower and any other person who signs, guarantees or endorses this Note to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew of extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with wham the modification is made. The obligations under this Note are joint and several. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE BORROWER: Capital Bank Corporation By: /s/ B. Grant Yarber By: /s/ William R. Lampley -------------------------------- -----------------------=------- B. Grant Yarber, President & CEO William R. Lampley, Interim CFO of Capital Bank Corporation of Capital Bank Corporation 6 EX-10.2 3 ex10-2.txt Exhibit 10.2
COMMERCIAL PLEDGE AGREEMENT - -------------------------------------------------------------------------------------------------------------- Principal Loan Date Maturity Loan No Call / Coll Account Officer Initials $30,000,000.00 12-27-2005 01-31-2006 04AD / STKU 53803 - -------------------------------------------------------------------------------------------------------------- References in the shaded area are for Lender's use only and do nut limit lbs applicability of this document toany particular loan or item Any item above containing "***" has been omitted due to text length limitations. - -------------------------------------------------------------------------------------------------------------- Borrower: Capital Bank Corporation (TIN: 56-2101930) Lender: First Tennessee Bank National Association 4901 Glen wood Avenue Financial Institutions Raleigh NC 27612 845 Crossover Lane, Suits 150 Memphis, TN 38117 (901) 435-7972 ==============================================================================================================
THIS COMMERCIAL PLEDGE AGREEMENT dated December 27, 2005 is made and executed between Capital Bank Corporation ("Grantor") and First Tennessee Bank National Association ("Lender"). GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a security interest in the Collateral to secure the Indebtedness and agrees that Lender shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Lender may have by law. COLLATERAL DESCRIPTION. The word "Collateral" as used in this Agreement means Grantor's present and future rights, title and interest in and to, together with any and all present and future additions thereto, substitutions therefore, and replacements thereof together with any and all present and future certificates and/or instruments evidencing any Stock and further together with all income and proceeds as described herein: 100% of stock in Capital Bank. RIGHT OF SETOFF. To the extent permitted by applicable law. Lender reserves a right of setoff in all Grantor s accounts with Lender (whether checking, savings, or some other account). This includes all accounts Grantor may open in the future. However, this does not include any IRA or Keogh accounts or any trust accounts for which setoff would be prohibited by law. Grantor authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts, and, at Lender's option, to administratively freeze all such accounts to allow Lender to protect Lender's charge and setoff rights provided in this paragraph REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. Grantor represents end warrants to Lender that: Ownership. Grantor is the lawful owner of the Collateral free and clear of all security interests, liens, encumbrances and claims of others except as disclosed to and accepted by Lender in writing prior to execution of this Agreement. Right to Pledge. Grantor has the full right power and authority to enter into this Agreement and to pledge the Collateral. Authority; Binding Effect. Grantor has the full right, power and authority to enter into this Agreement and to grant a security interest in the Collateral to Lender. This Agreement is binding upon Grantor as well as Grantor's successors and assigns, and is legally enforceable in accordance with its terms. The foregoing representations and warranties, and all other representations and warranties contained in this Agreement are and shall be continuing in nature and shall remain in full force and effect until such time as this Agreement is terminated or cancelled as provided herein. Valid Issuance of Stock. All of the Stock have been duly and validly issued and are fully paid and nonassessable. Ownership of Stock. Unless otherwise previously disclosed to Lender in writing, the shares of Stock subject to this Agreement constitute all shares owned by of Grantor of the issued and outstanding shares of the capital stock of the corporation or corporations listed above. Free Transferability of Stock. Unless otherwise previously disclosed to Lender in writing, all of the shares of Stock are freely transferable and subject to sale without being subject to limitations, restriction, stock legends, or prohibitive covenants under any agreements or otherwise under which Grantor or the issuer of any such Stock may be bound or obligated. Stock Dividend; Stock Split. In order to prevent Lender's collateral position from becoming diluted by any stock dividends or stock splits, Grantor agrees to notify Lender immediately when knowledge of any such transaction or transactions becomes known, and to deliver all of the stock certificates to Lender for pledging within five (5) days of receipt of the stock dividend and/or stock split together with appropriately executed stock powers. No Further Assignment. Grantor has not, and shall not set, assign, transfer, encumber or otherwise dispose of any of Grantor s rights in the Collateral except as provided in this Agreement. No Defaults. There are no defaults existing under the Collateral, and there are no offsets or counterclaims to the same. Grantor will strictly and promptly perform each of the terms conditions covenants and agreements if any, contained in the Collateral which are to be performed by Grantor. No Violation. The execution and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party and its certificate or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement. 2 Financing Statements. Grantor authorizes Lender to file a UCC financing statement, or alternatively, a copy of this Agreement to perfect Lender's security interest. At Lender's request, Grantor additionally agrees to sign all other documents that are necessary to perfect, protect, and continue Lender's security interest in the Property. Grantor will pay all filing fees, title transfer fees, and other fees and costs involved unless prohibited by law or unless Lender is required by law to pay such fees and costs Grantor irrevocably appoints Lender to execute documents necessary to transfer title if there is a default. Lender may file a copy of this Agreement as a financing statement. If Grantor changes Grantor's name or address, or the name or address of any person granting a security interest under this Agreement changes Grantor will promptly notify the Lender of such change. LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. Lender may hold the Collateral until all Indebtedness has been paid and satisfied. Thereafter Lender may deliver the Collateral to Grantor or to any other owner of the Collateral. Lender shall have the following rights in addition to all other rights Lender may have by law: Maintenance and Protection of Collateral. Lender may, but shall not be obligated to, take such steps as it deems necessary or desirable to protect, maintain, insure, store, or care for the Collateral, including paying of any liens or claims against the Collateral. This may include such things as hiring other people, such as attorneys, appraisers or other experts. Lender may charge Grantor for any cost incurred in so doing. When applicable law provides more than one method of perfection of Lender's security interest, Lender may choose the method(s) to be used. If the Collateral consists of stock, bonds or other investment property for which no certificate has been issued. Grantor agrees, at Lender's request either to request issuance of an appropriate certificate or to give instructions on Lender's forms to the issuer, transfer agent, mutual fund company or broker, as the case may be, to record on its books or records Lender's security interest in the Collateral. Grantor also agrees to execute any additional documents, including but not limited to a control agreement necessary to perfect Lender's security interest as Lender may desire. Income and Proceeds from the Collateral. Lender may receive all Income and Proceeds and add it to the Collateral. Grantor agrees to deliver to Lender immediately upon receipt, in the exact form received and without commingling with other property, all Income and Proceeds from the Collateral which may be received by, paid or delivered to Grantor or for Grantor s account whether as an addition to in discharge of. in substitution of or in exchange for any of the Collateral. Application of Cash At Lender's option. Lender may apply any cash, whether included in the Collateral or received as Income and Proceeds or through liquidation, sale, or retirement, of the Collateral, to the satisfaction of the Indebtedness or such portion thereof as Lender shall choose whether or not matured. Transactions with Others. Lender may (1) extend time for payment or other performance, (2) grant a renewal or change in terms or conditions, or (3) compromise compound or release any obligation with any one or more Obligors, endorsers, or 3 Guarantors of the Indebtedness as Lender deems advisable, without obtaining the prior written consent of Grantor, and no such act or failure to act shall affect Lender s rights against Grantor or The Collateral. All Collateral Secures Indebtedness. All Collateral shall be security for the Indebtedness, whether the Collateral is located at one or more offices or branches of Lender This will be the case whether or not the office or branch where Grantor obtained Grantor's loan knows about the Collateral or relies upon the Collateral as security. Collection of Collateral. Grantor agrees that Lender may, at any time and for any reason, whether or not Grantor is then in default under any indebtedness, collect the Income and Proceeds directly from the Obligors. Grantor authorizes and directs the Obligors if Lender decides to collect the Income and Proceeds to pay and deliver to Lender all Income and Proceeds from the Collateral and to accept Lender's receipt for the payments. Power of Attorney. Grantor irrevocably appoints Lender as Grantor's attorney-in-fact with full power of substitution, (a) to demand, collect, receive, receipt for, sue and recover all Income and Proceeds and other sums of money and other property which may now or hereafter become due, owing or payable from the Obligors in accordance with the terms of the Collateral; (b) to execute, sign, endorse any and all instruments, receipts, checks drafts and warrants issued in payment for the Collateral; (c) to settle or compromise any and all claims arising under the Collateral, ad in the place and stead of Grantor, execute and deliver Grantor's release and acquittance for Grantor; (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in Lender's own name or in the name of Grantor, or otherwise, which in the discretion of Lender may seem to be necessary or advisable; and (e) to execute in Grantor's name and to deliver to the Obligors on Grantor's behalf at the time and in the manner specified by the Collateral any necessary instruments or documents. Perfection of Security Interest Upon Lender's request. Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral. When applicable law provides more than one method of perfection of Lender's security interest. Lender may choose the method(s) to be used. Upon Lender's request, Grantor will sign and deliver any writings necessary to perfect Lender's security interest. If any of the Collateral consists of securities for which no certificate has been issued, Grantor agrees, at Lender's option, either to request issuance of an appropriate certificate or to execute appropriate instructions on Lender's forms instructing the issuer, transfer agent, mutual fund company, or broker, as the case may be to record on its books or records, by book-entry or otherwise. Lender's security interest in the Collateral. Grantor hereby appoints Lender as Grantor's irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect, amend, or to continue the security interest granted in this Agreement or to demand termination of filings of other secured parties. This is a continuing Security Agreement and will continue in effect even though all or any part of the Indebtedness is paid in full and even though for a period of time Grantor may not be indebted to Lender. 4 LENDERS EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender's interest in the Collateral or if Grantor fails to comply with any provision of this Agreement or any Related Documents including but not limited to Grantor's failure to discharge or pay when due any amounts Grantor is required to discharge or pay under this Agreement or any Related Documents Lender on Grantor's behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests encumbrances and other claims at any time levied or placed on the Collateral and paying all costs for insuring maintaining and preserving the Collateral. All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note, from the date incurred or paid by Lender to the date of repayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender's option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note's maturity. The Agreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon Default. LIMITATIONS ON OBLIGATIONS OF LENDER. Lender shall use ordinary reasonable care in the physical preservation and custody of the Collateral in Lender's possession, but shall have no other obligation to protect the Collateral or its value. In particular, but without limitation, Lender shall have no responsibility for (A) any depreciation in value of the Collateral or for the collection or protection of, any Income and Proceeds from the Collateral (B) preservation of rights against parties to the Collateral or against third persons, (C) ascertaining any maturities, calls, conversions, exchanges, offers, tenders, or similar matters relating to any of the Collateral, or (D) informing Grantor about any of the above, whether or not Lender has or is deemed to have knowledge of such matters. Except as provided above, Lender shall have no liability for depreciation or deterioration of the Collateral. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Grantor fails to make any payment when due under the Indebtedness. Other Defaults. Grantor fails to comply with or to perform any other term obligation covenant or condition contained in this Agreement or in any of the Related Documents or to comply with or to perform any term obligation covenant or condition contained in any other agreement between Lender and Grantor. Default in Favor of Third Parties Should Grantor or any Grantor default under any loan, extension of credit., security agreement, purchase or sales agreement, or any other agreement in favor of any other creditor or person that may materially affect any of Grantor's property or Grantor's or any Grantor's ability to repay the Indebtedness or perform their respective obligations under this Agreement or any of the Related Documents. 5 False Statements. Any warranty, representation or statement made or furnished to Lender by Grantor or on Grantor's behalf, or made by Guarantor, or any other guarantor endorser, surety, or accommodation party under this Agreement or the Related Documents in connection with the obtaining of the Indebtedness evidenced by the Note of any security document directly or indirectly securing repayment of the Note is false or misleading in any material respect either now or at the time made or furnished or becomes false or misleading at any time thereafter. Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral document to create a valid and perfected security interest or lien) at any time and for any reason. Insolvency. The dissolution or termination of Grantor's existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors any type of creditor workout of the commencement of any proceeding under any bankruptcy or insolvency Jaws by or against Grantor. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Grantor or by any governmental agency against any collateral securing the Indebtedness. This includes a garnishment of any of Grantor's accounts, including deposit accounts with Lender. However this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender in its sole discretion as being an adequate reserve or bond for the dispute. Execution; Attachment. Any execution or attachment is levied against the Collateral and such execution or attachment is not set aside discharged or stayed within thirty (30) days after the same is levied. Change in Zoning or Public Restriction. Any change in any zoning ordinance or regulation or any other public restriction is enacted, adopted or implemented that limits or defines the uses which may be made of the Collateral such that the present or intended use of the Collateral as specified in the Related Documents would be in violation of such zoning ordinance or regulation or public restriction as changed. Default Under Other Lien Documents. A default occurs under any other mortgage deed of trust or security agreement covering all or any portion of the Collateral. Judgment. Unless adequately covered by insurance in the opinion of Lender, the entry of a final judgment for the payment of money involving more than ten thousand dollars ($10,000.00) against Grantor and the failure by Grantor to discharge the same, or cause it to be discharged, or bonded off to Lender's satisfaction within thirty (30) days from the 6 date of the order decree or process under which or pursuant to which such judgment was entered. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor, or any other guarantor endorser surety, or accommodation party of any of the Indebtedness or Guarantor, or any other guarantor, endorser, surety, or accommodation party dies or becomes incompetent or revokes or disputes the validity of, or liability under any Guaranty of the Indebtedness. Adverse Change. A material adverse change occurs in Grantor's financial condition or Lender believes the prospect of payment or performance of the Indebtedness is impaired. Cure Provisions. If any default, other than a default in payment or failure to satisfy Lender's requirement in the Insufficient Market Value of Securities section is curable and if Grantor has not been given a notice of a breach of the same provision of this Agreement within the preceding twelve (12) months, it may be cured if Grantor, after receiving written notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days immediately initiates steps which Lender deems in Lenders sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement at any time thereafter, Lender may exercise any one or more of the following rights and remedies: Accelerate Indebtedness. Declare all Indebtedness, including any prepayment penalty which Grantor would be required to pay immediately due and payable without notice of any kind to Grantor. Collect the Collateral. Collect any of the Collateral and at Lender's option and to the extent permitted by applicable law retain possession of the Collateral while suing on the Indebtedness. Sell the Collateral. Sell the Collateral at Lender's discretion, as a unit or in parcels, at one or more public or private sales. Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender shaft give or mail to Grantor, and other persons as required by law notice at least ten (10) days in advance of the time and place of any public sale, or of the time after which any private sale may be made. However, no notice need be provided to any person who, after an Event of Default occurs, enters into and authenticates an agreement waiving that persons right to notification of sale Grantor agrees that any requirement of reasonable notice as to Grantor is satisfied if Lender mails notice by ordinary mail addressed to Grantor at the last address Grantor has given Lender in writing. If a public safe is held, there shall be sufficient compliance with all requirements of notice to the public by a single publication in any newspaper of general circulation in the county where the 7 Collateral is located, setting forth the time and place of sale and a brief description of the property to be sold Lender may be a purchaser at any public sale. Self Securities. Sell any securities included in the Collateral in a manner consistent with applicable federal and state securities laws. If because of restrictions under such laws Lender is unable, or believes Lender is unable, to sell the securities in an open market transaction. Grantor agrees that Lender wilt have no obligation to delay sale until the securities can be registered. Then Lender may make a private sale to one or more persons or to a restricted group of persons even though such sale may result in a price that is less favorable than might be obtained in an open market transaction. Such a sale will be considered commercially reasonable. If any securities held as Collateral are "restricted securities" as defined in the Rules of the Securities and Exchange Commission (such as Regulation D or Rule 144) or the rules of state securities departments under state "Blue Sky" laws, or if Grantor or any other owner of the Collateral is an affiliate of the issuer of the securities. Grantor agrees that neither Grantor, nor any member of Grantor's family, nor any other person signing this Agreement will sell or dispose of any securities of such issuer without obtaining Lender s prior written consent. Rights and Remedies with Respect to Investment Property. Financial Assets and Related Collateral. In addition to other rights and remedies granted under this Agreement and under applicable law. Lender may exercise any or all of the following rights and remedies: (1) register with any issuer or broker or other securities intermediary any of the Collateral consisting of investment property or financial assets (collectively herein, "investment property") in Lender's, sole name or in the name of Lender's broker, agent or nominee; (2) cause any issuer, broker or other securities intermediary to deliver to Lender any of the Collateral consisting of securities, or investment property capable of being delivered; (3) enter into a control agreement or power of attorney with any issuer or securities intermediary with respect to any Collateral consisting of investment property, on such terms as Lender may deem appropriate in its sole discretion, including without limitation, an agreement granting to Lender any of the rights provided hereunder without further notice to or consent by Grantor; (4) execute any such control agreement on Grantor s behalf and in Grantor's name, and hereby irrevocably appoints Lender as agent and attorney-in-fact, coupled with an interest, for the purpose of executing such control agreement on Grantor's behalf; (5) exercise any and alt rights of Lender under any such control agreement or power of attorney; (6) exercise any voting, conversion, registration purchase option, or other rights with respect to any Collateral; (7) collect, with or without legal action, and issue receipts concerning any notes, checks drafts, remittances or distributions that are paid or payable with respect to any Collateral consisting of investment property Any control agreement entered with respect to any investment property shall contain the following provisions, at Lender's discretion. Lender shall be authorized to instruct the issuer, broker or other securities intermediary to take or to refrain from taking such actions with respect to the investment property as Lender may instruct, without further notice to or consent by Grantor. Such actions may include without limitation the issuance of entitlement orders account instructions, general trading or buy or sell orders, transfer and redemption orders, and step loss orders. Lender shall be further entitled to instruct the issuer broker or securities intermediary to sell or to 8 liquidate any investment property, or to pay the cash surrender or account termination value with respect to any and all investment property, and to deliver all such payments and liquidation proceeds to Lender. Any such control agreement shall contain such authorizations as are necessary to place Lender in "control" of such investment collateral, as contemplated under the provisions of the Uniform Commercial Code, and shall fully authorize Lender to issue "entitlement orders" concerning the transfer redemption liquidation or disposition of investment collateral in conformance with the provisions of the Uniform Commercial Code. Foreclosure. Maintain a judicial suit for foreclosure and sale of the Collateral. Specific Performance. Lender may, in addition to or in lieu of the foregoing remedies, in Lenders sole discretion, commence an appropriate action against Grantor seeking specific performance of any covenant contained in this Agreement or in aid of the execution or enforcement of any power in this Agreement granted. Transfer Title. Effect transfer of title upon sale of all or part of the Collateral. For this purpose Grantor irrevocably appoints Lender as Grantor's attorney-in-fact to execute endorsements assignments and instruments in the name of Grantor and each of them (if more than one) as shall be necessary or reasonable. Other Rights and Remedies. Have end exercise any or all of the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code at law in equity or otherwise. Application of Proceeds. Apply any cash which is part of the Collateral, or which is received from the collection or sale of the Collateral, to reimbursement of any expenses, including any costs for registration of securities, commissions incurred in connection with a sale, attorneys' fees and court costs, whether or not there is a lawsuit and including any fees on appeal, incurred by Lender in connection with the collection and sale of such Collateral and to the payment of the Indebtedness of Grantor to Lender, with any excess funds to be paid to Grantor as the interests of Grantor may appear. Grantor agrees, to the extent permitted by law. to pay any deficiency after application of the proceeds of the Collateral to the Indebtedness. Election of Remedies. Except as may be prohibited by applicable law, all of Lender's rights and remedies, whether evidenced by this Agreement, the Related Documents or by any other writing, shall be cumulative and may be exercised singularly or concurrently Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Agreement, after Grantor's failure to perform shall not affect Lender's right to declare a default and exercise its remedies. EXCLUSION FROM INDEBTEDNESS. Excluded from indebtedness shall be any indebtedness governed by the Federal Truth in Lending Act. 9 MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment. Attorneys Fees; Expenses. Grantor agrees to pay upon demand all of Lender's costs and expenses including Lender's attorneys fees and Lender's legal expenses incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, and Grantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender's attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services Grantor also shall pay all court costs and such additional fees as may be directed by the court. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be issued to Interpret or define the provisions of this Agreement. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender s rights or of any of Grantor's obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender. Non-Liability of Lender. The relationship between Grantor and Lender created by this Agreement is strictly a debtor and creditor relationship and not fiduciary in nature, nor is the relationship to be construed as creating any partnership or joint venture between Lender and Grantor, Grantor is exercising Grantor's own judgement with respect to Grantor's business. All information supplied to Lender is for Lender's protection only and no other party is entitled to rely on such information. There is no duty for Lender to review, inspect supervise or inform Grantor of any matter with respect to Grantor's business, Lender and Grantor intend that Lender may reasonably rely on all information supplied by Grantor to Lender, together with all representations and warranties given by Grantor to Lender without investigation or confirmation by Lender and that any investigation or failure to investigate will not diminish Lender's right to so rely. 10 Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party s address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address. Unless otherwise provided or required by law if there is more than one Grantor any notice given by Lender to any Grantor is deemed to be notice given to all Grantors. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance, that finding shall not make the offending provision illegal invalid, or unenforceable as to any other circumstance. If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not effect the legality validity or enforceability of any other provision of this Agreement. Sole Discretion of Lender. Whenever Lender s consent or approval is required under this Agreement, the decision as to whether or not to consent or approve shall be in the sole and exclusive discretion of Lender and Lender's decision shall be final and conclusive. Successors and Assigns. Subject to any limitations stated in this Agreement on transfer of Grantor's interest, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Grantor, Lender, without notice to Grantor, may deal with Grantor's successors with reference to this Agreement and the Indebtedness by way of forbearance or extension without releasing Grantor from the obligations of this Agreement or liability under the Indebtedness. Time is of the Essence. Time is of the essence in the performance of this Agreement. Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action proceeding or counterclaim brought by any party against any other party. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shall include the plural, and the plural shall include the singular, as the 11 context may require Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms In the Uniform Commercial Code: Agreement. The word "Agreement" means this Commercial Pledge Agreement, as this Commercial Pledge Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Commercial Pledge Agreement from time to time. Borrower. The word "Borrower" means Capital Bank Corporation and includes all co-signers and co-makers signing the Note. Collateral. The word "Collateral" means all of Grantor s right title and interest in and to all the Collateral as described in the Collateral Description section of this Agreement. Default. The word "Default" means the Default set forth in this Agreement in the section titled "Default". Event of Default. The words "Event of Default" mean individually collectively, and interchangeably any of the events of default set forth in this Agreement in the default section of this Agreement. Grantor. The word "Grantor" means Capital Bank Corporation. Guarantor. The word "Guarantor" means any guarantor, surety, or accommodation party of any or all of the Indebtedness, and, in each case, Grantor's successors, assigns, heirs personal representatives, executors and administrators of any guarantor surety or accommodation party. Guaranty. The word "Guaranty" means the guaranty from Guarantor, or any other guarantor endorser surety or accommodation party to Lender, including without limitation a guaranty of all or part of the Note. Income and Proceeds. The words "Income and Proceeds" mean all present and future income, proceeds, earnings, increases, and substitutions from or for the Collateral of every kind and nature, including without limitation all payments, interest, profits, distributions, benefits, rights, options, warrants., dividends stock dividends stock splits, stock rights, regulatory dividends subscriptions, monies, claims for money due and to become due, proceeds of any insurance on the Collateral, shares of stock of different par value or no par value issued in substitution or exchange for shares included in the Collateral, and all other property Grantor is entitled to receive on account of such Collateral including accounts, documents, instruments, chattel paper, and general intangibles. Indebtedness. The word "Indebtedness" means the indebtedness evidenced by the Note or Related Documents, including all principal and interest together with all other 12 indebtedness and costs and expenses for which Grantor is responsible under this Agreement or under any of the Related Documents. Lender. The word "Lender" means First Tennessee Bank National Association, its successors and assigns. Note. The word "Note" means the Note executed by Capital Bank Corporation in the principal amount of $30,000,000.00 dated December 27, 2005, together with all renewals of extensions of modifications of refinancings of consolidations of and substitutions for the note or credit agreement. Obligor. The word "Obligor" means individually, collectively and interchangeably without limitation any and all persons obligated to pay money or to perform some other act under the Collateral. Property. The word "Property" means all of Grantor's right title and interest in and to all the Property as described in the "Collateral Description" section of this Agreement. Related Documents. The words "Related Documents" mean all promissory notes, credit agreements, loan agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages and all other instruments agreements and documents, whether now or hereafter existing executed in connection with the Indebtedness. Stock. The word "Stock" means individually, collectively and interchangeably Grantor's stock, and other securities to pledge under this Agreement together with any and all additions thereto, substitutions therefor or replacements thereof. GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL PLEDGE AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED DECEMBER 27 2005 GRANTOR: Capital Bank Corporation By: /s/ B. Grant Yarber By: /s/ William R. Lampley -------------------------------- -----------------------=------- B. Grant Yarber, President & CEO William R. Lampley, Interim CFO of Capital Bank Corporation of Capital Bank Corporation 13 -----END PRIVACY-ENHANCED MESSAGE-----