Exhibit 10.2
 
CONVERTIBLE SECURED NOTE PURCHASE AGREEMENT
 
March 20, 2013
 
To: 
1030 Norton LLC

Convertible Secured Note of Community Shores
Bank Corporation, Due March 31, 2015
 
Community Shores Bank Corporation, a Michigan corporation (the "Company"), whose
address is 1030 W. Norton Avenue, Muskegon, Michigan 49441, agrees with 1030
Norton LLC, a Michigan limited liability company ("you") as follows:
 
1.           The Note.  The Company intends to issue a single convertible
secured note in the principal amount of $1,280,000 due March 31, 2015 (the
"Note").  The Company has taken all necessary action to authorize the execution
and delivery of this Agreement and the sale and issuance to you under this
Agreement of the Note.  The Note will be in substantially the form set forth as
Exhibit A to this Agreement.  The Note will be dated as of the Closing Date (as
defined below), and mature on March 31, 2015 (the “Maturity Date”), unless the
Maturity Date is extended by written agreement of the Company and you.  The Note
will bear interest on its unpaid principal balance at 8% per annum from the
Closing Date until payment in full or conversion of the Note, payable quarterly
in arrears on April 1, July 1, October 1, and January 1 of each year, for the
immediately preceding quarter, commencing April 1, 2013.  During the continuance
of any Event of Default (as defined below) the per annum rate of interest
payable on the unpaid principal balance of the Note will increase from 8% per
annum to 10% per annum.  The Note will be secured by that certain Pledge
Agreement by and between the Company and you, the form of which is attached as
Exhibit B to this Agreement (the “Pledge Agreement”), to be delivered at such
time and upon the satisfaction of such conditions as specified in Section 3
below.   Further, outstanding principal and accrued and unpaid interest may be
convertible into common stock of the Company on the terms and conditions
outlined in the Note.  The Note may be prepaid in whole or in part prior to
maturity, without any prepayment fee, at any time at the election of the
Company, upon at least one (1) days prior written notice to you.
 
THE NOTE WILL BE ISSUED IN REGISTERED FORM ONLY AND WILL BE TRANSFERABLE ONLY AS
PROVIDED IN THIS AGREEMENT.  THE NOTE WILL NOT BE ELIGIBLE AS COLLATERAL FOR
LOANS FROM THE COMPANY'S SUBSIDIARY, COMMUNITY SHORES BANK (THE "BANK").  THE
NOTE IS NOT A DEPOSIT OR OTHER OBLIGATION OF THE BANK.  THE NOTE IS NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
 
2.           Purchase and Sale of the Note. Subject to the terms and conditions
of this Agreement, and in reliance upon the representations and warranties set
forth in this Agreement, you agree to purchase from the Company, and the Company
agrees to issue and sell to you the Note, in the aggregate principal amount of
$1,280,000, upon delivery by you, at or prior to the Closing Date, of the
purchase price specified in Section 3. The Company will initially issue to you
one Note registered in your name and payable to you in the aggregate principal
amount of the Note being purchased by you.
 
 
 

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3.           Closing and Post-Closing Events.
 
(a)           The Closing under this Agreement will take place at the main
office of the Company at 1030 W. Norton Avenue, Muskegon, Michigan 49441, at
10:00 a.m., on March 20, 2013, or on such other date and time as may be mutually
agreed upon between you and the Company (such date and time is called the
"Closing Date").  Unless otherwise mutually agreed between you and the Company,
at the Closing the Company will deliver the Note to you against payment by you,
by delivery to the Company of cash, bank cashier's check, or wire transfer, of
100% of the aggregate principal amount of the Note to be sold and delivered to
you (the “Purchase Price”).
 
(b)           After the Closing Date and as soon as reasonably practicable
following the release and discharge by Fifth Third Bank of that certain Pledge
Agreement made as of September 16, 2008 between the Company and Fifth Third Bank
and the return to the Company by Fifth Third Bank of the stock certificate
evidencing the shares of the Bank pledged pursuant thereto, the Company will
execute and deliver the Pledge Agreement to you.
 
4.           Representations and Warranties of the Company.  The Company
represents and warrants to you as follows:
 
(a)           The Company is a corporation organized and validly existing in
good standing under the laws of the State of Michigan.
 
(b)           The Company is duly authorized to conduct its current business and
has all requisite corporate power and authority to own and operate its
properties and assets (including the voting capital stock of the Bank), and to
carry on its business; except to the extent that the Company's failure to be so
authorized or have such power or authority would not be expected to have a
material adverse effect on the Company.
 
(c)           The Company is duly authorized by all requisite corporate action
to enter into this Agreement, to issue and sell the Note, and to perform the
terms of this Agreement and of the Note.
 
(d)           There are no actions, suits, proceedings or investigations pending
before any court or governmental agency, or, to the Company's knowledge,
threatened before any such court or governmental agency, which the Company
expects will result in any judgment, order, decree or liability having a
material adverse effect upon the business or financial condition of the Company,
or which questions the validity of the Note or this Agreement, other than a
Written Agreement between the Company and the Federal Reserve Bank of Chicago
dated December 16, 2010, a Consent Order among the Federal Deposit Insurance
Corporation (“FDIC”), the Michigan Office of Financial and Insurance Regulation
(“OFIR”) and the Bank dated  September 2, 2010, and a Supervisory Prompt
Corrective Action Directive issued by the Chicago Regional Office of the FDIC to
the Bank dated August 17, 2011.
 
 
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(e)           The Company has filed all federal, state, local and other tax
returns required by law to be filed by it, and all taxes shown to be due and all
additional assessments shown to be due, have been paid by the Company; except to
the extent that the failure to make any such filing or payment would not be
expected to have a material adverse effect on the Company.
 
(f)           Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated by this Agreement, nor compliance
with the provisions of this Agreement and of the Note, will result in any
violation of any term of the Company’s Articles of Incorporation or its Bylaws,
where such violation would be expected to have a material adverse effect on the
Company.
 
(g)           There exists no condition, event or act which would constitute an
Event of Default, as defined in Section 8 of this Agreement, or which, after
notice or lapse of time or both, would constitute such an Event of Default.
 
(h)           The authorized capital stock of the Bank consists of 1,000,0000
shares of common stock, of which 1,000,000 shares are issued and
outstanding.  The Company owns all of the issued and outstanding Common Stock of
the Bank.  The Bank is a wholly-owned subsidiary of the Company.
 
(i)           The authorized capital stock of the Company consists of 9,000,000
shares of common stock, of which 1,468,800 shares are issued and outstanding,
and 1,000,000 shares of preferred stock, of which no shares are issued and
outstanding.
 
5.           Representations, Warranties and Covenants of the Purchaser.  You
are  aware that the Company intends to issue the Note pursuant to an exemption
from registration under Rule 506 of Regulation D or Section 4(2) of the
Securities Act of 1933 (the "Securities Act"), and under Section 202(n) of the
Michigan Uniform Securities Act (2002) (the "Michigan Act"), or without
registration under the Michigan Act in reliance on Section 18 of the Securities
Act.   In determining whether these exemptions from registration under the
Securities Act, the Michigan Act, or other applicable securities laws, are
available, the Company is relying upon your representations, warranties and
covenants contained in this Agreement.  You represent and warrant to, and agree
with, the Company as follows:
 
(a)           You are acquiring the Note solely for your own account, for
investment and not with a view to any further sale or distribution of the Note.
 
 
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(b)           The Note has not been registered under the Securities Act, the
Michigan Act, or any other state securities act, and will not be sold or
otherwise transferred without registration under the Securities Act, the
Michigan Act, and any other applicable state securities act, or an exemption
from registration.   You recognize that the Note will bear a restrictive legend
providing that no sale or other transfer may be made without registration under
federal and state securities laws or an exemption from registration.  The
records of the Company will also be marked to note the restrictions on transfer
of the Note referred to in this Section.
 
(c)           In addition to the restrictions on transfer set forth in
subsection (b) above, you agree that you will give the Company at least 10
business days (or such shorter period as the Company may agree to) advance
notice of any proposed sale, pledge, or other transfer of the Note or of any
interest in the Note; and will not sell, pledge or otherwise transfer the Note,
or any interest in the Note, without the prior written consent of the
Company.  The Company may decline to grant its consent for any reason, or no
reason.
 
(d)           The Note was not offered to you by means of any advertisement,
article, notice or other communication published in any newspaper, magazine or
similar medium, or broadcast over television or radio, or any other form of
general solicitation or advertising.  Materials submitted to you in connection
with the purchase of the Note were received by you at least 48 hours before this
Agreement was signed.
 
(e)           You have not paid or agreed to pay any commission to any person
for soliciting you to purchase the Note; and you are not aware any other person
making any agreement to pay, or paying any commission in connection with the
sale of the Note.
 
(f)           You are an "accredited investor" as that term is defined in
Regulation D under the Securities Act, because you are a limited liability
company, all of the members of which are accredited investors.
 
(g)           All communication with you regarding the purchase of the Note has
occurred in the State of Michigan; and your principal office is located in the
State of Michigan.
 
(h)           You have full power and authority, and have taken, and your
members and manager(s) have taken all action necessary to authorize the purchase
of the Note, and you have obtained the consent or approval of all governmental
agencies or bodies whose consent or approval is required for your purchase of
the Note.  Your purchase of the Note does not violate any law, rule or
regulation to which you are subject nor the terms of any agreement or
undertaking to which you are a party.
 
 
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(i)           You confirm that, in making your decision to purchase the Note,
you have relied solely upon independent investigations made by you or your
representatives, including your own professional tax and other advisors, and
that you and such representatives and advisors have been given the opportunity
to ask questions of, and to receive answers from, persons acting on behalf of
the Company concerning the terms and conditions of this offering, and to obtain
any additional information, to the extent such persons possess such information
or can acquire it without unreasonable effort or expense.
 
(j)           You confirm that (A) each of your members reached his decision to
invest in you independently from the other members, (B) none of your members has
entered into, and none of your members has any intention to enter into, any
agreement or understanding with any other member(s) for the purpose of
exercising a controlling influence over the management and policies of the
Company, including but not limited to any agreement or understanding regarding
the voting or transfer of any shares of the Company’s common stock into which
any portion of the principal and unpaid interest on the Note may be converted,
and (C) none of your members who is a director of the Company has any intention
to act in concert with any other directors or shareholders of the Company,
including you, with respect to the exercise of his voting rights as a director,
provided, however, that this shall not limit a director’s ability to exercise
his legitimate duties and rights as a director, including the ability to consult
with other directors and shareholders as appropriate.
 
6.           Payment, Registration and Transfer of the Note.  The Company may
make all payments on account of the principal of the Note and any interest
thereon directly by check duly mailed or delivered to you at your address set
forth in the register referred to in this Section 6, without any presentment or
notation of payment, notwithstanding any provisions to the contrary in the Note
with respect to the place and manner of payment.  Any amount of principal so
paid on the Note shall be regarded as having been retired and cancelled at the
time of payment.  When all  principal of and interest on the Note has been fully
paid, the Note shall be surrendered to the Company and shall be retired and
cancelled.
 
The Company will cause to be kept at its principal office a register in which
shall be entered the name and address of the holder of the Note, the particulars
of the Note, and of all transfers of the Note.  The person in whose name the
Note shall be so registered shall be deemed and treated as the owner of the Note
for all purposes of this Agreement and the Company shall not be affected by any
notice to the contrary.  Payment of or on account of the principal of and
interest on the Note shall be made only to or upon the written order of the
registered owner (which in the case of a payment on an Interest Payment Date
shall be the registered owner at the close of business on the related Regular
Record Date as defined in the Note).  For the purpose of any request, direction,
consent, or waiver under this Agreement, the Company may deem and treat the
registered owner of the Note as the owner of the Note without production of the
Note.
 
 
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Subject to compliance with the requirements of Sections 5(b) and 5(c) of this
Agreement, the holder of the Note may at any time prior to maturity or payment
in full of the Note transfer the Note by surrender of the Note at the principal
office of the Company with an appropriate instrument of transfer, and the
Company shall, without expense to such holder or transferee (other than payment
of a sum sufficient to cover any tax or other governmental charge payable in
connection with such transfer or exchange), execute and deliver to the
transferee a new Note registered in the name of such transferee in principal
amount equal to the unpaid principal amount of the Note so transferred.  All
Notes so issued upon transfers or exchanges shall have the same maturity and
rate of interest, contain the same provisions, and be subject to the same terms
and conditions as the Note so surrendered, including all of the provisions of
this Agreement.
 
Upon receipt of evidence satisfactory to the Company of the loss, theft,
destruction or mutilation of any Note, and, if requested by the Company, upon
delivery of an indemnity agreement or security reasonably satisfactory to the
Company, the Company will issue a new Note of like tenor and amount in lieu of
such lost, stolen, destroyed or mutilated Note.   References in this Agreement
to the Note shall include any Note issued pursuant to this Section 6.
 
7.           Covenants of the Company.  The Company covenants and agrees that,
so long as the Note is outstanding, it will perform and observe the following
covenants and provisions:
 
(a)           The Company will pay the principal of and interest on the Note at
the time and place and in the manner stated in the Note.
 
(b)           The Company will not sell all or substantially all of its assets
unless the purchaser agrees to be liable for the payment of all of the Company's
obligations under the Note.
 
(c)           The Company will not consolidate with or merge into any other
corporation or entity or permit any other corporation or entity to consolidate
with or merge into the Company; provided that the foregoing shall not apply to
any consolidation or merger to which the Company is a party if the Company is
the surviving corporation, or the surviving corporation agrees to be liable for
the payment of all of the Company's obligations under the Note.
 
(d)           The Company will, from time to time, within ten (10) days after
submission of a written request for payment, reimburse you for all reasonable
out-of-pocket costs, including legal fees and expenses, incurred by you in
connection with the preparation or review of this Agreement, the Note, any
amendment or proposed amendment to this Agreement or the Note, or any related
documents, or in analyzing or enforcing any of your rights under this Agreement
or the Note, or in connection with any claim or inquiry brought by any
shareholder of the Company or by any bank regulatory organization, in connection
with this Agreement, the Note, or any  of the related transactions.
 
 
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(e)           To the extent permitted by law, the Company agrees that it will
not cause or permit the Bank to issue additional shares of capital stock while
any amount under the Note is outstanding, without the prior written consent of
the holder of the Note.
 
(f)           The Company will utilize a portion of the proceeds of the Note to
obtain the release and discharge of all indebtedness owed by the Company to
Fifth Third Bank under that certain Loan Agreement made as of September 7, 2002,
as amended, and a release and discharge of that certain Pledge Agreement made as
of September 16, 2008 between the Company and Fifth Third Bank.
 
8.           Defaults.  Each of the following events shall constitute an "Event
of Default" under this Agreement:
 
(a)           If the Company shall default in the payment of any part of the
principal of the Note when the same shall become due and payable, whether at
maturity or at a date fixed for prepayment or by acceleration or otherwise; and
the default continues for more than (ten) 10 days after the holder of the Note
provides written notice of the default to the Company; or
 
(b)           If the Company shall default in the payment of any installment of
interest on the Note, and the default continues for more than (fifteen) 15 days
after the holder of the Note provides written notice of the default to the
Company; or
 
(c)           If the Company shall default in the performance or observance of
any of the terms, covenants, or conditions of this Agreement or the Note, and
such default shall continue for more than thirty (30) days after the holder of
the Note provides written notice of the default  to the Company; or
 
(d)           If any representation or warranty made by the Company in this
Agreement shall prove to have been false or incorrect in any material respect on
the date as of which it was made; or
 
(e)           The Commissioner of the Michigan Office of Financial and Insurance
Regulation, the Board of Governors of the Federal Reserve System, or the Federal
Deposit Insurance Corporation, or any other regulatory authority having
jurisdiction shall take possession of the properties, assets, and business of
the Bank or appoint a receiver or conservator of the Bank; or
 
(f)           Any action or proceeding shall be commenced by or against the
Company for reorganization, liquidation or similar relief under the Bankruptcy
Code, or any other bankruptcy, reorganization or insolvency law or statute, and
shall remain undismissed for 30 days.
 
 
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If an Event of Default under paragraphs (e) or (f) above shall occur and be
continuing, the Note shall, without further action on the part of the holder or
any other person, automatically and immediately become due and payable.  If an
Event of Default under paragraphs (a), (b), (c) or (d) above shall occur and be
continuing, then the holder of the Note shall have the option (unless such event
shall have been remedied) to declare the Note to be due and payable.  In the
event that the Note becomes due and payable automatically as provided for in the
first sentence of this paragraph, then the Note shall immediately mature and
become due and payable without presentment, demand, protest or further notice of
any kind, all of which are expressly waived.  No delay on the part of the holder
of the Note in exercising any right, power, or privilege under this Agreement
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other rights, power or privilege under this Agreement.
 
9           Amendments, Waivers and Consents.  Changes or additions to this
Agreement may be made, and compliance with any covenant or provision herein set
forth may be omitted or waived, if the Company shall obtain consent thereto in
writing from the holder of the Note. Any consent may be given subject to the
satisfaction of conditions stated in the document setting forth or accompanying
the consent.
 
10.           Survival of Representations and Warranties.  All representations
and warranties contained in this Agreement are made in writing in connection
with the transactions contemplated by this Agreement, are made as of the date of
this Agreement, and shall survive the execution and delivery of this Agreement
and of the Note.
 
11.           Notices.  Any notice or demand which by any provision of this
Agreement is required or provided to be given shall be deemed to have been
sufficiently given or served for all purposes when actually delivered, or if
earlier, three business days after being sent by registered or certified United
States mail, return receipt requested, and postage prepaid, to the applicable
party at the address set forth opposite the signature of such party below or at
such other address with respect to either party as such party shall notify the
other in writing.
 
12.           Benefits.  All of the terms and provisions of this Agreement shall
bind and inure to the benefit of the parties to this Agreement and their
respective successors and permitted assigns, including all permitted assignees
and subsequent holders of the Note; provided that despite any purported
assignment or transfer of the Note the Company shall be entitled to treat as the
owner of the Note the holder designated as payee on the records maintained by
the Company unless and until a transfer of the Note in conformity with the terms
of this Agreement shall have been completed, including without limitation
registration of transfer as provided for in Section 6 hereof.
 
 
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13.           Governing Law.  This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan, without regard to choice
of law principles of such State.
 
14.           Counterparts.  This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered shall be an original,
but such counterparts shall together constitute one and the same instrument.
 
 
If you agree with the above, please sign this Agreement and return it to the
Company, at which time this Agreement will become and evidence a binding
agreement between the Company and you as of the date and year first above
written.
 
Very truly yours,
 
COMMUNITY SHORES BANK
  CORPORATION
 

 
Address of Company:
     
1030 W. Norton Avenue
Muskegon, Michigan 49441
By: /s/ Heather Brolick
Attention: Heather Brolick
Heather Brolick, President and CEO
President and CEO
       
PURCHASER
     
This Agreement is hereby accepted
 
 and agreed to:
       
Address of Purchaser:
   
1030 Norton LLC
1985 East Laketon Ave.
 
Muskegon, MI 49442
 
Attention: Bruce J. Essex,
Managing Partner
By: /s/Bruce J. Essex
 
Bruce J. Essex
 
Its: Managing Partner
 

 
 
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EXHIBIT A
 
FORM OF SECURED CONVERTIBLE NOTE
 
The Note shall be in substantially the form set forth in this Exhibit, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by resolution of the Board of Directors of the Company or
by the officer or officers executing the Note, as evidenced by his, her, or
their execution of the Note.

 
COMMUNITY SHORES BANK CORPORATION
 
SECURED CONVERTIBLE NOTE
 DUE March 31, 2015
 
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, THE MICHIGAN
UNIFORM SECURITIES ACT, OR THE SECURITIES LAWS OF ANY OTHER STATE.  THIS NOTE
MAY NOT BE SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933, THE MICHIGAN UNIFORM SECURITIES ACT, AND ANY OTHER
APPLICABLE STATE SECURITIES LAWS, UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE.
 
THIS NOTE IS SUBJECT TO RESTRICTIONS ON SALE, PLEDGE AND OTHER TRANSFERS SET
FORTH IN AN AGREEMENT BETWEEN THE HOLDER AND ISSUER OF THIS NOTE, INCLUDING
RESTRICTIONS REQUIRING, IN MOST CASES, THE ISSUER'S CONSENT PRIOR TO ANY SALE,
PLEDGE OR OTHER TRANSFER.
 
THIS NOTE IS NOT A DEPOSIT OR OTHER OBLIGATION OF COMMUNITY SHORES BANK AND IS
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.  THIS NOTE IS INELIGIBLE TO SECURE A LOAN FROM COMMUNITY SHORES BANK.
 
Community Shores Bank Corporation, a Michigan corporation (the "Company"), for
value received, hereby promises to pay to:
 
1030 Norton LLC, a Michigan limited liability company
 
or permitted registered assigns, on March 31, 2015, the principal sum of One
Million Two Hundred Eighty Thousand Dollars ($1,280,000) and to pay interest on
the unpaid principal amount of this Note from the date of this Note or from the
most recent Interest Payment Date (as defined below) to which interest hereon
has been paid or duly provided for, whichever is later, quarterly  in arrears on
the 1st day of April, July, October, and January (each an "Interest Payment
Date") in each year commencing on April 1, 2013, at eight percent (8%) per annum
until the principal of this Note is paid or converted pursuant to the next
paragraph.
 
 
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If the Company makes an offering of its common stock upon maturity of the Note
to retire the Note, the holder of the Note may elect to convert any portion of
the total principal amount and accrued and unpaid interest of the Note into
fully paid and nonassessable shares of the Company's common stock (the
"Share(s)").  The number of Share(s) into which any portion of the total
principal amount and accrued and unpaid interest of the Note may be converted
shall be determined by dividing such portion of the total principal balance and
accrued and unpaid interest of the Note by seventy-five percent (75%) of the per
share price at which the shares of common stock are offered.  (Expressed
algebraically, the number of Shares into which any portion of the total
principal amount and accrued and unpaid interest of the Note is convertible
equals x/(.75*y); where x is equal to the portion of the total principal balance
and accrued and unpaid interest of the Note to be converted and y is equal to
the offering price per share established by the Company for the offering.) No
fractional shares shall be issued.
 
During the continuance of any Event of Default (as defined in the Purchase
Agreement referred to below) the per annum rate of interest payable on the
unpaid principal balance of this Note will increase from eight percent (8%) to
ten percent (10%) per annum.
 
The interest so payable and punctually paid or duly provided for on any Interest
Payment Date will be paid to the person in whose name this Note is registered at
the close of business on the Regular Record Date for such interest which shall
be the 15th day (whether or not a business day) of the calendar month
immediately preceding an Interest Payment Date, notwithstanding the cancellation
of this Note upon any transfer or exchange of this Note subsequent to such
Regular Record Date and prior to such Interest Payment Date.  The principal of
and interest on this Note shall be payable at the principal office of the
Company in Muskegon County, Michigan; provided, however, that payment of
interest or principal may be made at the option of the Company by check mailed
to the address of the person entitled to the payment as such address may appear
on the Note Register.  All such payments shall be made in such coin or currency
of the United States of America as at the time of payment is legal tender for
payment of public and private debts.
 
This Note may be prepaid in whole or in part prior to maturity, without any
prepayment fee, at any time at the election of the Company, upon at least one
(1) days prior written notice to the person in whose name this Note is
registered.
 
This Note is issued under and pursuant to a Convertible Secured Note Purchase
Agreement dated March 20, 2013, by and between the Company and the initial
registered owner of this Note (the "Purchase Agreement") to which Purchase
Agreement (and any amendments thereto) reference is made for a description of
the rights, limitations of rights, obligations, and duties of the Company and
the person in whose name this Note is registered, the terms upon which the Note
is, and is to be, registered and delivered, and a description of the
circumstances under which the maturity of the Note may be subject to
acceleration.
 
 
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Upon execution and delivery of the Pledge Agreement by the Company as and when
provided in the Purchase Agreement, this Note will be secured by a security
interest, as more particularly described in the Pledge Agreement.
 
This Note is issued subject to the provisions of the Purchase Agreement, and
each holder of this Note, by accepting the same, agrees to and shall be bound by
such provisions.
 
This Note is issuable only as a registered Note.  No service charge will be made
for any permitted transfer or exchange of this Note, but the Company will
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection with any transfer or exchange.  The Company may
treat the person in whose name this Note is registered as the owner of this Note
for the purpose of receiving payment and for all other purposes whether or not
this Note is overdue, and the Company shall not be affected by any notice to the
contrary.
 
As provided in the Purchase Agreement and subject to certain limitations set
forth in the Purchase Agreement, this Note is transferable on the Note Register
of the Company, upon surrender of this Note for transfer at the principal office
of the Company in Muskegon County, Michigan, duly endorsed by, or accompanied by
a written instrument of transfer in form satisfactory to the Company, duly
executed by, the registered holder of this Note.
 
Community Shores Bank Corporation has caused this Note to be executed in its
corporate name by the manual signature of its duly authorized officer.
 
Date:   March 20, 2013
 
COMMUNITY SHORES BANK CORPORATION
 
BY: /s/ Heather Brolick
Heather Brolick, President and CEO
 
 
 
 
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EXHIBIT B
 
FORM OF PLEDGE AGREEMENT
 
The Pledge Agreement shall be in substantially the form set forth in this
Exhibit, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by resolution of the Board of Directors
of the Company or by the officer or officers executing the Note, as evidenced
by his, her, or their execution of the Note.
 
 
PLEDGE AGREEMENT
 
THIS PLEDGE AGREEMENT (this “Agreement”) is made as of March 20, 2013, by and
between COMMUNITY SHORES BANK CORPORATION, a Michigan corporation, of 1030 West
Norton Avenue, Muskegon, Michigan 49441, (“Debtor”) and 1030 NORTON LLC, a
Michigan limited liability company, of 1985 East Laketon Ave., Muskegon, MI
49412 (“Secured Party”).
 
1. Grant of Security Interest.   Debtor grants to Secured Party a security
interest in all shares of the capital stock of Community Shores Bank, a Michigan
banking corporation, that Debtor now owns and acquires in future (the
“Shares”) and in (1) all securities, security entitlements and other financial
assets, instruments and other property (“Additional Property”) that Debtor at
any time receives or is entitled to receive by reason of any stock dividend,
stock split, recapitalization, reclassification, merger, consolidation,
liquidation, exchange, renewal, redemption, substitution or other transaction
regarding the Shares or regarding any Additional Property, (2) all dividends,
interest and other distributions that Debtor at any time receives or is entitled
to receive in respect of any of the Shares or any Additional Property
(“Distributions”) and (3) all proceeds of the Shares, the Additional Property
and the Distributions.  The Shares, the Additional Property, the Distributions
and the proceeds thereof are referred to in this Agreement as “Collateral”.
 
2. Indebtedness Secured.  Debtor gives this security interest to secure payment
and performance of Debtor’s obligations under that certain Convertible Secured
Note Purchase Agreement dated March 20, 2013, as the same may be amended or
restated from time to time (the “Note Purchase Agreement”), and that certain
Convertible Secured Note Due March 31, 2015 issued under the Note Purchase
Agreement (together with any substitute or replacement note(s) issued therefor
from time to time, the “Note”).  The Note Purchase Agreement and the Note are
secured by this Agreement and are collectively referred to as the
“Indebtedness.”
 
 
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3. Warranties and Representations.  Debtor represents and warrants to, and
agrees with, Secured Party as follows:
 
a. Debtor is a corporation organized and validly existing in good standing under
the laws of the State of Michigan; Debtor has full corporate power and authority
to enter into and perform its obligations under this Agreement; the signing,
delivery and performance of this Agreement have been duly authorized by all
necessary action of Debtor’s board of directors and will not violate Debtor’s
articles of incorporation or bylaws; and this Agreement is Debtor’s valid and
binding obligation, enforceable in accordance with its terms.
 
b. Debtor owns the Collateral and, subject to the consent of the Federal Reserve
Bank of Chicago [(which has been obtained),] has the unqualified right to
transfer the Collateral to Secured Party.  The Collateral is not subject to any
security interest, lien, encumbrance, adverse claim or other claim in favor of
any third party, or to any right or option of any third party to purchase or
acquire any of the Collateral.
 
c. Each instrument, security or other financial asset included in the Collateral
is genuine and what it purports to be and has not been materially altered.  Each
security included in the Collateral is validly issued and fully paid.  The
Shares are subject to assessment to the extent and in the manner provided by the
Michigan Banking Code of 1999, as amended.
 
d. Debtor’s address set forth on the first page of this Agreement is the
location of Debtor’s chief executive office.
 
4. Agreements of Debtor.  Debtor agrees that
 
a. Debtor shall promptly sign and deliver to Secured Party all stock powers,
bond powers, assignments, endorsements, power of attorney, agreements,
instructions to issuers, security intermediaries and other parties and other
documents, including financing statements, that Secured Party from time to time
requests to perfect Secured Party’s security interest in the Collateral.  Debtor
consents to the filing by Secured Party of a financing statement reflecting
Secured Party’s security interest in the Collateral.
 
b. Debtor shall not sell, lease, transfer, or assign any Collateral or any
interest in any Collateral or permit any Collateral to be transferred by
operation of law.
 
c. Debtor shall pay promptly when due all taxes and assessments upon the
Collateral.
 
 
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d. Debtor shall furnish to Secured Party all information regarding the
Collateral that Secured Party requests and shall allow Secured Party at any
reasonable time to inspect Debtor’s records regarding the Collateral.
 
e. Debtor shall promptly deliver to Secured Party all certificates and other
instruments or documents that evidence title or rights to the Collateral,
including certificates and other instruments and documents that Debtor receives
in the future.
 
f. Debtor shall immediately notify Secured Party in writing of any change in
Debtor’s name, identity or corporate structure and of any change in the location
of Debtor’s chief executive office.
 
5. Secured Party’s Rights.   Secured Party shall have the rights specified in
this Section 5 only after the occurrence of (i) failure by Debtor to pay any of
the Indebtedness at maturity, (ii) Secured Party has given the notice specified
in Section 7 following such failure, and (iii) the 90-day period specified in
Section 7 has expired without cure.
 
a. If Debtor fails to perform any of Debtor’s obligations under this Agreement,
then Secured Party may, without giving Debtor notice or obtaining the consent of
Debtor, perform that obligation on Debtor’s behalf.  (This may include, for
example, signing stock powers and other documents described in Section 4(a)
above).  To the extent necessary, Debtor appoints Secured Party as Debtor’s
agent and attorney-in-fact with full power and authority to perform those
obligations.  Debtor shall reimburse Secured Party on demand for any expense
that Secured Party incurs in performing any obligation and shall pay to Secured
Party interest on the expense, from the date on which the Secured Party incurred
the expense, at an annual rate equal to 8% per annum.  Secured Party is not
required to perform an obligation that Debtor has failed to perform.
 
b. With respect to the custody and preservation of Collateral in its possession,
Secured Party’s only duty will be to use reasonable care.  Secured Party shall
not have any obligation to take any steps necessary to preserve rights against
prior parties.  Secured Party shall not have any duty to sell any Collateral
even if its value declines.  Secured Party shall not have any obligation to
exercise, or to notify Debtor of, any conversion or redemption rights or to take
any similar action with regard to any Collateral.
 
6. Voting Rights.  Unless and until Debtor fails to pay any of the Indebtedness
at maturity, Secured Party has given the notice specified in Section 7 following
such failure, and the 90-day period specified in Section 7 has expired without
cure, Debtor may exercise all voting and other powers and rights pertaining to
any Collateral and may receive and retain all dividends on Collateral.
 
 
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7. Remedies.  If any of the Indebtedness is not paid at maturity, then upon 90
days’ prior written notice by Secured Party to Debtor and the expiration of such
90-day period without cure, Secured Party shall have all of the rights and
remedies of a secured party under applicable laws.  Without limiting those
rights and remedies, if all or any part of the Indebtedness is not paid at
maturity, following such written notice by Secured Party to Debtor and the
expiration of such 90-day period without cure then:
 
a. Secured Party shall have the right, but no obligation, to exercise and
enforce any or all of Debtor’s rights and remedies with respect to the
Collateral, including, but not limited to, the right to demand, enforce payment
of, collect and receive all dividends, interest, principal payments and other
sums that are at any time owing with respect to any of the Collateral and to
apply the sums to the Indebtedness in any manner that Secured Party determines.
 
b. Secured Party may sell or otherwise dispose of the Collateral in any
commercially reasonable manner.  Any notification that Secured Party is required
to give to Debtor regarding any sale or other disposition of Collateral shall be
considered reasonable if Secured Party mails or otherwise sends or delivers it
to Debtor at least thirty days before the sale or other disposition.
 
c. Secured Party shall apply the proceeds of any collection or disposition of
Collateral first to Secured Party’s attorney fees and expenses, as provided in
Paragraph 8 of this Agreement, and then to the Indebtedness, in any manner that
Secured Party determines, and Debtor shall be liable for any deficiency
remaining.
 
All rights and remedies of Secured Party shall be cumulative and may be
exercised from time to time.
 
8. Expenses.  Debtor shall reimburse Secured Party on demand for all reasonable
attorney fees, legal expenses, and other expenses that Secured Party incurs in
protecting and enforcing Secured Party’s rights under this Agreement.  This
includes fees and expenses incurred in trying to obtain possession of Collateral
from Debtor, a trustee or receiver in bankruptcy or any other person.  Secured
Party may apply any proceeds of collection or disposition of Collateral to
Secured Party’s reasonable attorney fees, legal expenses and other expenses.
 
9. Amendments and Waivers.  A provision of this Agreement may not be modified or
waived except by a written agreement signed by Secured Party.  Secured Party
shall continue to have all of Secured Party’s rights under this Agreement even
if Secured Party does not fully and promptly exercise them on all occasions.
 
 
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10. Notices.  Any notice to Debtor or Secured Party shall be considered to have
been given if and when it is mailed, with postage prepaid, to the respective
address of Debtor or Secured Party appearing on the first page of this Agreement
or if and when it is delivered personally.
 
11. Other.  In this Agreement “maturity” of any of the Indebtedness means the
time when that Indebtedness has become due and payable, for whatever reason
(including, for example, acceleration due to default or bankruptcy).  This
Agreement shall be binding upon and inure to the benefit of Debtor and Secured
Party and their successors and permitted assigns.
 
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