Exhibit 10.1

 
FIRST AMENDMENT TO
CREDIT AGREEMENT

This First Amendment to Credit Agreement (this “Amendment”) is made as of
November 3, 2010 by and between The Prudential Insurance Company of America, a
New Jersey Stock insurance corporation (the “Lender”), and City National
Bancshares Corporation, a New Jersey corporation and bank holding company under
the Bank Holding Company Act of 1956, as amended (the “Borrower”) and amends the
Credit Agreement dated as of February 21, 2007 between the Lender and the
Borrower.
 
RECITALS
ARTICLE IThe Lender and the Borrower entered into the Credit Agreement in order
to permit the Borrower to make Investments in City National Bank of New Jersey
(“CNB”) in the form of subordinated Indebtedness and on terms that would permit
CNB to treat such Indebtedness as Tier 2 Capital (the “Tier 2 Investment”).
 
ARTICLE IIThe Borrower has requested that the Lender modify certain provisions
of the Credit Agreement to permit the Tier 2 Investment to be converted into
Tier 1 Capital in the form of common equity, and to modify, among other things,
certain financial covenants and Events of Default.
 
ARTICLE IIIThe Lender is willing to accommodate the Borrower, on the terms and
conditions as hereinafter set forth.
 
AGREEMENT
 
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto hereby agree as follows:
 
3.01           The Borrower and the Lender agree that the Recitals above are a
part of this Amendment.  Unless otherwise expressly defined in this Amendment,
terms defined in the Credit Agreement shall have the same meaning under this
Amendment.
 
3.02           The Borrower represents and warrants to the Lender as follows:
 
(a)           The Borrower is a corporation duly organized, validly existing and
in good standing under the laws of the State of New Jersey.
 
(b)           The Borrower has the power and authority to execute and deliver
this Amendment and perform its obligations hereunder and has taken all necessary
and appropriate corporate action to authorize the execution, delivery and
performance of this Amendment.
 
(c)           The Credit Agreement, as amended by this Amendment, and each of
the other Loan Documents, are each hereby ratified, each remains in full force
and effect, and each constitutes the valid and legally binding obligation of the
Borrower, enforceable in accordance with its terms.
 

 
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(d)           Except as set forth on Schedule 2(d) attached hereto, all of the
Borrower’s representations and warranties contained in the Credit Agreement and
the other Loan Documents are true and correct on and as of the date of the
Borrower’ execution of this Amendment.
 
(e)           Except as waived hereunder, no Event of Default and no event
which, with notice, lapse of time or both would constitute an Event of Default,
has occurred and is continuing under the Credit Agreement or the other Loan
Documents.
 
3.03           The Credit Agreement is hereby amended as follows:
 
(a)           The first paragraph of the Statement of Purpose of the Credit
Agreement is hereby amended by deleting it in its entirety and replacing it with
the following:
 
““The Borrower has requested that the Lender extend credit to the Borrower in
the form of a term loan (the “Loan”) in the amount of $5,000,000, for the
purpose of making an investment in its wholly owned Subsidiary, City National
Bank of New Jersey (“CNB”), which will be classified as Tier 1 Capital.”
 
(b)           Section 1.1 of the Agreement is hereby amended by deleting the
definition of “Consolidated Non-Performing Loans” and replacing it with the
following definition:
 
““Consolidated Non-Performing Loans”: loans made by the Borrower and its
Subsidiaries which are not accruing or in which either a scheduled principal
payment, interest payment or other anticipated economic return is past due for
90 days or more after the date originally scheduled for such payment.”
 
(c)           Section 1.1 of the Agreement is hereby amended by adding the
following definitions (to be listed alphabetically within the other definitions
of Section 1.1 of the Agreement):
 
““Consolidated Total Loans”: all loans made by the Borrower and its
Subsidiaries, whether or not performing.
 
“Consolidated Troubled Debt Restructured Loans”:  shall be defined in accordance
with GAAP and means those Restructured Assets where the Lender has granted
concessions as a result of the borrower thereunder having financial
difficulties.
 
“Leverage Ratio”:  as defined at 12 CFR 208.41(c).
 
“Liquidity Standards”:  the liquidity standards of the Office of the Comptroller
of the Currency, as set forth in the Comptrollers Handbook at “Liquidity,
February 2001”.
 
“Tier 1 Risk-Based Capital Ratio”:  as defined at 12 CFR 208.41(h).
 
“Total Risk-Based Capital Ratio”:  as defined at 12 CFR 208.41(j).
 

 
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“Waived Period”: the period commencing January 1, 2008 through January 1, 2015.”
 
(d)           Section 3.14 of the Agreement is hereby amended by deleting it in
its entirety and replacing it with the following:
 
“The proceeds of the Loan shall be used by the Borrower to make equity
investments in CNB that will permit CNB to treat such investments as Tier 1
Capital.”
 
(e)           Article VI - “Financial - Covenants” of the Agreement is hereby
amended by deleting it in its entirety and replacing it with the following:
 
“ARTICLE VI - – FINANCIAL – COVENANTS
 
6.01           Financial Maintenance Covenants.
 
The Borrower covenants that it will not permit at any time:
 
(a)           Capital Adequacy.  CNB or any other Depository Institution
Subsidiary to fail to maintain the greater of: (x) such capital adequacy ratios
required by applicable law, rule or regulation to maintain its status as a Well
Capitalized Bank, or (y) (i) a Total Risk-Based Capital Ratio equal to or
greater than the minimum threshold for such ratio, (ii) a Tier 1 Risk-Based
Capital Ratio equal to or greater than the minimum threshold for such ratio, and
(iii) a Leverage Ratio equal to or greater than the minimum threshold for such
ratio, in each case as such minimum threshold shall then be mandatory for CNB or
any other Depository Institution Subsidiary pursuant to applicable law,
evidenced by a certificate of the Chief Financial Officer of the Borrower
addressed to the Lender stating that such officer has personal knowledge of the
thresholds applicable for each such ratio as established by the Office of the
Comptroller of the Currency and attaching thereto any written evidence, if any,
of such thresholds.
 
(b)           Asset Quality.  (i) the ratio of Consolidated Non-Performing Loans
to Consolidated Total Loans to exceed:
 
From:
Through:
Ratio:
     
Amendment Closing Date
End of Third Quarter 2011
18%
     
End of Third Quarter 2011
End of Third Quarter 2012
15%
     
End of Third Quarter 2012
End of Third Quarter 2013
10%
     
End of Third Quarter 2013
End of Third Quarter 2014
6%
     
End of Third Quarter 2014
Loan Maturity Date
3%

 
, or (ii) the ratio of Consolidated Loss Reserve Allowance to Consolidated
Non-Performing Loans to exceed:
 
 
 
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From:
Through:
Ratio:
     
Amendment Closing Date
End of Third Quarter 2011
18%
     
End of Third Quarter 2011
End of Third Quarter 2012
22%
     
End of Third Quarter 2012
End of Third Quarter 2013
27%
     
End of Third Quarter 2013
End of Third Quarter 2014
33%
     
End of Third Quarter 2014
Loan Maturity Date
40%
     

, or (iii) Consolidated Troubled Debt Restructured Loans to exceed 10% of
Consolidated Total Loans,
 
(c)           Liquidity.  CNB or any other Depository Institution Subsidiary to
fail to comply with the Liquidity Standards, as demonstrated in monthly analysis
of its sources and uses of funds;
 
(d)           Earnings.  (i) its return on assets to be less than:
 
From:
Through:
Ratio:
     
Amendment Closing Date
End of Third Quarter 2011
(6.0%)
     
End of Third Quarter 2011
End of Third Quarter 2012
0.0%
     
End of Third Quarter 2012
End of Third Quarter 2013
0.25%
     
End of Third Quarter 2013
End of Third Quarter 2014
0.4%
     
End of Third Quarter 2014
Loan Maturity Date
0.5%
     

, or (ii) its return on equity to be less than:
 
From:
Through:
Ratio:
     
Amendment Closing Date
End of Third Quarter 2011
(100%)
     
End of Third Quarter 2011
End of Third Quarter 2012
2.0%
     
End of Third Quarter 2012
End of Third Quarter 2013
5.0%
     
End of Third Quarter 2013
End of Third Quarter 2014
8.0%
     
End of Third Quarter 2014
Loan Maturity Date
10.0%”
     

(f)           Section 7.01(a) shall be deleted in its entirety and replaced with
the following:
 

 
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“(a) Any Depository Institution Subsidiary may (i) sell loans in the ordinary
course of business, and (ii) sell Consolidated Non-Performing Loans and other
non-performing assets;”.
 
(g)           Section 9.02 shall be amended so that notices to the Borrower will
be sent to the attention of both (i) the President and Chief Executive Officer,
and (ii) the Senior Vice President and Chief Financial Officer.
 
3.04           The Lender hereby agrees that circumstances and events set forth
on Schedule 4 attached hereto shall not be treated as an event giving rise to an
Event of Default under Section 8.02 of the Credit Agreement and hereby waives
its right to assert the occurrence of any such Event of Default.
 
3.05           The Lender hereby agrees that to the extent there occurred an
Event of Default at any time prior to the date of this Amendment, the payment of
default interest accrued upon the occurrence and during the continuance of such
Event of Default, if any, is hereby waived.
 
3.06           This Amendment shall become effective when and only when:
 
(a)           this Amendment shall be executed and delivered by the Borrower and
the Lender;
 
(b)           the Lender shall have received a certificate of the Secretary of
the Borrower as to (x) resolutions of its Board of Directors then in full force
and effect authorizing the execution, delivery and performance of this
Amendment, (y) the incumbency signatures of those of its officers authorized to
act with respect to this Amendment, and (z) the Borrower’s good standing in the
State of New Jersey;
 
(c)           the Lender shall have received a certificate of the Secretary of
CNB as to (x) resolutions of its Board of Directors then in full force and
effect authorizing, among other things, the conversion of the $5,000,000
subordinated note held by the Borrower into a Tier I Capital equity investment,
and (y) CNB’s certificate of existence with the Office of the Comptroller of the
Currency and any other regulatory authorities;
 
(d)           the Lender shall have received from the Borrower an executed
amended and restated Note in the form of Exhibit A attached to this Amendment;
 
(e)           the Lender shall have received a certificate of an officer of the
Borrower pursuant to Section 4.01(c) of the Credit Agreement in the form of
Exhibit B attached to this Amendment;
 
(f)           the Lender shall have received opinions from Borrower’s Counsel
with respect to this Amendment, in form and content satisfactory to Lender;
 
(g)           the Borrower shall have paid to Lender all of Lender’s out of
pocket expenses related to the closing of the transactions contemplated
hereunder, including the fees and expenses of the Lender’s legal counsel; and
 
(h)           the Lender shall have received such additional closing documents
as it shall reasonably specify in connection with the transactions contemplated
hereby.
 

 
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3.07           The Borrower hereby issues, ratifies and confirms the
representations, warranties and covenants contained in the Credit Agreement, as
amended hereby, and each of the other Loan Documents given by the Borrower to
the Lender in favor of the Lender.  The Borrower agrees that this Amendment is
not intended to and shall not cause a novation with respect to any or all of the
Obligations.
 
3.08           The Borrower acknowledges and agrees that the Lender has acted in
good faith and has conducted itself in a commercially reasonable manner in their
relationships with the Borrower in connection with this Amendment and generally
in connection with the Credit Agreement and its obligations thereunder, the
Borrower hereby waives and releases any claims to the contrary.
 
3.09           The Borrower shall pay at the time this Amendment is executed (or
as otherwise provided for in this Agreement) and delivered all fees,
commissions, costs, charges, taxes and other expenses incurred by the Lender in
connection with this Amendment, including, but not limited to, reasonable fees
and expenses of the Lender’s counsel and all recording fees, taxes and charges.
 
3.10           This Amendment shall hereafter be deemed one of the Loan
Documents.  This Amendment may be executed in any number of duplicate originals
or counterparts, each of such duplicate originals or counterparts shall be
deemed to be an original and taken together shall constitute but one and the
same instrument.  The parties agree that their respective signatures may be
delivered by fax or electronic mail.  Any party who chooses to deliver its
signature by fax or electronic mail agrees to provide a counterpart of this
Amendment with its inked signature promptly to each other party.
 
3.11           THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW JERSEY.
 
3.12           THE BORROWER AND THE LENDER HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THE THIS AMENDMENT AND FOR ANY COUNTERCLAIM THEREIN.
 
The remainder of this page is intentionally blank.
 

 
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IN WITNESS WHEREOF, the parties have entered into this Amendment as of the date
first above written.
 
BORROWER

CITY NATIONAL BANCSHARES CORPORATION

By:                /Edward R.
Wright/                                                        
                                                                                     
Name:           Edward R. Wright
Title:             Senior Vice President and Chief Financial Officer

LENDER

THE PRUDENTIAL INSURANCE COMPANY OF AMERICA

By:                 /John
Kinghorn/                                                            
                                                                                     
Name:           John Kinghorn
Title:             Vice President

 
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