STOCK PLEDGE AGREEMENT
This STOCK PLEDGE AGREEMENT is dated February 17, 2009, and is
made by Cornerstone Financial Corp. (the "Debtor"), with an address of 0000
Xxxxxxxxx Xxxxx, Xxxxx 000X, Xx. Xxxxxx, Xxx Xxxxxx 00000, in favor of Atlantic
Central Bankers Bank (the "Secured Party"), with an address at 0000 Xxxxxx
Xxxxxx, Xxxx Xxxx, Xxxxxxxxxxxx 00000.
1. Pledge.
(a) To induce the Secured Party to extend the Obligations
(as defined below), the Debtor hereby grants a security interest in and pledges
to the Secured Party all of the Debtor's right, title and interest in and to the
collateral described in Exhibit "A" attached hereto and made a part hereof,
whether now owned or hereafter acquired, together with all additions,
substitutions, replacements and proceeds and all income, interest, dividends and
other distributions thereon (collectively, the "Collateral"). If the Collateral
includes securities for which Debtor owns certificates, documents or
instruments, such certificates are herewith delivered to the Secured Party
accompanied by duly executed blank stock or bond powers or assignments as
applicable. The Debtor hereby authorizes the transfer of possession of all
certificates, instruments, documents, securities entitlements and other evidence
of the Collateral to the Secured Party.
(b) If the Collateral is held with a broker, custodian or
other securities intermediary (the "Intermediary"), the Debtor shall deliver to
Secured Party a notification and consent agreement signed by the Intermediary
(the "Intermediary's Agreement") in which, among other things, the Intermediary
agrees to the terms hereof and agrees that Secured Party shall have sole control
over the Collateral.
2. Obligations Secured. The Collateral secures payment to the
Secured Party of all loans, advances, debts, liabilities, obligations, covenants
and duties owing to the Secured Party from the Debtor arising under or with
respect to the Loan Agreement dated even date herewith between the Debtor and
the Secured Party (the "Loan Agreement") and the non-revolving line of credit
loan (the "Loan") provided to the Debtor by the Secured Party and described in
the Loan Agreement, including all costs and expenses of the Secured Party
incurred in the documentation, negotiation, modification, enforcement, or
collection of the Loan and the Loan Agreement, including reasonable attorneys'
fees and expenses (collectively, the "Obligations").
3. Representations and Warranties. The Debtor represents and
warrants to the Secured Party as follows:
3.1 There are no restrictions on the pledge or transfer of
any of the Collateral, other than restrictions on transfer referenced on the
face of any certificates evidencing the Collateral, and any applicable
restrictions under the Bank Holding Company Act and the regulations thereunder,
the regulations of the Federal Deposit Insurance Corporation, and the New Jersey
Banking Act of 1948, as amended, and the regulations thereunder.
3.2 The Debtor is the legal owner of the Collateral, which
is registered in the name of the Debtor, the Intermediary or a nominee. The
Collateral constitutes all of the issued and outstanding shares of capital stock
of Cornerstone Bank, and there are no outstanding options, warrants or other
rights to purchase or otherwise acquire any shares of capital stock of
Cornerstone Bank.
3.3 The Collateral is free and clear of any security
interests, pledges, liens, encumbrances, charges, agreements, claims or other
arrangements or restrictions of any kind, except for any restrictions on
transfer described in Section 3.1 above, and the Debtor has not given control of
the Collateral to any person whatsoever other than Secured Party and has not
given possession of any part of the Collateral to any person other than the
Intermediary.
3.4 The Debtor has the right to transfer the Collateral free
of any encumbrances, and the Debtor will defend the Debtor's title to the
Collateral against the claims of all persons. Any registration with, or consent
or approval of, or other action by, any federal, state or other governmental
authority or regulatory body which was or is necessary for the validity of the
pledge of and grant of the security interest in the Collateral has been
obtained.
3.5 The pledge of and grant of the security interest in the
Collateral under this Agreement is effective to vest in the Secured Party a
valid and perfected first priority security interest, superior to the rights of
any other person, in
and to the Collateral as set forth herein.
4. Covenants; Control.
4.1 The Debtor will not incur, create, assume or permit to
exist any pledge, security interest, lien, charge or other encumbrance of any
nature whatsoever on any of the Collateral or assign, pledge or otherwise
encumber any right to receive income from the Collateral, or grant any control
over the Collateral or any interest therein to any person other than Secured
Party.
4.2 The Debtor will (a) take no action with respect to the
Collateral (including trades or withdrawals from any account with the
Intermediary or any other custodian, broker or other securities intermediary
within which the Collateral may be held) except as directed by the Secured
Party; and (b) take all such other action, and cause the Intermediary to take
all such action, with respect to the Collateral as the Secured Party may direct
in writing.
4.3 [Intentionally Omitted.]
4.4 If all or part of the Collateral constitutes "margin
stock" within the meaning of Regulation U of the Federal Reserve Board, the
Debtor agrees to execute and deliver Form U-1 to the Secured Party and, unless
otherwise agreed in writing between the Debtor and the Secured Party, no part of
the proceeds of the Obligations may be used to purchase or carry margin stock.
5. Default.
5.1 If any of the following occur (each an "Event of
Default"):
(a) any Event of Default as defined in the Loan Agreement;
(b) the failure by the Debtor to perform any of its
obligations hereunder when due;
(c) the falsity, inaccuracy or material breach by the Debtor
of any written warranty, representation or statement made in this Agreement;
(d) the failure of the Secured Party to have a perfected
first priority security interest in the Collateral;
(e) the termination or breach of the Intermediary's
Agreement; or
(f) should Secured Party cease to have sole and exclusive
control over the Collateral or should any other person obtain any control over
the Collateral;
then the Secured Party is authorized in its discretion to declare any or all of
the Obligations to be immediately due and payable without demand or notice,
which are expressly waived, and may exercise any one or more of the rights and
remedies granted pursuant to this Agreement or given to a secured party under
the Uniform Commercial Code of the applicable state, as it may be amended from
time to time, or otherwise at law or in equity, including the right to sell or
otherwise dispose of the Collateral.
5.2 (a) At any bona fide public sale the Secured Party shall
be free to purchase all or any part of the Collateral. Any such sale may be on
cash or credit. The Secured Party shall be authorized at any such sale (if it
deems it advisable to do so) to restrict the prospective bidders or purchasers
to persons who will represent and agree that they are purchasing the Collateral
for their own account in compliance with Regulation D of the Securities Act of
1933 (the "Act") or any other applicable exemption available under such Act and
who have obtained the state and federal bank regulatory approvals required in
connection with such persons acquiring ownership of any or all of the
Collateral. The Secured Party will not be obligated to make any sale if it
determines not to do so, regardless of the fact that notice of the sale may have
been given. The Secured Party may adjourn any sale and sell at the time and
place to which the sale is adjourned. If the Collateral is customarily sold on a
recognized market or threatens to decline speedily in value, the Secured Party
may sell such Collateral at any time without giving prior notice to the Debtor.
Whenever notice is otherwise required by law to be sent by the Secured Party to
the Debtor of any sale or other disposition of the Collateral, ten (10) days
written notice sent to the Debtor at the notice address specified below will be
reasonable.
(b) The Debtor recognizes (i) that the Secured Party may be
unable to effect or cause to be effected a public sale of the Collateral by
reason of certain prohibitions contained in the Act or otherwise, so that the
Secured Party may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire the Collateral for their own account, for investment and
without a view to the distribution or resale thereof. Accordingly, the Debtor
understands that, depending on the nature of the Collateral and the
circumstances surrounding the sale, private sales by the Secured Party may be at
prices and on other terms either more or less favorable to the seller than if
the Collateral were sold at one or more public sales, and Debtor agrees that the
Secured Party has no obligation to (x) delay or agree to delay the sale of any
of the Collateral for the period of time necessary to permit the issuer of the
securities which constitute the Collateral (even if the issuer would agree), to
register such securities for sale under the Act, or (y) seek any private sale if
the Collateral might be sold in the public markets. The Debtor agrees that
private or public sales made under the foregoing circumstances shall be deemed
to have been made in a commercially reasonable manner.
5.3 The net proceeds arising from the disposition of the
Collateral after deducting expenses incurred by the Secured Party will be
applied to the Obligations in the order determined by the Secured Party. If any
excess remains after the discharge of all of the Obligations, the same will be
paid to the Debtor. If after exhausting all of the Collateral there is a
deficiency, the Debtor will be liable therefor to the Secured Party.
5.4 If any demand is made at any time upon the Secured Party
for the repayment or recovery of any amount received by it in payment or on
account of any of the Obligations from the disposition of the Collateral and if
the Secured Party repays all or any part of such amount, the Debtor will be and
remain liable for the amounts so repaid or recovered to the same extent as if
never originally received by the Secured Party.
6. Voting Rights and Transfer. Prior to the occurrence of an
Event of Default, the Debtor will have the right to exercise all voting rights
with respect to the Collateral. At any time after the occurrence of an Event of
Default, the Secured Party may transfer any or all Collateral into Secured
Party's own name or the name of its nominee(s) and may exercise all voting
rights with respect to the Collateral, but no such transfer shall constitute a
taking of such Collateral in satisfaction of any or all of the Obligations
unless the Secured Party expressly so indicates by written notice to the Debtor.
7. Dividends, Interest and Premiums. The Debtor will have the
right to receive all cash dividends, interest and premiums declared and paid on
the Collateral prior to the occurrence of any Event of Default. In the event any
additional shares are issued to the Debtor as a stock dividend or in lieu of
interest on any of the Collateral, as a result of any split of any of the
Collateral, by reclassification or otherwise, any certificates evidencing any
such additional shares will be immediately delivered to the Secured Party and
such shares will be subject to this Agreement and be a part of the Collateral to
the same extent as the original Collateral. At any time after the occurrence of
an Event of Default, the Secured Party shall be entitled to receive all cash or
stock dividends, interest and premiums declared or paid on the Collateral, all
of which shall be subject to the Secured Party's rights under Section 5 above.
8. Further Assurances. The Debtor hereby authorizes the Secured
Party to file and record any notice, financing statement, continuation
statement, instrument, document or agreement that the Secured Party may consider
necessary or desirable to create, preserve, continue, perfect or validate any
security interest granted hereunder or to enable the Secured Party to exercise
or enforce its rights hereunder with respect to such security interest. Without
limiting the generality of the foregoing, the Debtor hereby irrevocably appoints
the Secured Party as the Debtor's attorney-in-fact to do all acts and things in
the Debtor's name that the Secured Party may deem necessary or desirable. The
Secured Party is authorized to file financing statements, continuation
statements and other documents under the Uniform Commercial Code relating to the
Collateral naming the Debtor as debtor and the Secured Party as secured party.
9. Notices. All notices, demands, requests, consents, approvals
and other communications required or permitted hereunder must be in writing and
will be effective (i) upon receipt if delivered personally to the Debtor or the
Secured Party, or (ii) on the next business day if sent by a nationally
recognized overnight commercial courier service promising next business day
delivery and requiring receipt for delivery (such as Federal Express), to the
address set forth above or to such other address as either the Debtor or the
Secured Party may give to the other in writing for such purpose.
10. Preservation of Rights. No delay or omission on the Secured
Party's part to exercise any right or power arising hereunder will impair any
such right or power or be considered a waiver of any such right or power, nor
will the Secured Party's action or inaction impair any such right or power. The
Secured Party's rights and remedies hereunder are cumulative and not exclusive
of any other rights or remedies that the Secured Party may have under other
agreements, at law or in equity.
11. Illegality. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
12. Changes in Writing. No modification, amendment or waiver of
any provision of this Agreement, nor consent to any departure by the Debtor
therefrom, will be effective unless made in a writing signed by the Secured
Party, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the
Debtor in any case will entitle the Debtor to any other or further notice or
demand in the same, similar or other circumstance.
13. Entire Agreement. This Agreement (including the documents and
instruments referred to herein) constitutes the entire agreement and supersedes
all other prior agreements and understandings, both written and oral, between
the Debtor and the Secured Party with respect to the subject matter hereof.
14. Successors and Assigns. This Agreement will be binding upon
and inure to the benefit of the Debtor and the Secured Party and their
respective heirs, executors, administrators, successors and assigns; provided,
however, that the Debtor may not assign this Agreement in whole or in part
without the Secured Party's prior written consent and the Secured Party at any
time may assign this Agreement in whole or in part.
15. Interpretation. In this Agreement, unless the Secured Party
and the Debtor otherwise agree in writing, the singular includes the plural and
the plural the singular; references to statutes are to be construed as including
all statutory provisions consolidating, amending or replacing the statute
referred to; the word "or" shall be deemed to include "and/or," the words
"including," "includes" and "include" shall be deemed to be followed by the
words "without limitation." Section headings in this Agreement are included for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose. If this Agreement is executed by more than one party as
Debtor, the obligations of such persons or entities will be joint and several.
16. Indemnity. The Debtor agrees to indemnify each of the Secured
Party, its directors, officers and employees and each legal entity, if any, who
controls the Secured Party (the "Indemnified Parties") and to hold each
Indemnified Party harmless from and against any and all claims, damages, losses,
liabilities and expenses (including all fees of counsel with whom any
Indemnified Party may consult and all expenses of litigation or preparation
therefor) which any Indemnified Party may incur or which may be asserted against
any Indemnified Party as a result of the execution of or performance under this
Agreement; provided, however, that the foregoing indemnity agreement shall not
apply to claims, damages, losses, liabilities and expenses solely attributable
to an Indemnified Party's gross negligence or willful misconduct. The indemnity
agreement contained in this Section shall survive the termination of this
Agreement. The Debtor may participate at its expense in the defense of any such
claim.
17. Governing Law and Jurisdiction. This Agreement has been
delivered to and accepted by the Secured Party and will be deemed to be made in
the Commonwealth of Pennsylvania. This Agreement will be interpreted and the
rights and liabilities of the Debtor and the Secured Party will be determined in
accordance with the laws of the Commonwealth of Pennsylvania, excluding its law
and principles of conflict of laws. The Debtor hereby irrevocably consents to
the exclusive jurisdiction of any state or federal court for Cumberland County,
Pennsylvania or the Middle District of Pennsylvania, and consents that all
service of process be sent by nationally recognized overnight courier service
directed to the Debtor at the Debtor's address set forth herein and service so
made will be deemed to be completed on the business day after deposit with such
courier; provided that nothing contained in this Agreement will prevent the
Secured Party from bringing any action, enforcing any award or judgment or
exercising any rights against the Debtor individually, or against any security
or against any property of the Debtor within any other county, state or other
foreign or domestic jurisdiction. The Debtor acknowledges and agrees that the
venue provided above is the most convenient forum for both the Secured Party and
the Debtor. The Debtor waives any objection to venue and any objection based on
a more convenient forum in any action instituted under this Agreement.
18. WAIVER OF JURY TRIAL. THE DEBTOR AND THE SECURED PARTY
IRREVOCABLY WAIVE ANY AND ALL RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE RELATING TO THIS AGREEMENT, ANY
DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED IN ANY OF SUCH DOCUMENTS. THE DEBTOR AND THE SECURED PARTY
ACKNOWLEDGE THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
The Debtor and the Secured Party each acknowledge that it has read and
understood all the provisions of this Agreement, including the waiver of jury
trial, and that each has been advised by counsel as necessary or appropriate.
WITNESS the due execution hereof as a document under seal, as
of the date first written above.
Cornerstone Financial Corp.
By:
-------------------------------
Name: Xxxxx Xxxxxxxxxx
Title: Executive Vice President
Atlantic Central Bankers Bank
By:_________________________________
EXHIBIT "A" TO STOCK PLEDGE AGREEMENT
Certificated Securities
__________ shares of common stock of Cornerstone Bank
