Exhibit 10.3

 

STOCK PLEDGE AGREEMENT

 

            This Stock Pledge Agreement (this “Agreement”), dated as of this 6th
day of June, 2014, is by and between The Brand Banking Company, (the “Lender”),
and Southern First Bancshares, Inc. (the “Borrower”).

W I T N E S S E T H:

WHEREAS, the Borrower has executed a promissory note (the “Note”) to the order
of Lender evidencing an extension of credit to the Borrower in the amount of
$10,000,000.00 (the “Loan”) in accordance with the terms of that certain Loan
Agreement, both dated of even date herewith (the “Loan Agreement”); and

 

WHEREAS, the obligations of the Borrower under the Note and the Loan Agreement
are subject to the further condition, among others, that the Borrower grants to
and creates in favor of the Lender a first priority security interest in the
Pledged Shares (as hereinafter defined) pursuant to the terms and conditions as
hereinafter provided except as otherwise specifically set forth herein.

 

NOW, THEREFORE, in consideration of the Loan and of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the Borrower, and in order to induce the Lender to make the Loan, the Borrower,
intending to be legally bound hereby, covenants and agrees as follows:

 

Section 1.                 Pledge.  As security for the full and timely payment
of the aggregate principal amount plus any accrued interest under the Loan (the
“Debt”) in accordance with the terms of the Note (the Note, the Loan Agreement,
this Stock Pledge Agreement, and any other documents evidencing or securing the
Loan are collectively referred to as the “Financing Documents”) and the full and
timely payment and performance of the obligations of the Borrower under the
Financing Documents, the Borrower hereby grants a perfected first priority
security interest in and pledges to the Lender all of Borrower’s right, title
and interest in and to 850,000 shares, which represents 100% of the issued and
outstanding common stock of Southern First Bank, a South Carolina
state-chartered bank and wholly owned subsidiary of the Borrower, together with
all additions, substitutions, replacements and proceeds thereof and all income,
interest, dividends and other distributions thereon (the “Pledged Shares”).

 

UPON EXECUTION AND DELIVERY OF THIS AGREEMENT, THE BORROWER SHALL DELIVER TO THE
LENDER CERTIFICATES OR OTHER DOCUMENTS EVIDENCING THE PLEDGED SHARES,
ACCOMPANIED BY EXECUTED STOCK POWERS IN BLANK WITH RESPECT TO THE PLEDGED SHARES
IN FAVOR OF THE LENDER, THE RIGHTS OF THE LENDER UNDER WHICH SHALL BE
EXERCISABLE ONLY UPON THE OCCURRENCE OF AN EVENT OF DEFAULT (AS HEREINAFTER
DEFINED), AND BY SUCH OTHER INSTRUMENTS OR DOCUMENTS AS THE LENDER OR ITS
COUNSEL MAY REASONABLY REQUEST.  THE BORROWER REPRESENTS THAT IT IS THE LEGAL
AND EQUITABLE OWNER OF, AND HAS THE COMPLETE AND UNCONDITIONAL AUTHORITY TO
PLEDGE, THE PLEDGED SHARES, AND HOLDS THE SAME FREE AND CLEAR OF ALL LIENS,
CHARGES, ENCUMBRANCES AND SECURITY INTERESTS EXCEPT THOSE IN FAVOR OF LENDER
GRANTED HEREUNDER, AND WILL DEFEND ITS TITLE THERETO AGAINST THE CLAIMS OF ALL
PERSONS WHOMSOEVER.  ALL OF THE PLEDGED SHARES ARE DULY AUTHORIZED, VALIDLY
ISSUED, FULLY PAID AND NONASSESSABLE. 

 

 

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The Borrower agrees to pay, or cause to be paid, prior to delinquency all taxes,
charges, liens and assessments against the Pledged Shares, and upon the failure
of the Borrower to do so, the Lender at its option may pay any of them and shall
be the sole judge of the legality or validity thereof and the amount necessary
to discharge the same.  All advances, charges, costs and expenses, including
reasonable attorneys’ fees, incurred or paid by the Lender in exercising any
right, power or remedy conferred by this Agreement, or in the enforcement
thereof, shall become a part of the indebtedness secured hereunder and shall be
paid to the Lender by the Borrower immediately upon demand therefor, with
interest thereon until paid in full at the rate as set forth in the Note.

 

Section 2.                 Covenants, Representations and Warranties.  The
Borrower represents and warrants to the Lender as follows:

(a)                There are no restrictions on the pledge or transfer of any of
the Pledged Shares.

(b)               The Borrower is the legal owner of the Pledged Shares, which
are registered in the name of the Borrower. 

(c)                The Pledged Shares are free and clear of any security
interests, pledges, liens, encumbrances, charges, agreements, claims or other
arrangements or restrictions of any kind, and the Borrower 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 Pledged Shares or
assign, pledge or otherwise encumber any right to receive income from the
Pledged Shares, other than in favor of the Lender.

(d)               The Borrower has the right to transfer the Pledged Shares, and
the Borrower will defend the Borrower’s title to the Pledged Shares 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 Pledged Shares has been obtained.

(e)                The pledge of and grant of the security interest in the
Pledged Shares is effective to vest in the Lender a valid and perfected first
priority security interest, superior to the rights of any other person, in and
to the Pledged Shares as set forth herein.

 

Section 3.                 Voting Rights and Transfer. 

(a)                So long as no Event of Default (as defined in Section 4
below) shall have occurred and be continuing and the Lender has not delivered
the notice specified in subsection (b) below, the Borrower shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
Pledged Shares or any part thereof for any purpose not inconsistent with the
terms of this Agreement or any document or agreement executed in connection
herewith.

(b)               Upon the occurrence and during the continuance of an Event of
Default, at the option of the Lender exercised in a writing sent to the
Borrower, all rights of the Borrower to exercise the voting and other consensual
rights which it would otherwise be entitled to exercise pursuant to subsection
(a) above shall cease, and the Lender shall thereupon have the sole right to
exercise such voting and other consensual rights.

 

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(c)                At any time after the occurrence of an Event of Default, the
Lender may transfer any or all of the Pledged Shares into its name or that of
its nominee and may exercise all voting rights with respect to the Pledged
Shares, but no such transfer shall constitute a taking of such Pledged Shares in
satisfaction of any or all of the Debt unless the Lender expressly so indicates
by written notice to the Borrower.

 

Section 4.                 Events of Default.

(a)                If any of the following occurs (each an “Event of Default”): 
(i) an Event of Default under any of the Financing Documents, (ii) the failure
by the Borrower to perform any of its obligations hereunder, (iii) the failure
of the Lender to have a perfected first priority security interest in the
Pledged Shares, or (iv) any restriction is imposed on the pledge or transfer of
any of the Pledged Shares after the date of this Agreement without the Lender’s
prior written consent, then the Lender is authorized in its discretion to
declare any or all of the Debt 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 UCC of the applicable state, as it may be amended from time to
time, or otherwise at law or in equity, including without limitation the right
to sell or otherwise dispose of any or all of the Pledged Shares at a public or
private sale, with or without advertisement thereof, upon such terms and
conditions as it may deem advisable and at such prices as it may deem best.

(b)               At any bona fide public sale, and to the extent permitted by
law, at any private sale, the Lender shall be free to purchase all or any part
of the Pledged Shares, free of any right or equity of redemption in the
Borrower, which right or equity is hereby waived and released.  Any such sale
may be on cash or credit.  The Lender 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 Lender may adjourn any sale and sell at the time and place
to which the sale is adjourned.  If the Pledged Shares are customarily sold on a
recognized market or threatens to decline speedily in value, the Lender may sell
such Pledged Shares at any time without giving prior notice to the Borrower. 
Whenever notice is otherwise required by law to be sent by the Lender to the
Borrower of any sale or other disposition of the Pledged Shares, ten (10) days
written notice sent to the Borrower at its address specified above will be
reasonable.

(c)                The Lender shall apply the net proceeds of any sale or
liquidation of the Pledged Shares, first to the payment of the reasonable costs
and expenses incurred by the Lender in connection with such sale or collection
including, without limitation, reasonable attorneys’ fees and legal expenses,
second to the payment of the Debt, whether on account of principal or interest
or otherwise as the Lender in its sole discretion may elect, and then to pay the
balance, if any, to the Borrower or as otherwise required by law.  If such
Proceeds are insufficient to pay the amounts required by law, the Borrower shall
be liable for any deficiency; provided, however, that nothing contained herein
will obligate the Lender to proceed against the Borrower or any other party
obligated under the Debt or against any other collateral for the Debt prior to
proceeding against the Pledged Shares.

 

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(d)               If any demand is made at any time upon the Lender for the
repayment or recovery of any amount received by it in payment or on account of
any of the Debt and if the Lender repays all or any part of such amount by
reason of any judgment, decree or order of any court or administrative body or
by reason of any settlement or compromise of any such demand, the Borrower will
be and remain liable for the amounts so repaid or recovered to the same extent
as if such amount had never been originally received by the Lender.  The
provisions of this Section will be and remain effective notwithstanding the
release of any of the Pledged Shares by the Lender in reliance upon such payment
(in which case the Borrower's liability will be limited to an amount equal to
the fair market value of the Pledged Shares determined as of the date such
Pledged Shares were released) and any such release will be without prejudice to
the Lender's rights hereunder and will be deemed to have been conditioned upon
such payment having become final and irrevocable.  This subsection shall survive
the termination of this Agreement.

 

Section 5.                 Dividends, Interest and Premiums.  The Borrower will
have the right to receive all cash dividends, distributions, interest and
premiums declared and paid on the Pledged Shares prior to the occurrence of any
Event of Default.  In the event any additional shares are issued to the Borrower
as a stock dividend or in lieu of interest on any of the Pledged Shares, as a
result of any split of any of the Pledged Shares, by reclassification or
otherwise, any certificates evidencing any such additional shares will be
immediately delivered to the Lender and such shares will be subject to this
Agreement and a part of the Pledged Shares to the same extent as the original
Pledged Shares.  At any time after the occurrence of an Event of Default, the
Lender shall be entitled to receive all cash or stock dividends, distributions,
interest and premiums declared or paid on the Pledged Shares, all of which shall
be subject to the Lender’s rights under Section 4 above.

 

Section 6.                 Further Assurances.  The Borrower hereby irrevocably
authorizes the Lender, at any time and from time to time, to execute (on behalf
of the Borrower), file and record against the Borrower any notice, financing
statement, continuation statement, amendment statement, instrument, document or
agreement under the UCC that the Lender may consider necessary or desirable to
create, preserve, continue, perfect or validate any security interest granted
hereunder or to enable the Lender to exercise or enforce its rights hereunder
with respect to such security interest.  Without limiting the generality of the
foregoing, the Borrower hereby irrevocably appoints the Lender as the Borrower’s
attorney-in-fact to take any actions set forth in this Section 6 in the
Borrower’s name that the Lender may deem necessary or desirable.  This power of
attorney is coupled with an interest with full power of substitution and is
irrevocable.  The Borrower hereby ratifies all that said attorney shall lawfully
do or cause to be done by virtue hereof.

 

Section 7.                 Continuing Validity of Obligations.  The agreements
and obligations of the Borrower hereunder are continuing agreements and
obligations, and are absolute and unconditional irrespective of the genuineness,
validity or enforceability of the Financing Documents or any other instrument or
instruments now or hereafter evidencing the Debt or any other agreement or
agreements now or hereafter entered into by the Lender and the Borrower pursuant
to which the Debt or any part thereof is issued or of any other circumstance
which might otherwise constitute a legal or equitable discharge of such
agreements and obligations.  Without limitation upon the foregoing, such
agreements and obligations shall continue in full force and effect as long as
the Debt or any part thereof remains outstanding and unpaid and shall remain in
full force and effect without regard to and shall not be released, discharged or
in any way affected by (i) any renewal, refinancing or refunding of the Debt in
whole or in part, (ii) any extension of the time of payment of the Note or other
instrument or instruments now or hereafter evidencing the Debt, or any part
thereof, (iii) any compromise or settlement with respect to the Debt or any part
thereof, or any forbearance or indulgence extended to the Borrower, (iv) any
amendment to or modification of the terms of the Note or other instrument or
instruments now or hereafter evidencing the Debt or any part thereof or any
other agreement or agreements now or hereafter entered into by the Lender and
the Borrower pursuant to which the Debt or any part thereof is issued or
secured, (v) any substitution, exchange, or release of a portion of, or failure
to preserve, perfect or protect, or other dealing in respect of, the Pledged
Shares or any other property or any security for the payment of the Debt or any
part thereof, (vi) any bankruptcy, insolvency, arrangement, composition,
assignment for the benefit of creditors or similar proceeding commenced by or
against the Borrower, (vii) any dissolution, liquidation or termination of the
Borrower for any reason whatsoever or (viii) any other matter or thing
whatsoever whereby the agreements and obligations of the Borrower hereunder,
would or might otherwise be released or discharged.  The Borrower hereby waives
notice of the acceptance of this Agreement by the Lender.

 

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Section 8.                 Defeasance.  Notwithstanding anything to the contrary
contained in this Agreement, upon payment in full of the Debt, performance of
all obligations under the Loan Agreement, the Note and any other instrument or
instruments evidencing the Debt, and termination of the Loan Agreement, this
Agreement shall terminate and be of no further force and effect and at the
request of the Borrower, the Lender shall thereupon terminate its security
interest in the Pledged Shares.  Until such time, however, this Agreement shall
be binding upon and inure to the benefit of the parties, their successors and
assigns; provided, however, that the Borrower may not assign this Agreement or
any of its rights under this Agreement or delegate any of its duties or
obligations under this Agreement and any such attempted assignment or delegation
shall be null and void.  This Agreement is not intended and shall not be
construed to obligate the Lender to take any action whatsoever with respect to
the Pledged Shares or to incur expenses or perform or discharge any obligation,
duty or disability of the Borrower.

 

Section 9.                 Miscellaneous.

(a)                The provisions of this Agreement are intended to be
severable.  If any provision of this Agreement shall for any reason be held
invalid or unenforceable, in whole or in part, in any jurisdiction, such
provision shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the validity or
enforceability of such provision in any other jurisdiction or any other
provision of this Agreement in any jurisdiction.

(b)               No failure or delay on the part of the Lender in exercising
any right, remedy, power or privilege under the Financing Documents shall
operate as a waiver thereof or of any other right, remedy, power or privilege of
the Lender under the Financing Documents; nor shall any single or partial
exercise of any such right, remedy, power or privilege preclude any other right,
remedy, power or privilege or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges of the Lender under the Financing Documents are cumulative and not
exclusive of any rights or remedies which it may otherwise have.

(c)                This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute but one and the same instrument.

(c)                The section headings contained in this Agreement are for
reference purposes only and shall not control or affect its construction or
interpretation in any respect.

(d)               The UCC shall govern the settlement, perfection and the effect
of attachment and perfection of the Lender's security interest in the Pledged
Shares and the rights, duties and obligations of the Lender and the Borrower
with respect to the Pledged Shares (whether or not the UCC applies to the
Pledged Shares).  This Agreement shall be deemed to be a contract under the Laws
of the State of Georgia and the execution and delivery of this Agreement and, to
the extent not inconsistent with the preceding sentence, the terms and
provisions of this Agreement shall be governed by and construed in accordance
with the Laws of that State of Georgia without regard to the principles of the
conflicts of laws thereof.

 

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(e)                The Borrower consents to the exclusive jurisdiction and venue
of the federal and state Courts located in Fulton County, Georgia in any action
on, relating to or mentioning the Financing Documents or any one or more of
them.

(f)                All notices, requests, demands, directions and other
communications (collectively “Notices”) under the provisions of this Agreement
must be in writing (including electronic mail and facsimile communication)
unless otherwise expressly permitted under this Agreement and must be sent by
first-class or first-class express mail, private overnight or next business day
courier, email (with confirmation) or by telex or telecopy with confirmation in
writing mailed first class, in all cases with charges prepaid, and any such
properly given Notice will be effective when received.  All Notices will be sent
to the applicable party at the addresses stated below or in accordance with the
last unrevoked written direction from such party to the other parties.

 

 

To the Borrower:                     Southern First Bancshares, Inc.

                                                100 Verdae Boulevard, Suite 100

                                                Greenville, SC 29606

                                                Attn: Mike Dowling

                                                Telephone Number: (864) 679-9070

                                                Telecopy Number:  (864) 679-9403

                                                Email:
mdowling@southernfirst.com

 

                        To the Lender:                         The Brand Banking
Company

                                                                        3328
Peachtree Road, NE

                                                                        Atlanta,
Georgia 30326

                                                                        Attn:
Chris Gruehn

                                                                       
Telephone Number: (770) 339-2086                                      

                                                                        Telecopy
Number: (678) 407-8948

                                                                        Email:
cgruehn@thebrandbank.com

 

                                                                       

 

[signatures appear on following page]

 

 

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IN WITNESS WHEREOF, this Agreement has been executed under seal by the parties
hereto.

 

                                                           
                                        BORROWER:

 

                                                                                                   
Southern First Bancshares, Inc.                        (SEAL)

                                   

 

 

                                                                                                   
By:______________________________

                                                                                                           
Name:       

                                                                                                           
Title:  

 

                                                           
                                       

                                                                                                       
LENDER:

 

                                                                                                       
The Brand Banking Company             (SEAL)

 

 

                                                                                                        
By:______________________________

                                                                                                               
Name:

                                                                                                               
Title:

                                                                 

 

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Irrevocable Stock Power

For value received the undersigned, in his capacity as Chief Financial Officer
of Southern First Bancshares, Inc., does hereby sell, assign and transfer unto,
The Brand Banking Company, 850,000 shares of the outstanding common stock of
Southern First Bank, as represented by Certificate Number 1. The undersigned
further irrevocably constitutes and appoints _________________, as Attorney to
transfer such shares on the books of Southern First Bancshares, Inc. with full
power of substitution in the premises.

 

                                                    Southern First Bancshares,
Inc.                                    (SEAL)

 

                                                                                                                           
By:                                                                  

                                                                                                                           
Name:       Michael D. Dowling

                                                                                                                           
Title:     Chief Financial Officer          

 

 

 

Dated: June 6, 2014

 

 

 

 

 

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