EXHIBIT 10.1

 

LOAN AND NOTE MODIFICATION AGREEMENT

 

THIS LOAN AND NOTE MODIFICATION AGREEMENT (this “Agreement”) is made as of the
28th day of December, 2009, by and between FIRST CHESTER COUNTY CORPORATION (the
“Borrower”) and GRAYSTONE TOWER BANK (the “Bank”).

 

WITNESSETH:

 

WHEREAS, pursuant to the terms and conditions of a Loan Agreement dated
November 20, 2009 by and between the Borrower and the Bank (the “Loan
Agreement”), a Promissory Note of even date therewith made by the Borrower for
the benefit of the Bank (the “Note”), and various other documents executed by or
on behalf of the Borrower including, without limitation, that certain Stock
Pledge Agreement dated November 20, 2009 (the “Pledge Agreement”) (together with
the Loan Agreement, Note and the Pledge Agreement, the “Loan Documents”), the
Bank extended to the Borrower a non-revolving term loan (the “Loan”) in the
principal amount of $4,000,000.00 (the “Loan Amount”); and

 

WHEREAS, the Borrower and Tower Bancorp, Inc., parent company of the Bank
(“Tower”), are parties to that certain Agreement and Plan of Merger of even date
herewith providing for the merger of the Borrower with and into Tower (the
“Merger Agreement”); and

 

WHEREAS, the Borrower has requested that the Loan Amount be increased by a
maximum of $22,000,000 in order to permit it to contribute such additional loan
proceeds to its primary operating subsidiary, First National Bank of Chester
County (“First National”), solely for purposes of satisfying First National’s
minimum regulatory capital requirements; and

 

WHEREAS, the Bank has agreed to grant such request upon the terms and conditions
provided herein.

 

NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties, intending to be legally bound, agree as follows:

 

1.                                         Loan Modification.  Upon and subject
to the terms and conditions of this Agreement, the Loan Amount is hereby
increased by up to $22,000,000 such that the Loan Amount shall be Twenty-six
Million Dollars ($26,000,000) or such lesser amount actually disbursed pursuant
to Section 3 hereof.  In furtherance thereof:

 

(a)           Loan Agreement.  The term “Loan,” as defined in the Loan
Agreement, and any and all references to the “principal amount” of the Loan or
other like terms is hereby amended to mean Twenty-six Million Dollars
($26,000,000) or such lesser amount actually disbursed pursuant to Section 3;
provided, however, that the fee to be paid by the Borrower to the Bank in the
event of an Event of Default, as defined in the Loan Agreement, arising under
Section 7.01(e) thereof shall remain at ten percent (10.00%) of the original
face amount of the Note (i.e., $400,000).

 

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(b)                                 Note.  The “principal amount” as set forth
in the Note is hereby amended to mean Twenty-six Million Dollars ($26,000,000)
or such lesser amount actually disbursed pursuant to Section 3, and all numeric
references to the principal amount or other like terms shall mean $26,000,000 or
such lesser amount actually disbursed pursuant to Section 3, and interest on the
part of the principal amount from time to time remaining outstanding and unpaid
under the Note shall accrue at the rate of six percent (6.00%) per annum, as
reduced from the original twelve percent (12.00%) stated therein.

 

(c)                                  Pledge Agreement.  The Pledge Agreement is
hereby amended such that the term “Loan,” as defined in the Pledge Agreement,
and any and all references to the “face amount” of the Note secured by the
Pledge Agreement or other like terms shall mean Twenty-six Million Dollars
($26,000,000) or such lesser amount actually disbursed pursuant to Section 3,
and the term “Obligations” set forth in the Pledge Agreement shall be construed
to expressly include the Borrower’s obligation to repay to the Bank all sums
owing under the Note, as modified hereby.

 

(d)                                 Other Loan Documents.  The other Loan
Documents are hereby amended such that any and all references therein to the
principal amount of the Loan shall mean Twenty-six Million Dollars ($26,000,000)
or such lesser amount actually disbursed pursuant to Section 3.

 

2.                                       Event of Default.  Each of the Loan
Documents is hereby amended to provide that any termination of the Merger
Agreement pursuant to Section 8.1 thereof shall immediately constitute an “Event
of Default” or “Default” under each of the Loan Documents, as applicable,
including, without limitation, the Note and Pledge Agreement.

 

3.                                       Disbursement.  Each of the Loan
Documents is hereby amended to provide that the Loan is to be used solely for
purposes of enabling First National to satisfy its minimum regulatory capital
requirements, as established by the Office of the Comptroller of the Currency
(the “OCC”).  The Borrower shall not request, and the Bank shall have no
obligation to disburse, funds under the Loan Documents in excess of the amount
that the Bank deems, in its sole and absolute discretion after consultation with
First National and the OCC, necessary to satisfy the minimum regulatory capital
requirements of First National (after taking into consideration any other
financing arrangements or other agreements by and between Bank, Borrower or
First National, including, but not limited to, that certain loan participation
agreement to be entered into by and between Bank and First National).

 

4.                                       Exempt Capital Raising Event.  The Bank
hereby agrees that the Loan, as modified hereby, and the use of the additional
proceeds thereof by Borrower for purposes of increasing the regulatory capital
of First National, shall not be deemed a “capital raising event” within the
meaning of Section 2.04 of the Loan Agreement.

 

5.                                       Other Terms.                          
Other than the amendments set forth in Sections 1, 2 and 3 of this Agreement,
all other terms and conditions of the Loan Agreement, the Note, the Pledge
Agreement and the other Loan Documents shall remain unchanged and in full force
and effect.

 

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6.                                       Warranties and Representations.    As
an inducement to the Bank to enter into this Agreement, the Borrower makes the
following representations and warranties to the Bank and acknowledges its
justifiable reliance thereon:

 

(a)                                  the Borrower is not in default under the
Loan Agreement, the Note, the Pledge Agreement or any of the other Loan
Documents, and the Borrower is in full compliance with all of the terms and
conditions thereof;

 

(b)                                 no event exists, or is likely to exist in
the future, which with the passage of time, notice, or both, will constitute a
default under the Loan Agreement, the Note, the Pledge Agreement or any of the
other Loan Documents;

 

(c)                                  all warranties and representations
previously made to the Bank by the Borrower remain true, accurate and complete;

 

(d)                                 there have been no material adverse changes
in the Borrower’s finances or operations which would cause the Borrower to be in
default under any of the financial covenants contained in the Loan Documents;
and

 

(e)                                  all Loan Documents, as modified and amended
herein, are the valid and binding obligations of the Borrower and are fully
enforceable in accordance with their terms.

 

7.                                       Borrower’s Deliverables.  As an
inducement to the Bank to enter into this Agreement:

 

(a)                                  the Bank shall have received on the date
hereof from Borrower’s counsel, an opinion, dated the date hereof, in form and
substance satisfactory to the Bank, opining that this Agreement has been duly
and validly authorized, executed and delivered on behalf of the Borrower, and
the Agreement and Loan Documents represent binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms, as such
terms have been modified hereby; and

 

(b)                                 certified copies of all corporate action
taken by the Borrower, including resolutions of its Board of Directors
authorizing the execution, delivery and performance of this Agreement and the
Loan Documents, as amended hereby, together with a certificate of the Secretary
of the Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign this Agreement.

 

8.                                       No Novation.    The parties hereto do
not intend that the amendment of the Loan Agreement, the Note, the Pledge
Agreement or any of the other Loan Documents as described herein shall create or
effect a novation.

 

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9.                                       Incorporation.    The terms and
conditions of the Loan Agreement, the Note, the Pledge Agreement and the other
Loan Documents are incorporated by reference and made a part hereof, as if fully
set forth herein.  In the event of any inconsistencies between this Agreement
and any other Loan Document, the terms and conditions of the other Loan Document
shall control, except to the extent expressly modified in this Agreement. 
Capitalized terms not otherwise defined herein shall have the meanings
attributed thereto in the Loan Agreement.

 

10.                                 Binding Agreement.  This Agreement shall be
legally binding upon and shall inure to the benefit of the Borrower and the
Bank, and their respective successors and permitted assigns.

 

11.                                 Choice of Law.  This Agreement shall be
governed by the laws of the Commonwealth of Pennsylvania.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by their proper and duly authorized officers as of the day and
year first above written.

 

 

FIRST CHESTER COUNTY CORPORATION

 

 

 

By:

/s/ James M. Deitch

 

Name: James M. Deitch

 

Title: Chief Operating Officer

 

 

 

 

 

 

 

GRAYSTONE TOWER BANK

 

 

 

 

By:

/s/ Andrew Samuel

 

Name: Andrew Samuel

 

Title: President

 

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